**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, 2007





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, 2007, there were 32,303,670 outstanding shares of the registrant's
      common stock.











**INVENTIV
      HEALTH, INC.**


**INDEX
      TO QUARTERLY REPORT ON**


**FORM
      10-Q**





**PART
                I. FINANCIAL INFORMATION**
            
            
            PageITEM
                1. Financial StatementsCondensed
                Consolidated Balance Sheets as of September 30, 2007
                (unaudited) and
                December 31, 2006
            
            
            1Condensed
                Consolidated Income Statements for the three and
                nine-months ended
                September 30, 2007 and 2006 (unaudited)
            
            
            2Condensed
                Consolidated Statements of Cash Flows for the
                nine-months ended
                September 30, 2007 and 2006 (unaudited)
            
            
            3Notes
                to unaudited Condensed Consolidated Financial
                Statements
            
            
            4-19ITEM
                2. Management's Discussion and Analysis of Financial
                Condition and Results
                of Operations
            
            
            20-30ITEM
                3. Quantitative and Qualitative Disclosures About Market
                Risk
            
            
            31ITEM
                4. Controls and Procedures
            
            
            32**PART
                II. OTHER INFORMATION**ITEM
                1. Legal Proceedings****
            
            
            32ITEM
                1A. Risk Factors
            
            
            32ITEM
                5. Other Information
            
            
            32ITEM
                6. Exhibits
            
            
            33**SIGNATURES**
            
            
            34








**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 and our ability to fund our operations
                for the foreseeable future;





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





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





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





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





·
            our
                ability to continue to comply with the covenants and terms of our
                credit
                facility and to access sufficient capital to fund our
                operations;





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





·
            changes
                in trends in the pharmaceutical industry or in pharmaceutical
                outsourcing.




Investors
      should carefully consider these risk factors and the matters discussed under
      Item 1A, Risk Factors, of our Form 10-K for the year ended December 31, 2006
      and
      our Form 10-Q for the three-months ended June 30, 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
                31,2007
                (unaudited)
            2006**ASSETS**Current
                assets:Cash
                and equivalents
            $67,219
            $79,835Restricted
                cash
            2,061
            50Accounts
                receivable, net of allowances for doubtful accounts of $9,539 and
                $3,583
                atSeptember
                30, 2007 and December 31, 2006, respectively
            151,706
            124,283Unbilled
                services
            97,822
            75,691Prepaid
                expenses and other current assets
            14,417
            8,524Income
                tax receivable
            2,027
            --Current
                deferred tax assets
            1,947
            834Total
                current assets
            337,199
            289,217Property
                and equipment, net
            52,176
            43,380Equity
                investments
            5,562
            5,076Goodwill
            335,209
            266,827Other
                intangibles, net
            285,917
            152,637Deposits
                and other assets
            13,171
            13,917Total
                assets
            $1,029,234
            $771,054**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Current
                portion of capital lease obligations
            $13,929
            $11,708Current
                portion of long-term debt
            3,300
            1,667Accrued
                payroll, accounts payable and accrued expenses
            97,001
            123,175Current
                income tax liabilities
            --
            1,475Client
                advances and unearned revenue
            63,613
            64,508Total
                current liabilities
            177,843
            202,533Capital
                lease obligations, net of current portion
            24,139
            21,800Long-term
                debt
            325,875
            162,917Non-current
                income tax liabilities
            7,249
            --Deferred
                tax liabilities
            16,478
            6,756Other
                non-current liabilities
            12,427
            18,471Total
                liabilities
            564,011
            412,477Commitments
                and contingenciesMinority
                interests
            (47)
            115Stockholders’
                Equity:Preferred
                stock, $.001 par value, 10,000,000 shares authorized, none issued
                and
                outstanding atSeptember
                30, 2007 and December 31, 2006, respectively
            --
            --Common
                stock, $.001 par value, 50,000,000 shares authorized; 32,289,669
                and
                29,975,710shares
                issued and outstanding at September 30, 2007 and December 31, 2006,
                respectively
            32
            30Additional
                paid-in-capital
            359,749
            284,331Accumulated
                other comprehensive losses
            (789)
            (226)Accumulated
                earnings
            106,278
            74,327Total
                stockholders’ equity
            465,270
            358,462Total
                liabilities and stockholders’ equity
            $1,029,234
            $771,054


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


1


**INVENTIV
      HEALTH, INC.**


**CONDENSED
      CONSOLIDATED INCOME STATEMENTS**


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


**(unaudited)**





**For
                the Three-Months Ended**
            
            **For
                the Nine-Months Ended****September
                30,******
            
            **September
                30,****2007**
            **2006**
            
            **2007**
            **2006**Net
                revenues
            $212,650
            $163,682
            
            $582,496
            $461,359Reimbursed
                out-of-pockets
            42,263
            34,098
            
            126,807
            93,077Total
                revenues
            254,913
            197,780
            
            709,303
            554,436Operating
                expenses:Cost
                of services
            131,575
            106,610
            
            371,475
            299,672Reimbursable
                out-of-pocket expenses
            42,977
            34,798
            
            128,779
            94,404Selling,
                general and administrative expenses
            51,515
            35,884
            
            146,545
            100,809Total
                operating expenses
            226,067
            177,292
            
            646,799
            494,885Operating
                income
            28,846
            20,488
            
            62,504
            59,551Interest
                expense
            (6,574)
            (3,854)
            
            (14,020)
            (7,752)Interest
                income
            727
            683
            
            2,068
            1,780Income
                from continuing operations before income tax provision, minority
                interest
                in income of subsidiary and income from equity investments
            22,999
            17,317
            
            50,552
            53,579Income
                tax provision
            (8,711)
            (7,169)
            
            (18,569)
            (12,605)Income
                from continuing operations before minority interest in income of
                subsidiary and income from equity investments
            14,288
            10,148
            
            31,983
            40,974Minority
                interest in income of subsidiary
            (246)
            (230)
            
            (736)
            (905)Income
                from equity investments
            92
            277
            
            438
            133Income
                from continuing operations
            14,134
            10,195
            
            31,685
            40,202Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            90
            49
            
            266
            1,268Net
                income from discontinued operations
            90
            49
            
            266
            1,268Net
                income
            $14,224
            $10,244
            
            $31,951
            $41,470Earnings
                per share (see Note 7):Continuing
                operations:Basic
            $0.44
            $0.35
            
            $1.01
            $1.39Diluted
            $0.43
            $0.34
            
            $0.99
            $1.34Discontinued
                operations:Basic
            $0.00
            $0.00
            
            $0.01
            $0.04Diluted
            $0.00
            $0.00
            
            $0.00
            $0.04Net
                income:Basic
            $0.44
            $0.35
            
            $1.02
            $1.43Diluted
            $0.43
            $0.34
            
            $0.99
            $1.38Weighted
                average common shares outstanding:Basic
            32,232
            29,411
            
            31,331
            28,937Diluted
            32,876
            30,359
            
            32,114
            29,959





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





2


**INVENTIV
      HEALTH, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH
      FLOWS**


**(in
      thousands)**


**(unaudited)**


**For
                the Nine-Months Ended****September
                30,****2007**
            **2006**Cash
                flows from operating activities:Net
                income
            31,951
            41,470Income
                from discontinued operations
            (266)
            (1,268)Income
                from continuing operations
            31,685
            40,202Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
            13,192
            11,185Amortization
            7,315
            4,187Income
                from equity investments
            (438)
            (133)Minority
                interest in income of subsidiary
            736
            905Fair
                market value adjustment on derivative financial instrument
            882
            (2,359)Deferred
                taxes
            (2,225)
            (9,210)Stock
                compensation expense
            7,807
            5,578Tax
                benefit from stock option exercises and vesting of restricted
                shares
            9,390
            8,206Changes
                in assets and liabilities, net of effects from discontinued
                operations:Accounts
                receivable, net
            (4,171)
            21,087Unbilled
                services
            (19,583)
            (22,759)Prepaid
                expenses and other current assets
            (3,371)
            (1,722)Accrued
                payroll, accounts payable and accrued expenses
            (5,038)
            2,970Net
                tax liabilities
            2,234
            7,782Client
                advances and unearned revenue
            (9,897)
            5,569Excess
                tax benefits from stock based compensation
            (7,740)
            (7,608)Other
            (5,077)
            (2,563)Net
                cash provided by continuing operations
            15,701
            61,317Net
                cash used in discontinued operations
            (215)
            (15)Net
                cash provided by operating activities
            15,486
            61,302Cash
                flows from investing activities:Restricted
                cash balances
            (399)
            3,534Investment
                in cash value of life insurance policies
            (2,618)
            (2,758)Cash
                paid for acquisitions, net of cash acquired
            (164,711)
            (50,440)Acquisition
                earn-out payments
            (23,475)
            (8,267)Equity
                investments
            (48)
            267Purchases
                of property and equipment
            (6,049)
            (5,398)Proceeds
                from manufacturers rebates on leased vehicles
            3,718
            285Net
                cash used in continuing operations
            (193,582)
            (62,777)Net
                cash provided by discontinued operations
            481
            1,283Net
                cash used in investing activities
            (193,101)
            (61,494)Cash
                flows from financing activities:Net
                borrowings of long-term debt
            166,250
            --Repayments
                on long-term debt
            (1,659)
            (9,563)Repayments
                on capital lease obligations
            (10,362)
            (8,678)Deferred
                financing costs for long-term debt
            (2,154)
            --Withholding
                shares for taxes
            (731)
            (104)Proceeds
                from exercise of stock options
            6,559
            4,656Excess
                tax benefits from stock-based compensation
            7,740
            7,608Distributions
                to minority interests in affiliated partnership
            (899)
            --Net
                cash provided by (used in) continuing operations
            164,744
            (6,081)Net
                cash provided by (used in) discontinued operations
            --
            --Net
                cash provided by (used in) financing activities
            164,744
            (6,081)Effect
                of exchange rate changes
            255
            252Net
                change in cash and equivalents
            (12,616)
            (6,021)Cash
                and equivalents, beginning of period
            79,835
            73,102Cash
                and equivalents, end of period
            $67,219
            $67,081Supplemental
                disclosures of cash flow information:Cash
                paid for interest
            $13,093
            $9,595Cash
                paid for income taxes
            $13,592
            $5,781Supplemental
                disclosures of non-cash activities:Vehicles
                acquired through capital lease agreements
            $10,435
            $12,576Stock
                issuance related to acquisitions
            $53,173
            $27,177





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





3
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**1.****Organization
      and Business:**





inVentiv
      Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
      leading provider of value-added services to the pharmaceutical, life sciences
      and healthcare industries. The Company supports a broad range of clinical
      development, communications and commercialization activities that are critical
      to its customers' ability to complete the development of new drug products
      and
      medical devices and successfully commercialize them. In addition, the Company
      provides medical cost containment services to payors in its patient outcomes
      business. Our goal is to assist 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 275 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 2007, as discussed in Note
      19:





·
            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. This segment includes
                the Smith Hanley group of companies (which includes Smith Hanley
                Associates, Smith Hanley Consulting Group and MedFocus), HHI Clinical
                & Statistical Research Services (“HHI”), and Synergos, LLP
                ("Synergos").





·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                public relations, interactive communications and physician education.
                This
                segment includes inVentiv Communications, Inc. (then known as inChord
                Communications, Inc.), Jeffrey Simbrow Associates ("JSAI"), ignite
                comm.net and Incendia Health, Inc. (collectively, “Ignite”), Chamberlain
                Communications Group, Inc. (“Chamberlain”), Addison Whitney, Inc.
                (“Addison Whitney”) and Chandler Chicco Agency (“CCA”).





·
            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
                includesinVentiv
                Strategy & Analytics and inVentiv Selling Solutions.





·
            inVentiv
                Patient Outcomes,which provides services related to patient adherence, patient assistance
                and reimbursement, clinical educator teams, medical cost containment
                and
                disease management. This segment includesInnovative
                Health Strategies, Inc., iProcert, LLC and the related AWAC.MD business
                (collectively "AWAC"), Adheris, Inc. (“Adheris”), The Franklin Group
                (“Franklin”) and The Therapeutics Institute (“TTI”).





The
      Company’s services are designed to develop, execute and monitor strategic and
      tactical sales and marketing plans and programs for the promotion of
      pharmaceutical, biotechnology and other life sciences products.





**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. 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, 2007 and December
        31,
        2006, the condensed consolidated income statements of the Company for the
        three
        and nine-months ended September 30, 2007 and 2006 and the condensed consolidated
        cash flows for the nine-months ended September 30, 2007 and 2006. Operating
        results for the three and nine-months ended September 30, 2007 are not
        indicative of the results that may be expected for the year ending December
        31,
        2007.





4
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




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, 2006
      as
      filed with the Securities and Exchange Commission on February 28, 2007. Certain
      balances in segment reporting have been reclassified to conform to the current
      segment reporting structure. In August 2007, the Company added a fourth
      operating segment, inVentiv Patient Outcomes, for financial reporting purposes.
      This new segment more closely links the Company's various patient-oriented
      business units. The Company also realigned some of its divisions to reflect
      the
      new segment reporting, which is reflected in the Company's condensed
      consolidated balance sheets as of September 30, 2007 and December 31, 2006,
      the
      condensed consolidated income statements of the Company for the three and
      nine-months ended September 30, 2007 and 2006 and the condensed consolidated
      cash flows for the nine-months ended September 30, 2007 and 2006.  See
      Note
      19,*Segment
      Information*,
      for
      further details.





The
      condensed consolidated financial statements include the accounts of the Company,
      its wholly owned subsidiaries and its 53% owned subsidiary, Taylor Search
      Partners (“TSP”), which was acquired in conjunction with the acquisition of
      inVentiv Communications, Inc. As discussed above, the Company’s 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 2005, the Company entered into an exclusive joint venture agreement
      with SIRO Clinpharm Pvt. Ltd., one of India's largest domestic contract research
      organizations, to offer pharmaceutical companies India-based clinical data
      management services. The results of this joint venture are not material to
      the
      Company’s condensed consolidated financial statements.





The
      Company has a 15% ownership interest in Heart Reklambyra AB (“Heart”), an
      advertising agency located in Sweden and a 44% interest in Angela Liedler GmbH
      (“Liedler”), a communication and marketing services provider for medical and
      pharmaceutical products, located in Germany. Both of these investments are
      accounted for using the equity method of accounting. The results of these
      ownership interests are not material to the condensed consolidated financial
      statements.








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





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS 159”) 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 SFAS No. 157, *Fair
      Value Measurements.* The
      Company has not yet determined if it will choose to measure any eligible
      financial assets and liabilities at fair value.





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. The Company has not
      yet
      determined the impact SFAS 157 will have on our consolidated balance sheets,
      results of operations and cash flows.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin (“SAB”) No. 108, *Considering
      the Effects of Prior Year Misstatements when Quantifying Current Year
      Misstatements.* SAB
      No. 108 requires analysis of misstatements using both an income statement
      (rollover) approach and a balance sheet (iron curtain) approach in assessing
      materiality and provides for a one-time cumulative effect transition adjustment.
      SAB No. 108 is effective for the Company’s 2006 annual financial
      statements. The adoption of SAB No. 108 did not have a material impact on
      our consolidated balance sheets, results of operations and cash
      flows.





5
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




In
      July
      2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), *Accounting
      for Uncertainty in Income Taxes, an interpretation of FASB Statement
      No. 109* .
      FIN 48
      clarifies the accounting for income taxes by prescribing the minimum recognition
      threshold a tax position is required to meet before being recognized in the
      consolidated financial statements. FIN 48 also provides guidance on
      derecognition, measurement, classification, interest and penalties, accounting
      in interim periods, disclosure and transition. FIN 48 applies to all tax
      positions related to income taxes subject to FASB Statement No. 109, *Accounting
      for Income Taxes* (“FASB
      No. 109”). FIN 48 is effective for fiscal years beginning after
      December 15, 2006; as such, the Company has adopted FIN 48 as of January 1,
      2007, as required. Differences between the amounts recognized in the
      consolidated financial statements prior to the adoption of FIN 48 and the
      amounts reported after adoption are accounted for as a cumulative-effect
      adjustment recorded to the beginning balance of retained earnings. The adoption
      of FIN 48 did not have a material impact on the Company’s consolidated
      statements of operations, financial position, cash flows, and other significant
      matters, such as debt covenants or the Company’s normal business practices.








**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., p ro
      forma
      financial information was not required to be disclosed under the Securities
      and
      Exchange Commission’s Regulation S-X for the following acquisitions because none
      of the specific thresholds were met as they were not material to the
      consolidated operations of the Company at the time of acquisition.





**CCA** - In
      July 2007, the Company completed the acquisition of CCA, for approximately
      $69.0
      million in cash and stock, including certain post-closing adjustments and direct
      acquisition costs which have yet to be finalized. The Company will be obligated
      to make certain earn-out payments, which may be material, contingent on CCA’s
      performance measurements during 2007 through 2010. CCA is based 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 were included in the condensed
      consolidated financial statements within the inVentiv Communications’ segment
      from the acquisition date to September 30, 2007.





**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 which have yet to be finalized. 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 ("TPAs"), ERISA self-funded plans,
      fully
      insured plans, employer groups, managing general underwriters ("MGUs") 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. AWAC’s financial results were included in the condensed consolidated
      financial statements within the inVentiv Patient Outcomes segment from the
      acquisition date to September 30, 2007.





**Addison
      Whitney** - In
      June 2007, the Company completed the acquisition of Addison Whitney for
      approximately $18.3 million in cash and stock, including certain post-closing
      adjustments and direct acquisition costs which have yet to be finalized. The
      Company will be obligated to make certain earn-out payments, which may be
      material, contingent on Addison Whitney’s performance measurements during 2007
      through 2010. Addison Whitney is based in North Carolina, and specializes in global
      branding consultancy that focuses on creating unique corporate and product
      brands .
      Addison
      Whitney’s financial results were included in the condensed consolidated
      financial statements within the inVentiv Communications’ segment from the
      acquisition date to September 30, 2007.





**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 which have yet to be finalized. 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 were included in the condensed consolidated
      financial statements within the inVentiv Commercial segment from the acquisition
      date to September 30, 2007.





6
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




**Ignite** - In
      March 2007, the Company completed the acquisition of Ignite and Incendia Health
      Studios (which now operates as a division of Ignite) for approximately $21.2
      million in cash and stock, including certain post-closing adjustments and direct
      acquisition costs which have yet to be finalized. The Company will be obligated
      to make certain earn-out payments, which may be material, contingent on Ignite's
      performance measurements during 2007 through 2010. Ignite is based in Irvine,
      California, and specializes in medical advertising and interactive
      communications targeting patients and caregivers. Ignite’s financial results
      were included in the condensed consolidated financial statements within the
      inVentiv Communications’ segment from the acquisition date to September 30,
      2007.




**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 which have yet to be finalized. 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 were
      included in the condensed consolidated financial statements within the
      Communications’ segment from the acquisition date to September 30, 2007.




**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. 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 ASERT
      LLC 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 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, as well as investigator and
      patient recruitment. The Company will be obligated to make certain earn-out
      payments, which may be material, contingent on Synergos’s performance
      measurements during 2006 and 2007. The 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 results of Synergos have been reflected
      in
      the inVentiv Clinical segment from the date of its acquisition.





**JSAI** - In
      April 2006, the Company acquired JSAI for approximately $8.8 million in cash
      and
      stock, including certain post-closing adjustments and direct acquisition costs.
      JSAI is Canada's leading healthcare marketing and communications agency. The
      Company will be obligated to make certain earn-out payments, which may be
      material, contingent on JSAI’s performance measurements during the 12-month
      periods ending March 31, 2007, 2008 and 2009. The amount due with respect to
      JSAI for the 12-month period ended March 31, 2007 was approximately $2.8 million
      in cash and stock, which the Company accrued at March 31, 2007, and the cash
      portion of approximately $1.1 million was paid in 2007; the remaining stock
      portion will be issued once certain contractual restrictions have been met.
      The
      results of JSAI have been reflected in the inVentiv Communications segment
      from
      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. The portion adjusted in the subsequent
      year mainly relates to the finalization of the earn-out for the previous year,
      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.





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




**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, as more fully
      described in Note 10. 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
      will be obligated to make certain earn-out payments, which may be material,
      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. 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.





**PRS** - In
      August 2005, the Company acquired the net assets of PRS, a provider of
      compliance management and marketing support services based in Horsham,
      Pennsylvania. PRS specializes in pharmaceutical sample management and compliance
      services; its operations are similar in nature to the business of Franklin,
      which was acquired in June 2004. The closing consideration for the transaction
      was approximately $13.6 million in cash and stock, including certain
      post-closing adjustments and direct acquisition costs. The Company was obligated
      to make certain earn-out payments contingent on PRS’s performance measurements
      in 2005 and 2006. The amount due with respect to PRS for 2005 was approximately
      $0.3 million, which was accrued for as of December 31, 2005 and paid in April
      2006. PRS’ 2006 earnout of approximately $2.0 million in cash and stock, of
      which $1.7 million was accrued at December 31, 2006, was paid in 2007. The
      portion adjusted in the subsequent year mainly relates to the finalization
      of
      the earn-out for the previous year, as allowed under the contract. The results
      of PRS have been reflected in the inVentiv Commercial segment since the date
      of
      acquisition.




**5.**  **Allowance
      for Doubtful Accounts:**





During
      the nine-months ended September 30, 2007, the Company increased its allowance
      for doubtful accounts by $5.9 million. The majority of this increase relates
      to
      an increase in the allowance for doubtful accounts recorded in the second
      quarter of 2007 for a receivable from a client that declared Chapter 11
      bankruptcy.





**6.**  **Employee
      Stock Compensation:**




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





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




8
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**





The
      adoption of SFAS 123R resulted in stock-based compensation expense of $2.8
      million, of which $0.7 million was recorded in cost of services and $2.1 million
      recorded as Selling, General and Administrative expenses (“SG&A”) for the
      three months ended September 30, 2007 and $2.2 million, of which $0.7 million
      was recorded in cost of services and $1.5 million recorded as SG&A for the
      three months ended September 30, 2006. 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 recorded as SG&A; for the
      nine-months ended September 30, 2006, stock-based compensation expense was
      $5.6
      million, of which $1.9 million was recorded in cost of services and $3.7 million
      was recorded as SG&A.





Stock-based
      compensation expense caused income before income tax provision, minority
      interest in income of subsidiary and income from equity investments to decrease
      by $2.8 million and $2.2 million for the three months ended September 30, 2007
      and 2006, respectively, caused net income to decrease by $1.7 million and $1.3
      million for the three months ended September 30, 2007 and 2006, respectively,
      and caused basic and diluted earnings per share to decrease by $0.05 per share
      and $0.04 per share for the three months ended September 30, 2007 and 2006,
      respectively. During the nine months ended September 30, 2007 and September
      30,
      2006 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 $7.8 million and $5.6 million, respectively, caused
      net income to decrease by $4.6 million and $3.3 million for the nine months
      ended September 30, 2007 and 2006, respectively, and caused basic and diluted
      earnings per share to decrease by $0.14 per share and $0.11 per share for the
      nine months ended September 30, 2007 and 2006, respectively.





Cash
      provided by financing activities increased by $7.7 million and $7.6 million
      for
      the nine-months ended September 30, 2007 and 2006, 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,****2007**
            **2006**
            **2007**
            **2006**Expected
                life of option
            5.5-6
                yrs
            5.5-6
                yrs
            5.5-6
                yrs
            5.5-6
                yrsRisk-free
                interest rate
            4.90%
            --(1)
            4.81%
            4.90%Expected
                volatility
            40%
            45%
            40%
            45%Expected
                dividend yield
            0.00%
            0.00%
            0.00%
            0.00%


(1)  In
      the
      third quarter of 2006, 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 2007 and 2006 the volatility remains at a range of
      39-40%. For the
      nine months ended September 30, 2007 the Company elected to use the simplified
      method of determining the expected term as permitted by SAB 107 and the
      range
      of the expected term remained unchanged at 5.5 to 6 years. 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 2007 and 2006 were 3.36% and 2.92%,
      respectively.








9
 **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”) authorizes incentive stock
      options, nonqualified stock options, restricted stock awards, restricted stock
      units and stock appreciation rights ("SARs”). The aggregate number of shares of
      the Company’s common stock that may be issued under the Stock Plan upon exercise
      of options, SARs or in the form of restricted stock is 9.1 million shares.
      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
      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, 2007 (in thousands, except per share
      amounts):


**Shares**
            **Weighted
                Average Exercise Price**
            **Weighted
                Average Remaining Contractual Term (in years)**
            **Aggregate
                Intrinsic Value**Outstanding
                at January 1, 2007
            2,194
            $14.43Granted
                and assumed
            171
            $35.75Exercised
            (759)
            $8.64Forfeited/expired/cancelled
            (64)
            $22.14Outstanding
                at September 30, 2007
            1,542
            $19.33
            7.14
            $37,775Vested
                and expected to vest at September 30, 2007
            1,467
            $19.06
            7.09
            $36,318Options
                exercisable at September 30, 2007
            712
            $14.20
            6.16
            $21,098




The
      weighted-average grant-date fair value of stock options granted during the
      three-months ended September 30, 2007 was $17.36 per share, no stock options
      were granted during the three-months ended September 30, 2006. The
      weighted-average grant-date fair value of stock options granted during the
      nine-months ended September 30, 2007 and 2006 was $16.62 and $13.02 per share,
      respectively. The total intrinsic value of options exercised during the
      three-months ended September 30, 2007 and 2006 was $0.7 million and $1.9
      million, respectively, and in addition, $6.6 million and $4.7 million during
      the
      nine-months ended September 30, 2007 and 2006, respectively. As of September
      30,
      2007 and December 31, 2006, there was approximately $7.9 million and $8.9
      million, respectively, of total unrecognized compensation cost related to
      nonvested share-based compensation arrangements granted; that cost is expected
      to be recognized over a weighted average of 2.2 years and 2.4 years,
      respectively.






The
      actual tax benefit realized for the tax deductions from option exercise of
      the
      share-based payment arrangements totaled $1.3 million and $3.7 million for
      the
      three months ended September 30, 2007 and 2006, respectively, and during the
      nine-months ended September 30, 2007 and 2006 was $7.8 million and $7.7 million,
      respectively.




10
 
 **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
                Options**Exercise
                Price Range**
            **Numbers
                of Options**
            **Weighted
                Average Exercise Price**
            **Weighted
                Average**
              **Remaining
                Life**
              **(years)**
            **Number
                of Options**
            **Weighted
                Average**
              **Exercise
                Price**$1.48
            To
            $8.06
            185,699
            $5.40
            3.45
            185,699
            $5.40$8.45
            To
            $15.48
            132,309
            $9.85
            6.31
            68,697
            $9.81$15.96
            To
            $15.96
            300,000
            $15.96
            6.98
            250,000
            $15.96$16.89
            To
            $17.25
            200,962
            $17.09
            7.07
            32,184
            $17.07$17.57
            To
            $23.70
            164,811
            $18.49
            6.95
            85,313
            $17.89$23.91
            To
            $26.76
            197,000
            $25.58
            8.14
            44,813
            $25.63$26.77
            To
            $26.77
            180,000
            $26.77
            8.70
            45,000
            $26.77$30.64
            To
            $30.64
            24,588
            $30.64
            8.89
            524
            $30.64$35.01
            To
            $35.01
            98,851
            $35.01
            9.31
            --
            $--$37.21
            To
            $37.21
            57,914
            $37.21
            9.75
            --
            $--1,542,134
            
            
            712,230




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,
      2007
      is presented below:





(in
                thousands, except per share amounts)
            **Shares**
            **Weighted
                Average Grant-Date Fair Value**Nonvested
                at January 1, 2007
            520
            $24.66Granted
            269
            $35.38Released
            (119)
            $22.40Forfeited
            (50)
            $27.42Nonvested
                at September 30, 2007
            620
            $29.36




As
      of
      September 30, 2007 and December 31, 2006, there was approximately $13.9 million
      and $9.2 million, respectively, of total unrecognized compensation cost related
      to nonvested share-based compensation arrangements granted under the Stock
      Plan;
      that cost is expected to be recognized over a weighted average of 3.0 and 3.3
      years, respectively. The total fair value of shares vested during the three
      and
      nine months ended September 30, 2007 was $0.2 million and $4.3 million,
      respectively. During the three and nine-months ended September 30, 2006 the
      amounts were $0.1 million and $1.4 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.


11
 
 **INVENTIV
        HEALTH, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
        Continued**





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








**Three-Months
                Ended September 30,**
            **Nine-Months
                Ended September 30,****2007**
            **2006**
            **2007**
            **2006****(in
                thousands, except per share data)****Basic
                EPS from Continuing Operations Computation**Income
                from continuing operations
            $14,134
            $10,195
            $31,685
            $40,202Weighted
                average number of common shares outstanding
            32,232
            29,411
            31,331
            28,937Basic
                EPS from continuing operations
            $0.44
            $0.35
            $1.01
            $1.39**Diluted
                EPS from Continuing Operations Computation**Income
                from continuing operations
            $14,134
            $10,195
            $31,685
            $40,202Weighted
                average number of common shares outstanding
            32,232
            29,411
            31,331
            28,937Stock
                options(1)
            465
            837
            596
            916Restricted
                stock awards(2)
            179
            111
            187
            106Total
                diluted common shares outstanding
            32,876
            30,359
            32,114
            29,959Diluted
                EPS from continuing operations
            $0.43
            $0.34
            $0.99
            $1.34




(1) For the
      three-months and nine-months ended September 30, 2007, 180,724 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. Similarly, for the three and nine months ended September 30, 2006,
      456,584 shares and 333,905 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, 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. Similarly,
      for
      the three and nine months ended September 30, 2006, 1,196 shares and 8,057
      shares, respectively, were excluded from the calculation of diluted EPS due
      to
      the fact that the shares are considered anti-dilutive because the number of
      potential buyback shares is greater than the number of weighted shares
      outstanding.




**8.**  **Significant
      Clients:**





During
      the
      nine-months ended September 30, 2007 and 2006 the Company had no clients that
      accounted for more than 10%, individually, of the Company's total revenues
      across our inVentiv Clinical, inVentiv Communications, inVentiv Commercial
      and
      inVentiv Patient Outcomes segments.








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





Goodwill
      consists of the following:





(in
                thousands)
            **January
                1,****2007**
            **Acquisitions**
            **Contingent****Consideration(1)**
            **September
                30,****2007**inVentiv
                Clinical
            $55,742
            $12
            $287
            $56,041inVentiv
                Communications
            112,928
            44,302
            2,543
            159,773inVentiv
                Commercial
            40,366
            4,021
            266
            44,653inVentiv
                Patient Outcomes
            57,791
            16,656
            295
            74,742Total
            $266,827
            $64,991
            $3,391
            $335,209


(1)
            The
                contingent consideration represents adjustments relating to the
                finalization of the earnouts for the twelve months ended December
                31, 2006
                and March 31, 2007. (see Note
                4)


12
 
 **INVENTIV
        HEALTH, INC.**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
        Continued**




Other
      intangible assets consist of the following:





**September
                30, 2007**
            
            **December
                31, 2006**(in
                thousands)
            
            **Accumulated**
            
            
            
            **Accumulated****Gross**
            **Amortization**
            **Net**
            
            **Gross**
            **Amortization**
            **Net**Customer
                relationships
            $110,107
            $(13,239)
            $96,868
            
            $59,987
            $(7,240)
            $52,747Technology
            37,940
            (1,007)
            36,933
            
            2,340
            (119)
            2,221Noncompete
                agreement
            880
            (568)
            312
            
            880
            (372)
            508Tradenames
                subject to amortization
            911
            (180)
            731
            
            911
            (66)
            845Other
            1,235
            (322)
            913
            
            260
            (204)
            56Total
                definite-life intangibles
            151,073
            (15,316)
            135,757
            
            64,378
            (8,001)
            56,377Tradenames
                not subject to amortization(1)
            150,160
            --
            150,160
            
            96,260
            --
            96,260Total
                other intangibles(2)
            $301,233
            $(15,316)
            $285,917
            
            $160,638
            $(8,001)
            $152,637





(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
                $140.6 million increase in total gross other intangibles arise from
                the
                2007 acquisitions.





The
      Company’s acquisitions have resulted in approximately $314.6 million of goodwill
      and the following gross intangible assets:





**Intangible
                asset**
            
            **Amount**
              **(in
                thousands)**
            **Weighted
                average amortization period**Tradename
            
            $151,071
            (1)Customer
                relationships
            
            110,107
            11.8
                yearsTechnology
            
            37,940
            14.5
                yearsNoncompete
                agreement
            
            880
            4.1
                yearsOther
            
            975
            3.5
                yearsTotal
            
            $300,973
            (2)





(1)
            $0.9
                million of the tradenames are definite-life intangibles, which have
                a
                weighted average amortization period of 6 years.


(2)
            Excludes
                $0.3 million of a definite-life intangible asset established prior
                to the
                2004-2007 acquisitions.





Amortization
      expense, based on intangibles subject to amortization held at September 30,
      2007, is expected to be $3.4 million for the remainder of 2007, $13.5 million
      in
      2008, $13.1 million in 2009, $12.7 million in 2010, $12.3 million in 2011,
      $11.9
      million in 2012 and $68.8 million thereafter.





Goodwill
      and other indefinite-life intangibles, such as tradenames, are assessed annually
      for potential impairment on June 30, pursuant to the guidelines of SFAS 142, *Goodwill
      and Other Intangible Assets* .
      The
      Company conducted its assessment and concluded that the foregoing balances
      on
      the Company’s Condensed Consolidated Balance Sheet were not impaired as of June
      30, 2007. The Company continues to maintain this position as of September 30,
      2007, based on various factors, including updated forecasts and the current
      condition of the Company.





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




On
      July
      6, 2007, the Company entered into an Amended and Restated Credit Agreement
      (“the
      Credit Agreement”) with UBS AG, Stamford Branch and others. The Credit Agreement
      provides for a secured term loan of $330 million which was made available to
      inVentiv in a single drawing, up to $20 million in additional term loans
      ("delayed draw term loans") that may be advanced no later than January 6, 2008,
      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.






13
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




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






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






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




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




The
        Company
        has the intent and ability to choose the three-month LIBOR base rate for
        the
        duration of the term of the Credit Agreement. The three-month LIBOR base
        rate as
        of September 30, 2007 and December 31, 2006 was 5.23% and 5.36%, respectively.
        As disclosed in Note 12, the Company has two derivative financial instruments,
        totaling $330 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 $4.6 million and $2.7 million and are included in Deposits
      and OtherAssets on the balance sheet as of September 30, 2007 and
      December 31, 2006, respectively.





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





**11.**  **Capital
      Lease Obligations:**





During
      2000, the Company entered into a master lease agreement to provide a fleet
      of
      automobiles for sales representatives of its inVentiv Commercial Services
      operating segment. 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 $14.2 million (including rebates of $3.7 million) and
      $12.6 million (including rebates of $0.3 million) during the nine-months ended
      September 30, 2007 and 2006, respectively. The Company also incurred net
      disposals of $4.6 million and $6.7 million during the nine-months ended
      September 30, 2007 and 2006, respectively.





**12.**  **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.
        The
        Company records the fair market value of its derivatives as other assets
        and other liabilities within its consolidated balance sheet. Derivatives
        that are not part of hedge relationships are recorded at fair market value
        on the Company's Consolidated Balance Sheet with the offsetting
        adjustment to interest expense on its 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 its consolidated income statement.
  The
        Company enters into interest rate swaps to manage interest rate risk associated
        with debt.
 
 Effective
        October 2005, the Company entered into an amortizing three-year interest
        rate
        swap arrangement with a notional amount of $175 million to fix the interest
        rate
        on the six-year $175 million loan arrangement entered into to facilitate
        the
        acquisition of inVentiv Communications, Inc. The Company entered into this
        interest rate swap agreement to modify the interest rate characteristics
        of its
        outstanding long-term debt. At inception, and at least quarterly thereafter,
        the
        Company assesses whether derivatives used to hedge transactions are highly
        effective in offsetting changes in the interest cash flows of the hedged
        item.
        To the extent the derivatives instruments are highly effective hedges, the
        change in fair value of the effective portion is recorded as a component
        of
        other comprehensive income (loss). To the extent there is any hedge
        ineffectiveness, changes in fair value relating to the ineffective portion
        are
        immediately recognized in earnings (interest expense).
 
 From
        October 2005 to July 2006, the Company did not designate its original swap
        arrangement for hedge accounting and recorded an approximate $2.9 million
        reduction to interest expense relating to the mark-to-market adjustment,
        and a
        corresponding derivative asset for approximately $2.9 million, which was
        recorded in Deposits and Other Assets on the Condensed Consolidated Balance
        Sheet. The fair values of the interest rate swaps were obtained from dealer
        quotes. The fair value of the swaps represent the estimated amount the Company
        would receive or pay to terminate the agreement taking into consideration
        the
        difference between the contract rate of interest and rates currently quoted
        for
        agreements of similar terms and maturities.
 
 On
        July
        17, 2006, the Company formally designated the interest rate swap as a cash
        flow
        hedge pursuant to SFAS No. 133, *Accounting
        for Derivative Instruments and Hedging Activities* .
        The
        Company employed the dollar offset method to assess effectiveness by performing
        a shock test and utilized the hypothetical derivative method under DIG Issue
        G7
        to measure ineffectiveness. The hypothetical derivative contains the same
        terms
        and conditions as the debt agreement with an inception date of July 17, 2006.
        The hypothetical swap had a fair value of zero on the date of designation
        and
        the hedging swap had a fair value of $2.9 million on the date of designation.
        As
        the swap fair value will decline to zero at maturity, the $2.9 million of
        fair
        value will be recognized in earnings over the remaining life of the swap
        as part
        of the ineffectiveness calculation. During the nine-months ended September
        30,
        2007, the fair market value of the original derivative asset decreased by
        $1.3
        million to a derivative liability of approximately $0.1 million. Approximately
        $0.9 million was recorded as interest expense, attributable to the financing
        component embedded within the interest rate swap, while the remaining $0.4
        million ($0.2 million, net of taxes) was recorded as a decrease to Other
        Comprehensive Income.
 
 On
        September 6, 2007, the Company entered into a new amortizing five-year interest
        rate swap arrangement with a notional amount of $165 million at hedge inception,
        with an accretive notional amount increase to $325 million effective December
        31, 2008 to hedge the total outstanding debt notional when the Company’s
        original 2005 three-year interest rate swap arrangement described above expires.
        At hedge inception, the Company employed the dollar offset method by performing
        a shock test to assess effectiveness and utilized the hypothetical derivative
        method under DIG Issue G7 to measure ineffectiveness. The hypothetical
        derivative contains the same terms and conditions as the original derivative.
        As
        a result of the hypothetical derivative method, there was no ineffectiveness
        for
        the period ended September 30, 2007, and as a result, $1.4 million ($0.8
        million, net of taxes) was recorded as a decrease to Other Comprehensive
        Income
        and an increase to the swap liability, recorded as Other non-current liabilities
        in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2007.


**13.**  **Commitments
      and Contingencies:**





The
      Company is subject to lawsuits, investigations and claims arising out of the
      conduct of its business, including those related to commercial transactions,
      contracts, government regulation and employment matters. Certain claims, suits
      and complaints have been filed or are pending against the Company. Certain
      such
      claims that are pending against Adheris are described in Part I, Item 3 of
      the
      Company's Annual Report on Form 10-K for the fiscal year ended December 31,
      2006. With the exception of the claims described therein, all pending matters
      are of a kind routinely experienced in our business and are consistent with
      our
      historical experience. In the opinion of management, taking into account the
      advice of legal counsel, no matters outstanding as of September 30, 2007 are
      likely to have a material adverse effect on inVentiv.





15
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




Pursuant
      to the acquisition of inVentiv Communications, Inc., the Company assumed a
      $7.5
      million existing incentive plan liability (out of a potential $15.0 million
      liability) on inVentiv Communications, Inc.’s balance sheet relating to certain
      performance thresholds of the segment over a three-year period from 2005 through
      2007. The first $5.0 million of this obligation is to be paid by or for the
      account of the former shareholders of inVentiv Communications, Inc.; as such,
      this amount was recorded as a receivable from the former
      shareholders **.** The
      Company has monitored these performance thresholds on a quarterly basis. At
      December 31, 2006, as a result of new business and the strengthened outlook
      for
      inVentiv Communications, Inc.’s business during 2007, management felt it was
      appropriate to record an additional $3.5 million (of which $1.2 million was
      recorded in cost of services and $2.3 million was recorded in SG&A) of the
      potential $15 million liability since the likelihood of achieving the next
      threshold is probable and the amount is estimable, pursuant to SFAS No. 5,
      Accounting for Contingencies. The Company will continue to monitor these
      performance thresholds, which may result in up to an additional $3.7 million
      of
      expenses, but currently the Company does not believe that it is probable that
      the final threshold will be met.





**14.**  **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 $6.5
      million and $4.2 million were included in other non-current liabilities in
      the
      Company’s Condensed Consolidated Balance Sheets as of September 30, 2007 and
      December 31, 2006. 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, 2007 and December
      31, 2006 was approximately $5.5 million and $2.9 million, respectively, and
      is
      currently classified in Deposits and Other Assets on the Company’s Condensed
      Consolidated Balance Sheets. In addition, approximately $0.8 million and $1.1
      million as of September 30, 2007 and December 31, 2006, respectively, were
      invested in mutual funds and classified in Prepaid expenses and other current
      assets on our Condensed Consolidated Balance Sheets.





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





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 effective tax rate for the nine-month period ended September 30, 2006 was
      23.9%, which included approximately $9.1 million tax benefit relating to net
      operating losses of a previously divested unit. 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.





As
      of
      September 30, 2007 the income tax receivable of $2.0 million resulted primarily
      from timing differences in payments and stock compensation deductions. The
      deferred tax liabilities increased $9.7 million during the nine-months ended
      September 30, 2007 primarily from the acquisition of Chamberlain, CCA and AWAC.
      During the nine-months ended September 30, 2007, the Company recorded $6.2
      million of additional tax reserves, interest and penalties related to
      pre-acquisition tax exposures in addition to offsetting assets supported by
      tax
      indemnity agreements.





The
      Company adopted the provisions of FASB Interpretation No. 48, Accounting for
      Uncertainty in Income Taxes (FIN 48), on January 1, 2007. The adoption of FIN
      48
      did not have a material impact on the Company’s consolidated balance sheet,
      results of operations or cash flows. The amount of unrecognized tax benefit
      was
      $2.5 million as of January 1, 2007 and $2.0 million as of September 30, 2007.
      Included in this balance were positions that, if recognized, would affect the
      effective tax rate by $1.6 million as of January 1, 2007 and $1.2 million as
      of
      September 30, 2007.





16
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




The
      Company recognizes potential interest and penalties related to unrecognized
      tax
      benefits in income tax expense. The total amount of accrued interest and
      penalties recorded as of January 1, 2007 was $1.2 million. As of September
      30,
      2007, there was no net change in the potential interest and penalties associated
      with uncertain tax positions. No net change resulted as $0.3 million of
      additional interest and penalties was offset by $0.3 million interest and
      penalties settled.





The
      Company or one of its subsidiaries files income tax returns in the U.S. federal
      jurisdiction, and various states and foreign jurisdictions. The Company is
      no
      longer subject to U.S. federal income tax examinations for years before 2004
      and
      generally, is no longer subject to state and local income tax examinations
      by
      tax authorities for years before 2003.





Management
      has concluded that it is reasonably possible that the unrecognized tax benefits
      will decrease by approximately $1.2 million within the next 12 months. The
      decrease is primarily related to additional federal and state taxes that may
      be
      settled or have expiring statutes of limitations.





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




The
      following table describes the 2007 activity in the Company’s Stockholders’
Equity accounts for the nine-months ended September 30, 2007:




**Common
                Stock**
            **Additional
                Paid-In**
              **Capital**
            **Accumulated
                earnings**
            **Comprehensive**
              **Income**
            **Accumulated
                Other Comprehensive (Losses) (1)**
            **Total**Balance
                at December 31, 2006
            $30
            $284,331
            $74,327
            
            ($226)
            $358,462Net
                income
            
            
            31,951
            $31,951
            
            31,951Net
                change in effective portion of
              derivative,
                net of taxes
            
            
            
            (1,088)
            (1,088)
            (1,088)Foreign
                currency translation
              Adjustment
            
            
            
            525
            525
            525$31,388Restricted
                stock expense
            
            3,896
            
            
            
            3,896Withholding
                shares for taxes
            
            (731)
            
            
            
            (731)Tax
                benefit from exercise of
              employee
                stock options and vesting
              of
                restricted stock
            
            7,877
            
            
            
            7,877Stock
                issued for consultant compensation
            
            735
            
            
            
            735Proceeds
                from exercise of stock
              Options
            1
            6,558
            
            
            
            6,559Stock
                option expense
            
            3,911
            
            
            
            3,911Issuance
                of shares in connection with
              Acquisitions
            1
            53,172
            
            
            
            53,173Balance
                at September 30, 2007
            $32
            $359,749
            $106,278
            
            $(789)
            $465,270





(1)
      As of
      September 30, 2007 Accumulated Other Comprehensive Income consists of $1.0
      million of currency translation fluctuations in our 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 as well as approximately
      ($1.8 million, net of taxes) that relates to the effective portion of the
      Company’s derivative instruments, as described in Note 12.





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





For
      the
      nine months ended September 30, 2007 and 2006, earnings from discontinued
      operations, net of taxes, were approximately $0.3 million and $1.3 million,
      respectively. The gains on disposals of discontinued operations consisted of
      contingency payments due from the Company’s previously-divested Germany-based
      unit.








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





inVentiv
      Communications’ leases its current headquarters facility in Westerville, Ohio
      from Lexington MLP Westerville L.P. Prior to May 15, 2007, this facility was
      partially owned by R. Blane Walter, the Company’s President (who is also a
      member of the Board of Directors), his brothers and other current employees
      of
      inVentiv Communications. The term of the lease is fifteen years, and expires
      on
      September 30, 2015.





17
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




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





The
      Company
      currently manages four operating segments: inVentiv Clinical, inVentiv
      Communications, inVentiv Commercial and inVentiv Patient Outcomes, and its
      non-operating reportable segment, “Other”, which is based on the way management
      makes operating decisions and assesses performance. As mentioned in Note 2,
      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, 2007:


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





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





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





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





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





The
      following segment information has been prepared as if our Patient Outcomes
      segment and the segment realignment described above had been in effect from
      January 1, 2006:





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





**inVentiv**
              **Clinical**
            **inVentiv
                Communications**
            **inVentiv
                Commercial**
            **inVentiv
                Patient Outcomes**
            **Other**
            **Total**Revenues
            $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








18
 **INVENTIV
            HEALTH, INC.**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
            Continued**




Three-months
      ended September 30, 2006 (in thousands):





**InVentiv**
              **Clinical**
            **inVentiv
                Communications**
            **inVentiv
                Commercial**
            **inVentiv
                Patient Outcomes**
            **Other**
            **Total**Revenues
            $40,079
            $53,903
            $89,551
            $16,202
            $--
            $199,735Less:
                Intersegment revenues
            (122)
            (372)
            (1,461)
            --
            --
            (1,955)Reported
                Revenues
            $39,957
            $53,531
            $88,090
            $16,202
            $--
            $197,780Depreciation
                and amortization
            415
            1,014
            3,176
            551
            22
            5,178Interest
                expense
            --
            52
            421
            --
            3,381
            3,854Interest
                income
            24
            162
            10
            41
            446
            683Segment
                income (loss) (1)
            $3,865
            $8,841
            $9,490
            $1,562
            $(6,441)
            $17,317








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





**InVentiv**
              **Clinical**
            **inVentiv
                Communications**
            **inVentiv
                Commercial**
            **inVentiv
                Patient Outcomes**
            **Other**
            **Total**Revenues
            $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








Nine-months
      ended September 30, 2006 (in thousands):





**inVentiv**
              **Clinical**
            **inVentiv
                Communications**
            **inVentiv
                Commercial**
            **inVentiv
                Patient Outcomes**
            **Other**
            **Total**Revenues
            $111,089
            $150,872
            $254,781
            $42,239
            $--
            $558,981Less:
                Intersegment revenues
            (278)
            (861)
            (3,406)
            --
            --
            (4,545)Reported
                Revenues
            $110,811
            $150,011
            $251,375
            $42,239
            $--
            $554,436Depreciation
                and amortization
            1,144
            2,801
            10,051
            1,312
            64
            15,372Interest
                expense
            --
            67
            1,235
            4
            6,446
            7,752Interest
                income
            47
            358
            19
            118
            1,238
            1,780Segment
                income (loss) (1)
            $8,789
            $22,924
            $31,708
            $4,125
            $(13,967)
            $53,579








(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,**
              **2007**
            **December
                31, 2006**Total
                Assets:inVentiv
                Clinical
            
            $
            126,315
            $
            $105,253inVentiv
                Communications
            
            
            477,215
            
            324,399inVentiv
                Commercial
            
            
            187,216
            
            172,260inVentiv
                Patient Outcomes
            
            
            184,076
            
            105,175Other
            
            
            54,412
            
            63,967Total
                assets
            
            $
            1,029,234
            $
            771,054







19


**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, 2006.





*Overview*





inVentiv
      Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”) is a
      leading provider of value-added services to the pharmaceutical, life sciences
      and healthcare industries. We support a broad range of clinical development,
      communications and commercialization activities that are critical to its
      customers' ability to complete the development of new drug products and medical
      devices and successfully commercialize them. In addition, we provide medical
      cost containment services to payors in our patient outcomes business. Our goal
      is to assist 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 275 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 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. We have
      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, we provide a variety of services
      that enhance savings and improve patient outcomes including opportunities to
      address billing errors, additional discounts and treatment protocols for
      patients.





*Business
      Segments*





We
      currently serve our clients primarily through four business segments, which
      correspond to our reporting segments for 2007:





·
            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. This segment includes
                the Smith Hanley group of companies (which includes Smith Hanley
                Associates, Smith Hanley Consulting Group and MedFocus), HHI Clinical
                & Statistical Research Services (“HHI”), and Synergos, LLP
                ("Synergos").





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





·
            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
                includesinVentiv
                Strategy & Analytics and inVentiv Selling Solutions.





·
            inVentiv
                Patient Outcomes,which provides services related to patient adherence, patient assistance
                and reimbursement, clinical educator teams and medical cost containment
                and disease management. This segment includesInnovative
                Health Strategies, Inc., iProcert, LLC and the related AWAC.MD business
                (collectively "AWAC"), Adheris, Inc. (“Adheris”), The Franklin Group
                (“Franklin”) and The Therapeutics Institute (“TTI”).





Our
      services are designed to develop, execute and monitor strategic and tactical
      sales and marketing plans and programs for the promotion of pharmaceutical,
      biotechnology and other life sciences products.





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





20


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 revenue growth reflects our strong track record in winning
      new business, which in turn is enhanced by our pursuit of cross-servicing
      opportunities within and across our business segments. Furthermore, although
      our
      revenues are generally received under contracts with limited terms and that
      can
      be terminated at the client’s option on short notice, we have been successful
      historically in obtaining increasing amounts of repeat business from our clients
      and in expanding the scope of the services we provide to them and thereby
      sustaining multi-year relationships with many of our clients.





We
      seek
      out acquisitions in order to fill strategic gaps, selectively strengthen
      existing franchises, further strengthen and broaden our clinical,
      communications, commercial and/or patient outcomes capabilities, add
      complementary client relationships and bring on board additional management
      talent. We believe that our track record in identifying, negotiating, closing
      and integrating strategic, accretive acquisitions has been successful to-date.
      While the performance of all of our business units has been strong over the
      past
      several years, our acquired business operations have contributed to an even
      greater degree to our revenue growth and profitability.







*Acquisitions
      and Divestitures*





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





**Acquisition**
            **Type
                of Business**
            **Segment
                (“inVentiv”)**
            **Headquarters
                Location**
            **Month
                Acquired**Chandler
                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





21


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





**International
      Operations**





CCA,
      acquired in July 2007, includes operations in the United Kingdom and France.
      As
      part of the acquisition of inVentiv Communications, Inc. in October 2005, we
      added that company's U.K.-based operations. These operations, based in London
      and Paris, 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.




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








*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, 2006. 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,
      2006.














22


**Three-Months
      Ended September 30, 2007 Compared to Three-Months Ended September 30,
      2006**





**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,****2007**
            **2006**Revenues:
            
            Percentage(1)
            
            Percentage(1)inVentiv
                Clinical
            $50,655
            19.9%
            $39,957
            20.2%inVentiv
                Communications
            73,770
            28.9%
            53,531
            27.1%inVentiv Commercial
            104,410
            41.0%
            88,090
            44.5%inVentiv
                Patient Outcomes
            26,078
            10.2%
            16,202
            8.2%Total
                revenues
            254,913
            100.0%
            197,780
            100.0%Cost
                of services(1)
                (2):inVentiv
                Clinical
            33,725
            66.6%
            26,208
            65.6%inVentiv
                Communications
            42,577
            57.7%
            32,950
            61.6%inVentiv Commercial
            82,622
            79.1%
            71,054
            80.7%inVentiv
                Patient Outcomes
            15,628
            59.9%
            11,196
            69.1%Total
                cost of services
            174,552
            68.5%
            141,408
            71.5%Selling,
                general and administrative expenses
            51,515
            20.2%
            35,884
            18.1%Total
                operating income
            28,846
            11.3%
            20,488
            10.4%Interest
                expense
            (6,574)
            (2.6)%
            (3,854)
            (1.9)%Interest
                income
            727
            0.3%
            683
            0.3%Income
                from continuing operations before income tax provision,minority
                interest in income of subsidiary and income from equityinvestments
            22,999
            9.0%
            17,317
            8.8%Income
                tax provision
            (8,711)
            (3.4)%
            (7,169)
            (3.6)%Income
                from continuing operations before minority interest inincome
                of subsidiary and income from equity investments
            14,288
            5.6%
            10,148
            5.2%Minority
                interest in income of subsidiary
            (246)
            (0.1%)
            (230)
            (0.1)%Income
                from equity investments
            92
            --
            277
            0.1%Income
                from continuing operations
            14,134
            5.5%
            10,195
            5.2%Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            90
            0.1%
            49
            --Income
                from discontinued operations
            90
            0.1%
            49
            --Net
                income
            $14,224
            5.6%
            $10,244
            5.2%Earnings
                per share:Continuing
                operations:Basic
            $0.44
            
            $0.35Diluted
            $0.43
            
            $0.34Discontinued
                operations:Basic
            $0.00
            
            $0.00Diluted
            $0.00
            
            $0.00Net
                earnings:Basic
            $0.44
            
            $0.35Diluted
            $0.43
            
            $0.34


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


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


23





***Revenues*** :
      Revenues increased by approximately $57 million, or 29%, to $255 million during
      the third quarter of 2007, from $198 million during the third quarter of 2006.
      Net revenues increased by approximately $49 million, or 30%, to $213 million
      during the third quarter of 2007, from $164 million in the third quarter of
      2006.




inVentiv
      Clinical’s revenues were $51 million during the third quarter of 2007, an
      increase of $11 million compared to $40 million during the third quarter of
      2006. inVentiv Clinical revenues accounted for 20% of total inVentiv revenues
      during the third quarter of 2007. Revenues in inVentiv Clinical were higher
      in
      2007 predominantly due to increased placement of temporary personnel and
      increased traction in functional outsourcing.




inVentiv
      Communications’ revenues were $74 million during the third quarter of 2007, an
      increase of $20 million or 37% from the third quarter of 2006. inVentiv
      Communications’ revenues accounted for 29% of total inVentiv revenues during the
      third quarter of 2007. The majority of this increase is due to the incremental
      revenue relating to the acquisitions of Ignite, Chamberlain, Addison Whitney
      and
      CCA in 2007.




inVentiv
      Commercial’s revenues were $104 million during the third quarter of 2007, an
      increase of $16 million, or 18% from the third quarter of 2006. inVentiv
      Commercial revenues accounted for 41% of total inVentiv revenues for the third
      quarter of 2007. The third quarter of 2007 benefited from several new wins,
      expansions and incentive fees from certain sales contracts. We continue to
      benefit from the industry trend towards cost efficient solutions, and are
      positioned as a market leader in flexible sales force solutions. In October
      2007, we announced the wind-down of a sales team during the fourth quarter
      of
      2007, which is typical from time to time in the industry; however, we are
      continuing to provide services to this client in other areas. In addition,
      we
      are actively discussing sales force opportunities with several other clients,
      building on our strong track record in successfully redeploying sales teams.





inVentiv
      Patient Outcomes’ revenues were $26 million during the third quarter of 2007, up
      $10 million from the third quarter of 2006. Growth in the segment was both
      organic as well as from the addition of AWAC. The inVentiv Patient Outcomes
      segment, which was formed in August 2007, more closely links our various
      patient-oriented business units, including Adheris, which was formerly reported
      in the Communications’ segment, Franklin’s patient assistance and reimbursement
      offerings, which was formerly reported in the Commercial segment, and The
      Therapeutics Institute’s clinical education services which was formerly reported
      in the Commercial segment, as well as AWAC, which the Company acquired in July
      2007.







***Cost
      of Services*** :
      Cost of
      services increased by approximately $34 million or 24%, to $175 million during
      the third quarter of 2007 from $141 million in the third quarter of 2006. Cost
      of services as a percentage of revenues was 69% and 72% during the third quarter
      of 2007 and 2006, respectively.





inVentiv
      Clinical’s cost of services increased by approximately $8 million, or 31%, to
      $34 million during the third quarter of 2007 from $26 million during the third
      quarter of 2006. Cost of services as a percentage of revenues was 67% and 66%
      during the third quarter of 2007 and 2006, respectively.





inVentiv
      Communications’ cost of services increased by 30% to $43 million during the
      third quarter of 2007 when compared to the third quarter of 2006. Most of this
      variance is due to new acquisitions as described above in *Revenues* .
      Cost of
      services as a percentage of the segment’s revenues decreased from 62% during the
      third quarter of 2006 to 58% during the third quarter of 2007, mainly due to
      the
      acquisition of higher gross margin businesses in 2007.





Cost
      of
      services at inVentiv Commercial increased by approximately $12 million, or
      17%,
      to $83 million in the third quarter of 2007, mainly due to the increase in
      revenues. Cost of services was 79% and 81% of inVentiv Commercial’s revenues
      during the third quarter of 2007 and 2006, respectively.





inVentiv
      Patient Outcomes cost of services increased by approximately $5 million, or
      45%,
      to $16 million in the third quarter of 2007 from $11 million during the third
      quarter of 2006, mainly due to the acquisition of AWAC, and increased organic
      business at Adheris and Franklin, as mentioned above.





***Selling,
      General and Administrative Expenses (“SG&A”)*** :
      SG&A expenses increased by approximately $16 million, or 44%, to $52 million
      during the third quarter of 2007 from $36 million during the third quarter
      of
      2006, mainly due to increased acquisitions in 2007.




24


SG&A
      expenses at inVentiv Clinical were approximately $12 million during the third
      quarter of 2007, compared to $10 million during the third quarter of 2006 due
      to
      increased selling expense and commissions from additional business and
      additional staffing requirements.




SG&A expenses at inVentiv Communications increased $8 million to $20
      million during the third quarter of 2007. New acquisitions contributed to most
      of this increase.




SG&A
      expenses at inVentiv Commercial increased by approximately $2 million to $9
      million during the third quarter of 2007 from $7 million during the third
      quarter of 2006. SG&A increased due to annual increases in equity and
      non-equity compensation, and SG&A from the new inVentiv Commercial divisions
      acquired during the fourth quarter of 2006 and in 2007.




SG&A
      expenses at inVentiv Patient Outcomes increased by $3 million to $6 million
      during the third quarter of 2007, mainly due to the acquisition of AWAC.




Other
      SG&A was approximately $4 million for the third quarter of 2007, an increase
      of approximately 14% from the third quarter of 2006. The increase was mainly
      related to additional, ongoing audit fees arising as a result of new
      acquisitions. In addition, there were annual increases in equity and non-equity
      compensation expense from the previous year.




***Interest
      Expense:*** Interest
      expense increased by approximately $3 million, or 75%, from the third quarter
      of
      2006 to the third quarter of 2007, mainly due to higher interest on the
      additional $166 million borrowed in the new Credit Agreement entered into in
      July 2007, as more fully explained in *Liquidity
      and Capital Resources* .




***Provision
      for Income Taxes*** : The
      effective tax rate for the quarter ended September 30, 2007 was 38.1%, versus
      41.3% during the quarter ended September 30, 2006. The 2007 rate 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 increased by approximately $4 million to $14 million
      during the third quarter of 2007 when compared to the third quarter of 2006.
      Diluted earnings per share increased to $0.43 per share during the third quarter
      of 2007 from $0.34 per share during the third quarter of 2006.  Overall EPS
      and net income increased between quarters because of increased business wins
      and
      new acquisitions.


25


**Nine-Months
      Ended September 30, 2007 Compared to Nine-Months Ended September 30,
      2006**





**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,****2007**
            **2006**Revenues:
            
            Percentage(1)
            
            Percentage(1)inVentiv
                Clinical
            $139,062
            19.6%
            $110,811
            20.0%inVentiv
                Communications
            201,059
            28.3%
            150,011
            27.1%inVentiv Commercial
            300,000
            42.3%
            251,375
            45.3%inVentiv
                Patient Outcomes
            69,182
            9.8%
            42,239
            7.6%Total
                revenues
            709,303
            100.0%
            554,436
            100.0%Cost
                of services(1)(2):inVentiv
                Clinical
            94,301
            67.8%
            74,080
            66.9%inVentiv
                Communications
            125,072
            62.2%
            93,106
            62.1%inVentiv Commercial
            238,609
            79.5%
            197,309
            78.5%inVentiv
                Patient Outcomes
            42,272
            61.1%
            29,581
            70.0%Total
                cost of services
            500,254
            70.5%
            394,076
            71.1%Selling,
                general and administrative expenses
            146,545
            20.7%
            100,809
            18.2%Total
                operating income
            62,504
            8.8%
            59,551
            10.7%Interest
                expense
            (14,020)
            (2.0)%
            (7,752)
            (1.3)%Interest
                income
            2,068
            0.3%
            1,780
            0.3%Income
                from continuing operations before income tax provision,
              minority
                interest in income of subsidiary and income (loss) from equity investments
            50,552
            7.1%
            53,579
            9.7%Income
                tax provision
            (18,569)
            (2.6)%
            (12,605)
            (2.3)%Income
                from continuing operations before minority interest in
              income
                of subsidiary and income (loss) from equity investments
            31,983
            4.5%
            40,974
            7.4%Minority
                interest in subsidiary
            (736)
            (0.1)%
            (905)
            (0.2)%Income
                (loss) from equity investments
            438
            0.1%
            133
            --Income
                from continuing operations
            31,685
            4.5%
            40,202
            7.2%Income
                from discontinued operations:Gains
                on disposals of discontinued operations, net of taxes
            266
            0.0%
            1,268
            0.3%Income
                from discontinued operations
            266
            0.0%
            1,268
            0.3%Net
                income
            $31,951
            4.5%
            $41,470
            7.5%Earnings
                per share:Continuing
                operations:Basic
            $1.01
            
            $1.39Diluted
            $0.99
            
            $1.34Discontinued
                operations:Basic
            $0.01
            
            $0.04Diluted
            $0.00
            
            $0.04Net
                earnings:Basic
            $1.02
            
            $1.43Diluted
            $0.99
            
            $1.38


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


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


26





***Revenues*** :
      Revenues increased by approximately $155 million, or 28%, to $709 million during
      the nine-months ended September 30, 2007, from $554 million during the
      nine-months ended September 30, 2006. Net revenues increased by approximately
      $121 million, or 26%, to $582 million during the nine-months ended September
      30,
      2007, from $461 million during the nine-months ended September 30,
      2006.




inVentiv
      Clinical’s revenues were $139 million during the nine months ended September 30,
      2007, an increase of $28 million compared to $111 million during the nine months
      ended September 30, 2006. Revenues in inVentiv Clinical were higher in 2007
      predominantly due to increased placement of temporary personnel and new business
      wins to provide functional outsourcing services. Also, in April 2006, the
      Company acquired Synergos, which complements the segment by strengthening the
      functional outsourcing service.




inVentiv
      Communications’ revenues were $201 million during the nine months ended
      September 30, 2007, an increase of $51 million or 34% from the nine months
      ended
      September 30, 2006. inVentiv Communications’ revenues accounted for 28% of total
      inVentiv revenues during the nine months ended September 30, 2007. Approximately
      $12 million of this increase relates to recent business wins in various
      advertising and communications’ agencies. The remaining increase is due to
      incremental revenue relating to the timing of 2007 acquisitions of Ignite,
      Chamberlain, Addison Whitney and CCA, and 2006 acquisition of JSAI.




Revenues
      in our inVentiv Commercial segment were $300 million during the nine months
      ended September 30, 2007, an increase of $49 million, or 20%, from the nine
      months ended September 30, 2006. Most of the variance relates to new business
      wins, which more than offset revenues from contracts that wound down in the
      natural course.





inVentiv
      Patient Outcomes’ revenues were $69 million during the third quarter of 2007, up
      $27 million from the nine months ended September 30, 2006. Growth in the segment
      was both organic as well as from the addition of AWAC. The inVentiv Patient
      Outcomes segment, which was formed in August 2007, more closely links our
      various patient-oriented business units, including Adheris, which was formerly
      reported in the Communications’ segment, Franklin’s patient assistance and
      reimbursement offerings, which was formerly reported in the Commercial segment,
      and The Therapeutics Institute’s clinical education services which was formerly
      reported in the Commercial segment, as well as AWAC, which the Company acquired
      in July 2007.





***Cost
      of Services*** :
      Cost of
      services increased by approximately $106 million or 27%, to $500 million for
      the
      nine months ended September 30, 2007 from $394 million in the nine months ended
      September 30, 2006. Cost of services remained fairly constant as a percentage
      of
      revenues at 71% for the nine months ended September 30, 2007 and 2006.





inVentiv
      Clinical’s cost of services increased by approximately $20 million, or 27%, to
      $94 million during the nine months ended September 30, 2007 from $74 million
      during the nine months ended September 30, 2006. Cost of services as a
      percentage of revenues slightly increased from 67% during the nine months ended
      September 30, 2006 to 68% during the same period in 2007 as we made
      infrastructure investments in preparation for a material functional outsourcing
      win with a top 20 pharmaceutical company.





inVentiv
      Communications’ cost of services increased by approximately $32 million, or 34%,
      to $125 million during the nine months ended September 30, 2007 from $93 million
      during the nine months ended September 30, 2006, which is in line with the
      variance in revenues over the same periods. Cost of services as a percentage
      of
      revenues remained fairly constant at 62% during the nine months ended September
      30, 2007 and 2006.





Cost
      of
      services at inVentiv Commercial increased by approximately $42 million, or
      21%,
      to $239 million during the nine months ended September 30, 2007 from $197
      million during the nine months ended September 30, 2006. Cost of services as
      a
      percentage of revenues slightly increased from 79% during the nine months ended
      September 30, 2006 to 80% during the same period in 2007. The increase in the
      cost of sales percentage was driven by the increase in limited scope sales
      force
      services, including the new on-boarding program with a top 20 pharmaceutical
      company.





inVentiv
      Patient Outcomes cost of services increased by approximately $12 million, or
      40%, to $42 million during the nine months ended September 30, 2007 from $30
      million during the nine months ended September 30, 2006, mainly due to the
      acquisition of AWAC and increased organic business at Adheris and Franklin,
      as
      mentioned above.





***SG&A*** :
      SG&A expenses increased by approximately $46 million, or 46%, to $147
      million from $101 million in the nine months ended September 30, 2007 and 2006,
      respectively, mainly due to increased acquisitions in 2006 and 2007.


27




SG&A
      expenses at inVentiv Clinical was approximately $35 million in the nine months
      ended September 30, 2007, compared to $28 million during the same period in
      2006
      due to increased selling expense and commissions from additional business;
      additional staffing requirements; and SG&A expense from Synergos, which was
      acquired on April 1, 2006.




SG&A
      expenses at inVentiv Communications increased $14 million to $48 million during
      the nine months ended September 30, 2007. New acquisitions contributed to the
      majority of this increase.




SG&A
      expenses at inVentiv Commercial increased by approximately $15 million to $36
      million during the nine months ended September 30, 2007 from the nine months
      ended September 30, 2006. The majority of this increase was due to recording
      a
      receivables reserve relating to a client that declared Chapter 11 bankruptcy
      subsequent to the end of the second quarter of 2007. We have never had a
      collections issue as a result of client bankruptcy, with virtually all of our
      clients having excellent payment histories, and we do not believe the
      circumstances giving rise to this receivables reserve are likely to reoccur
      in
      future periods. SG&A also increased due to annual increases in equity and
      non-equity compensation, and SG&A from the new inVentiv Commercial divisions
      acquired during the fourth quarter of 2006.




SG&A
      expenses at inVentiv Patient Outcomes increased by $6 million to $15 million
      during the nine months ended September 30, 2007, mainly due to the acquisitions
      of Adheris and AWAC.




Other SG&A, which encompasses the activities of the corporate management
      group, increased by approximately 36% from the nine months ended September
      30,
      2006 to the same period in 2007. The increase was mainly related to additional,
      ongoing audit fees arising as a result of new acquisitions. In addition, there
      were annual increases in equity and non-equity compensation expense from the
      previous year.




***Interest
      Expense:*** Interest
      expense increased by approximately $6 million, or 75%, from the nine months
      of
      2006 to the nine months of 2007. Approximately $3.0 million of the difference
      was 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* .
      In
      addition, as mentioned in Item 3, *Quantitative
      and Qualitative Disclosures About Market Risk* ,
      the
      Company did not designate its initial hedge for hedge accounting until July
      2006, which resulted in a $2.4 million net reduction to interest expense
      relating to the mark-to-market adjustment during the nine months ended September
      30, 2006 versus $0.9 million of interest expense due to the financing element
      embedded within the interest rate swap during the nine months ended September
      30, 2007.




***Provision
      for Income Taxes*** : 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 effective tax rate for the nine-month period ended September 30, 2006 was
      23.9%, which included approximately $9.1 million tax benefit relating to net
      operating losses of a previously divested unit. 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 decreased by approximately $9 million to $32 million
      during the nine months ended September 30, 2007 when compared to the same period
      in 2006. Diluted earnings per share decreased to $0.99 per share during the
      nine
      months ended September 30, 2007 from $1.38 per share during the nine months
      ended September 30, 2006. Excluding the impact of the increase in the
      uncollectible receivable reserve during the second quarter of 2007 and the
      one-time tax benefits in 2007 and 2006, overall EPS and net income increased
      over the respective periods because of increased wins and new
      acquisitions.




28


**Liquidity
      and Capital Resources**





At
      September 30, 2007, inVentiv had $67 million of unrestricted cash and
      equivalents, a decrease of $13 million from December 31, 2006. For the
      nine-months ended September 30, 2006 compared to September 30, 2007, cash
      provided by operations decreased by $46 million from a source of $61 million
      to
      $15 million. Cash used in investing activities increased from $61 million to
      $193 million for the nine-months ended September 30, 2006 and 2007,
      respectively. Cash provided by financing activities increased from a use of
      $6
      million to a source of $165 million over the same comparative periods.





Cash
      provided by operations was $15 million during the nine-months ended September
      30, 2007, while cash provided by operations was $61 million in the nine-months
      ended September 30, 2006. This decrease was, in large part, due to lower net
      income and the timing of certain client advances and payments in the Commercial
      and Clinical segments.




Cash
      used
      in investing activities was $193 million for the nine-months ended September
      30,
      2007 compared to $61 million used during the same period in 2006. During the
      nine months ended September 30, 2006, the Company paid approximately $50 million
      of cash, net of cash acquired, for the acquisitions of Adheris, Synergos and
      JSAI and approximately $8 million of cash relating to earnout contingency
      payments from previous acquisitions. During the nine months ended September
      30,
      2007, approximately $165 million of cash related to the acquisitions of Ignite,
      Chamberlain, Addison Whitney, Strategyx, AWAC and CCA while approximately $23
      million of cash related to earnout contingency payments from previous
      acquisitions.





Cash
      provided by financing
      activities was $165 million for the nine-months ended September 30, 2007,
      compared to $6 million used in financing activities for the nine-months ended
      September 30, 2006. As discussed below, we amended and restated our existing
      credit agreement by approximately $166 million and incurred approximately $2
      million in fees, to help finance the AWAC and CCA acquisitions.





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




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




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




·
            enter
                into a new $166 million loan to help 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 includes up to $20 million in additional term loans
        (“delayed draw term loans”) that may be advanced no later than January 6, 2008,
        a $50 million revolving credit facility, of which $10 million is available
        for
        the issuance of letters of credit, and a swingline facility.  The term loan
        will mature on the seventh anniversary of the Amended and Restated Credit
        Agreement, with scheduled amortization of 1% per year during years one through
        six and 94% during year seven. The delayed draw term loans will mature on
        the
        seventh anniversary of the Amended and Restated 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 Amended and Restated Credit Agreement.


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




·
            Interest
                on the loans accrue, at our election, at either (1) the Alternate
                Base
                Rate (which is the greater of UBS’s prime rate and federal funds effective
                rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest
                periods
                determined at our option of 1, 2, 3 or 6 months (or, if the affected
                lenders agree, 9 months), in each case plus a spread based on the
                type of
                loan and method of interest rate determination elected.






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




29


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 II, Item 5 below, effective September 6, 2007, we entered
      into
      a five-year swap arrangement for $165 million to hedge against the additional
      credit exposure under the Amended and Restated Credit Agreement.





As
      of
      September 30, 2007, we complied with the requirements, including all covenants,
      of the credit facility. 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 2004, 2005, 2006
      and
      2007 acquisitions include earn-out
      provisions pursuant to which the sellers will become entitled to additional
      consideration, which may be material, if the acquired businesses achieve
      specified performance measurements. See Note 4 to our condensed consolidated
      financial statements included in Part I, Item 1 of this Form 10-Q.








30





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





**Long-Term
      Debt Exposure**





At
      September 30, 2007, the Company had $329.2 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, 2007, a hypothetical increase or
      decrease of 10% in the variable interest rate would have an immaterial effect
      on
      interest expense due to the fixed rate associated with our derivative financial
      instruments.





**Derivative
      Financial Instrument**


SFAS
        No. 133 “Accounting for Derivative Instruments and Hedging Activities”
(“SFAS 133”), as amended, establishes accounting and reporting standards for
        derivative instruments, including certain derivative instruments embedded
        in
        other contracts, and for hedging activities. It requires the recording of
        all
        derivatives as either assets or liabilities on the balance sheet measured
        at
        estimated fair value and the recognition of the unrealized gains and losses.
        We
        record the fair market value of our derivatives as other assets and other
        liabilities within our consolidated balance sheet. Derivatives that are not
        part
        of hedge relationships are recorded at fair market value on our Consolidated
        Balance Sheet with the offsetting adjustment to interest expense on our
        Consolidated Income Statement. For hedge relationships designated as cash
        flow
        hedges under SFAS 133, changes in fair value of the effective portion of
        a
        designated cash flow hedge are recorded to other comprehensive income or
        loss;
        the ineffective portion is recorded to interest expense in our consolidated
        income statement.
  We
        enter into interest rate swaps to
        manage interest rate risk associated with debt.
 
 Effective
        October 2005, the Company entered into an amortizing three-year interest
        rate
        swap arrangement with a notional amount of $175 million to fix the interest
        rate
        on the six-year $175 million loan arrangement entered into to facilitate
        the
        acquisition of inVentiv Communications, Inc. The Company entered into this
        interest rate swap agreement to modify the interest rate characteristics
        of its
        outstanding long-term debt. At inception, and at least quarterly thereafter,
        the
        Company assesses whether derivatives used to hedge transactions are highly
        effective in offsetting changes in the interest cash flows of the hedged
        item.
        To the extent the derivatives instruments are highly effective hedges, the
        change in fair value of the effective portion is recorded as a component
        of
        other comprehensive income (loss). To the extent there is any hedge
        ineffectiveness, changes in fair value relating to the ineffective portion
        are
        immediately recognized in earnings (interest expense).
 
 From
        October 2005 to July 2006, the Company did not designate its original swap
        arrangement for hedge accounting and recorded an approximate $2.9 million
        reduction to interest expense relating to the mark-to-market adjustment,
        and a
        corresponding derivative asset for approximately $2.9 million, which was
        recorded in Deposits and Other Assets on the Condensed Consolidated Balance
        Sheet. The fair values of the interest rate swaps were obtained from dealer
        quotes. The fair value of the swaps represent the estimated amount the Company
        would receive or pay to terminate the agreement taking into consideration
        the
        difference between the contract rate of interest and rates currently quoted
        for
        agreements of similar terms and maturities.
 
 On
        July
        17, 2006, the Company formally designated the interest rate swap as a cash
        flow
        hedge pursuant to SFAS No. 133, *Accounting
        for Derivative Instruments and Hedging Activities* .
        The
        Company employed the dollar offset method to assess effectiveness by performing
        a shock test and utilized the hypothetical derivative method under DIG Issue
        G7
        to measure ineffectiveness. The hypothetical derivative contains the same
        terms
        and conditions as the debt agreement with an inception date of July 17, 2006.
        The hypothetical swap had a fair value of zero on the date of designation
        and
        the hedging swap had a fair value of $2.9 million on the date of designation.
        As
        the swap fair value will decline to zero at maturity, the $2.9 million of
        fair
        value will be recognized in earnings over the remaining life of the swap
        as part
        of the ineffectiveness calculation. During the nine-months ended September
        30,
        2007, the fair market value of the original derivative asset decreased by
        $1.3
        million to a derivative liability of approximately $0.1 million. Approximately
        $0.9 million was recorded as interest expense, attributable to the financing
        component embedded within the interest rate swap, while the remaining $0.4
        million ($0.2 million, net of taxes) was recorded as a decrease to Other
        Comprehensive Income.
 
 On
        September 6, 2007, the Company entered into a new amortizing five-year interest
        rate swap arrangement with a notional amount of $165 million at hedge inception,
        with an accretive notional amount increase to $325 million effective December
        31, 2008 to hedge the total outstanding debt notional when the Company’s
        original 2005 three-year interest rate swap arrangement described above expires.
        At hedge inception, the Company employed the dollar offset method by performing
        a shock test to assess effectiveness and utilized the hypothetical derivative
        method under DIG Issue G7 to measure ineffectiveness. The hypothetical
        derivative contains the same terms and conditions as the original derivative.
        As
        a result of the hypothetical derivative method, there was no ineffectiveness
        for
        the period ended September 30, 2007, and as a result, $1.4 million ($0.8
        million, net of taxes) was recorded as a decrease to Other Comprehensive
        Income
        and an increase to the swap liability, recorded as Other non-current liabilities
        in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2007.





**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, 2007, the accumulated other comprehensive earnings
      related to foreign currency translations was approximately $1.0 million. Foreign
      currency transaction gains and (losses) are included in the results of
      operations and are not material.





31


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




Based
      on
      their evaluation as of September 30, 2007, 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,
      2007 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, 2007 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*** ****





We
      are
      subject to lawsuits, investigations and claims arising out of the conduct of
      our
      business, including those related to commercial transactions, contracts,
      government regulation and employment matters. Certain claims, suits and
      complaints have been filed or are pending against us. Certain such claims that
      are pending against Adheris are described in Part I, Item 3 of our Annual Report
      on Form 10-K for the fiscal year ended December 31, 2006. With the exception
      of
      the claims described therein, all pending matters are of a kind routinely
      experienced in our business and are consistent with our historical
      experience.





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





Except
      as
      described in Item 1A of our Quarterly Report on Form 10-Q for the three-months
      ended June 30, 2007, 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,
      2006.




**ITEM 5.*****Other
      Information***





We
      entered into an interest rate swap transaction on September 6, 2007 with Bank
      of
      America, N.A. (the “Counterparty”).  We entered into this interest
      rate swap transaction to mitigate our floating rate interest risk on debt that
      is outstanding under our amended and restated credit facility.  The
      interest rate swap matures in September 2012.  We are required to make
      certain quarterly fixed rate payments to the Counterparty calculated on a
      notional amount of $165 million (increasing to $325 million effective December
      31, 2008 when our existing three-year interest rate swap arrangement expires)
      while the Counterparty is obligated to make certain quarterly floating rate
      payments to us referencing the same notional amount.  The interest
      rate swap transaction effectively fixes the annual interest rate payable on
      $165
      million ($325 million effective December 31, 2008) of our debt which may exist
      to 4.90% under the amended and restated credit
      facility.  Notwithstanding the terms of the interest rate swap
      transaction, we are ultimately obligated for all amounts due and payable under
      the amended and restated credit facility.







32





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





10.23
                *
            
            Purchase
                Agreement dated as of July 6, 2007 by and among Chandler Chicco
                Agency,
                LLC, BioSector 2 LLC, Chandler Chicco Agency SARL and BioSector 2,
                Limited
                (collectively, the “Companies”),the
                members of the Companies listed on Schedule I thereto,
                the Registrantand
                ChandlerChicco LLC10.24
                *
            
            Purchase
                Agreement dated as of July 6, 2007 by and among,Innovative Health Strategies, Inc. (f/k/a IHS of SC, Inc.)("IHS"),
                AWAC.MD, Inc ("AWAC"),
                iProcert, LLC ("iProcert",
                and together with IHS and AWAC, the "Companies"),the
                shareholders and members of the Companies listed on Schedule I
                thereto,the
                Registrant and AWAC LLC31.1
            
            Certification
                by the Chief Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200231.2
            
            Certification
                by the Chief Financial Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1
            
            Chief
                Executive Officer’s Certification of Financial Statements Pursuant to 18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 200232.2
            
            Chief
                Financial Officer’s Certification of Financial Statements Pursuant to 18
                U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




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





33





**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
              9, 2007
            By:
            /s/ David
              S.
              BassinDavid
                S. BassinChief
                Financial Officer and Secretary
              (Principal
                  financial officer and principal accounting
                  officer)





34