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 September 30, 2008





or





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


Exchange
Act of 1934





For the
Transition Period From ___________ to ___________





Commission
file number 0-30318





INVENTIV
HEALTH, INC.


(Exact
name of registrant as specified in its charter)





Delaware                                             52-2181734


(State or
other
jurisdiction                             (IRS
Employer


of
incorporation or
organization)                          Identification
No.)





200
Cottontail Lane


Vantage
Court North


Somerset,
New Jersey 08873


(Address
of principal executive office and zip code)





(800)
416-0555


(Registrant's
telephone number, including area code)





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





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





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





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





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





As of
October 31, 2008, there were 33,262,369 outstanding shares of the registrant's
common stock.











INVENTIV
HEALTH, INC.


INDEX
TO QUARTERLY REPORT ON


FORM
10-Q





PART
      I. FINANCIAL INFORMATIONITEM
      1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2008
      (unaudited)and December 31, 2007Condensed Consolidated Income Statements for the three and
      nine-monthsended September 30, 2008 and 2007
    (unaudited)Condensed Consolidated Statements of Cash Flows for the
      nine-monthsended September 30, 2008 and 2007
    (unaudited)Notes to unaudited Condensed Consolidated Financial
      StatementsITEM
      2. Management's Discussion and Analysis of Financial
      Condition andResults of OperationsITEM
      3. Quantitative and Qualitative Disclosures About
      Market RiskITEM
      4. Controls and ProceduresPART
      II. OTHER INFORMATIONITEM
      1. Legal ProceedingsITEM
      1A. Risk FactorsITEM 2.
      Unregistered Sales of Equity Securities and Use of
      ProceedsITEM
      5. Other InformationITEM
      6. ExhibitsSIGNATURES








FORWARD-LOOKING
STATEMENTS





This
Quarterly Report on Form 10-Q contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements are only
predictions and provide our current expectations or forecasts of future events
and financial performance and may be identified by the use of forward-looking
terminology, including the terms “believes,” “estimates,” “anticipates,”
“expects,” “plans,” “intends,” “may,” “will” or “should” or, in each case, their
negative, or other variations or comparable terminology, though the absence of
these words does not necessarily mean that a statement is not
forward-looking.





We intend that all forward-looking
statements be subject to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are subject to many
risks and uncertainties that could cause our actual results to differ materially
from any future results expressed or implied by the forward-looking statements.
Forward-looking statements include all matters that are not historical facts and
include, without limitation statements concerning:





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


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


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


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


·
            our belief that there are ample opportunities for cross-selling to our
      existing clients;


·
            our anticipation that it will be necessary to continue to select, invest
      in and develop new and enhanced technology and end-user databases on a
      timely basis
              in the future in order to maintain our
  competitiveness;


·
            our expectations regarding the impact of our acquisitions, joint ventures
      and partnerships;


·
            our
      expectations regarding the impact of the adoption of certain accounting
      standards;


·
            our
      expectations regarding the potential impact of pending litigation;
      and


·
            our
      expectations regarding the liquidation of the Columbia Strategic Cash
      Portfolio.








These
forward-looking statements reflect our current views about future events and are
subject to risks, uncertainties and assumptions. We wish to caution readers that
certain important factors may have affected and could in the future affect our
actual results and could cause actual results to differ significantly from those
expressed in any forward-looking statement. The most important factors that
could prevent us from achieving our goals, and cause the assumptions underlying
forward-looking statements and the actual results to differ materially from
those expressed in or implied by those forward-looking statements include, but
are not limited to, the following:





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


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


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


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


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


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


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





·
            our
      ability to successfully operate new lines of
  business;


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


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


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


·
            the
      potential impact of government regulation on us and on our clients
      base;


·
            our
      ability to comply with all applicable laws as well as our ability to
      successfully implement from a timing and cost perspective any changes in
      applicable laws;


·
            our
      ability to recruit, motivate and retain qualified personnel, including
      sales representatives and clinical
staff;


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


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


·
            the
      actual outcome of pending
litigation;


·
            any
      potential impairment of intangible assets derived from reductions in
      market capitalization;


·
              changes
      in trends in the pharmaceutical industry or in pharmaceutical outsourcing;
      and·
              our inability to determine the actual time at which the liquidation of our
      Columbia Strategic Cash Portfolio will be completed or the total losses
      that we will actually
                realizefrom
      that investment vehicle.










Investors should carefully consider
these risk factors and the matters discussed under Item 1A, Risk Factors, of our
Form 10-K for the year ended December 31, 2007.





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











PART
I. FINANCIAL INFORMATION


ITEM
1.                      Financial
Statements


INVENTIV
HEALTH, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS


(in
thousands, except share and per share amounts)


September
      30,
                                          December
      31,2008
      (unaudited)
                                          2007ASSETSCurrent
      assets:Cash
      and equivalents
                                          $86,880
                                          $50,973Restricted
      cash and marketable securities
                                          12,773
                                          47,164Accounts
      receivable, net of allowances for doubtful accounts of $3,377 and $3,098
      atSeptember
      30, 2008 and December 31, 2007, respectively
                                          148,301
                                          162,198Unbilled
      services
                                          105,653
                                          89,384Prepaid
      expenses and other current assets
                                          13,968
                                          19,836Current
      deferred tax assets
                                          4,846
                                          4,279Total
      current assets
                                          372,421
                                          373,834Property
      and equipment, net
                                          66,951
                                          54,740Equity
      investments
                                          220
                                          309Goodwill
                                          388,238
                                          383,714Other
      intangibles, net
                                          285,305
                                          281,122Deposits
      and other assets
                                          22,042
                                          17,137Total
      assets
                                          $1,135,177
                                          $1,110,856LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Current
      portion of capital lease obligations
                                          $15,471
                                          $17,464Current
      portion of long-term debt
                                          3,300
                                          3,300Accrued
      payroll, accounts payable and accrued expenses
                                          94,642
                                          138,708Current
      income tax liabilities
                                          3,046
                                          6,814Client
      advances and unearned revenue
                                          73,691
                                          76,696Total
      current liabilities
                                          190,150
                                          242,982Capital
      lease obligations, net of current portion
                                          28,715
                                          20,945Long-term
      debt
                                          322,575
                                          325,050Non-current
      income tax liabilities
                                          5,584
                                          7,323Deferred
      tax liabilities
                                          19,795
                                          13,164Other
      non-current liabilities
                                          25,884
                                          23,766Total
      liabilities
                                          592,703
                                          633,230Commitments
      and contingenciesMinority
      interests
                                          375
                                          160Stockholders’
      Equity:Preferred
      stock, $.001 par value, 10,000,000 shares authorized, none issued and
      outstanding atSeptember
      30, 2008 and December 31, 2007, respectively
                                          --
                                          --Common
      stock, $.001 par value, 50,000,000 shares authorized; 33,255,812 and
      32,325,109Shares
      issued and outstanding at September 30, 2008 and December 31, 2007,
      respectively
                                          33
                                          32Additional
      paid-in-capital
                                          392,204
                                          362,116Accumulated
      other comprehensive losses
                                          (6,485)
                                          (6,493)Accumulated
      earnings
                                          156,347
                                          121,811Total
      stockholders’ equity
                                          542,099
                                          477,466Total
      liabilities and stockholders’ equity
                                          $1,135,177
                                          $1,110,856


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





INVENTIV
HEALTH, INC.


CONDENSED CONSOLIDATED INCOME STATEMENTS


(in
thousands, except per share amounts)


(unaudited)





For
      the Three-Months Ended
                      
                      For
      the Nine-Months EndedSeptember
    30,
                      
                      September
      30,2008
                      2007
                      
                      2008
                      2007Net
      revenues
                      $243,383
                      $212,650
                      
                      $703,964
                      $582,496Reimbursed
      out-of-pockets
                      45,790
                      42,263
                      
                      132,572
                      126,807Total
      revenues
                      289,173
                      254,913
                      
                      836,536
                      709,303Operating
      expenses:Cost
      of services
                      153,427
                      131,575
                      
                      441,001
                      371,475Reimbursable
      out-of-pocket expenses
                      48,649
                      42,977
                      
                      139,083
                      128,779Selling,
      general and administrative expenses
                      59,498
                      51,515
                      
                      180,983
                      146,545Total
      operating expenses
                      261,574
                      226,067
                      
                      761,067
                      646,799Operating
      income
                      27,599
                      28,846
                      
                      75,469
                      62,504Interest
      expense
                      (6,443)
                      (6,574)
                      
                      (19,134)
                      (14,020)Interest
      income
                      438
                      727
                      
                      1,684
                      2,068Income
      from continuing operations before income tax provision, minority interest
      in income of subsidiary and (loss) income from equity
      investments
                      21,594
                      22,999
                      
                      58,019
                      50,552Income
      tax provision
                      (8,125)
                      (8,711)
                      
                      (22,518)
                      (18,569)Income
      from continuing operations before minority interest in income of
      subsidiary and (loss) income from equity investments
                      13,469
                      14,288
                      
                      35,501
                      31,983Minority
      interest in income of subsidiary
                      (130)
                      (246)
                      
                      (1,022)
                      (736)(Loss)
      income from equity investments
                      (13)
                      92
                      
                      (47)
                      438Income
      from continuing operations
                      13,326
                      14,134
                      
                      34,432
                      31,685Income
      from discontinued operations:(Losses)
      gains on disposals of discontinued operations, net of
taxes
                      (3)
                      90
                      
                      104
                      266Net
      (loss) income from discontinued operations
                      (3)
                      90
                      
                      104
                      266Net
      income
                      $13,323
                      $14,224
                      
                      $34,536
                      $31,951Earnings
      per share (see Note 7):Continuing
      operations:Basic
                      $0.40
                      $0.44
                      
                      $1.04
                      $1.01Diluted
                      $0.40
                      $0.43
                      
                      $1.03
                      $0.99Discontinued
      operations:Basic
                      $0.00
                      $0.00
                      
                      $0.01
                      $0.01Diluted
                      $0.00
                      $0.00
                      
                      $0.00
                      $0.00Net
      income:Basic
                      $0.40
                      $0.44
                      
                      $1.05
                      $1.02Diluted
                      $0.40
                      $0.43
                      
                      $1.03
                      $0.99Weighted
      average common shares outstanding:Basic
                      33,215
                      32,232
                      
                      32,969
                      31,331Diluted
                      33,498
                      32,876
                      
                      33,429
                      32,114





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








INVENTIV
HEALTH, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in
thousands)


(unaudited)


For
      the Nine-months EndedSeptember
      30,2008
                  2007Cash
      flows from operating activities:Net
      income
                  $34,536
                  $31,951Income
      from discontinued operations
                  (104)
                  (266)Income
      from continuing operations
                  34,432
                  31,685Adjustments
      to reconcile net income from continuing operations to net cash provided by
      operating activities:Depreciation
                  15,196
                  13,192Amortization
                  11,302
                  7,315Loss
      (income) from equity investments
                  47
                  (438)Minority
      interest in income of subsidiary
                  1,022
                  736Fair
      market value adjustment on derivative financial instrument
                  1,001
                  882Deferred
      taxes
                  6,064
                  (2,225)Impairment
      of marketable securities
                  607
                  --Stock
      compensation expense
                  8,321
                  7,807Tax
      benefit from stock option exercises and vesting of restricted
      shares
                  3,131
                  9,390Changes
      in assets and liabilities, net of effects from discontinued
      operations:Accounts
      receivable, net
                  14,564
                  (4,171)Unbilled
      services
                  (15,227)
                  (19,583)Prepaid
      expenses and other current assets
                  6,031
                  (3,371)Accrued
      payroll, accounts payable and accrued expenses
                  (6,054)
                  (5,038)Net
      tax liabilities
                  (8,145)
                  2,234Client
      advances and unearned revenue
                  (3,228)
                  (9,897)Excess
      tax benefits from stock based compensation
                  (360)
                  (7,740)Other
                  2,833
                  (5,077)Net
      cash provided by continuing operations
                  71,537
                  15,701Net
      cash used in discontinued operations
                  (52)
                  (215)Net
      cash provided by operating activities
                  71,485
                  15,486Cash
      flows from investing activities:Restricted
      cash balances and marketable securities
                  28,687
                  (399)Investment
      in cash value of life insurance policies
                  (886)
                  (2,618)Cash
      paid for acquisitions, net of cash acquired
                  (18,031)
                  (164,711)Acquisition
      earn-out payments
                  (22,126)
                  (23,475)Equity
      investments
                  42
                  (48)Purchases
      of property and equipment
                  (13,506)
                  (6,049)Proceeds
      from manufacturers rebates on leased vehicles
                  3,773
                  3,718Net
      cash used in continuing operations
                  (22,047)
                  (193,582)Net
      cash provided by discontinued operations
                  156
                  481Net
      cash used in investing activities
                  (21,891)
                  (193,101)Cash
      flows from financing activities:Net
      borrowings of long-term debt
                  --
                  166,250Repayments
      on long-term debt
                  (2,475)
                  (1,659)Repayments
      on capital lease obligations
                  (11,499)
                  (10,362)Deferred
      financing costs for long-term debt
                  --
                  (2,154)Withholding
      shares for taxes
                  (1,071)
                  (731)Proceeds
      from exercise of stock options
                  2,372
                  6,559Excess
      tax benefits from stock-based compensation
                  360
                  7,740Distributions
      to minority interests in affiliated partnership
                  (807)
                  (899)Net
      cash (used in) provided by continuing operations
                  (13,120)
                  164,744Net
      cash (used in) provided by discontinued operations
                  --
                  --Net
      cash (used in) provided by financing activities
                  (13,120)
                  164,744Effect
      of exchange rate changes
                  (567)
                  255Net
      change in cash and equivalents
                  35,907
                  (12,616)Cash
      and equivalents, beginning of period
                  50,973
                  79,835Cash
      and equivalents, end of period
                  $86,880
                  $67,219Supplemental
      disclosures of cash flow information:Cash
      paid for interest
                  $17,727
                  $13,093Cash
      paid for income taxes
                  $21,168
                  $13,592Supplemental
      disclosures of non-cash activities:Vehicles
      acquired through capital lease agreements
                  $20,139
                  $10,435Stock
      issuance related to acquisitions
                  $18,921
                  $53,173





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


INVENTIV
HEALTH, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





1.          Organization
and Business:





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





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





Business
Segments





The
Company currently serves its clients primarily through four business segments,
which correspond to its reporting segments for 2008:  See Note 20,
Segment Information,
for further details.





·
            inVentiv
      Clinical, which provides professional resourcing and services to
      pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management.   inVentiv
      Clinical consists of the Smith Hanley group of companies (which includes
      Smith Hanley Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”)
      and MedFocus), HHI Clinical & Statistical Research Services (“HHI”),
      and Synergos;





·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”) (acquired in March
      2007), Chamberlain Communications Group, Inc. (“Chamberlain”) (acquired in
      March 2007), Addison Whitney (acquired in June 2007) and Chandler Chicco
      Agency (“CCA”) (acquired in July
2007);





·
            inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.  This segment includes inVentiv Strategy
      & Analytics (including its Strategyx business unit acquired in June
      2007) and inVentiv Selling Solutions;
and





·
            inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease management. This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute (“TTI”), AWAC (acquired in July 2007) and Patient Marketing
      Group, Inc. (“PMG”) (acquired in August
2008).





The
Company’s services are designed to provide resources and other clinical services
in support of the pharmaceutical clinical development process, and to develop,
execute and monitor strategic and tactical sales and marketing plans and
programs for the promotion of pharmaceutical, biotechnology and other life
sciences products.   In addition, the Company provides a variety
of services that enhance savings and improve patient outcomes for third party
administrators and other payors.


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





2.           Basis
of Presentation





The
accompanying unaudited condensed consolidated financial statements present the
condensed consolidated balance sheets, condensed consolidated results of
operations and condensed consolidated cash flows of the Company and its
subsidiaries (the "condensed consolidated financial statements"). These
condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") and pursuant to the rules and regulations of the United States
Securities and Exchange Commission (“SEC”) related to interim financial
statements. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP have been
omitted.  The Company believes that the disclosures made herein are
adequate such that the information presented is not misleading. These condensed
consolidated financial statements reflect all adjustments (consisting of only
normal recurring adjustments) that, in the opinion of management, are necessary
to fairly present the Company's condensed consolidated balance sheets as of
September 30, 2008 and December 31, 2007, the condensed consolidated income
statements of the Company for the three and nine months ended September 30, 2008
and 2007 and the condensed consolidated cash flows for the nine-months ended
September 30, 2008 and 2007.  Operating results for the three and nine
months ended September 30, 2008 are not indicative of the results that may be
expected for the year ending December 31, 2008.





These
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2007 as
filed with the Securities and Exchange Commission on February 29,
2008.





The
consolidated financial statements include the accounts of inVentiv Health, Inc.,
its wholly owned subsidiaries and its 60% owned subsidiary, Taylor Search
Partners (“TSP”), which was acquired in conjunction with the acquisition of
inVentiv Communications, Inc.  Our continuing operations consist
primarily of four business segments: inVentiv Clinical, inVentiv Communications,
inVentiv Commercial and inVentiv Patient Outcomes.  All significant
intercompany transactions have been eliminated in consolidation.  In
December 2007, the Company increased its investment interest from 44% to 85% in
Angela Liedler GmbH (“Liedler”), a service provider of communication and
marketing tools for technical, medical and pharmaceutical products, located in
Germany.  The Company accounted for Liedler as an equity investment
until the date of the acquisition of the additional interest, and then
consolidated its results thereafter.





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





3.           Recently
Issued Accounting Standards:





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




In March
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 161
“Disclosures about Derivative Instruments and Hedging Activities an amendment of
FASB Statement No. 133”, which requires additional disclosures regarding a
company’s derivative instruments and hedging activities by requiring disclosure
of the fair values of derivative instruments and their gains and losses in a
tabular format. It also requires disclosure of derivative features that are
credit risk–related as well as cross-referencing within the notes to the
financial statements to enable financial statement users to locate important
information about derivative instruments, financial performance, and cash flows.
SFAS 161 is effective for fiscal years beginning after November 15, 2008. The
Company is currently evaluating the impact of this standard on its Condensed
Consolidated Financial Statements.





In
December 2007, the FASB issued SFAS No. 141(R), “Business
Combinations” (“SFAS 141(R)”), which addresses the recognition and accounting
for identifiable assets acquired, liabilities assumed, and noncontrolling
interests in business combinations. SFAS 141(R) also establishes expanded
disclosure requirements for business combinations. SFAS 141(R) will become
effective January 1, 2009.  The Company is currently evaluating the
impact of this standard on its Condensed Consolidated Financial Statements;
however, this is mainly dependent on the timing, nature and extent of our
acquisitions consummated after January 1, 2009.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS
160”), which addresses the accounting and reporting framework for minority
interests by a parent company.  SFAS 160 also addresses disclosure
requirements to distinguish between interests of the parent and interests of the
noncontrolling owners of a subsidiary. SFAS 160 will become effective January 1,
2009.  The Company is currently evaluating the impact of this standard
on its Condensed Consolidated Financial Statements.





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


In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an amendment of FASB Statement No.
115.SFAS No. 159 provides companies with an option to report
selected financial assets and liabilities at fair value.  This
statement is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. Early adoption is permitted as of the beginning
of a fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements.The Company’s adoption of SFAS 159, effective
January 1, 2008, did not have a material effect on its condensed consolidated
balance sheets, results of operations and cash flows as we did not elect this
fair value option.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements”.  SFAS 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of SFAS 157 are effective for the fiscal year beginning January
1, 2008; as such, the Company has adopted SFAS 157 as of January 1, 2008, as
required.  In February 2008, the FASB delayed the effective date of
SFAS 157 for certain nonfinancial assets and liabilities until January 1, 2009;
the scope of which applies to all the Company’s nonfinancial assets and
liabilities.  Accordingly, the Company’s adoption of this standard for
2008 is limited to financial assets and liabilities.  The Company
expects to complete its evaluation of the impact SFAS 157 will have on its
nonfinancial assets and liabilities when the FASB completes its evaluation of
implementation issues.





4.           Acquisitions:





Acquisitions
are accounted for using purchase accounting, including SFAS No. 141, Business Combinations, (“SFAS
No. 141”) and the financial results of the acquired businesses are included in
the Company’s financial statements from their acquisitions dates.  If
a business is acquired subsequent to a reporting period, but prior to the
issuance of the Company’s financial statements, it is disclosed in the notes to
the consolidated financial statements.  Earn-out payments from
acquisitions are generally accrued at the end of an earn-out period in
conjunction with the preparation of the Company’s quarterly financial statements
when the acquired company’s results are reviewed, as more fully described
below.  The terms of the acquisition agreements generally include
multiple earn-out periods or a multi-year earnout period.  Except for
inVentiv Communications, Inc., pro forma financial information was not required
to be disclosed under the Securities and Exchange Commission’s Regulation S-X
for the following acquisitions because none of the specific thresholds were met
as they were not material to the consolidated operations of the Company at the
time of acquisition.





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





CCA - In July 2007, the
Company completed the acquisition of CCA, for approximately $69.1 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on CCA’s performance
measurements during 2007 through 2010.  CCA is headquartered in New
York and is one of the largest healthcare-focused public relations firms in the
world.  CCA includes agencies organized and operating in the United
States, the United Kingdom and France.  CCA’s financial results have
been reflected in the inVentiv Communications’ segment since the date of its
acquisition.





AWAC - In
July 2007, the Company completed the acquisition of AWAC for approximately $76.3
million in cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on AWAC’s performance
measurements during 2007 through 2010.  AWAC is based in Georgia and
is a leading provider of proprietary IT-driven cost containment and medical
consulting solutions to third party administrators, ERISA self-funded plans,
fully insured plans, employer groups, managing general underwriters and
insurance carriers.  The AWAC acquisition included the business assets
of AWAC.MD, Inc. as well as Innovative Health Strategies, Inc. and iProcert,
LLC, which were acquired as entities.  Innovative Health Strategies,
Inc. and iProcert, LLC were subsequently dissolved and their business operations
consolidated with the AWAC.MD business operations.  AWAC’s financial
results have been reflected in the inVentiv Patient Outcomes segment since the
date of its acquisition.





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


Addison Whitney - In June
2007, the Company completed the acquisition of the net assets of Addison
Whitney, Inc. for approximately $18.3 million in cash and stock, including
certain post-closing adjustments and direct acquisition costs.  The
Company will be obligated to make certain earn-out payments, which may be
material, contingent on Addison Whitney’s performance measurements during 2007
through 2010.  Addison Whitney is based in North Carolina, and
specializes in global branding consultancy that focuses on creating unique
corporate and product brands.  Addison Whitney’s financial results
have been reflected in the inVentiv Communications’ segment since the date of
its acquisition.





Strategyx- In June 2007, the
Company completed the acquisition of Strategyx for approximately $9.9 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  The Company will be obligated to make certain
earn-out payments, which may be material, contingent on Strategyx’s performance
measurements during 2007 through 2010.  Strategyx is based in
Somerville, New Jersey, and specializes in global strategic
consulting.  Strategyx’s financial results have been reflected in the
inVentiv Commercial segment since the date of its acquisition.





Ignite - In March 2007, the
Company completed the acquisition of the assets of ignite comm.net and Incendia
Health, Inc. (including its Incendia Health Studios brand of services, which is
now operated as a division of Ignite) for approximately $21.2 million in cash
and stock, including certain post-closing adjustments and direct acquisition
costs.  The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Ignite's performance measurements
during 2007 through 2010.  For the 12-month period ended March 31,
2008, approximately $6.3 million of cash and stock was accrued, of which
approximately $6.2 million was paid during the third quarter of
2008.  Ignite is based in Irvine, California and specializes in
medical advertising and interactive communications targeting patients and
caregivers.  Ignite’s financial results have been reflected in the
inVentiv Communications segment since the date of its acquisition.





Chamberlain - In March 2007,
the Company completed the acquisition of Chamberlain for approximately $14.7
million in cash and stock, including certain post-closing adjustments and direct
acquisition costs. The Company will be obligated to make certain earn-out
payments, which may be material, contingent on Chamberlain's performance
measurements during 2007 through 2009. Chamberlain is based in New York, and
specializes in public relations in the healthcare industry. Chamberlain’s
financial results have been reflected in the inVentiv Communications segment
since the date of its acquisition.





MedConference - In November
2006, the Company completed the acquisition of the net assets of The Maxwell
Group, Inc. and its MedConference brand of services (“MedConference”) for
approximately $8.1 million in cash and stock, including certain post-closing
adjustments and direct acquisition costs.  MedConference, based in
Norristown, PA, was founded in 1989 and is a leading provider of live and
on-demand virtual event services to the pharmaceutical industry.  The
Company will be obligated to make certain earn-out payments, which may be
material, contingent on MedConference's performance measurements during 2006
through 2008.  The amount accrued at December 31, 2006, and paid in
2007, with respect to MedConference for the 2006 earnout was approximately $1.6
million in cash and stock.  MedConference did not achieve the initial
earnout threshold for 2007 and thus, no amount was accrued.  The
results of MedConference have been reflected in the inVentiv Commercial segment
since the date of its acquisition.





DialogCoach - In November
2006, the Company completed the acquisition of the net assets of American
Speakers Education Research and Training, L.L.C. and DialogCoach LLC
(collectively, “DialogCoach”) for approximately $5.7 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  DialogCoach, based in Coopersburg, PA, is an education and
training company focused on customized solutions in specialty markets and
building training and educational programs.  The Company will be
obligated to make certain earn-out payments, which may be material, contingent
on DialogCoach's performance measurements during 2006 through
2008.  DialogCoach did not achieve the initial earnout threshold for
2006 and 2007 and thus, no amount was accrued.  The results of
DialogCoach have been reflected in the inVentiv Commercial segment since the
date of its acquisition.





Synergos - In April 2006, the
Company acquired the net assets of Synergos for approximately $6.4 million in
cash and stock, including certain post-closing adjustments and direct
acquisition costs.  Synergos, based in The Woodlands, Texas, is a
focused clinical services provider with expertise in clinical trial management
services, particularly project management and monitoring. The Company was
obligated to make certain earn-out payments, contingent on Synergos’s
performance measurements during 2006 and 2007.  The amount accrued at
December 31, 2006, and paid in 2007, with respect to Synergos for the 2006
earnout, was approximately $0.8 million in cash and stock. The amount accrued at
December 31, 2007 for the 2007 earnout was approximately $0.9 million in cash
and stock, which was paid in May 2008.    The results of
Synergos have been reflected in the inVentiv Clinical segment from the date of
its acquisition.





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


JSAI - In April 2006, the
Company acquired JSAI for approximately $8.8 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  JSAI is Canada's leading healthcare marketing and
communications agency. The Company will be obligated to make certain earn-out
payments, which may be material, contingent on JSAI’s performance measurements
during the 12-month periods ending March 31, 2007, 2008 and 2009.  The
amount due with respect to JSAI for the 12-month period ended March 31, 2007 was
approximately $2.8 million in cash and stock, which the Company accrued at March
31, 2007, of which the cash portion was paid in 2007 and stock portion was paid
in 2008 once certain contractual restrictions were met.  JSAI did not
achieve the initial earnout threshold for the 12-month period ended March 31,
2008 and thus, no amount was accrued.   The results of JSAI have
been reflected in the inVentiv Communications segment since the date of its
acquisition.





Adheris - In February 2006,
the Company acquired Adheris for approximately $69.9 million in cash and stock,
including certain post-closing adjustments and direct acquisition
costs.  Adheris is a Massachusetts-based industry leader in the area
of patient compliance and persistency programs.  The Company will be
obligated to make certain earn-out payments, which may be material, contingent
on Adheris's performance measurements during 2006 through
2008.  Adheris’s 2006 earnout of approximately $7.7 million in cash
and stock, of which $7.9 million was accrued at December 31, 2006, was paid in
2007.   Adheris’ 2007 earnout of approximately $15.1 million in
cash and stock, of which $15.3 million was accrued at December 31, 2007, was
paid in 2008.  The portions adjusted in the subsequent years mainly
relate to the finalization of the earn-out for the previous years, as allowed
under the contract.  The results of Adheris were reflected in the
inVentiv Communications segment from the date of its acquisition until June 30,
2007.  Adheris was transferred from the inVentiv Communications
segment to the inVentiv Patient Outcomes segment following the acquisition of
AWAC and the concomitant revision of our segment reporting
analysis.





inVentiv Communications, Inc.
- In October 2005, the Company acquired all of the outstanding capital stock of
inVentiv Communications, Inc. (then known as inChord Communications, Inc.) for
approximately $196.8 million of cash and stock, including certain post-closing
adjustments and direct acquisition costs.  To help finance the
transaction, the Company entered into a Credit Agreement, dated October 5, 2005,
which was amended and restated on July 6, 2007, as more fully described in Note
11.  The Company acquired inVentiv Communications, Inc. to vastly
expand its service portfolio in the marketing and communications arena, expand
its market position in the pharmaceutical services market and achieve
cross-selling opportunities by leveraging its existing
businesses.  The Company was obligated to make certain earn-out
payments, contingent on inVentiv Communications, Inc.’s performance measurements
from 2005 through 2007.  inVentiv Communications, Inc.’s 2005 earnout
of approximately $3.8 million in cash and stock, of which $3.6 million was
accrued at December 31, 2005, was paid in 2006.  inVentiv
Communications, Inc.’s 2006 earnout of approximately $24.7 million in cash and
stock, of which $25.0 million was accrued for at December 31, 2006, was paid in
2007.  inVentiv Communications, Inc.’s 2007 earnout was approximately
$21.8 million in cash and stock, which was accrued at December 31, 2007, of
which $18.5 million was paid in 2008 and $3.3 million remains accrued at
September 30, 2008.  The portions adjusted in the subsequent years
mainly relate to the finalization of the earn-outs for the previous years, as
allowed under the contract.   The results of inVentiv
Communications, Inc. have been reflected in the inVentiv Communications segment
since the date of acquisition.





5.           Restricted
Cash and Marketable Securities:





As of September 30, 2008, there was
approximately $1.6 million of restricted cash, of which $0.3 million relates to
outstanding letters of credit, to support the security deposits relating to the
New York, Washington D.C, California and London offices of CCA and are reflected
in the inVentiv Communications segment.  The beneficiaries have not
drawn on the $0.3 million letters of credit.  As this cash has been
pledged as collateral, it is restricted from use for general purposes and has
been classified in restricted cash and marketable securities at September 30,
2008 and December 31, 2007.





The
Company receives cash advances from its clients as funding for specific projects
and engagements. These funds are deposited into segregated bank accounts and
used solely for purposes relating to the designated projects. Although these
funds are not held subject to formal escrow agreements, the Company considers
these funds to be restricted and has classified these balances accordingly. Cash
held in such segregated bank accounts totaled approximately $0.1 million and
$0.2 million held in escrow on behalf of clients and was included in restricted
cash and marketable securities at September 30, 2008 and December 31, 2007,
respectively.




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


As of
September 30, 2008 and December 31, 2007, the Company had $16.2 million and
$45.3 million, respectively, invested in the Columbia Strategic Cash Portfolio
(“CSCP”).  During the third quarter of 2008, based on an update
provided by CSCP, the Company has recorded $5.1 million of the $16.2 million
balance as long-term.  The $5.1 million is classified as deposits and
other assets on the September 30, 2008 Balance Sheet, which is expected to be
distributed after the third quarter of 2009.  As the majority of the
Company’s recorded balances in the CSCP continue to be short-term in nature,
$11.1 million and $45.3 million, respectively,  are classified as
restricted cash and marketable securities on the September 30, 2008 and December
31, 2007 Balance Sheets.  During the nine months ended September 30,
2008 and fourth quarter of 2007, the Company recorded $0.6 million and $0.8
million, respectively, relating to impairments of the Company's investment in
the CSCP, which held certain asset-backed securities.  Subsequent to
the end of the third quarter of 2008, based on current portfolio data available,
there was approximately $0.7 million of additional impairment, which will be
recorded during the fourth quarter of 2008 and may materially change depending
on market conditions.  Consistent with the Company's investment policy
guidelines, the majority of CSCP investments held by the Company had AAA/Aaa
credit ratings at the time of purchase.




The CSCP
maintained a net asset value of $1 per unit until December 2007, after which the
net asset value per unit fluctuated, and will continue to fluctuate, based on
changes in market values of the securities held by the portfolio.  The
process of liquidating CSCP’s portfolio was initiated in December 2007 and is
anticipated to continue through 2009.  Future impairment charges may
result depending on market conditions until the fund is fully liquidated. The
$1.4 million cumulative impairment charge through September 30, 2008, which
excludes the subsequent additional impairment discussed in the preceding
paragraph, does not have a material impact on the company's liquidity or
financial flexibility.




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





6.           Employee
Stock Compensation:




The Company follows SFAS No. 123
(“SFAS 123R”), Share-Based
Payment, which establishes accounting for share-based awards exchanged
for employee services and requires companies to expense the estimated fair value
of these awards over the requisite employee service period.





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







The
adoption of SFAS 123R resulted in stock-based compensation expense of $2.6
million, of which $0.6 million was recorded in cost of services and $2.0 million
recorded as Selling, General and Administrative expenses (“SG&A”) for the
three months ended September 30, 2008 and $2.8 million, of which $0.7 million
was recorded in cost of services and $2.1 million recorded as SG&A for the
three months ended September 30, 2007. For the nine-months ended September 30,
2008, stock-based compensation expense was $8.3 million, of which $1.9 million
was recorded in cost of services and $6.4 million recorded as SG&A; for the
nine-months ended September 30, 2007, stock-based compensation expense was $7.8
million, of which $2.0 million was recorded in cost of services and $5.8 million
was recorded as SG&A.





Stock-based
compensation expense caused income before income tax provision, minority
interest in income of subsidiary and income from equity investments to decrease
by $2.6 million and $2.8 million for the three months ended September 30, 2008
and 2007, respectively, caused net income to decrease by $1.6 million and $1.7
million for the three months ended September 30, 2008 and 2007, respectively,
and caused basic and diluted earnings per share to decrease by $0.05 per share
for the three months ended September 30, 2008 and 2007.  During the
nine months ended September 30, 2008 and September 30, 2007 the stock-based
compensation expense caused income before income tax provision, minority
interest in income of subsidiary and income from equity investments to decrease
by $8.3 million and $7.8 million, respectively, caused net income to decrease by
$4.9 million and $4.6 million for the nine months ended September 30, 2008 and
2007, respectively, and caused basic and diluted earnings per share to decrease
by $0.15 per share and $0.14 per share for the nine months ended September 30,
2008 and 2007, respectively.





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


Cash
provided by financing activities increased by $0.4 million and $7.7 million for
the nine-months ended September 30, 2008 and 2007, respectively, related to
excess tax benefits from the exercise of stock-based awards.





Assumptions





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





Three
      Months Ended
                September
      30,
              Nine
      Months Ended
                September
      30,2008
              2007
              2008
              2007Expected
      life of option
              5.5-6
      yrs
              5.5-6
      yrs
              5.5-6
      yrs
              5.5-6
      yrsRisk-free
      interest rate
              --(1)
              4.90%
              3.06%
              4.81%Expected
      volatility
              40%
              40%
              37%
              40%Expected
      dividend yield
              0.00%
              0.00%
              0.00%
              0.00%


(1)In the third quarter of
2008, no options were granted by the Company, hence, the interest rate was not
applicable.








With the adoption of SFAS 123R in 2006,
the Company has limited its issuance of stock options to senior executives,
while granting restricted shares to employees at various
levels.  During the fourth quarter of 2005, prior to the adoption of
SFAS 123R, management analyzed its expected volatility and expected life of
stock options and concluded that the expected volatility for options granted
during the fourth quarter of 2005 should be 45% and the expected life of the
options granted should range between 5.5 and 6.0 years, depending on the
grantee’s employee status.  The Company analyzed historical trends in
these variables on a quarterly basis; during the nine months of 2008 and 2007
the volatility remains at a range of 37-40%.  As of January 1, 2008,
the Company adopted SAB 110 revision to SAB topic 14 for determining the
expected term and the range of the expected term remained unchanged at 5.5 to 6
years as previously reported under SAB 107.  The Company continues to
base the estimate of risk-free rate on the U.S. Treasury yield curve in effect
at the time of grant. The Company has never paid cash dividends, does not
currently intend to pay cash dividends, and has certain restrictions under its
credit facility to pay dividends and thus has assumed a 0% dividend
yield.  These conclusions were based on several factors, including
past company history, current and future trends, comparable benchmarked data and
other key metrics.




As part of the requirements of SFAS
123R, the Company is required to estimate potential forfeitures of stock grants
and adjust compensation cost recorded accordingly.  The forfeiture
rate was estimated based on historical forfeitures.  The estimate of
forfeitures will be adjusted over the requisite service period to the extent
that actual forfeitures differ, or are expected to differ, from such estimates.
Changes in estimated forfeitures will be recognized through a cumulative
catch-up adjustment in the period of change and will also impact the amount of
stock compensation expense to be recognized in future periods.  The
forfeiture rates utilized for the nine months ended 2008 and 2007 were 6.92% and
3.36%, respectively.





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





Stock Incentive Plan and
Award Activity





The
Company’s 2006 Stock Incentive Plan (“Stock Plan” or “LTIP”) authorizes
incentive stock options, nonqualified stock options, restricted stock awards,
restricted stock units and stock appreciation rights ("SARs”).  Prior
to the adoption of the LTIP, the Company was authorized to grant equity
incentive awards under its 1999 Stock Incentive Plan (together with the LTIP,
the "Equity Incentive Plans"), which was terminated at the time the LTIP was
adopted.  The aggregate number of unissued shares of the Company’s
common stock that may be issued under the Stock Plan is 1.5 million
shares.





The
exercise price of options granted under the Stock Plan may not be less than 100%
of the fair market value per share of the Company’s common stock on the date of
the option grant. The vesting and other provisions of the options are determined
by the Compensation Committee of the Company’s Board of Directors.








The
following table summarizes activity under the Company’s Equity Incentive Plans
for the nine months ended September 30, 2008 (in thousands, except per share
amounts):


Shares
            Weighted
      Average Exercise Price
            Weighted
      Average Remaining Contractual Term (in years)
            Aggregate
      Intrinsic ValueOutstanding
      at January 1, 2008
            1,506
            $19.43Granted
      and assumed
            261
            $31.37Exercised
            (170)
            $13.96Forfeited/expired/cancelled
            (91)
            $19.29Outstanding
      at September 30, 2008
            1,506
            $22.13
            6.74
            $3,007Vested
      and expected to vest at September 30, 2008
            1,440
            $21.74
            6.66
            $3,007Options
      exercisable at September 30, 2008
            836
            $16.76
            5.57
            $2,967




The
weighted-average grant-date fair value of stock options granted during the
three-months ended September 30, 2008 was not applicable because no stock
options were granted and $17.36 per share for the three-months ended September
30, 2007.  The weighted-average grant-date fair value of stock options
granted during the nine-months ended September 30, 2008 and 2007 was $12.83 per
share and $16.62 per share, respectively.   The total intrinsic
value of options exercised during the three-months ended September 30, 2008 and
2007 was $0.2 million and $0.7 million, respectively, and was $2.4 million and
$6.6 million during the nine-months ended September 30, 2008 and 2007,
respectively.  As of September 30, 2008 and December 31, 2007, there
was approximately $5.3 million and $6.6 million, respectively, of total
unrecognized compensation cost related to nonvested share-based compensation
arrangements granted under the Stock Plan; that cost is expected to be
recognized over a weighted average of 2.4 years and 2.2 years,
respectively.






The
actual tax benefit realized for the tax deductions from option exercise of the
share-based payment arrangements were negligible and $1.3 million for the three
months ended September 30, 2008 and 2007, respectively, and totaled $1.0 million
and $7.8 million for the nine-months ended September 30, 2008 and 2007,
respectively.




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




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







Outstanding Options
                  
                  Exercisable OptionsExercise
      Price Range
                  Numbers
      of Options
                  Weighted
      Average Exercise Price
                  Weighted
      Average
                    Remaining
      Life
                    (years)
                  Number
      of Options
                  Weighted
      Average
                    Exercise
      Price$1.66
                  To
                  $8.06
                  151,674
                  $6.21
                  2.05
                  151,674
                  $6.21$8.45
                  To
                  $15.48
                  99,916
                  $10.00
                  5.27
                  99,916
                  $10.00$15.96
                  To
                  $15.96
                  250,000
                  $15.96
                  5.98
                  250,000
                  $15.96$16.89
                  To
                  $17.75
                  188,803
                  $17.26
                  5.88
                  112,413
                  $17.34$18.20
                  To
                  $26.76
                  198,623
                  $24.92
                  7.05
                  88,750
                  $24.80$26.77
                  To
                  $26.77
                  180,000
                  $26.77
                  7.70
                  90,000
                  $26.77$28.66
                  To
                  $31.45
                  124,882
                  $29.73
                  9.24
                  4,352
                  $30.64$32.55
                  To
                  $32.55
                  156,891
                  $32.55
                  9.30
                  --
                  --$35.01
                  To
                  $35.01
                  96,822
                  $35.01
                  8.31
                  24,213
                  $35.01$37.21
                  To
                  $37.21
                  57,914
                  $37.21
                  8.75
                  14,479
                  $37.211,505,525
                  
                  
                  835,797


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





(in
      thousands, except per share amounts)
            Shares
            Weighted
      Average Grant-Date Fair ValueNonvested
      at January 1, 2008
            596
            $29.41Granted
            313
            $30.45Released
            (181)
            $27.49Forfeited
            (38)
            $28.66Nonvested
      at September 30, 2008
            690
            $30.41




As of
September 30, 2008 and December 31, 2007, there was approximately $14.1 million
and $12.4 million, respectively, of total unrecognized compensation cost related
to nonvested share-based compensation arrangements granted under the Stock Plan;
that cost is expected to be recognized over a weighted average of 2.7 years and
2.8 years, respectively. The total fair value of shares vested during the three
and nine months ended September 30, 2008 was $0.1 million and $5.5 million,
respectively.  During the three and nine-months ended September 30,
2007 the amounts were $0.2 million and $4.3 million, respectively.




7.           Earnings
Per Share (“EPS”):





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





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








Three-Months
      Ended September 30,
              Nine-months
      Ended September 30,2008
              2007
              2008
              2007(in
      thousands, except per share data)Basic
      EPS from Continuing Operations ComputationIncome
      from continuing operations
              $13,326
              $14,134
              $34,432
              $31,685Weighted
      average number of common shares outstanding
              33,215
              32,232
              32,969
              31,331Basic
      EPS from continuing operations
              $0.40
              $0.44
              $1.04
              $1.01Diluted
      EPS from Continuing Operations ComputationIncome
      from continuing operations
              $13,326
              $14,134
              $34,432
              $31,685Weighted
      average number of common shares outstanding
              33,215
              32,232
              32,969
              31,331Stock
      options (1)
              229
              465
              293
              596Restricted
      stock awards (2)
              54
              179
              167
              187Total
      diluted common shares outstanding
              33,498
              32,876
              33,429
              32,114Diluted
      EPS from continuing operations
              $0.40
              $0.43
              $1.03
              $0.99





(1)   For
the three-months and nine-months ended September 30, 2008, 798,133 shares and
566,365 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 nine months ended September
30, 2007, 180,724 shares and 143,941 shares, respectively, were excluded from
the calculation of diluted EPS due to the fact that the shares are considered
anti-dilutive because the number of potential buyback shares is greater than the
number of weighted shares outstanding.


(2) For
the three-months and nine-months ended September 30, 2008, 489,774 shares and
48,303 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 nine months ended September
30, 2007, negligible amount of shares were excluded from the calculation of
diluted EPS due to the fact that the shares are considered anti-dilutive because
the number of potential buyback shares is greater than the number of weighted
shares outstanding.





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


8.           Significant
Clients:





During
the nine-months ended September 30, 2008 and 2007 the Company had no clients
that accounted for more than 10%, individually, of the Company's total revenues
across our inVentiv Clinical, inVentiv Communications, inVentiv Commercial and
inVentiv Patient Outcomes segments.








9.           Goodwill and Other Intangible
Assets:





Goodwill
consists of the following:


(in
      thousands)
            January
      1,
              2008
            Acquisitions
            Contingent
      Consideration(1)
            Other
            September
      30,
              2008inVentiv
      Clinical
            $56,944
            $--
            $32
            $186
            $57,162inVentiv
      Communications
            190,958
            (6,517)
      (2)
            6,107
            863(3)
            191,411inVentiv
      Commercial
            45,773
            --
            --
            --
            45,773inVentiv
      Patient Outcomes
            90,039
            4,046
            (193)
            --
            93,892Total
            $383,714
            ($2,471)
            $5,946
            $1,049
            $388,238





(1)
            The
      contingent consideration represents adjustments relating to the
      finalization of the earnouts for the twelve months ended December 31, 2007
      and March 31, 2008. (see Note 4)





(2)
            The
      entire amount relates to the allocation of the goodwill at year-end to
      identifiable intangible assets arising from the Liedler acquisition, which
      was acquired on December 28, 2007.  Under SFAS 141, if a
      business combination is consummated toward the end of an acquiring
      enterprise's fiscal year or the acquired enterprise is very large or
      unusually complex, the acquiring enterprise may not be able to obtain some
      of the data required to complete the allocation of the cost of the
      purchased enterprise for inclusion in its next annual financial
      report.  As discussed in Part 2, Item 8 of our Annual Report on
      Form 10-K, since Liedler was acquired on December 28, 2007, the valuation
      was not completed by the time the 10-K was filed.  The
      allocation period of Liedler will culminate later this year when the
      Company finalizes its valuation in this
  investment.





(3)
            This
      amount relates to a tax adjustment on the Chamberlain acquisition
      accounted for under EITF 93-7 Uncertainties Related to Income Taxes in a
      Purchase Business Combination.


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





Other intangible assets consist of the
following:





September
      30, 2008
                          
                          December
      31, 2007(in
      thousands)
                          
                          Accumulated
                          
                          
                          
                          AccumulatedGross
                          Amortization
                          Net
                          
                          Gross
                          Amortization
                          NetCustomer
      relationships
                          $117,369
                          $(24,270)
                          $93,099
                          
                          $105,537
                          $(15,946)
                          $89,591Technology
                          39,440
                          (3,850)
                          35,590
                          
                          37,940
                          (1,714)
                          36,226Noncompete
      agreement
                          1,506
                          (847)
                          659
                          
                          880
                          (617)
                          263Tradenames
      subject to amortization
                          3,008
                          (666)
                          2,342
                          
                          1,211
                          (277)
                          934Other
                          1,234
                          (609)
                          625
                          
                          1,234
                          (386)
                          848Total
      definite-life intangibles
                          162,557
                          (30,242)
                          132,315
                          
                          146,802
                          (18,940)
                          127,862Tradenames
      not subject to amortization (1)
                          152,990
                          --
                          152,990
                          
                          153,260
                          --
                          153,260Total
      other intangibles (2)
                          $315,547
                          $(30,242)
                          $285,305
                          
                          $300,062
                          $(18,940)
                          $281,122





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


(2)
            The
      $15.5 million increase in total gross other intangibles arise from the
      assignment of intangibles from the Liedler and PMG
      acquisitions.





The Company’s acquisitions have
resulted in approximately $367.5 million of goodwill and the following gross
intangible assets:





Intangible
      asset
              
              Amount
                (in
      thousands)
              Weighted
      average amortization periodTradename
              
              $155,998
              (1)Customer
      relationships
              
              117,369
              10.7
      yearsTechnology
              
              39,440
              14.2
      yearsNoncompete
      agreement
              
              1,506
              4.5
      yearsOther
              
              975
              3.5
      yearsTotal
              
              $315,288
              (2)





(1)
            $3.0
      million of the tradenames are definite-life intangibles, which have a
      weighted average amortization period of 5.0
  years.


(2)
            Excludes $0.3 million of a
      definite-life intangible asset that was not
      acquisition-related.





Amortization expense, based on
intangibles subject to amortization held at September 30, 2008, is expected to
be $3.9 million for the remainder of 2008, $15.5 million in 2009, $15.0 million
in 2010, $14.6 million in 2011, $14.1 million in 2012, $12.6 million in 2013 and
$56.6 million thereafter.





The
balances recorded on the Company’s Condensed Balance Sheet for goodwill and
other indefinite-life intangibles, such as tradenames, are assessed annually for
potential impairment as of June 30, pursuant to the guidelines of SFAS 142,
Goodwill and Other Intangible
Assets.  The Company conducted its assessment and concluded
that these balances were not impaired as of June 30, 2008, and has determined
that there are no factors present that would more-likely-than-not reduce the
fair value of the Company’s reporting units below their carrying amounts and
therefore the Company believes that no impairment exists as of September 30,
2008.





As a
result of recent market conditions, including the credit crisis, the
Company, along with many other companies in and out of the industry, has
experienced a decline in market capitalization.  The Company does
not believe that an event occurred or circumstances changed that would
more-likely-than-not reduce the fair value of the Company’s reporting units
below their carrying amounts as of September 30, 2008, but it will continue
to monitor economic conditions and other factors to determine whether an
impairment test is warranted during future periods.  Continuance of
the current market conditions and other factors could result in the Company
determining that some or all of its goodwill and other intangible assets are
impaired.








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








10.           Fair
Value Measurement




As
discussed in Note 3, the Company adopted SFAS 157 on January 1, 2008
which requires enhanced disclosures about assets and liabilities measured
at fair value. Our adoption of SFAS 157 was limited to financial assets and
liabilities, which primarily relate to our marketable securities, deferred
compensation plan and derivative contracts.




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




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


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






The
following table represents the Company’s assets and liabilities measured at fair
value on a recurring basis as of September 30, 2008 and the basis for that
measurement:





(in
      thousands)
            Total
      Fair Value Measurement September 30, 2008
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            Significant
      Other Observable Inputs
              (Level
      2)
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            $16,221(1)
            $--
            $16,221(1)
            $--Deferred
      Compensation
              Plan
      Assets
            7,404
            --
            7,404
            --TOTAL
      ASSETS
            $23,625
            --
            $23,625
            --LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            $7,418
            --
            $7,418
            --Derivative
      Liabilities
            10,830
            --
            339
            10,491TOTAL
      LIABILITIES
            $18,248
            $--
            $7,757
            $10,491





(1) – As
described in Note 5, the marketable securities balance of $16.2 million includes
$11.1 million classified as restricted cash and marketable securities and $5.1
million as deposits and other assets, respectively, on the Company’s September
30, 2008 Balance Sheet.





As
mentioned in Note 13 below, as a result of recent market conditions, the Company
updated its valuation of its five-year interest rate derivative as of September
30, 2008, resulting in a credit value adjustment of $1.4 million to the
derivative liability, with a corresponding offset to Other Comprehensive Income
as a result of cash flow hedge accounting.  This valuation, which
involved current and future probability-adjusted risk factors, included inputs
derived from valuation techniques in which one or more significant inputs were
unobservable, thus changing the classification from a Level 2 input to a Level 3
input.  The significant inputs in this valuation included credit
market spread, estimated exposure and company and counterparty default
risk.  The following is a rollforward of the Level 3 liability through
September 30, 2008:








Fair
      Value Measurements(in
      thousands)
                Using
      Significant Unobservable Inputs (Level 3)DerivativeBalance
      at January 1, 2008
                $--Included
      in earnings (or changes in net assets)
                --Included
      in other comprehensive income
                --Purchases,
      issuances and settlements
                --Transfers
      in and/or out of Level 3
                10,491Balance
      at September 30, 2008
                $10,491





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


11.           Debt:




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






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






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






The term
loan will mature on the seventh anniversary of the Credit Agreement, with
scheduled quarterly amortization of 1% per year during years one through six and
94% during year seven. The delayed draw term loans will mature on the seventh
anniversary of the Credit Agreement, with scheduled quarterly amortization of
0.25% per quarter and the balance becoming due on such seventh anniversary. The
revolving loans will mature on the sixth anniversary of the Credit Agreement.
Amounts advanced under the Credit Agreement must be prepaid with a percentage,
determined based on a leverage test set forth in the Credit Agreement, of Excess
Cash Flow (as defined in the Credit Agreement) and the proceeds of certain
non-ordinary course asset sales, certain issuances of debt obligations and 50%
of certain issuances of equity securities of inVentiv and its subsidiaries,
subject to certain exceptions. inVentiv may elect to prepay the loans, in whole
or in part at any time, in certain minimum principal amounts, without penalty or
premium (other than normal LIBOR break funding costs). Amounts borrowed under
the Credit Agreement in respect of term loans (including delayed draw term
loans) that are repaid or prepaid may not be reborrowed. Amounts borrowed under
the Credit Agreement in respect of revolving loans may be paid or prepaid and
reborrowed.






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






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






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






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


The
Company has the intent and ability to choose the three-month LIBOR base rate for
the duration of the term of the Credit Agreement.  The three-month
LIBOR base rate as of September 30, 2008 and December 31, 2007 was 4.05% and
4.70%, respectively.  As disclosed in Note 12, the Company has two
derivative financial instruments, totaling $326 million, to hedge against the
new $330 million term loan facility.




The
Company accounts for amendments to its revolving credit facility under the
provisions of EITF Issue No. 98-14, Debtor’s Accounting for the Changes
in Line-of-Credit or Revolving-Debt Arrangements(EITF 98-14), and
its term loan under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a
Modification or Exchange of Debt Instruments(EITF 96-19). In
amending its revolving credit facility, deferred financing costs are being
amortized over the term of the new arrangement since the borrowing capacity
increased in the new loan, per the guidance in EITF 98-14.  In
connection with an amendment of our existing $164 million term loan, under the
terms of EITF 96-19, bank and any third-party fees were deferred and
amortized over the term of the Credit Agreement since the old and new debt
instruments were not substantially different.  The unamortized portion
of the deferred financing costs were approximately $4.0 million and $4.3 million
and are included in Deposits and Other Assets on the balance sheet as of
September 30, 2008 and December 31, 2007, respectively.





12.        Capital
Lease Obligations:





During
2000, the Company entered into a master lease agreement to provide a fleet of
automobiles for sales representatives of its inVentiv Commercial Services
operating segment. Subsequent to 2000, the Company entered into other lease
agreements with multiple vendors. Based on the terms of the agreements,
management concluded that the leases were capital leases based on the criteria
established by SFAS No. 13, Accounting for Leases. The
Company capitalized leased vehicles and recorded the related lease obligations
totaling approximately $23.9 million (including rebates of $3.8 million) and
$14.2 million (including rebates of $3.7 million) during the nine-months ended
September 30, 2008 and 2007, respectively.  The Company also incurred
net disposals of $10.4 million and $4.6 million during the nine-months ended
September 30, 2008 and 2007, respectively.





13.           Derivative
Financial Instrument:







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




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





Effective
October 2005, the Company entered into an amortizing three-year interest rate
swap arrangement with a notional amount of $175 million to fix the interest rate
on the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc. The Company entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  From October 2005 to July 2006, the
Company did not designate its original swap arrangement for hedge accounting and
recorded an approximate $2.9 million reduction to interest expense relating to
the mark-to-market adjustment, and a corresponding derivative asset for
approximately $2.9 million, which was recorded in Deposits and Other Assets on
the Condensed Consolidated Balance Sheet.  The fair value of the swaps
represent the estimated amount the Company would receive or pay to terminate the
agreement taking into consideration the difference between the contract rate of
interest and rates currently quoted for agreements of similar terms and
maturities.





On July
17, 2006, the Company formally designated the interest rate swap as a cash flow
hedge pursuant to SFAS No. 133.  The Company employed the dollar
offset method to assess effectiveness by performing a sensitivity analysis and
utilized the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement with an inception date of July 17,
2006.  The hypothetical swap had a fair value of zero on the date of
designation and the hedging swap had a fair value of $2.9 million on the date of
designation.  As the swap fair value will decline to zero at maturity,
the $2.9 million of fair value will be recognized in earnings over the remaining
life of the swap as part of the ineffectiveness calculation.  During
the nine months ended September 30, 2008, the fair market value of the original
derivative asset increased by $0.7 million from a liability of approximately
$1.0 million to approximately $0.3 million.  Approximately $1.0
million was recorded as interest expense, attributable to the financing
component embedded within the interest rate swap, while $1.7 million ($1.0
million, net of taxes) was recorded as an increase to Other Comprehensive
Income.  Due to the fact that this derivative ends on December 31,
2008, the fair value factors are not material, and as a result, no fair value
adjustment was necessary at September 30, 2008.





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


On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount increase to $325 million effective December
31, 2008 to hedge the total outstanding debt notional when the Company’s
original 2005 three-year interest rate swap arrangement described above
expires.  At hedge inception, the Company employed the dollar offset
method by performing a sensitivity analysis to assess effectiveness and utilized
the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  As a result of the hypothetical
derivative method, there was no ineffectiveness for the period ended September
30, 2008, and accordingly, $0.2 million ($0.1 million, net of taxes) was
recorded as a decrease to Other Comprehensive Income and an increase to other
non-current liabilities on the Company’s Condensed Consolidated Balance
Sheet.  This change in Other Comprehensive Income includes the $1.4
million credit value adjustment as discussed in Note 10.





Based on
current assumptions regarding the interest rate environment and other market
conditions at September 30, 2008, the estimated amount of accumulated other
comprehensive income that is expected to be reclassified into interest expense
under our hedge relationships within the next 12 months is $5.1 million, of
which $4.7 million will be included as part of our fixed interest on the loan
for 2008.





14.           Commitments
and Contingencies:





The
Company is subject to lawsuits, investigations and claims arising out of the
conduct of its business, including those related to commercial transactions,
contracts, government regulation and employment matters. Certain claims, suits
and complaints have been filed or are pending against the
Company.   With the exception of the claims described below, all
pending matters are of a kind routinely experienced in our business and are
consistent with our historical experience.





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





After
several rounds of pleading challenges to Plaintiff’s various renditions of the
complaint, all but one pharmaceutical manufacturing company, AstraZeneca, LP,
were dismissed from the case, leaving only Albertsons, Inc., Adheris, and
AstraZeneca as the remaining defendants (“Defendants”) in this
action.  In pleading challenge to Plaintiff’s Fifth Amended Complaint,
the remaining defendants were successful in eliminating a number of claims,
including fraud-based and breach of privacy claims.  Plaintiff’s class
allegations were stricken as improper with leave to amend.  The
operative Sixth Amended Complaint was filed on January 6, 2008.  
Defendants moved on or about February 28, 2008 to strike certain of Plaintiff’s
claims and Plaintiff's class allegations as improper.  These motions
were denied.  In conjunction therewith, Plaintiff’s Motion for
Reconsideration as to her breach of privacy claim was granted.  As a
result, there are four live claims alleged against Adheris: (i) violation of the
CMIA; (ii) breach of fiduciary duty; (iii) unjust enrichment; and (iv) breach of
privacy.





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





On July
11, 2008, counsel for the parties entered into a 60-day litigation standstill to
pursue settlement through mediation.  The agreement included taking
off calendar all pending motions, discovery and depositions for 60
days.  The parties are continuing to engage in settlement discussions,
and we believe that a settlement can be achieved on terms that would have no
material financial impact on Adheris, although no assurance can be given that a
settlement will be achieved on such terms or at all.  Any settlement
agreement will be subject to Court approval.





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


The
Company's insurer, AIG, is defending this action under reservation of
rights.  The Company is unable to estimate the loss or range of loss
that may result from this action if the proposed settlement is not
consummated.  Adheris intends to continue to defend this action
vigorously, and the Company does do not believe that this action will have a
material adverse effect on its consolidated balance sheets, results of
operations or cash flows.  It is impossible to predict the outcome of
litigation with certainty, however, and there can be no assurance that an
adverse result in this proceeding would not have a potentially material adverse
effect on the Company's consolidated balance sheets, results of operations or
cash flows.





Indemnification
Claim.  In January 2008, PRS received a demand for
indemnification from one of its customers relating to a lawsuit filed against
the customer pursuant to the Telephone Consumer Protection Act of 1991, as
amended by the Junk Fax Prevention Act of 2005, 47 U.S.C. § 227, a state
consumer fraud statute and common law conversion; and seeks statutory and actual
damages allegedly caused by the sending of unsolicited fax advertisements
related to the customer’s product.  PRS assisted the customer in
sending the faxes in question, although the actual faxing was done by an
unaffiliated entity.  The customer based its demand for
indemnification on an indemnification clause found in its services contract with
PRS.  PRS agreed to indemnify the customer on the condition that PRS
and its appointed counsel would have control over the defense of this
matter.


In
January 2008, PRS received a demand for indemnification from one of its
customers relating to a lawsuit filed against the customer pursuant to the
Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention
Act of 2005, 47 U.S.C. § 227, a state consumer fraud statute and common law
conversion; and seeks statutory and actual damages allegedly caused by the
sending of unsolicited fax advertisements related to the customer’s
product.  PRS assisted the customer in sending the faxes in question,
although the actual faxing was done by an unaffiliated entity.  The
customer based its demand for indemnification on an indemnification clause found
in its services contract with PRS.  PRS agreed to indemnify the
customer on the condition that PRS and its appointed counsel would have control
over the defense of this matter.


The
Company's insurer, Chubb Group, is defending this action under reservation of
rights.  The parties have engaged in settlement discussions, and we
believe that a settlement can be achieved on terms that would have no material
financial impact on PRS, although no assurance can be given that a settlement
will be achieved on such terms or at all.  Any settlement agreement
will be subject to Court approval.  The Company is unable to estimate
the loss or range of loss that may result from this action if the proposed
settlement is not consummated.  PRS intends to continue to defend this
action vigorously, and the Company does do not believe that this action will
have a material adverse effect on its consolidated balance sheets, results of
operations or cash flows.  It is impossible to predict the outcome of
litigation with certainty, however, and there can be no assurance that an
adverse result in this proceeding would not have a potentially material adverse
effect on the Company's consolidated balance sheets, results of operations or
cash flows.


15.           Deferred
Compensation:





The
Ventiv Health, Inc. Deferred Compensation Plan (the "NQDC Plan") provides
eligible management and other highly compensated employees with the opportunity
to defer, on a pre-tax basis, their salary, bonus, and other specified cash
compensation and to receive the deferred amounts, together with a deemed
investment return (positive or negative), either at a pre-determined time in the
future or upon termination of employment with the Company or an affiliated
employer participating in the NQDC Plan.  The compensation deferrals
were initiated in 2005.  The deferred compensation liability of
approximately $7.4 million and $6.8 million were included in other non-current
liabilities in the Company’s Condensed Consolidated Balance Sheets as of
September 30, 2008 and December 31, 2007.  The NQDC Plan does not
provide for the payment of above-market interest to participants.





To assist
in the funding of the NQDC Plan obligation, the Company participates in a
corporate-owned life insurance program in a rabbi trust whereby it purchases
life insurance policies covering the lives of certain employees, with the
Company named as beneficiary.  Rabbi trusts are grantor trusts
generally set up to fund compensation for a select group of management or highly
paid executives.  The cash value of the life insurance policy at
September 30, 2008 and December 31, 2007 was approximately $6.2 million and $5.4
million, respectively, and is currently classified in Deposits and Other Assets
on the Company’s Condensed Consolidated Balance Sheets. In addition,
approximately $1.2 million and $1.4 million as of September 30, 2008 and
December 31, 2007, respectively, were invested in mutual funds and classified in
Prepaid expenses and other current assets on our Condensed Consolidated Balance
Sheets.





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


16.           Income
Taxes





The
effective tax rate for the nine-month period ended September 30, 2008 was
39.5%.  The rate included a tax benefit relating to state taxes
settled of approximately $0.3 million, a tax detriment relating to interest on
unrecognized tax benefits of approximately $0.1 million, $0.4 million of tax
benefits relating to adjustments to amounts reflected in tax filings and $0.1
million of tax benefit relating to utilization of certain foreign net operating
losses.  The effective tax rate for the nine-month period ended
September 30, 2007 was 37.0%.  The rate included a tax benefit for
federal and state taxes settled or statutes expired of approximately $0.8
million; $0.2 million of tax detriments relating to interest on unrecognized tax
benefits and permanent item true- ups; $0.6 million of a tax benefit relating to
state net operating losses; and $1.0 million of a tax benefit relating to
federal tax benefits of state tax reserves. The Company’s current effective
tax rate is based on current projections for earnings in the tax jurisdictions
in which inVentiv does business and is subject to taxation.  The
Company’s effective tax rate could fluctuate due to changes in earnings between
operating entities and related tax jurisdictions.





The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48), on January 1, 2007.  The gross
amount of unrecognized tax benefit was $6.3 million as of December 31, 2007 and
$5.6 million as of September 30, 2008.  Included in this balance were
positions totaling $1.0 million at December 31, 2007 and at September 30, 2008
that, if recognized, would affect the effective tax rate.





The
Company recognizes potential interest and penalties related to unrecognized tax
benefits in income tax expense.  The total amount of accrued interest
and penalties recorded was $2.7 million at December 31, 2007 and at September
30, 2008.





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





Management has concluded that it is
reasonably possible that the unrecognized tax benefits will decrease by
approximately $1.4 million within the next 12 months.  The decrease is
primarily related to federal and state taxes that may be settled or have
expiring statutes of limitations.





17.           Stockholders’
Equity





The following table describes the 2008
activity in the Company’s Stockholders’ Equity accounts for the nine-months
ended September 30, 2008:





(in
      thousands, share amounts)
                          Common
      Stock
                          Additional
      Paid-In
                            Capital
                          Accumulated
      earnings
                          Comprehensive
                            Income
                          Accumulated
      Other Comprehensive Losses (1)
                          TotalBalance
      at December 31, 2007
                          $32
                          $362,116
                          $121,811
                          --
                          $(6,493)
                          $477,466Net
      income
                          
                          
                          34,536
                          $34,536
                          
                          34,536Net
      change in effective portion of
                            derivative,
      net of taxes
                          
                          
                          
                          856
                          856
                          856Foreign
      currency translation
                            Adjustment
                          
                          
                          
                          (848)
                          (848)
                          (848)$34,544Restricted
      stock expense
                          
                          4,843
                          
                          
                          
                          4,843Withholding
      shares for taxes
                          
                          (1,071)
                          
                          
                          
                          (1,071)Tax
      benefit from exercise of
                            employee
      stock options and vesting
                            of
      restricted stock
                          
                          496
                          
                          
                          
                          496Consultant
      compensation
                          
                          72
                          
                          
                          
                          72Proceeds
      from exercise of stock
                            Options
                          
                          2,372
                          
                          
                          
                          2,372Stock
      option expense
                          
                          3,478
                          
                          
                          
                          3,478Issuance
      of shares in connection with
                            Acquisitions
                          1
                          18,920
                          
                          
                          
                          18,921Other
                          
                          978
                          
                          
                          
                          978Balance
      at September 30, 2008
                          $33
                          $392,204
                          $156,347
                          
                          $(6,485)
                          $542,099





(1) As of
September 30, 2008, the $6.5 million of Accumulated Other Comprehensive Losses
relates to the effective portion, net of taxes, of the Company’s derivative
instruments, as described in Note 13.





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


18.           Discontinued
Operations:





For the
nine months ended September 30, 2008 and 2007, earnings from discontinued
operations, net of taxes, were approximately $0.1 million and $0.3 million,
respectively.  The gains on disposals of discontinued operations
consisted of contingency payments due from the Company’s previously-divested
Germany-based unit.





19.           Related
Parties:





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





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





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





20.           Segment
Information:





The
Company currently manages four operating segments: inVentiv Clinical, inVentiv
Communications, inVentiv Commercial and inVentiv Patient Outcomes, and its
non-operating reportable segment, “Other”, which is based on the way management
makes operating decisions and assesses performance.  The Company added
a fourth segment after the acquisition of AWAC, realigned certain existing
divisions, and has reclassified its segment reporting to conform to the current
segment structure in accordance with SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information.  The following represents
the Company’s reportable segments as of September 30, 2008:





·
            inVentiv
      Clinical, which provides services related to permanent placement,
      clinical staffing, data collection and management and functional service
      provision primarily in support of pharmaceutical clinical
      development.





·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.





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





·
            inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease
management.





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





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


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





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





inVentiv
                  Clinical
                inVentiv
      Communications
                inVentiv
      Commercial
                inVentiv
      Patient Outcomes
                Other
                TotalRevenues
                $55,954
                $84,538
                $121,388
                $31,824
                $--
                $293,704Less:
      Intersegment revenues
                --
                (443)
                (4,088)
                --
                --
                (4,531)Reported
      Revenues
                $55,954
                $84,095
                $117,300
                $31,824
                $--
                $289,173Depreciation
      and amortization
                591
                2,508
                4,991
                1,490
                9
                $9,589Interest
      expense
                --
                45
                358
                1
                6,039
                6,443Interest
      income
                15
                146
                --
                8
                269
                438Segment
      income (loss) (1)
                $4,166
                $9,382
                $11,268
                $6,801
                $(10,023)
                $21,594








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





InVentiv
                  Clinical
                inVentiv
      Communications
                inVentiv
      Commercial
                inVentiv
      Patient Outcomes
                Other
                TotalRevenues
                $50,799
                $74,317
                $106,416
                $26,078
                $--
                $257,610Less:
      Intersegment revenues
                (144)
                (547)
                (2,006)
                --
                --
                (2,697)Reported
      Revenues
                $50,655
                $73,770
                $104,410
                $26,078
                $--
                $254,913Depreciation
      and amortization
                484
                2,215
                4,125
                1,262
                12
                8,098Interest
      expense
                --
                32
                607
                1
                5,934
                6,574Interest
      income
                6
                222
                23
                28
                448
                727Segment
      income (loss) (1)
                $4,870
                $11,049
                $12,060
                $4,510
                $(9,490)
                $22,999








Nine-months
ended September 30, 2008 (in thousands):





InVentiv
                  Clinical
                inVentiv
      Communications
                inVentiv
      Commercial
                inVentiv
      Patient Outcomes
                Other
                TotalRevenues
                $162,592
                $269,093
                $328,535
                $91,467
                $--
                $851,687Less:
      Intersegment revenues
                (169)
                (1,024)
                (13,958)
                --
                --
                (15,151)Reported
      Revenues
                $162,423
                $268,069
                $314,577
                $91,467
                $--
                $836,536Depreciation
      and amortization
                1,690
                7,579
                13,111
                4,086
                32
                26,498Interest
      expense
                --
                96
                1,083
                2
                17,953
                19,134Interest
      income
                82
                492
                --
                32
                1,078
                1,684Segment
      income (loss) (1)
                $12,072
                $32,869
                $27,789
                $16,518
                $(31,229)
                $58,019








Nine-months
ended September 30, 2007 (in thousands):





inVentiv
                  Clinical
                inVentiv
      Communications
                inVentiv
      Commercial
                inVentiv
      Patient Outcomes
                Other
                TotalRevenues
                $139,209
                $202,025
                $306,712
                $69,182
                $--
                $717,128Less:
      Intersegment revenues
                (147)
                (966)
                (6,712)
                --
                --
                (7,825)Reported
      Revenues
                $139,062
                $201,059
                $300,000
                $69,182
                $--
                $709,303Depreciation
      and amortization
                1,381
                4,772
                11,977
                2,332
                45
                20,507Interest
      expense
                --
                25
                1,661
                4
                12,330
                14,020Interest
      income
                42
                526
                56
                76
                1,368
                2,068Segment
      income (loss) (1)
                $9,512
                $28,342
                $23,956
                $11,582
                $(22,840)
                $50,552








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




(in
      thousands)
            
            September
      30, 2008
            December
      31, 2007Total
      Assets:inVentiv
      Clinical
            
            $
            134,649
            $
            $127,426inVentiv Communications
            
            
            507,608
            
            513,079inVentiv
      Commercial
            
            
            193,283
            
            183,787inVentiv Patient Outcomes
            
            
            214,825
            
            198,141Other
            
            
            84,812
            
            88,423Total
      assets
            
            $
            1,135,177
            $
            1,110,856







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





This
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements, accompanying notes and other financial information included in the
Annual Report on Form 10-K for the year ended December 31, 2007.





Overview





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





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





Business
Segments





We
currently serve our clients primarily through four business segments, which
correspond to our reporting segments for 2008:





·
            inVentiv
      Clinical, which provides professional resourcing and services to
      the pharmaceutical, biotech and device companies.  Professional
      resourcing services include providing clinical research professionals in
      support of clients’ research efforts, including permanent placement,
      clinical staffing, and strategic resource teams.  In addition,
      inVentiv Clinical provides its clinical research clients with outsourced
      functional services in various areas, including clinical operations,
      medical affairs and biometrics/data management.   inVentiv
      Clinical consists of the Smith Hanley group of companies (which includes
      Smith Hanley Associates (“SHA”), Smith Hanley Consulting Group (“SHCG”)
      and MedFocus), HHI Clinical & Statistical Research Services (“HHI”),
      and Synergos;





·
            inVentiv
      Communications, which provides services related to pharmaceutical
      advertising, branding, public relations, interactive communications and
      physician education.  This segment includes inVentiv
      Communications, Inc., Jeffrey Simbrow Associates (“JSAI”), Ignite Health
      and Incendia Health Studios (collectively, “Ignite”) (acquired in March
      2007), Chamberlain Communications Group, Inc. (“Chamberlain”) (acquired in
      March 2007), Addison Whitney (acquired in June 2007) and Chandler Chicco
      Agency (“CCA”) (acquired in July
2007);





·
            inVentiv
      Commercial, which consists of the Company’s outsourced sales and
      marketing teams, planning and analytics services, sample accountability
      services, marketing support services, professional development and
      training, and recruitment of sales representatives in the commercial
      services area.  This segment includes inVentiv Strategy
      & Analytics (including its Strategyx business unit acquired in June
      2007) and inVentiv Selling Solutions;and





·
            inVentiv Patient
      Outcomes, which provides services related to patient adherence,
      patient assistance and reimbursement, clinical educator teams and medical
      cost containment and disease management. This segment includes Adheris,
      Inc. (“Adheris”), The Franklin Group (“Franklin”), The Therapeutics
      Institute (“TTI”), AWAC (acquired in July 2007) and Patient Marketing
      Group, Inc. (“PMG”) (acquired in August
2008).








International
Operations





As part
of the acquisition of inVentiv Communications, Inc. in October 2005, we added
that company's United Kingdom-based operations.  As part of the
acquisition of CCA in July 2007, we added CCA’s operations in the United Kingdom
and France.  These units collectively provide advertising, marketing
and public relations services to clients throughout Europe.  In April
2006, we acquired JSAI, a leading healthcare marketing and communications agency
in Canada.





In
December 2007, we increased our investment interest from 44% to 85% in Angela
Liedler GmbH (“Liedler”), a provider of communication and marketing services for
medical and pharmaceutical products, located in Germany.  We accounted
for Liedler as an equity investment until the date of the acquisition of the
additional interest, and then consolidated its results thereafter.  We
also have a 15% ownership interest in Heart Reklambyra AB (“Heart”), an
advertising agency located in Sweden, which we account for by using the equity
method of accounting.  Neither investment is material to the overall
consolidated financial statements.





In
addition to our fully-owned international operations and our minority ownership
interests, we have within GSW Worldwide and within CCA an established network of
over a dozen international affiliate relationships, which do not involve
any  equity interest in those affiliates, that help support our client
needs in additional international markets.





Business
Strategy





Our
strategy relies on both internal growth and acquisitions to meet our growth
objectives.  Our businesses have generated strong revenue growth for
the past several years.  Our internal revenue growth reflects our
strong track record in winning new business, which in turn is enhanced by our
pursuit of cross-servicing opportunities within and across our business
segments.  Our revenues are generally received under contracts with
limited terms and that can be terminated at the client’s option on short
notice.  We have been successful historically in obtaining increasing
amounts of repeat business from many of our clients and in expanding the scope
of the services we provide to them and thereby sustaining multi-year
relationships with many of our clients.  When relationships do not
renew, we have been successful in redeploying personnel quickly and
efficiently.





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





Acquisition
            Type
      of Business
            Segment
      (“inVentiv”)
            Headquarters
      Location
            Month
      AcquiredPatient
      Marketing Group
            Patient
      relationship marketing
            Patient
      Outcomes
            New
      Jersey
            August
      2008Chandler
      Chicco Agency
            Public
      relations
            Communications
            New
      York
            July
      2007AWAC
            Medical
      cost containment services
            Patient
      Outcomes
            Georgia
            July
      2007Addison
      Whitney
            Global
      branding consultancy
            Communications
            North
      Carolina
            June
      2007Strategyx
            Strategic
      consulting
            Commercial
            New
      Jersey
            June
      2007Ignite
      Health
            Interactive
      communications agency
            Communications
            California
            March
      2007Chamberlain
            Public
      relations
            Communications
            New
      York
            March
      2007MedConference
            Virtual
      event services
            Commercial
            Pennsylvania
            November
      2006DialogCoach
            Education
      and training
            Commercial
            Pennsylvania
            November
      2006JSAI
            Marketing
      and communications agency
            Communications
            Ontario,
              Canada
            April
      2006Synergos
            Clinical
      trial management services
            Clinical
            Texas
            April
      2006Adheris
            Patient
      pharmaceutical compliance
            Patient
      Outcomes
            Massachusetts
            February
      2006inVentiv
      Communications, Inc.
            Advertising
      and communications services
            Communications
            Ohio
            October
      2005PRS
            Regulatory
      compliance
            Commercial
            Pennsylvania
            August
      2005HHI
            Data
      management and statistical analyses
            Clinical
            Maryland
            November
      2004Smith
      Hanley
            Contract
      staffing and clinical trial support
            Clinical
            Connecticut
            October
      2004Franklin
            Patient
      support programs
            Patient
      Outcomes
            New
      Jersey
            June
      2004








We seek
out acquisitions in order to fill strategic gaps, selectively strengthen
existing franchises, further strengthen and broaden our clinical,
communications, commercial and/or patient outcomes capabilities, add
complementary client relationships and bring on board additional management
talent.  We believe that our track record to-date in identifying,
negotiating, closing and integrating strategic, accretive acquisitions has been
successful.  Acquisitions contributed significantly to our
quarter-over-quarter revenue growth for the nine-month periods ended September
30, 2008 and 2007.





While we
have reduced our level of acquisition activity during 2008, we will continue to
evaluate our strategic position and intend to make opportunistic acquisitions
that enable us to expand the scope of our service offerings and drive
shareholder value.





Our
acquisition activity adds complexity to the analysis of period-to-period
financial results and makes direct comparison of those financial results
difficult.  Our acquisitions are accounted for using purchase
accounting and the financial results of the acquired businesses are included in
our consolidated financial statements from their acquisitions
dates.  A prior year period that ended before an acquisition was
completed, however, will not include the corresponding financial results of the
acquired business.





During
the three and nine-month periods ended September 30, 2008, revenues from 2008
acquisitions totaled $2.0 million, all of which was in our inVentiv Patient
Outcomes segment.





Trends
and Uncertainties





The
Company is subject to a variety of risks, trends and uncertainties, which are a
consequence of the macroeconomic environment, developments within our or our
clients' industries and circumstances particular to inVentiv.  The
risks to which we are subject include the risks described in Item 1A of our Form
10-K for the year ended December 31, 2007 and in Part II, Item 1A of this
report.





Outsourcing
Trends and the Current Economic Environment





Our
business as a whole, and of our inVentiv Clinical, inVentiv Commercial and
inVentiv Patient Outcomes segments in particular, is related significantly to
the degree to which pharmaceutical companies outsource services that have
traditionally been performed internally by fully integrated
manufacturers.  We believe that our business has been positively
affected by a trend of pharmaceutical manufacturers toward utilizing outsourcing
arrangements as a means of controlling variable unit cost and increasing
flexibility.  We also believe that the significant percentage of New
Drug Application (“NDA”) and New Molecular Entity (“NME”) approvals attributable
to small and mid-tier pharmaceutical and biotechnology companies presents an
opportunity for companies providing outsourced services because these companies
often prefer to employ high-quality, third party service providers (either
directly or in co-promotion situations with pharmaceutical partners) to effect
critical late-stage developmental and commercialization functions.  We
therefore target a broad spectrum of companies within the pharmaceutical
industry in seeking to develop business opportunities. We are also engaged in a
continuous process of expanding and refining our service offerings, and pursuing
cross-servicing opportunities within and across our business segments, in order
to respond more flexibly to the market and address broader revenue opportunities
with existing and new clients.








Current
economic conditions in the U.S. and abroad make it extremely difficult for the
Company to predict the near-term performance of its businesses, all of which are
dependent in large part upon the performance of clients in the pharmaceutical
and life sciences industries.  Although the pharmaceutical industry is
generally regarded as anticyclical, a sustained recession, particularly a severe
one, would be expected to result in increased budget scrutiny and efforts to
significantly reduce expenditures in all areas of our clients'
businesses.  During 2008, our inVentiv Communications division has
been affected by the tentativeness of clients to make marketing spend
decisions.  Some clients are reducing marketing expenditures through
reducing the scopes of agency projects and delaying decisions on new marketing
initiatives.  Management is addressing these challenges by taking
steps to reduce fixed costs and create more flexibility in the Company’ s cost
structure.  In the inVentiv Communications division in particular, we
are: (1) reducing our fixed cost headcount; (2) supplementing resources with
talented flex employees who work for us on an as-needed basis; and (3) creating
a studio in our Columbus office to manage project-based graphic design and
production needs for all of the agencies across the Communications division,
which will enable us to reduce overhead, improve the quality and speed of
service to our clients, and reduce our dependence on external
vendors.





We
believe that these steps will allow the Company to manage resources efficiently
and to improve margins.  We also believe that as a result of the
Company’s cost initiatives and the flexibility of it service offerings, the
Company has an opportunity to capture increased market share in certain of its
business segments..














Regulatory
Uncertainty





Because most of our revenues are
generated by businesses involved in the commercialization of pharmaceutical
products, uncertainties surrounding the approval of our clients' pharmaceutical
products directly affect us.  The pace at which a pharmaceutical
product moves through the FDA approval process, and the application by the FDA
of standards and procedures related to clinical testing, manufacturing, labeling
claims and other matters are difficult to predict and may change over
time.  One of our large-scope new clients received non-approvals
during the second quarter of 2008 on two major drugs, and other clients also
faced FDA non-approvals.  FDA non-approvals and delays in approval can
significantly impact revenue, particularly in the inVentiv Communications
segment, because of the relationship between the approval process and the amount
and timing of client marketing expenditures to support the affected
pharmaceutical products.





Critical
Accounting Estimates





Most of our contract sales agreements
in the inVentiv Commercial division include fixed price
components.  When pricing these contracts, we estimate the future
costs of these fixed price components.  While we are the beneficiary
of any savings we are able to achieve as compared to this estimated pricing, we
also bear the risk of loss if costs prove to be higher than anticipated and
those increased costs cannot be offset by savings in other
areas.  Accordingly, our financial condition and results of operations
could be adversely impacted by any unanticipated increase in the general level
of inflation or in pricing of specific products.





During 2008, unanticipated increases in
the price of gasoline have resulted in our bearing fuel costs under certain of
our contract sales representative agreements that exceeded contractual
reimbursement rates. In addition, as a result of disruptions in the credit
markets, we expect the leasing rates under new leases for fleet vehicles
provided to our contract sales representatives to increase.  Although
we are not able to adjust our contracts with our clients to absorb the
additional costs in the short term, we expect over time to adjust our contracts,
to minimize the exposure and incremental costs.





Critical
Accounting Policies





The Company’s critical accounting
policies are set forth in its Annual Report on Form 10-K for the year ended
December 31, 2007.  There has been no change, update or revision to
the Company’s critical accounting policies subsequent to the filing of the
Company’s Form 10-K for the year ended December 31, 2007.








Fair
Value Measurement




The
Company adopted SFAS 157 on January 1, 2008 which requires enhanced
disclosures about assets and liabilities measured at fair value. Our adoption of
SFAS 157 was limited to financial assets and liabilities, which primarily relate
to our marketable securities, deferred compensation plan and derivative
contracts.  SFAS 157 includes a fair value hierarchy that is intended
to increase consistency and comparability in fair value measurements and related
disclosures. The fair value hierarchy is based on inputs to valuation techniques
that are used to measure fair value that are either observable or unobservable.
Observable inputs reflect assumptions market participants would use in pricing
an asset or liability based on market data obtained from independent sources
while unobservable inputs reflect a reporting entity’s pricing based upon their
own market assumptions. The fair value hierarchy consists of the following three
levels:


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





The
following table represents the Company’s assets and liabilities measured at fair
value on a recurring basis as of September 30, 2008 and the basis for that
measurement:








(in
      thousands)
            Total
      Fair Value Measurement September 30, 2008
            Quoted
      Prices in Active Markets for Identical Assets (Level 1)
            Significant
      Other Observable Inputs
              (Level
      2)
            Significant
      Unobservable Inputs
              (Level
      3)ASSETSMarketable
      Securities
            $16,221(1)
            $--
            $16,221(1)
            $--Deferred
      Compensation
              Plan
      Assets
            7,404
            --
            7,404
            --TOTAL
      ASSETS
            $23,625
            --
            $23,625
            --LIABILITIESDeferred
      Compensation
              Plan
      Liabilities
            $7,418
            --
            $7,418
            --Derivative
      Liabilities
            10,830
            --
            339
            10,491TOTAL
      LIABILITIES
            $18,248
            $--
            $7,757
            $10,491





(1) – As
described in Note 5, the marketable securities balance of $16.2 million includes
$11.1 million classified as restricted cash and marketable securities and $5.1
million as deposits and other assets, respectively, on the Company’s September
30, 2008 Balance Sheet.





As
a result of recent market conditions, the Company updated its valuation of its
five-year interest rate derivative as of September 30, 2008, resulting in a
credit value adjustment of $1.4 million to the derivative liability, with a
corresponding offset to Other Comprehensive Income as a result of cash flow
hedge accounting.  This valuation, which involved current and future
probability-adjusted risk factors, included inputs derived from valuation
techniques in which one or more significant inputs were unobservable, thus
changing the classification of the $10.5 million derivative liability from a
Level 2 input to a Level 3 input.  The significant inputs in this
valuation included credit market spread, estimated exposure and company and
counterparty default risk.











Three-Months
Ended September 30, 2008 Compared to Three-Months Ended September 30,
2007





Results
of Operations





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





(in
      thousands, except for per share data)
                                                For
      the Three-Months Ended September 30,2008
                                                2007Revenues:
                                                
                                                Percentage
      (1)
                                                
                                                Percentage(1)inVentiv
      Clinical
                                                $55,954
                                                19.3%
                                                $50,655
                                                19.9%inVentiv
      Communications
                                                84,095
                                                29.1%
                                                73,770
                                                28.9%inVentiv
      Commercial
                                                117,300
                                                40.6%
                                                104,410
                                                41.0%inVentiv
      Patient Outcomes
                                                31,824
                                                11.0%
                                                26,078
                                                10.2%Total
      revenues
                                                289,173
                                                100.0%
                                                254,913
                                                100.0%Cost
      of services (1)
      (2):inVentiv
      Clinical
                                                38,083
                                                68.1%
                                                33,725
                                                66.6%inVentiv
      Communications
                                                50,267
                                                59.8%
                                                42,577
                                                57.7%inVentiv
      Commercial
                                                95,553
                                                81.5%
                                                82,622
                                                79.1%inVentiv
      Patient Outcomes
                                                18,173
                                                57.1%
                                                15,628
                                                59.9%Total
      cost of services
                                                202,076
                                                69.9%
                                                174,552
                                                68.5%Selling,
      general and administrative expenses
                                                59,498
                                                20.6%
                                                51,515
                                                20.2%Total
      operating income
                                                27,599
                                                9.5%
                                                28,846
                                                11.3%Interest
      expense
                                                (6,443)
                                                (2.2)%
                                                (6,574)
                                                (2.6)%Interest
      income
                                                438
                                                0.2%
                                                727
                                                0.3%Income
      from continuing operations before income tax provision,
                                                  minority
      interest in income of subsidiary and income from equity
                                                  investments
                                                21,594
                                                7.5%
                                                22,999
                                                9.0%Income
      tax provision
                                                (8,125)
                                                (2.8%)
                                                (8,711)
                                                (3.4)%Income
      from continuing operations before minority interest in
                                                  income
      of subsidiary and income from equity investments
                                                13,469
                                                4.7%
                                                14,288
                                                5.6%Minority
      interest in income of subsidiary
                                                (130)
                                                (0.1%)
                                                (246)
                                                (0.1%)Income
      from equity investments
                                                (13)
                                                --
                                                92
                                                --Income
      from continuing operations
                                                13,326
                                                4.6%
                                                14,134
                                                5.5%Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
                                                (3)
                                                --
                                                90
                                                0.1%Income
      from discontinued operations
                                                (3)
                                                --
                                                90
                                                0.1%Net
      income
                                                $13,323
                                                4.6%
                                                $14,224
                                                5.6%Earnings
      per share:Continuing
      operations:Basic
                                                $0.40
                                                
                                                $0.44Diluted
                                                $0.40
                                                
                                                $0.43Discontinued
      operations:Basic
                                                $0.00
                                                
                                                $0.00Diluted
                                                $0.00
                                                
                                                $0.00Net
      earnings:Basic
                                                $0.40
                                                
                                                $0.44Diluted
                                                $0.40
                                                
                                                $0.43


(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 $34 million, or 13%, to $289 million during
the three months ended September 30, 2008, from $255 million during the three
months ended September 30, 2007.  Net revenues increased by
approximately $30 million, or 14%, to $243 million during the three months ended
September 30, of 2008, from $213 million in the three months ended September 30,
2007.  During the three months ended September 30, 2008, revenues
related to acquisitions consummated during 2008 approximated $2 million
exclusively in inVentiv Patient Outcomes.




inVentiv
Clinical’s revenues were $56 million during the third quarter of 2008, an
increase of $5 million compared to third quarter of 2007.  inVentiv
Clinical revenues accounted for 19% of total inVentiv revenues during the third
quarter of 2008.  Revenues in inVentiv Clinical were higher in 2008
predominantly due to increased placement of temporary personnel and increased
traction in functional outsourcing.




inVentiv
Communications’ revenues were $84 million during the third quarter of 2008, an
increase of $10 million or 14% from the third quarter of
2007.  inVentiv Communications’ revenues accounted for 29% of total
inVentiv revenues during the third quarter of 2008.  This increase is
due to organic revenue growth, primarily in our public relations and advertising
and communication support businesses.





inVentiv
Commercial’s revenues were $117 million during the third quarter of 2008, an
increase of 13% from the third quarter of 2007.  inVentiv Commercial
revenues accounted for 41% of total inVentiv revenues for the third quarter of
2008.  The Company benefited from several new wins and expansions from
certain sales contracts in 2008.  inVentiv Commercial continues to
benefit from the industry trend towards cost efficient solutions, and is
positioned as a market leader in flexible sales force solutions.





inVentiv
Patient Outcomes’ revenues were $32 million during the third quarter of 2008, up
$6 million from the third quarter of 2007.  Acquisition revenues
represented 37% of this increase, with additional organic growth in the segment
from our patient pharmaceutical compliance programs and clinical nurse
educators, on-call specialists and medical science liaison
programs.   The inVentiv Patient Outcomes segment, which was
formed during the third quarter of 2007, more closely links our various
patient-oriented business units, including Adheris, which was formerly reported
in the Communications’ segment, Franklin’s patient assistance and reimbursement
offerings, which was formerly reported in the Commercial segment,  The
Therapeutics Institute’s clinical education services which was formerly reported
in the Commercial segment, AWAC, which the Company acquired in July 2007, and
PMG, which the Company acquired in August 2008.





Cost of
Services: Cost of services increased by approximately $27 million or 15%,
to $202 million during the third quarter of 2008 from $175 million in the third
quarter of 2007.  Most of this variance is due to organic growth as
described above in Revenues.  Cost of
services as a percentage of revenues was 70% and 69% during the third quarter of
2008 and 2007, respectively.





inVentiv
Clinical’s cost of services increased by approximately 12%, to $38 million
during the third quarter of 2008 from $34 million during the third quarter of
2007.  Cost of services as a percentage of revenues was 68% and 67%
during the third quarter of 2008 and 2007, respectively.





inVentiv
Communications’ cost of services increased by 16% to $50 million during the
third quarter of 2008 when compared to the third quarter of 2007, mainly due to
the increase in Revenues.  Most of
this variance is due to organic growth as described above in Revenues.Cost
of services as a percentage of the segment’s revenues was 60% and 58% during the
third quarter of 2008 and 2007, respectively.





Cost of
services at inVentiv Commercial increased by approximately $14 million, or 17%,
to $96 million in the third quarter of 2008, mainly due to the increase in
revenues.  Cost of services was 82% of inVentiv Commercial’s revenues
during the third quarter of 2008 and 79% of revenues during the third quarter of
2007.  This increased percentage of cost of services is primarily due
to a change in the mix of business from full scope to limited scope
teams.





inVentiv
Patient Outcomes cost of services increased by approximately $2 million, or 13%,
to $18 million in the third quarter of 2008 from $16 million during the third
quarter of 2007, mainly due to the acquisition of PMG, and increased organic
business at Adheris and TTI.





Selling, General
and Administrative Expenses (“SG&A”): SG&A expenses increased by
approximately $7 million, or 13%, to $59 million during the third quarter of
2008 from $52 million during the third quarter of 2007, mainly due to
incremental increase from 2007 acquisitions and overall compensation across our
segments, as described below.








SG&A
expenses at inVentiv Clinical increased by 17% from the third quarter of 2007 to
the third quarter of 2008. This increase was primarily attributed to higher
selling costs due to increased revenues, as well as additional costs related to
infrastructure expansion in terms of people and technology.






SG&A
expenses at inVentiv Communications increased $5 million to $25 million during
the third quarter of 2008.  The increase was, in large part, directly
related to the increased revenues in our public relations and advertising and
communication support businesses as described in Revenues,as well as
increased compensation across our other Communications businesses.






SG&A
expenses at inVentiv Commercial increased by approximately $1 million to $10
million during the third quarter of 2008 from $9 million during the third
quarter of 2007, which was mainly due to increased compensation across the
segment relative to the respective periods.






SG&A
expenses at inVentiv Patient Outcomes increased by $1 million to $7 million
during the third quarter of 2008, mainly due to the acquisition of
PMG.






Other
SG&A was approximately $4 million for the third quarter of 2008, which was
relatively consistent with the respective prior year period.






Net Interest
Expense:Net interest expense increased by approximately $0.2
million from the third quarter of 2008 to the third quarter of 2007 due to the
lower interest income from our current investments.




Provision for
Income Taxes: The effective tax rate for the third quarter of 2008 was
37.9%, versus 38.1% during the third quarter of 2007.  The rate for
the third quarter of 2008 included approximately $0.4 million of tax benefits
relating to adjustments to amounts reflected in tax filings and $0.1 million of
tax benefit relating to utilization of certain foreign net operating losses, and
the rate for 2007 included approximately $0.4 million of a tax benefit relating
to the utilization of certain state net operating losses.  The Company’s
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which inVentiv does business and is subject to
taxation.  The Company’s effective tax rate could fluctuate due to
changes in earnings between operating entities and differences in tax rates in
the related tax jurisdictions.





Net Income and
Earnings Per Share (“EPS”): inVentiv’s net income
decreased by approximately $1 million to $13 million during the third quarter of
2008 when compared to the third quarter of 2007.  Diluted earnings per
share decreased to $0.40 per share during the third quarter of 2008 from $0.43
per share during the third quarter of 2007.  Overall EPS and net income
decreased between quarters because of a change in business mix and increased
costs.





Nine-months
Ended September 30, 2008 Compared to Nine-months Ended September 30,
2007





Results
of Operations





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


(in thousands,
      except for per share data)
                                      For
      the Nine-months Ended September 30,2008
                                      2007Revenues:
                                      
                                      Percentage(1)
                                      
                                      Percentage(1)inVentiv
      Clinical
                                      $162,423
                                      19.4%
                                      $139,062
                                      19.6%InVentiv
      Communications
                                      268,069
                                      32.1%
                                      201,059
                                      28.3%InVentiv
      Commercial
                                      314,577
                                      37.6%
                                      300,000
                                      42.3%inVentiv
      Patient Outcomes
                                      91,467
                                      10.9%
                                      69,182
                                      9.8%Total
      revenues
                                      $836,536
                                      100.0%
                                      $709,303
                                      100.0%Cost
      of services (1)(2):inVentiv
      Clinical
                                      112,007
                                      69.0%
                                      94,301
                                      67.8%inVentiv
      Communications
                                      159,628
                                      59.6%
                                      125,072
                                      62.2%inVentiv
      Commercial
                                      253,146
                                      80.5%
                                      238,609
                                      79.5%inVentiv
      Patient Outcomes
                                      55,303
                                      60.5%
                                      42,272
                                      61.1%Total
      cost of services
                                      580,084
                                      69.3%
                                      500,254
                                      70.5%Selling,
      general and administrative expenses
                                      180,983
                                      21.7%
                                      146,545
                                      20.7%Total
      operating income
                                      75,469
                                      9.0%
                                      62,504
                                      8.8%Interest
      expense
                                      (19,134)
                                      (2.3)%
                                      (14,020)
                                      (2.0)%Interest
      income
                                      1,684
                                      0.2%
                                      2,068
                                      0.3%Income
      from continuing operations before income tax provision,
                                        minority
      interest in income of subsidiary and (loss) income from equity
      investments
                                      58,019
                                      6.9%
                                      50,552
                                      7.1%Income
      tax provision
                                      (22,518)
                                      (2.7)%
                                      (18,569)
                                      (2.6)%Income
      from continuing operations before minority interest in
                                        income
      of subsidiary and (loss) income from equity investments
                                      35,501
                                      4.2%
                                      31,983
                                      4.5%Minority
      interest in subsidiary
                                      (1,022)
                                      (0.1)%
                                      (736)
                                      (0.1)%(Loss)
      income from equity investments
                                      (47)
                                      --
                                      438
                                      0.1%Income
      from continuing operations
                                      34,432
                                      4.1%
                                      31,685
                                      4.5%Income
      from discontinued operations:Gains
      on disposals of discontinued operations, net of taxes
                                      104
                                      --
                                      266
                                      --Income
      from discontinued operations
                                      104
                                      --
                                      266
                                      --Net
      income
                                      $34,536
                                      4.1%
                                      $31,951
                                      4.5%Earnings
      per share:Continuing
      operations:Basic
                                      $1.04
                                      
                                      $1.01Diluted
                                      $1.03
                                      
                                      $0.99Discontinued
      operations:Basic
                                      $0.01
                                      
                                      $0.01Diluted
                                      $0.00
                                      
                                      $0.00Net
      earnings:Basic
                                      $1.05
                                      
                                      $1.02Diluted
                                      $1.03
                                      
                                      $0.99


(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 $128 million, or 18%, to $837 million during
the nine-months ended September 30, 2008, from $709 million during the
nine-months ended September 30, 2007.  Net revenues increased by
approximately $122 million, or 21%, to $704 million during the nine-months ended
September 30, 2008, from $582 million during the nine-months ended September 30,
2007.  During the nine months ended September 30, 2008, revenues
related to acquisitions consummated during 2008 approximated $2 million
exclusively in inVentiv Patient Outcomes.







inVentiv
Clinical’s revenues were $162 million during the nine months ended September 30,
2008, an increase of $23 million compared to $139 million during  the
nine months ended September 30, 2007.  Revenues in inVentiv Clinical
were higher in 2008 predominantly due to increased placement of temporary
personnel and new business wins to provide functional outsourcing
services.




inVentiv
Communications’ revenues were $268 million during the nine months ended
September 30, 2008, an increase of $67 million or 33% from the nine months ended
September 30, 2007.  inVentiv Communications’ revenues accounted for
32% of total inVentiv revenues during the nine months ended September 30,
2008.  Revenues from acquisition growth represented 76% of the
increase, with the remaining increase due to the organic growth across all of
the Communications’ revenue streams.





Revenues
in our inVentiv Commercial segment were $315 million during the nine months
ended September 30, 2008, an   increase of approximately 5% from
the nine months ended September 30, 2007.  Approximately 17% of this
increase was due to acquisition growth, with the remainder relating to organic
growth from several new wins and expansions from certain sales contracts in
2008.  inVentiv Commercial continues to benefit from the industry
trend towards cost efficient solutions, and are positioned as a market leader in
flexible sales force solutions.





inVentiv
Patient Outcomes’ revenues were $91 million during the nine months ended
September 30, 2008, up $22 million from the nine months ended September 30,
2007.  Revenues from acquisition growth represented 49% of the
increase, with the remainder due to organic growth from our patient
pharmaceutical compliance programs and clinical nurse educators, on-call
specialists and medical science liaison programs.  The inVentiv
Patient Outcomes segment, which was formed in August 2007, more closely links
our various patient-oriented business units, including Adheris, which was
formerly reported in the Communications’ segment, Franklin’s patient assistance
and reimbursement offerings, which was formerly reported in the Commercial
segment, and The Therapeutics Institute’s clinical education services which was
formerly reported in the Commercial segment, AWAC, which the Company acquired in
July 2007 and PMG, which the Company acquired in August 2008.





Cost of
Services: Cost of services increased by approximately $80 million or 16%,
to $580 million for the nine months ended September 30, 2008 from $500 million
in the nine months ended September 30, 2007. Cost of services as a percentage of
revenues decreased from 71% to 69% between the nine months ended September 30,
2007 and 2008, respectively.





inVentiv
Clinical’s cost of services increased by approximately $18 million, or 19%, to
$112 million during the nine months ended September 30, 2008 from $94 million
during the nine months ended September 30, 2007.  Cost of services as
a percentage of revenues increased from 68% to 69% during the nine months ended
September 30, 2007 and 2008.





inVentiv
Communications’ cost of services increased by approximately $35 million, or 28%,
to $160 million during the nine months ended September 30, 2008 from $125
million during the nine months ended September 30, 2007.  Cost of
services as a percentage of revenues decreased from 62% to 60% during these
respective periods as a result of acquisitions with larger gross margins, but
higher SG&A.





Cost of
services at inVentiv Commercial increased by approximately 6% from the nine
months ended September 30, 2007, in line with the increase in revenues as
explained above.  Cost of services as a percentage of revenues
remained fairly consistent at 80% during these respective periods.





inVentiv
Patient Outcomes’ cost of services increased by approximately $13 million, or
31%, to $55 million during the nine months ended September 30, 2008 from $42
million during the nine months ended September 30, 2007, mainly due to the
acquisitions of AWAC and PMG and increased organic business at Adheris and
TTI.





SG&A:
SG&A expenses increased by approximately $34 million, or 23%, to $181
million from $147 million in the nine months ended September 30, 2008 and 2007,
respectively, mainly due to increased acquisitions in 2007 and increased
compensation across our segments, offset by a receivables reserve arising from a
client bankruptcy as described below.








SG&A
expenses at inVentiv Clinical increased by approximately 9% for the nine months
ended September 30, 2007 to the nine months ended September 30, 2008 primarily
attributed to higher selling costs due to increased revenues, in addition to
additional costs related to infrastructure expansion in terms of people and
technology.




SG&A
expenses at inVentiv Communications increased $28 million to $76 million during
the nine months ended September 30, 2008.  New acquisitions
constituted the majority of this increase.






SG&A
expenses at inVentiv Commercial decreased by approximately $3 million to $33
million during the nine months ended September 30, 2008 from the nine months
ended September 30, 2007.  The majority of this decrease was due to a
receivables reserve recorded during the second quarter of 2007 relating to a
client that declared Chapter 11 bankruptcy.  Prior to the client
bankruptcy in 2007, we have not historically had a collections issue as a result
of client bankruptcy, with virtually all of our clients having excellent payment
histories.  This decrease was offset by an increase in compensation
across the Commercial businesses relative to the respective
periods.






SG&A
expenses at inVentiv Patient Outcomes increased by $5 million to $20 million
during the nine months ended September 30, 2008, mainly due to the acquisitions
of AWAC and PMG.






Other
SG&A increased by approximately 17% to $14 million from the nine months
ended September 30, 2007 to the same period in 2008 The increase was mainly
related to annual increases in equity and non-equity compensation expense from
the previous year, inclusive of changes resulting from additional corporate
personnel transferring from the operating units.






Interest
Expense:Interest expense increased by approximately $5
million, or 36%, from the nine months ended September 30, 2007 to the nine
months ended September 30, 2008, mainly due to higher interest on the additional
$166 million borrowed in the new Credit Agreement entered into in July 2007, as
more fully explained in Liquidity and Capital
Resources.




Provision for
Income Taxes: The effective tax rate for the nine-month period ended
September 30, 2008 was 39.6%, versus an effective tax rate of 37.0% for the nine
months ended September 30, 2007.  For the nine months ended September
30, 2008, the rate included a tax benefit relating to state taxes settled
of approximately $0.3 million ($0.2 million after federal tax
effect), a tax detriment relating to interest on unrecognized tax benefits
of approximately $0.1 million, $0.4 million of tax benefits relating to
adjustments to amounts reflected in tax filings and $0.1 million of tax benefit
relating to utilization of certain foreign net operating losses.  The
rate at nine months 2007 included a tax benefit for federal and state taxes
settled or statutes expired of approximately $0.8 million ($0.6 million after
federal tax effect); $0.2 million of tax detriments relating to interest on
unrecognized tax benefits and permanent item true- ups; $0.6 million of a tax
benefit relating to state net operating losses; and $1.0 million of a tax
benefit relating to federal tax benefits of state tax reserves. The Company’s
current effective tax rate is based on current projections for earnings in the
tax jurisdictions in which inVentiv does business and is subject to
taxation.  The Company’s effective tax rate could fluctuate due to
changes in earnings between operating entities and differences in tax rates in
the related tax jurisdictions.





Net Income and
EPS: inVentiv’s
net income increased by approximately $3 million to $35 million during the nine
months ended September 30, 2008 when compared to the same period in
2007.  Diluted earnings per share increased to $1.03 per share during
the nine months ended September 30, 2008 from $0.99 per share during the nine
months ended September 30, 2007.  Overall EPS and net income increased
between the periods because of increased business wins, new acquisitions and the
impact of the increase in the uncollectible receivable reserve during the second
quarter of 2007, which lowered EPS during the prior period.













Liquidity
and Capital Resources





At
September 30, 2008, inVentiv had $87 million of unrestricted cash and
equivalents, an increase of $36 million from December 31, 2007.  For
the nine-months ended September 30, 2008 compared to September 30, 2007, cash
provided by operations increased by $56 million from a source of $15 million to
$71 million.  Cash used in investing activities decreased from $193
million to $22 million for the nine-months ended September 30, 2007 and 2008,
respectively.  Cash provided by financing activities decreased from a
source of $165 million to a use of $13 million over the same comparative
periods.





Cash
provided by operations was $71 million during the nine-months ended September
30, 2008, while cash provided by operations was $15 million in the nine-months
ended September 30, 2007.  This increase was, in large part, due to
improved collections on accounts receivable, timing of our unbilled services and
unearned revenue, increased depreciation and amortization from capital
expenditures and acquisition activity, as well as reduced excess tax benefits
from stock based compensation.  In addition, $5 million of a former
shareholder receivable was satisfied pursuant to the inVentiv Communications,
Inc. acquisition related incentive plan.





Cash used
in investing activities was $22 million for the nine-months ended September 30,
2008 compared to $193 million used during the same period in
2007.  During the nine months ended September 30, 2007, approximately
$165 million of cash related to the acquisitions of Ignite, Chamberlain, Addison
Whitney, Strategyx, CCA and AWAC, while approximately $23 million of cash
related to earnout contingency payments from previous
acquisitions.  During the nine months ended September 30, 2008, only
$40 million was paid for acquisitions and earnouts.  During the nine
months ended September 30, 2008, the Company also received proceeds of $28
million from our investment in the Columbia Strategic Cash Portfolio (“CSCP”),
with a balance remaining of $16 million at September 30, 2008.  As
described in Note 5 of Part 1, Item 1, the $16 million balance includes $11
million classified as restricted cash and marketable securities and $5 million
as deposits and other assets, respectively, on our September 30, 2008 Balance
Sheet.





Cash used
in financing activities was $13 million for the nine-months ended September 30,
2008, compared to $165 million provided by financing activities for the
nine-months ended September 30, 2007.  Approximately $166 million was
borrowed as a result of our amended credit facility, as further described
below.  Stock options proceeds were lower in 2008 than 2007 due to the
continued trend by the Company from stock options to restricted stock as well as
lower exercises due to a decrease in stock price.  As noted in cash
provided by operations above, there were reduced excess tax benefits from stock
based compensation, which has an offsetting effect on cash flows from financing
activities.





Our
principal external source of liquidity is our syndicated, secured credit
agreement, which we entered into with UBS AG, and others in connection with the
inVentiv Communications, Inc. acquisition.  On July 6, 2007, we
amended this credit facility and in connection therewith entered into an Amended
and Restated Credit Agreement with UBS AG and the other lenders party to the
credit facility.  The key features of the Amended and Restated Credit
Agreement are as follows:




·
            A
      $330 million term loan facility was made available to inVentiv in a single
      drawing, which was used to






·
            refinance
      the existing October 2005 credit facility, which had a remaining balance
      of  $164 million, and






·
            fund
      the acquisitions of CCA and AWAC and pay the fees associated with the new
      credit facility, with the balance retained by inVentiv as working
      capital.




The
credit agreement also included up to $20 million in additional term loans
(“delayed draw term loans”) that was to be advanced no later than January 6,
2008.  The Company elected not to draw additional amounts under the
agreement.  The credit agreement also contains a $50 million revolving
credit facility, of which $10 million is available for the issuance of letters
of credit, and a swingline facility.  The term loan will mature on the
seventh anniversary of the credit agreement, with scheduled amortization of 1%
per year during years one through six and 94% during year seven.  The
revolving loans will mature on the sixth anniversary of the credit
agreement.


·
            Amounts
      advanced under the credit agreement must be prepaid with a percentage,
      determined based on a leverage test set forth in the credit agreement, of
      Excess Cash Flow (as defined in the credit agreement) and the proceeds of
      certain non-ordinary course asset sales and certain issuances of debt
      obligations and 50% of certain issuances of equity securities of inVentiv
      and its subsidiaries, subject to certain exceptions. We may elect to
      prepay the loans, in whole or in part at any time, in certain minimum
      principal amounts, without penalty or premium (other than normal LIBOR
      break funding costs). Amounts borrowed under the credit agreement in
      respect of term loans (including delayed draw term loans) that are repaid
      or prepaid may not be reborrowed.  Amounts borrowed under the
      credit agreement in respect of revolving loans may be paid or prepaid and
      reborrowed.




·
            Interest
      on the loans 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 and transactions with affiliates. The credit agreement
      also includes a financial covenant under which inVentiv is required to
      maintain a total leverage ratio that does not exceed, as of the last day
      of any four consecutive fiscal quarters, 4.0 to 1.0 through December 31,
      2009 and 3.5 to 1.0 thereafter.




Effective October 2005, we entered into
a three- year swap arrangement for $175 million to hedge against the original
$175 million loan arrangement entered into to facilitate the acquisition of
inVentiv Communications, Inc. As more fully described in Part I, Item 3 below,
effective September 6, 2007, we entered into a five-year swap arrangement for
$165 million to hedge against the additional credit exposure under the credit
agreement.





We
believe that our cash and equivalents, cash to be provided by operations and
available credit under our credit facility will be sufficient to fund our
current operating requirements over the next 12 months.  However, we
cannot assure you that these sources of liquidity will be sufficient to fund all
internal growth initiatives, investments and acquisition activities that we may
wish to pursue. If we pursue significant internal growth initiatives or if we
wish to acquire additional businesses in transactions that include cash payments
as part of the purchase price, we may pursue additional debt or equity sources
to finance such transactions and activities, depending on market
conditions.  The acquisition agreements entered into in connection
with our 2006 and 2007 acquisitions and our acquisition of PMG include earn-out
provisions pursuant to which the sellers will become entitled to additional
consideration, which may be material, if the acquired businesses achieve
specified performance measurements.  See Note 4 to our condensed
consolidated financial statements included in Part I, Item 1 of this Form
10-Q.

















ITEM 3.  Quantitative and Qualitative
Disclosures About Market Risk





Long-Term
Debt Exposure





At
September 30, 2008, the Company had $326 million debt outstanding under its
secured term loan as described under “Liquidity and Capital Resources” in Item 2
above.  The Company will incur variable interest expense with respect
to our outstanding loan.  This interest rate risk may be partially
offset by our derivative financial instrument, as described
below.  Based on our debt obligation outstanding at September 30,
2008, a hypothetical increase or decrease of 10% of our variable interest rate
would have an immaterial effect on interest expense due to the fixed rate
associated with our derivative financial instruments.





Derivative
Financial Instrument




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




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





Effective
October 2005, the Company entered into an amortizing three-year interest rate
swap arrangement with a notional amount of $175 million to fix the interest rate
on the six-year $175 million loan arrangement entered into to facilitate the
acquisition of inVentiv Communications, Inc. The Company entered into this
interest rate swap agreement to modify the interest rate characteristics of its
outstanding long-term debt.  From October 2005 to July 2006, the
Company did not designate its original swap arrangement for hedge accounting and
recorded an approximate $2.9 million reduction to interest expense relating to
the mark-to-market adjustment, and a corresponding derivative asset for
approximately $2.9 million, which was recorded in Deposits and Other Assets on
the Condensed Consolidated Balance Sheet.  The fair value of the swaps
represent the estimated amount the Company would receive or pay to terminate the
agreement taking into consideration the difference between the contract rate of
interest and rates currently quoted for agreements of similar terms and
maturities.





On July
17, 2006, the Company formally designated the interest rate swap as a cash flow
hedge pursuant to SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.  The Company employed the
dollar offset method to assess effectiveness by performing a sensitivity
analysis and utilized the hypothetical derivative method under DIG Issue G7 to
measure ineffectiveness.  The hypothetical derivative contains the
same terms and conditions as the debt agreement with an inception date of July
17, 2006.  The hypothetical swap had a fair value of zero on the date
of designation and the hedging swap had a fair value of $2.9 million on the date
of designation.  As the swap fair value will decline to zero at
maturity, the $2.9 million of fair value will be recognized in earnings over the
remaining life of the swap as part of the ineffectiveness
calculation.  During the nine months ended September 30, 2008, the
fair market value of the original derivative asset increased by $0.7 million
from a liability of approximately $1.0 million to approximately $0.3
million.  Approximately $1.0 million was recorded as interest expense,
attributable to the financing component embedded within the interest rate swap,
while $1.7 million ($1.0 million, net of taxes) was recorded as an increase to
Other Comprehensive Income.





On
September 6, 2007, the Company entered into a new amortizing five-year interest
rate swap arrangement with a notional amount of $165 million at hedge inception,
with an accretive notional amount increase to $325 million effective December
31, 2008 to hedge the total outstanding debt notional when the Company’s
original 2005 three-year interest rate swap arrangement described above
expires.  At hedge inception, the Company employed the dollar offset
method by performing a sensitivity analysis to assess effectiveness and utilized
the hypothetical derivative method under DIG Issue G7 to measure
ineffectiveness.  The hypothetical derivative contains the same terms
and conditions as the debt agreement.  As a result of the hypothetical
derivative method, there was no ineffectiveness for the period ended September
30, 2008, and accordingly, $0.2 million ($0.1 million, net of taxes) was
recorded as an decrease to Other Comprehensive Income and an increase to other
non-current liabilities on the Company’s Condensed Consolidated Balance
Sheet.  This change in Other Comprehensive Income includes the $1.4
million credit value adjustment as discussed in Note 10.











Foreign
Currency Exchange Rate Exposure





The
Company is not currently affected by foreign currency exchange rate exposure,
except for any fluctuations in the foreign bank accounts remaining from the
divestitures of our European business units,from continuing operations of
our UK, France and Canadian subsidiaries and equity investments and minority
interests in our foreign business units, which are not material to its
consolidated financial statements.  Our treatment of foreign
subsidiaries is consistent with the guidelines set forth in SFAS 52, Foreign Currency
Translations.   The financial statements of our
subsidiaries expressed in foreign currencies are translated from the respective
functional currencies to U.S. Dollars, with results of operations and cash flows
translated at average exchange rates during the period, and assets and
liabilities translated at end of the period exchange rates.  At
September 30, 2008, there were no accumulated other comprehensive earnings
related to foreign currency translations.  Foreign currency
transaction gains and (losses) are included in the results of operations and are
not material.





ITEM 4.  Controls and
Procedures




Based on
their evaluation as of September 30, 2008, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) were effective as of September 30,
2008 to provide reasonable assurance that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized, and reported
within the time periods specified by the SEC, and that material information
relating to the Company and its consolidated subsidiaries is made known to
management, including the Chief Executive Officer and Chief Financial Officer,
particularly during the period when our periodic reports are being
prepared.  There were no changes in our internal controls over
financial reporting during the quarter ended September 30, 2008 that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.






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




PART
II.                      OTHER
INFORMATION





ITEM 1.   Legal
Proceedings





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





After
several rounds of pleading challenges to Plaintiff’s various renditions of the
complaint, all but one pharmaceutical manufacturing company, AstraZeneca, LP,
were dismissed from the case, leaving only Albertsons, Inc., Adheris, and
AstraZeneca as the remaining defendants (“Defendants”) in this
action.  In pleading challenge to Plaintiff’s Fifth Amended Complaint,
the remaining defendants were successful in eliminating a number of claims,
including fraud-based and breach of privacy claims.  Plaintiff’s class
allegations were stricken as improper with leave to amend.  The
operative Sixth Amended Complaint was filed on January 6, 2008.  
Defendants moved on or about February 28, 2008 to strike certain of Plaintiff’s
claims and Plaintiff's class allegations as improper.  These motions
were denied.  In conjunction therewith, Plaintiff’s Motion for
Reconsideration as to her breach of privacy claim was granted.  As a
result, there are four live claims alleged against Adheris: (i) violation of the
CMIA; (ii) breach of fiduciary duty; (iii) unjust enrichment; and (iv) breach of
privacy.








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





On July
11, 2008, counsel for the parties entered into a 60-day litigation standstill to
pursue settlement through mediation.  The agreement included taking
off calendar all pending motions, discovery and depositions for 60
days.  The parties are continuing to engage in settlement discussions,
and we believe that a settlement can be achieved on terms that would have no
material financial impact on Adheris, although no assurance can be given that a
settlement will be achieved on such terms or at all.  Any settlement
agreement will be subject to Court approval.





The
Company's insurer, AIG, is defending this action under reservation of
rights.  The Company is unable to estimate the loss or range of loss
that may result from this action if the proposed settlement is not
consummated.  Adheris intends to continue to defend this action
vigorously, and the Company does do not believe that this action will have a
material adverse effect on its consolidated balance sheets, results of
operations or cash flows.  It is impossible to predict the outcome of
litigation with certainty, however, and there can be no assurance that an
adverse result in this proceeding would not have a potentially material adverse
effect on the Company's consolidated balance sheets, results of operations or
cash flows.





Indemnification
Claim. In
January 2008, PRS received a demand for indemnification from one of its
customers relating to a lawsuit filed against the customer pursuant to the
Telephone Consumer Protection Act of 1991, as amended by the Junk Fax Prevention
Act of 2005, 47 U.S.C. § 227, a state consumer fraud statute and common law
conversion; and seeks statutory and actual damages allegedly caused by the
sending of unsolicited fax advertisements related to the customer’s
product.  PRS assisted the customer in sending the faxes in question,
although the actual faxing was done by an unaffiliated entity.  The
customer based its demand for indemnification on an indemnification clause found
in its services contract with PRS.  PRS agreed to indemnify the
customer on the condition that PRS and its appointed counsel would have control
over the defense of this matter.
 
 The
Company's insurer, Chubb Group, is defending this action under reservation of
rights.  The parties have engaged in settlement discussions, and we
believe that a settlement can be achieved on terms that would have no material
financial impact on PRS, although no assurance can be given that a settlement
will be achieved on such terms or at all.  Any settlement agreement
will be subject to Court approval.  The Company is unable to estimate
the loss or range of loss that may result from this action if the proposed
settlement is not consummated.  PRS intends to continue to defend this
action vigorously, and the Company does do not believe that this action will
have a material adverse effect on its consolidated balance sheets, results of
operations or cash flows.  It is impossible to predict the outcome of
litigation with certainty, however, and there can be no assurance that an
adverse result in this proceeding would not have a potentially material adverse
effect on the Company's consolidated balance sheets, results of operations or
cash flows.


With the
exception of the above claims, all pending matters are of a kind routinely
experienced in our business and are consistent with our historical
experience.




ITEM 1A.  Risk Factors





Other
than as described below, there have been no material changes in the risk factors
discussed in Item 1A of our Form 10-K for the year ended December 31,
2007.





The
rate of growth of gross domestic product in the U.S. has declined in the last
few quarters indicating that the U.S. economy is in or nearing a
recession.





Sustained downturns or sluggishness in
the U.S. economy generally affect the markets in which we operate. Some
customers of our inVentiv Communications division are reducing marketing
expenditures or delaying decisions on new marketing
initiatives.  While the economic uncertainties in which we operate
make it challenging for us to predict the near-term future of our operations, a
U.S. recession would likely have a significant adverse impact on our clients and
our business.





Recent
disruptions in the credit markets may negatively impact our liquidity and our
ability to obtain financing, and may increase our financing costs.





We have a $50 million working capital
line under our secured credit facility that provides us with a source of
liquidity beyond cash generated from operations.  We also have an
unsecured line of credit with an affiliate of Bank of America, N.A., that
provides liquidity in respect of our holdings in the Columbia Strategic Cash
Portfolio.  See footnote 5 to our consolidated financial statements in
Part I, Item 1 of this report.  If one of our lenders suffers
liquidity issues, we may be unable to access these anticipated sources of
liquidity if and when they are required.  The credit market turmoil
could negatively impact our ability to obtain additional sources of
financing.  An impairment of our access to credit facilities when
required could  have a material adverse effect on our ability to
execute our operating strategy, and could also prevent us from executing our
acquisition strategy or taking advantage of other business expansion
opportunities.  Furthermore, to the extent the counterparties to our
interest rate swap agreements suffer liquidity issues, we could be exposed to
interest rate risk that is intended to be eliminated by our hedging
arrangements.








Inflation
may adversely affect our business operations in the future.





Given the
current macroeconomic environment, it is possible that the U.S. government may
attempt in the near future to provide a monetary stimulus, a fiscal stimulus, or
both, to the U.S. economy. Such actions may lead to inflationary conditions in
our cost base, particularly resulting in an increase in the commissions and
compensation and benefits components of our SG&A expenses. This may harm our
margins and profitability if we are unable to increase prices or cut costs
enough to offset the effects of inflation in our cost base.





Many
of the contracts under which we provide services are subject to termination on
short notice, which may make our revenues less predictable.





We
provide services to many of our most significant clients under contracts that
our clients may cancel on short notice (generally 10 to 120 days, depending on
the specific business unit). In addition, many of our pharmaceutical sales
contracts provide our clients with the opportunity to internalize the sales
forces under contract. Although we have been successful in a number of cases in
negotiating longer-term commitments and a non-cancelable initial period for
pharmaceutical sales contracts, we cannot be assured that clients will renew
relationships beyond the expiration date of existing contracts in any of our
business units. Furthermore, while we have been successful in originating new
business opportunities and in replacing revenues attributable to contracts that
are terminated or not renewed, our stock price may fluctuate significantly in
response to announcements of contract terminations or nonrenewals.





Certain
of our customer contracts contain fixed price components that are not subject to
adjustment in the short term and expose us to pricing risk.





Under the terms of certain of our
customer agreements, we pass through costs on a fixed price basis based on our
cost estimates at the beginning of the contract term. During 2008, unanticipated
increases in the price of gasoline have resulted in our bearing fuel costs under
certain of our contract sales representative agreements that exceeded
contractual reimbursement rates. In addition, as a result of disruptions in the
credit markets, we expect the leasing rates under new leases for fleet vehicles
provided to our contract sales representatives to increase as a result of the
current disruptions in the credit market.  Although we seek to adjust
pass-through costs as contracts are renewed, we are subject to pricing risk on
fixed cost items for the duration of the contracts under which they are
provided.





If the costs to us of providing fixed
priced items increases, we may be exposed to reduced profits, or losses, under
the relevant agreements, which could have a material adverse effect on our
consolidated financial condition and results of operations.





Substantial
defaults by our customers on our accounts receivable could have a significant
negative impact on our business, results of operations, financial condition or
liquidity.





A
significant portion of our working capital consists of accounts receivable from
customers. If customers responsible for a significant amount of accounts
receivable were to become insolvent or otherwise unable to pay for products and
services, or were to become unwilling or unable to make payments in a timely
manner, our business, consolidated results of operations, consolidated financial
position or liquidity could be materially and adversely affected. In the event
of an economic or industry downturn, such downturn could have an adverse effect
on the servicing of these accounts receivable, which could result in longer
payment cycles, increased collection costs and defaults in excess of
management’s expectations, particularly in relation to smaller or more thinly
capitalized clients. Without limitation, current recessionary economic
conditions in the U.S. and disruptions in the credit market could cause delays
in collection or defaults, including as a result of declines in the
creditworthiness of our customers, business failures and increased conservatism
in our customers' cash management strategies.








ITEM 2.  Unregistered Sales of Equity
Securities and Use of Proceeds





The information contained in Part II,
Item 5 of this report is incorporated by reference.





ITEM 5.  Other
Information





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





As of
August 22, 2008, in connection with the payment of the earnout obligation for
the period ending December 31, 2007 under the purchase agreement relating to our
acquisition of inVentiv Communications, Inc., we issued for the account of
inVentiv Communications, Inc. a total of 22,876 unregistered shares of common
stock.




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











ITEM
6.                      Exhibits





31.1
              
              Certification
      by the Chief Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
              
              Certification
      by the Chief Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
              
              Chief
      Executive Officer’s Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
              
              Chief
      Financial Officer’s Certification of Financial Statements Pursuant to 18
      U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002


















SIGNATURES





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





INVENTIV
HEALTH, INC.




Date:
      November 7, 2008
              By:
              /s/ David
      S. BassinName :
      David S. BassinTitle:
      Chief Financial Officer and Secretary(Principal
      financial officer and principal accounting officer)