**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





Form
      10-Q





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


Exchange
      Act of 1934





For
      the
      quarterly period ended June 30, 2006





or





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


Exchange
      Act of 1934





For
      the
      Transition Period From ___________ to ___________





Commission
      file number 0-30318





**INVENTIV
      HEALTH, INC.**


(Exact
      name of registrant as specified in its charter)





Delaware
      52-2181734


(State
      or
      other jurisdiction (IRS Employer


of
      incorporation or organization) Identification No.)





200
      Cottontail Lane


Vantage
      Court North


Somerset,
      New Jersey 08873


(Address
      of principal executive office and zip code)





(800)
      416-0555


(Registrant's
      telephone number, including area code)





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





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





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





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





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





As
      of
      July 31, 2006, there were 29,304,231 outstanding shares of the registrant's
      common stock.











**INVENTIV
      HEALTH, INC.**


**INDEX
      TO QUARTERLY REPORT ON**


**FORM
      10-Q**





**PART
                I. FINANCIAL INFORMATION**ITEM
                1. Financial StatementsCondensed
                Consolidated Balance Sheets as of June 30,
                2006and
                December 31, 2005 (unaudited)Condensed
                Consolidated Income Statements for the three and
                six-monthsended
                June 30, 2006 and 2005 (unaudited)Condensed
                Consolidated Statements of Cash Flows for the
                six-monthsended
                June 30, 2006 and 2005
                (unaudited)Notes
                to 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 Procedures**PART
                II. OTHER INFORMATION**ITEM
                1. Legal Proceedings****ITEM
                1A. Risk FactorsITEM
                2. Unregistered Sales of Equity Securities and use
                of ProceedsITEM
                4. Submission of Matters to a Vote of Security
                HoldersITEM
                6. Exhibits**SIGNATURES****EXHIBITS**











**PART
      I. FINANCIAL INFORMATION**





**ITEM
      1.**  ***Financial
      Statements***


**INVENTIV
      HEALTH, INC.**


**CONDENSED
      CONSOLIDATED BALANCE
      SHEETS**


**(in
      thousands, except share and per share amounts)**


**(unaudited)**


**June
                30,**
            
            **December
                31,****2006**
            
            **2005****ASSETS**Current
                assets:Cash
                and equivalents
            
            $
            50,391
            
            $
            73,102Restricted
                cash
            
            
            317
            
            
            3,878Accounts
                receivable, net of allowances for doubtful accounts of
                $3,887and
                $3,979 at June 30, 2006 and December 31, 2005,
                respectively
            
            
            101,875
            
            
            112,782Unbilled
                services
            
            
            61,481
            
            
            41,206Prepaid
                expenses and other current assets
            
            
            10,663
            
            
            5,737Current
                deferred tax assets
            
            
            4,100
            
            
            4,029Total
                current assets
            
            
            228,827
            
            
            240,734Property
                and equipment, net
            
            
            40,604
            
            
            36,637Equity
                investments
            
            
            4,735
            
            
            5,183Goodwill
            
            
            212,122
            
            
            173,777Other
                intangibles, net
            
            
            152,208
            
            
            117,606Deferred
                tax assets
            
            
            10,555
            
            
            3,428Deposits
                and other assets
            
            
            10,817
            
            
            6,529Total
                assets
            
            $
            659,868
            
            $
            583,894**LIABILITIES
                AND STOCKHOLDERS' EQUITY**Current
                liabilities:Current
                portion of capital lease obligations
            
            $
            10,152
            
            $
            10,859Current
                portion of long-term debt
            
            
            1,750
            
            
            1,750Accrued
                payroll, accounts payable and accrued expenses
            
            
            63,049
            
            
            77,816Current
                income tax liabilities
            
            
            12,608
            
            
            7,359Client
                advances and unearned revenue
            
            
            44,779
            
            
            29,393Total
                current liabilities
            
            
            132,338
            
            
            127,177Capital
                lease obligations, net of current portion
            
            
            18,440
            
            
            17,695Long-term
                debt
            
            
            171,938
            
            
            172,813Other
                non-current liabilities
            
            
            14,410
            
            
            12,994Total
                liabilities
            
            
            337,126
            
            
            330,679Commitments
                and contingenciesMinority
                Interest
            
            
            120
            
            
            (4
            )Stockholders'
                equity:Preferred
                stock, $.001 par value, 10,000,000 shares authorized, none
                issuedand
                outstanding at June 30, 2006 and December 31, 2005,
                respectively
            
            
            --
            
            
            --Common
                stock, $.001 par value, 50,000,000 shares authorized; 29,294,229
                and27,862,436
                shares issued and outstanding at June 30, 2006 andDecember
                31, 2005, respectively
            
            
            29
            
            
            28Additional
                paid-in-capital
            
            
            267,891
            
            
            233,441Deferred
                compensation
            
            
            --
            
            
            (3,563
            )Accumulated
                other comprehensive earnings
            
            
            935
            
            
            221Accumulated
                earnings
            
            
            53,767
            
            
            23,092Total
                stockholders' equity
            
            
            322,622
            
            
            253,219Total
                liabilities and stockholders' equity
            
            $
            659,868
            
            $
            583,894


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









**INVENTIV
      HEALTH, INC.**


**CONDENSED
      CONSOLIDATED INCOME STATEMENTS**


**(in
      thousands, except per share amounts)**


**(unaudited)**





**For
                the Three-Months Ended**
            
            **For
                the Six-Months Ended****June
                30,**
            
            **June
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005**Net
                revenues
            
            $
            154,739
            
            $
            112,530
            
            $
            297,677
            
            $
            217,045Reimbursable
                out-of-pockets
            
            
            28,240
            
            
            19,258
            
            
            58,979
            
            
            35,601Total
                revenues
            
            
            182,979
            
            
            131,788
            
            
            356,656
            
            
            252,646Operating
                expenses:Cost
                of services
            
            
            97,947
            
            
            80,451
            
            
            193,061
            
            
            158,104Reimbursed
                out-of-pocket expenses
            
            
            29,913
            
            
            19,310
            
            
            59,606
            
            
            35,369Selling,
                general and administrative expenses
            
            
            34,938
            
            
            16,955
            
            
            64,925
            
            
            31,355Total
                operating expenses
            
            
            162,798
            
            
            116,716
            
            
            317,592
            
            
            224,828Operating
                income
            
            
            20,181
            
            
            15,072
            
            
            39,064
            
            
            27,818Interest
                expense
            
            
            (2,241
            )
            
            (322
            )
            
            (3,898
            )
            
            (710
            )Interest
                income
            
            
            362
            
            
            253
            
            
            1,096
            
            
            506Income
                from continuing operations before income tax provision, minority
                interest
                in income of subsidiary and income (loss) from equity
                investments
            
            
            18,302
            
            
            15,003
            
            
            36,262
            
            
            27,614Income
                tax benefit (provision)
            
            
            1,748
            
            
            (5,971
            )
            
            (5,436
            )
            
            (9,390
            )Income
                from continuing operations before minority interest in income of
                subsidiary and income (loss) from equity investments
            
            
            20,050
            
            
            9,032
            
            
            30,826
            
            
            18,224Minority
                interest in income of subsidiary
            
            
            (352
            )
            
            --
            
            
            (676
            )
            
            --Income
                (loss) from equity investments
            
            
            166
            
            
            --
            
            
            (144
            )
            
            --Income
                from continuing operations
            
            
            19,864
            
            
            9,032
            
            
            30,006
            
            
            18,224Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            
            
            1,115
            
            
            1,463
            
            
            1,221
            
            
            1,562Net
                income from discontinued operations
            
            
            1,115
            
            
            1,463
            
            
            1,221
            
            
            1,562Net
                income
            
            $
            20,979
            
            $
            10,495
            
            $
            31,227
            
            $
            19,786Earnings
                per share (see Note 6):Continuing
                operations:Basic
            
            $
            0.68
            
            $
            0.34
            
            $
            1.05
            
            $
            0.69Diluted
            
            $
            0.66
            
            $
            0.32
            
            $
            1.01
            
            $
            0.66Discontinued
                operations:Basic
            
            $
            0.04
            
            $
            0.05
            
            $
            0.04
            
            $
            0.06Diluted
            
            $
            0.03
            
            $
            0.06
            
            $
            0.04
            
            $
            0.05Net
                income:Basic
            
            $
            0.72
            
            $
            0.39
            
            $
            1.09
            
            $
            0.75Diluted
            
            $
            0.69
            
            $
            0.38
            
            $
            1.05
            
            $
            0.71Weighted
                average common shares outstanding:Basic
            
            
            29,188
            
            
            26,757
            
            
            28,696
            
            
            26,431Diluted
            
            
            30,186
            
            
            27,879
            
            
            29,737
            
            
            27,763





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









**INVENTIV
      HEALTH, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


**(in
      thousands)**


**(unaudited)**





**For
                Six-Months Ended****June
                30,****2006**
            
            **2005**Cash
                flows from operating activities:
            
            
            
            (Revised)Net
                income from continuing operations
            
            $
            30,006
            
            $
            18,224Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
            
            
            7,578
            
            
            8,508Amortization
            
            
            2,616
            
            
            602Loss
                from equity investments
            
            
            144
            
            
            --Minority
                interest in income of subsidiary
            
            
            676
            
            
            --Fair
                market value adjustment on derivative financial instrument
            
            
            (2,824
            )
            
            --Deferred
                taxes
            
            
            (7,198
            )
            
            (343
            )Stock
                compensation expense
            
            
            3,336
            
            
            245Tax
                benefit from stock option exercises and vesting of restricted
                shares
            
            
            4,530
            
            
            7,815Changes
                in assets and liabilities, net of effects from discontinued
                operations:Accounts
                receivable, net
            
            
            22,971
            
            
            (18,763
            )Unbilled
                services
            
            
            (18,428
            )
            
            (6,807
            )Prepaid
                expenses and other current assets
            
            
            (2,889
            )
            
            (1,539
            )Accrued
                payroll, accounts payable and accrued expenses
            
            
            (8,912
            )
            
            (2,607
            )Current
                income tax liabilities
            
            
            5,128
            
            
            (836
            )Client
                advances and unearned revenue
            
            
            2,411
            
            
            (3,917
            )Excess
                tax benefits from stock based compensation
            
            
            (4,002
            )
            
            --Other
            
            
            3,569
            
            
            2,257Net
                cash provided by continuing operations
            
            
            38,712
            
            
            2,839Net
                cash provided by (used in) discontinued operations
            
            
            1,103
            
            
            (50
            )Net
                cash provided by operating activities
            
            
            39,815
            
            
            2,789Cash
                flows from investing activities:Restricted
                cash balances
            
            
            3,561
            
            
            (1,298
            )Investment
                in cash value of life insurance policies
            
            
            (3,439
            )
            
            (961
            )Cash
                paid for acquisitions, net of cash acquired
            
            
            (50,412
            )
            
            (902
            )Acquisition
                earn-out payments
            
            
            (8,267
            )
            
            (5,181
            )Equity
                investments
            
            
            304
            
            
            --Purchases
                of property and equipment
            
            
            (3,755
            )
            
            (2,923
            )Proceeds
                from manufacturers rebates on leased vehicles
            
            
            141
            
            
            2Net
                cash used in continuing operations
            
            
            (61,867
            )
            
            (11,263
            )Net
                cash provided by discontinued operations
            
            
            118
            
            
            1,612Net
                cash used in investing activities
            
            
            (61,749
            )
            
            (9,651
            )Cash
                flows from financing activities:Repayments
                on credit agreement
            
            
            (875
            )
            
            --Repayments
                on capital lease obligations
            
            
            (6,759
            )
            
            (6,418
            )Withholding
                shares for taxes
            
            
            (85
            )
            
            --Proceeds
                from exercise of stock options
            
            
            2,778
            
            
            3,433Excess
                tax benefits from stock-based compensation
            
            
            4,002
            
            
            --Distributions
                to minority interests in affiliated partnership
            
            
            (552
            )
            
            --Net
                cash used in continuing operations
            
            
            (1,491
            )
            
            (2,985
            )Net
                cash provided by discontinued operations
            
            
            --
            
            
            --Net
                cash used in financing activities
            
            
            (1,491
            )
            
            (2,985
            )Effect
                of exchange rate changes
            
            
            714
            
            
            (48
            )Net
                decrease in cash and equivalents
            
            
            (22,711
            )
            
            (9,895
            )Cash
                and equivalents, beginning of period
            
            
            73,102
            
            
            50,809Cash
                and equivalents, end of period
            
            $
            50,391
            
            $
            40,914Supplemental
                disclosures of cash flow information:Cash
                paid for interest
            
            $
            6,392
            
            $
            725Cash
                paid for income taxes
            
            $
            2,977
            
            $
            2,766Supplemental
                disclosures of non-cash activities:Vehicles
                acquired through capital lease agreements
            
            $
            11,144
            
            $
            4,898Stock
                issuance related to acquisitions
            
            $
            27,177
            
            $
            3,255





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







**INVENTIV
          HEALTH, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS**
  **1.**  **Organization
        and Business:**





inVentiv
      Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”,
      formerly Ventiv Health, Inc.) is a leading provider of value-added services
      to
      the pharmaceutical and life sciences 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 bring them to market. Our goal
      is
      to assist our customers in meeting their objectives in each of these areas
      by
      providing our services on a flexible and cost-effective basis. We provide
      services to over 200 client organizations, including all top 20 global
      pharmaceutical companies and numerous emerging and specialty biotechnology
      companies.





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. We have established expertise and leadership in providing
      the services our clients require at each of these stages of product development
      and commercialization and seek to address their outsourced service needs on
      a
      comprehensive basis throughout the product life cycle.





On
      June
      14, 2006, we changed our name to inVentiv Health, Inc. as part of a re-branding
      initiative that began when we acquired inChord Communications, Inc. ("inChord"),
      a healthcare marketing and communications company, in October 2005.





*Business
      Segments*





We
      currently serve our clients primarily through three business segments, which
      correspond to our reporting segments for 2006:





·
            inVentiv
                Clinical,
                which provides services related to permanent placement, clinical
                staffing,
                data collection and management and functional service provision.
                This
                segment was initially built through several businesses that were
                acquired
                in the fourth quarter of 2004: the Smith Hanley group of companies
                (which
                includes Smith Hanley Associates, Smith Hanley Consulting Group and
                MedFocus) and HHI Clinical & Statistical Research Services (“HHI”). In
                April 2006, the Company augmented inVentiv Clinical with the acquisition
                of Synergos, LLP ("Synergos"), a clinical services provider with
                expertise
                in clinical trial management
                services.





·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                interactive communication development and patient and physician education.
                This segment includes inChord, Adheris, Inc. ("Adheris"), a patient
                compliance and persistence communications company, which we acquired
                in
                the first quarter of 2006, and Jeffrey Simbrow Associates Inc. (and
                certain of its affiliated companies) ("JSAI"), a leading healthcare
                marketing and communications agency, which we acquired in the second
                quarter of 2006, as more fully discussed below.





·
            inVentiv
                Commercial,
                which consists of our outsourced sales and marketing teams, planning
                and
                analytics services, sample accountability and patient assistance
                businesses, marketing support services, professional development
                and
                training, and recruitment of sales representatives in the commercial
                services area.





Our
      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.





**2.**  **Basis
      of Presentation**





The
      accompanying unaudited condensed consolidated financial statements present
      the
      condensed consolidated financial position, 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 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 accounting principles generally accepted in the
      United States of America ("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 financial position as of June 30, 2006 and December
      31,
      2005, the condensed consolidated income statements of the Company for the three
      and six-months ended June 30, 2006 and 2005 and the condensed consolidated
      cash
      flows for the six-months ended June 30, 2006 and 2005. Certain revenues and
      cost
      of services balances have been reclassified to conform to current presentation
      related to the presentation of reimbursable expenses in accordance with Emerging
      Issues Task Force No. 01-14, *Income
      Statement Characterization of Reimbursements Received for "Out-of-Pocket"
      Expenses Incurred* .
      Operating results for the three and six-months ended June 30, 2006 are not
      indicative of the results that may be expected for the year ending December
      31,
      2006.





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, 2005
      as
      filed with the Securities and Exchange Commission on March 16, 2006.





The
      condensed consolidated financial statements include the accounts of inVentiv
      Health, Inc., its wholly owned subsidiaries and its 53% owned subsidiary, Taylor
      Search Partners (“TSP”), which was acquired in conjunction with the acquisition
      of inChord. Our continuing operations consist primarily of three business
      segments: inVentiv Clinical, inVentiv Communications and inVentiv Commercial.
      All significant intercompany transactions have been eliminated in
      consolidation.




As
      a
      result of the acquisition of inChord, we have a 15% ownership interest in Heart
      Reklambyra AB (“Heart”), an advertising agency located in Sweden and a 44%
      interest in Angela Liedler GmbH (“Liedler”), a service provider of communication
      and marketing tools for technical, medical and pharmaceutical products, located
      in Germany. Both of these investments are accounted for using the equity method
      of accounting.





In
      December 2005, we entered into an exclusive joint venture agreement with SIRO
      Clinpharm Pvt. Ltd., India's largest domestic contract research organization,
      to
      offer pharmaceutical companies India-based clinical data management services.
      This project is in the development stage and has not commenced providing client
      services.





*Condensed
      Consolidated Statements of Cash Flows*





During
      the third quarter of 2005, the Company revised the presentation of its condensed
      consolidated statements of cash flows to separately present the cash flows
      from
      discontinued operations within the categories of operating, investing and
      financing activities. A summary of the effect of the revised presentation on
      the
      consolidated statements of cash flows for the six months ended June 30, 2005
      is
      as follows:


**Six
                  Months Ended**
                **June
                  30, 2005***(in
                  thousands)*Net
                  cash flows used in operating activities as previously
                  reported
              
              $
              2,839Change
                  in net cash flows from discontinued operations
              
              
              (50
              )Net
                  cash flows used in operating activities as currently
                  reported
              
              $
              2,789
  
 **INVENTIV
        HEALTH, INC.**


**NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
        Continued**


**3.**  **Recently
      Issued Accounting Standards:**




In
      July
      2006, the Financial Accounting Standards Board (the “FASB”) issued FASB
      Interpretation No. 48 (“FIN 48”), *Accounting
      for Uncertainty in Income Taxes, an interpretation of FASB Statement
      No. 109* .
      FIN 48
      clarifies the accounting for income taxes by prescribing the minimum recognition
      threshold a tax position is required to meet before being recognized in the
      financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. FIN 48 applies to all tax positions related
      to income taxes subject to FASB Statement No. 109, *Accounting
      for Income Taxes* (“FASB
      No. 109”). FIN 48 is effective for fiscal years beginning after
      December 15, 2006. Differences between the amounts recognized in the
      statements of financial position prior to the adoption of FIN 48 and the amounts
      reported after adoption should be accounted for as a cumulative-effect
      adjustment recorded to the beginning balance of retained earnings. The Company
      has not yet determined the impact this interpretation will have on its
      consolidated results of operations or financial position.





On
      November 10, 2005, the FASB issued Interpretation No. 45-3, *Application
      of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a
      Business or Its Owners* (“FIN
      45-3”). FIN 45-3 amends FIN 45 *,
      Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
      Indirect Guarantees of Indebtedness of Others* (“FIN
      45”), to expand the scope to include guarantees granted to a business, such as
      a
      physician’s practice, or its owner(s), that the revenue of the business for a
      period will be at least a specified amount. Under FIN 45-3, the accounting
      requirements of FIN 45 are effective for any new revenue guarantees issued
      or
      modified on or after January 1, 2006 and the disclosure of all revenue
      guarantees, regardless of whether they were recognized under FIN 45, is required
      for all interim and annual periods beginning after January 1, 2006. The
      adoption of FIN 45-3 did not have a material impact on our condensed
      consolidated balance sheets, condensed consolidated income statements or
      condensed consolidated statements of cash flows.





In
      June
      2005, the FASB issued Statement of Financial Account Standard (“SFAS”) No. 154, *Accounting
      Changes and Error Corrections* ,
      (“SFAS
      No.154”) a replacement of Accounting Principles Board ("APB") Opinion No. 20, *Accounting
      Changes* ,
      and
      Statement No. 3, *Reporting
      Accounting Changes in Interim Financial Statements* .
      SFAS
      No. 154 changes the requirements for the accounting for and the reporting of
      a
      change in accounting principle. Previously, most voluntary changes in accounting
      principles required recognition by recording a cumulative effect adjustment
      within net income in the period of change. SFAS No. 154 requires retrospective
      application to prior periods’ financial statements, unless it is impracticable
      to determine either the specific period effects or the cumulative effect of
      the
      change. SFAS No. 154 is effective for accounting changes made in fiscal years
      beginning after December 15, 2005. The implementation of SFAS No. 154 did not
      have an impact on our condensed consolidated balance sheets, condensed
      consolidated income statements or condensed consolidated statements of cash
      flows.





**4.**  **Acquisitions:**





In
      April
      2006, the Company acquired Synergos for approximately $6.4 million in cash
      and
      stock, including certain post-closing adjustments and direct acquisition costs,
      for approximately $0.7 million of net tangible assets. Synergos, based in The
      Woodlands, Texas, is a focused clinical services provider with expertise in
      clinical trial management services, particularly project management and
      monitoring, as well as investigator and patient recruitment. The Company will
      be
      obligated to make certain earn-out payments, which may be material, contingent
      on Synergos’s performance measurements during 2006 and 2007. The results of
      Synergos have been reflected in the inVentiv Clinical segment from the date
      of
      its acquisition. The assets acquired and liabilities assumed in connection
      with
      the acquisition and pro forma results of operations are not deemed material
      to
      the condensed consolidated financial statements.





In
      April
      2006, the Company acquired JSAI for approximately $8.8 million in cash and
      stock, including certain post-closing adjustments and direct acquisition costs.
      JSAI is Canada's leading healthcare marketing and communications agency. The
      Company will be obligated to make certain earn-out payments, which may be
      material, contingent on JSAI’s performance measurements during the 12-month
      periods ending March 31, 2007, 2008 and 2009. The results of JSAI have been
      reflected in the inVentiv Communications segment from the date of its
      acquisition. The assets acquired and liabilities assumed in connection with
      the
      acquisition and pro forma results of operations are not deemed material to
      the
      condensed consolidated financial statements.





In
      February 2006, the Company acquired Adheris for approximately $69.6 million
      in
      cash and stock, including certain post-closing adjustments and direct
      acquisition costs, for approximately $10.0 million of net tangible assets.
      Adheris is a Massachusetts-based industry leader in the area of patient
      compliance and persistency programs. The Company will be obligated to make
      certain earn-out payments, which may be material, contingent on Adheris's
      performance measurements during 2006 through 2008. The results of Adheris have
      been reflected in the inVentiv Communications segment from the date of its
      acquisition. The assets acquired and liabilities assumed in connection with
      the
      acquisition and pro forma results of operations are not deemed material to
      the
      condensed consolidated financial statements.




In
      October 2005, the Company acquired all of the outstanding capital stock of
      inChord for approximately $196.8 million of cash and stock, including certain
      post-closing adjustments and direct acquisition costs, for approximately $18.6
      million of net tangible assets. To help finance the transaction, the Company
      entered into a Credit Agreement, dated October 5, 2005, as more fully described
      in footnote 10. The Company acquired inChord to vastly expand its service
      portfolio in the marketing and communications arena, expand its market position
      in the pharmaceutical services market and achieve cross-selling opportunities
      by
      leveraging its existing businesses. The Company will be obligated to make
      certain earn-out payments, which may be material, contingent on inChord’s
      performance measurements from 2005 through 2007. inChord’s 2005 earnout of $3.8
      million in cash and stock, of which $3.6 million was accrued at December 31,
      2005, was paid in 2006. The portion adjusted in the subsequent year mainly
      relate to the finalization of the earn-outs for the previous year, as allowed
      under the contract. The results of inChord have been reflected in the inVentiv
      Communications segment since the date of acquisition.




In
      August
      2005, the Company acquired the net assets of PRS, a provider of compliance
      management and marketing support services based in Horsham, Pennsylvania. PRS
      specializes in pharmaceutical sample management and compliance services; its
      operations are similar in nature to the business of Franklin Group, Inc. and
      Lincoln Ltd, Inc. (together, “Franklin”), which was acquired in June 2004. The
      closing consideration for the transaction was approximately $13.6 million in
      cash and stock (taking into account post-closing adjustments and direct
      acquisition costs) for approximately $1.0 million of net assets. The Company
      will be obligated to make certain earn-out payments, which may be material,
      contingent on PRS’s performance measurements in 2005 and 2006. The amount due
      with respect to PRS for 2005 was approximately $0.3 million, which was accrued
      for as of December 31, 2005 and paid in April 2006. The results of PRS have
      been
      reflected in the inVentiv Commercial segment since the date of acquisition.





In
      November 2004, the Company acquired the net assets of HHI. HHI, based in
      Baltimore, Maryland, is a specialized statistical analysis and data management
      provider to the U.S. pharmaceutical industry. HHI complements the Smith Hanley
      business by offering clients the option of outsourced clinical support services
      as an alternative to internal staffing. The closing consideration for the
      transaction was approximately $6.2 million in cash and stock (taking into
      account post-closing adjustments and direct acquisition costs) for approximately
      $0.8 million of net tangible assets. The Company is obligated to make certain
      earn-out payments, which may be material, contingent on HHI’s performance
      measurements in 2005 and 2006. HHI’s 2005 earn-out was approximately $5.4
      million, which $5.0 million was previously accrued for at December 31, 2005,
      and
      paid during the first quarter of 2006. The results of HHI have been reflected
      in
      the inVentiv Clinical segment since the date of acquisition.





In
      October 2004, the Company acquired the net assets of Smith Hanley. Smith Hanley
      specializes primarily in providing late-stage clinical staffing and recruiting
      services to the U.S. pharmaceutical industry. The Company acquired Smith Hanley
      to expand its service portfolio in the clinical services and recruitment areas,
      expand its market position in the pharmaceutical services market and achieve
      cross-selling opportunities by leveraging our existing sales force and
      relationships. The Company acquired approximately $9.5 million of net tangible
      assets for consideration of approximately $52.9 million in cash and stock
      (taking into account post-closing adjustments and direct acquisition costs)
      and
      was obligated to make certain earn-out payments, contingent on Smith Hanley’s
      performance measurements in 2004 and 2005. Smith Hanley’s 2004 earn-out paid in
      2005 was approximately $6.6 million, for which $6.8 million was previously
      accrued for at December 31, 2004. Smith Hanley’s 2005 earn-out paid in 2006 was
      approximately $4.6 million, of which $4.0 million was previously accrued for
      at
      December 31, 2005. The portions adjusted in the subsequent years mainly relate
      to the finalization of the earn-outs for the respective years. The results
      of
      Smith Hanley have been reflected in the inVentiv Clinical segment since the
      date
      of acquisition.





In
      June
      2004, the Company acquired the net assets of Franklin, based in Somerville,
      New
      Jersey. Franklin specializes primarily in conducting patient assistance programs
      and pharmaceutical compliance services. The Company paid approximately $11.3
      million in cash and stock (taking into account post-closing adjustments and
      direct acquisition costs) to acquire approximately $2.7 million of net tangible
      assets. The Company is obligated to make certain earn-out payments, which may
      be
      material, contingent on Franklin’s performance measurements during 2004 through
      2006. Franklin’s 2004 earn-out paid in 2005 was approximately $1.8 million, $1.7
      million of which was accrued for at December 31, 2004. Franklin’s 2005 earn-out
      paid in April 2006 was approximately $3.2 million, which was accrued for at
      December 31, 2005. The portions adjusted in the subsequent years mainly relate
      to the finalization of the earn-outs for the respective years. Franklin’s
      financial results have been reflected in the inVentiv Commercial segment since
      the date of acquisition.







**INVENTIV
        HEALTH, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued**
  **5.**  **Employee
        Stock Compensation:**




In
      December 2004, the FASB revised SFAS No. 123 (“SFAS 123(R)”), *Share-Based
      Payment* ,
      which
      establishes accounting for share-based awards exchanged for employee services
      and requires companies to expense the estimated fair value of these awards
      over
      the requisite employee service period. On April 14, 2005, the SEC adopted a
      new rule amending the effective dates for FAS 123(R). In accordance with the
      new
      rule, the Company adopted the accounting provisions of SFAS 123 (R) as of
      January 1, 2006.





On
      January 1, 2006, the Company adopted SFAS 123(R) using the modified
      prospective application method, as permitted under SFAS 123(R), which requires
      measurement of compensation cost of all stock-based awards at fair value on
      the
      date of grant and recognition of compensation over the service periods for
      awards expected to vest. Under this method, compensation cost in 2006 includes
      the portion vesting in the period for (1) all stock-based awards granted prior
      to, but not vested as of, January 1, 2006, based on the grant date fair value
      estimated in accordance with the original provisions of SFAS No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      123”), and (2) all stock-based awards granted subsequent to January 1, 2006,
      based on the grant date fair value estimated in accordance with the provisions
      of SFAS 123(R). The Company will recognize the cost of all employee stock awards
      on a straight-line basis over their respective vesting periods, net of estimated
      forfeitures. Accordingly, prior periods amounts have not been restated. Under
      this method, the Company is required to record compensation expense for all
      awards granted after the date of adoption and for the unvested portion of
      previously granted awards that remain outstanding at the date of
      adoption.





The
      adoption of SFAS 123 (R) resulted in stock-based compensation expense of $1.7
      million, of which $0.6 million was recorded in cost of services and $1.1 million
      recorded as Selling, General and Administrative expenses (“SG&A”) for the
      three months ended June 30, 2006 and $3.3 million, of which $1.2 million was
      recorded in cost of services and $2.1 million recorded as SG&A for the six
      months ended June 30, 2006. The incremental stock-based compensation expense
      caused income before income tax provision, minority interest in income of
      subsidiary and income (loss) from equity investments to decrease by $1.7 million
      and $ 3.3 million for the three months and six months ended June 30, 2006,
      respectively, net income to decrease by $1.0 million and $2.0 million for the
      three months and six months ended June 30, 2006, respectively, and basic and
      diluted earnings per share to decrease by $0.03 per share and $0.07 per share
      for the three months and six months ended June 30, 2006, respectively. Cash
      provided by operating activities decreased and cash provided by financing
      activities increased by $4.0 million related to excess tax benefits from the
      exercise of stock-based awards.




On
      November 10, 2005, the FASB issued FASB Staff Position No. 123(R)-3, *Transition
      Election Related to Accounting for Tax Effects of Share-Based Payment
      Awards* .
      The
      Company has elected to adopt the alternative transition method provided in
      this
      FASB Staff Position for calculating the tax effects of share-based compensation
      pursuant to SFAS 123R. The alternative transition method includes a simplified
      method to establish the beginning balance of the additional paid-in capital
      pool
      (APIC pool) related to the tax effects of employee share-based compensation,
      which is available to absorb tax deficiencies recognized subsequent to the
      adoption of SFAS 123R.





Pro
      forma Information for Periods Prior to the Adoption of
      FAS 123R





Prior
      to
      the adoption of SFAS 123(R), the Company applied Accounting Principles Board
      No.
      25 (“APB 25”) to account for its stock-based awards. Under ABP 25, the Company
      only recorded stock-based compensation expense for restricted stock units.
      Under
      the provisions of APB 25, the Company was not required to recognize compensation
      expense for the cost of stock options issued under its equity compensation
      plans
      as all options were granted with an exercise price equal to the market value
      of
      the underlying common stock on the date of grant. In addition, forfeitures
      of
      awards were recognized as they occurred. The Company has not changed its
      valuation model used for estimating the fair value of options granted after
      January 1, 2006, from the Black-Scholes option-pricing model previously used
      for
      pro forma presentation purposes as required under SFAS 123, as amended by SFAS
      No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosures* .





The
      following table details the effect on net income and earnings per share had
      compensation expense for the employee stock-based awards been recorded in the
      second quarter and year ended June 30, 2005 based on the fair value method
      under
      SFAS 123:





(in
                thousands, except per share data)
            
            **Three-Months
                Ended June 30, 2005**
            
            **Six-Months
                Ended June 30, 2005**Net
                income attributable to common shareholders, as reported
            
            $
            10,495
            
            $
            19,786Add:
                total stock-based compensation expense included in reported net income
                attributable to common shareholders, net of tax
            
            
            71
            
            
            100Less:
                stock-based employee compensation expense determined under the fair
                value
                method, net of related income tax
            
            
            (684
            )
            
            (2,336
            )Pro
                forma net earnings
            
            $
            9,882
            
            $
            17,550As
                reported: Basic
            
            $
            0.39
            
            $
            0.75As
                reported: Diluted
            
            $
            0.38
            
            $
            0.71Pro
                forma: Basic
            
            $
            0.37
            
            $
            0.66Pro
                forma: Diluted
            
            $
            0.35
            
            $
            0.63





Assumptions





The
      fair
      value of each option grant is estimated on the date of grant using a
      Black-Scholes option pricing model with the following weighted average
      assumptions:




**Three
                  Months Ended**
                **June
                  30,**
              **Six
                  Months Ended**
                **June
                  30,****2006**
              **2005**
              **2006**
              **2005**Expected
                  life of option
              5.5-6
                  yrs
              4
                  yrs
              5.5-6
                  yrs
              4
                  yrsRisk-free
                  interest rate
              5.03%
              3.77%
              4.90%
              4.13%Expected
                  volatility
              45%
              83%
              45%
              84%Expected
                  dividend yield
              0.00%
              0.00%
              0.00%
              0.00%




During
      the fourth quarter of 2005, management analyzed its expected volatility and
      expected life of stock options and concluded that the current expected
      volatility for options granted during the fourth quarter of 2005 should be
      45%
      and the expected life of the options granted should range between 5.5 and 6.0
      years, depending on the grantee’s employee status. During
      the three months and six months ended June 30, 2005, the Company utilized an
      expected volatility of 83% and 84%, respectively, and an expected term of 4
      years for both periods in its calculation of stock compensation expense, which
      was disclosed in its condensed consolidated financial statement footnotes.
      The
      variables used in the first half of 2005 and prior years were based solely
      on
      historical data, while the current rates are more reflective of current and
      future periods. These
      conclusions were based on several factors, including past company history,
      current and future trends, comparable benchmarked data and other key metrics.
      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 and does not currently intend to pay cash dividends, thus has
      assumed a 0% dividend yield.





As
      part
      of the requirements of SFAS 123 (R), 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.







**INVENTIV
      HEALTH, INC.**


**NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
          Continued**




Stock
      Incentive Plan and Award Activity





As
      of
      June 14, 2006, the Company’s 2006 Stock Incentive Plan (“Stock Plan”) authorizes
      it to grant incentive stock options, nonqualified stock options, restricted
      stock awards, restricted stock units and stock appreciation rights ("SARs”). The
      aggregate number of shares of our common stock that may be issued under the
      Stock Plan upon exercise of options, SARs or in the form of restricted stock
      is
      9.1 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 our common stock on the date of the option
      grant. The vesting and other provisions of the options are determined by the
      Compensation Committee of our Board of Directors.




The
      following table summarizes activity under our equity incentive plans for the
      six
      months ended June 30, 2006 (in thousands, except per share
      amounts):




**Shares**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Remaining Contractual Term (in years)**
            
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2006
            
            
            2,971
            
            $
            10.47Granted
                and assumed
            
            
            328
            
            $
            25.89Exercised
            
            
            (442
            )
            $
            6.29Forfeited/expired/cancelled
            
            
            (82
            )
            $
            14.43Outstanding
                at June 30, 2006
            
            
            2,775
            
            $
            12.84
            
            
            7.38
            
            $
            44,239Options
                exercisable at June 30, 2006
            
            
            1,233
            
            $
            8.85
            
            
            6.30
            
            $
            24,582




The
      weighted-average grant-date fair value of stock options granted during the
      three-months ended June 30, 2006 and 2005 was $12.94 and $11.73 per share,
      respectively, and in addition, during the six-months ended June 30, 2006 and
      2005 were $12.48 and $14.13 per share. The total intrinsic value of options
      exercised during the three-months ended June 30, 2006 and 2005 was $0.4 million
      and $0.3 million, respectively, and in addition, during the six-months ended
      June 30, 2006 and 2005 were $2.8 million and $3.4 million. As of June 30, 2006,
      there was approximately $11.4 million of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted; that cost
      is
      expected to be recognized over a weighted average of 2.8 years.




The
      actual tax benefit realized for the tax deductions from option exercise of
      the
      share-based payment arrangements totaled $0.5 million, individually, for both
      the three months ended June 30, 2006 and 2005 and during the six-months ended
      June 30, 2006 and 2005 were $4.0 million and $7.1 million,
      respectively.




A
      summary
      of the status and changes of our nonvested shares related to our equity
      incentive plans as of and during the six months ended June 30, 2006 is
      presented below:




(in
                  thousands, except per share amounts)
              **Shares**
              **Weighted
                  Average Grant-Date Fair Value**Nonvested
                  at January 1, 2006
              208
              $20.31Granted
              348
              $25.69Released
              (35)
              $18.52Forfeited
              (10)
              $23.93Nonvested
                  at June 30, 2006
              511
              $24.03




As
      of
      June 30, 2006, there was approximately $10.2 million 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 3.7 years. The total fair value of shares vested during
      the
      three and six-months ended June 30, 2006 were $1.0 million and $1.3 million,
      respectively. During the three and six-months ended June 30, 2005 the amounts
      were negligible.




**6.**  **Earnings
      Per Share (“EPS”):**





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





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


**Three-Months
                Ended June 30,**
            
            **Six-Months
                Ended June 30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****(in
                thousands, except per share and footnote disclosure
                data)****Basic
                EPS from Continuing Operations Computation**Income
                from continuing operations
            
            $
            19,864
            
            $
            9,032
            
            $
            30,006
            
            $
            18,224Weighted
                average number of common shares outstanding
            
            
            29,188
            
            
            26,757
            
            
            28,696
            
            
            26,431Basic
                EPS from continuing operations
            
            $
            0.68
            
            $
            0.34
            
            $
            1.05
            
            $
            0.69**Diluted
                EPS from Continuing Operations Computation**Income
                from continuing operations
            
            $
            19,864
            
            $
            9,032
            
            $
            30,006
            
            $
            18,224Weighted
                average number of common shares outstanding
            
            
            29,188
            
            
            26,757
            
            
            28,696
            
            
            26,431Stock
                options(1)
            
            
            897
            
            
            1,112
            
            
            948
            
            
            1,323Restricted
                stock awards(2)
            
            
            101
            
            
            10
            
            
            93
            
            
            9Total
                diluted common shares outstanding
            
            
            30,186
            
            
            27,879
            
            
            29,737
            
            
            27,763Diluted
                EPS from continuing operations
            
            $
            0.66
            
            $
            0.32
            
            $
            1.01
            
            $
            0.66




(1)
      For the three and six months ended June 30, 2006, 308,210 shares and 283,869
      shares, respectively, were excluded from the calculation of diluted EPS due
      to
      the fact that the shares are considered anti-dilutive because the number of
      potential buyback shares is greater than the number of weighted shares
      outstanding.  Similarly, for the three and six months ended June 30, 2005,
      102,545 shares and 84,616 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 and six months ended June 30, 2006, 27,203 shares and 15,006 shares,
      respectively, were excluded from the calculation of diluted EPS due to the
      fact
      that the shares are considered anti-dilutive because the number of potential
      buyback shares is greater than the number of weighted shares outstanding. 
Similarly, for the three and six-months ended June 30, 2005, 10,500 shares
      and
      6,613 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.


**INVENTIV
              HEALTH, INC.**
 **NOTES
              TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
              Continued**
 **7.**  **Significant
            Clients:**




During
      the six-months ended June
      30, 2006, the Company had no clients that accounted for more than 10%,
      individually, of the Company's total revenues across our inVentiv Clinical,
      inVentiv Communications and inVentiv Commercial segments. For the six-months
      ended June 30, 2005, three clients accounted for approximately 16%, 12% and
      11%,
      individually, of the Company's total revenues across our inVentiv Clinical
      and
      inVentiv Commercial segments.





**8.**  **Restricted
      Cash:**





Restricted
      cash balances as of June 30, 2006 and December 31, 2005 were $0.3 million and
      $3.9 million, respectively. During the first two quarters of 2006, except as
      described in the following paragraph, the Company replaced most of its existing
      letters of credit with letters of credit under UBS AG Stamford Branch. These
      letters of credit were previously cash collateralized for various obligations
      and represented cash restricted from use for general purposes as of December
      31,
      2005. The new letters of credit are no longer fully cash collateralized and
      do
      not represent restricted cash.





In
      June
      2005, the Company pledged approximately $0.3 million of cash as collateral
      on an
      outstanding standby letter of credit to support the security deposit relating
      to
      the New York office rental for the inVentiv Clinical segment. The beneficiary
      has not drawn on this letter of credit. As this cash has been pledged as
      collateral, it is restricted from use for general purposes and has been
      classified accordingly in the Condensed Consolidated Balance Sheets as of June
      30, 2006 and December 31, 2005.





**9** .  **Goodwill
      and Other Intangible Assets:**





Goodwill
      consists of the following:




(in
                  thousands)
              
              **January
                  1,**
                **2006**
              
              **2006
                  Acquisitions**
              
              **Contingent****(1)****Consideration**
              
              **June
                  30,**
                **2006**inVentiv
                  Clinical
              
              $
              45,427
              
              $
              3,235
              
              $
              1,004
              
              $
              49,666inVentiv
                  Communications
              
              
              87,538
              
              
              34,014
              
              
              136
              
              
              121,688inVentiv
                  Commercial
              
              
              40,812
              
              
              --
              
              
              (44
              )
              
              40,768Total
              
              
              173,777
              
              $
              37,249
              
              
              1,096
              
              
              212,122




(1)
      The contingent consideration represents adjustments relating to the finalization
      of the 2005 earnouts (see Note 4 for further details).




Other
      intangible assets consist of the following:





**June
                30, 2006**
            
            **December
                31, 2005**(in
                thousands)
            
            
            
            **Accumulated**
            
            
            
            
            
            **Accumulated****Gross**
            
            **Amortization**
            
            **Net**
            
            **Gross**
            
            **Amortization**
            
            **Net**Customer
                relationships
            
            $
            57,642
            
            $
            (4,473
            )
            $
            53,169
            
            $
            37,787
            
            $
            (2,098
            )
            $
            35,689Noncompete
                agreement
            
            
            1,644
            
            
            (266
            )
            
            1,378
            
            
            690
            
            
            (103
            )
            
            587Tradenames
                subject to amortization
            
            
            1,139
            
            
            (64
            )
            
            1,075
            
            
            --
            
            
            --
            
            
            --Other
            
            
            530
            
            
            (204
            )
            
            326
            
            
            260
            
            
            (190
            )
            
            70Total
                definite-life intangibles
            
            
            60,955
            
            
            (5,007
            )
            
            55,948
            
            
            38,737
            
            
            (2,391
            )
            
            36,346Tradenames
                not subject to amortization
            
            
            96,260
            
            
            --
            
            
            96,260
            
            
            81,260
            
            
            --
            
            
            81,260Total
                other intangibles(1)
            
            $
            157,215
            
            $
            (5,007
            )
            $
            152,208
            
            $
            119,997
            
            $
            (2,391
            )
            $
            117,606





(1) The
      $37.2 million increase in total gross other intangibles arises from the
      acquisitions of Adheris, JSAI and Synergos.





The
      2004,
      2005 and 2006 business combinations discussed in footnote 4 above resulted
      in
      approximately $191.5 million of goodwill (all of which is expected to be
      deductible for tax purposes) and the following gross intangible
      assets:





**Intangible
                asset**
            
            **Amount**
              **(in
                thousands)**
            
            **Weighted
                average amortization period**Tradename
            
            $
            97,399
            
            
            (1
            )Customer
                relationships
            
            
            57,642
            
            
            11.2
                yearsNoncompete
                agreement
            
            
            1,644
            
            
            4.0
                yearsTechnology
            
            
            270
            
            
            4.0
                yearsTotal
            
            $
            156,955
            (2)





(1)
            $1.1
                million of the tradenames are indefinite-life intangibles. The remaining
                definite life intangibles have a weighted average amortization period
                of 6
                years.


(2)
            Excludes
                $0.3 million of a definite-life intangible asset established prior
                to the
                2004-2006 acquisitions.







**INVENTIV
          HEALTH, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
          Continued**
 Amortization expense, based on intangibles subject to amortization held at
        June
        30, 2006, is expected to be $3.1 million for the last six months of 2006,
        $6.3
        million in 2007, $6.1 million in 2008, $5.6 million in 2009, $5.1 million
        in
        2010, $5.0 million in 2011 and $24.7 million thereafter.





Goodwill
      and other indefinite-life intangibles, such as tradenames, are assessed annually
      for potential impairment on June 30, pursuant to the guidelines of SFAS 142, *Goodwill
      and Other Intangible Assets* .
      The
      Company conducted its assessment and concluded that the foregoing balances
      on
      the Company’s Condensed Consolidated Balance Sheet were not impaired as of June
      30, 2006.




**10.**  **Debt:**




The
      Company’s principal external source of liquidity is its syndicated, secured
      credit agreement, which was entered into with UBS AG, Stamford Branch, and
      others in connection with the inChord acquisition. The key features of this
      credit facility are as follows:





·
            A
                $175 million term loan facility was made available to the Company
                in a
                single drawing at the time of the inChord transaction. The credit
                agreement also includes a $50 million revolving credit facility,
                of which
                $5 million is available for the issuance of letters of credit, and
                a $5
                million swingline facility.





·
            The
                term loan will mature on the sixth anniversary of the Credit Agreement,
                with scheduled quarterly amortization of 1% per year during years
                one
                through five and 95% during year six. 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 and certain issuances of
                our debt
                obligations or equity securities, subject to certain exceptions.
                The
                Company 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 that are repaid or prepaid may not be
                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 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, acquisitions and transactions with affiliates. The credit
      agreement also includes covenants under which we are required to maintain a
      maximum leverage ratio and minimum interest rate coverage and fixed charge
      coverage ratios that vary based on the amount of time elapsed since the initial
      extension of credit. As of June 30, 2006, the Company complied with the
      requirements of the credit facility.




The
      three-month LIBOR base rate as of June 30, 2006 was 5.50%. As mentioned in
      footnote 12, the Company entered into a derivative financial instrument to
      hedge
      against its $175 million term loan facility.




During
      2005, the Company incurred costs of approximately $3.3 million related to the
      credit agreement. These amounts are classified as deferred financing costs
      and
      are included as Deposits and Other Assets on the June 30, 2006 Condensed
      Consolidated Balance Sheet. These deferred financing costs are amortized as
      interest expense over the life of the loan. At June 30, 2006, the Company had
      approximately $173.7 million outstanding on the term loan, $3.6 million
      outstanding with respect to letters of credit under the revolving credit
      facility and no amounts outstanding under the swingline facility. The
      aggregate annual scheduled principal payments for the next five years and
      thereafter related to the term loan facility at June 30, 2006 are summarized
      as
      follows:




(in
                thousands)June
                30, 2007
            
            $
            1,750June
                30, 2008
            
            
            1,750June
                30, 2009
            
            
            1,750June
                30, 2010
            
            
            1,750June
                30, 2011
            
            
            125,125June
                30, 2012 and thereafter
            
            
            41,563$
            173,688





**11.**  **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. During the fourth quarter of 2002, the segment entered into
      a
      second agreement with another vendor. Based on the terms of the agreement,
      management concluded that the leases were capital in nature 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 $11.1 million (including rebates of $0.1 million) and
      $4.9 million during the six-month periods ended June 30, 2006 and 2005,
      respectively. The Company also incurred net disposals of $4.9 million and $2.0
      million during the six-months ended June 30, 2006 and 2005,
      respectively.




**12.**  **Derivative
      Financial Instruments:**





Effective
      October 2005, the Company entered into a three-year interest rate swap
      arrangement for $175 million to apply a fixed interest rate against the six-year
      $175 million loan arrangement entered into to facilitate the acquisition of
      inChord. The Company entered into this interest rate swap agreement to modify
      the interest rate characteristics of its outstanding long-term debt. At
      inception, and at least quarterly thereafter, the Company assesses whether
      derivatives used to hedge transactions are highly effective in offsetting
      changes in the cash flow of the hedged item. To the extent the instruments
      are
      considered to be effective, changes in fair value are recorded as a component
      of
      other comprehensive income (loss). To the extent there is any hedge
      ineffectiveness, changes in fair value relating to the ineffective portion
      are
      immediately recognized in earnings (interest expense).





For
      the
      six months ended June 30, 2006, the Company did not qualify for hedge accounting
      and recorded a $2.8 million reduction to interest expense relating to the
      mark-to-market adjustment required to record hedge ineffectiveness to earnings,
      and a corresponding derivative asset of approximately $2.8 million, which was
      recorded in Deposits and Other Assets on the Condensed Consolidated Balance
      Sheet; to date, this asset totals $3.1 million on the June 30, 2006 Condensed
      Consolidated Balance Sheet. The fair values of the interest rate swaps are
      obtained from dealer quotes. These values represent the estimated amount the
      Company would receive or pay to terminate the agreement taking into
      consideration the difference between the contract rate of interest and rates
      currently quoted for agreements of similar terms and maturities.





**13.**  **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 are described in Part I, Item 3 of
      the
      Company's Annual Report on Form 10-K for the fiscal year ended December 31,
      2005. 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 and based on the advice
      of
      legal counsel, no matters outstanding as of June 30, 2006 are likely to have
      a
      material adverse effect on inVentiv.





Pursuant
      to the acquisition of inChord, the Company assumed a $7.5 million existing
      liability on inChord’s balance sheet relating to certain performance thresholds
      of inChord over a three-year period. The Company will continue to periodically
      monitor these performance thresholds, which may result in up to an additional
      $7.5 million of future expenses if and when it is probable that the additional
      thresholds will be met. As of June 30, 2006, the Company has not recorded any
      additional liability since the additional performance thresholds have not been
      met.








**INVENTIV
          HEALTH, INC.**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
          Continued**
 **14.**  **Deferred
        Compensation:**





On
      November 22, 2004, inVentiv adopted the Ventiv Health, Inc. Deferred
      Compensation Plan (the "Plan"), which was approved by inVentiv’s Board of
      Directors. The 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 Plan. The
      compensation deferrals were initiated in 2005. The deferred compensation
      liability of approximately $3.5 million was included in other non-current
      liabilities in the Company’s Condensed Consolidated Balance Sheet as of June 30,
      2006. The Plan does not provide for the payment of above-market interest to
      participants.





To
      assist
      in the funding of the Plan obligation, the Company participates in a
      corporate-owned life insurance program in a rabbi trust whereby it purchases
      life insurance policies covering the lives of certain employees, with the
      Company named as beneficiary. Rabbi trusts are grantor trusts generally set
      up
      to fund compensation for a select group of management or highly paid executives.
      The cash value of the life insurance policy at June 30, 2006 was approximately
      $2.7 million and is currently classified in Deposits and Other Assets on the
      Company’s Condensed Consolidated Balance Sheet as of June 30, 2006.





**15.**   **Income
      Taxes**





In
      June
      2006, inVentiv recorded a tax benefit of approximately $9.1 million relating
      to
      net operating losses of a previously-divested unit. The Company’s management has
      determined that it is probable that this deferred tax asset will be utilized,
      thus reducing the valuation allowance during the second quarter of 2006
      accordingly. Excluding this one-time tax benefit, inVentiv recorded a provision
      for income taxes on continuing operations using an estimated effective tax
      rate
      of 40.0% for the six-month period ended June 30, 2006. In March 2005, inVentiv
      recorded a tax benefit of approximately $1.6 million primarily related to prior
      period tax contingencies, which are no longer required; excluding this one-time
      tax benefit, inVentiv recorded a provision for income taxes on continuing
      operations using an estimated effective tax rate of 39.8% for the six-month
      period ended June 30, 2005. Our 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. Our effective tax rate could fluctuate
      due
      to changes in earnings between operating entities and related tax jurisdictions,
      or due to the potential tax impact arising from previous
      divestitures.


**16.**   **Stockholders’
      Equity**




The
      following table describes the 2006 activity in the Company’s Stockholders’
Equity accounts for the six months ended June 30, 2006:




Common
                Stock
            
            Additional
                Paid-In
              Capital
            
            Accumulated
                earnings
            
            Deferred
                Compen-
              Sation
            
            Compre-hensive
              Income
            
            Accumulated
                Other Comprehen-sive Income (Losses)
            
            TotalBalance
                at December 31, 2005
            
            $
            28
            
            $
            233,441
            
            $
            23,092
            
            $
            (3,563
            )
            
            
            
            $
            221
            
            $
            253,219Net
                income
            
            
            
            
            
            
            
            
            31,227
            
            
            
            
            $
            31,227
            
            
            
            
            
            31,227Foreign
                currency translation
              Adjustment
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            714
            
            
            714
            
            
            71431,941Reclassification
                of unvested restricted shares to additional paid-in
                capital
            
            
            
            
            
            (3,563
            )
            
            
            
            
            3,563
            
            
            
            
            
            
            
            
            --Vesting
                of restricted shares
            
            
            
            
            
            1,222
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,222Withhold
                shares for taxes
            
            
            
            
            
            (85
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )Tax
                benefit from exercise of employee stock options and vesting of restricted
                stock
            
            
            
            
            
            4,409
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,409Consultant
                compensation
            
            
            
            
            
            399
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            399Exercise
                of stock options
            
            
            
            
            
            2,778
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,778Stock
                option expense
            
            
            
            
            
            2,114
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,114Issuance
                of shares in connection with acquisitions
            
            
            1
            
            
            27,176
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            27,177Cash
                distribution TSP
            
            
            
            
            
            
            
            
            (552
            )
            
            
            
            
            
            
            
            
            
            
            (552
            )Balance
                at June 30, 2006
            
            $
            29
            
            $
            267,891
            
            $
            53,767
            
            $
            --
            
            
            
            
            $
            935
            
            $
            322,622





**17.**  **Discontinued
      Operations:**





For
      the
      six months ended June 30, 2006 and 2005, earnings from discontinued operations,
      net of taxes, were approximately $1.2 million and $1.6 million, respectively.
      The gains on disposals of discontinued operations mainly consisted of
      contingency payments due from our previously-divested Germany-based
      unit.







**18.**  **Related
      Parties:**





The
      Company is currently in a lease with Olde Worthington Road LLC for inVentiv
      Communications’ current headquarters facility in Westerville, Ohio. This
      facility is partially owned by the current inVentiv Communications’ Chief
      Executive Officer (who is also a member of the Board of Directors), his brothers
      and other current employees of inVentiv Communications through their ownership
      in GSW Capital LLC. GSW Capital LLC is a 50% owner of Olde Worthington Road
      LLC.
      The term of the lease is fifteen years, and expires on September 30, 2015
      (subject to an early termination option effective as of September 30, 2010
      in favor of inChord).




**19.**  **Segment
      Information:**





The
      Company currently manages three operating segments: inVentiv Clinical, inVentiv
      Communications and inVentiv Commercial, and its non-operating reportable
      segment, “Other”, which is based on the way management makes operating decisions
      and assesses performance. The following represents our reportable segments:





·
            inVentiv
                Clinical,
                which provides services related to permanent placement, clinical
                staffing,
                data collection and management and functional service
                provision





·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                interactive communication development and patient and physician education





·
            inVentiv
                Commercial,
                which consists of the Company’s outsourced sales and marketing teams,
                planning and analytics services, sample accountability and patient
                assistance businesses, marketing support services, professional
                development and training, and recruitment of sales representatives
                in the
                commercial services area.





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




In
      August
      2005, the Company acquired PRS, which is reported in the inVentiv Commercial
      segment from the date of its acquisition. In October 2005, the Company acquired
      inChord, which created the operating segment, inVentiv Communications, from
      the
      date of its acquisition. In February 2006, the Company acquired Adheris, which
      is reported in the inVentiv Communications segment from the date of its
      acquisition. In April 2006, the Company acquired Synergos, which is reported
      in
      the inVentiv Clinical segment from the date of its acquisition and JSAI, which
      is reported in the inVentiv Communications segment from the date of its
      acquisition.




Segment
      information for the three-months ended June 30, 2006 is as follows (in
      thousands):





**inVentiv**
              **Clinical**
            
            **inVentiv
                Communications**
            
            **inVentiv
                Commercial**
            
            **Other**
            
            **Total**Revenues
            
            $
            38,541
            
            $
            64,898
            
            $
            80,955
            
            $
            --
            
            $
            184,394Less:
                Intersegment revenues
            
            
            (122
            )
            
            (363
            )
            
            (930
            )
            
            --
            
            
            (1,415
            )Reported
                Revenues
            
            $
            38,419
            
            $
            64,535
            
            $
            80,025
            
            $
            --
            
            $
            182,979Depreciation
                and amortization
            
            
            415
            
            
            1,466
            
            
            3,469
            
            
            22
            
            
            5,372Interest
                expense
            
            
            --
            
            
            8
            
            
            415
            
            
            1,818
            
            
            2,241Interest
                income
            
            
            10
            
            
            155
            
            
            --
            
            
            197
            
            
            362Segment
                income (loss) (1)
            
            $
            3,597
            
            $
            8,797
            
            $
            10,245
            
            $
            (4,337
            )
            $
            18,302




Segment
      information for the three-months ended June 30, 2005 is as follows (in
      thousands):





**inVentiv**
              **Clinical**
            
            **inVentiv
                Communications**
            
            **inVentiv
                Commercial**
            
            **Other**
            
            **Total**Revenues
            
            $
            27,757
            
            $
            --
            
            $
            104,224
            
            $
            --
            
            $
            131,981Less:
                Intersegment revenues
            
            
            --
            
            
            --
            
            
            (193
            )
            
            --
            
            
            (193
            )Reported
                Revenues
            
            $
            27,757
            
            $
            --
            
            $
            104,031
            
            $
            --
            
            $
            131,788Depreciation
                and amortization
            
            
            311
            
            
            --
            
            
            3,203
            
            
            22
            
            
            3,536Interest
                expense
            
            
            --
            
            
            --
            
            
            315
            
            
            7
            
            
            322Interest
                income
            
            
            6
            
            
            --
            
            
            33
            
            
            214
            
            
            253Segment
                income (loss) (1)
            
            $
            2,153
            
            $
            --
            
            $
            14,620
            
            $
            (1,770
            )
            $
            15,003





Segment
      information for the six-months ended June 30, 2006 is as follows (in
      thousands):





**inVentiv**
              **Clinical**
            
            **inVentiv
                Communications**
            
            **inVentiv
                Commercial**
            
            **Other**
            
            **Total**Revenues
            
            $
            71,011
            
            $
            117,476
            
            $
            170,759
            
            $
            --
            
            $
            359,246Less:
                Intersegment revenues
            
            
            (156
            )
            
            (489
            )
            
            (1,945
            )
            
            --
            
            
            (2,590
            )Reported
                Revenues
            
            $
            70,855
            
            $
            116,987
            
            $
            168,814
            
            $
            --
            
            $
            356,656Depreciation
                and amortization
            
            
            729
            
            
            2,321
            
            
            7,101
            
            
            43
            
            
            10,194Interest
                expense
            
            
            --
            
            
            19
            
            
            814
            
            
            3,065
            
            
            3,898Interest
                income
            
            
            22
            
            
            282
            
            
            --
            
            
            792
            
            
            1,096Segment
                income (loss) (1)
            
            $
            4,923
            
            $
            17,506
            
            $
            21,359
            
            $
            (7,526
            )
            $
            36,262





Segment
      information for the six months ended June 30, 2005 is as follows (in
      thousands):





**InVentiv**
              **Clinical**
            
            **inVentiv
                Communications**
            
            **inVentiv
                Commercial**
            
            **Other**
            
            **Total**Revenues
            
            $
            52,467
            
            $
            --
            
            $
            200,527
            
            $
            --
            
            $
            252,994Less:
                Intersegment revenues
            
            
            (8
            )
            
            --
            
            
            (340
            )
            
            --
            
            
            (348
            )Reported
                Revenues
            
            $
            52,459
            
            $
            --
            
            $
            200,187
            
            $
            --
            
            $
            252,646Depreciation
                and amortization
            
            
            621
            
            
            --
            
            
            8,446
            
            
            43
            
            
            9,110Interest
                expense
            
            
            --
            
            
            --
            
            
            603
            
            
            107
            
            
            710Interest
                income
            
            
            12
            
            
            --
            
            
            59
            
            
            435
            
            
            506Segment
                income (loss) (1)
            
            $
            4,107
            
            $
            --
            
            $
            27,063
            
            $
            (3,556
            )
            $
            27,614




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





(in
                thousands)
            
            **June
                30, 2006**
            
            **Dec.
                31, 2005**Total
                Assets:inVentiv
                Clinical
            
            $
            100,436
            
            $
            84,731inVentiv
                Communications
            
            
            349,178
            
            
            248,986inVentiv
                Commercial
            
            
            153,142
            
            
            171,468Other
            
            
            57,112
            
            
            78,709Total
                assets
            
            $
            659,868
            
            $
            583,894













**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 years ended December 31, 2005, 2004 and
      2003.





*Overview*





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. 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 bring them to market. Our goal is to assist our customers in
      meeting their objectives in each of these areas by providing our services on
      a
      flexible and cost-effective basis. We provide services to over 200 client
      organizations, including all top 20 global pharmaceutical companies and numerous
      emerging and specialty biotechnology companies.





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. We have established expertise and leadership in providing
      the services our clients require at each of these stages of product development
      and commercialization and seek to address their outsourced service needs on
      a
      comprehensive basis throughout the product life cycle. Our services assist
      our
      clients in developing, executing and monitoring strategic and tactical sales
      and
      marketing plans and programs for the promotion of pharmaceutical, biotechnology
      and other life sciences products.




We
        currently serve our clients primarily through three business
        segments:
 
 ·
              inVentiv
                  Clinical,
                  which provides services related to permanent placement, clinical
                  staffing,
                  data collection and management and functional service provision.
 
 ·
              inVentiv
                  Communications,
                  which provides services related to pharmaceutical advertising,
                  branding,
                  interactive communication development and patient and physician
                  education.
 
 ·
              inVentiv
                  Commercial,
                  which consists of our outsourced sales and marketing teams, planning
                  and
                  analytics services, sample accountability and patient assistance
                  businesses, marketing support services, professional development
                  and
                  training, and recruitment of sales representatives in the commercial
                  services area.
 inVentiv
          Clinical was initially built through the acquisition of the Smith Hanley
          group
          of companies and HHI during the fourth quarter of 2004 and was augmented
          with
          the acquisition of Synergos in April 2006. inVentiv Communications was
          founded
          with the acquisition of inChord in October 2005 and also includes Adheris,
          which
          was acquired in February 2006, and JSAI, which was acquired in April 2006.
          inVentiv Commercial includes our outsourced sales and marketing teams,
          planning
          and analytics services and other services that we have operated since our
          inception and also includes Franklin Group, which was acquired in June
          of 2004
          and PRS, which was acquired in August of 2005.


On
      June
      14, 2006, we changed our name to inVentiv Health, Inc. as part of a re-branding
      initiative that began when we acquired inChord.




*Acquisitions
      and Divestitures*




The
        pursuit of
        strategic acquisitions is a core part of our business strategy. We believe
        that
        our expertise in identifying potential acquisition targets, assessing their
        importance to our operational and growth objectives, diligencing and completing
        the acquisition of appropriate businesses and effectively integrating them
        with
        our existing operations is a significant competitive advantage. The following
        is
        a summary of our acquisitions to date:




**Target**
                **Type
                    of Business**
                **Location**
                **Month
                    Acquired**JSAI
                Marketing
                    and communications agency
                Canada
                April
                    2006Synergos
                Clinical
                    trial management services
                Texas
                April
                    2006Adheris
                Patient
                    pharmaceutical compliance
                Massachusetts
                February
                    2006inChord
                Advertising
                    and communications support
                Ohio
                October
                    2005PRS
                Regulatory
                    compliance
                Pennsylvania
                August
                    2005HHI
                Data
                    management and statistical analyses
                Maryland
                November
                    2004Smith
                    Hanley
                Contract
                    research and clinical trial support
                Connecticut
                October
                    2004Franklin
                Patient
                    support programs
                New
                    Jersey
                June
                    2004





Our
      acquisition activity adds complexity to the analysis of period-to-period
      financial results and makes direct comparison of those financial results
      difficult. Our acquisitions are accounted for using purchase accounting and
      the
      financial results of the acquired businesses are included in our 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.





Our
      financial statements for the second quarter and the first six months of 2006
      include the financial results of inChord, PRS, Adheris, JSAI and Synergos.
      Each
      of those businesses was acquired after the completion of the corresponding
      2005
      fiscal periods.





During
      2002 and 2003, we divested our Communications and European Contract Sales
      businesses. We have been receiving payments subsequent to some of these
      divestitures based on the subsequent earnings of the divested unit. For the
      six
      months ended June 30, 2006 and 2005, we received approximately $0.1 million
      and
      $1.6 million, respectively, relating to the Germany-based contract sales
      organization.





*Critical
      Accounting Policies*





The
      Company’s critical accounting policies are set forth in its Annual Report on
      Form 10-K for the year ended December 31, 2005. There has been no change, update
      or revision to the Company’s critical accounting policies subsequent to the
      filing of the Company’s Form 10-K for the year ended December 31, 2005, except
      for the adoption of Statement
      of Financial Accounting Standards No. 123 (“SFAS 123 (R)”) , *Share-Based
      Payment* , as
      more
      fully described below.




In
      December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      123 (R), which establishes accounting for share-based awards exchanged for
      employee services and requires companies to expense the estimated fair value
      of
      these awards over the requisite employee service period. On April 14, 2005,
      the U.S. Securities and Exchange Commission adopted a new rule amending the
      effective dates for SFAS 123 (R). In accordance with the new rule, the Company
      adopted the accounting provisions of SFAS 123 (R) as of January 1, 2006.





inVentiv
      adopted SFAS 123 (R) using the modified prospective transition method beginning
      January 1, 2006. Accordingly, during the six-month period ended June 30,
      2006, inVentiv recorded stock-based compensation expense for awards granted
      prior to, but not yet vested, as of January 1, 2006, as if the fair value
      method required for pro forma disclosure under FAS 123 were in effect for
      expense recognition purposes, adjusted for estimated forfeitures. For
      stock-based awards granted after January 1, 2006, inVentiv recognized
      compensation expense based on the estimated grant date fair value method using
      the Black-Scholes valuation model. For these awards, compensation expense was
      recognized using a ratable amortization method.





In
      the
      process of implementing FAS 123(R), during the fourth quarter of 2005,
      inVentiv analyzed certain key variables, such as expected volatility and
      expected term to determine an accurate estimate of these variables. As a result
      of this analysis, inVentiv determined that the expected volatility should be
      45%, while the expected term should range from 5.5 to 6 years. During the three
      months ended June 30, 2005, the Company utilized an expected volatility of
      84%
      and an expected term of 4 years. The variables used in early 2005 and prior
      years were based solely on historical data, while the current rates are more
      reflective of current and future periods. FAS 123(R) requires that
      stock-based compensation expense be based on awards that are ultimately expected
      to vest. Stock-based compensation for the six-month period ended June 30, 2006
      has been reduced for estimated forfeitures. When estimating forfeitures,
      inVentiv considers voluntary termination behaviors as well as trends of actual
      option forfeitures.







**Three-Months
      Ended June 30, 2006 Compared to Three-Months Ended June 30,
      2005**





**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:




**For
                the Three-Months Ended June 30,****2006**
            
            **2005****(in
                thousands, except for per share data)**Revenues:
            
            
            
            Percentage(1)
            
            
            
            Percentage(1)inVentiv
                Clinical
            
            $
            38,419
            
            
            21.0
            %
            $
            27,757
            
            
            21.1
            %inVentiv
                Communications
            
            
            64,535
            
            
            35.3
            %
            
            --
            
            
            --inVentiv
                Commercial
            
            
            80,025
            
            
            43.7
            %
            
            104,031
            
            
            78.9
            %Total
                revenues
            
            
            182,979
            
            
            100.0
            %
            
            131,788
            
            
            100.0
            %Cost
                of services(2):inVentiv
                Clinical
            
            
            25,028
            
            
            65.1
            %
            
            18,154
            
            
            65.4
            %inVentiv
                Communications
            
            
            40,469
            
            
            62.7
            %
            
            --
            
            
            --inVentiv
                Commercial
            
            
            62,363
            
            
            77.9
            %
            
            81,607
            
            
            78.4
            %Total
                cost of services
            
            
            127,860
            
            
            69.9
            %
            
            99,761
            
            
            75.7
            %Selling,
                general and administrative expenses
            
            
            34,938
            
            
            19.1
            %
            
            16,955
            
            
            12.9
            %Total
                operating income
            
            $
            20,181
            
            
            11.0
            %
            $
            15,072
            
            
            11.4
            %Interest
                expense
            
            
            (2,241
            )
            
            (1.2
            )%
            
            (322
            )
            
            (0.2
            )%Interest
                income
            
            
            362
            
            
            0.2
            %
            
            253
            
            
            0.2
            %Income
                from continuing operations before income tax provision,
              minority
                interest in income of subsidiary and income from equity
              investments
            
            
            18,302
            
            
            10.0
            %
            
            15,003
            
            
            11.4
            %Income
                tax benefit (provision)
            
            
            1,748
            
            
            1.0
            %
            
            (5,971
            )
            
            (4.5
            )%Income
                from continuing operations before minority interest in
              income
                of subsidiary and income from equity investments
            
            
            20,050
            
            
            11.0
            %
            
            9,032
            
            
            6.9
            %Minority
                interest in subsidiary
            
            
            (352
            )
            
            (0.2
            )%
            
            --
            
            
            --Income
                from equity investments
            
            
            166
            
            
            0.1
            %
            
            --
            
            
            --Income
                from continuing operations
            
            
            19,864
            
            
            10.9
            %
            
            9,032
            
            
            6.9
            %Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            
            
            1,115
            
            
            0.6
            %
            
            1,463
            
            
            1.1
            %Income
                from discontinued operations
            
            
            1,115
            
            
            0.6
            %
            
            1,463
            
            
            1.1
            %Net
                income
            
            $
            20,979
            
            
            11.5
            %
            $
            10,495
            
            
            8.0
            %Earnings
                per share:Continuing
                operations:Basic
            
            $
            0.68
            
            
            
            
            $
            0.34Diluted
            
            $
            0.66
            
            
            
            
            $
            0.32Discontinued
                operations:Basic
            
            $
            0.04
            
            
            
            
            $
            0.05Diluted
            
            $
            0.03
            
            
            
            
            $
            0.06Net
                earnings:Basic
            
            $
            0.72
            
            
            
            
            $
            0.39Diluted
            
            $
            0.69
            
            
            
            
            $
            0.38





(1)
            Cost
                of services is expressed as a percentage of segment revenue. All
                other
                line items are displayed as a percentage of total
                revenues.


(2)
            Cost
                of services includes reimbursed out of pocket
                expenses.








***Revenues*** :
      Revenues increased by approximately $51.2 million, or 38.8%, to $183.0 million
      during the second quarter of 2006, from $131.8 million during the second quarter
      of 2005.




inVentiv
      Clinical’s revenues were $38.4 million during the second quarter of 2006, an
      increase of $10.6 million compared to $27.8 million during the second quarter
      of
      2005. inVentiv Clinical revenues accounted for 21.0% of total inVentiv revenues
      during the second quarter of 2006. Revenues in the clinical staffing division
      were higher in 2006 predominantly due to increased placement of temporary
      personnel. The acquisition of Synergos in April 2006 also contributed to
      revenues for the second quarter of 2006.




inVentiv
      Communications’ revenues were $64.5 million during the second quarter of 2006.
      inVentiv Communications revenues accounted for 35.3% of total inVentiv revenues
      during the second quarter of 2006. inVentiv Communications was established
      in
      October 2005 with the acquisition of inChord and also includes the operations
      of
      Adheris, which was acquired in February 2006, and JSAI, which was acquired
      in
      April 2006.




Revenues
      in our inVentiv Commercial segment were $80.0 million during the second quarter
      of 2006, a decrease of $24.0 million, or 23.1% from the $104.0 million during
      the second quarter of 2005. inVentiv Commerical revenues accounted for 43.7%
      of
      total inVentiv revenues for the second quarter of 2006. This decrease resulted
      primarily from anticipated wind-downs of certain contracts, and was partially
      offset by additional revenue during 2006 from PRS, which was acquired in August
      2005. The sales teams business is expected to resume its growth trajectory
      in
      the second half of the year with the addition of several new contract wins.





***Cost
      of Services*** :
      Cost of
      services increased by approximately $28.1 million or 28.2%, to $127.9 million
      during the second quarter of 2006 from $99.8 million in the second quarter
      of
      2005. Cost of services as a percentage of revenues decreased to 69.9% during
      the
      second quarter of 2006 from 75.7% during the second quarter of 2005. In addition
      to increases in variable costs associated with increased revenues, cost of
      services includes $0.6 million of share-based compensation expense not recorded
      in prior years. On
      January 1, 2006, inVentiv adopted the provisions of Statement
      of Financial Accounting Standards No. 123 ("FAS 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. In prior periods, inVentiv recorded
      compensation expense for unvested restricted shares over the applicable vesting
      periods. Starting in January 2006, as a result of adopting FAS 123 (R), inVentiv
      has also recorded compensation expense for its stock options. For further
      details on the new accounting policy, see section on Critical Accounting
      Policies.





inVentiv
      Clinical’s cost of services increased by approximately $6.8 million, or 37.9%,
      to $25.0 million during the second quarter of 2006 from $18.2 million during
      the
      second quarter of 2005. Cost of services as a percentage of revenues slightly
      decreased from 65.4% during the second quarter of 2005 to 65.1% during the
      same
      period in 2006.





inVentiv
      Communications, which was established in October 2005 and contributed
      approximately $40.5 million to cost of sales during the second quarter of 2006.
      Cost of sales was 62.7% of this segment’s revenues.





Cost
      of
      services at inVentiv Commercial decreased by approximately $19.2 million, or
      23.6%, to $62.4 million in the second quarter of 2006 from $81.6 million in
      the
      second quarter of 2005, mainly due to the decrease in revenues. Cost of services
      was 77.9% of inVentiv Commercial revenues during the second quarter of 2006,
      compared to 78.4% during the second quarter of 2005. The decrease of cost of
      services as a percentage of revenue in 2006 as compared to 2005 was attributable
      to a shift toward higher-margin businesses.





***Selling,
      General and Administrative Expenses ("SG&A")*** :
      SG&A expenses increased by approximately $17.9 million, or 106.1%, to $34.9
      million during the second quarter of 2006 from $17.0 million during the second
      quarter of 2005. This increase was primarily due to SG&A expenses at
      inVentiv Communications, which was acquired in October 2005; increased
      compensation levels in 2006 versus 2005; and $1.1 million of share-based
      compensation expense, for which there was no corresponding expense during 2005.




SG&A
      expenses at inVentiv Clinical were approximately $9.8 million during the second
      quarter of 2006, compared to $7.5 million during the second quarter of 2005.
      Additional staffing was required as the division has grown over the past year.




SG&A
      expenses at inVentiv Communications, which was acquired in October 2005, were
      approximately $15.4 million during the second quarter of 2006.




SG&A
      expenses at inVentiv Commercial decreased by approximately $0.5 million, or
      6.9%, to $7.0 million during the second quarter of 2006 from $7.5 million during
      the second quarter of 2005. This decrease was attributable to ongoing cost
      savings measures implemented by management to align our support and
      infrastructure with the current level of operations and was partially offset
      by
      expenses related to PRS, for which there were no corresponding expenses during
      the second quarter of 2005 since the acquisition did not occur until August
      2005.




Other
      SG&A was approximately $2.7 million for the second quarter of 2006, an
      increase of approximately $0.7 million or 36.5% from $2.0 million during the
      second quarter of 2005. The increase was mainly related to increases in
      stock-based compensation expense that was required to be accounted for beginning
      in 2006, additional staff hired in internal audit and higher compensation than
      in the previous year.




***Provision
      for Income Taxes*** :
      In June
      2006, inVentiv recorded a tax benefit of approximately $9.1 million relating
      to
      net operating losses of a previously-divested unit. Management has determined
      that it is probable that this deferred tax asset will be utilized and has
      reduced the valuation allowance during the second quarter of 2006 accordingly.
      Excluding this one-time tax benefit, inVentiv recorded a provision for income
      taxes on continuing operations using an estimated effective tax rate of 40.0%
      for the three-month period ended June 30, 2006. For the three months ended
      June
      30, 2005, inVentiv used an effective tax rate of 39.8%. Our 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. Our effective tax
      rate could fluctuate due to changes in earnings between operating entities
      and
      related tax jurisdictions, or due to the potential tax impact arising from
      previous divestitures.





***Discontinued
      Operations*** :
      Earnings from discontinued operations, net of taxes, were approximately $1.1
      million and $1.5 million for the second quarter of 2006 and the second quarter
      of 2005, respectively. The gains on disposals of discontinued operations mainly
      consisted of contingency payments due from our previously-divested Germany-based
      unit.





***Net
      Income and Earnings Per Share*** *:* inVentiv’s net income increased by approximately $10.5 million to $21.0 million
      during the second quarter of 2006 from net income of $10.5 million during the
      second quarter of 2005.  Diluted earnings per share increased to $0.69 per
      share during the second quarter of 2006 from $0.38 per share during the second
      quarter of 2005.  Operating results were higher due to improved results in
      inVentiv Clinical, new acquisitions, and a one-time tax benefit, offset by
      stock-based compensation expense recorded as a result of adopting FAS
      123R.





**Six-Months
      Ended June 30, 2006 Compared to Six-Months Ended June 30,
      2005**





**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:




**For
                the Six-Months Ended June 30,****2006**
            
            **2005****(in
                thousands, except for per share data)**Revenues:
            
            
            
            Percentage(1)
            
            
            
            Percentage(1)inVentiv
                Clinical
            
            $
            70,855
            
            
            19.9
            %
            $
            52,459
            
            
            20.8
            %inVentiv
                Communications
            
            
            116,987
            
            
            32.8
            %
            
            --
            
            
            --inVentiv
                Commercial
            
            
            168,814
            
            
            47.3
            %
            
            200,187
            
            
            79.2
            %Total
                revenues
            
            
            356,656
            
            
            100.0
            %
            
            252,646
            
            
            100.0
            %Cost
                of services(2):inVentiv
                Clinical
            
            
            47,872
            
            
            67.6
            %
            
            34,278
            
            
            65.3
            %inVentiv
                Communications
            
            
            72,635
            
            
            62.1
            %
            
            --
            
            
            --inVentiv
                Commercial
            
            
            132,160
            
            
            78.3
            %
            
            159,195
            
            
            79.5
            %Total
                cost of services
            
            
            252,667
            
            
            70.8
            %
            
            193,473
            
            
            76.6
            %Selling,
                general and administrative expenses
            
            
            64,925
            
            
            18.2
            %
            
            31,355
            
            
            12.4
            %Total
                operating income
            
            $
            39,064
            
            
            11.0
            %
            $
            27,818
            
            
            11.0
            %Interest
                expense
            
            
            (3,898
            )
            
            (1.1
            )%
            
            (710
            )
            
            (0.3
            )%Interest
                income
            
            
            1,096
            
            
            0.3
            %
            
            506
            
            
            0.2
            %Income
                from continuing operations before income tax provision,
              minority
                interest in income of subsidiary and loss from equity
              investments
            
            
            36,262
            
            
            10.2
            %
            
            27,614
            
            
            10.9
            %Income
                tax provision
            
            
            (5,436
            )
            
            (1.5
            )%
            
            (9,390
            )
            
            (3.7
            )%Income
                from continuing operations before minority interest in
              income
                of subsidiary and loss from equity investments
            
            
            30,826
            
            
            8.7
            %
            
            18,224
            
            
            7.2
            %Minority
                interest in subsidiary
            
            
            (676
            )
            
            (0.2
            )%
            
            --
            
            
            --Loss
                from equity investments
            
            
            (144
            )
            
            --
            
            
            --
            
            
            --Income
                from continuing operations
            
            
            30,006
            
            
            8.5
            %
            
            18,224
            
            
            7.2
            %Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            
            
            1,221
            
            
            0.3
            %
            
            1,562
            
            
            0.6
            %Income
                from discontinued operations
            
            
            1,221
            
            
            0.3
            %
            
            1,562
            
            
            0.6
            %Net
                income
            
            $
            31,227
            
            
            8.8
            %
            $
            19,786
            
            
            7.8
            %Earnings
                per share:Continuing
                operations:Basic
            
            $
            1.05
            
            
            
            
            $
            0.69Diluted
            
            $
            1.01
            
            
            
            
            $
            0.66Discontinued
                operations:Basic
            
            $
            0.04
            
            
            
            
            $
            0.06Diluted
            
            $
            0.04
            
            
            
            
            $
            0.05Net
                earnings:Basic
            
            $
            1.09
            
            
            
            
            $
            0.75Diluted
            
            $
            1.05
            
            
            
            
            $
            0.71





(1)
            Cost
                of services is expressed as a percentage of segment revenue. All
                other
                line items are displayed as a percentage of total
                revenues.


(2)
            Cost
                of services includes reimbursed out of pocket
                expenses.








***Revenues*** :
      Revenues increased by approximately $104.1 million, or 41.2%, to $356.7 million
      in the six-month period ended June 30, 2006, from $252.6 million in the
      six-months ended June 30, 2005.




inVentiv
      Clinical’s revenues were $70.9 million during the six months ended June 30,
      2006, an increase of $18.4 million compared to $52.5 million during the
      six-months ended June 30, 2005. Revenues in the clinical staffing division
      were
      higher in 2006 predominantly due to increased placement of temporary personnel.
      The clinical staffing division also typically experiences a decrease in
      personnel during the first quarter of a year as clients may decide not to
      continue to employ these temporary personnel. This “falloff” was less
      significant in 2006 than 2005. Finally, in April 2006, the Company acquired
      Synergos, which complements the segment by strengthening the functional
      outsourcing service.




inVentiv
      Communications was acquired in October 2005 and contributed approximately $117.0
      million of revenues during the six-months ended June 30, 2006. This segment
      specializes in pharmaceutical advertising, branding, marketing and medical
      education.




Revenues
      in our inVentiv Commercial business were $168.8 million, a decrease of $31.4
      million or 15.7% from the $200.2 million in the same period in 2005. This
      decrease resulted primarily from anticipated wind-downs of certain contracts,
      and was partially offset by additional revenue during 2006 from PRS, which
      was
      acquired in August 2005. The sales teams business is expected to resume its
      growth trajectory in the second half of the year with the addition of several
      new contract wins.





***Cost
      of Services*** :
      Cost of
      services increased by approximately $59.2 million or 30.6%, to $252.7 million
      for the six-months ended June 30, 2006 from $193.5 million in the six-months
      ended June 30, 2005. Cost of services decreased as a percentage of revenues
      to
      70.8% from 76.6% in the six-months ended June 30, 2006 and 2005, respectively.
      Overall cost of services increased due to increased revenue over the same
      period; in addition, cost of services increased partially due to $1.2 million
      of
      share-based compensation expense not recorded in prior years. On January 1,
      2006, inVentiv adopted the provisions of Statement
      of Financial Accounting Standards No. 123 (FAS 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. In prior periods, inVentiv recorded
      compensation expense for unvested restricted shares over the applicable vesting
      periods. Starting in January 2006, as a result of adopting FAS 123 (R), inVentiv
      has also recorded compensation expense for its stock options. For further
      details on the new accounting policy, see section on Critical Accounting
      Policies.





inVentiv
      Clinical’s cost of services increased by approximately $13.6 million, or 39.7%,
      to $47.9 million during the six months ended June 30, 2006 from $34.3 million
      during the six-months ended June 30, 2005. Cost of services as a percentage
      of
      revenues increased from 65.3% during the six-months ended June 30, 2005 to
      67.6%
      during the same period in 2006.





inVentiv
      Communications was acquired in October 2005 and incurred approximately $72.6
      million of cost of sales during the six months ended June 30, 2006. Cost of
      sales was 62.1% of this segment’s revenues. This segment specializes in
      pharmaceutical advertising, branding, marketing and medical
      education.





Cost
      of
      services at inVentiv Commercial decreased by approximately $27.0 million, or
      17.0%, to $132.2 million in the six months ended June 30, 2006 from $159.2
      million in the six months ended June 30, 2005, mainly due to the decrease in
      revenues. Cost of services was 78.3% of inVentiv Commercial revenue in the
      six
      months ended June 30, 2006, compared to 79.5% in the six months ended June
      30,
      2005. The decrease of cost of services as a percentage of revenue in 2006 as
      compared to 2005 was attributable to a shift toward higher-margin
      businesses.





***Selling,
      General and Administrative Expenses*** :
      SG&A expenses increased by approximately $33.5 million, or 107.1%, to $64.9
      million from $31.4 million in the six months ended June 30, 2006 and 2005,
      respectively. This increase was primarily due to SG&A expenses at inVentiv
      Communications, which was acquired in October 2005; increased compensation
      levels in 2006 versus 2005; and $2.1 million of share-based compensation
      expense, which was new in 2006, as described above in the cost of services
      section.




SG&A
      expenses at inVentiv Clinical was approximately $18.1 million in the first
      half
      of 2006, compared to $14.1 million during the first half of 2005. Additional
      staffing requirements were required as the division has grown over the past
      year.




SG&A
      expenses at inVentiv Communications, which was acquired in October 2005, was
      approximately $27.1 million in the first half of 2006.




SG&A
      expenses at inVentiv Commercial increased by approximately $1.1 million, or
      8.2%, to $14.5 million in the six months ended June 30, 2006 from $13.4 million
      incurred in the six months ended June 30, 2005. This increase was attributable
      to expenses related to PRS that were not included in the first half of 2005
      since the acquisition did not occur until August 2005, offset by ongoing cost
      savings measures implemented by management to align our support and
      infrastructure with the current level of operations.




Other
      SG&A was approximately $5.3 million for the six-months ended June 30, 2006,
      an increase of approximately $1.4 million or 35.3% from $3.9 million for the
      six-months ended June 30, 2005. The increase was mainly related to increases
      in
      stock-based compensation expense in 2006, additional staff hired in internal
      audit and higher compensation from the previous year.




***Provision
      for Income Taxes*** :
      In June
      2006, inVentiv recorded a tax benefit of approximately $9.1 million relating
      to
      net operating losses of a previously-divested unit. The Company’s management has
      determined that it is probable that this deferred tax asset will be utilized,
      thus reducing the valuation allowance during the second quarter of 2006
      accordingly. Excluding this one-time tax benefit, inVentiv recorded a provision
      for income taxes on continuing operations using an estimated effective tax
      rate
      of 40.0% for the six-month period ended June 30, 2006. In March 2005, inVentiv
      recorded a tax benefit of approximately $1.6 million primarily related to prior
      period tax contingencies, which are no longer required; excluding this one-time
      tax benefit, inVentiv recorded a provision for income taxes on continuing
      operations using an estimated effective tax rate of 39.8% for the six-month
      period ended June 30, 2005. Our 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. Our effective tax rate could fluctuate
      due
      to changes in earnings between operating entities and related tax jurisdictions,
      or due to the potential tax impact arising from previous
      divestitures.





***Discontinued
      Operations*** :
      For the
      six months ended June 30, 2006 and 2005, earnings from discontinued operations,
      net of taxes, were approximately $1.2 million and $1.6 million, respectively.
      The gains on disposals of discontinued operations mainly consisted of
      contingency payments due from our previously-divested Germany-based unit.





***Net
      Income and Earnings Per Share*** *:* inVentiv’s net income increased by approximately $11.4 million to $31.2 million,
      from net income of $19.8 million in the six months ended June 30, 2006 and
      2005,
      respectively. Diluted earnings per share increased to earnings of $1.05 per
      share for the six-month period ended June 30, 2006 from earnings of $0.71 per
      share for the six-month period ended June 30, 2005.  Operating results were
      higher due to increased results in inVentiv Clinical, new acquisitions, and
      a
      one-time tax benefit, offset by stock-based compensation expense recorded as
      a
      result of adopting FAS 123R.





**Liquidity
      and Capital Resources**





At
      June
      30, 2006, inVentiv had $50.4 million of unrestricted cash and equivalents,
      a
      decrease of $22.7 million from December 31, 2005. For the six-months ended
      June
      30, 2005 compared to June 30, 2006, cash provided by operations increased by
      $37.0 million from $2.8 million to $39.8 million. Cash used in investing
      activities increased from $9.7 million to $61.7 million for the six-months
      ended
      June 30, 2005 and 2006, respectively. Cash used in financing activities
      decreased from $3.0 million to $1.5 million over the same comparative periods.





Cash
      provided by operations was $39.8 million during the six-months ended June 30,
      2006, while cash provided by operations was $2.8 million in the six-months
      ended
      June 30, 2005. This increase was, in large part, due to the collection of
      certain payments due under various contracts. The accounts receivable and
      unbilled services balances decreased by approximately $4.5 million during the
      first half of 2006, versus an increase of approximately $25.6 million during
      the
      first half of 2005, both net of acquired balances from acquisitions. This was
      mainly due to the timing of collection of certain receivables during the first
      half of 2006.





Cash
      used
      in investing activities was $61.7 million for the six-months ended June 30,
      2006
      compared to $9.7 million used during the same period in 2005. During the six
      months ended June 30, 2006, the Company paid approximately $50.4 million of
      cash, net of cash acquired, for the acquisitions of Adheris, JSAI and Synergos.
      In addition, the Company paid approximately $3.1 million more in the cash
      portion of earnout contingency payments during the first half of 2006 then
      during the first half of 2005, mainly due to the additional earnout payments
      for
      the businesses acquired during 2005.





Cash
      used
      in financing activities was $1.5 million and $3.0 million, respectively, for
      the
      first half of 2006 and 2005. During the first half of 2006, inVentiv adopted
      FAS
      123 R, resulting in a financing inflow and corresponding operating outflow
      of
      $4.0 million. This financing inflow was partially offset by repayment of debt
      under the new credit facility established in October 2005, as more fully
      described below, and lower proceeds from the exercise of stock options during
      the first half of 2006 versus the same period in 2005.





The
      acquisition agreements entered into in connection with inVentiv’s 2004, 2005 and
      2006 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 footnote 4 to our condensed consolidated
      financial statements included in Part I, Item 1 of this Quarterly Report on
      Form
      10-Q.




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 inChord acquisition. As of June 30, 2006, the Company
      complied with the requirements of the credit facility. The key features of
      this
      credit facility are as follows:






·
            A
                $175 million term loan facility was made available to inVentiv in
                a single
                drawing at the time of the inChord transaction. The credit agreement
                also
                includes a $50 million revolving credit facility, of which $5 million
                is
                available for the issuance of letters of credit, and a $5 million
                swingline facility.




·
            The
                term loan will mature on the sixth anniversary of the Credit Agreement,
                with scheduled quarterly amortization of 1% per year during years
                one
                through five and 95% during year six. 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 and certain issuances of
                debt
                obligations or 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 credit agreement that are repaid or prepaid may not be
                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
                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, acquisitions and transactions with affiliates.
                The
                credit agreement also includes covenants under which we are required
                to
                maintain a maximum leverage ratio and minimum interest rate coverage
                and
                fixed charge coverage ratios that vary based on the amount of time
                elapsed
                since the initial extension of
                credit.





Effective
      October 2005, we entered into a three- year swap arrangement for $175 million
      to
      hedge against the six-year $175 million loan arrangement entered into to
      facilitate the acquisition of inChord.





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.





**Contractual
      Obligations**





During
      2006, we acquired Synergos for approximately $5.8 million in cash and stock,
      JSAI for approximately $8.6 million in cash and stock and Adheris for
      approximately $67.0 million in cash and stock (in each case excluding direct
      acquisition costs and post-closing adjustments). Pursuant to the related
      acquisition agreements, we will be obligated to make certain earnout payments,
      which may be material, contingent on the financial performance of the acquired
      businesses during 2006 and in subsequent years, as described more fully in
      footnote 4 to our condensed consolidated financial statements included in Part
      I, Item 1 of this Quarterly Report on Form 10-Q.





With
      the
      foregoing exceptions, there have been no material changes, outside the ordinary
      course of business, in our outstanding contractual obligations from those
      disclosed within “Management’s Discussion and Analysis of Financial Condition
      and Results of Operations” in our Annual Report on Form 10-K for the year ended
      December 31, 2005.





**Off-Balance
      Sheet Arrangements**





As
      of
      June 30, 2006, we did not have any off-balance-sheet arrangements, as defined
      in
      Item 303(a)(4)(ii) of SEC Regulation S-K.




*Forward-Looking
        Statements*
 
 This
        Quarterly Report on Form 10-Q, including this Management’s Discussion and
        Analysis of Financial Condition and Results of Operations, 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. These
        statements concern expectations, beliefs, projections, future plans and
        strategies, anticipated events or trends and similar expressions concerning
        matters that are not historical facts. Specifically, this report contains
        forward-looking statements regarding:
 
 ·
              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
                  expectations regarding our pursuit of additional debt or equity
                  sources to
                  finance our internal growth initiatives or acquisitions;
                  and
 
 ·
              our
                  expectations regarding the impact of the adoption of certain accounting
                  standards.
 
 These
        forward-looking statements reflect our current views about future events
        and are
        subject to risks, uncertainties and assumptions. We wish to caution readers
        that
        certain important factors may have affected and could in the future affect
        our
        actual results and could cause actual results to differ significantly from
        those
        expressed in any forward-looking statement. The most important factors that
        could prevent us from achieving our goals, and cause the assumptions underlying
        forward-looking statements and the actual results to differ materially from
        those expressed in or implied by those forward-looking statements include,
        but
        are not limited to, the following:
  ·
              our
                  ability to sufficiently increase our revenues and maintain or decrease
                  expenses and cash capital expenditures to permit us to fund our
                  operations;
  ·
              our
                  ability to continue to comply with the convenants and terms of
                  our credity
                  facility and to access sufficient capital to fund our
                  operations;
  ·
              the
                  actual impact of the adoption of certain accounting standards;
                  and
 
 ·
              changes
                  in trends in the pharmaceutical industry or in pharmaceutical
                  outsourcing.
  Investors
        should carefully consider these risk factors and the matters discussed under
        Item 1A, Risk Factors, of the Company’s Form 10-K for the year ended December
        31, 2005.











**ITEM
      3.*****Quantitative
      and Qualitative Disclosures About Market Risk*******





**Long-Term
      Debt Exposure**





At
      June
      30, 2006, inVentiv had $173.7 million debt outstanding under its term loan
      and $3.6 million outstanding with respect to letters of credit under its
      revolving credit facility. See Liquidity and Capital Resources section for
      further detail on inVentiv’s credit agreement. inVentiv will incur variable
      interest expense with respect to its outstanding loan. This interest rate risk
      may be partially offset by our derivative financial instrument, as described
      below. Based on our debt obligation outstanding at June 30, 2006, 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
      the
      derivative financial instrument.





**Derivative
      Financial Instrument**





Effective
      October 2005, the Company entered into a three-year interest rate swap
      arrangement for $175 million to apply a fixed interest rate against the six-year
      $175 million loan arrangement entered into to facilitate the acquisition of
      inChord. The Company entered into this interest rate swap agreement to modify
      the interest rate characteristics of its outstanding long-term debt. At
      inception, and at least quarterly thereafter, the Company assesses whether
      derivatives used to hedge transactions are highly effective in offsetting
      changes in the cash flow of the hedged item. To the extent the instruments
      are
      considered to be effective, changes in fair value are recorded as a component
      of
      other comprehensive income (loss). To the extent there is any hedge
      ineffectiveness, changes in fair value relating to the ineffective portion
      are
      immediately recognized in earnings (interest expense).





For
      the
      six months ended June 30, 2006, the Company did not qualify for hedge accounting
      and recorded a $2.8 million reduction to interest expense relating to the
      mark-to-market adjustment required to record hedge ineffectiveness to earnings,
      and a corresponding derivative asset of approximately $2.8 million, which was
      recorded in Deposits and Other Assets on the Condensed Consolidated Balance
      Sheet; to date, this asset totals $3.1 million on the June 30, 2006 Condensed
      Consolidated Balance Sheet. The fair values of the interest rate swaps are
      obtained from dealer quotes. These values represent the estimated amount the
      Company would receive or pay to terminate the agreement taking into
      consideration the difference between the contract rate of interest and rates
      currently quoted for agreements of similar terms and maturities.





**Foreign
      Currency Exchange Rate Exposure**





inVentiv
      is not currently affected by foreign currency exchange rate exposure, except
      for
      any fluctuations in the foreign bank accounts remaining from the divestitures
      of
      inVentiv’s European business units and our equity investments and minority
      interests in inVentiv Communications’ foreign business units, which are not
      material to our financial statements. At June 30, 2006, the accumulated other
      comprehensive earnings was approximately $0.9 million.




**ITEM
      4.*****Controls
      and Procedures***




Based
      on
      their evaluation as of June 30, 2006, 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) were effective as of June 30, 2006. There were no changes
      in our internal controls over financial reporting during the quarter ended
      June
      30, 2006 that have materially affected, or are reasonably likely to materially
      affect, our internal controls over financial reporting.










**PART
      II.**  **OTHER
      INFORMATION**





**ITEM
      1.*****Legal
      Proceedings*******





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 are described in Part I, Item 3 of
      the
      Company's Annual Report on Form 10-K for the fiscal year ended December 31,
      2005. With the exception of the claims described therein, all pending matters
      are of a kind routinely experienced in our business and are consistent with
      our
      historical experience.





**ITEM
      1A.*****Risk
      Factors*******





There
      have been no material changes in the risk factors discussed in Item 1A of the
      Company’s Form 10-K for the year ended December 31, 2005.





**ITEM
      2.*****Recent
      Sales of Unregistered Securities*******





On
      June
      2006, we issued 63,750 shares of common stock pursuant to the earnout provision
      in the stock purchase agreement relating to our acquisition of the outstanding
      capital stock of inChord Communications, Inc. These shares were issued in
      reliance on Section 4(2) of the Securities Act.




**ITEM
      4.*****Submission
      of Matters to a Vote of Security Holders*******





At
      an annual meeting of the stockholders of the Company, held on June 14, 2006,
      the
      following matters were submitted to a vote of our stockholders, with the
      following votes cast:





(i) 
      the election of eight directors to the Board of Directors for a term of one
      year, expiring at the 2007 Annual Meeting:





**For**
            **Withheld**Eran
                Broshy
            23,648,739
            2,378,229A.
                Clayton Perfall
            24,962,279
            1,064,689Donald
                Conklin
            24,201,396
            1,825,032John
                R. Harris
            25,232,251
            794,717Per
                G.H. Lofberg
            25,228,009
            798,959Mark
                E. Jennings
            25,232,254
            794,714Terrell
                G. Herring
            23,530,014
            2,496,954R.
                Blane Walter
            23,529,452
            2,497,516








(ii)
      the
      amendment of the Company’s Certificate of Incorporation changing the name
      of the Company to inVentiv Health, Inc:




**For**
            **Withheld**
            **Abstain**
            **Unvoted**inVentiv
                Health, Inc. name change
            25,951,085
            61,866
            14,016
            --





(iii)
      the
      approval of the Company’s 2006 Long-Term Incentive Plan;





**For**
            **Withheld**
            **Abstain**
            **Unvoted**2006
                Long-Term incentive plan approval
            16,851,781
            4,078,170
            84,535
            5,012,482





(iv)
      the
      ratification of  the appointment of Deloitte and Touche LLP as the
      Company’s independent auditors for 2006:





**For**
            **Withheld**
            **Abstain**
            **Unvoted**Deloitte
                & Touche LLP ratification
            25,986,453
            27,367
            13,148
            --















**ITEM
      6.*****Exhibits***




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




Certain
      portions omitted pursuant to a request for confidential treatment. The omitted
      material has been filed separately with the Securities and Exchange
      Commission.








**SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
  **INVENTIV
                HEALTH, INC.**Date: August
                9, 2006
              By:
              /s/ John
                R.
                EmeryJohn R. EmeryTitle Chief
                  Financial Officer
                (Principal financial officer and duly authorized
                  signatory)