**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, 2006
 
 or
 
 **[_]
        Transition Report Pursuant to Section 13 or 15(d) of the
        Securities**
 Exchange
        Act of 1934
 
 For
        the
        Transition Period From ___________ to ___________
 
 Commission
        file number 0-30318
 
 **INVENTIV
        HEALTH, INC.**
 (Exact
        name of registrant as specified in its charter)
 
 Delaware                                                          
52-2181734
 (State or other
        jurisdiction                                        
(IRS Employer
 of
        incorporation or
        organization)                               
 Identification No.)
 
 200
        Cottontail Lane
 Vantage
        Court North
 Somerset,
        New Jersey 08873
 (Address
        of principal executive office and zip code)
 
 (800)
        416-0555
 (Registrant's
        telephone number, including area code)
 
 Indicate
        by check mark whether registrant (1) has filed all reports required to be
        filed
        by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. Yes [X] No [_]
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See definition of "accelerated
        filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
        one):
 
 Large
        accelerated filer [ ]    Accelerated
        filer [X]   Non-accelerated
        filer [_]
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Act). Yes [_] No [X]
 
 Indicate
        the number of shares outstanding of each of the issuer's classes of common
        stock, as of the latest practicable date.
 
 As
        of
        October 31, 2006, there were 29,683,275 outstanding shares of the registrant's
        common stock.
 
 
  
  **INVENTIV
        HEALTH, INC.**
 **INDEX
        TO QUARTERLY REPORT ON**
 **FORM
        10-Q**
 **PART
                    I. FINANCIAL INFORMATION**ITEM
                    1. Financial StatementsCondensed
                    Consolidated Balance Sheets as of September 30, 2006and
                    December 31, 2005 (unaudited)Condensed
                    Consolidated Income Statements for the three and
                    nine-monthsended
                    September 30, 2006 and 2005
                    (unaudited)Condensed
                    Consolidated Statements of Cash Flows for the
                    nine-monthsended
                    September 30, 2006 and 2005
                    (unaudited)Notes
                    to Condensed Consolidated Financial
                    StatementsITEM
                    2. Management's Discussion and Analysis of Financial
                    Condition andResults
                    of OperationsITEM
                    3. Quantitative and Qualitative Disclosures About
                    Market
                    RiskITEM
                    4. Controls and Procedures**PART
                    II. OTHER INFORMATION**ITEM
                    1. Legal Proceedings****ITEM
                    1A. Risk FactorsITEM
                    3. Unregistered Sales of Equity Securities
                    and use
                    of ProceedsITEM
                    5. Other InformationITEM
                    6. Exhibits**SIGNATURES****EXHIBITS**
 
  **PART
        I. FINANCIAL INFORMATION**
 
 **ITEM
        1.**  ***Financial
        Statements***
 **INVENTIV
        HEALTH, INC.**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(in
        thousands, except share and per share amounts)**
 **(unaudited)**
 **September
                  30,**
              
              **December
                  31,****2006**
              
              **2005****ASSETS**Current
                  assets:Cash
                  and equivalents
              
              $
              67,081
              
              $
              73,102Restricted
                  cash
              
              
              344
              
              
              3,878Accounts
                  receivable, net of allowances for doubtful accounts of
                  $2,827and
                  $3,979 at September 30, 2006 and December 31, 2005,
                  respectively
              
              
              103,759
              
              
              112,782Unbilled
                  services
              
              
              65,812
              
              
              41,206Prepaid
                  expenses and other current assets
              
              
              9,496
              
              
              5,737Current
                  deferred tax assets
              
              
              6,695
              
              
              4,029Total
                  current assets
              
              
              253,187
              
              
              240,734Property
                  and equipment, net
              
              
              37,760
              
              
              36,637Equity
                  investments
              
              
              5,049
              
              
              5,183Goodwill
              
              
              207,294
              
              
              173,777Other
                  intangibles, net
              
              
              150,637
              
              
              117,606Deferred
                  tax assets
              
              
              9,972
              
              
              3,428Deposits
                  and other assets
              
              
              13,409
              
              
              6,529Total
                  assets
              
              $
              677,308
              
              $
              583,894**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  liabilities:Current
                  portion of capital lease obligations
              
              $
              9,934
              
              $
              10,859Current
                  portion of long-term debt
              
              
              1,750
              
              
              1,750Accrued
                  payroll, accounts payable and accrued expenses
              
              
              69,051
              
              
              77,816Current
                  income tax liabilities
              
              
              15,526
              
              
              7,359Client
                  advances and unearned revenue
              
              
              47,937
              
              
              29,393Total
                  current liabilities
              
              
              144,198
              
              
              127,177Capital
                  lease obligations, net of current portion
              
              
              16,390
              
              
              17,695Long-term
                  debt
              
              
              163,250
              
              
              172,813Other
                  non-current liabilities
              
              
              14,488
              
              
              12,994Total liabilities
              
              $
              338,326
              
              $
              330,679Commitments
                  and contingenciesMinority
                  Interest
              
              
              91
              
              
              (4
              )Stockholders'
                  equity:Preferred
                  stock, $.001 par value, 10,000,000 shares authorized, none
                  issuedand
                  outstanding at September 30, 2006 and December 31, 2005,
                  respectively
              
              
              --
              
              
              --Common
                  stock, $.001 par value, 50,000,000 shares authorized; 29,644,433
                  and27,862,436
                  shares issued and outstanding at September 30, 2006 andDecember
                  31, 2005, respectively
              
              $
              30
              
              $
              28Additional
                  paid-in-capital
              
              
              275,403
              
              
              233,441Deferred
                  compensation
              
              
              --
              
              
              (3,563
              )Accumulated
                  other comprehensive (losses) earnings
              
              
              (1,104
              )
              
              221Accumulated
                  earnings
              
              
              64,562
              
              
              23,092Total
                  stockholders' equity
              
              
              338,891
              
              
              253,219Total
                  liabilities and stockholders' equity
              
              $
              677,308
              
              $
              583,894
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  
  **INVENTIV
        HEALTH, INC.**
 **CONDENSED
        CONSOLIDATED INCOME STATEMENTS**
 **(in
        thousands, except per share amounts)**
 **(unaudited)**
 
 **For
                  the Three-Months Ended**
              
              **For
                  the Nine-Months Ended****September
                  30,**
              
              **September
                  30,****2006**
              
              **2005**
              
              **2006**
              
              **2005**Net
                  revenues
              
              $
              163,682
              
              $
              110,276
              
              $
              461,359
              
              $
              327,562Reimbursed
                  out-of-pockets
              
              
              34,098
              
              
              18,083
              
              
              93,077
              
              
              53,443Total
                  revenues
              
              
              197,780
              
              
              128,359
              
              
              554,436
              
              
              381,005Operating
                  expenses:Cost
                  of services
              
              
              106,610
              
              
              79,638
              
              
              299,672
              
              
              237,908Reimbursable
                  out-of-pocket expenses
              
              
              34,798
              
              
              18,126
              
              
              94,404
              
              
              53,328Selling,
                  general and administrative expenses
              
              
              35,884
              
              
              16,726
              
              
              100,809
              
              
              48,082Total
                  operating expenses
              
              
              177,292
              
              
              114,490
              
              
              494,885
              
              
              339,318Operating
                  income
              
              
              20,488
              
              
              13,869
              
              
              59,551
              
              
              41,687Interest
                  expense
              
              
              (3,854
              )
              
              (332
              )
              
              (7,752
              )
              
              (1,042
              )Interest
                  income
              
              
              683
              
              
              335
              
              
              1,780
              
              
              841Income
                  from continuing operations before income tax provision, minority
                  interest
                  in income of subsidiary and income from equity investments
              
              
              17,317
              
              
              13,872
              
              
              53,579
              
              
              41,486Income
                  tax (provision) benefit
              
              
              (7,169
              )
              
              1,161
              
              
              (12,605
              )
              
              (8,229
              )Income
                  from continuing operations before minority interest in income of
                  subsidiary and income from equity investments
              
              
              10,148
              
              
              15,033
              
              
              40,974
              
              
              33,257Minority
                  interest in income of subsidiary
              
              
              (230
              )
              
              --
              
              
              (905
              )
              
              --Income
                  from equity investments
              
              
              277
              
              
              --
              
              
              133
              
              
              --Income
                  from continuing operations
              
              
              10,195
              
              
              15,033
              
              
              40,202
              
              
              33,257Income
                  from discontinued operations:Gains
                  on disposals of discontinued operations, net of taxes
              
              
              49
              
              
              78
              
              
              1,268
              
              
              1,640Net
                  income from discontinued operations
              
              
              49
              
              
              78
              
              
              1,268
              
              
              1,640Net
                  income
              
              $
              10,244
              
              $
              15,111
              
              $
              41,470
              
              $
              34,897Earnings
                  per share (see Note 6):Continuing
                  operations:Basic
              
              $
              0.35
              
              $
              0.56
              
              $
              1.39
              
              $
              1.25Diluted
              
              $
              0.34
              
              $
              0.53
              
              $
              1.34
              
              $
              1.19Discontinued
                  operations:Basic
              
              $
              0.00
              
              $
              0.00
              
              $
              0.04
              
              $
              0.06Diluted
              
              $
              0.00
              
              $
              0.01
              
              $
              0.04
              
              $
              0.06Net
                  income:Basic
              
              $
              0.35
              
              $
              0.56
              
              $
              1.43
              
              $
              1.31Diluted
              
              $
              0.34
              
              $
              0.54
              
              $
              1.38
              
              $
              1.25Weighted
                  average common shares outstanding:Basic
              
              
              29,411
              
              
              26,943
              
              
              28,937
              
              
              26,604Diluted
              
              
              30,359
              
              
              28,132
              
              
              29,959
              
              
              27,890
 
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
  
  **INVENTIV
        HEALTH, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH
        FLOWS**
 **(in
        thousands)**
 **(unaudited)**
 
 **For
                  Nine-Months Ended****September
                  30,****2006**
              
              **2005**Cash
                  flows from operating activities:Net
                  income from continuing operations
              
              $
              40,202
              
              $
              33,257Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
              
              
              11,185
              
              
              12,720Amortization
              
              
              4,187
              
              
              988Income
                  from equity investments
              
              
              (133
              )
              
              --Minority
                  interest in income of subsidiary
              
              
              905
              
              
              --Fair
                  market value adjustment on derivative financial instrument
              
              
              (2,359
              )
              
              --Deferred
                  taxes
              
              
              (9,210
              )
              
              (7,281
              )Stock
                  compensation expense
              
              
              5,578
              
              
              399Tax
                  benefit from stock option exercises and vesting of restricted
                  shares
              
              
              8,206
              
              
              8,463Changes
                  in assets and liabilities, net of effects from discontinued
                  operations:Accounts
                  receivable, net
              
              
              21,087
              
              
              (19,738
              )Unbilled
                  services
              
              
              (22,759
              )
              
              1,395Prepaid
                  expenses and other current assets
              
              
              (1,722
              )
              
              (1,093
              )Accrued
                  payroll, accounts payable and accrued expenses
              
              
              2,970
              
              
              (2,471
              )Current
                  income tax liabilities
              
              
              7,782
              
              
              2,195Client
                  advances and unearned revenue
              
              
              5,569
              
              
              (3,082
              )Excess
                  tax benefits from stock based compensation
              
              
              (7,608
              )
              
              --Other
              
              
              (2,563
              )
              
              2,253Net
                  cash provided by continuing operations
              
              
              61,317
              
              
              28,005Net
                  cash (used in) provided by discontinued operations
              
              
              (15
              )
              
              28Net
                  cash provided by operating activities
              
              
              61,302
              
              
              28,033Cash
                  flows from investing activities:Restricted
                  cash balances
              
              
              3,534
              
              
              (1,350
              )Investment
                  in cash value of life insurance policies
              
              
              (2,758
              )
              
              (1,370
              )Cash
                  paid for acquisitions, net of cash acquired
              
              
              (50,440
              )
              
              (10,547
              )Acquisition
                  earn-out payments
              
              
              (8,267
              )
              
              (5,181
              )Equity
                  investments
              
              
              267
              
              
              --Purchases
                  of property and equipment
              
              
              (5,398
              )
              
              (4,025
              )Proceeds
                  from manufacturers rebates on leased vehicles
              
              
              285
              
              
              2Net
                  cash used in continuing operations
              
              
              (62,777
              )
              
              (22,471
              )Net
                  cash provided by discontinued operations
              
              
              1,283
              
              
              1,612Net
                  cash used in investing activities
              
              
              (61,494
              )
              
              (20,859
              )Cash
                  flows from financing activities:Repayments
                  on credit agreement
              
              
              (9,563
              )
              
              --Repayments
                  on capital lease obligations
              
              
              (8,678
              )
              
              (10,721
              )Withholding
                  shares for taxes
              
              
              (104
              )
              
              --Proceeds
                  from exercise of stock options
              
              
              4,656
              
              
              4,856Excess
                  tax benefits from stock-based compensation
              
              
              7,608
              
              
              --Net
                  cash used in continuing operations
              
              
              (6,081
              )
              
              (5,865
              )Net
                  cash provided by discontinued operations
              
              
              --
              
              
              --Net
                  cash used in financing activities
              
              
              (6,081
              )
              
              (5,865
              )Effect
                  of exchange rate changes
              
              
              252
              
              
              (64
              )Net
                  change in cash and equivalents
              
              
              (6,021
              )
              
              1,245Cash
                  and equivalents, beginning of period
              
              
              73,102
              
              
              50,809Cash
                  and equivalents, end of period
              
              $
              67,081
              
              $
              52,054Supplemental
                  disclosures of cash flow information:Cash
                  paid for interest
              
              $
              9,595
              
              $
              1,051Cash
                  paid for income taxes
              
              $
              5,781
              
              $
              4,865Supplemental
                  disclosures of non-cash activities:Vehicles
                  acquired through capital lease agreements
              
              $
              12,576
              
              $
              7,895Stock
                  issuance related to acquisitions
              
              $
              27,177
              
              $
              7,360
 The
        accompanying notes are an integral part of these condensed consolidated
        financial statements
 
  
 
  **INVENTIV
        HEALTH, INC.**
 NOTES
        TO CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS
  **1.**  **Organization
        and Business:**
 
 inVentiv
        Health Inc. (together with its subsidiaries, “inVentiv”, or the “Company”,
        formerly Ventiv Health, Inc.) is a leading provider of value-added services
        to
        the pharmaceutical and life sciences industries. The Company supports a broad
        range of clinical development, communications and commercialization activities
        that are critical to its customers' ability to complete the development of
        new drug products and medical devices and successfully bring them to market.
        The
        Company’s goal is to assist its customers in meeting their objectives in
        each of its operational areas by providing our services on a flexible and
        cost-effective basis. The Company provides services to over 200 client
        organizations, including all top 20 global pharmaceutical companies and numerous
        emerging and specialty biotechnology companies.
 
 The
        Company’s service offerings reflect the changing needs of its clients as
        their products move through the late-stage development and regulatory approval
        processes and into product launch. The Company has established expertise
        and
        leadership in providing the services its clients require at each of these
        stages of product development and commercialization and seek to address their
        outsourced service needs on a comprehensive basis throughout the product
        life
        cycle.
 
 On
        June
        14, 2006, the Company changed its name to inVentiv Health, Inc. as part of
        a
        re-branding initiative that began when the Company acquired inChord
        Communications, Inc. ("inChord"), a healthcare marketing and communications
        company, in October 2005.
 
 *Business
        Segments*
 
 The
        Company currently serves our clients primarily through three business segments,
        which correspond to its reporting segments for 2006:
 
 ·
            inVentiv
                Clinical,
                which provides services related to permanent placement, clinical
                staffing,
                data collection and management and functional service provision.
                This
                segment includes the Smith Hanley group of companies (which includes
                Smith
                Hanley Associates, Smith Hanley Consulting Group and MedFocus) and
                HHI
                Clinical & Statistical Research Services (“HHI”), which the Company
                acquired during the fourth quarter of 2004, and Synergos, LLP
                ("Synergos"), a clinical services provider with expertise in clinical
                trial management services, which the Company acquired in the second
                quarter of 2006. 
 ·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                interactive communication development and patient and physician education.
                This segment includes inChord, Adheris, Inc. ("Adheris"), a patient
                compliance and persistence communications company, which the Company
                acquired in the first quarter of 2006, and Jeffrey Simbrow Associates
                ("JSAI"), a leading healthcare marketing and communications agency,
                which
                the Company acquired in the second quarter of 2006, as more fully
                discussed below. 
 ·
            inVentiv
                Commercial,
                which consists of the Company’s outsourced sales and marketing teams,
                planning and analytics services, sample accountability and patient
                assistance businesses, marketing support services, professional
                development and training, and recruitment of sales representatives
                in the
                commercial services area. 
 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 financial position, condensed consolidated results
        of
        operations and condensed consolidated cash flows of the Company and its
        subsidiaries (the "condensed consolidated financial statements"). These
        condensed consolidated financial statements have been prepared pursuant to
        the
        rules and regulations of the United States Securities and Exchange Commission
        (“SEC”) related to interim financial statements. Accordingly, certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with accounting principles generally accepted in the
        United States of America ("GAAP") have been omitted. The Company
        believes that the disclosures made herein are adequate such that the information
        presented is not misleading. These condensed consolidated financial statements
        reflect all adjustments (consisting of only normal recurring adjustments)
        that,
        in the opinion of management, are necessary to fairly present the Company's
        condensed consolidated financial position as of September 30, 2006 and December
        31, 2005, the condensed consolidated income statements of the Company for
        the
        three and nine-months ended September 30, 2006 and 2005 and the condensed
        consolidated cash flows for the nine-months ended September 30, 2006 and
        2005.
        In 2006, the Company changed its presentation of reimbursable expenses accounted
        for in accordance with Emerging Issues Task Force No. 01-14, *Income
        Statement Characterization of Reimbursements Received for "Out-of-Pocket"
        Expenses Incurred* to
        separately present such amounts as a component of total revenues and total
        operating expenses. Operating results for the three and nine-months ended
        September 30, 2006 are not indicative of the results that may be expected
        for
        the year ending December 31, 2006.
 
 **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,
        2005 as
        filed with the Securities and Exchange Commission on March 16, 2006.
 
 The
        condensed consolidated financial statements include the accounts of inVentiv
        Health, Inc., its wholly owned subsidiaries and its 53% owned subsidiary,
        Taylor
        Search Partners (“TSP”), which was acquired in conjunction with the acquisition
        of inChord. As discussed above, the Company’s continuing operations consist
        primarily of three business segments: inVentiv Clinical, inVentiv Communications
        and inVentiv Commercial. All significant intercompany transactions have been
        eliminated in consolidation.
  As
        a
        result of the acquisition of inChord, 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 service provider of
        communication and marketing tools for technical, medical and pharmaceutical
        products located in Germany. Both of these investments are accounted for
        using
        the equity method of accounting.
 
 In
        December 2005, the Company entered into an exclusive joint venture agreement
        with SIRO Clinpharm Pvt. Ltd., India's largest domestic contract research
        organization, to offer pharmaceutical companies India-based clinical data
        management services. This project is in the development stage and has not
        commenced providing client services.
 
 **3.**  **Recently
        Issued Accounting Standards:**
 
 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 our fiscal year 2006 annual financial
        statements. As of the date of this report, the Company does not believe that
        the
        adoption of SAB No. 108 will have a material impact on our consolidated
        results of operations or financial position.
 
 In
        September 2006, the Financial Accounting Standards Board (the “FASB”) issued
        Statement of Financial Accounting Standard ("SFAS") No. 157, "Fair Value
        Measurements" ("SFAS 157"). 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
        its
        consolidated results of operations or financial position.
 
 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
        financial statements. FIN 48 also provides guidance on derecognition,
        measurement, classification, interest and penalties, accounting in interim
        periods, disclosure and transition. FIN 48 applies to all tax positions related
        to income taxes subject to FASB Statement No. 109, *Accounting
        for Income Taxes* (“FASB
        No. 109”). FIN 48 is effective for fiscal years beginning after
        December 15, 2006. Differences between the amounts recognized in the
        statements of financial position prior to the adoption of FIN 48 and the
        amounts
        reported after adoption should be accounted for as a cumulative-effect
        adjustment recorded to the beginning balance of retained earnings. The Company
        has not yet determined the impact FIN 48 will have on its consolidated results
        of operations or financial position.
 
 On
        November 10, 2005, the FASB issued Interpretation No. 45-3, *Application
        of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a
        Business or Its Owners* (“FIN
        45-3”). FIN 45-3 amends FIN 45 *,
        Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
        Indirect Guarantees of Indebtedness of Others* (“FIN
        45”), to expand the scope to include guarantees granted to a business, such
        as a
        physician’s practice, or its owner(s), that the revenue of the business for a
        period will be at least a specified amount. Under FIN 45-3, the accounting
        requirements of FIN 45 are effective for any new revenue guarantees issued
        or
        modified on or after January 1, 2006 and the disclosure of all revenue
        guarantees, regardless of whether they were recognized under FIN 45, is required
        for all interim and annual periods beginning after January 1, 2006. The
        adoption of FIN 45-3 did not have a material impact on the Company’s condensed
        consolidated balance sheets, condensed consolidated income statements or
        condensed consolidated statements of cash flows.
 
 In
        June
        2005, the FASB issued SFAS No. 154, *Accounting
        Changes and Error Corrections* ,
        (“SFAS
        No.154”) a replacement of Accounting Principles Board ("APB") Opinion No. 20, *Accounting
        Changes* ,
        and
        Statement No. 3, *Reporting
        Accounting Changes in Interim Financial Statements* .
        SFAS
        No. 154 changes the requirements for the accounting for and the reporting
        of a
        change in accounting principle. Previously, most voluntary changes in accounting
        principles required recognition by recording a cumulative effect adjustment
        within net income in the period of change. SFAS No. 154 requires retrospective
        application to prior periods’ financial statements, unless it is impracticable
        to determine either the specific period effects or the cumulative effect
        of the
        change. SFAS No. 154 is effective for accounting changes made in fiscal years
        beginning after December 15, 2005. The adoption of SFAS No. 154 did not have
        an
        impact on the Company’s condensed consolidated balance sheets, condensed
        consolidated income statements or condensed consolidated statements of cash
        flows.
 
 **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 still disclosed in this footnote. Earn-out payments from
        acquisitions are generally accrued during the fourth quarter of every year
        when
        the divisional results are finalized and paid in the subsequent year, as
        more
        fully described below.
 
 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 $7.0 million in cash and stock, excluding post-closing
        adjustments and direct acquisition costs, which have yet to be finalized.
        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. MedConference's financial results were not included in
        the
        condensed consolidated financial statements since the acquisition was completed
        after September 30, 2006. Med Conference is expected to be included in
        the inVentiv Commercial segment.
 
 In
        November 2006, the Company completed the acquisition of the net assets of
        ASERT
        LLC and Dialog Coach LLC (collectively, “ASERT”) for approximately $5.0 million
        in cash and stock, excluding post-closing adjustments and direct acquisition
        costs, which have yet to be finalized. ASERT, 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 ASERT's performance measurements during 2006 through 2008. ASERT’s financial
        results were not included in the condensed consolidated financial statements
        since the acquisition was completed after September 30, 2006. ASERT is
        expected to be included in the inVentiv Commercial segment.
 
 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; the Company acquired approximately $0.7 million of net
        tangible assets in the transaction. Synergos, based in The Woodlands, Texas,
        is
        a focused clinical services provider with expertise in clinical trial management
        services, particularly project management and monitoring, as well as
        investigator and patient recruitment. The Company will be obligated to make
        certain earn-out payments, which may be material, contingent on Synergos’s
        performance measurements during 2006 and 2007. The results of Synergos have been
        reflected in the inVentiv Clinical segment from the date of its acquisition.
        Pro
        forma financial information was not required to be disclosed under the
        Securities and Exchange Commission’s Regulation S-X because none of the specific
        thresholds were met for this acquisition.
 
 In
        April
        2006, the Company acquired JSAI for approximately $8.8 million in cash and
        stock, including certain post-closing adjustments and direct acquisition
        costs.
        JSAI is Canada's leading healthcare marketing and communications agency.
        The
        Company will be obligated to make certain earn-out payments, which may be
        material, contingent on JSAI’s performance measurements during the 12-month
        periods ending March 31, 2007, 2008 and 2009. The results of JSAI have been
        reflected in the inVentiv Communications segment from the date of its
        acquisition. Pro forma financial information was not required to be disclosed
        under the Securities and Exchange Commission’s Regulation S-X because none of
        the specific thresholds were met for this acquisition.
 
 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; the Company acquired approximately $10.1 million of net
        tangible assets in the transaction. Adheris is a Massachusetts-based industry
        leader in the area of patient compliance and persistency programs. The Company
        will be obligated to make certain earn-out payments, which may be material,
        contingent on Adheris's performance measurements during 2006 through 2008.
        The
        results of Adheris have been reflected in the inVentiv Communications segment
        from the date of its acquisition. Pro forma financial information was not
        required to be disclosed under the Securities and Exchange Commission’s
        Regulation S-X because none of the specific thresholds were met for this
        acquisition.
  In
        October 2005, the Company acquired all of the outstanding capital stock of
        inChord for approximately $196.8 million of cash and stock, including certain
        post-closing adjustments and direct acquisition costs; the Company acquired
        approximately $23.6 million of net tangible assets in the transaction. To
        help
        finance the transaction, the Company entered into a Credit Agreement, dated
        October 5, 2005, as more fully described in footnote 10. The Company acquired
        inChord to vastly expand its service portfolio in the marketing and
        communications arena, expand its market position in the pharmaceutical services
        market and achieve cross-selling opportunities by leveraging its existing
        businesses. The Company will be obligated to make certain earn-out payments,
        which may be material, contingent on inChord’s performance measurements from
        2005 through 2007. inChord’s 2005 earnout of $3.8 million in cash and stock, of
        which $3.6 million was accrued at December 31, 2005, was paid in 2006. The
        portion adjusted in the subsequent year mainly relate to the finalization
        of the
        earn-outs for the previous year, as allowed under the contract. The results
        of
        inChord have been reflected in the inVentiv Communications segment since
        the
        date of acquisition.
  
 **INVENTIV
          HEALTH, INC.**
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS-Continued
 In
        August
        2005, the Company acquired the net assets of PRS, a provider of compliance
        management and marketing support services based in Horsham, Pennsylvania.
        PRS
        specializes in pharmaceutical sample management and compliance services;
        its
        operations are similar in nature to the business of Franklin Group, Inc.
        and
        Lincoln Ltd, Inc. (together, “Franklin”), which was acquired in June 2004. The
        closing consideration for the transaction was approximately $13.6 million
        in
        cash and stock (taking into account post-closing adjustments and direct
        acquisition costs); the Company acquired approximately $1.0 million of net
        tangible assets in the transaction. The Company will be obligated to make
        certain earn-out payments, which may be material, contingent on PRS’s
        performance measurements in 2005 and 2006. The amount due with respect to
        PRS
        for 2005 was approximately $0.3 million, which was accrued for as of December
        31, 2005 and paid in April 2006. The results of PRS have been reflected in
        the
        inVentiv Commercial segment since the date of acquisition.
 
 In
        November 2004, the Company acquired the net assets of HHI. HHI, based in
        Baltimore, Maryland, is a specialized statistical analysis and data management
        provider to the U.S. pharmaceutical industry. HHI complements the Smith Hanley
        business by offering clients the option of outsourced clinical support services
        as an alternative to internal staffing. The closing consideration for the
        transaction was approximately $6.2 million in cash and stock (taking into
        account post-closing adjustments and direct acquisition costs); the Company
        acquired approximately $0.8 million of net tangible assets in the transaction.
        The Company is obligated to make certain earn-out payments, which may be
        material, contingent on HHI’s performance measurements in 2005 and 2006. HHI’s
        2005 earn-out was approximately $5.4 million, which $5.0 million was previously
        accrued for at December 31, 2005, and paid during the first quarter of 2006.
        The
        results of HHI have been reflected in the inVentiv Clinical segment since
        the
        date of acquisition.
 
 In
        October 2004, the Company acquired the net assets of Smith Hanley. Smith
        Hanley
        specializes primarily in providing late-stage clinical staffing and recruiting
        services to the U.S. pharmaceutical industry. The Company acquired Smith
        Hanley
        to expand its service portfolio in the clinical services and recruitment
        areas,
        expand its market position in the pharmaceutical services market and achieve
        cross-selling opportunities by leveraging our existing sales force and
        relationships. The Company acquired approximately $9.5 million of net tangible
        assets for consideration of approximately $52.9 million in cash and stock
        (taking into account post-closing adjustments and direct acquisition costs)
        and
        was obligated to make certain earn-out payments, contingent on Smith Hanley’s
        performance measurements in 2004 and 2005. Smith Hanley’s 2004 earn-out paid in
        2005 was approximately $6.6 million, for which $6.8 million was previously
        accrued for at December 31, 2004. Smith Hanley’s 2005 earn-out paid in 2006 was
        approximately $4.6 million, of which $4.0 million was previously accrued
        for at
        December 31, 2005. The portions adjusted in the subsequent years mainly relate
        to the finalization of the earn-outs for the respective years. The results
        of
        Smith Hanley have been reflected in the inVentiv Clinical segment since the
        date
        of acquisition.
 
 In
        June
        2004, the Company acquired the net assets of Franklin, based in Somerville,
        New
        Jersey. Franklin specializes primarily in conducting patient assistance programs
        and pharmaceutical compliance services. The Company paid approximately $11.3
        million in cash and stock (taking into account post-closing adjustments and
        direct acquisition costs) to acquire approximately $2.7 million of net tangible
        assets. The Company is obligated to make certain earn-out payments, which
        may be
        material, contingent on Franklin’s performance measurements during 2004 through
        2006. Franklin’s 2004 earn-out paid in 2005 was approximately $1.8 million, $1.7
        million of which was accrued for at December 31, 2004. Franklin’s 2005 earn-out
        paid in April 2006 was approximately $3.2 million, which was accrued for
        at
        December 31, 2005. The portions adjusted in the subsequent years mainly relate
        to the finalization of the earn-outs for the respective years. Franklin’s
        financial results have been reflected in the inVentiv Commercial segment
        since
        the date of acquisition.
 
 **5.**  **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.
  **INVENTIV
            HEALTH, INC.**
 NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL
            STATEMENTS-Continued
 On
        January 1, 2006, the Company adopted SFAS 123R using the modified
        prospective application method, as permitted under SFAS 123R, which requires
        measurement of compensation cost of all stock-based awards at fair value
        on the
        date of grant and recognition of compensation over the service periods for
        awards expected to vest. Under this method, compensation cost in 2006 includes
        the portion vesting in the period for (1) all stock-based awards granted
        prior
        to, but not vested as of, January 1, 2006, based on the grant date fair value
        estimated in accordance with the original provisions of SFAS No. 123, *Accounting
        for Stock-Based Compensation* (“SFAS
        123”), and (2) all stock-based awards granted subsequent to January 1, 2006,
        based on the grant date fair value estimated in accordance with the provisions
        of SFAS 123R. The Company will recognize the cost of all employee stock awards
        on a straight-line basis over their respective vesting periods, net of estimated
        forfeitures. Accordingly, prior periods amounts have not been restated. Under
        this method, the Company is required to record compensation expense for all
        awards granted after the date of adoption and for the unvested portion of
        previously granted awards that remain outstanding at the date of
        adoption.
  The
        adoption of SFAS 123R resulted in incremental stock-based compensation expense
        of $2.2 million, of which $0.7 million was recorded in cost of services and
        $1.5
        million recorded as Selling, General and Administrative expenses (“SG&A”)
        for the three months ended September 30, 2006 and $5.6 million, of which
        $1.9
        million was recorded in cost of services and $3.7 million recorded as SG&A
        for the nine months ended September 30, 2006. The incremental stock-based
        compensation expense caused income from continuing operations before income
        tax
        provision, minority interest in income of subsidiary and income from equity
        investments to decrease by $2.2 million and $5.6 million for the three months
        and nine months ended September 30, 2006, respectively, net income to decrease
        by $1.3 million and $3.3 million for the three months and nine months ended
        September 30, 2006, respectively, and basic and diluted earnings per share
        to
        decrease by $0.04 per share and $0.11 per share for the three months and
        nine
        months ended September 30, 2006, respectively. Cash provided by operating
        activities decreased and cash provided by financing activities increased
        by $7.6
        million related to excess tax benefits from the exercise of stock-based
        awards.
  On
        November 10, 2005, the FASB issued FASB Staff Position No. 123R-3, *Transition
        Election Related to Accounting for Tax Effects of Share-Based Payment
        Awards* .
        The
        Company has elected to adopt the alternative transition method provided in
        this
        FASB Staff Position for calculating the tax effects of share-based compensation
        pursuant to SFAS 123R. The alternative transition method includes a simplified
        method to establish the beginning balance of the additional paid-in capital
        pool
        (APIC pool) related to the tax effects of employee share-based compensation,
        which is available to absorb tax deficiencies recognized subsequent to the
        adoption of SFAS 123R.
  Pro
        forma Information for Periods Prior to the Adoption of
        SFAS 123R
 
 Prior
        to
        the adoption of SFAS 123R, the Company applied Accounting Principles Board
        No.
        25 (“APB 25”) to account for its stock-based awards. Under ABP 25, the Company
        only recorded stock-based compensation expense for restricted stock units.
        Under
        the provisions of APB 25, the Company was not required to recognize compensation
        expense for the cost of stock options issued under its equity compensation
        plans
        as all options were granted with an exercise price equal to the market value
        of
        the underlying common stock on the date of grant. In addition, forfeitures
        of
        awards were recognized as they occurred. The Company has not changed its
        valuation model used for estimating the fair value of options granted after
        January 1, 2006, from the Black-Scholes option-pricing model previously used
        for
        pro forma presentation purposes as required under SFAS 123, as amended by
        SFAS
        No. 148, *Accounting
        for Stock-Based Compensation - Transition and Disclosures* .
 
 The
        following table details the effect on net income and earnings per share had
        compensation expense for the employee stock-based awards been recorded in
        the
        third quarter and year ended September 30, 2005 based on the fair value method
        under SFAS 123:
 
 (in
                  thousands, except per share data)
              
              **Three-Months
                  Ended September 30, 2005**
              
              **Nine-Months
                  Ended September 30, 2005**Net
                  income attributable to common shareholders, as reported
              
              $
              15,111
              
              $
              34,897Add:
                  total stock-based compensation expense included in reported net
                  income
                  attributable to common shareholders, net of tax
              
              
              140
              
              
              239Less:
                  stock-based employee compensation expense determined under the
                  fair value
                  method, net of related income tax
              
              
              (647
              )
              
              (2,967
              )Pro
                  forma net earnings
              
              $
              14,604
              
              $
              32,169As
                  reported: Basic
              
              $
              0.56
              
              $
              1.31As
                  reported: Diluted
              
              $
              0.54
              
              $
              1.25Pro
                  forma: Basic
              
              $
              0.54
              
              $
              1.21Pro
                  forma: Diluted
              
              $
              0.52
              
              $
              1.15
  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,****2006****(1)**
                
                **2005****(1)**
                
                **2006**
                
                **2005**Expected
                    life of option
                
                
                5.5-6
                    yrs
                
                
                4
                    yrs
                
                
                5.5-6
                    yrs
                
                
                4
                    yrsRisk-free
                    interest rate
                
                
                --(1)
                
                
                --(1)
                
                
                4.90
                %
                
                4.13
                %Expected
                    volatility
                
                
                45
                %
                
                82
                %
                
                45
                %
                
                84
                %Expected
                    dividend yield
                
                
                0.00
                %
                
                0.00
                %
                
                0.00
                %
                
                0.00
                %
 
 (1)  In
        the
        third quarter of 2006 and 2005, no options were granted by the Company, hence,
        the interest rate was not applicable.
 
 During
        the fourth quarter of 2005, management analyzed its expected volatility and
        expected life of stock options and concluded that the current expected
        volatility for options granted during the fourth quarter of 2005 should be
        45%
        and the expected life of the options granted should range between 5.5 and
        6.0
        years, depending on the grantee’s employee status. During
        the three months and nine months ended September 30, 2005, the Company utilized
        an expected volatility of 82% and 84%, respectively, and an expected term
        of 4
        years for both periods in its calculation of stock compensation expense,
        which
        was disclosed in its condensed consolidated financial statement footnotes.
        The
        variables used in the first nine months of 2005 and prior years were based
        solely on historical data, while the current rates are more reflective of
        current and future periods. These
        conclusions were based on several factors, including past company history,
        current and future trends, comparable benchmarked data and other key metrics.
        The Company continues to base the estimate of risk-free rate on the U.S.
        Treasury yield curve in effect at the time of grant. The Company has never
        paid
        cash dividends and does not currently intend to pay cash dividends, thus
        has
        assumed a 0% dividend yield.
 
 As
        part
        of the requirements of SFAS 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.
 
 
 **INVENTIV
          HEALTH, INC.**
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS-Continued
 Stock
        Incentive Plan and Award Activity
 
 As
        of
        June 14, 2006, the Company’s 2006 Stock Incentive Plan (“Stock Plan”) authorizes
        it to grant incentive stock options, nonqualified stock options, restricted
        stock awards, restricted stock units and stock appreciation rights ("SARs”). The
        aggregate number of shares of 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.
 
 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 our Board of Directors.
  The
        following table summarizes activity under the Company’s equity incentive plans
        for the nine months ended September 30, 2006 (in thousands, except per share
        amounts):
  **Shares**
              **Weighted
                  Average Exercise Price**
              **Weighted
                  Average Remaining Contractual Term (in years)**
              **Aggregate
                  Intrinsic Value**Outstanding
                  at January 1, 2006
              2,971
              $10.47Granted
                  and assumed
              331
              $25.89Exercised
              (791)
              $5.89Forfeited/expired/cancelled
              (108)
              $13.45Outstanding
                  at September 30, 2006
              2,403
              $13.96
              7.45
              $43,423Options
                  exercisable at September 30, 2006
              945
              $10.56
              6.58
              $20,294
  The
        weighted-average grant-date fair value of stock options granted during the
        three-months ended September 30, 2006 and 2005 were not applicable as no
        stock
        options were granted in both periods and during the nine-months ended September
        30, 2006 and 2005 were $13.02 and $14.13 per share. The total intrinsic value
        of
        options exercised during the three-months ended September 30, 2006 and 2005
        was
        $1.9 million and $1.4 million, respectively, and in addition, during the
        nine-months ended September 30, 2006 and 2005 were $4.7 million and $4.9
        million. As of September 30, 2006, there was approximately $10.2 million
        of
        total unrecognized compensation cost related to nonvested share-based
        compensation arrangements granted; that cost is expected to be recognized
        over a
        weighted average of 2.6 years.
  The
        actual tax benefit realized for the tax deductions from option exercise of
        the
        share-based payment arrangements totaled $9.0 million and $2.2 million for
        the
        three months ended September 30, 2006 and 2005, respectively, and during
        the
        nine-months ended September 30, 2006 and 2005 were $19.1 million and $20.1
        million, respectively.
  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**$1.19
              To
              $1.48
              6,750
              $1.32
              6.06
              500
              $1.48$1.66
              To
              $1.66
              344,537
              $1.66
              6.20
              98,475
              $1.66$1.72
              To
              $7.94
              264,087
              $4.43
              5.65
              246,687
              $4.57$8.06
              To
              $9.15
              244,749
              $8.30
              5.47
              139,625
              $8.17$10.30
              To
              $15.48
              57,176
              $13.25
              7.51
              16,828
              $13.24$15.96
              To
              $15.96
              420,000
              $15.96
              7.98
              320,000
              $15.96$16.86
              To
              $16.89
              245,000
              $16.88
              7.97
              37,500
              $16.86$17.25
              To
              $17.75
              351,313
              $17.48
              7.95
              73,459
              $17.67$18.20
              To
              $26.76
              289,124
              $24.90
              9.06
              12,250
              $23.73$26.77
              To
              $26.77
              180,000
              $26.77
              9.70
              --
              $--2,402,736
              
              
              945,324
  A
        summary
        of the status and changes of the Company’s nonvested shares related to our
        equity incentive plans as of and during the nine months ended September 30,
        2006 is presented below:
 
 (in
                  thousands, except per share amounts)
              
              **Shares**
              
              **Weighted
                  Average Grant-Date Fair Value**Nonvested
                  at January 1, 2006
              
              
              208
              
              $
              20.31Granted
              
              
              367
              
              $
              25.90Released
              
              
              (37
              )
              $
              18.70Forfeited
              
              
              (19
              )
              $
              24.24Nonvested
                  at September 30, 2006
              
              
              519
              
              $
              24.22
  As
        of
        September 30, 2006, there was approximately $9.7 million of total unrecognized
        compensation cost related to nonvested share-based compensation arrangements
        granted under the Stock Plan; that cost is expected to be recognized over
        a
        weighted average of 3.5 years. The total fair value of shares vested during
        the
        three and nine-months ended September 30, 2006 were $0.1 million and $1.4
        million, respectively. During the three and nine-months ended September 30,
        2005
        the amounts were negligible.
  **6.**  **Earnings
        Per Share (“EPS”):**
 
 Basic
        earnings per share excludes dilution for potentially dilutive securities
        and is
        computed by dividing net income or loss attributable to common shareholders
        by
        the weighted average number of common shares outstanding during the
        period.  Diluted net income per share reflects the potential dilution that
        could occur if securities or other instruments to issue common stock were
        exercised or converted into common stock. Potentially dilutive securities
        are
        excluded from the computation of diluted net income per share when their
        inclusion would be antidilutive.
  A
        summary
        of the computation of basic and diluted earnings per share from continuing
        operations is as follows:
 
 **Three-Months
                  Ended September 30,**
              
              **Nine-Months
                  Ended September 30,****2006**
              
              **2005**
              
              **2006**
              
              **2005****(in
                  thousands, except per share data)****Basic
                  EPS from Continuing Operations Computation**Income
                  from continuing operations
              
              $
              10,195
              
              $
              15,033
              
              $
              40,202
              
              $
              33,257Weighted
                  average number of common shares outstanding
              
              
              29,411
              
              
              26,943
              
              
              28,937
              
              
              26,604Basic
                  EPS from continuing operations
              
              $
              0.35
              
              $
              0.56
              
              $
              1.39
              
              $
              1.25**Diluted
                  EPS from Continuing Operations Computation**Income
                  from continuing operations
              
              $
              10,195
              
              $
              15,033
              
              $
              40,202
              
              $
              33,257Weighted
                  average number of common shares outstanding
              
              
              29,411
              
              
              26,943
              
              
              28,937
              
              
              26,604Stock
                  options(1)
              
              
              837
              
              
              1,155
              
              
              916
              
              
              1,269Restricted
                  stock awards(2)
              
              
              111
              
              
              34
              
              
              106
              
              
              17Total
                  diluted common shares outstanding
              
              
              30,359
              
              
              28,132
              
              
              29,959
              
              
              27,890Diluted
                  EPS from continuing operations
              
              $
              0.34
              
              $
              0.53
              
              $
              1.34
              
              $
              1.19
  (1) 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.  Similarly, for the three and nine months ended September 30,
        2005, 59,332 shares and 64,310 shares, respectively, were excluded from the
        calculation of diluted EPS due to the fact that the shares are considered
        anti-dilutive because the number of potential buyback shares is greater than
        the
        number of weighted shares outstanding.
  (2) For the
        three and 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. 
Similarly, for the three and nine months ended September 30, 2005, 734 shares
        and 893 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.
  **7.**  **Significant
        Clients:**
 
 During
        the
        nine-months ended September 30, 2006, the Company had no clients that accounted
        for more than 10%, individually, of the Company's total revenues across our
        inVentiv Clinical, inVentiv Communications and inVentiv Commercial segments.
        For
        the nine-months ended September 30, 2005, three clients accounted for
        approximately 16%, 12% and 10%, individually, of the Company's total revenues
        across our inVentiv Clinical and inVentiv Commercial segments.
 
 **8.**  **Restricted
        Cash:**
 
 Restricted
        cash balances as of September 30, 2006 and December 31, 2005 were $0.3 million
        and $3.9 million, respectively. During the first two quarters of 2006, except
        as
        described in the following paragraph, the Company replaced most of its existing
        letters of credit with letters of credit under UBS AG Stamford Branch. These
        letters of credit were previously cash collateralized for various obligations
        and represented cash restricted from use for general purposes as of December
        31,
        2005. The new letters of credit are no longer fully cash collateralized and
        do
        not represent restricted cash.
 
 In
        June
        2005, the Company pledged approximately $0.3 million of cash as collateral
        on an
        outstanding standby letter of credit to support the security deposit relating
        to
        the New York office rental for the inVentiv Clinical segment. The beneficiary
        has not drawn on this letter of credit. As this cash has been pledged as
        collateral, it is restricted from use for general purposes and has been
        classified accordingly in the Condensed Consolidated Balance Sheets as of
        September 30, 2006 and December 31, 2005.
  
  **INVENTIV
          HEALTH, INC.**
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          SERVICES
 
 **9** .  **Goodwill
        and Other Intangible Assets:**
 
 Goodwill
        consists of the following:
  (in
                    thousands)
                
                **January
                    1,**
                  **2006**
                
                **Acquisitions**
                
                **Contingent****(1)****Consideration**
                
                **Other**
                
                **September
                    30,**
                  **2006**inVentiv
                    Clinical
                
                $
                45,427
                
                $
                3,240
                
                $
                1,004
                
                $
                --
                
                $
                49,671inVentiv
                    Communications
                
                
                87,538
                
                
                34,183
                
                
                134
                
                
                (5,000(2)
                )
                
                116,855inVentiv
                    Commercial
                
                
                40,812
                
                
                --
                
                
                (44
                )
                
                --
                
                
                40,768Total
                
                $
                173,777
                
                $
                37,423
                
                $
                1,094
                
                $
                (5,000
                )
                $
                207,294
  (1)
            The
                contingent consideration represents adjustments relating to the
                finalization of the 2005 earnouts (see Note 4 for further
                details). (2)
            The
                $5.0 million reduction of goodwill relates to amounts previously
                recorded
                as a liability of inChord prior to the acquisition by inVentiv. Prior
                to
                the acquisition, historical management of inChord recorded a liability
                of
                $7.5 million related to a special bonus arrangement more fully discussed
                in Note 13. Certain provisions in the asset purchase agreement of
                inChord
                obligate the former sellers to reimburse the Company for the first
                $5
                million of the payment of the special bonus. As such, the amount
                has been
                adjusted to reclassify $5 million from Goodwill and Other Intangible
                Assets to Deposits and Other Assets in the Condensed Consolidated
                Balance
                Sheet as of September 30, 2006.  Other
        intangible assets consist of the following:
 
 **September
                  30, 2006**
              
              **December
                  31, 2005**(in
                  thousands)
              
              
              
              **Accumulated**
              
              
              
              
              
              **Accumulated****Gross**
              
              **Amortization**
              
              **Net**
              
              **Gross**
              
              **Amortization**
              
              **Net**Customer
                  relationships
              
              $
              57,642
              
              $
              (5,848
              )
              $
              51,794
              
              $
              37,787
              
              $
              (2,098
              )
              $
              35,689Noncompete
                  agreement
              
              
              1,644
              
              
              (392
              )
              
              1,252
              
              
              690
              
              
              (103
              )
              
              587Tradenames
                  subject to amortization
              
              
              1,139
              
              
              (94
              )
              
              1,045
              
              
              --
              
              
              --
              
              
              --Other
              
              
              530
              
              
              (244
              )
              
              286
              
              
              260
              
              
              (190
              )
              
              70Total
                  definite-life intangibles
              
              
              60,955
              
              
              (6,578
              )
              
              54,377
              
              
              38,737
              
              
              (2,391
              )
              
              36,346Tradenames
                  not subject to amortization(1)
              
              
              96,260
              
              
              --
              
              
              96,260
              
              
              81,260
              
              
              --
              
              
              81,260Total
                  other intangibles(2)
              
              $
              157,215
              
              $
              (6,578
              )
              $
              150,637
              
              $
              119,997
              
              $
              (2,391
              )
              $
              117,606
 
 (1)
            These
                indefinite-life tradenames arose primarily from the acquisitions
                of
                Franklin, Smith Hanley, inChord and Adheris, 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, as mentioned at the end
                of
                this note. (2)
            The
                $37.2 million increase in total gross other intangibles arises from
                the
                acquisitions of Adheris, JSAI and
                Synergos. 
 The
        2004,
        2005 and 2006 business combinations discussed in footnote 4 above resulted
        in
        approximately $186.7 million of goodwill (all of which is expected to be
        deductible for tax purposes) and the following gross intangible
        assets:
 
 **Intangible
                  asset**
              
              **Amount**
                **(in
                  thousands)**
              
              **Weighted
                  average amortization period**Tradename
              
              $
              97,399
              
              
              (1
              )Customer
                  relationships
              
              
              57,642
              
              
              11.2
                  yearsNoncompete
                  agreement
              
              
              1,644
              
              
              4.0
                  yearsTechnology
              
              
              270
              
              
              4.0
                  yearsTotal
              
              $
              156,955
              (2)
 
 (1)
            $1.1
                million of the tradenames are 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
                2004-2006 acquisitions.  Amortization
        expense, based on intangibles subject to amortization held at September 30,
        2006, is expected to be $1.6 million for the last three months of 2006, $6.3
        million in 2007, $6.1 million in 2008, $5.6 million in 2009, $5.1 million
        in
        2010, $5.0 million in 2011 and $24.7 million thereafter.
 
 Goodwill
        and other indefinite-life intangibles, such as tradenames, are assessed annually
        for potential impairment on June 30, pursuant to the guidelines of SFAS 142, *Goodwill
        and Other Intangible Assets* .
        The
        Company conducted its assessment and concluded that the foregoing balances
        on
        the Company’s Condensed Consolidated Balance Sheet were not impaired as of June
        30, 2006.
  **10.**  **Debt:**
  The
        Company’s principal external source of liquidity is its syndicated, secured
        credit agreement, which was entered into with UBS AG, Stamford Branch, and
        others in connection with the inChord acquisition. The key features of this
        credit facility are as follows:
 
 ·
            A
                $175 million term loan facility was made available to the Company
                in a
                single drawing at the time of the inChord transaction. The credit
                agreement also includes a $50 million revolving credit facility,
                of which
                $5 million is available for the issuance of letters of credit, and
                a $5
                million swingline facility. 
 ·
            The
                term loan will mature on the sixth anniversary of the Credit Agreement,
                with scheduled quarterly amortization of 1% per year during years
                one
                through five and 95% during year six. The revolving loans will mature
                on
                the sixth anniversary of the Credit Agreement. 
 ·
            Amounts
                advanced under the credit agreement must be prepaid with a percentage,
                determined based on a leverage test set forth in the credit agreement,
                of
                Excess Cash Flow (as defined in the credit agreement) and the proceeds
                of
                certain non-ordinary course asset sales and certain issuances of
                the
                Company’s debt obligations or equity securities, subject to certain
                exceptions. The Company may elect to prepay the loans, in whole or
                in part
                at any time, in certain minimum principal amounts, without penalty
                or
                premium (other than normal LIBOR break funding costs). Amounts borrowed
                under the credit agreement that are repaid or prepaid may not be
                reborrowed. 
 ·
            Interest
                on the loans accrue, at the Company’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 the Company’s option of 1, 2, 3 or 6 months
                (or, if the affected lenders agree, 9 months), in each case plus
                a spread
                based on the type of loan and method of interest rate determination
                elected. 
 The
        credit agreement contains, among other things, conditions precedent,
        representations and warranties, covenants and events of default customary
        for
        facilities of this type. Such covenants include certain limitations on
        indebtedness, liens, sale-leaseback transactions, guarantees, fundamental
        changes, dividends, acquisitions and transactions with affiliates. The credit
        agreement also includes covenants under which the Company is required to
        maintain a maximum leverage ratio and minimum interest rate coverage and
        fixed
        charge coverage ratios that vary based on the amount of time elapsed since
        the
        initial extension of credit. As of September 30, 2006, the Company complied
        with
        the requirements of the credit facility.
  The
        three-month LIBOR base rate as of September 30, 2006 was 5.37%. As mentioned
        in
        footnote 12, the Company entered into a derivative financial instrument to
        hedge
        against this $175 million term loan facility.
  During
        2005, the Company incurred costs of approximately $3.3 million related to
        the
        credit agreement. These amounts are classified as deferred financing costs
        and
        are included as Deposits and Other Assets on the September 30, 2006 Condensed
        Consolidated Balance Sheet. These deferred financing costs are amortized
        as
        interest expense over the life of the loan. At September 30, 2006, the Company
        had approximately $165.0 million outstanding on the unsecured term loan.
        The
        aggregate annual scheduled principal payments for the next five years and
        thereafter related to the Company’s long-term debt at September 30, 2006 are
        summarized as follows:
  (in
                  thousands)September
                  30, 2007
              
              $
              1,750September
                  30, 2008
              
              
              1,750September
                  30, 2009
              
              
              1,750September
                  30, 2010
              
              
              1,750September
                  30, 2011
              
              
              124,690Thereafter
              
              
              33,310$
              165,000
 
 **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. During the fourth quarter of 2002, the segment entered
        into a
        second agreement with another vendor. Based on the terms of the agreement,
        management concluded that the leases were capital in nature based on the
        criteria established by SFAS No. 13, *Accounting
        for Leases* .
        The
        Company capitalized leased vehicles and recorded the related lease obligations
        totaling approximately $12.6 million (including rebates of $0.3 million)
        and
        $7.9 million during the nine-month periods ended September 30, 2006 and 2005,
        respectively. The Company also incurred net disposals of $6.7 million and
        $5.2
        million during the nine-months ended September 30, 2006 and 2005,
        respectively.
 
 **12.**  **Derivative
        Financial Instrument:**
 
 Effective
        October 2005, the Company entered into an amortizing three-year interest
        rate
        swap arrangement with a notional amount of $175 million at inception to apply
        a
        fixed interest rate against the six-year $175 million loan arrangement entered
        into to facilitate the acquisition of inChord. The Company entered into this
        interest rate swap agreement to modify the interest rate characteristics
        of its
        outstanding long-term debt. At inception, and at least quarterly thereafter,
        the
        Company assesses whether derivatives used to hedge transactions are highly
        effective in offsetting changes in the cash flow of the hedged item. To the
        extent the instruments are considered to be effective, changes in fair value
        are
        recorded as a component of other comprehensive income (loss). To the extent
        there is any hedge ineffectiveness, changes in fair value relating to the
        ineffective portion are immediately recognized in earnings (interest expense).
 
 From
        October 2005 to July 2006, the Company did not qualify for hedge accounting
        and
        recorded a $2.9 million reduction to interest expense relating to the
        mark-to-market adjustment, and a corresponding derivative asset of 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. These values represent the estimated amount
        the
        Company would receive or pay to terminate the agreement taking into
        consideration the difference between the contract rate of interest and rates
        currently quoted for agreements of similar terms and maturities.
 
 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 by performing a shock test to assess
        ineffectiveness and utilized the hypothetical model to measure ineffectiveness.
        The hypothetical derivative contains the same terms and conditions as the
        original derivative, but was initiated in July 2006. From July 2006 to September
        2006, the fair market value of the derivative asset decreased to approximately
        $1.0 million, resulting in a $1.9 million decrease in the derivative asset;
        approximately $1.6 million adjustment to Other Comprehensive Income; and
        $0.3
        million of interest expense due to ineffectiveness.
 
 **13.**  **Commitments
        and Contingencies:**
 
 The
        Company is subject to lawsuits, investigations and claims arising out of
        the
        conduct of its business, including those related to commercial transactions,
        contracts, government regulation and employment matters. Certain claims,
        suits
        and complaints have been filed or are pending against the Company. Certain
        such
        claims that are pending against Adheris are described in Part I, Item 3 of
        the
        Company's Annual Report on Form 10-K for the fiscal year ended December 31,
        2005. (John Weld Jr. on behalf of himself and all other similarly
        situated v. CVS Pharmacy, Inc., Elensys Care Services, Inc. and Glaxo Wellcome,
        Inc. (Civil Action No. 98-0897F); and (Utility Consumer Action Network v.
        Albertson's Inc. (Case No. GIC 830069)).  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.
  As
        described in Item 3 of the Company's Annual Report on Form 10-K for the fiscal
        year ended December 31, 2005, the class in the Weld action was decertified
        and
        the case dismissed as to the class claims in February 2006 due to the class
        plaintiffs' failure to prosecute, subject to a 60-day stay to allow a new
        party
        and a new law firm to continue the class claims. In June 2006, in conjunction
        with an extension of this 60-day period, the Weldcourt
        entered orders recertifying the class, permitting the class claims to go
        forward
        and ultimately permitting one of the original named class plaintiffs to remain.
        In October 2006, the defendants initiated motions for summary judgment and
        for
        reconsideration of the court's recertification of the plaintiff class. The
        Company intends to defend this suit vigorously.  In the opinion of
        management and based on the advice of legal counsel, no matters outstanding
        as
        of September 30, 2006 are likely to have a material adverse effect on inVentiv
        consolidated results of operations or financial position.
  Pursuant
            to the acquisition of inChord, the Company assumed a $7.5 million existing
            liability on inChord’s balance sheet relating to certain performance thresholds
            of inChord over a three-year period. The first $5.0 million of this obligation
            is to be paid by or for the account of the former shareholders of inChord;
            as
            such, this amount was recorded as a long-term receivable from the former
            shareholders as discussed in Note 9. The Company will continue to periodically
            monitor these performance thresholds, which may result in up to an additional
            $7.5 million of future expenses if and when it is probable that the additional
            thresholds will be met. As of September 30, 2006, the Company has not
            recorded
            any additional liability since the satisfaction of the additional performance
            thresholds has not occurred or been determined to be probable.
  **14.**  **Deferred
        Compensation:**
 
 On
        November 22, 2004, inVentiv adopted the Ventiv Health, Inc. Deferred
        Compensation Plan (the "Plan"), which was approved by inVentiv’s Board of
        Directors. The Plan provides eligible management and other highly compensated
        employees with the opportunity to defer, on a pre-tax basis, their salary,
        bonus, and other specified cash compensation and to receive the deferred
        amounts, together with a deemed investment return (positive or negative),
        either
        at a pre-determined time in the future or upon termination of employment
        with
        the Company or an affiliated employer participating in the Plan. The
        compensation deferrals were initiated in 2005. The deferred compensation
        liability of approximately $3.7 million and $1.9 million was included in
        other
        non-current liabilities in the Company’s Condensed Consolidated Balance Sheet as
        of September 30, 2006 and December 31, 2005, respectively. The Plan does
        not
        provide for the payment of above-market interest to participants.
 
 To
        assist
        in the funding of the Plan obligation, the Company participates in a
        corporate-owned life insurance program in a rabbi trust whereby it purchases
        life insurance policies covering the lives of certain employees, with the
        Company named as beneficiary. Rabbi trusts are grantor trusts generally set
        up
        to fund compensation for a select group of management or highly paid executives.
        The cash value of the life insurance policy at September 30, 2006 and December
        31, 2005 was approximately $3.6 million and $1.9 million, respectively, are
        currently classified in Deposits and Other Assets on the Company’s Condensed
        Consolidated Balance Sheet as of September 30, 2006.
 
 **15.**   **Income
        Taxes**
 
 In
        June
        2006, inVentiv recorded a tax benefit of approximately $9.1 million relating
        to
        net operating losses of a previously-divested unit. The Company’s management has
        determined that it is probable that this deferred tax asset will be utilized,
        thus reducing the valuation allowance during the second quarter of 2006
        accordingly. Excluding this one-time tax benefit and $0.1 million in other
        adjustments, inVentiv recorded a provision for income taxes on continuing
        operations using an estimated effective tax rate of 40.3% for the nine-month
        period ended September 30, 2006.
 
 In
        March
        2005, inVentiv recorded a tax benefit of approximately $1.6 million primarily
        related to prior period tax contingencies, which are no longer required.
        During
        the third quarter of 2005, the Company recorded a tax benefit of approximately
        $6.7 million primarily related to the reversal of previously recorded valuation
        allowance as the Company determined that it was more likely than not that
        an
        additional portion of its deferred tax asset was expected to be realized.
        Excluding these one-time tax benefits, inVentiv recorded a provision for
        income
        taxes on continuing operations using an estimated effective tax rate of 39.8%
        for the nine-month period ended September 30, 2005. The Company’s current
        effective tax rate is based on current projections for earnings in the tax
        jurisdictions in which inVentiv does business and is subject to taxation.
        The
        Company’s effective tax rate could fluctuate due to changes in earnings between
        operating entities and related tax jurisdictions, or due to the potential
        tax
        impact arising from previous divestitures.
  
  **INVENTIV
          HEALTH, INC.**
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS-Continued
 **16.**   **Stockholders’
        Equity**
  The
        following table describes the 2006 activity in the Company’s Stockholders’
Equity accounts for the nine months ended September 30, 2006:
  Common
                  Stock
              Additional
                  Paid-In
                Capital
              Accumulated
                  earnings
              Deferred
                  Compen-
                Sation
              Comprehensive
                Income
              Accumulated
                  Other Comprehensive Income (Losses) (1)
              TotalBalance
                  at December 31, 2005
              $28
              $233,441
              $23,092
              $(3,563)
              
              $221
              $253,219Net
                  income
              
              
              41,470
              
              $41,470
              
              41,470Net
                  change in effective portion of derivative
              
              
              
              
              (1,577)
              (1,577)
              (1,577)Foreign
                  currency translation adjustment
              
              
              
              
              252
              252
              252$40,145Reclassification
                  of unvested restricted shares to additional paid-in
                  capital
              
              (3,563)
              
              3,563
              
              
              --Vesting
                  of restricted shares
              
              2,186
              
              
              
              
              2,186Withhold
                  shares for taxes
              
              (104)
              
              
              
              
              (104)Tax
                  benefit from exercise of employee stock options and vesting of
                  restricted
                  stock
              
              7,820
              
              
              
              
              7,820Consultant
                  compensation
              
              399
              
              
              
              
              399Exercise
                  of stock options
              1
              4,656
              
              
              
              
              4,657Stock
                  option expense
              
              3,392
              
              
              
              
              3,392Issuance
                  of shares in connection with acquisitions
              1
              27,176
              
              
              
              
              27,177Balance
                  at September 30, 2006
              $30
              $275,403
              $64,562
              $--
              
              $(1,104)
              $338,891
 
 (1)
        -
        Accumulated Other Comprehensive Income (Losses) consists of currency translation
        fluctuations in the foreign bank accounts remaining from the divestitures
        of
        inVentiv’s European business units and the Company’s equity investments and
        minority interests in inVentiv Communications’ foreign business units;
        approximately ($1.6) million relates to the effective portion of the Company’s
        derivative instrument, as described in Note 12.
 
 **17.**  **Discontinued
        Operations:**
 
 For
        the
        nine months ended September 30, 2006 and 2005, earnings from discontinued
        operations, net of taxes, were approximately $1.3 million and $1.6 million,
        respectively. The gains on disposals of discontinued operations mainly consisted
        of contingency payments due from the Company’s previously-divested Germany-based
        unit.
  **18.**  **Related
        Parties:**
 
 The
        Company is currently in a lease with Olde Worthington Road LLC for inVentiv
        Communications’ current headquarters facility in Westerville, Ohio. This
        facility is partially owned by the current inVentiv Communications’ Chief
        Executive Officer (who is also a member of the Board of Directors), his brothers
        and other current employees of inVentiv Communications through their ownership
        in GSW Capital LLC. GSW Capital LLC is a 50% owner of Olde Worthington Road
        LLC.
        The term of the lease is fifteen years, and expires on September 30, 2015.
  **19.**  **Segment
        Information:**
 
 The
        Company currently manages three operating segments: inVentiv Clinical, inVentiv
        Communications and inVentiv Commercial, and its non-operating reportable
        segment, “Other”, which is based on the way management makes operating decisions
        and assesses performance. The following represents the Company’s reportable
        segments:
 
 ·
            inVentiv
                Clinical,
                which provides services related to permanent placement, clinical
                staffing,
                data collection and management and functional service
                provision 
 ·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                interactive communication development and patient and physician education 
 ·
            inVentiv
                Commercial,
                which consists of the Company’s outsourced sales and marketing teams,
                planning and analytics services, sample accountability and patient
                assistance businesses, marketing support services, professional
                development and training, and recruitment of sales representatives
                in the
                commercial services area. 
 ·
            Other,
                which encompasses the activities of the corporate management group.  In
        August
        2005, the Company acquired PRS, which is reported in the inVentiv Commercial
        segment from the date of its acquisition. In October 2005, the Company acquired
        inChord, which created the operating segment, inVentiv Communications, from
        the
        date of its acquisition. In February 2006, the Company acquired Adheris,
        which
        is reported in the inVentiv Communications segment from the date of its
        acquisition. In April 2006, the Company acquired Synergos, which is reported
        in
        the inVentiv Clinical segment from the date of its acquisition and JSAI,
        which
        is reported in the inVentiv Communications segment from the date of its
        acquisition.
   
 **INVENTIV
          HEALTH, INC.**
 NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL
          STATEMENTS-Continued
 Segment
        information for the three-months ended September 30, 2006 is as follows (in
        thousands):
 
 **inVentiv**
                **Clinical**
              
              **inVentiv
                  Communications**
              
              **inVentiv
                  Commercial**
              
              **Other**
              
              **Total**Revenues
              
              $
              40,079
              
              $
              66,877
              
              $
              92,779
              
              $
              --
              
              $
              199,735Less:
                  Intersegment revenues
              
              
              122
              
              
              372
              
              
              1,461
              
              
              --
              
              
              1,955Reported
                  Revenues
              
              $
              39,957
              
              $
              66,505
              
              $
              91,318
              
              $
              --
              
              $
              197,780Depreciation
                  and amortization
              
              
              415
              
              
              1,453
              
              
              3,284
              
              
              26
              
              
              5,178Interest
                  expense
              
              
              --
              
              
              52
              
              
              421
              
              
              3,381
              
              
              3,854Interest
                  income
              
              
              24
              
              
              213
              
              
              --
              
              
              446
              
              
              683Segment
                  income (loss) (1)
              
              $
              3,865
              
              $
              11,014
              
              $
              8,879
              
              $
              (6,441
              )
              $
              17,317
  Segment
        information for the three-months ended September 30, 2005 is as follows (in
        thousands):
 
 **inVentiv**
                **Clinical**
              
              **inVentiv
                  Communications**
              
              **inVentiv
                  Commercial**
              
              **Other**
              
              **Total**Revenues
              
              $
              30,388
              
              $
              --
              
              $
              98,055
              
              $
              --
              
              $
              128,443Less:
                  Intersegment revenues
              
              
              --
              
              
              --
              
              
              84
              
              
              --
              
              
              84Reported
                  Revenues
              
              $
              30,388
              
              $
              --
              
              
              97,971
              
              $
              --
              
              
              128,359Depreciation
                  and amortization
              
              
              310
              
              
              --
              
              
              4,266
              
              
              22
              
              
              4,598Interest
                  expense
              
              
              --
              
              
              --
              
              
              325
              
              
              7
              
              
              332Interest
                  income
              
              
              9
              
              
              --
              
              
              41
              
              
              285
              
              
              335Segment
                  income (loss) (1)
              
              $
              2,834
              
              $
              --
              
              $
              13,431
              
              $
              (2,393
              )
              $
              13,872
 
 For
        the
        nine-months ended September 30, 2006 is as follows (in
        thousands):
 
 **inVentiv**
                **Clinical**
              
              **inVentiv
                  Communications**
              
              **inVentiv
                  Commercial**
              
              **Other**
              
              **Total**Revenues
              
              $
              111,090
              
              $
              184,352
              
              $
              263,539
              
              $
              --
              
              $
              558,981Less:
                  Intersegment revenues
              
              
              278
              
              
              861
              
              
              3,406
              
              
              --
              
              
              4,545Reported
                  Revenues
              
              $
              110,812
              
              $
              183,491
              
              $
              260,133
              
              $
              --
              
              $
              554,436Depreciation
                  and amortization
              
              
              1,144
              
              
              3,785
              
              
              10,378
              
              
              65
              
              
              15,372Interest
                  expense
              
              
              --
              
              
              71
              
              
              1,235
              
              
              6,446
              
              
              7,752Interest
                  income
              
              
              47
              
              
              495
              
              
              --
              
              
              1,238
              
              
              1,780Segment
                  income (loss) (1)
              
              $
              8,789
              
              $
              28,519
              
              $
              30,238
              
              $
              (13,967
              )
              $
              53,579
 
 
 For
        the
        nine months ended September 30, 2005 is as follows (in thousands):
 
 **inVentiv**
                **Clinical**
              
              **inVentiv
                  Communications**
              
              **inVentiv
                  Commercial**
              
              **Other**
              
              **Total**Revenues
              
              $
              82,854
              
              $
              --
              
              $
              298,583
              
              $
              --
              
              $
              381,437Less:
                  Intersegment revenues
              
              
              8
              
              
              --
              
              
              424
              
              
              --
              
              
              432Reported
                  Revenues
              
              $
              82,846
              
              $
              --
              
              $
              298,159
              
              
              --
              
              
              381,005Depreciation
                  and amortization
              
              
              931
              
              
              --
              
              
              12,712
              
              
              65
              
              
              13,708Interest
                  expense
              
              
              --
              
              
              --
              
              
              928
              
              
              114
              
              
              1,042Interest
                  income
              
              
              21
              
              
              --
              
              
              100
              
              
              720
              
              
              841Segment
                  income (loss) (1)
              
              $
              6,941
              
              $
              --
              
              $
              40,492
              
              $
              (5,947
              )
              $
              41,486
  (1)
            Income
                from continuing operations before income tax provision, minority
                interest
                in income of subsidiary and income (loss) from equity
                investments (in
                    thousands)
                
                **September
                    30, 2006**
                
                **December
                    31, 2005**Total
                    Assets:inVentiv
                    Clinical
                
                $
                99,755
                
                $
                84,731inVentiv
                    Communications
                
                
                353,165
                
                
                248,986inVentiv
                    Commercial
                
                
                150,968
                
                
                171,468Other
                
                
                73,420
                
                
                78,709Total
                    assets
                
                $
                677,308
                
                $
                583,894
   
 **ITEM
        2.**  ***Management'sDiscussion
        and Analysis of Financial Condition and
        Results of Operations***
 
 This
        Management's Discussion and Analysis of Financial Condition and Results of
        Operations should be read in conjunction with the consolidated financial
        statements, accompanying notes and other financial information included in
        the
        Annual Report on Form 10-K for the years ended December 31, 2005, 2004 and
        2003.
 
 *Overview*
 
 inVentiv
        Health, Inc. (together with its subsidiaries, “inVentiv”, or the “Company”,
        formerly Ventiv Health Inc.) is a leading provider of value-added services
        to
        the pharmaceutical and life sciences industries. On June 14, 2006, we changed
        our name to inVentiv Health, Inc. (from Ventiv Health, Inc.) as part of a
        re-branding initiative that began when we acquired inChord. We support a
        broad
        range of clinical development, communications and commercialization activities
        that are critical to our customers' ability to complete the development of
        new
        drug products and medical devices and successfully bring them to market.
        Our
        goal is to assist our customers in meeting their objectives in each of our
        operational areas by providing our services on a flexible and cost-effective
        basis. We provide services to over 200 client organizations, including all
        top
        20 global pharmaceutical companies and numerous emerging and specialty
        biotechnology companies.
 
 Our
        service offerings reflect the changing needs of our clients as their products
        move through the late-stage development and regulatory approval processes
        and
        into product launch. We have established expertise and leadership in providing
        the services our clients require at each of these stages of product development
        and commercialization and seek to address their outsourced service needs
        on a
        comprehensive basis throughout the product life cycle. Our services assist
        our
        clients in developing, executing and monitoring strategic and tactical sales
        and
        marketing plans and programs for the promotion of pharmaceutical, biotechnology
        and other life sciences products.
  We
        currently serve our clients primarily through three business
        segments:
 
 ·
            inVentiv
                Clinical,
                which provides services related to permanent placement, clinical
                staffing,
                data collection and management and functional service provision. 
 ·
            inVentiv
                Communications,
                which provides services related to pharmaceutical advertising, branding,
                interactive communication development and patient and physician education. 
 ·
            inVentiv
                Commercial,
                which consists of our outsourced sales and marketing teams, planning
                and
                analytics services, sample accountability and patient assistance
                businesses, marketing support services, professional development
                and
                training, and recruitment of sales representatives in the commercial
                services area. 
 inVentiv
        Clinical was initially built through the acquisition of the Smith Hanley
        group
        of companies and HHI during the fourth quarter of 2004 and was augmented
        with
        the acquisition of Synergos in April 2006. inVentiv Communications was founded
        with the acquisition of inChord in October 2005 and also includes Adheris,
        which
        was acquired in February 2006, and JSAI, which was acquired in April 2006.
        inVentiv Commercial includes our outsourced sales and marketing teams, planning
        and analytics services and other services that we have operated since our
        inception and also includes Franklin Group, which was acquired in June of
        2004
        and PRS, which was acquired in August of 2005.
 
 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 increasing 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.
 
 Our
        strategy relies on both internal growth and acquisitions to meet our growth
        objectives. Our businesses have generated strong revenue growth for the past
        few
        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. As a result of these
        successes, our customer base has become increasingly diversified within the
        pharmaceutical and life sciences industries, with no single customer accounting
        for in excess of 10% of revenues. 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.
 
 We
        seek
        out acquisitions in order to fill strategic gaps, selectively strengthen
        existing franchises, further strengthen and broaden our clinical, communications
        and/or commercial 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*
 
 The
        pursuit of strategic acquisitions is a core part of our business strategy.
        We
        believe that our expertise in identifying potential acquisition targets,
        assessing their importance to our operational and growth objectives, diligencing
        and completing the acquisition of appropriate businesses and effectively
        integrating them with our existing operations is a significant competitive
        advantage. The following is a summary of our acquisitions to date:
  **Target**
                **Type
                    of Business**
                **Location**
                **Month
                    Acquired**MedConference
                Virtual
                    event services
                Pennsylvania
                November
                    2006ASERT
                Education
                    and training
                Pennsylvania
                November
                    2006JSAI
                Marketing
                    and communications agency
                Canada
                April
                    2006Synergos
                Clinical
                    trial management services
                Texas
                April
                    2006Adheris
                Patient
                    pharmaceutical compliance
                Massachusetts
                February
                    2006inChord
                Advertising
                    and communications support
                Ohio
                October
                    2005PRS
                Regulatory
                    compliance
                Pennsylvania
                August
                    2005HHI
                Data
                    management and statistical analyses
                Maryland
                November
                    2004Smith
                    Hanley
                Contract
                    research and clinical trial support
                Connecticut
                October
                    2004Franklin
                Patient
                    support programs
                New
                    Jersey
                June
                    2004
  Our
        acquisition activity adds complexity to the analysis of period-to-period
        financial results and makes direct comparison of those financial results
        difficult. Our acquisitions are accounted for using purchase accounting and
        the
        financial results of the acquired businesses are included in our financial
        statements from their acquisitions dates. A prior year period that ended
        before
        an acquisition was completed, however, will not include the corresponding
        financial results of the acquired business.
 Our
        financial statements for the third quarter and the first nine months of 2006
        include the financial results of inChord, PRS, Adheris, JSAI and Synergos.
 
 During
        2002 and 2003, we divested our Communications and European Contract Sales
        businesses. We have been receiving payments subsequent to some of these
        divestitures based on the subsequent earnings of the divested unit. For the
        nine
        months ended September 30, 2006 and 2005, we received approximately $1.3
        million
        and $1.6 million, respectively, relating to the Germany-based contract sales
        organization.
 
 *Critical
        Accounting Policies*
 
 The
        Company’s critical accounting policies are set forth in its Annual Report on
        Form 10-K for the year ended December 31, 2005. There has been no change,
        update
        or revision to the Company’s critical accounting policies subsequent to the
        filing of the Company’s Form 10-K for the year ended December 31, 2005, except
        for the adoption of Statement
        of Financial Accounting Standards No. 123 (“SFAS 123R”) , *Share-Based
        Payment* , as
        more
        fully described below.
  In
        December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
        123R, which establishes accounting for share-based awards exchanged for employee
        services and requires companies to expense the estimated fair value of these
        awards over the requisite employee service period. On April 14, 2005, the
        U.S. Securities and Exchange Commission adopted a new rule amending the
        effective dates for SFAS 123R. In accordance with the new rule, the Company
        adopted the accounting provisions of SFAS 123R as of January 1, 2006.
 
 inVentiv
        adopted SFAS 123R using the modified prospective transition method beginning
        January 1, 2006. Accordingly, during the nine-month period ended September
        30, 2006, inVentiv recorded stock-based compensation expense for awards granted
        prior to, but not yet vested, as of January 1, 2006, as if the fair value
        method required for pro forma disclosure under FAS 123 were in effect for
        expense recognition purposes, adjusted for estimated forfeitures. For
        stock-based awards granted after January 1, 2006, inVentiv recognized
        compensation expense based on the estimated grant date fair value method
        using
        the Black-Scholes valuation model. For these awards, compensation expense
        was
        recognized using a ratable amortization method.
 
 In
        the
        process of implementing SFAS 123R, during the fourth quarter of 2005,
        inVentiv analyzed certain key variables, such as expected volatility and
        expected term to determine an accurate estimate of these variables. As a
        result
        of this analysis, inVentiv determined that the expected volatility should
        be
        45%, while the expected term should range from 5.5 to 6 years. During the
        three
        months ended September 30, 2005, the Company utilized an expected volatility
        of
        82% and an expected term of 4 years. The variables used in early 2005 and
        prior
        years were based solely on historical data, while the current rates are more
        reflective of current and future periods. SFAS 123R requires that
        stock-based compensation expense be based on awards that are ultimately expected
        to vest. Stock-based compensation for the nine-month period ended September
        30,
        2006 has been reduced for estimated forfeitures. When estimating forfeitures,
        inVentiv considers voluntary termination behaviors as well as trends of actual
        option forfeitures.
 
 
 
  
  **Three-Months
        Ended September 30, 2006 Compared to Three-Months Ended September 30,
        2005**
 
 **Results
        of Operations**
 
 The
        following sets forth, for the periods indicated, certain components of our
        operating earnings, including such data stated as percentage of
        revenues:
  **For
                  the Three-Months Ended September 30,****2006**
              **2005****(in
                  thousands, except for per share data)**Revenues:
              
              Percentage(1)
              
              Percentage(1)inVentiv
                  Clinical
              $39,957
              20.2%
              $30,388
              23.7%inVentiv
                  Communications
              66,505
              33.6%
              --
              --inVentiv
                  Commercial
              91,318
              46.2%
              97,971
              76.3%Total
                  revenues
              197,780
              100.0%
              128,359
              100.0%Cost
                  of services(1)
                  (2):inVentiv
                  Clinical
              26,209
              65.6%
              20,077
              66.1%inVentiv
                  Communications
              40,582
              61.0%
              --
              --inVentiv
                  Commercial
              74,617
              81.7%
              77,687
              79.3%Total
                  cost of services
              141,408
              71.5%
              97,764
              76.2%Selling,
                  general and administrative expenses
              35,884
              18.1%
              16,726
              13.0%Total
                  operating income
              20,488
              10.4%
              $13,869
              10.8%Interest
                  expense
              (3,854)
              (1.9)%
              (332)
              (0.3)%Interest
                  income
              683
              0.3%
              335
              0.3%Income
                  from continuing operations before income tax provision,
                minority
                  interest in income of subsidiary and income from equity
                investments
              17,317
              8.8%
              13,872
              10.8%Income
                  tax (provision) benefit
              (7,169)
              (3.6)%
              1,161
              0.9%Income
                  from continuing operations before minority interest in
                income
                  of subsidiary and income from equity investments
              10,148
              5.2%
              15,033
              11.7%Minority
                  interest in subsidiary
              (230)
              (0.1)%
              --
              --Income
                  from equity investments
              277
              0.1%
              --
              --Income
                  from continuing operations
              10,195
              5.2%
              15,033
              11.7%Income
                  from discontinued operations:Gains
                  on disposals of discontinued operations, net of taxes
              49
              --
              78
              0.1%Income
                  from discontinued operations
              49
              --
              78
              0.1%Net
                  income
              $10,244
              5.2%
              $15,111
              11.8%Earnings
                  per share:Continuing
                  operations:Basic
              $0.35
              
              $0.56Diluted
              $0.34
              
              $0.53Discontinued
                  operations:Basic
              $0.00
              
              $0.00Diluted
              $0.00
              
              $0.01Net
                  earnings:Basic
              $0.35
              
              $0.56Diluted
              $0.34
              
              $0.54
 
 (1)
            Cost
                of services is expressed as a percentage of segment revenue. All
                other
                line items are displayed as a percentage of total
                revenues. (2)
            Cost
                of services includes reimbursed out of pocket
                expenses.  
  
 ***Revenues*** :
        Revenues increased by approximately $69.4 million, or 54.1%, to $197.8 million
        during the third quarter of 2006, from $128.4 million during the third quarter
        of 2005.
  inVentiv
        Clinical’s revenues were $40.0 million during the third quarter of 2006, an
        increase of $9.6 million compared to $30.4 million during the third quarter
        of
        2005. inVentiv Clinical revenues accounted for 20.2% of total inVentiv revenues
        during the third quarter of 2006. Revenues in the clinical staffing division
        were higher in 2006 predominantly due to increased placement of temporary
        personnel. The acquisition of Synergos in April 2006 also contributed to
        revenues for the third quarter of 2006.
  inVentiv
        Communications’ revenues were $66.5 million during the third quarter of 2006.
        inVentiv Communications revenues accounted for 33.6% of total inVentiv revenues
        during the third quarter of 2006. inVentiv Communications was established
        in
        October 2005 with the acquisition of inChord and also includes the operations
        of
        Adheris, which was acquired in February 2006, and JSAI, which was acquired
        in
        April 2006.
  Revenues
        in our inVentiv Commercial segment were $91.3 million during the third quarter
        of 2006, a decrease of $6.7 million, or 6.8% from the $98.0 million during
        the
        third quarter of 2005. inVentiv Commercial revenues accounted for 46.2% of
        total
        inVentiv revenues for the third quarter of 2006. This decrease resulted
        primarily from anticipated wind-downs of certain contracts, and was partially
        offset by certain other new contracts as well as a full quarter of revenue
        during 2006 from PRS, which was acquired in August 2005 and thus only
        contributing revenue for a partial quarter during the third quarter of 2005.
 
 ***Cost
        of Services*** :
        Cost of
        services increased by approximately $43.6 million or 44.6%, to $141.4 million
        during the third quarter of 2006 from $97.8 million in the third quarter
        of
        2005. Cost of services as a percentage of revenues decreased to 71.5% during
        the
        third quarter of 2006 from 76.2% during the third quarter of 2005. In addition
        to increases in variable costs associated with increased revenues, cost of
        services includes approximately $0.7 million of third quarter 2006 share-based
        compensation expense not recorded in prior years. On January 1, 2006, inVentiv
        adopted the provisions of Statement
        of Financial Accounting Standards No. 123 (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. In prior periods, inVentiv recorded
        compensation expense for unvested restricted shares over the applicable vesting
        periods. Starting in January 2006, as a result of adopting SFAS 123R, inVentiv
        has also recorded compensation expense for its stock options. For further
        details on the new accounting policy, see section on Critical Accounting
        Policies.
 
 inVentiv
        Clinical’s cost of services increased by approximately $6.1 million, or 30.5%,
        to $26.2 million during the third quarter of 2006 from $20.1 million during
        the
        third quarter of 2005. This increase is consistent with the increase in the
        segment’s revenue. Cost of services as a percentage of revenues slightly
        decreased from 66.1% during the third quarter of 2005 to 65.6% during the
        same
        period in 2006.
 
 inVentiv
        Communications, which was established in October 2005, contributed approximately
        $40.6 million to cost of sales during the third quarter of 2006. Cost of
        sales
        was 61.0% of this segment’s revenues.
 
 Cost
        of
        services at inVentiv Commercial decreased by approximately $3.1 million,
        or
        4.0%, to $74.6 million in the third quarter of 2006 from $77.7 million in
        the
        third quarter of 2005, mainly due to the decrease in revenues. Cost of services
        was 81.7% of inVentiv Commercial revenues during the third quarter of 2006,
        compared to 79.3% during the third quarter of 2005. Part of this increase
        is due
        to increased stock-based compensation expense due to the adoption of SFAS
        123R.
 
 ***Selling,
        General and Administrative Expenses (“SG&A”)*** :
        SG&A expenses increased by approximately $19.2 million, or 114.5%, to $35.9
        million during the third quarter of 2006 from $16.7 million during the third
        quarter of 2005. This increase was primarily due to SG&A expenses at
        inVentiv Communications, which was acquired in October 2005; increased
        compensation levels in 2006 versus 2005; and $1.5 million of share-based
        compensation expense during the third quarter of 2006 versus $0.2 million
        during
        the third quarter of 2005.
  SG&A
        expenses at inVentiv Clinical were approximately $9.9 million during the
        third
        quarter of 2006, compared to $7.5 million during the third quarter of 2005
        due
        to increased selling expense and commissions from additional business;
        additional staffing requirements; SG&A expense from Synergos, which was
        acquired on April 1, 2006; and increased compensation expense relating to
        the
        adoption of SFAS 123R.
  SG&A
        expenses at inVentiv Communications, which was acquired in October 2005,
        were
        approximately $15.1 million during the third quarter of 2006.
  SG&A
        expenses at inVentiv Commercial increased by approximately $0.8 million,
        or
        12.6%, to $7.4 million during the third quarter of 2006 from $6.6 million
        during
        the third quarter of 2005. This increase was mainly due to additional
        compensation expense recorded during the third quarter of 2006 that had not
        been
        recorded in prior years until the adoption of SFAS 123R as described above.
  Other
        SG&A was approximately $3.5 million for the third quarter of 2006, an
        increase of approximately $0.8 million or 31.3% from $2.7 million during
        the
        third quarter of 2005. The increase was mainly related to increases in
        stock-based compensation expense that was required to be accounted for beginning
        in 2006, additional staff hired in internal audit and higher compensation
        than
        in the previous year.
  ***Provision
        for Income Taxes*** :
        inVentiv recorded a provision for income taxes on continuing operations using
        an
        estimated effective tax rate of 40.9% for the third quarter of 2006. This
        was a
        result of increasing the full year rate from 40.0% utilized in prior quarters
        to
        40.3%. This full year rate excludes $0.1 million in other adjustments. During
        the third quarter of 2005, Ventiv recorded a tax benefit of approximately
        $6.7
        million primarily related to the reversal of reserves for net operating losses
        created by the divestiture and shutdown of certain former subsidiaries. Prior
        to
        this tax benefit, inVentiv’s quarterly effective tax rate was 39.8% for the
        three-month period ended September 30, 2005. Our current effective tax rate
        is
        based on current projections for earnings in the tax jurisdictions in which
        inVentiv does business and is subject to taxation. Our effective tax rate
        could
        fluctuate due to changes in earnings between operating entities and related
        tax
        jurisdictions, or due to the potential tax impact arising from previous
        divestitures.
 
 ***Net
        Income and Earnings Per Share (“EPS”)*** *:* inVentiv’s net income decreased by approximately $4.9 million to $10.2 million
        during the third quarter of 2006 from net income of $15.1 million during
        the
        third quarter of 2005, respectively. Diluted earnings per share decreased
        to
        $0.34 per share during the third quarter of 2006 from $0.54 per share during
        the
        third quarter of 2005.  Net income and EPS decreased in large part because
        of a $6.7 million tax benefit recorded during the third quarter of 2005,
        with no
        equivalent adjustment during the third quarter of 2006. Operating results
        were
        higher due to improved results in inVentiv Clinical and new acquisitions,
        offset
        by stock-based compensation expense recorded as a result of adopting SFAS
        123R.
  
  **Nine-Months
        Ended September 30, 2006 Compared to Nine-Months Ended September 30,
        2005**
 
 **Results
        of Operations**
 
 The
        following sets forth, for the periods indicated, certain components of our
        operating earnings, including such data stated as percentage of
        revenues:
   **For
                  the Nine-Months Ended September 30,****2006**
              
              **2005****(in
                  thousands, except for per share data)**Revenues:
              
              
              
              Percentage(1)
              
              
              
              Percentage(1)inVentiv
                  Clinical
              
              $
              110,812
              
              
              20.0
              %
              $
              82,846
              
              
              21.7
              %inVentiv
                  Communications
              
              
              183,491
              
              
              33.1
              %
              
              --
              
              
              --inVentiv
                  Commercial
              
              
              260,133
              
              
              46.9
              %
              
              298,159
              
              
              78.3
              %Total
                  revenues
              
              
              554,436
              
              
              100.0
              %
              
              381,005
              
              
              100.0
              %Cost
                  of services(1)(2):inVentiv
                  Clinical
              
              
              74,080
              
              
              66.9
              %
              
              54,355
              
              
              65.6
              %inVentiv
                  Communications
              
              
              113,217
              
              
              61.7
              %
              
              --
              
              
              --inVentiv
                  Commercial
              
              
              206,779
              
              
              79.5
              %
              
              236,881
              
              
              79.4
              %Total
                  cost of services
              
              
              394,076
              
              
              71.1
              %
              
              291,236
              
              
              76.4
              %Selling,
                  general and administrative expenses
              
              
              100,809
              
              
              18.2
              %
              
              48,082
              
              
              12.6
              %Total
                  operating income
              
              
              59,551
              
              
              10.7
              %
              
              41,687
              
              
              10.9
              %Interest
                  expense
              
              
              (7,752
              )
              
              (1.3
              )%
              
              (1,042
              )
              
              (0.3
              )%Interest
                  income
              
              
              1,780
              
              
              0.3
              %
              
              841
              
              
              0.3
              %Income
                  from continuing operations before income tax provision,
                minority
                  interest in income of subsidiary and income from equity
                investments
              
              
              53,579
              
              
              9.7
              %
              
              41,486
              
              
              10.9
              %Income
                  tax provision
              
              
              (12,605
              )
              
              (2.3
              )%
              
              (8,229
              )
              
              (2.2
              )%Income
                  from continuing operations before minority interest in
                income
                  of subsidiary and income from equity investments
              
              
              40,974
              
              
              7.4
              %
              
              33,257
              
              
              8.7
              %Minority
                  interest in subsidiary
              
              
              (905
              )
              
              (0.2
              )%
              
              --
              
              
              --Income
                  from equity investments
              
              
              133
              
              
              --
              
              
              --
              
              
              --Income
                  from continuing operations
              
              
              40,202
              
              
              7.2
              %
              
              33,257
              
              
              8.7
              %Income
                  from discontinued operations:Gains
                  on disposals of discontinued operations, net of taxes
              
              
              1,268
              
              
              0.3
              %
              
              1,640
              
              
              0.5
              %Income
                  from discontinued operations
              
              
              1,268
              
              
              0.3
              %
              
              1,640
              
              
              0.5
              %Net
                  income
              
              $
              41,470
              
              
              7.5
              %
              $
              34,897
              
              
              9.2
              %Earnings
                  per share:Continuing
                  operations:Basic
              
              $
              1.39
              
              
              
              
              $
              1.25Diluted
              
              $
              1.34
              
              
              
              
              $
              1.19Discontinued
                  operations:Basic
              
              $
              0.04
              
              
              
              
              $
              0.06Diluted
              
              $
              0.04
              
              
              
              
              $
              0.06Net
                  earnings:Basic
              
              $
              1.43
              
              
              
              
              $
              1.31Diluted
              
              $
              1.38
              
              
              
              
              $
              1.25
 
 (1)
            Cost
                of services is expressed as a percentage of segment revenue. All
                other
                line items are displayed as a percentage of total
                revenues. (2)
            Cost
                of services includes reimbursed out of pocket
                expenses.  
  
 ***Revenues*** :
        Revenues increased by approximately $173.4 million, or 45.5%, to $554.4 million
        in the nine-month period ended September 30, 2006, from $381.0 million in
        the
        nine-months ended September 30, 2005.
  inVentiv
        Clinical’s revenues were $110.8 million during the nine months ended September
        30, 2006, an increase of $28.0 million compared to $82.8 million during the
        nine-months ended September 30, 2005. Revenues in the clinical staffing division
        were higher in 2006 predominantly due to increased placement of temporary
        personnel. The clinical staffing division also typically experiences a decrease
        in personnel during the first quarter of a year as clients may decide not
        to
        continue to employ these temporary personnel. This “falloff” was less
        significant in 2006 than 2005. Finally, in April 2006, the Company acquired
        Synergos, which complements the segment by strengthening the functional
        outsourcing service.
  inVentiv
        Communications was acquired in October 2005 and contributed approximately
        $183.5
        million of revenues during the nine-months ended September 30, 2006. This
        segment specializes in pharmaceutical advertising, branding, marketing and
        medical education.
  Revenues
        in our inVentiv Commercial business were $260.1 million, a decrease of $38.1
        million or 12.8% from the $298.2 million in the same period in 2005. This
        decrease resulted primarily from anticipated wind-downs of certain contracts,
        and was partially offset by additional revenue during 2006 from PRS, which
        was
        acquired in August 2005.
 
 ***Cost
        of Services*** :
        Cost of
        services increased by approximately $102.8 million or 35.3%, to $394.0 million
        for the nine-months ended September 30, 2006 from $291.2 million in the
        nine-months ended September 30, 2005. Cost of services decreased as a percentage
        of revenues to 71.1% from 76.4% in the nine-months ended September 30, 2006
        and
        2005, respectively. Overall cost of services increased due to increased revenue
        over the same period; in addition, cost of services increased partially due
        to
        $1.9 million of share-based compensation expense not recorded in prior years.
        On
        January 1, 2006, inVentiv adopted the provisions of Statement
        of Financial Accounting Standards No. 123 (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. In prior periods, inVentiv recorded
        compensation expense for unvested restricted shares over the applicable vesting
        periods. Starting in January 2006, as a result of adopting SFAS 123R, inVentiv
        has also recorded compensation expense for its stock options. For further
        details on the new accounting policy, see section on Critical Accounting
        Policies below.
 
 inVentiv
        Clinical’s cost of services increased by approximately $19.7 million, or 36.3%,
        to $74.1 million during the nine months ended September 30, 2006 from $54.4
        million during the nine-months ended September 30, 2005. Cost of services
        as a
        percentage of revenues increased from 65.6% during the nine-months ended
        September 30, 2005 to 66.9% during the same period in 2006.
 
 inVentiv
        Communications was acquired in October 2005 and incurred approximately $113.2
        million of cost of sales during the nine months ended September 30, 2006.
        Cost
        of sales was 61.7% of this segment’s revenues. This segment specializes in
        pharmaceutical advertising, branding, marketing and medical
        education.
 
 Cost
        of
        services at inVentiv Commercial decreased by approximately $30.1 million,
        or
        12.7%, to $206.8 million in the nine months ended September 30, 2006 from
        $236.9
        million in the nine months ended September 30, 2005, mainly due to the decrease
        in revenues. Cost of services was 79.5% of inVentiv Commercial revenue in
        the
        nine months ended September 30, 2006, compared to 79.4% in the nine months
        ended
        September 30, 2005.
 
 ***Selling,
        General and Administrative Expenses (“SG&A”)*** :
        SG&A expenses increased by approximately $52.7 million, or 109.7%, to $100.8
        million from $48.1 million in the nine months ended September 30, 2006 and
        2005,
        respectively. This increase was primarily due to SG&A expenses at inVentiv
        Communications, which was acquired in October 2005; increased compensation
        levels in 2006 versus 2005; and $3.7 million of share-based compensation
        expense, which was new in 2006, as described above in the cost of services
        section.
  SG&A
        expenses at inVentiv Clinical was approximately $28.0 million in the first
        nine
        months of 2006, compared to $21.6 million during the same period in 2005
        due to
        increased selling expense and commissions from additional business; additional
        staffing requirements; SG&A expense from Synergos, which was acquired on
        April 1, 2006; and increased compensation expense relating to the adoption
        of
        SFAS 123R.
  SG&A
        expenses at inVentiv Communications, which was acquired in October 2005,
        was
        approximately $42.2 million in the first nine months of 2006.
  SG&A
        expenses at inVentiv Commercial increased by approximately $1.9 million,
        or
        9.7%, to $21.9 million in the nine months ended September 30, 2006 from $20.0
        million incurred in the nine months ended September 30, 2005. This increase
        was
        mainly due to the increased compensation expense attributable to the adoption
        of
        SFAS 123R this year.
  Other
        SG&A was approximately $8.8 million for the nine-months ended September 30,
        2006, an increase of approximately $2.3 million or 33.7% from $6.5 million
        for
        the nine-months ended September 30, 2005. The increase was mainly related
        to
        increases in stock-based compensation expense in 2006, additional staff hired
        in
        internal audit and higher compensation than the previous year.
  ***Provision
        for Income Taxes*** :
        In June
        2006, inVentiv recorded a tax benefit of approximately $9.1 million relating
        to
        net operating losses of a previously-divested unit. The Company’s management has
        determined that it is probable that this deferred tax asset will be utilized,
        thus reducing the valuation allowance during the second quarter of 2006
        accordingly. Excluding this one-time tax benefit and a $0.1 million in other
        adjustments, inVentiv recorded a provision for income taxes on continuing
        operations using an estimated effective tax rate of 40.3%, for the nine-month
        period ended September 30, 2006.
 
 In
        March
        2005, Ventiv recorded a tax benefit of approximately $1.6 million primarily
        related to prior period tax contingencies, which are no longer required.
        During
        the third quarter of 2005, Ventiv recorded a tax benefit of approximately
        $6.7
        million primarily related to the reversal of reserves for net operating losses
        created by the divestiture and shutdown of certain former subsidiaries. The
        aggregate effect of these benefits reduced Ventiv’s nine-month ended September
        30, 2005 effective tax rate from 39.8% to approximately 19.8%.
 
 Our
        current effective tax rate is based on current projections for earnings in
        the
        tax jurisdictions in which inVentiv does business and is subject to taxation.
        Our effective tax rate could fluctuate due to changes in earnings between
        operating entities and related tax jurisdictions, or due to the potential
        tax
        impact arising from previous divestitures.
 
 ***Discontinued
        Operations*** :
        For the
        nine months ended September 30, 2006 and 2005, earnings from discontinued
        operations, net of taxes, were approximately $1.3 million and $1.6 million,
        respectively. The gains on disposals of discontinued operations mainly consisted
        of contingency payments due from our previously-divested Germany-based unit.
 
 ***Net
        Income and Earnings Per Share (“EPS”)*** *:* inVentiv’s net income increased by approximately $6.6 million to $41.5 million,
        from net income of $34.9 million in the nine months ended September 30, 2006
        and
        2005, respectively. Diluted earnings per share increased to earnings of $1.38
        per share for the nine-month period ended September 30, 2006 from earnings
        of
        $1.25 per share for the nine-month period ended September 30, 2005. 
Operating results were higher due to increased results in inVentiv Clinical
        and
        the new acquisitions, offset by stock-based compensation expense recorded
        as a
        result of adopting SFAS 123R.
  
  
 **Liquidity
        and Capital Resources**
 
 At
        September 30, 2006, inVentiv had $67.1 million of unrestricted cash and
        equivalents, a decrease of $6.0 million from December 31, 2005. For the
        nine-months ended September 30, 2005 compared to September 30, 2006, cash
        provided by operations increased by $33.3 million from $28.0 million to $61.3
        million. Cash used in investing activities increased from $20.9 million to
        $61.5
        million for the nine-months ended September 30, 2005 and 2006, respectively.
        Cash used in financing activities increased from $5.9 million to $6.1 million
        over the same comparative periods.
 
 Cash
        provided by operations was $61.3 million during the nine-months ended September
        30, 2006, while cash provided by operations was $28.0 million in the nine-months
        ended September 30, 2005. This increase was, in large part, due to the increased
        operating cash flows from the inChord and other acquisitions. The accounts
        receivable and unbilled services balances increased by approximately $1.7
        million during the first nine months of 2006, versus an increase of
        approximately $18.3 million during the first nine months of 2005, both net
        of
        acquired balances from acquisitions. This was mainly due to the timing of
        collection of certain receivables during the periods and increased collections
        in 2006.
 
 Cash
        used
        in investing activities was $61.5 million for the nine-months ended September
        30, 2006 compared to $20.9 million used during the same period in 2005. During
        the nine months ended September 30, 2006, the Company paid approximately
        $50.4
        million of cash, net of cash acquired, for the acquisitions of Adheris, JSAI
        and
        Synergos, versus approximately $10.5 million for the acquisition of PRS during
        the nine-months ended September 30, 2005. In addition, the Company paid
        approximately $3.1 million more in the cash portion of earnout contingency
        payments during the first nine months of 2006 than during the first nine
        months
        of 2005, mainly due to the additional 2006 earnout payments for the businesses
        acquired during 2005.
 
 Cash
        used
        in financing activities was $6.1 million and $5.9 million, respectively,
        for the
        first nine months of 2006 and 2005. During the first nine months of 2006,
        inVentiv adopted SFAS 123 R, resulting in a $7.6 million excess tax benefit,
        which is displayed as a financing inflow and corresponding operating outflow.
        This did not exist during the first nine months of 2005. This financing inflow
        was offset by repayment of debt under the new credit facility established
        in
        October 2005, as more fully described below.
 
 The
        acquisition agreements entered into in connection with inVentiv’s 2004, 2005 and
        2006 acquisitions include earn-out
        provisions pursuant to which the sellers will become entitled to additional
        consideration, which may be material, if the acquired businesses achieve
        specified performance measurements. See footnote 4 to our condensed consolidated
        financial statements included in Part I, Item 1 of this Quarterly Report
        on Form
        10-Q.
  Our
        principal external source of liquidity is our syndicated, secured credit
        agreement, which we entered into with UBS AG, Stamford Branch, and others
        in
        connection with the inChord acquisition. As of September 30, 2006, the Company
        complied with the requirements of the credit facility. The key features of
        this
        credit facility are as follows:
   ·
            A
                $175 million term loan facility was made available to inVentiv in
                a single
                drawing at the time of the inChord transaction. The credit agreement
                also
                includes a $50 million revolving credit facility, of which $5 million
                is
                available for the issuance of letters of credit, and a $5 million
                swingline facility.  ·
            The
                term loan will mature on the sixth anniversary of the Credit Agreement,
                with scheduled quarterly amortization of 1% per year during years
                one
                through five and 95% during year six. The revolving loans will mature
                on
                the sixth anniversary of the Credit
                Agreement.  ·
            Amounts
                advanced under the credit agreement must be prepaid with a percentage,
                determined based on a leverage test set forth in the credit agreement,
                of
                Excess Cash Flow (as defined in the credit agreement) and the proceeds
                of
                certain non-ordinary course asset sales and certain issuances of
                debt
                obligations or equity securities of inVentiv and its subsidiaries,
                subject
                to certain exceptions. We may elect to prepay the loans, in whole
                or in
                part at any time, in certain minimum principal amounts, without penalty
                or
                premium (other than normal LIBOR break funding costs). Amounts borrowed
                under the credit agreement that are repaid or prepaid may not be
                reborrowed.  ·
            Interest
                on the loans accrue, at our election, at either (1) the Alternate
                Base
                Rate (which is the greater of UBS’s prime rate and federal funds effective
                rate plus 1/2 of 1%) or (2) the Adjusted LIBOR Rate, with interest
                periods
                determined at our option of 1, 2, 3 or 6 months (or, if the affected
                lenders agree, 9 months), in each case plus a spread based on the
                type of
                loan and method of interest rate determination
                elected.  ·
            The
                credit agreement contains, among other things, conditions precedent,
                representations and warranties, covenants and events of default customary
                for facilities of this type. Such covenants include certain limitations
                on
                indebtedness, liens, sale-leaseback transactions, guarantees, fundamental
                changes, dividends, acquisitions and transactions with affiliates.
                The
                credit agreement also includes covenants under which we are required
                to
                maintain a maximum leverage ratio and minimum interest rate coverage
                and
                fixed charge coverage ratios that vary based on the amount of time
                elapsed
                since the initial extension of credit. 
 Effective
        October 2005, we entered into a three- year swap arrangement for $175 million
        to
        hedge against the six-year $175 million loan arrangement entered into to
        facilitate the acquisition of inChord.
 
 We
        believe that our cash and equivalents, cash to be provided by operations
        and
        available credit under our credit facility will be sufficient to fund our
        current operating requirements over the next 12 months. However, we cannot
        assure you that these sources of liquidity will be sufficient to fund all
        internal growth initiatives, investments and acquisition activities that
        we may
        wish to pursue. If we pursue significant internal growth initiatives or if
        we
        wish to acquire additional businesses in transactions that include cash payments
        as part of the purchase price, we may pursue additional debt or equity sources
        to finance such transactions and activities, depending on market
        conditions.
 
 **Contractual
        Obligations**
 
 During
        2006, we acquired Synergos for approximately $5.8 million in cash and stock,
        JSAI for approximately $8.6 million in cash and stock and Adheris for
        approximately $67.0 million in cash and stock (in each case excluding direct
        acquisition costs and post-closing adjustments). Pursuant to the related
        acquisition agreements, we will be obligated to make certain earnout payments,
        which may be material, contingent on the financial performance of the acquired
        businesses during 2006 and in subsequent years, as described more fully in
        footnote 4 to our condensed consolidated financial statements included in
        Part
        I, Item 1 of this Quarterly Report on Form 10-Q.
 
 With
        the
        foregoing exceptions, there have been no material changes, outside the ordinary
        course of business, in our outstanding contractual obligations from those
        disclosed within “Management’s Discussion and Analysis of Financial Condition
        and Results of Operations” in our Annual Report on Form 10-K for the year ended
        December 31, 2005.
 
 **Off-Balance
        Sheet Arrangements**
 
 As
        of
        September 30, 2006, we did not have any off-balance-sheet arrangements, as
        defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
 
 **Forward-Looking
        Statements**
 
 This
        Quarterly Report on Form 10-Q, including this Management’s Discussion and
        Analysis of Financial Condition and Results of Operations, contains
“forward-looking statements” within the meaning of Section 27A of the Securities
        Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
        statements concern expectations, beliefs, projections, future plans and
        strategies, anticipated events or trends and similar expressions concerning
        matters that are not historical facts. Specifically, this report contains
        forward-looking statements regarding:
 
 ·
              our
                  estimates regarding our liquidity, capital expenditures and sources
                  of
                  both, and our ability to fund our operations and planned capital
                  expenditures for the foreseeable future;
 
 ·
              our
                  expectations regarding our pursuit of additional debt or equity
                  sources to
                  finance our internal growth initiatives or acquisitions;
                  and
 
 ·
              our
                  expectations regarding the impact of the adoption of certain accounting
                  standards.
 
 These
        forward-looking statements reflect our current views about future events
        and are
        subject to risks, uncertainties and assumptions. We wish to caution readers
        that
        certain important factors may have affected and could in the future affect
        our
        actual results and could cause actual results to differ significantly from
        those
        expressed in any forward-looking statement. The most important factors that
        could prevent us from achieving our goals, and cause the assumptions underlying
        forward-looking statements and the actual results to differ materially from
        those expressed in or implied by those forward-looking statements include,
        but
        are not limited to, the following:
 
 ·
              our
                  ability to sufficiently increase our revenues and maintain or decrease
                  expenses and cash capital expenditures to permit us to fund our
                  operations;
  ·
              our
                  ability to continue to comply with the 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 the Company’s Form 10-K for the year ended December
        31, 2005.
 
 
  
  
 **ITEM
        3.** ***Quantitative
        and Qualitative Disclosures About Market Risk*** ****
 
 **Long-Term
        Debt Exposure**
 
 At
        September 30, 2006, inVentiv had $165.0 million debt outstanding under its
        unsecured term loan. See Liquidity and Capital Resources section for further
        detail on inVentiv’s credit agreement. inVentiv will incur variable interest
        expense with respect to its outstanding loan. This interest rate risk may
        be
        partially offset by our derivative financial instrument, as described below.
        Based on our debt obligation outstanding at September 30, 2006, a hypothetical
        increase or decrease of 10% in the variable interest rate would have an
        immaterial effect on interest expense due to the fixed rate associated with
        the
        derivative financial instrument.
 
 **Derivative
        Financial Instrument**
 
 Effective
        October 2005, the Company entered into an amortizing three-year interest
        rate
        swap arrangement with a notional amount of $175 million at inception to apply
        a
        fixed interest rate against the six-year $175 million loan arrangement entered
        into to facilitate the acquisition of inChord. The Company entered into this
        interest rate swap agreement to modify the interest rate characteristics
        of its
        outstanding long-term debt. At inception, and at least quarterly thereafter,
        the
        Company assesses whether derivatives used to hedge transactions are highly
        effective in offsetting changes in the cash flow of the hedged item. To the
        extent the instruments are considered to be effective, changes in fair value
        are
        recorded as a component of other comprehensive income (loss). To the extent
        there is any hedge ineffectiveness, changes in fair value relating to the
        ineffective portion are immediately recognized in earnings (interest expense).
 
 From
        October 2005 to July 2006, the Company did not qualify for hedge accounting
        and
        recorded a $2.9 million reduction to interest expense relating to the
        mark-to-market adjustment, and a corresponding derivative asset of 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. These values represent the estimated amount
        the
        Company would receive or pay to terminate the agreement taking into
        consideration the difference between the contract rate of interest and rates
        currently quoted for agreements of similar terms and maturities.
 
 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 by performing a shock test to assess
        ineffectiveness and utilized the hypothetical model to measure ineffectiveness.
        The hypothetical derivative contains the same terms and conditions as the
        original derivative, but was initiated in July 2006. From July 2006 to September
        2006, the fair market value of the derivative asset decreased to approximately
        $1.0 million, resulting in a $1.9 million decrease in the derivative asset;
        approximately $1.6 million adjustment to Other Comprehensive Income; and
        $0.3
        million of interest expense due to ineffectiveness.
 
 **Foreign
        Currency Exchange Rate Exposure**
 
 inVentiv
        is not currently affected by foreign currency exchange rate exposure, except
        for
        any fluctuations in the foreign bank accounts remaining from the divestitures
        of
        inVentiv’s European business units and our equity investments and minority
        interests in inVentiv Communications’ foreign business units, which are not
        material to our financial statements. At September 30, 2006, the foreign
        currency translation account, which is part of accumulated other comprehensive
        earnings on the Condensed Consolidated Balance Sheet, was approximately $0.3
        million.
  **ITEM
        4.** ***Controls
        and Procedures***
  Based
        on
        their evaluation as of September 30, 2006, our Chief Executive Officer and
        Chief
        Financial Officer have concluded that our disclosure controls and procedures
        (as
        defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
        of 1934, as amended) were effective as of September 30, 2006. There were
        no
        changes in our internal controls over financial reporting during the quarter
        ended September 30, 2006 that have materially affected, or are reasonably
        likely
        to materially affect, our internal controls over financial
        reporting.
   
  
 **PART
        II.**  **OTHER
        INFORMATION**
 
 **ITEM
        1.**  ***Legal
        Proceedings*** ****
 
 The
        Company is subject to lawsuits, investigations and claims arising out of
        the
        conduct of its business, including those related to commercial transactions,
        contracts, government regulation and employment matters. Certain claims,
        suits
        and complaints have been filed or are pending against the Company. Certain
        such
        claims that are pending against Adheris are described in Part I, Item 3 of
        the
        Company's Annual Report on Form 10-K for the fiscal year ended December 31,
        2005
        (John Weld, Jr., on behalf of himself and all other similarly situated
        v. CVS
        Pharmacy, Inc., Elensys Care Services, Inc. and Glaxo Wellcome, Inc. (Civil
        Action No. 98-0897F); and (Utility Consumer Action Network v Albertson's
        Inc. (Case No. GIC 830069)). 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.
 As
          described
          in Item 3 of the Company's Annual Report on Form 10-K for the fiscal year
          ended
          December 31, 2005, the class in the Weld action was decertified and the
          case
          dismissed as to the class claims in February 2006 due to the class plaintiffs'
          failure to prosecute, subject to a 60-day stay to allow a new party and
          a new
          law firm to continue the class claims. In June 2006, in conjunction with
          an
          extension of this 60-day period, the Weld court
          entered orders recertifying the class, permitting the class claims to go
          forward
          and ultimately permitting one of the original named class plaintiffs to
          remain.
          In October 2006, the defendants initiated motions for summary judgment
          and for
          reconsideration of the court's recertification of the plaintiff class. We
          intend to defend this suit vigorously and do not believe it will have a
          material
          adverse effect on inVentiv.
  **ITEM
        1A.** ***Risk
        Factors*** ****
 
 There
        have been no material changes in the risk factors discussed in Item 1A of
        the
        Company’s Form 10-K for the year ended December 31, 2005.
 
 **ITEM 3.** ***Unregistered
        Sales of Equity Securities and Use of Proceeds.***
 
 Please
        see the disclosure in Item 5 of the report, which is incorporated herein
        by
        reference.
 
 **ITEM 5.** ***Other
        Information***
 
 In
        connection with the closing of the previously announced acquisition of the
        assets of The Maxwell Group, Inc. by the Company, on November 3, 2006, the
        Company issued for the account of The Maxwell Group, Inc. a total
        of 75,108 unregistered shares of common. The common stock issued in connection with
        the
        closing of the acquisition was exempt from registration pursuant to
        Section 4(2) of the Securities Act of 1933, as amended.
 
 In
        connection with the closing of the previously announced acquisition of the
        assets of American
        Speakers Education Research and Training, L.L.C. and
        DialogCoach, L.L.C. by the Company, on November 3, 2006, the Company issued
        for
        the account of American
        Speakers Education Research and Training, L.L.C. a total
        of 53,648 unregistered shares of common. The common stock issued in connection with
        the
        closing of the acquisition was exempt from registration pursuant to
        Section 4(2) of the Securities Act of 1933, as amended.
 
 **ITEM
        6.**  ***Exhibits***
 
 31.1
              
              Certification
                  by the Chief Executive Officer Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 200231.2
              
              Certification
                  by the Chief Financial Officer Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 200232.1
              
              Chief
                  Executive Officer’s Certification of Financial Statements Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 200232.2
              
              Chief
                  Financial Officer’s Certification of Financial Statements Pursuant to 18
                  U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
  
 
  
  
  **SIGNATURES**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 **INVENTIV
        HEALTH, INC.**
  Date: November
                8, 2006
              By:
              /s/ John
                R. EmeryJohn R. Emery
                Chief
                  Financial Officer
                (Principal
                  financial officer and duly authorized signatory)