UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-Q





[X]   Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities


Exchange
Act of 1934





For the
quarterly period ended March 31, 2009





or





[_]   Transition
Report Pursuant to Section 13 or 15(d) of the Securities


Exchange
Act of 1934





For the
Transition Period From ___________ to ___________





Commission
file number 0-30318





INVENTIV
HEALTH, INC.


(Exact
name of registrant as specified in its charter)





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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes [ ]  No
[_]





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





Large
accelerated filer
[X]                                                                           Accelerated
filer [
]                                                      Non-accelerated
filer [_]





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





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.





As of
April 24, 2009, there were 33,449,474 outstanding shares of the registrant's
common stock.











INVENTIV
HEALTH, INC.


INDEX
TO QUARTERLY REPORT ON


FORM
10-Q





PART
      I. FINANCIAL INFORMATIONITEM 1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31,
      2009 (unaudited)and December 31, 2008Condensed Consolidated Income Statements for the
      three-monthsended March 31, 2009 and 2008
      (unaudited)Condensed Consolidated Statements of Cash Flows for the
      three-monthsended March 31, 2009 and 2008
    (unaudited)Notes to unaudited Condensed Consolidated Financial
      StatementsITEM 2. Management's Discussion and Analysis of Financial
      Condition andResults of OperationsITEM 3. Quantitative and Qualitative Disclosures About
      Market RiskITEM 4. Controls and ProceduresPART II. OTHER INFORMATIONITEM 1. Legal ProceedingsITEM 1A. Risk FactorsITEM 5. Other InformationITEM 6. 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
      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; ·
                    our
      expectations regarding the potential impact of pending litigation;
      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:





·
            the
      potential impact of a recessionary environment on our customers and
      business;


·
            our
      ability to sufficiently increase our revenues and maintain or decrease
      expenses and cash capital expenditures to permit us to fund our
      operations;


·
            our
      ability to continue to comply with the covenants and terms of our credit
      facility and to access sufficient capital under our credit agreement or
      from other sources of debt or equity financing to fund our
      operations;


·
            the
      impact of any default by any of our credit providers or swap
      counterparties;


·
            our
      ability to accurately forecast costs to be incurred in providing services
      under fixed price contracts, including with respect to the leasing costs
      for our fleet vehicles and related fuel
costs;


·
            the possibility
      that customer agreements will be terminated or not
  renewed;


·
            our
      ability to grow our existing client relationships, obtain new clients and
      cross-sell our services;


·
            our
      ability to successfully operate new lines of
  business;


·
            our
      ability to manage our infrastructure and resources to support our
      growth;


·
            our
      ability to successfully identify new businesses to acquire, conclude
      acquisition negotiations and integrate the acquired businesses into our
      operations;


·
            any
      disruptions, impairments, or malfunctions affecting software as well as
      excessive costs or delays that may adversely impact our continued
      investment in and development of
software.


·
            the
      potential impact of government regulation on us and on our 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 and clinical
staff;


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


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


·
            the
      actual outcome of pending
litigation;


·
            any
      potential impairment of intangible
assets;


·
            consolidation
      in the pharmaceutical industry;·
            changes
      in trends in the pharmaceutical industry or in pharmaceutical outsourcing;
      and·
            our
      ability to determine the actual time at which the liquidation of our
      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, 2008.





Except to the extent required by
applicable laws or rules, we do not undertake to update any forward-looking
statements or to publicly announce revisions to any of the forward-looking
statements, whether as a result of new information, future events or
otherwise.








PART
I. FINANCIAL INFORMATION




ITEM 1.    Financial
Statements




INVENTIV
HEALTH, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(in
thousands, except share and per share amounts)


March
      31,
            
            
            December
      31,2009
              (unaudited)
            
            
            2008
              (Revised)ASSETSCurrent
      assets:Cash
      and equivalents
            
            $
            90,179
            
            
            $
            90,463Restricted
      cash and marketable securities
            
            
            4,827
            
            
            
            8,069Accounts
      receivable, net of allowances for doubtful accounts of $4,283 and $4,787
      atMarch
      31, 2009 and December 31, 2008, respectively
            
            
            150,118
            
            
            
            158,689Unbilled
      services
            
            
            78,829
            
            
            
            86,390Prepaid
      expenses and other current assets
            
            
            11,806
            
            
            
            16,880Current
      tax assets
            
            
            595
            
            
            
            595Current
      deferred tax assets
            
            
            9,588
            
            
            
            9,198Total
      current assets
            
            
            345,942
            
            
            
            370,284Property
      and equipment, net
            
            
            63,510
            
            
            
            63,382Equity
      investments
            
            
            1,428
            
            
            
            1,423Goodwill
            
            
            215,705
            
            
            
            215,526Other
      intangibles, net
            
            
            223,179
            
            
            
            226,509Non-current
      deferred tax assets
            
            
            72,143
            
            
            
            75,172Deposits
      and other assets
            
            
            22,619
            
            
            
            20,820Total
      assets
            
            $
            944,526
            
            
            $
            973,116LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
            
            $
            12,076
            
            
            $
            13,417Current
      portion of long-term debt
            
            
            4,266
            
            
            
            4,279Accrued
      payroll, accounts payable and accrued expenses
            
            
            99,821
            
            
            
            129,009Current
      income tax liabilities
            
            
            4,472
            
            
            
            2,736Client
      advances and unearned revenue
            
            
            52,684
            
            
            
            57,223Total
      current liabilities
            
            
            173,319
            
            
            
            206,664Capital
      lease obligations, net of current portion
            
            
            22,828
            
            
            
            25,010Long-term
      debt
            
            
            320,935
            
            
            
            321,828Non-current
      income tax liabilities
            
            
            5,666
            
            
            
            5,636Other
      non-current liabilities
            
            
            44,988
            
            
            
            46,334Total
      liabilities
            
            
            567,736
            
            
            
            605,472Equity:inVentiv
      Health Inc. stockholders’ equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atMarch
      31, 2009 and December 31, 2008, respectively
            
            
            --
            
            
            
            --Common
      stock, $.001 par value, 50,000,000 shares authorized; 33,370,186 and
      33,272,543Shares
      issued and outstanding at March 31, 2009 and December 31, 2008,
      respectively
            
            
            33
            
            
            
            33Additional
      paid-in-capital
            
            
            395,491
            
            
            
            394,560Accumulated
      other comprehensive losses
            
            
            (20,255
            )
            
            
            (20,869
            )Accumulated
      earnings (deficit)
            
            
            1,699
            
            
            
            (6,210
            )Total
      inVentiv Health Inc. stockholders’ equity
            
            
            376,968
            
            
            
            367,514Noncontrolling
      interest
            
            
            (178
            )
            
            
            130Total
      equity
            
            
            376,790
            
            
            
            367,644Total
      liabilities and equity
            
            $
            944,526
            
            
            $
            973,116


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 March 31,2009
            
            
            2008
              (Revised)Net
      revenues
            
            $
            220,984
            
            
            $
            224,578Reimbursable
      out-of-pockets
            
            
            36,668
            
            
            
            37,743Total
      revenues
            
            
            257,652
            
            
            
            262,321Operating
      expenses:Cost
      of services
            
            
            144,486
            
            
            
            142,789Reimbursed
      out-of-pocket expenses
            
            
            36,690
            
            
            
            37,484Selling,
      general and administrative expenses
            
            
            57,154
            
            
            
            62,206Total
      operating expenses
            
            
            238,330
            
            
            
            242,479Operating
      income
            
            
            19,322
            
            
            
            19,842Interest
      expense
            
            
            (5,774
            )
            
            
            (6,382
            )Interest
      income
            
            
            65
            
            
            
            830Income
      from continuing operations before income tax provision and income (loss)
      from equity investments
            
            
            13,613
            
            
            
            14,290Income
      tax provision
            
            
            (5,772
            )
            
            
            (5,642
            )Income
      from continuing operations before income (loss) from equity
      investments
            
            
            7,841
            
            
            
            8,648Income
      (loss) from equity investments
            
            
            17
            
            
            
            (40
            )Income
      from continuing operations
            
            
            7,858
            
            
            
            8,608Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            --
            
            
            
            12Income
      from discontinued operations
            
            
            --
            
            
            
            12Net
      income
            
            
            7,858
            
            
            
            8,620Less:  Net
      loss (income) attributable to the noncontrolling
              Interest
            
            
            51
            
            
            
            (576
            )Net
      income attributable to inVentiv Health Inc.
            
            $
            7,909
            
            
            $
            8,044Earnings
      per share (see Note 7):Continuing
      operations attributable to inVentiv Health Inc.:Basic
            
            $
            0.24
            
            
            $
            0.25Diluted
            
            $
            0.24
            
            
            $
            0.24Discontinued
      operations attributable to inVentiv Health Inc.:Basic
            
            $
            0.00
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            $
            0.00Net
      income attributable to inVentiv Health Inc.:Basic
            
            $
            0.24
            
            
            $
            0.25Diluted
            
            $
            0.24
            
            
            $
            0.24Weighted
      average common shares outstanding:Basic
            
            
            33,351
            
            
            
            32,623Diluted
            
            
            33,460
            
            
            
            33,120





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 Three-Months EndedMarch
      31,2009
            
            
            2008
              (Revised)Cash
      flows from operating activities:Net
      income attributable to inVentiv Health Inc.
            
            $
            7,909
            
            
            $
            8,044Income
      from discontinued operations
            
            
            --
            
            
            
            (12
            )Net
      (loss) income attributable to the noncontrolling
              Interest
            
            
            (51
            )
            
            
            576Income
      from continuing operations
            
            
            7,858
            
            
            
            8,608Adjustments
      to reconcile net income  to net cash  provided by
      operating activities:Depreciation
            
            
            5,360
            
            
            
            4,953Amortization
            
            
            3,154
            
            
            
            3,657Tradename
      writeoff
            
            
            117
            
            
            
            --(Income)
      loss from equity investments
            
            
            (17
            )
            
            
            40Adjustment
      on derivative financial instrument
            
            
            --
            
            
            
            323Deferred
      taxes
            
            
            2,639
            
            
            
            (2,694
            )Adjustment
      on marketable securities
            
            
            (1,682
            )
            
            
            491Stock
      compensation expense
            
            
            2,561
            
            
            
            2,528Tax
      benefit from stock option exercises and vesting of restricted
      shares
            
            
            594
            
            
            
            1,780Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
            
            
            8,571
            
            
            
            29,811Unbilled
      services
            
            
            7,561
            
            
            
            (21,551
            )Prepaid
      expenses and other current assets
            
            
            5,074
            
            
            
            6,085Accrued
      payroll, accounts payable and accrued expenses
            
            
            (12,519
            )
            
            
            (12,974
            )Net
      tax liabilities
            
            
            35
            
            
            
            (7,915
            )Client
      advances and unearned revenue
            
            
            (4,539
            )
            
            
            (10,304
            )Excess
      tax benefits from stock based compensation
            
            
            1,137
            
            
            
            (366
            )Other
            
            
            (3,967
            )
            
            
            7,599Net
      cash provided by continuing operations
            
            
            21,937
            
            
            
            10,071Net
      cash used in discontinued operations
            
            
            (613
            )
            
            
            (144
            )Net
      cash provided by operating activities
            
            
            21,324
            
            
            
            9,927Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
            
            
            4,924
            
            
            
            15,305Investment
      in cash value of life insurance policies
            
            
            1,865
            
            
            
            (583
            )Cash
      paid for acquisitions, net of cash acquired
            
            
            (517
            )
            
            
            (1,263
            )Acquisition
      earn-out payments
            
            
            (16,792
            )
            
            
            (16,234
            )Equity
      investments
            
            
            12
            
            
            
            (67
            )Purchases
      of property and equipment
            
            
            (4,727
            )
            
            
            (5,332
            )Proceeds
      from manufacturers rebates on leased vehicles
            
            
            434
            
            
            
            38Net
      cash used in continuing operations
            
            
            (14,801
            )
            
            
            (8,136
            )Net
      cash provided by discontinued operations
            
            
            613
            
            
            
            156Net
      cash used in investing activities
            
            
            (14,188
            )
            
            
            (7,980
            )Cash
      flows from financing activities:Repayments
      on long-term debt
            
            
            42
            
            
            
            (825
            )Borrowings
      under line of credit
            
            
            (948
            )
            
            
            --Repayments
      on capital lease obligations
            
            
            (4,272
            )
            
            
            (4,414
            )Withholding
      shares for taxes
            
            
            (506
            )
            
            
            (1,025
            )Proceeds
      from exercise of stock options
            
            
            13
            
            
            
            1,357Excess
      tax benefits from stock-based compensation
            
            
            (1,137
            )
            
            
            366Distributions
      to noncontrolling interests in affiliated partnership
            
            
            (257
            )
            
            
            (262
            )Net
      cash (used in) provided by financing activities
            
            
            (7,065
            )
            
            
            (4,803
            )Effect
      of exchange rate changes
            
            
            (355
            )
            
            
            7Net
      change in cash and equivalents
            
            
            (284
            )
            
            
            (2,849
            )Cash
      and equivalents, beginning of period
            
            
            90,463
            
            
            
            50,973Cash
      and equivalents, end of period
            
            $
            90,179
            
            
            $
            48,124Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            5,632
            
            
            $
            5,980Cash
      paid for income taxes
            
            $
            2,580
            
            
            $
            8,982Supplemental
      disclosures of non-cash activities:Vehicles
      acquired through capital lease agreements
            
            $
            3,279
            
            
            $
            7,405Stock
      issuance related to acquisitions
            
            $
            --
            
            
            $
            15,619





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










INVENTIV HEALTH,
INC.




NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued





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 and life sciences
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 bring them to market.  The Company’s
goal is to assist its customers in meeting their objectives in each of its
operational areas by providing our services on a flexible and cost-effective
basis that permits the Company to provide discrete service offerings in focused
areas as well as integrated multidisciplinary solutions.  The Company
provides services to over 350 client organizations, including all top 20 global
pharmaceutical companies and numerous emerging and specialty biotechnology
companies.





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





Business
Segments





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





·
            inVentiv
      Clinical, which provides professional resourcing and 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”), Chamberlain
      Communications Group, Inc. (“Chamberlain”), Addison Whitney, Angela
      Liedler GmbH ("Liedler") and Chandler Chicco Agency
      (“CCA”);




·
            inVentiv
      Commercial, which consists of our outsourced sales and marketing
      teams, planning and analytics services, sample accountability services,
      marketing support services, professional development and training, and
      recruitment of sales representatives in the commercial services
      area.  This segment includes Advance Insights, formerly known as
      inVentiv
      Strategy & Analytics, and inVentiv Selling
      Solutions.  inVentiv Selling Solutions includes Promotech
      Logistics Solutions LLC ("PLS"), acquired in December 2008;
      and




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




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





2.           Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements present the
condensed consolidated balance sheets, condensed consolidated results of
operations and condensed consolidated cash flows of the Company and its
subsidiaries (the "condensed consolidated financial statements"). These
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") and pursuant to the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) related to interim financial
statements. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been
omitted.  The Company believes that the disclosures made herein are
adequate such that the information presented is not misleading. These condensed
consolidated financial statements reflect all adjustments (consisting of only
normal recurring adjustments) that, in the opinion of management, are necessary
to fairly present the Company's condensed consolidated balance sheets as of
March 31, 2009 and December 31, 2008, the condensed consolidated income
statements of the Company for the three-months ended March 31, 2009 and 2008 and
the condensed consolidated cash flows for the three-months ended March 31, 2009
and 2008.  Operating results for the three-months ended March 31, 2009
are not indicative of the results that may be expected for the year ending
December 31, 2009. Certain amounts presented for prior periods have been
reclassified to conform to the current year presentation.  See Note 3
for the retrospective application of SFAS No. 160, “Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51”
(“SFAS 160”).





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, 2008 as
filed with the Securities and Exchange Commission on February 27,
2009.





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 intercompany
transactions have been eliminated in consolidation.  The Company
increased its investment interest from 44% to 85% in Liedler, a service provider
of communication and marketing tools for technical, medical and pharmaceutical
products, located in Germany.  The Company accounted for Liedler as an
equity investment until the acquisition date, and then included its results in
our consolidated results thereafter.





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




3.           Recently
Issued Accounting Standards:




In
April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly”,which
provides additional guidance for estimating fair value in accordance with SFAS
No. 157 when the volume and level of activity for the asset or liability
have decreased significantly. FSP FAS 157-4 also provides guidance on
identifying circumstances that indicate a transaction is not orderly. The
provisions of FSP FAS 157-4 are effective for the Company’s interim period
ending on June 30, 2009. The Company is currently evaluating the effect
that the provisions of FSP FAS 157-4 may have on its condensed consolidated
financial statements.




In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair
Value of Financial Instruments”,which requires disclosures about fair
value of financial instruments in interim reporting periods of publicly traded
companies that were previously only required to be disclosed in annual financial
statements. The provisions of FSP FAS 107-1 and APB 28-1 are effective for the
Company’s interim period ending on June 30, 2009. The Company is currently
evaluating the effect that the provisions of FSP 107-1 and APB 28-1 may have on
its condensed consolidated financial statements.




In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments”,which provides additional guidance
designed to create greater clarity and consistency in accounting for and
presenting impairment losses on securities. The provisions of FSP FAS 115-2 and
FAS 124-2 are effective for the Company’s interim period ending on June 30,
2009.  The Company is currently evaluating the effect that the
provisions of FSP FAS 115-2 and FAS 124-2 may have on its condensed consolidated
financial statements.





In
October 2008, the FASB issued Staff Position No. FSP FAS 157-3 “Determining
the Fair Value of a Financial Asset When the Market for That Asset Is Not
Active” (FSP FAS 157-3) which amends FAS 157 to include guidance on how to
determine the fair value of a financial asset in an inactive market and which is
effective immediately on issuance, including prior periods for which financial
statements have not been issued.  The implementation of FSP
FAS 157-3 did not have a material impact on the Company’s financial
position and results of operations.





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."




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 adopted SFAS 161, effective January 1, 2009, as required.




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)
is  effective January 1, 2009, being applied prospectively for
acquisitions after this date.  Since the Company has not had any
acquisitions that are subject to the provisions of SFAS 141R, we continue to
evaluate the impact of this standard on our condensed consolidated financial
statements; however, this will be mainly dependent on the timing, nature and
extent of our acquisitions consummated after January 1, 2009.  The
Company adopted SFAS 141(R), effective January 1, 2009, as
required.




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.  The Company adopted the
provisions of SFAS 160, effective January 1, 2009, as required.  As a
result of the adoption, the Company has reported noncontrolling interest
(previously minority interest) as a component of equity in the Condensed
Consolidated Balance Sheets and the net income or loss attributable to
noncontrolling interests has been separately identified in the Condensed
Consolidated Income Statements.  The prior periods presented have also
been reclassified to conform to the current classification required by SFAS
160.





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.




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 acquisition 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.  Earnout payments from acquisitions
are generally accrued at the end of an earnout 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 earnout periods
or a multi-year earnout period.  Pro forma financial information was
not required to be disclosed under the Securities and Exchange Commission’s
Regulation S-X for the 2007 and 2008 acquisitions noted below 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.





The
following acquisitions were consummated during 2008:





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





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





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




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





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


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




5.           Restricted
Cash and Marketable Securities





As of March 31, 2009 and December 31,
2008, there were approximately $1.3 million of restricted cash, of which $0.4
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 reflected in the inVentiv Communications
segment.  The beneficiaries have not drawn on the $0.4 million letters
of credit.  As this cash has been pledged as collateral, it is
restricted from use for general purposes and has been classified in restricted
cash and marketable securities at March 31, 2009 and December 31,
2008.





The Company receives cash advances from
its clients as funding for specific projects and engagements. These funds are
deposited into segregated bank accounts and used solely for purposes relating to
the designated projects. Although these funds are not held subject to formal
escrow agreements, the Company considers these funds to be restricted and has
classified these balances accordingly. Cash held in such segregated bank
accounts totaled approximately $0.1 million held in escrow on behalf of clients
and was included in restricted cash and marketable securities at March 31, 2009
and December 31, 2008.





As of March 31, 2009 and December 31,
2008, the Company had $7.2 million and $10.0 million, respectively, invested in
the Columbia Strategic Cash Portfolio (“CSCP”).  Based on an update
provided by CSCP for March 31, 2009, the Company has recorded $3.7 million of
the $7.2 million balance as long-term.  The $3.7 million is classified
as deposits and other assets on the March 31, 2009 Condensed Consolidated
Balance Sheet, which is expected to be distributed after March 31,
2010.  As the majority of the Company’s recorded balances in the CSCP
continue to be short-term in nature, $3.5 million and $6.3 million,
respectively, are classified as restricted cash and marketable securities on the
March 31, 2009 and December 31, 2008 condensed consolidated balance
sheets.  During the periods ended March 31, 2009 and December 31,
2008, the Company recorded no impairment and $2.6 million, respectively,
relating to impairments of the Company's investment in the CSCP, which held
certain asset-backed securities.  Subsequent to March 31, 2009, the
value of the CSCP may materially change depending on market
conditions.  Consistent with the Company's investment policy
guidelines, the majority of CSCP investments had AAA/Aaa credit ratings at the
time of purchase.





The CSCP maintained a net asset value
of $1 per unit until December 2007, after which the net asset value per unit
fluctuated, 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 2010.  Future impairment charges may result depending on
market conditions until the fund is fully liquidated. The $3.4 million
cumulative impairment charge through March 31, 2009 does not have a material
impact on the company's liquidity or financial flexibility.




On
February 27, 2008, we entered into an unsecured credit facility (the “Blue Ridge
facility”) with Blue Ridge Investments, L.L.C., an affiliate of Bank of America,
N.A., to allow the Company to separately borrow up to the current balance
remaining in the CSCP.   We have not borrowed any funds under
this credit facility.  The Blue Ridge facility provides for multiple
drawdowns from time to time until maturity, which shall be the earlier of the
day following the redemption of all of our shares of the CSCP and July 1,
2009.  The outstanding balance under the facility may not (subject to
limited exceptions) exceed our account value in the CSCP, and distributions from
the CSCP must be applied to reduce the outstanding principal balance under the
facility.  Amounts borrowed bear interest at the one-month LIBOR rate
plus 0.35% per annum, fluctuating daily.





6.           Employee
Stock Compensation:




The
Company follows 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.





Stock-based
compensation expense was $2.6 million, of which $0.3 million was recorded in
cost of services and $2.3 million recorded as Selling, General and
Administrative expenses (“SG&A”) for the three months ended March 31, 2009
and $2.5 million, of which $0.5 million was recorded in cost of services and
$2.0 million recorded as SG&A for the three months ended March 31,
2008.





Stock-based
compensation expense caused income before income tax provision and income from
equity investments to decrease by $2.6 million and $2.5 million for the
three months ended March 31, 2009 and 2008, respectively, caused net income to
decrease by $1.5 million for the three months ended March 31, 2009 and 2008, and
caused basic and diluted earnings per share to decrease by $0.05 per share for
the three months ended March 31, 2009 and 2008.





Cash
(used in) provided by financing activities was $(1.1) million and $0.4 million
for the three-months ended March 31, 2009 and 2008, 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
            Three
      Months EndedMarch
      31,
            March
      31,2009
            2008Expected life
      of option
            6
      yrs
            6
      yrsRisk-free
      interest rate
            1.36%
            2.90%Expected
      volatility
            47%
            37%Expected
      dividend yield
            0.00%
            0.00%




The Company analyzed historical trends
in expected volatility and expected life of stock options on a quarterly basis;
during 2009 and 2008 the volatility ranged between of
37%-47%.  As of January 1, 2008, the Company adopted SAB 110 revision
to SAB topic 14 for determining the expected term and the range of the expected
term remained unchanged at 5.5 to 6 years as previously reported under SAB
107.  The Company continues to base the estimate of risk-free rate on
the U.S. Treasury yield curve in effect at the time of grant. The Company has
never paid cash dividends, does not currently intend to pay cash dividends, and
has certain restrictions under its credit facility to pay dividends and thus has
assumed a 0% dividend yield.  These conclusions were based on several
factors, including past company history, current and future trends, comparable
benchmarked data and other key metrics.





As part of the requirements of SFAS
123R, the Company is required to estimate potential forfeitures of stock grants
and adjust compensation cost recorded accordingly.  The forfeiture
rate was estimated based on historical forfeitures.  The estimate of
forfeitures will be adjusted over the requisite service period to the extent
that actual forfeitures differ, or are expected to differ, from such estimates.
Changes in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact the amount of
stock compensation expense to be recognized in future periods.  The
forfeiture rates utilized for the three months ended March 31, 2009 and 2008
were 5.29% and 4.88%, respectively.





Stock Incentive Plan and
Award Activity





The
Company’s 2006 Stock Incentive Plan (“Stock Plan”) authorizes incentive stock
options, nonqualified stock options, restricted stock awards, restricted stock
units and stock appreciation rights ("SARs”).  Prior to the adoption
of the LTIP, the Company was authorized to grant equity incentive awards under
its 1999 Stock Incentive Plan (together with the LTIP, the "Equity Incentive
Plans"), which was terminated at the time the LTIP was adopted.  The
aggregate number of unissued shares of the Company’s common stock that may be
issued under the Stock Plan is 0.2 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 three months ended March 31, 2009 (in thousands, except per share
amounts):




Shares
            Weighted
      Average Exercise Price
            Weighted
      Average Remaining Contractual Term (in years)
            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2009
            1,499
            $22.18
            6.52
            $1,014Granted
      and assumed
            495Exercised
            (2)Forfeited/expired/cancelled
            (1)Outstanding
      at March 31, 2009
            1,991
            $19.38
            7.14
            $283Vested
      and expected to vest at March 31, 2009
            1,909
            $19.47
            7.04
            $283Options
      exercisable at March 31, 2009
            1,040
            $18.52
            5.45
            $283




The
weighted-average grant-date fair value of stock options granted during the
three-months ended March 31, 2009 and 2008 was $4.96 per share and $13.14
per share, respectively.  The total intrinsic value of options
exercised during the three-months ended March 31, 2009 and 2008 was negligible
and $1.4 million, respectively.  As of March 31, 2009 and December 31,
2008, there was approximately $6.2 million and $4.6 million, respectively, of
total unrecognized compensation cost related to nonvested share-based
compensation arrangements granted; that cost is expected to be recognized over a
weighted average of 3.1 years and 2.5 years, respectively.




The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements totaled negligible and $0.6 million for the
three months ended March 31, 2009 and 2008, respectively.









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




Options
outstanding and exercisable have exercise price ranges and weighted average
remaining contractual lives of:





Outstanding Options
            
            Exercisable OptionsExercise
      Price Range
            Numbers
      of Options
            Weighted
      Average Exercise Price
            Weighted
      Average
              Remaining
      Life
              (years)
            Number
      of Options
            Weighted
      Average
              Exercise
      Price$1.66
            To
            $8.45
            212,550
            $6.91
            2.49
            212,550
            $6.91$9.15
            To
            $10.45
            7,050
            $9.50
            4.25
            7,050
            $9.50$10.82
            To
            $10.82
            494,746
            $10.82
            9.79
            --
            $--$10.86
            To
            $15.48
            26,244
            $14.00
            5.25
            26,244
            $14.00$15.96
            To
            $15.96
            250,000
            $15.96
            5.48
            250,000
            $15.96$16.89
            To
            $20.10
            200,052
            $17.40
            5.39
            198,802
            $17.40$20.63
            To
            $26.77
            363,624
            $26.07
            6.91
            225,187
            $25.95$28.66
            To
            $32.55
            281,773
            $31.30
            8.77
            57,222
            $32.06$35.01
            To
            $35.01
            96,822
            $35.01
            7.81
            48,419
            $35.01$37.21
            To
            $37.21
            57,914
            $37.21
            8.25
            14,479
            $37.211,990,775
            
            
            1,039,953


A summary
of the status and changes of the Company’s nonvested shares related to its
restricted shares from equity incentive plans as of and during the three months
ended March 31, 2009 is presented below:





(in
      thousands, except per share amounts)
            Shares
            Weighted
      Average Grant-Date Fair ValueNonvested
      at January 1, 2009
            667
            $30.30Granted
            573
            $10.75Released
            (143)
            $30.76Forfeited
            (10)
            $24.70Nonvested
      at March 31, 2009
            1,087
            $19.96




As of
March 31, 2009 and December 31, 2008, there was approximately $16.6 million and
$12.6 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 3.1
years  and 2.5 years, respectively. The total fair value of shares
vested during the three months ended March 31, 2009 and 2008 was $1.5 million
and $3.1 million, respectively.







7.           Earnings
Per Share (“EPS”):





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







INVENTIV HEALTH,
INC.




NOTES TO
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
Continued





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





Three-Months
      Ended March 31,2009
            
            
            2008Basic
      EPS from Continuing Operations ComputationIncome
      from continuing operations attributable to inVentiv
      Health.Inc.
            
            $
            7,909
            
            
            $
            8,032Weighted
      average number of common shares outstanding
            
            
            33,351
            
            
            
            32,623Basic
      EPS from continuing operations attributable to inVentiv
      Health.Inc.
            
            $
            0.24
            
            
            $
            0.25Diluted
      EPS from Continuing Operations ComputationIncome
      from continuing operations attributable to inVentiv
      Health.Inc.
            
            $
            7,909
            
            
            $
            8,032Weighted
      average number of common shares outstanding
            
            
            33,351
            
            
            
            32,623Stock
      options (1)
            
            
            65
            
            
            
            328Restricted
      stock awards (2)
            
            
            44
            
            
            
            169Total
      diluted common shares outstanding
            
            
            33,460
            
            
            
            33,120Diluted
      EPS from continuing operations attributable to inVentiv
      Health.Inc.
            
            $
            0.24
            
            
            $
            0.24




(1)   For
the three-months ended March 31, 2009 and 2008, 1,697,012 and 340,728 shares,
respectively, were excluded from the calculation of diluted EPS due to the fact
that the shares are considered anti-dilutive because the number of potential
buyback shares is greater than the number of weighted shares
outstanding.





(2) For
the three-months ended March 31, 2009 and 2008, 899,891 and 27,440 shares,
respectively, were excluded from the calculation of diluted EPS due to the fact
that the shares are considered anti-dilutive because the number of potential
buyback shares is greater than the number of weighted shares
outstanding.





8.           Significant
Clients:





During
the three-months ended March 31, 2009 and 2008 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)
            inVentiv
              Clinical
            inVentiv
      Communications
            inVentiv
      Commercial
            inVentiv
      Patient Outcomes
            Other
            TotalBalance
      as of January 1, 2008
            $56,944
            $190,958
            $45,773
            $90,039
            --
            $383,714Goodwill
      acquired during the year
            --
            --
            1,561
            5,202
            --
            6,763Goodwill
      through contingent consideration(1)
            32
            31,127
            --
            12,153
            --
            43,312Goodwill
      allocation(2)
            --
            (6,674)
            --
            --
            --
            (6,674)Other
      adjustments
            186
            863(4)
            --
            --
            --
            1,049Impairment
      losses(3)
            (41,344)
            (112,667)
            --
            (58,627)
            --
            (212,638)Balance
      as of December 31, 2008
            $15,818
            $103,607
            $47,334
            $48,767
            --
            $215,526Goodwill
      through contingent consideration(1)
            --
            119
            --
            --
            --
            119Goodwill
      allocation(5)
            --
            --
            60
            --
            --
            60Balance
      as of March 31, 2009
            $15,818
            $103,726
            $47,394
            $48,767
            --
            $215,705





(1)
            The
      contingent consideration represents adjustments relating to the
      finalization of the earnouts for the twelve months ended December 31 each
      year and March 31 for 2008.


(2)
            The
      amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the final valuation, completed
      during 2008, for the Liedler acquisition, which was acquired on December
      28, 2007.  Under 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 2007
      10-K was filed.


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


(4)
            This
      amount relates to a tax adjustment on the Chamberlain acquisition
      accounted for under EITF 93-7 Uncertainties Related to Income Taxes in a
      Purchase Business Combination.


(5)
            The
      amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the PLS
      acquisition.  Identifiable intangible assets were allocated at
      December 31, 2008, but were revised accordingly based on finalization of
      the valuation, as allowed under SFAS
141.




Other intangible assets consist of the
following:





March
      31, 2009
            
            
            December
      31, 2008(in
      thousands)
            
            
            
            
            Accumulated
            
            
            
            
            
            
            
            
            AccumulatedGross
            
            
            Amortization
            
            
            Net
            
            
            Gross
            
            
            Amortization
            
            
            NetCustomer
      relationships
            
            $
            113,836
            
            
            $
            (29,897
            )
            
            $
            83,939
            
            
            $
            113,896
            
            
            $
            (27,177
            )
            
            $
            86,719Technology
            
            
            14,168
            
            
            
            (4,692
            )
            
            
            9,476
            
            
            
            14,168
            
            
            
            (4,497
            )
            
            
            9,671Noncompete
      agreement
            
            
            1,506
            
            
            
            (965
            )
            
            
            541
            
            
            
            1,506
            
            
            
            (911
            )
            
            
            595Tradenames
      subject to amortization
            
            
            2,158
            
            
            
            (902
            )
            
            
            1,256
            
            
            
            2,275
            
            
            
            (790
            )
            
            
            1,485Other
            
            
            1,233
            
            
            
            (756
            )
            
            
            477
            
            
            
            1,232
            
            
            
            (683
            )
            
            
            549Total
      definite-life intangibles
            
            
            132,901
            
            
            
            (37,212
            )
            
            
            95,689
            
            
            
            133,077
            
            
            
            (34,058
            )
            
            
            99,019Tradenames
      not subject to amortization (1)
            
            
            127,490
            
            
            
            --
            
            
            
            127,490
            
            
            
            127,490
            
            
            
            --
            
            
            
            127,490Total
      other intangibles (2)
            
            $
            260,391
            
            
            $
            (37,212
            )
            
            $
            223,179
            
            
            $
            260,567
            
            
            $
            (34,058
            )
            
            $
            226,509





(1)
            These
      indefinite-life tradenames arose primarily from acquisitions where the
      brand names of the entities acquired are very strong and
      longstanding.  These tradenames are also supported annually in
      the Company’s impairment test for goodwill and tradenames conducted in
      June of every year and the interim impairment test performed at December
      31, 2008.


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





The
Company has the following identifiable intangible assets:





Intangible
      asset
            
            Amount
              (in
      thousands)
            
            
            Weighted
      average amortization periodTradename
            
            $
            129,648
            
            
            
            (1
            )Customer
      relationships
            
            
            113,836
            
            
            10.8
      yearsTechnology
            
            
            14,168
            
            
            14.3
      yearsNoncompete
      agreement
            
            
            1,506
            
            
            4.5
      yearsOther
            
            
            1,233
            
            
            4.5
      yearsTotal
            
            $
            260,391





(1)
            $2.3
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 4.8
  years.




Amortization
expense, based on intangibles subject to amortization held at March 31, 2009, is
expected to be $9.3 million for the remainder of 2009, $12.0 million in 2010,
$11.6 million in 2011, $11.5 million in 2012, $10.2 million in 2013 and $41.2
million thereafter.





The
balances recorded on the Company’s Condensed Balance Sheet for goodwill and
other indefinite-life intangibles, such as tradenames, are assessed annually for
potential impairment as of June 30, pursuant to the guidelines of SFAS 142,
Goodwill and Other Intangible
Assetsand SFAS 144,Accounting for the Impairment of or Disposal of Long-Lived Assets. The
Company performed annual impairment tests as of June 30, 2008 and concluded that
the existing goodwill and indefinite lived intangible tradename balances were
not impaired.  During the fourth quarter of 2008, as a result of
adverse equity market conditions that caused a decrease in the current market
multiples and the company’s stock price, the Company concluded that a triggering
event had occurred indicating potential impairment, and accordingly recorded an
impairment charge of approximately $268 million, pursuant to the results of the
impairment test performed on its goodwill and other intangible assets at
December 31, 2008.   The Company does not believe that an
event occurred or circumstances changed that would more-likely-than-not reduce
the fair value of the Company’s reporting units below their carrying amounts,
inclusive of the impairment charge noted above, as of March 31,
2009.  As the Company’s annual impairment testing is June 30 of each
year, any changes in economic conditions or  other factors subsequent
to March 31, 2009 will be evaluated as part of June 30, 2009 impairment
testing.




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




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 primarily relates to our
marketable securities, deferred compensation plan and derivative
contracts.




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




SFAS 157
includes a fair value hierarchy that is intended to increase consistency and
comparability in fair value measurements and related disclosures. The fair value
hierarchy is based on inputs to valuation techniques that are used to measure
fair value that are either observable or unobservable. Observable inputs reflect
assumptions market participants would use in pricing an asset or liability based
on market data obtained from independent sources while unobservable inputs
reflect a reporting entity’s pricing based upon their own market assumptions.
The fair value hierarchy consists of the following three levels:




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





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





(in
      thousands)
            Total
      Fair Value Measurement March 31, 2009
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            Significant
      Other Observable Inputs
              (Level
      2)
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            $7,197
            --
            --
            $7,197Deferred
      Compensation
              Plan
      Assets
            7,229
            --
            7,229
            --TOTAL
      ASSETS
            $14,426
            --
            $7,229
            $7,197LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            7,277
            --
            7,277
            --Derivative
      Liabilities
            29,163
            --
            --
            29,163TOTAL
      LIABILITIES
            $36,440
            --
            $7,277
            $29,163





(1) – As
described in Note 5, the Level 3 marketable securities balance of $7.2 million
includes $3.5 million classified as restricted cash and marketable securities
and $3.7 million as deposits and other assets, respectively, on the Company’s
March 31, 2009 Condensed Consolidated Balance Sheet.





As a
result of market conditions related to the interest rate environment, the
Company updated its valuation of its five-year interest rate derivative as of
March 31, 2009, resulting in a credit value adjustment of $4.9 million to the
derivative liability, with a corresponding offset to Other Comprehensive Income
as a result of cash flow hedge accounting (see Note 13).  This
valuation, which involved current and future probability-adjusted risk factors,
included inputs derived from valuation techniques in which one or more
significant inputs were unobservable, classifying this as a Level 3 input under
the definition described above.  The significant inputs in this
valuation included credit market spread, estimated exposure and company and
counterparty default risk.





As a
result of the decrease in available investment prices from September 30, 2008 to
December 31, 2008 due to market conditions, the Company changed its
classification of marketable securities from a Level 2 input to a Level 3
input.    The Company incurred a $2.6 million impairment
charge during 2008, of which $2.0 million was in the fourth quarter of 2008 and
primarily related to the lack of liquidity and resulting distressed values of
investments in the marketplace.  These factors resulted in a
significant percentage of the securities within CSCP that required unobservable
inputs, which was not materially present through September 30,
2008.  These significant inputs included interest rate curves, credit
curves and creditworthiness of the counterparty.  The classification
and significant unobservable inputs remained consistent for the period ended
March 31, 2009.   There were no changes to the presentation of
the CSCP in the condensed consolidated financial statements as a result of the
Level 2 input to Level 3 input change.





The
following is a rollforward of the Level 3 assets and liabilities through March
31, 2009:





Fair
      Value Measurements(in
      thousands)
            Using
      Significant Unobservable Inputs (Level 3)ASSETS
            CSCPBalance
      at January 1, 2009
            $9,999Included
      in earnings (or changes in net assets)
            --Included
      in other comprehensive income
            --Purchases,
      issuances and settlements
            (2,802)Transfers
      in and/or out of Level 3
            --Balance
      at March 31, 2009
            $7,197LIABILITIES
            DerivativeBalance
      at January 1, 2009
            $30,783Included
      in earnings (or changes in net assets)
            --Included
      in other comprehensive income
            (1,008)Deferred
      tax impact of other comprehensive income
            (612)Transfers
      in and/or out of Level 3
            --Balance
      at March 31, 2009
            $29,163





11.           Debt:




On July
6, 2007, the Company entered into an Amended and Restated Credit Agreement (“the
Credit Agreement”) with UBS AG, Stamford Branch and others. The Credit Agreement
provides for a secured term loan of $330 million which was made available to
inVentiv in a single drawing, up to $20 million in additional term loans
(“delayed draw term loans”) that was available to be advanced no later than
January 6, 2008, which we elected to not draw, a $50 million revolving credit
facility, of which $10 million is available for the issuance of letters of
credit, and a swingline facilty.  The Credit Agreement was used
to:




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




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




The term
loan will mature on the seventh anniversary of the Credit Agreement, with
scheduled quarterly amortization of 1% per year during years one through six and
94% during year seven.  The revolving loans will mature on the sixth
anniversary of the Credit Agreement. Amounts advanced under the Credit Agreement
must be prepaid with a percentage, determined based on a leverage test set forth
in the Credit Agreement, of Excess Cash Flow (as defined in the Credit
Agreement) and the proceeds of certain non-ordinary course asset sales, certain
issuances of debt obligations and 50% of certain issuances of equity securities
of inVentiv and its subsidiaries, subject to certain exceptions. inVentiv may
elect to prepay the loans, in whole or in part at any time, in certain minimum
principal amounts, without penalty or premium (other than normal LIBOR break
funding costs). Amounts borrowed under the Credit Agreement in respect of term
loans that are repaid or prepaid may not be reborrowed. Amounts borrowed under
the Credit Agreement in respect of revolving loans may be paid or prepaid and
reborrowed.




Interest
on the loans will accrue, at inVentiv's election, at either (1) the Alternate
Base Rate (which is the greater of UBS's prime rate and federal funds effective
rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest periods
determined at inVentiv's option of 1, 2, 3 or 6 months (or, if the affected
lenders agree, 9 months), in each case plus a spread based equal to 0.75% for
Alternate Base Rate loans and 1.75% for Adjusted LIBOR Rate loans.




The
Credit Agreement contains, among other things, conditions precedent,
representations and warranties, covenants and events of default customary for
facilities of this type. Such covenants include certain limitations on
indebtedness, liens, sale-leaseback transactions, guarantees, fundamental
changes, dividends and transactions with affiliates. The Credit Agreement also
includes a financial covenant under which inVentiv is required to maintain a
total leverage ratio that does not exceed, as of the last day of any four
consecutive fiscal quarters, 4.0 to 1.0 through December 31, 2009 and 3.5 to 1.0
thereafter.  The Company’s leverage ratio was 2.36 to 1.0 as of March
31, 2009, which is in compliance with the financial covenant.




Under
certain conditions, the lending commitments under the Credit Agreement may be
terminated by the lenders and amounts outstanding under the Credit Agreement may
be accelerated. Such events of default include failure to pay any principal,
interest or other amounts when due, failure to comply with covenants, breach of
representations or warranties in any material respect, non-payment or
acceleration of other material debt of inVentiv and its subsidiaries,
bankruptcy, insolvency, material judgments rendered against inVentiv or certain
of its subsidiaries or a 40% change of control of inVentiv, subject to various
exceptions and notice, cure and grace periods.




The
Company has the intent and ability to choose the three-month LIBOR base rate for
the duration of the term of the Credit Agreement.  The three-month
LIBOR base rate as of March 31, 2009 and December 31, 2008 was 1.19% and 1.43%,
respectively.  As disclosed in Note 13, the Company has a derivative
financial instrument, currently with a notional amount of $324 million, to hedge
against the current term loan facility.




The
Company accounts for amendments to its revolving credit facility under the
provisions of EITF Issue No. 98-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 98-14), and
its term loan under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 96-19). In
amending its revolving credit facility, deferred financing costs are being
amortized over the term of the new arrangement since the borrowing capacity
increased in the new loan, per the guidance in EITF 98-14.  In
connection with an amendment of our existing $164 million term loan, under the
terms of EITF 96-19, bank and any third-party fees were deferred and
amortized over the term of the Credit Agreement since the old and new debt
instruments were not substantially different.  The unamortized portion
of the deferred financing costs were approximately $3.7 million and
$3.9 million and are included in Deposits and Other Assets on the Condensed
Consolidated balance sheets as of March 31, 2009 and December 31, 2008,
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 $3.7 million and $7.4 million (including $0.4 million of
rebates and negligible rebates, respectively) during the three-months ended
March 31, 2009 and 2008, respectively.  The Company also incurred net
disposals of $3.4 million and $7.5 million during the three-months ended March
31, 2009 and 2008, respectively.





13.           Derivative
Financial Instrument:




SFAS No.
133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”),
as amended, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities.  It requires the recording of
all derivatives as either assets or liabilities on the balance sheet measured at
estimated fair value and the recognition of the unrealized gains and
losses.  We record the fair market value of our derivatives as other
assets and other liabilities within our consolidated balance
sheet.  Derivatives that are not part of hedge relationships are
recorded at fair market value on our Consolidated Balance Sheet with the
offsetting adjustment to interest expense on our Consolidated Income
Statement.  For hedge relationships designated as cash flow hedges
under SFAS 133, changes in fair value of the effective portion of a designated
cash flow hedge are recorded to other comprehensive income or loss; the
ineffective portion is recorded to interest expense in our consolidated income
statement.




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





On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount that increased to $325 million effective
December 31, 2008 (concurrently with the expiration of the Company’s original
2005 three-year interest rate swap arrangement) to hedge the total outstanding
debt notional amount.  This hedge relationship was designated as a
cash flow hedge.  At hedge inception, the Company employed the dollar
offset method by performing a sensitivity analysis to assess effectiveness and
utilized the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  The fair value of the
derivative, net of credit value adjustment, was approximately $29.2 million and
$30.8 million as of March 31, 2009 and December 31, 2008, respectively, and was
recorded in other non-current liabilities.  As a result of the
hypothetical derivative method, there was no ineffectiveness for the period
ended March 31, 2009, and accordingly, $1.6 million ($1.0 million, net of taxes)
was recorded as a decrease to Other Comprehensive Income and an increase to
other non-current liabilities on the Company’s Condensed Consolidated Balance
Sheet.  This change in Other Comprehensive Income includes the $4.9
million credit value adjustment as discussed in Note 10.  The amount
of loss reclassified from accumulated other comprehensive income into interest
expense for the three months ended March 31, 2009 was approximately $2.8
million.





Based on
current assumptions regarding the interest rate environment and other market
conditions at March 31, 2009, the estimated amount of accumulated other
comprehensive income that is expected to be reclassified into interest expense
under our hedge relationships within the next 12 months is $12.1
million.





14.           Commitments
and Contingencies:





The
Company is subject to lawsuits, investigations and claims arising out of the
conduct of its business, including those related to commercial transactions,
contracts, government regulation and employment matters. Certain claims, suits
and complaints have been filed or are pending against the
Company.   Certain such claims that are pending against Adheris
and PRS are described in Part I, Item 3 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2008. With the exception of the
claims described therein, all pending matters are of a kind routinely
experienced in our business and are consistent with our historical
experience.  In the opinion of management, taking into account the
advice of legal counsel, no matters outstanding as of March 31, 2009 are likely
to have a material adverse effect on inVentiv.





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 $7.3 million and $6.8 million were included in other non-current
liabilities in the Company’s Condensed Consolidated Balance Sheets as of March
31, 2009 and December 31, 2008.  The NQDC Plan does not provide for
the payment of above-market interest to participants.





To assist
in the funding of the NQDC Plan obligation, the Company participates in a
corporate-owned life insurance program in a rabbi trust whereby it purchases
life insurance policies covering the lives of certain employees, with the
Company named as beneficiary.  Rabbi trusts are grantor trusts
generally set up to fund compensation for a select group of management or highly
paid executives.  The cash value of the life insurance policy at March
31, 2009 and December 31, 2008 was approximately $6.9 million and $5.1 million,
respectively, and is currently classified in Deposits and Other Assets on the
Company’s Condensed Consolidated Balance Sheets. In addition, approximately $0.3
million and $1.6 million as of March 31, 2009 and December 31, 2008,
respectively, were invested in mutual funds and classified in Prepaid expenses
and other current assets on our Condensed Consolidated Balance
Sheets.





16.           Income
Taxes





The
effective tax rate for the three-month period ended March 31, 2009 was 42.2%.
The rate includes a tax detriment of 1% due to the settlement of various state
audits.  The effective rate for the three-month period ended March 31,
2008 was 41.3%. 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 gross
amount of unrecognized tax benefit was $5.3 million as of December 31, 2008 and
$4.7 million as of March 31, 2009.  Included in this balance were
positions totaling $0.9 million as of December 31, 2008, and March 31, 2009 that
if recognized, would affect the effective tax rate.





The
Company recognizes potential interest and penalties related to unrecognized tax
benefits in income tax expense.  The total amount of accrued interest
and penalties recorded as of December 31, 2008 and March 31, 2009 was $2.6
million and $2.3 respectively.





The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction, and various states and foreign jurisdictions.  The
Company is no longer subject to U.S. federal income tax examinations for years
before 2005 and generally, is no longer subject to state and local income tax
examinations by tax authorities for years before 2004.





Management
has concluded that it is reasonably possible that the unrecognized tax benefits
will decrease by approximately $2.5 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.           Equity





The following table describes the 2009
activity in the Company’s Total’ Equity accounts for the three-months ended
March 31, 2009:








inVentiv
      Health Inc Shareholders(in
      thousands, except share amounts)
            Common
      Stock
            Additional
      Paid-In
              Capital
            Accumulated
      (deficit) earnings
            Compre-hensive
              Income
            Accumulated
      Other Comprehen-sive Losses (1)
            Noncontroll-ing
      Interest
            TotalBalance
      at December 31, 2008
            $33
            $394,560
            ($6,210)
            --
            $(20,869)
            $130
            $367,644Net
      income
            
            
            7,909
            
            
            (51)
            7,858Net
      change in effective portion of
              derivative,
      net of taxes
            
            
            
            1,008
            1,008
            
            1,008Unrealized
      gain on marketable securities
            
            
            
            58
            58
            
            58Foreign
      currency translation
              Adjustment
            
            
            
            (452)
            (452)
            
            (452)614Restricted
      stock expense
            
            1,775
            
            
            
            
            1,775Withholding
      shares for taxes
            
            (506)
            
            
            
            
            (506)Tax
      expense from exercise of
              employee
      stock options and vesting
              of
      restricted stock
            
            (1,137)
            
            
            
            
            (1,137)Proceeds
      from exercise of stock
              Options
            
            13
            
            
            
            
            13Stock
      option expense
            
            786
            
            
            
            
            786Distributions
            
            
            
            
            
            (257)
            (257)Balance
      at March 31, 2009
            $33
            $395,491
            $1,699
            
            $(20,255)
            (178)
            $376,790





(1) As of
March 31, 2009 Accumulated Other Comprehensive Losses consists of a $3.1 million
loss 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 noncontrolling interest in our foreign business units,
a $0.1 million unrealized gain from marketable securities as well as other
comprehensive losses of approximately $17.3 million, net of taxes, that relates
to the effective portion of the Company’s derivative instruments, as described
in Note 13.





18.           Related
Parties:





Several inVentiv business units
provided services to Cardinal Health, Inc. (“Cardinal”) during
2009.  Revenues generated for services provided to Cardinal totaled
approximately $0.2 million and $0.5 million for the periods ended March
31, 2009 and December 31, 2008, respectively.  Robert Walter, who
is the father of R. Blane Walter, our CEO, served as Executive Chairman, and
subsequently as an Executive Director, of Cardinal during 2007 and
2008.  R. Blane Walter and his immediate family members (including
Robert Walter) and related trusts own approximately 2.4% of the outstanding
capital stock of Cardinal.  All transactions between the Company and
Cardinal were on arms'-length terms and were negotiated without the involvement
of any members of the Walter family.





The
Company, through its Promotech business unit, purchased warehouse consulting and
procurement services from South Atlantic Systems Group ("SAS") commencing in
2007.  These contractual arrangements with SAS have been completed for
2008 and provided for total payments of approximately $0.8 million. Mark
Teixeira, who is the brother-in-law of David Bassin, our Chief Financial
Officer, is the General Manager for South Atlantic Systems and was granted an
11.6% equity interest in SAS as of December 31, 2007.





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





19.           Segment
Information:





The
Company currently manages four operating segments: inVentiv Clinical, inVentiv
Communications, inVentiv Commercial and inVentiv Patient Outcomes, and its
non-operating reportable segment, “Other”, which is based on the way management
makes operating decisions and assesses performance.  The following
represents the Company’s reportable segments as of March 31, 2009:





·
            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 pharmaceutical
      compliance programs, patient support programs, clinical educator teams,
      medical cost containment and consulting solutions and patient relationship
      marketing.





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








Three-months
ended March 31, 2009 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            51,218
            
            
            $
            71,352
            
            
            $
            107,320
            
            
            $
            32,396
            
            
            
            --
            
            
            $
            262,286Less:
      Intersegment revenues
            
            
            (48
            )
            
            
            (421
            )
            
            
            (4,097
            )
            
            
            (68
            )
            
            
            --
            
            
            
            (4,634
            )Reported
      Revenues
            
            $
            51,170
            
            
            $
            70,931
            
            
            $
            103,223
            
            
            $
            32,328
            
            
            
            --
            
            
            $
            257,652Depreciation
      and amortization
            
            
            562
            
            
            
            2,485
            
            
            
            4,310
            
            
            
            1,147
            
            
            
            10
            
            
            
            8,514Interest
      expense
            
            
            --
            
            
            
            19
            
            
            
            111
            
            
            
            2
            
            
            
            5,642
            
            
            
            5,774Interest
      income
            
            
            1
            
            
            
            --
            
            
            
            --
            
            
            
            28
            
            
            
            36
            
            
            
            65Segment
      income (loss) (1)
            
            $
            1,511
            
            
            $
            9,867
            
            
            $
            6,941
            
            
            $
            5,943
            
            
            $
            (10,649
            )
            
            $
            13,613








Three-months
ended March 31, 2008 (in thousands):





inVentiv
              Clinical
            
            
            inVentiv
      Communications
            
            
            inVentiv
      Commercial
            
            
            inVentiv
      Patient Outcomes
            
            
            Other
            
            
            TotalRevenues
            
            $
            52,186
            
            
            $
            88,494
            
            
            $
            93,724
            
            
            $
            29,898
            
            
            $
            --
            
            
            $
            264,302Less:
      Intersegment revenues
            
            
            (101
            )
            
            
            (220
            )
            
            
            (1,660
            )
            
            
            --
            
            
            
            --
            
            
            
            (1,981
            )Reported
      Revenues
            
            $
            52,085
            
            
            $
            88,274
            
            
            $
            92,064
            
            
            $
            29,898
            
            
            $
            --
            
            
            $
            262,321Depreciation
      and amortization
            
            
            547
            
            
            
            2,519
            
            
            
            4,231
            
            
            
            1,301
            
            
            
            12
            
            
            
            8,610Interest
      expense
            
            
            --
            
            
            
            17
            
            
            
            429
            
            
            
            1
            
            
            
            5,935
            
            
            
            6,382Interest
      income
            
            
            49
            
            
            
            235
            
            
            
            --
            
            
            
            17
            
            
            
            529
            
            
            
            830Segment
      income (loss) (1)
            
            $
            2,955
            
            
            $
            12,638
            
            
            $
            4,486
            
            
            
            4,764
            
            
            $
            (10,553
            )
            
            $
            14,290




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




(in
      thousands)
            
            March
      31, 2009
            December
      31, 2008Total
      Assets:inVentiv
      Clinical
            
            $
            102,514
            $
            $97,162inVentiv
      Communications
            
            
            368,354
            
            377,123inVentiv
      Commercial
            
            
            181,798
            
            205,910inVentiv
      Patient Outcomes
            
            
            138,688
            
            134,355Other
            
            
            153,172
            
            158,566Total
      assets
            
            $
            $944,526
            $
            $973,116





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





This
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements, accompanying notes and other financial information included in the
Annual Report on Form 10-K for the year ended December 31, 2008.





Overview





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





Our
service offerings reflect the changing needs of our clients as their products
move through the late-stage development and regulatory approval processes and
into product launch and then throughout the product lifecycle.  We
have established expertise and leadership in providing the services our clients
require at each of these stages of product development and commercialization and
seek to address their outsourced service needs on a comprehensive basis
throughout the product lifecycle.  For payors, we provide 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 serve
our clients primarily through four business segments, which correspond to our
reporting segments for 2009:





·
            inVentiv
      Clinical, which provides professional resourcing and services to
      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”), Chamberlain
      Communications Group, Inc. (“Chamberlain”), Addison Whitney, Angela
      Liedler GmbH (“Liedler”) and Chandler Chicco Agency
    (“CCA”);




·
            inVentiv
      Commercial, which consists of our outsourced sales and marketing
      teams, planning and analytics services, sample accountability services,
      marketing support services, professional development and training, and
      recruitment of sales representatives in the commercial services
      area.  This segment includes Advance Insights, formerly known as
      inVentiv Strategy & Analytics and inVentiv Selling Solutions. 
      inVentiv Selling Solutions includes Promotech Logistics Solutions LLC
      ("PLS"), acquired in December 2008;
and




·
            inVentiv Patient
      Outcomes,  which provides services related to patient
      pharmaceutical compliance programs, patient support programs, clinical
      educator teams, medical cost containment and consulting solutions and
      patient relationship marketing.  This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute, AWAC (acquired in July 2007) and Patient Marketing Group, LLC.
      (“PMG”) (acquired in August 2008).




Outsourcing
Trends and the Current Economic Environment





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.  Current economic conditions in the U.S. and abroad
make it difficult for us to predict the near-term performance of our
businesses.  Although the pharmaceutical industry is generally
regarded as non-cyclical, the current recessionary environment has impacted and
can be expected to further impact virtually all economic activity in the United
States and abroad, including in the pharmaceutical and life sciences industry,
and is resulting in increased budget scrutiny and efforts to significantly
reduce expenditures in all areas of our clients' businesses.





Our
inVentiv Communications division has been affected since 2008 by the
tentativeness of clients to make marketing spend decisions, as evidenced by,
among other things, longer lead times by our clients in developing their
marketing budgets.  Increased sales during latter part of the first
quarter indicate that conditions may be stabilizing or improving.  We
believe that our clients are intently focused on their short-term spending and
cost-cutting efforts, and are continuing to look for ways to streamline their
operations.  Some clients are reducing marketing expenditures through
reducing the scopes of agency projects and delaying decisions on new marketing
initiatives.  The consequence has been to shift the revenue
opportunities for our inVentiv Communications division away from supporting
in-market products, where margins have traditionally been the most
attractive.





Client
budgeting constraints and reductions in overall pharmaceutical marketing
expenditures have also impacted our inVentiv Patient Outcomes
division.  Again, increased sales during latter part of the first
quarter indicate that conditions may be stabilizing or improving.





An
offsetting and longer-term positive trend for us is that our clients appear to
be adopting clear strategies to outsource more of their pharmaceutical marketing
expenditures in lower cost and more flexible solutions consistent with what
inVentiv offers.  Our sale of integrated, multi-service offerings
increased significantly during the first quarter of 2009 and we believe that
integrated offerings, which represented 15% of revenues during the quarter, are
a significant area of opportunity in the future.





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





·
            reducing
      fixed cost headcount;


·
            our
      "in balance" staffing initiative, through which we are
      converting  FTE's to hourly positions that can be billed in
      direct response to the requirements of our client
    engagements;


·
            completion
      of our "super studio" in Columbus, Ohio, which will increase utilization
      and efficiency by allowing the management of project-based graphic design
      and production needs for agencies across the Communications
      division;


·
            negotiation
      of favorable rates with our vendors;
and


·
            completion
      of implementation of our Peoplesoft software to manage enterprise-wide
      resources.





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




Regulatory Uncertainty





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





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




Business
Strategy





Although
certain areas of our business have slowed during recent quarters as a result of
the current trends discussed above, our businesses have generated strong overall
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.  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.  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.  When relationships do not
renew, we have been successful in redeploying personnel quickly and
efficiently.





Strategic
acquisitions have been a core element of our business strategy since
2004.  Acquisitions contributed significantly to our annual revenue
growth over the last few years.  We expect to be more selective and
execute fewer acquisitions going forward.  We will continue to
evaluate our strategic position and intend to make opportunistic acquisitions
that enable us to expand the scope of our service offerings and drive
shareholder value.





Our
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.





No new
acquisitions were consummated during the first quarter of 2008 or 2009 and,
accordingly, no revenues were generated from acquisitions during those
periods.  However, our acquisitions of PLS and PMG during the second
half of 2008 contributed to certain quarterly variances, as compared with prior
year periods, within the Commercial and Patient Outcomes’
segments.  See -- Results of Operations below.





International
Operations





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





Division
            Location
            Percent
      Ownership
            Put/Call
      OptionsinVentiv
      Communications
            United
      Kingdom
            100%France
            100%Canada
            100%Germany
      (Liedler)
            85%
            inVentiv
      has the option to acquire the remaining 15% equity interestItaly
            37.5%Germany
      (Haas and Health)
            19.9%
            inVentiv
      may acquired an additional 60.1% within 90 days following calendar year
      2010, and the remaining 20% for a period of 90 days following the third
      anniversary of the acquisition of the 60.1% equity
  interestSweden
            15%inVentiv
      Clinical
            Mexico
            100%Brazil
            100%India
            100%
            Sciformix
      Corp. has option to acquire 20% of joint venture entity through January
      2010inVentiv
      Commercial
            Japan
            100%Canada
            100%Puerto
      Rico
            100%




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





Critical
Accounting Policies





The Company’s critical accounting
policies are described in its Annual Report on Form 10-K for the year ended
December 31, 2008.  There has been no material change, update or
revision to the Company’s critical accounting policies.







Three-Months
Ended March 31, 2009 Compared to Three-Months Ended March 31, 2008





Results
of Operations





The
following sets forth, for the periods indicated, certain components of our
operating earnings, including such data stated as percentage of
revenues:




(in
      thousands, except for per share data)
            
            For
      the Three-Months Ended March 31,2009
            
            
            2008Revenues:
            
            
            
            
            Percentage
      (1)
            
            
            
            
            
            Percentage(1)inVentiv
      Clinical
            
            $
            51,170
            
            
            
            19.9
            %
            
            $
            52,085
            
            
            
            19.9
            %inVentiv
      Communications
            
            
            70,931
            
            
            
            27.5
            %
            
            
            88,274
            
            
            
            33.6
            %inVentiv
      Commercial
            
            
            103,223
            
            
            
            40.1
            %
            
            
            92,064
            
            
            
            35.1
            %inVentiv
      Patient Outcomes
            
            
            32,328
            
            
            
            12.5
            %
            
            
            29,898
            
            
            
            11.4
            %Total
      revenues
            
            
            257,652
            
            
            
            100.0
            %
            
            
            262,321
            
            
            
            100.0
            %Cost
      of services (1)
      (2):inVentiv
      Clinical
            
            
            38,529
            
            
            
            75.3
            %
            
            
            36,529
            
            
            
            70.1
            %inVentiv
      Communications
            
            
            38,875
            
            
            
            54.8
            %
            
            
            49,595
            
            
            
            56.2
            %inVentiv
      Commercial
            
            
            84,806
            
            
            
            82.2
            %
            
            
            75,657
            
            
            
            82.2
            %inVentiv
      Patient Outcomes
            
            
            18,966
            
            
            
            58.7
            %
            
            
            18,492
            
            
            
            61.9
            %Total
      cost of services
            
            
            181,176
            
            
            
            70.3
            %
            
            
            180,273
            
            
            
            68.7
            %Selling,
      general and administrative expenses:inVentiv
      Clinical
            
            
            11,131
            
            
            
            21.8
            %
            
            
            12,650
            
            
            
            24.3
            %inVentiv
      Communications
            
            
            22,161
            
            
            
            31.2
            %
            
            
            26,258
            
            
            
            29.8
            %inVentiv
      Commercial
            
            
            11,365
            
            
            
            11.0
            %
            
            
            11,491
            
            
            
            12.5
            %inVentiv
      Patient Outcomes
            
            
            7,445
            
            
            
            23.0
            %
            
            
            6,659
            
            
            
            22.3
            %Other
            
            
            5,052
            
            
            
            --
            
            
            
            5,148
            
            
            
            --Total
      selling, general and administrative expenses
            
            
            57,154
            
            
            
            22.2
            %
            
            
            62,206
            
            
            
            23.7
            %Total
      operating income
            
            
            19,322
            
            
            
            7.5
            %
            
            
            19,842
            
            
            
            7.6
            %Interest
      expense
            
            
            (5,774
            )
            
            
            (2.2
            )%
            
            
            (6,382
            )
            
            
            (2.4
            )%Interest
      income
            
            
            65
            
            
            
            --
            
            
            
            830
            
            
            
            0.3
            %Income
      from continuing operations before income tax provision
              and
      income (loss) from equity investments
            
            
            13,613
            
            
            
            5.3
            %
            
            
            14,290
            
            
            
            5.5
            %Income
      tax provision
            
            
            (5,772
            )
            
            
            (2.3
            )%
            
            
            (5,642
            )
            
            
            (2.2
            )%Income
      from continuing operations before income (loss) from equity
      investments
            
            
            7,841
            
            
            
            3.0
            %
            
            
            8,648
            
            
            
            3.3
            %Income
      (loss) from equity investments
            
            
            17
            
            
            
            --
            
            
            
            (40
            )
            
            
            --Income
      from continuing operations
            
            
            7,858
            
            
            
            3.0
            %
            
            
            8,608
            
            
            
            3.3
            %Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
            
            
            --
            
            
            
            --
            
            
            
            12
            
            
            
            --Income
      from discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            12
            
            
            
            --Net
      income
            
            $
            7,858
            
            
            
            3.0
            %
            
            $
            8,620
            
            
            
            3.3
            %(Less):  Net loss (income) attributable to the noncontrolling
      interest
            
            
            51
            
            
            
            0.1
            %
            
            
            (576
            )
            
            
            (0.2
            )%Net
      income attributable to inVentiv Health Inc.
            
            $
            7,909
            
            
            
            3.1
            %
            
            $
            8,044
            
            
            
            3.1
            %Earnings
      per share:Continuing
      operations attributable to inVentiv Health Inc.:Basic
            
            $
            0.24
            
            
            
            
            
            
            $
            0.25Diluted
            
            $
            0.24
            
            
            
            
            
            
            $
            0.24Discontinued
      operations attributable to inVentiv Health Inc.:Basic
            
            $
            0.00
            
            
            
            
            
            
            $
            0.00Diluted
            
            $
            0.00
            
            
            
            
            
            
            $
            0.00Net
      earnings attributable to inVentiv Health Inc.:Basic
            
            $
            0.24
            
            
            
            
            
            
            $
            0.25Diluted
            
            $
            0.24
            
            
            
            
            
            
            $
            0.24


(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 decreased by approximately $4 million, or 2%, to $258 million during
the first quarter of 2009, from $262 million during the first quarter of 2008.
Net revenues (revenues, net of pass-through costs) decreased by approximately $4
million, or 2%, to $221 million during the first quarter of 2009 from $225
million in the first quarter of 2008.




inVentiv
Clinical’s revenues were $51 million during the first quarter of 2009, a
decrease of $1 million compared to $52 million during  the first
quarter of 2008.  inVentiv Clinical revenues accounted for 20% of
total inVentiv revenues during the first quarter of 2009.  Revenues in
inVentiv Clinical were lower in 2009 predominantly due to a softening in the
demand for our resourcing services due to the current economic
environment.




inVentiv
Communications’ revenues were $71 million during the first quarter of 2009, a
decrease of $17 million or 19% from the first quarter of
2008.  inVentiv Communications’ revenues accounted for 28% of total
inVentiv revenues during the first quarter of 2009.  The majority of
this decrease is due to the tentativeness of our clients to make marketing spend
decisions, as described above in Outsourcing Trends and the Current
Economic Environment.





inVentiv
Commercial’s revenues were $103 million during the first quarter of 2009, an
increase of $11 million, or 12% from the first quarter of
2008.  inVentiv Commercial revenues accounted for 40% of total
inVentiv revenues for the first quarter of 2009. Approximately 29% of the
increase related to the inclusion of PLS’s results in the first quarter of 2009,
with the remaining increase due to increased sales representatives, despite the
wind-down of Boehringer Ingelheim during the fourth quarter of 2008, and
increased pass-through revenues.





inVentiv
Patient Outcomes’ revenues were $32 million during the first quarter of 2009, up
$2 million from the first quarter of 2008.  The acquisition of PMG
contributed approximately $3.4 million of revenues during the first quarter of
2009.  The revenue growth was partially offset by delays in contract
approvals.





Cost of
Services: Cost of services increased by approximately $1 million or 1%,
to $181 million during the first quarter of 2009 from $180 million in the first
quarter of 2008.  Cost of services as a percentage of revenues was 70%
and 69% during the first quarter of 2009 and 2008, respectively.





inVentiv
Clinical’s cost of services increased by approximately $2 million, or 5%, to $39
million during the first quarter of 2009 from $37 million during the first
quarter of 2008.  Cost of services as a percentage of revenues was 75%
and 70% during the first quarter of 2009 and 2008, respectively.  The
increased percentage was primarily due to an increase in headcounts and
pass-through expenses in our CRO services division.





inVentiv
Communications’ cost of services decreased by 22% to $39 million during the
first quarter of 2009 when compared to the first quarter of
2008.  This variance is related to the decrease in revenues described
above.  Cost of services as a percentage of the segment’s revenues
decreased from 56% during the first quarter of 2008 to 55% during the first
quarter of 2009.





Cost of
services at inVentiv Commercial increased by approximately $9 million, or 12%,
to $85 million in the first quarter of 2009, mainly due to the increase in
revenues and the inclusion of PLS results, as described above.  Cost
of services was 83% and 82% of inVentiv Commercial’s revenues during the first
quarter of 2009 and 2008, respectively.





inVentiv
Patient Outcomes cost of services increased by approximately $1 million, or 6%,
to $19 million in the first quarter of 2009 from $18 million during the first
quarter of 2008, mainly due to the inclusion of PMG’s results during the first
quarter of 2009, as mentioned above.





Selling, General
and Administrative Expenses (“SG&A”): SG&A expenses decreased by
approximately $5 million, or 8%, to $57 million during the first quarter of 2009
from $62 million during the first quarter of 2008.




SG&A
expenses at inVentiv Clinical decreased by approximately $2 million to
approximately $11 million during the first quarter of 2009, compared to $13
million during the first quarter of 2008 due to lower commissions in our
resourcing and permanent placement groups as a result of the lower
revenue.




SG&A
expenses at inVentiv Communications decreased $4 million to $22 million during
the first quarter of 2009 due to lower rent and professional fees.




SG&A
expenses at inVentiv Commercial were approximately $11million during the first
quarter of 2009 and the first quarter of 2008.  The addition of PLS
SG&A was offset by lower costs due to an integration of certain departments
into a corporate function.




SG&A
expenses at inVentiv Patient Outcomes were approximately $7 million during the
first quarter of 2009 and 2008.




Other
SG&A was approximately $5 million for the first quarter of 2009 and
2008.  The comparative balances include an increase from an
integration of certain divisional departments into a corporate function in 2009,
which was offset by a sale of certain marketable securities.




Interest
Expense:Interest expense was approximately $6 million during
the first quarter of 2008 and the first quarter of 2009, mainly due to the
consistent period interest on our Credit Agreement, as more fully explained in
Liquidity and Capital
Resources.




Provision for
Income Taxes: The effective tax rate for the first quarter of 2009 was
42.2%, versus 41.3% during the first quarter of 2008.  The rate
includes a tax detriment of 1% due to the settlement of various state audits.
The rate for the first quarter of 2008 included a tax detriment relating to
interest on unrecognized tax benefits of approximately 0.2%. 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 was
$8 million during the first quarter of 2009 and the first quarter of
2008.  Diluted earnings per share during the first quarter of 2009 did
not change from the first quarter of 2008.









Liquidity
and Capital Resources





At March
31, 2009, inVentiv had approximately $90 million of unrestricted cash and
equivalents, consistent with the December 31, 2008 balance.  For the
three-months ended March 31, 2008 compared to March 31, 2009, cash provided by
operations increased by $11 million from a source of $10 million to a source of
$21 million.  Cash used in investing activities increased from $8
million to $14 million for the three-months ended March 31, 2008 and 2009,
respectively.  Cash provided by financing activities increased from a
use of $5 million to a use of $7 million over the same comparative
periods.





Cash
provided by operations was $21 million during the three-months ended March 31,
2009, while cash provided in operations was $10 million in the three-months
ended March 31, 2008.  This increase was primarily due to the improved
collections and timing of unbilled services across our segments in the first
quarter of 2009 as compared to first quarter of 2008.  This is a
result of our continued focus on strengthening our collections process as the
credit environment has worsened.





Cash used
in investing activities was $14 million for the three-months ended March 31,
2009 compared to $8 million used during the same period in
2008.  During the three months ended March 31, 2009 and 2008, the
Company paid approximately $17 million of cash relating to earnout contingency
payments and post-closing adjustments from previous
acquisitions.  During the three months ended March 31, 2009 and 2008,
the Company also received proceeds of $5 million and $15 million, respectively,
from our investment in marketable securities, which was mainly from redemptions
from the Columbia Strategic Cash Portfolio (“CSCP”).  An increase in
the cash value of life insurance policies from our deferred compensation plan
increased cash from investing activities by approximately $3
million.





Cash used
in financing activities was $7 million for the three-months ended March 31,
2009, compared to $5 million used by financing activities for the three-months
ended March 31, 2008.  The difference primarily relates to the
decrease in the Company’s stock price for these comparative periods, which has
resulted in significantly less exercises of stock options as well as tax expense
in the first quarter of 2009 as opposed to excess tax benefits in the first
quarter of 2008 from stock-based compensation.





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. Our leverage ratio was 2.36 to 1.0
as of March 31, 2009, which is in compliance with the financial
covenant.




Effective September 6, 2007, we entered
into a five-year swap arrangement for $165 million, in which the notional amount
increased to $325 million upon the expiration of our 2005 swap arrangement in
December 2008, to hedge against our credit exposure under the Amended and
Restated Credit Agreement.  The swap arrangement is explained in more
detail in Part I, Item 3 below.




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 2007 and 2008 acquisitions include earn-out provisions pursuant to
which the sellers will become entitled to additional consideration, which may be
material, if the acquired businesses achieve specified performance
measurements.  See Note 4 to our condensed consolidated financial
statements included in Part I, Item 1 of this Form 10-Q.








ITEM 3.  Quantitative and Qualitative
Disclosures About Market Risk





Long-Term
Debt Exposure





At March
31, 2009 the Company had $324 million debt outstanding under its secured term
loan as described under “Liquidity and Capital Resources” in Item 2
above.  The Company will incur variable interest expense with respect
to our outstanding loan.  This interest rate risk may be partially
offset by our derivative financial instrument, as described
below.  Based on our debt obligation outstanding at March 31, 2009, a
hypothetical increase or decrease of 10% in the variable interest rate would
have an immaterial effect on interest expense due to the fixed rate associated
with our derivative financial instruments.





Derivative
Financial Instrument





On
September 6, 2007, we entered into a new amortizing five-year interest rate swap
arrangement with a notional amount of $165 million at hedge inception, with an
accretive notional amount that increased to $325 million effective December 31,
2008 (concurrently with the expiration of the Company’s original 2005 three-year
interest rate swap arrangement) to hedge the total outstanding debt notional
amount.  This hedge relationship was designated as a cash flow
hedge.  At hedge inception, we 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 March 31,
2009, and accordingly, $1.6 million ($1.0 million, net of taxes) was recorded as
a decrease to Other Comprehensive Income and an increase to other non-current
liabilities on our Condensed Consolidated Balance Sheet.




Foreign
Currency Exchange Rate Exposure





The
Company is not currently affected by foreign currency exchange rate exposure,
except for any fluctuations in the foreign bank accounts remaining from the
divestitures of our European business units,from continuing operations of
our UK, France and Canadian subsidiaries and equity investments and
noncontrolling interest in our foreign business units, which are not material to
its consolidated financial statements.  Our treatment of foreign
subsidiaries is consistent with the guidelines set forth in SFAS 52, Foreign Currency
Translations.   The financial statements of our
subsidiaries expressed in foreign currencies are translated from the respective
functional currencies to U.S. Dollars, with results of operations and cash flows
translated at average exchange rates during the period, and assets and
liabilities translated at end of the period exchange rates.  At March
31, 2009, the accumulated other comprehensive earnings related to foreign
currency translations was approximately $3.1 million.  Foreign
currency transaction gains and (losses) are included in the results of
operations and are not material.





ITEM 4.  Controls and
Procedures




Based on
their evaluation as of March 31, 2009, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) were effective as of March 31, 2009 to
provide reasonable assurance that information required to be disclosed in our
Exchange Act reports is recorded, processed, summarized, and reported within the
time periods specified by the SEC, and that material information relating to the
Company and its consolidated subsidiaries is made known to management, including
the Chief Executive Officer and Chief Financial Officer, particularly during the
period when our periodic reports are being prepared.  There were no
changes in our internal controls over financial reporting during the quarter
ended March 31, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.






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




PART II.  OTHER INFORMATION





ITEM 1.    Legal
Proceedings





Weisz v.
Albertsons, Inc.(San Diego Superior Court
Case No. GIC 830069):  This action was filed on May 17, 2004 in
San Diego Superior Court, California by Utility Consumer Action Network against
Albertsons, Inc. and its affiliated drug store chains and seventeen
pharmaceutical companies.  This complaint alleged, among other claims,
violation of the California Unfair Competition Law and the California
Confidentiality of Medical Information Act (“CMIA”) arising from the operation
of manufacturer-sponsored, pharmacy-based compliance programs similar to
Adheris’ refill reminder programs.  An amended complaint was filed on
November 4, 2004 adding Adheris as a defendant to the lawsuit.  A
subsequent amendment to the complaint substituted Plaintiff Kimberly Weisz
(“Plaintiff”) as the class representative to this purported class
action.





After several rounds of pleading
challenges to Plaintiff’s various renditions of the complaint, all but one
pharmaceutical manufacturing company, AstraZeneca, LP, were dismissed from the
case, leaving only Albertsons, Inc., Adheris, and AstraZeneca as the remaining
defendants (“Defendants”) in this action.  In the latest pleading
challenge to Plaintiff’s Fifth Amended Complaint, the remaining defendants were
successful in eliminating a number of claims, including fraud-based and breach
of privacy claims.  Defendants also successfully moved to strike
Plaintiff’s class allegations as improper.  The operative Sixth
Amended Complaint, which was filed on January 6, 2008, alleges five causes of
action against Defendants.  Only three of these claims – violation of
the CMIA, breach of fiduciary duty, and unjust enrichment – are alleged against
Adheris.





On February 8, 2009, the remaining
parties to the Weisz action entered into a Settlement Agreement and Release (the
"Weisz Settlement").  Under the terms of the Weisz Settlement, which
has been preliminarily approved by the court but remains subject to final court
approval after a fairness hearing, Adheris would agree to refrain from knowing
participation in any refill reminder programs, targeted mailings or
notifications regarding medical conditions of specific California residents
except those residents who have expressly opted in to the communication or as
otherwise permitted by California law.  Adheris currently does not
conduct significant business in California of the type encompassed by Weisz
Settlement.  It is expected that Adheris’ financial contribution to
the settlement in excess of its retention amount will be funded by
insurance.  Our insurer, AIG, is defending this action under
reservation of rights.





The hearing to consider final approval
of the Weisz Settlement is scheduled for June 5, 2009.  The
court-ordered period for objection to the settlement expired on April 27, 2009
and to date no objections to the settlement have been received by
us.  If the settlement does not become final, Adheris intends to
continue to defend this action vigorously, and we do not believe that this
action will have a material adverse effect on our consolidated balance sheets,
results of operations or cash flows.  It is impossible to predict the
outcome of litigation with certainty, however, and there can be no assurance
that an adverse result in this proceeding would not have a potentially material
adverse effect on our condensed consolidated balance sheets, results of
operations or cash flows.





Indemnification
Claim.  In January 2008, PRS received a demand for
indemnification from one of its customers relating to a lawsuit filed 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.





Our insurer, Chubb Group, is defending
this action under reservation of rights.  In December 2008, the
parties to the action entered into a settlement agreement, which is subject to
Court approval and requires notification to various state attorneys
general.  The hearing to consider final approval of the settlement is
scheduled for June 10, 2009.  If the settlement agreement becomes
final, the amount to be paid to the settlement class in excess of the deductible
amount is expected to be funded by Chubb Group.  If the settlement
does not become final, PRS intends to continue to defend this action vigorously,
and  we do not believe that this action will have a material adverse
effect on our consolidated balance sheets, results of operations or cash
flows.  It is impossible to predict the outcome of litigation with
certainty, however, and there can be no assurance that an adverse result in this
proceeding would not have a potentially material adverse effect on our condensed
consolidated balance sheets, results of operations or cash flows.





Other  We
are subject to lawsuits, investigations and claims arising out of the conduct of
our business, including those related to commercial transactions, contracts,
government regulation and employment matters.  Certain such claims
have been filed or are pending against us.  All such matters are of a
kind routinely experienced in our business and are consistent with our
historical experience.  We do not believe that any such routine action
will have a material adverse effect on us.





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, 2008.





ITEM 5.  Other
Information





On March
12, 2009, we released a total of 74,716 unregistered shares of our Common Stock
to the former stockholder of inVentiv Communications, Inc. (fka inChord
Communications, Inc.) ("inVentiv Communications") pursuant to the earnout
provisions of the acquisition agreement relating to inVentiv's 2005 acquisition
of inVentiv Communications.





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





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.May
      8, 2009
              By:
              /s/ DAVID
      S. BASSINDavid
      S. BassinChief
      Financial Officer and Secretary(Principal
      financial officer and principal accounting officer)