424B3 1 g92632b3e424b3.htm PHARMA SERVICES INTERMEDIATE HOLDING CORP. PHARMA SERVICES INTERMEDIATE HOLDING CORP.
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-123250
PROSPECTUS
(QUINTILES LOGO)
$219,000,000
Pharma Services Intermediate Holding Corp.
Offer to Exchange
111/2% Senior Discount Notes due 2014,
which have been registered under the Securities Act of 1933,
for any and all outstanding
111/2% Senior Discount Notes due 2014,
which have not been registered under the Securities Act of 1933
 
    We are offering, upon the terms and subject to the conditions set forth in this prospectus and the accompanying letter of transmittal, to exchange $219 million aggregate principal amount at maturity of our outstanding 111/2% Senior Discount Notes due 2014, which are referred to as the private notes, for an equal principal amount of 111/2% Senior Discount Notes due 2014, which are referred to as the exchange notes, with substantially identical terms. The exchange notes are registered under the Securities Act of 1933, as amended, or the Securities Act, and, as a result, will generally not be subject to the transfer restrictions applicable to the private notes. We are a wholly owned subsidiary of Pharma Services Holding, Inc., or Pharma Services. We own 99.2% of the outstanding common stock of Quintiles Transnational Corp., or Quintiles, with Pharma Services owning the remainder.
    This exchange offer expires at 5:00 p.m., New York City time, on May 6, 2005, unless extended. You must tender your private notes by the expiration date to obtain exchange notes and the liquidity benefits the exchange notes offer.
    The exchange notes will accrete at a rate of 111/2% per annum, compounded semiannually on April 1 and October 1 of each year to, but not including, April 1, 2009. Thereafter, cash interest on the exchange notes will accrue at a rate of 111/2% per annum and, subject to specified limitations, will be payable semiannually in arrears on April 1 and October 1 of each year, commencing on October 1, 2009, until maturity. See “Description of the Notes — Principal, Maturity and Interest.” The exchange notes will mature on April 1, 2014. We may redeem some or all of the exchange notes at any time on or after April 1, 2009. We may redeem all or a portion of the exchange notes prior to April 1, 2009 at a price equal to 100% of the accreted value thereof, plus a “make-whole” premium. In addition, prior to April 1, 2007, we may redeem up to 40% of the aggregate principal amount at maturity of the exchange notes from the proceeds of certain equity offerings. If we undergo a change of control or sell certain assets, we may be required to offer to purchase the exchange notes from holders. Additionally, upon a change of control at any time prior to April 1, 2007, we may redeem all, but not less than all, of the exchange notes at a redemption price equal to 100% of the accreted value of the exchange notes on the redemption date plus a “change of control” premium. The redemption prices and other redemption terms are discussed under the caption “Description of the Notes — Optional Redemption.”
    The exchange notes are unsecured senior obligations of ours, are not guaranteed and are structurally subordinated in right of payment to all obligations of our subsidiaries, including Quintiles.
    No public market exists for the private notes or the exchange notes. We do not intend to list the exchange notes on any securities exchange or to seek approval for quotation through any automated quotation system.
    Investing in the exchange notes involves risks. See “Risk Factors” beginning on page 14.
    Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for private notes where such private notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, starting on the expiration date and ending on the close of business 90 days after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution.”
    NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is April 5, 2005.


FORWARD-LOOKING STATEMENTS
SUMMARY
RISK FACTORS
THE EXCHANGE OFFER
THE PHARMA SERVICES TRANSACTION
USE OF PROCEEDS
CAPITALIZATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
PRINCIPAL STOCKHOLDERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
DESCRIPTION OF OTHER INDEBTEDNESS
DESCRIPTION OF THE NOTES
BOOK-ENTRY; DELIVERY AND FORM
UNITED STATES TAXATION
Applicable High Yield Discount Obligations
Sale, Exchange and Retirement of Notes
PLAN OF DISTRIBUTION
LEGAL MATTERS
EXPERTS
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF PHARMA SERVICES INTERMEDIATE HOLDING CORP. AND SUBSIDIARIES


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      You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus may only be used where it is legal to sell these securities. The information about us contained in this prospectus is materially complete; however, you should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus.
 
TABLE OF CONTENTS
         
    Page
     
Forward-Looking Statements
    ii  
Summary
    1  
Risk Factors
    14  
The Exchange Offer
    29  
The Pharma Services Transaction
    41  
Use of Proceeds
    41  
Capitalization
    42  
Unaudited Pro Forma Condensed Consolidated Financial Information
    43  
Selected Historical Consolidated Financial Data
    47  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
    49  
Business
    73  
Management
    92  
Principal Stockholders
    109  
Certain Relationships and Related Transactions
    115  
Description of Other Indebtedness
    117  
Description of the Notes
    121  
Book-Entry; Delivery and Form
    172  
United States Taxation
    175  
Plan of Distribution
    181  
Legal Matters
    182  
Experts
    182  
Where You Can Obtain Additional Information
    182  
Index to Consolidated Financial Statements of Pharma Services Intermediate Holding Corp. and Subsidiaries
    F-1  
 
      No person is authorized in connection with this exchange offer to give any information or to make any representation not contained in this prospectus, and, if given or made, such other information or representation must not be relied upon as having been authorized by us. The information contained herein is as of the date hereof and is subject to change, completion or amendment without notice. Neither the delivery of this prospectus at any time nor the offer, sale or delivery of any note shall, under any circumstances, create any implication that there has been no change in the information set forth herein or in our affairs since the date hereof.
      In making an investment decision regarding the exchange notes, you must rely on your own examination of us and the terms of this exchange offer, including the merits and risks involved. Neither we nor any of our representatives is making any representation to any offeree or purchaser of the exchange notes regarding the advisability or legality of an investment therein by such offeree or purchaser under any applicable legal investment or similar laws or regulations. You should not construe the contents of this prospectus as legal, business or tax advice, and you should consult your own counsel, accountants and other advisors as to the legal, tax, business, financial and related aspects of a purchase of the exchange notes.
      This prospectus contains summaries believed to be accurate with respect to certain documents, but reference is made to the full text of the actual documents for complete information. All such summaries are qualified in their entirety by such reference. Copies of the documents that have been filed as exhibits to the registration statement, of which this prospectus is a part, can be obtained from the Securities and Exchange Commission or from us. See “Where You Can Obtain Additional Information.”


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      This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the notes to you or any person in any jurisdiction where it is unlawful to make such an offer or solicitation.
NOTICE TO NEW HAMPSHIRE RESIDENTS
      NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED, 1955, AS AMENDED, WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
FORWARD-LOOKING STATEMENTS
      This prospectus contains forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words “may,” “will,” “anticipate,” “estimate,” “believe,” “continue” or “target” or the negative thereof or similar words and expressions are intended to identify forward-looking statements. Except as required under the federal securities laws or by the rules and regulations of the Securities and Exchange Commission, or SEC, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. The many factors that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements include, without limitation:
  •  the ability of our subsidiaries to make distributions to us in amounts sufficient to make required interest and principal and other payments on the notes offered hereby;
 
  •  Quintiles’ and Intermediate Holding’s substantial indebtedness;
 
  •  Quintiles’ and Intermediate Holding’s ability to comply with certain covenants in our respective debt documents;
 
  •  Quintiles’ ability to maintain large customer contracts or to enter into new contracts;
 
  •  variation in the actual savings and operating improvements resulting from Quintiles’ restructurings;
 
  •  changes in existing, and the adoption of new, regulations affecting the pharmaceutical industry;
 
  •  changes in trends in the pharmaceutical industry;
 
  •  the risk that the market for Quintiles’ products and services will not grow as expected;
 
  •  Quintiles’ ability to efficiently distribute backlog among project management groups and match demand to resources;
 
  •  delays in obtaining or failure to receive required regulatory approvals of Quintiles’ customers’ projects or products;

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  •  the risk that certain of Quintiles’ existing transactions, including those undertaken through its PharmaBio Development Group, will not generate revenues, profits or return on investment at the rate or levels Quintiles expects or that royalty revenues under the PharmaBio Development Group’s arrangements may not be adequate to offset Quintiles’ upfront and ongoing expenses in providing sales and marketing services or in making milestone and marketing payments;
 
  •  risks and potential liabilities associated with supervising clinical trials, data and laboratory analysis, patient recruitment and operating laboratories used for such purposes, including risks relating to the personal injury or death of persons participating in the clinical trials;
 
  •  risks and potential liabilities associated with assertions by either regulatory agencies or customers that Quintiles has performed its services improperly, which, if proven, could subject Quintiles to substantial damages, fines or penalties;
 
  •  the risk that new and proposed laws and regulations regarding confidentiality of patients’ information could result in increased liability risks or costs or limit Quintiles’ service offerings;
 
  •  Quintiles’ ability to operate successfully in a new line of business;
 
  •  the risk that Verispan, L.L.C., our joint venture with McKesson Corporation, relating to the informatics business, will not be successful;
 
  •  changes in the economic and geopolitical conditions in the various countries in which Quintiles conducts operations;
 
  •  the general possibility or express threat of terrorist attacks such as those that occurred on September 11, 2001 and other terrorist acts or disruptive events;
 
  •  the outbreak or escalation of international hostilities, such as those currently in effect in Afghanistan, Iraq and the Middle East generally; and
 
  •  other factors disclosed in this prospectus under the caption “Risk Factors.”

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SUMMARY
      This summary may not contain all of the information that may be important to you. You should read this summary together with the entire prospectus, including the risk factors and our financial statements and the related notes included elsewhere herein, before making a decision with respect to exchanging the private notes. Unless otherwise indicated or the context otherwise requires:
  •  “We,” “us” and “our” refer to Pharma Services Intermediate Holding Corp., a Delaware corporation, and its subsidiaries on a consolidated basis, including Quintiles on a Predecessor basis prior to its acquisition on September 25, 2003;
 
  •  “Intermediate Holding” refers to Pharma Services Intermediate Holding Corp. on an unconsolidated basis;
 
  •  “Private notes” refers to our outstanding 111/2% Senior Discount Notes due 2014;
 
  •  “Exchange notes” refers to our 111/2% Senior Discount Notes due 2014 being offered hereby;
 
  •  “Notes” refers collectively to the exchange notes being offered hereby and the private notes;
 
  •  “Pharma Services” refers to Pharma Services Holding, Inc., a Delaware corporation and the parent of Intermediate Holding;
 
  •  “Quintiles” refers to Quintiles Transnational Corp., a North Carolina corporation and a direct subsidiary of Intermediate Holding; and
 
  •  “Pharma Services transaction” refers collectively to Pharma Services’ acquisition of Quintiles, sometimes referred to as the “merger,” the equity investments in Pharma Services by One Equity Partners LLC, or One Equity, Dennis B. Gillings, Ph.D., Executive Chairman, Chief Executive Officer and founder of Quintiles, and his affiliates, certain members of senior management, Texas Pacific Group, through various of its affiliates, sometimes collectively referred to as “TPG,” Temasek Holdings (Private) Limited, through various of its affiliates, sometimes referred to as “Temasek,” and other investors, the funding of Quintiles’ secured credit facility and the offering of senior subordinated notes by Quintiles, each as further described herein.
      The exchange notes offered hereby are the exclusive obligations of Intermediate Holding and not of Pharma Services or any of Intermediate Holding’s subsidiaries. Intermediate Holding is a holding company with no income from operations or physical assets. Intermediate Holding operates its business through and receives all of its income from Quintiles and its subsidiaries. Intermediate Holding was incorporated in the State of Delaware on August 18, 2003 in anticipation of the acquisition of Quintiles by Pharma Services. Intermediate Holding owns 99.2% of the outstanding common stock of Quintiles, with Pharma Services owning the remainder. Intermediate Holding’s only asset is its ownership of Quintiles’ common stock.
Company Overview
      We operate our business through Quintiles and its subsidiaries, which provide a full range of integrated product development and commercial development solutions to the pharmaceutical, biotechnology and medical device industries. Based on our competitors’ press releases and public filings with the SEC, we are the largest company in the pharmaceutical outsourcing services industry as ranked by 2004 gross revenues. We also provide market research services and strategic analyses to support healthcare decisions and healthcare policy consulting to governments and other organizations worldwide. This broad range of services helps our customers lower their costs, reduce the length of time from the beginning of development to peak sales of a new drug or medical device and increase the sales of their products.
      Our business is organized into three segments: the Product Development Group, the Commercial Services Group and the PharmaBio Development Group. The combination of these three business segments, together with Verispan, L.L.C., or Verispan, our joint venture with McKesson Corporation, or McKesson, which provides research and market data to help drug sponsors better market their products,

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enables us to provide a broad range of outsourcing services to the pharmaceutical and biotechnology industries. We believe this comprehensive suite of services offers customers the opportunity to outsource through Quintiles all key phases of a product’s development and sales from the preclinical phase through patent expiration and beyond.
      Product Development Group. Our Product Development Group provides global expertise in drug development from early compound analysis through regulatory submission. Our capabilities span preclinical and all phases of clinical testing with particular strength in Phase I, Phase II and Phase III clinical studies. The Product Development Group has been divided into two lines of business: Early Development and Laboratory Services, which focuses on early stage pharmaceutical development and laboratory services for the later phases, and Clinical Development Services, which specializes in clinical trials for regulatory approval of products under investigation. We also emphasize and target strong opportunity in Phase IIIb and Phase IV clinical and marketing studies, traditionally known as Late Phase studies, which are developing into a third line of business in the Product Development Group called Strategic Research Services, or SRS. Late Phase studies may be recommended by regulators and utilized by our customers to assess safety issues and responses to drug therapy for commonly occurring patient profiles.
      Commercial Services Group. Our Commercial Services Group provides our customers with a comprehensive range of specialized pre-launch, launch and post-launch fee-for-service contract sales and strategic marketing services. The Commercial Services Group is comprised of our Commercialization business and our Medical Communication and Consulting business. Our Commercial Services Group not only provides contract sales, but also provides contract marketing and other services. This group delivers integrated, strategic and tactical solutions in sales and marketing across the product life cycle for pharmaceutical and biotechnology companies as well as for other entities across the healthcare spectrum. In addition, our Commercial Services Group provides strategic health and human services consulting for customers including hospitals, long-term care facilities, foundations, managed care organizations, employers, the military and federal and state governments.
      PharmaBio Development Group. Our PharmaBio Development Group enters into partnering arrangements with certain of our customers. These arrangements typically involve providing funding to the customer, either through direct payments or loans (sometimes convertible into capital stock of the customer) to help customers develop and/or market their particular drug(s). We also may invest in our customers’ equity and/or provide services through our Commercial Services Group, sometimes at our cost, in connection with these arrangements. These arrangements often grant us royalties or commissions based on sales of the customer’s product. We believe these partnering arrangements allow us to explore new opportunities and areas for incremental growth in a controlled manner that draws upon our skill and industry knowledge. Our professional clinical staff numbers in the thousands and provides a very broad base of knowledge and experience with considerable numbers of pharmaceutical products. This expertise enables us to conduct an in-depth assessment of a product’s potential in the marketplace before we enter into partnering arrangements with any of our customers. At the end of 2001, the PharmaBio Development Group expanded its scope of activities to include the acquisition of rights to market products.
      Dennis B. Gillings, Ph.D. founded Quintiles in 1982 to offer biostatistics and data management services to the pharmaceutical industry. Since that time, we have continued to expand the scope of our services and our geographic presence to support the needs of our customers on a worldwide basis. In recent years, we have focused our efforts on increasing the efficiency of our operating units, creating new services, consolidating our previous acquisitions, expanding our international presence, particularly in Japan, and increasing our presence with new customers, including biotechnology companies.
The Pharma Services Transaction
      On September 25, 2003, Pharma Services acquired all of the issued and outstanding common stock of Quintiles. Intermediate Holding currently holds 99.2% of the outstanding common stock of Quintiles with Pharma Services owning the remainder. Intermediate Holding is wholly owned by Pharma Services.

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Pharma Services was formed for purposes of the going private transaction by Dennis B. Gillings, Ph.D., Quintiles’ Executive Chairman, Chief Executive Officer and founder, and One Equity.
      The following table sets forth the sources and uses of funds to finance the Pharma Services transaction:
                         
Sources:       Uses:    
             
(dollars in thousands)
Quintiles’ cash
  $ 592,009     Purchase of outstanding Quintiles common stock and options to purchase common stock   $ 1,736,211  
Revolving credit facility(1)
    0     Indebtedness to be paid     912  
Term loan B
    310,000     Fees and expenses(4)     146,354  
                 
Quintiles’ 10% senior subordinated notes due 2013
    450,000              
Cash equity investments in Pharma Services(2)
    424,406              
Equity rollover into Pharma Services(3)
    107,062              
                 
 
Total sources
  $ 1,883,477       Total uses   $ 1,883,477  
                 
 
(1)  $75.0 million is currently available.
 
(2)  This amount includes cash equity investments of $222.3 million from One Equity, $90.0 million from TPG and $90.0 million from Temasek.
 
(3)  Includes $93.7 million of Quintiles’ common stock and options to purchase Quintiles’ common stock rolled over by Dr. Gillings and his affiliates.
 
(4)  Transaction fees and expenses include discounts to the initial purchasers of Quintiles’ senior subordinated notes, commitment and financing fees payable in connection with Quintiles’ senior secured credit facilities, change of control payments to certain of Quintiles’ employees whose employment was terminated following the consummation of the Pharma Services transaction and legal, accounting, advisory and other costs paid in connection with the Pharma Services transaction.
      On March 18, 2004, we completed the offering of the private notes with aggregate gross proceeds of $124.7 million. We used the net proceeds of that offering to pay a dividend on our common stock to Pharma Services. Pharma Services used the funds for the repurchase of a portion of its outstanding shares of preferred stock on a pro rata basis and for the payment of accrued and unpaid dividends on the stock repurchased.

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Corporate Structure
(CORPORATE STRUCTURE)
Intermediate Holding
      Intermediate Holding was incorporated on August 18, 2003 and is a holding company with no operations or physical assets. The only assets that Intermediate Holding owns are shares of Quintiles common stock. Intermediate Holding operates its business through and receives all of its income from Quintiles and its subsidiaries. Intermediate Holding owns 99.2% of the outstanding common stock of Quintiles, with Pharma Services owning the remainder. Our net loss comprises 99.2% of Quintiles’ net income ($1.0 million) reduced by $8.0 million of interest expense related to our senior discount notes, net of income tax benefit of $4.0 million, and $0.1 million of selling, general and administrative expenses.
      As a result of the Pharma Services transaction, Pharma Services Acquisition Corp., a subsidiary of Pharma Services, was merged with and into Quintiles, and Quintiles, as the surviving corporation, became an indirect wholly owned subsidiary of Pharma Services. Consequently, our results of operations, financial condition and cash flows prior to the date of the Pharma Services transaction are the same as Quintiles and are presented as the “predecessor.” The financial effects of the Pharma Services transaction and our results of operations, financial position and cash flows as the owner of 99.2% of the outstanding common stock of the surviving corporation following the Pharma Services transaction are presented as the “successor.” To clarify and emphasize that the successor company has been presented on an entirely new basis of accounting, we have separated predecessor and successor operations with a vertical black line, where appropriate.
Our Investors
      Pharma Services, directly and through its wholly owned subsidiary Intermediate Holding, owns the entire equity interest of Quintiles. Pharma Services was formed by Dennis B. Gillings, Ph.D., Quintiles’ Executive Chairman, Chief Executive Officer and founder, and One Equity. As of February 11, 2005, Dr. Gillings and his affiliates own approximately 19.6% of the outstanding shares of common stock of Pharma Services and 17.0% of its outstanding preferred stock. The total cash investment in Pharma Services was approximately $424.4 million, including approximately $90.0 million invested by each of Temasek and TPG and approximately $222.3 million by One Equity. Pharma Services also has an equity incentive plan under which its employees and directors may purchase up to 9,634,805 restricted shares of Pharma Services common stock, or be granted options to purchase up to 4,817,403 shares of Pharma Services common stock. As of February 11, 2005, 8,528,500 restricted shares of Pharma Services common stock have been purchased under the equity incentive plan and remain outstanding, and 3,812,500 options to purchase shares of Pharma Services common stock have been granted under the equity incentive plan.

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      One Equity manages $2.0 billion of investments and commitments for J.P. Morgan Chase & Co. in direct private equity transactions as well as venture and management buyout funds. One Equity’s investment professionals are located across North America and Europe, with offices located in New York, Chicago, Detroit, and Frankfurt, Germany. One Equity’s focus is on making majority-ownership investments in late-stage, middle market companies, with an emphasis on corporate partnerships and divestitures. Some of its recent investments include Polaroid Corporation, Ability One Corporation, Medex, Inc. and Mauser-Group.
      TPG was founded by David Bonderman, James G. Coulter and William S. Price, III in 1993 to pursue public and private investment opportunities through a variety of methods, including leveraged buyouts, recapitalizations, joint ventures and strategic public securities investments. TPG Partners III, L.P. (together with certain parallel investment entities) is a $4.0 billion private equity fund formed in 1999 to make investments in corporate acquisitions and is the principal TPG fund investing in Pharma Services. TPG and its predecessor funds currently manage over $8.0 billion of committed capital. The principals of TPG have extensive experience with public and private investments executed through a variety of methods, including leveraged buyouts, recapitalizations, joint ventures and strategic public securities investments. Over the past decade, TPG and its principals have invested over $6.0 billion of equity capital in over 50 transactions. TPG has extensive experience in the healthcare sector, including investments in Oxford Health Plans, GMP Companies and PPOM. Other significant investments include Continental Airlines (CAL), Del Monte Foods (DLM), Seagate Technology (STX), ON Semiconductor (ONNN), Findexa, J. Crew Group, Petco (PETC), Punch Taverns, Gate Gourmet and Burger King.
      Temasek is an investment holding company based in Singapore. Established in 1974, it holds and manages investments in companies which are involved in a wide range of business activities, from port, shipping and logistics, to banking and financial services, airlines, telecoms and media, power and utilities, and rail. Many of these companies are leading companies in Singapore, including Singapore Airlines, Singapore Telecoms, Singapore Technologies, Neptune Orient Lines-APL, PSA Corporation, DBS Bank and Singapore Power.
Principal Executive Office
      Our principal executive office is located at 4709 Creekstone Drive, Suite 200, Durham, North Carolina 27703. Our telephone number at that address is (919) 998-2000. Quintiles’ website address is www.quintiles.com. Information on Quintiles’ website is not incorporated into this prospectus and is not deemed to be a part of this prospectus. Quintiles® is our principal registered trademark.

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The Exchange Offer
The Exchange Offer We are offering to exchange up to $219.0 million aggregate principal amount at maturity of our 111/2% Senior Discount Notes due 2014, or the exchange notes, for up to $219.0 million aggregate principal amount at maturity of our 111/2% Senior Discount Notes due 2014 that are currently outstanding, or the private notes. The exchange offer is intended to satisfy certain obligations under our registration rights agreement (see “The Exchange Offer — Purpose of the Exchange Offer”). Private notes may only be exchanged in $1,000 principal increments. In order to be exchanged, a private note must be properly tendered and accepted. All private notes that are validly tendered and not validly withdrawn prior to the expiration of the exchange offer will be exchanged.
 
Resales Without Further Registration Based on an interpretation by the staff of the SEC, set forth in no-action letters issued to third parties, we believe that the exchange notes issued pursuant to the exchange offer may be offered for resale, resold or otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
 
• you are acquiring the exchange notes issued in the exchange offer in the ordinary course of your business;
 
• you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in, the distribution of the exchange notes issued to you in the exchange offer in violation of the provisions of the Securities Act; and
 
• you are not our “affiliate,” as defined under Rule 405 of the Securities Act.
 
In addition, each broker-dealer that receives exchange notes for its own account in exchange for private notes, where such private notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.”
 
The letter of transmittal states that, by so acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for private notes where such private notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed to use our reasonable best efforts to make this prospectus, as amended or supplemented, available to any broker-dealer for a period of 90 days after the consummation of the exchange offer, for use in connection with any such resale. See “Plan of Distribution.”

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Expiration Date 5:00 p.m., New York City time, on May 6, 2005 unless we extend the exchange offer.
 
Conditions to Exchange Offer The exchange offer is subject to customary conditions which include, among other things, any applicable law or any applicable interpretation of the staff of the SEC which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer. The exchange offer is not conditioned upon any minimum principal amount of private notes being submitted for exchange. See “The Exchange Offer — Conditions.”
 
Procedures for Participating in Exchange Offer If you wish to participate in the exchange offer, you must complete, sign and date an original or faxed letter of transmittal in accordance with the instructions contained in the letter of transmittal accompanying this prospectus. Then you must mail, fax or deliver the completed letter of transmittal, together with the notes you wish to exchange and any other required documentation to Wells Fargo Bank, N.A., which is acting as exchange agent, on or before the expiration date. By signing the letter of transmittal, you will represent that:
 
• you are acquiring the exchange notes issued in the exchange offer in the ordinary course of your business;
 
• you are not engaged in, do not intend to engage in or have any arrangement or understanding with any person to participate in, the distribution of the private notes or exchange notes;
 
• you are not an “affiliate” (as defined in Rule 405 under the Securities Act) of ours or, if you are such an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;
 
• if you are a broker-dealer, you have not entered into any arrangement or understanding with us or any “affiliate” of ours (within the meaning of Rule 405 under the Securities Act) to distribute the exchange notes; and
 
• if you are a broker-dealer and receive exchange notes for your own account in exchange for unregistered private notes that were acquired as a result of market-making activities or other trading activities, that you will deliver a prospectus in connection with any resale of such exchange notes.
 
Special Procedures for Beneficial Owners If your private notes are held through a broker, dealer, commercial bank, trust company or other nominee and you wish to surrender such private notes, you should contact your intermediary promptly and instruct it to surrender your private notes on your behalf.
 
If you wish to tender on your own behalf, you must, before completing and executing the letter of transmittal for the exchange offer and delivering your private notes, either arrange to have your private notes registered in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take a long time.

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Guaranteed Delivery Procedures If you wish to tender your private notes and you cannot meet the expiration date deadline, or you cannot deliver your private notes, the letter of transmittal or any other documentation on time, then you must surrender your private notes according to the guaranteed delivery procedures appearing below under “The Exchange Offer — Guaranteed Delivery Procedures.”
 
Acceptance of Private Notes and Delivery of Exchange Notes We will accept for exchange any and all private notes that are properly surrendered in the exchange offer and not withdrawn prior to the expiration date if you comply with the procedures of the exchange offer. The exchange notes will be delivered promptly after the expiration date.
 
Withdrawal Rights You may withdraw the surrender of your private notes at any time prior to the expiration date by complying with the procedures for withdrawal described in “The Exchange Offer — Withdrawal of Tenders.”
 
Accounting Treatment We will not recognize a gain or loss for accounting purposes as a result of the exchange.
 
Material Federal Income Tax Considerations The exchange of private notes for exchange notes should not be a taxable transaction for United States federal income tax purposes. You should not have to pay federal income tax as a result of your participation in the exchange offer. See “United States Taxation.”
 
Exchange Agent Wells Fargo Bank, N.A. is serving as the exchange agent in connection with the exchange offer. Wells Fargo Bank, N.A. also serves as trustee under the indenture governing the notes. The exchange agent can be reached at Wells Fargo Bank, N.A., Corporate Trust Operations, MAC N9303-121, P.O. Box 1517, Minneapolis, MN 55480, Attn: Reorg., its facsimile number is 612-667-4927 and its telephone number is 612-667- 9764.
 
Failure to Exchange Private Notes Will Adversely Affect You If you are eligible to participate in this exchange offer and you do not surrender your private notes as described in this prospectus, you will not have any further registration or exchange rights. In that event, your private notes will continue to accrue interest until maturity in accordance with the terms of the private notes but will continue to be subject to restrictions on transfer. As a result of such restrictions and the availability of registered exchange notes, your private notes are likely to be a much less liquid security.
 
Appraisal or Dissenters’ Rights Neither the Delaware General Corporation Law nor the indenture governing the private notes gives you any appraisal or dissenters’ rights nor any other right to seek monetary damages in court.
 
Regulatory Approvals We do not believe that the receipt of any material federal or state regulatory approval will be necessary in connection with the exchange offer, other than the effectiveness of the exchange offer registration statement under the Securities Act.

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The Exchange Notes
      The brief summary below describes the principal terms of the exchange notes. Some of the terms and conditions described below are subject to important limitations and exceptions. The “Description of the Notes” section of this prospectus contains a more detailed description of the terms and conditions of the exchange notes.
Issuer Pharma Services Intermediate Holding Corp.
 
Notes Offered $219.0 million aggregate principal amount at maturity of 111/2% Senior Discount Notes due 2014. These exchange notes will be issued under the same indenture and have the same terms as Intermediate Holding’s outstanding $219.0 million principal amount at maturity of 111/2% Senior Discount Notes due 2014.
 
Maturity Date April 1, 2014.
 
Accretion/ Interest The exchange notes accrete at the rate of 111/2% per annum, compounded semiannually on April 1 and October 1 of each year to, but not including, April 1, 2009. From and after April 1, 2009, cash interest on the exchange notes will accrue at the rate of 111/2% per annum, and will be payable semiannually in arrears on April 1 and October 1 of each year, commencing on October 1, 2009, until maturity.
 
Ranking The exchange notes will be senior unsecured obligations of Intermediate Holding and will be structurally subordinated to all obligations of each of Intermediate Holding’s existing and future subsidiaries, including Quintiles. It is not anticipated that Intermediate Holding will have any additional debt in the future, but should Intermediate Holding have such debt, then the exchange notes will:
 
• rank equally in right of payment to Intermediate Holding’s future unsecured senior indebtedness, if any;
 
• rank senior in right of payment to any of Intermediate Holding’s future senior subordinated indebtedness and subordinated indebtedness, if any; and
 
• be effectively subordinated in right of payment to Intermediate Holding’s existing secured debt and future secured debt, if any, to the extent of the value of the assets securing such debt.
 
As of December 31, 2004, Intermediate Holding had no senior indebtedness, senior subordinated indebtedness or subordinated indebtedness other than the private notes and its guarantee of $306.1 million borrowed by Quintiles under the senior credit facility. This amount does not include Intermediate Holding’s guarantee of the remaining $75.0 million of additional amounts available for borrowing under Quintiles’ senior secured credit facility. Intermediate Holding’s guarantee of amounts borrowed under the senior credit facility is secured and effectively senior to the exchange notes to the extent of the assets securing such guarantee.

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As of December 31, 2004, the private notes were effectively subordinated to $794.9 million of indebtedness, including $450.0 million of Quintiles’ senior subordinated notes, $306.1 million of borrowings under Quintiles’ senior secured credit facility and $38.8 million of other indebtedness.
 
Optional Redemption Prior to April 1, 2009, Intermediate Holding may redeem some or all of the exchange notes at a price equal to 100% of the accreted value thereof, plus any accrued and unpaid additional interest, if any, plus a “make-whole” premium.
 
Thereafter, Intermediate Holding may redeem all or part of the exchange notes at any time at the redemption prices set forth in the section “Description of the Notes — Optional Redemption.”
 
Prior to April 1, 2007, Intermediate Holding may redeem up to 40% of the aggregate principal amount at maturity of the exchange notes with the proceeds of certain equity offerings at 111.50% of the accreted value of the exchange notes, plus any accrued and unpaid additional interest, if any, provided that at least 60% of the original aggregate principal amount at maturity of the exchange notes remain outstanding after the redemption. See “Description of the Notes — Optional Redemption.”
 
Optional Redemption upon a Change of Control At any time prior to April 1, 2007, Intermediate Holding can choose to redeem all, but not less than all, of the exchange notes upon the occurrence of a change of control at the redemption prices listed in the “Description of the Notes” section under the heading “Optional Redemption,” provided that such redemption occurs within 60 days of the occurrence of such change of control.
 
Change of Control Upon the occurrence of a change of control, you will have the right, as a holder of exchange notes, to require Intermediate Holding to repurchase all or a portion of your exchange notes at a repurchase price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of repurchase. Intermediate Holding may not have sufficient funds, or the terms of its other debt may prevent Intermediate Holding from purchasing the exchange notes upon a change of control. See “Description of the Notes — Repurchase at the Option of Holders upon a Change of Control.”
 
Certain Covenants The indenture governing the exchange notes contains certain covenants that limit, among other things, Intermediate Holding’s ability and the ability of its restricted subsidiaries to:
 
• incur additional debt;
 
• pay dividends on, redeem or repurchase capital stock;
 
• issue capital stock of restricted subsidiaries;
 
• make certain investments;
 
• enter into certain types of transactions with affiliates;
 
• engage in unrelated businesses;

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• create liens; and
 
• sell certain assets or merge with or into other companies.
 
These covenants are subject to a number of important exceptions and limitations, which are described under the heading “Description of the Notes — Certain Covenants.”
 
Absence of an Established Market for the Notes We do not intend to apply to have the exchange notes listed on any securities exchange or to arrange for any quotation system to quote them. The initial purchaser of the private notes has advised us that it has heretofore made a market in the private notes. The initial purchaser has advised us that it currently intends to make a market in the exchange notes, but it is not obligated to do so. The initial purchaser may discontinue any market-making in the private notes or exchange notes at any time in its sole discretion. Accordingly, we cannot assure you that a liquid market will develop for the exchange notes, that you will be able to sell your exchange notes at a particular time or that the prices you receive when you sell will be favorable.
 
Use of Proceeds We will not receive any proceeds from the issuance of the exchange notes.
 
Risk Factors You should consider carefully all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under “Risk Factors.”

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
      Intermediate Holding was incorporated on August 18, 2003, and it conducts all of its business through Quintiles, shares of which constitute its only assets. The following summary historical financial information is based on our audited consolidated financial statements included elsewhere in this prospectus. During 2004, we completed the sale of certain assets representing our Bioglan Pharmaceuticals business, and, as such, the results of the Bioglan business, for all periods presented, have been reported separately as a discontinued operation. The financial data set forth in the following table should be read in conjunction with our audited consolidated financial statements, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Historical Consolidated Financial Data,” and “Unaudited Pro Forma Condensed Consolidated Financial Information” and, in each case, the related notes included elsewhere in this prospectus.
                                     
        Year Ended    
        December 31, 2003    
             
        September 26,     January 1,    
    Year Ended   Through     Through   Year Ended
    December 31,   December 31,     September 25,   December 31,
    2004   2003     2003   2002
                   
    Successor   Successor     Predecessor   Predecessor
    (dollars in thousands)
Statement of Operations Data:
                                 
Net revenues
  $ 1,782,254     $ 431,626       $ 1,196,247     $ 1,570,383  
Reimbursed service costs
    364,080       96,255         268,683       399,650  
Gross revenues
    2,146,334       527,881         1,464,930       1,970,033  
(Loss) income from continuing operations before income taxes(1)
    (79,634 )     (2,306 )       59,755       122,770  
(Loss) income from continuing operations
    (70,581 )     (12,128 )       32,535       81,222  
Income from discontinued operations, net of income taxes
    9,543       4,760         4,626       442  
Gain from sale of discontinued operation, net of income taxes
    53,987                      
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes
                        45,659  
Net (loss) income
  $ (7,051 )   $ (7,368 )     $ 37,161     $ 127,323  
                           
Other Financial Data:
                                 
 
Interest expense
    81,871       20,651         1,738       2,551  
 
Capital expenditures
    50,114       14,779         39,143       39,910  
 
Ratio of earnings to fixed charges(2)
    0.27 x     0.92 x       4.01 x     5.56 x

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    As of
    December 31,
    2004
     
    Successor
    (dollars in thousands)
Balance Sheet Data:
       
Cash and cash equivalents
  $ 535,732  
Investments in debt securities
    12,121  
Investments in marketable equity securities
    24,425  
Property, plant and equipment, net
    291,145  
Total assets
    2,053,449  
Long-term debt and capital leases including current portion
    931,112  
Stockholders’ equity
    307,470  
 
(1)  Includes charges and (gains) as set forth in the table below:
                                   
        Year Ended    
        December 31, 2003    
             
        September 26,     January 1,    
    Year Ended   Through     Through   Year Ended
    December 31,   December 31,     September 25,   December 31,
    2004   2003     2003   2002
                   
    Successor   Successor     Predecessor   Predecessor
    (dollars in thousands)
Restructuring charges and transaction costs
  $ 6,577     $ 54,148       $     $ 3,359  
Gain on sale of portion of an investment in a subsidiary
    (24,688 )                    
Non-operating gain on change of interest transaction
    (10,030 )                    
(2)  The ratio of earnings to fixed charges set forth herein is computed in accordance with Item 503(d) of Regulation S-K under the Securities Act and differs from the fixed charge coverage ratio computed for purposes of the indenture governing the notes, the indenture governing Quintiles’ senior subordinated notes and the credit agreement governing Quintiles’ senior secured credit facility. Deficiency in earnings available to cover fixed charges for the year ended December 31, 2004 and the period from September 26, 2003 through December 31, 2003 was $79.9 million and $2.3 million, respectively.

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RISK FACTORS
      An investment in the notes is subject to numerous risks, including those listed below. You should carefully consider the following risks, along with the information provided elsewhere in this prospectus. These risks could materially affect our ability to meet the obligations under the notes. You could lose all or part of your investment in, and expected return on, the notes.
Risks Relating to Our Business
      Our substantial debt could adversely affect our financial condition and prevent us from fulfilling our obligations to you under the notes.
      As of December 31, 2004, we had outstanding debt of approximately $931.1 million, of which the notes are effectively subordinated to the $794.9 million that represents Quintiles’ debt outstanding at that time. Our total debt represented approximately 75.2% of our total capitalization. Of the total debt, approximately $344.9 million represented Quintiles’ secured debt, and an additional $75.0 million in loans available under Quintiles’ senior credit facility also is secured by substantially all of Quintiles’ assets, if drawn upon.
      Our substantial indebtedness could adversely affect our financial condition and thus make it more difficult for us to satisfy our obligations with respect to the notes, including our obligation to pay principal and interest on the notes and our repurchase obligations, as well as our obligations under Quintiles’ senior secured credit facility and Quintiles’ senior subordinated notes. Our substantial indebtedness could also:
  •  increase our vulnerability to adverse general economic and industry conditions;
 
  •  require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, investments, capital expenditures, research and development efforts and other general corporate purposes;
 
  •  limit our ability to make required payments under our existing contractual commitments (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”);
 
  •  limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
 
  •  place us at a competitive disadvantage compared to our competitors that have less debt;
 
  •  increase our exposure to rising interest rates because a portion of our borrowings is at variable interest rates; and
 
  •  limit our ability to borrow additional funds on terms that are satisfactory to us or at all.
          The indenture governing the notes and our subsidiary’s other debt obligations contain covenants that limit our flexibility and prevent us from taking certain actions.
      The indenture governing the notes, the indenture governing Quintiles’ senior subordinated notes and the credit agreement governing Quintiles’ senior secured credit facility include a number of significant restrictive covenants. These covenants could adversely affect us by limiting our ability to plan for or react to market conditions, meet our capital needs and execute our business strategy. These covenants, among other things, limit our ability and the ability of our restricted subsidiaries to:
  •  incur additional debt;
 
  •  pay dividends on, redeem or repurchase capital stock;
 
  •  issue capital stock of restricted subsidiaries;

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  •  make certain investments;
 
  •  enter into certain types of transactions with affiliates;
 
  •  engage in unrelated businesses;
 
  •  create liens; and
 
  •  sell certain assets or merge with or into other companies.
      These covenants may significantly limit our operating and financial flexibility and limit our ability to respond to changes in our business or competitive activities. In addition, Quintiles’ senior secured credit facility includes other and more restrictive covenants and prohibits us from prepaying our other debt, including the notes and Quintiles’ senior subordinated notes, while borrowings under Quintiles’ senior secured credit facility are outstanding. Quintiles’ senior secured credit facility also requires us to maintain certain financial ratios and meet other financial tests. These covenants are broadly drafted and we must apply our judgment on a daily basis to whether our actions comply; however, our lenders may interpret these covenants differently and could claim that our actions are in violation of the covenants. Our failure to comply with these covenants could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their scheduled due date. If we were unable to make this repayment or otherwise refinance these borrowings, the lenders under Quintiles’ senior secured credit facility could elect to declare all amounts borrowed under Quintiles’ senior secured credit facility, together with accrued interest, to be due and payable, which, in some instances, would be an event of default under the indenture governing the notes and the indenture governing Quintiles’ senior subordinated notes. In addition, these lenders could foreclose on our assets. If we were unable to refinance these borrowings on favorable terms, our results of operations and financial condition could be adversely impacted by increased costs and less favorable terms, including interest rates and covenants. Any future refinancing of Quintiles’ senior secured credit facility is likely to contain similar restrictive covenants and may contain similar financial tests.
          Despite our level of indebtedness, we and our parent company are able to incur more debt and undertake additional obligations. Incurring such debt or undertaking such obligations could further exacerbate the risks to our financial condition.
      Although the indenture governing the notes, the indenture governing Quintiles’ senior subordinated notes and the credit agreement governing Quintiles’ senior secured credit facility each contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could increase. To the extent new debt is added to our current debt levels, our leverage risks would increase. In addition, to the extent new debt is incurred by Pharma Services, we may be required to generate sufficient cash flow to satisfy such obligations. See “Description of Other Indebtedness — Quintiles’ Senior Secured Credit Facility,” “ — Quintiles’ Senior Subordinated Notes” and “Description of the Notes.”
      While the indentures and the credit agreement also contain restrictions on our ability to make investments, these restrictions are subject to a number of qualifications and exceptions and the investments we may make in compliance with these restrictions could be substantial. The restrictions do not prevent us from incurring certain expenses in connection with our PharmaBio Development Group arrangements, including expenses we may incur to provide sales forces for the products of our PharmaBio Development customers at our cost under the terms of our agreements with those customers.
      Mitsui’s ownership interest in our Japanese subsidiary could give rise to Mitsui’s right to acquire our entire interest in our Japanese subsidiary or to require us to buy out Mitsui’s interest.
      As part of the terms of its investment in our Japanese subsidiary Quintiles Transnational Japan K.K., or QJPN, Mitsui & Co., Ltd., or Mitsui, acquired certain rights that could potentially allow Mitsui to acquire the remainder of our interest in QJPN. Upon the occurrence of certain actions by us or Pharma Services, including liquidation, dissolution, bankruptcy or similar events, Mitsui will have the option to

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(1) sell to us all or part of its interest in QJPN at a premium or (2) purchase from us all or part of our interest in QJPN at a discount. In addition, if there is a change in control of us or Pharma Services or a breach of certain provisions of our investment agreement with Mitsui, Mitsui could sell to us its entire interest in QJPN. As a result, if such rights are triggered, we could lose control of QJPN or be required to spend significant funds to acquire Mitsui’s interest in QJPN, either of which could have a material adverse effect on our business, results of operations and financial condition.
      The potential loss or delay of our large contracts could adversely affect our results.
      Many of our customers can terminate our contracts upon 15-90 days’ notice. In the event of termination, our contracts often provide for fees for winding down the project, but these fees may not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates. In addition, we may not realize the full benefits of our backlog of contractually committed services if our customers cancel, delay or reduce their commitments under their contracts with us. Thus, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our net revenue and profitability. We believe that this risk of loss or delay of multiple contracts potentially has greater effect as we pursue larger outsourcing arrangements with global pharmaceutical companies.
      We may be adversely affected by customer or therapeutic concentration.
      Although we did not have any one customer that accounted for 10% of net revenues for the year ended December 31, 2004, if any large customer decreases or terminates its relationship with us, our business, results of operations or financial condition could be materially adversely affected. For the quarter ended December 31, 2004, we had one customer who represented almost 10% of net revenues for that quarter.
      Additionally, conducting multiple clinical trials for different sponsors in a single therapeutic class involving drugs with the same or similar chemical action may adversely affect our business if some or all of the trials are canceled because of new scientific information or regulatory judgments that affect the drugs as a class. Similarly, marketing and selling products for different sponsors with similar drug action subjects us to risk if new scientific information or regulatory judgment prejudices the products as a class leading to compelled or voluntary prescription limitations or withdrawal of some or all of the products from the market.
      If we lose the services of key personnel, our business could be adversely affected.
      Our success substantially depends on the performance, contributions and expertise of our senior management team. Our performance also depends on our ability to identify, attract and retain qualified management and professional, scientific and technical operating staff, as well as our ability to recruit qualified representatives for our contract sales services. The departure of any key executive, or our inability to continue to attract and retain qualified personnel or replace any departed personnel in a timely fashion, could have a material adverse effect on our business, results of operations or financial condition.
      Investments in our customers’ business or products and our related commercial rights strategies could have a negative impact on our financial performance.
      As part of our PharmaBio Development Group’s business strategy, we enter into arrangements with customers in which we take on some of the risk of the potential success or failure of the customer’s business or products. These arrangements may include making a strategic investment in a customer, providing financing to a customer or acquiring an interest in the revenues from a customer’s product. For example, we may build or provide a sales organization for a biotechnology customer to commercialize a new product in exchange for an equity share in the business and a percentage of revenues of the product. We anticipate that in the early periods of many of these relationships, our expenses will exceed revenues from these arrangements, particularly where we are providing a sales force for the product at our own cost. Aggregate royalty or other payments made to us under these arrangements may not be adequate to offset our total expenditure in providing a sales force or in making milestone or marketing payments to our customers. We carefully analyze and select the customers and products with which we are willing to

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structure our risk-based deals. Products underlying our commercial rights strategies may not complete clinical trials, receive approval from the United States Food and Drug Administration, or FDA, or achieve the level of market acceptance or consumer demand that we expect, in which case we might not be able to earn a profit or recoup our investment with regard to a particular arrangement. In addition, the timing of regulatory approval and product launch and the achievement of other milestones are generally beyond our control and can affect our actual return from these investments. As a result, we could lose the value of our investments in our customers’ business or products. The potential negative effect to our financial performance could depend on the nature and timing of these arrangements and the length of time before it becomes apparent that the business or product will not achieve success. Our financial results would be adversely affected if our customers or their products do not achieve the level of success that we anticipate and/or our return or payment from the product investment or financing is less than our costs with respect to these arrangements. An additional negative effect of investments in our customers’ business or products could be that we are not awarded projects by other customers who believe we are in competition with them because of the investments.
      If we are unable to submit electronic records to the FDA according to FDA regulations, our ability to perform services for our customers which meet applicable regulatory requirements could be adversely affected.
      If we were unable to produce electronic records which meet the requirements of FDA regulations, our customers may be adversely affected when they submit the data concerned to the FDA in support of an application for approval of a product, which could harm our business. The FDA published 21 CFR Part 11 “Electronic Records; Electronic Signatures; Final Rule,” or Part 11, in 1997. Part 11 became effective in August 1997 and defines the regulatory requirements that must be met for FDA acceptance of electronic records and/or electronic signatures in place of the paper equivalents. Further, in August 2003, the FDA issued the “Guidance for Industry: Part 11, Electronic Records; Electronic Signatures — Scope and Application,” and, in September 2004, the agency issued a draft version of the “Guidance for Industry: Computerized Systems Used in Clinical Trials, Revision 1.” These guidance documents set forth the FDA’s current thinking on this topic. Further, on July 9, 2004, the FDA accepted comments from the public in order to re-evaluate or possibly amend or rescind Part 11. Currently, however, the regulation requires that those utilizing such electronic records and/or signatures employ procedures and controls designed to ensure the authenticity, integrity and, as appropriate, confidentiality of electronic records, and Part 11 requires those utilizing electronic signatures to ensure that a person appending an electronic signature cannot readily repudiate the signed record. Pharmaceutical, medical device and biotechnology companies are increasing their utilization of electronic records and electronic signatures and are requiring their service providers and partners to do likewise. Our ability to provide services to our customers depends in part on our compliance with the FDA’s requirements regarding Part 11. We are making steady and documented progress in bringing our critical computer applications into compliance according to written enhancement plans that have been reviewed and approved by third party authorities. Lower-priority systems are, likewise, being reviewed and revalidated. If we are unable to complete these compliance objectives, our ability to provide services to our customers which meet FDA requirements may be adversely affected.
      Compliance with changing regulation of corporate governance and public disclosure may result in additional risks and expenses.
      Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and new SEC regulations, are creating uncertainty for companies such as ours. These laws, regulations and standards are subject to varying interpretations in many cases, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased selling, general and administrative expenses and a diversion of management time and

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attention. In particular, our efforts to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the related regulations regarding our required assessment of our internal controls over financial reporting and our external auditors’ audit of that assessment has required the commitment of significant financial and managerial resources. We expect these efforts to require the continued commitment of significant resources. Further, our Board members, chief executive officer, chief financial officer and other executive officers could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified Board members and executive officers, which could harm our business. In addition, it may become more difficult and more expensive for us to obtain director and officer liability insurance.
      If we are unable to successfully develop and market potential new services, our growth could be adversely affected.
      A key element of our growth strategy is the successful development and marketing of new services that complement or expand our existing business. If we are unable to succeed in (1) developing new services and (2) attracting a customer base for those newly developed services, we will not be able to implement this element of our growth strategy, and our future business, results of operations and financial condition could be adversely affected.
      Our product development services could result in potential liability to us.
      We contract with drug companies to perform a wide range of services to assist them in bringing new drugs to market. Our services include monitoring clinical trials, data and laboratory analysis, electronic data capture, patient recruitment and other related services. The process of bringing a new drug to market is time-consuming and expensive. If we do not perform our services to contractual or regulatory standards, the clinical trial process could be adversely affected. Additionally, if clinical trial services such as laboratory analysis or electronic data capture and related services do not conform to contractual or regulatory standards, trial participants or trial results could be affected. These events would create a risk of liability to us from the pharmaceutical companies with whom we contract or the study participants. Similar risks apply to our product development services relating to medical devices.
      Included in the services we provide are technology systems which are proprietary or licensed to us, such as our Interactive Voice Response System, or IVRS, which, among other things, enables randomization of participants in a given clinical trial to different treatment arms and regulates the supply of investigational medicinal product, all by means of a touch tone telephone system. Malfunction of these systems could impair our customer delivery or harm our business. For example, if IVRS malfunctions and, as a result, clinical trial participants are incorrectly randomized or supplied with an incorrect medicinal product during the course of the clinical trial, then any such event would create a risk of liability to us from the pharmaceutical companies with whom we contract or participants in the clinical trial concerned.
      We also contract with physicians to serve as investigators in conducting clinical trials. Such studies create risk of liability for personal injury to or death of clinical trial participants, particularly to clinical trial participants with life-threatening illnesses, resulting from adverse reactions to the drugs administered during testing. It is possible third parties could claim that we should be held liable for losses arising from any professional malpractice of the investigators with whom we contract or in the event of personal injury to or death of persons participating in clinical trials. We do not believe we are legally accountable for the medical care rendered by third party investigators, and we would vigorously defend any such claims. However, such claims may still be brought against us, and it is possible we could be found liable for these types of losses.
      In addition to supervising tests or performing laboratory analysis, we also own a number of facilities where Phase I clinical trials are conducted. Phase I clinical trials involve testing an investigational new drug on a limited number of healthy individuals, typically 20 to 80 persons, to determine the drug’s basic safety. We also could be liable for the general risks associated with ownership of such a facility. These risks include, but are not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers.

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      We also package, label and distribute clinical trial supplies. We could be held liable for any problems that result from the trial drugs we package, label and distribute, including any quality control problems in our clinical trial supplies facilities, resulting in, for example, clinical trial supplies being incorrectly labeled, packaged, counted or distributed with potential consequences such as participants in the clinical trial receiving the incorrect medication or the incorrect dose of the medication concerned. These eventualities and others potentially arising from such errors could expose us to liability with both the pharmaceutical companies with whom we contract and to clinical trial participants. In addition, our clinical trial supplies facilities in the United States are subject to regulation, and potential inspection, by both the FDA and the United States Drug Enforcement Administration, or DEA.
      We also could be held liable for errors or omissions in connection with our services. For example, we could be held liable for errors or omissions or breach of contract if one of our laboratories inaccurately reports or fails to report lab results. Although we maintain insurance to cover risks of this kind, it is possible we could incur financial losses, which could adversely affect our results of operations and financial condition.
      Our commercialization services could result in potential liability to us.
      When we market and sell pharmaceutical products under contract for a pharmaceutical company, we could suffer liability for harm allegedly caused by those products, either as a result of a lawsuit against the pharmaceutical company to which we are joined, a lawsuit naming us or an action launched by a regulatory body. While we are indemnified by the pharmaceutical company for the action of the products we market and sell on its behalf, and while we carry insurance to cover harm caused by our negligence in performing services, it is possible that we could nonetheless incur financial losses, regulatory penalty or both.
      Our rights to market and sell certain pharmaceutical products expose us to product risks typically associated with pharmaceutical companies.
      From time to time, we may acquire or hold rights to market and sell certain pharmaceutical products. These product rights subject us to a number of risks typical to the pharmaceutical industry. For example, we could face product liability claims in the event users of products subject to our rights experience negative reactions or adverse side effects or in the event such products cause injury, are found to be unsuitable for their intended purpose or are otherwise defective. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we manufacture or sell, and any such product liability claim could adversely affect our business, operating results or financial condition. In addition, like pharmaceutical companies, our commercial success in this area will depend in part on our obtaining, securing and defending our intellectual property rights covering our pharmaceutical product rights. These risks may be augmented by certain risks if we outsource the manufacturing and/or distribution of these products, such as our inability to directly monitor quality control in the manufacturing and distribution processes.
      Our plans to market and sell pharmaceutical products also subject us to risks associated with participating in a business in which we have limited experience. If we are unable to operate this business as we expect, the financial results from this business could have a negative impact on our results of operations as a whole. The risk that our results may be affected if we are unable to successfully operate this business may increase in proportion with (1) the number of products or product rights we license or acquire in the future, (2) the applicable stage of the drug approval process of the products and (3) the levels of outsourcing involved in the development, manufacture and commercialization of such products.
      Our insurance may not cover all of our indemnification obligations and other liabilities associated with our operations.
      We maintain insurance designed to cover ordinary risks associated with our operations and our ordinary indemnification obligations. This insurance might not provide adequate coverage or may be contested by our carriers. The availability and level of coverage provided by our insurance could have a

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material impact on our profitability if we suffer uninsured losses or are required to indemnify third parties for uninsured losses.
      As part of the formation of Verispan, Verispan assumed our obligation under our settlement agreement with WebMD Corporation, or WebMD, to indemnify WebMD for losses arising out of or in connection with (1) the canceled Data Rights Agreement with WebMD, (2) our data business, which was contributed to the joint venture, (3) the collection, accumulation, storage or use of data by ENVOY Corporation, or ENVOY, for the purpose of transmitting or delivering data to us, (4) any actual transmission or delivery by ENVOY of data to us or (5) violations of law or contract attributable to any of the events described in (1) — (4) above. These indemnity obligations are limited to 50.0% for the first $20.0 million in aggregate losses, subject to exceptions for certain indemnity obligations that were not transferred to Verispan. Although Verispan has assumed our indemnity obligations to WebMD relating to our former data business, Verispan may have insufficient resources to satisfy these obligations or may otherwise default with respect thereto. In addition, WebMD may seek indemnity from us, and we would have to proceed against Verispan.
      In addition, we remain subject to other indemnity obligations to WebMD, including for losses arising out of the settlement agreement itself or out of the sale of ENVOY to WebMD. In particular, we could be liable for losses which may arise in connection with a class action lawsuit filed against ENVOY prior to our purchase and subsequent sale of it to WebMD, which has been settled. ENVOY and its insurance carrier, Federal Insurance Company, filed a lawsuit against Quintiles in June 2003 alleging that Quintiles should be responsible for payment of the settlement amount of $11.0 million and related fees and costs in connection with the class action lawsuit settlement. Our indemnity obligation with regard to losses arising from the sale of ENVOY to WebMD including ENVOY’s class action lawsuit is not subject to the limitation on the first $20.0 million of aggregate losses described above.
      In connection with the sale of certain assets relating to our Bioglan business, including rights to certain dermatology products, to Bradley Pharmaceuticals, Inc., or Bradley, we agreed to indemnify Bradley for losses caused by the manufacture, packaging, labeling, promotion, distribution, transportation, storage or sale of those products by or on our behalf prior to the transaction closing or patients’ use of products sold by or on our behalf prior to the transaction closing. For example, we could face product liability claims in the event users of these products, who bought them during the time we owned the product rights, experienced negative reactions or adverse side effects or in the event such products cause injury or are found to be unsuitable for their intended purposes or are otherwise defective. We are subject to similar risks with respect to any pharmaceutical product rights we may own at any time. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products we sold and any such product liability claims could adversely affect our operating results or financial condition.
      We may be exposed to additional income tax liabilities.
      In January 2004, we received a written communication from the Internal Revenue Service asserting that the income tax basis of the stock of our ENVOY subsidiary (which we sold in 2000 in a taxable transaction) may have been overstated and proposing an increase in our income taxes owed for 2000 by approximately $153.1 million. After further discussions, the Internal Revenue Service revised and reissued its prior communication, reducing the proposed assessment to $84.6 million. If our income tax basis is reduced, we will be required to pay additional income taxes, plus interest and possible penalties, on the amount of such reduction. If the reduction in our income tax basis is large enough, the resulting income tax effect could have a material adverse impact on our liquidity and financial condition. We are contesting the Internal Revenue Service’s challenge and are presently in the appeals process with the Internal Revenue Service.

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      Exchange rate fluctuations may affect our results of operations and financial condition.
      We derive a large portion of our net revenue from international operations. Our financial statements are denominated in United States dollars; thus, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect our results of operations and financial condition. Exchange rate fluctuations between local currencies and the United States dollar create risk in several ways, including:
  •  Foreign Currency Translation Risk. The revenue and expenses of our foreign operations are generally denominated in local currencies.
 
  •  Foreign Currency Transaction Risk. Our service contracts may be denominated in a currency other than the currency in which we incur expenses related to such contracts.
      We try to limit these risks through exchange rate fluctuation provisions stated in our service contracts, or we may hedge our transaction risk with foreign currency exchange contracts or options. At December 31, 2004, we had 12 open foreign exchange forward contracts relating to service contracts totaling approximately $10.9 million. Despite these efforts, we may still experience fluctuations in financial results from our operations outside the United States, and we cannot assure you that we will be able to favorably reduce our currency transaction risk associated with our service contracts.
      We face other risks in connection with our international operations.
      We have significant operations in foreign countries which may require complex arrangements to deliver services on global contracts for our customers. Additionally, we have moved significant operations from the United States and Europe to locations remote from our most developed business centers. As a result, we are subject to heightened risks inherent in conducting business internationally, including the following:
  •  foreign countries could enact legislation or impose regulations or other restrictions which have an adverse effect on our ability to conduct business in that country;
 
  •  the regulatory or judicial authorities of foreign countries may not enforce legal rights and recognize business procedures in a manner to which we are accustomed or would reasonably expect;
 
  •  political changes and economic crises may lead to changes in the business environment in which we operate; and
 
  •  natural disasters or international conflict, including terrorist acts, could interrupt our services, endangering our personnel and causing project delays or loss of study material or results, with a significant negative impact on our financial condition and results of operations.
      Operation of our information systems and evolution of the technology platform for our services pose risks to our business.
      Due to the global nature of our business and our reliance on information systems to provide our services, we intend to increase our use of Web-enabled and other integrated information systems in delivering our services. We are and will be exposed to the risks inherent in the development, integration and ongoing operation of our evolving information systems. These risks include:
  •  invasion, disruption, impairment or failure of data centers, telecommunications facilities or other key infrastructure platforms,
 
  •  failure or malfunction of or attacks on critical application systems or the hardware they run on, or
 
  •  excessive costs, excessive delays or other deficiencies in systems development and deployment.
      In addition, we are currently undertaking significant programs to optimize business processes in our product development and commercialization services. We have entered into agreements with certain vendors to provide systems development and integration services to develop or provide for us under license the information technology, or IT, platform for these programs. If such vendors fail to perform as required

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or if there are substantial delays in developing and implementing this platform, our customer delivery may be impaired and we may have to make substantial further investments, internally or with third parties, to achieve our objectives. Additionally, our progress may be limited by existing or claimed patents by parties who seek to enjoin us from using preferred technology or seek license payments from us. Meeting our objectives is dependent on a number of factors which may not take place as we anticipate, including obtaining adequate technology-enabled services, creating IT-enabled services which our customers will find desirable and implementing our business model with respect to these services. Also, these expenditures may have a negative impact on our profitability, at least until our IT-enabled processes and services become operational. We cannot assure you that any improvements in profitability resulting from our new capabilities will be sufficient to offset our investments. Our results could be affected negatively if our competitors are able to execute similar programs before we can launch ours or if they are able to structure a platform that attracts customers away from our services.
      We may not be able to derive the benefits we hope to achieve from Verispan, our joint venture with McKesson.
      In May 2002, we completed the formation of a joint venture, Verispan, with McKesson designed to leverage the operational strengths of the healthcare information business of each party. As part of the formation of Verispan, we contributed our former informatics business. As a result, Verispan remains subject to the risks to which our informatics business was exposed. If Verispan is not successful or if it experiences any of the difficulties described below, there could be an adverse effect on our results of operations and financial condition, as Verispan is a pass-through entity and, as such, its results are reflected in our financial statements to the extent of our interest in Verispan. Verispan could encounter certain other difficulties, including:
  •  its ability to obtain continuous access to de-identified healthcare data from third parties in sufficient quantities to support its informatics products;
 
  •  its ability to process and use the volume of data received from a variety of data providers;
 
  •  its ability to attract customers, besides Quintiles and McKesson, to purchase its products and services;
 
  •  the risk of changes in healthcare information privacy laws and regulations that could create a risk of liability, increase the cost of Verispan’s business or limit its service offerings; and
 
  •  the risk that industry regulation may restrict Verispan’s ability to analyze and disseminate pharmaceutical and healthcare data.
      Although we have a license to use Verispan’s commercially available data products and we may pay Verispan to create customized data products for us, if Verispan is unable to provide us with the quality and character of data products that we need to support those services, we would need to seek other strategic alternatives to achieve our goals.
      In contributing our former informatics business to Verispan, we assigned certain contracts to Verispan. Verispan has agreed to indemnify us against any liabilities we may incur in connection with these contracts after contributing them to Verispan, but we still may be held liable under the contracts to the extent Verispan is unable to satisfy its obligations, either under the contracts or to us.
Risks Relating to Our Industry
      Changes in aggregate spending, research and development budgets and outsourcing trends in the pharmaceutical and biotechnology industries could adversely affect our operating results and growth rate.
      Economic factors and industry trends that affect our primary customers, pharmaceutical and biotechnology companies, also affect our business. For example, the practice of many companies in these industries has been to hire outside organizations like us to conduct large clinical research and sales and marketing projects. This practice grew substantially during the 1990’s and has continued into the 2000’s

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and we have benefited from this trend. Some industry commentators believe that the rate of growth of outsourcing will tend to decrease. If these industries reduce their outsourcing of clinical research and sales and marketing projects, our operations and financial condition could be materially and adversely affected. We also believe we may be negatively impacted by mergers and other factors in the pharmaceutical industry, which appear to slow decision making by our customers and delay certain trials. We believe our commercialization services may be affected by reductions in new product launches and increases in the number of drugs losing patent protection. In addition, United States federal and state legislatures and numerous foreign governments are considering various types of healthcare reforms and may undertake efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with medical care providers and pharmaceutical companies. If future regulatory cost containment efforts limit the profitability of new drugs, our customers may reduce their research and development spending, which could reduce the business they outsource to us. We cannot predict the likelihood of any of these events or the effects they would have on our business, results of operations or financial condition.
      Changes in government regulation could decrease the need for the services we provide.
      Governmental agencies throughout the world, but particularly in the United States, Europe and Japan, highly regulate the drug development and approval process. A large part of our business involves helping pharmaceutical and biotechnology companies through the regulatory drug approval process. Any alteration of or relaxation in regulatory approval standards could eliminate or reduce the need for our services, and, as a result, our business could be materially adversely affected.
      Actions by government regulators or customers to limit the scope of prescription or withdraw approved products from the market could result in a loss of revenue.
      Governments have the authority after approving a product, to limit its scope of prescription or withdraw it from the market based on safety concerns. Similarly, customers may act to voluntarily limit the scope of prescription of products or withdraw them from the market. If we are providing services to customers for products that are limited or withdrawn, we could suffer a loss of revenue with negative impact to our financial results.
      Failure to comply with existing regulations could result in a loss of revenue.
      We are subject to a wide range of government regulations and review by a number of regulatory agencies including, in the United States, the Department of Justice, FDA, DEA, Department of Transportation and similar regulatory agencies throughout the world. Any failure on our part to comply with applicable regulations could have an adverse impact on our ability to perform our services. For example, non-compliance could result in the termination of ongoing clinical research or sales and marketing projects or the disqualification of data for submission to regulatory authorities, either of which could have a material adverse effect on us. If we were to fail to verify that informed consent is obtained from patient participants in connection with a particular clinical trial, the data collected from that trial could be compromised, and we could be required to repeat the trial under the terms of our contract at no further cost to our customer, but at substantial cost to us. Moreover, from time to time, one or more of our customers are investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials, programs and products. In these situations, we have often provided services to our customers with respect to the trials, programs or products being investigated, and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for trial or program compliance. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to substantial damages, fines or penalties. In addition, negative publicity regarding regulatory compliance of our customers’ trials, programs or products could have an adverse effect on our business and reputation.

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      New and proposed laws and regulations regarding confidentiality of patients’ information could result in increased risks of liability or increased cost to us, or could limit our service offerings.
      The confidentiality and release of patient-specific information are subject to governmental regulation. Under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the United States Department of Health and Human Services, or HHS, has issued regulations mandating heightened privacy and confidentiality protections for certain types of individually identifiable health information, or protected health information. We do not meet the definition of a “covered entity” under HIPAA; however, we are indirectly affected by HIPAA because many investigators with whom we are involved with in clinical trials are HIPAA “covered entities.” Also, the European Union, or EU, and its member states, as well as other countries, continue to issue new rules. National and United States state governments are contemplating or have proposed or adopted additional legislation governing the possession, use and dissemination of medical record information and other personal health information. In particular, proposals being considered by state governments may contain privacy and security protections that are more burdensome than the federal regulations. In order to comply with these regulations, we may need to implement new privacy and security measures, which may require us to make substantial expenditures or cause us to limit the products and services we offer. In addition, if we violate applicable laws, regulations or duties relating to the use, privacy or security of health information, we could be subject to civil or criminal penalty and be forced to alter our business practices.
Risks Relating to the Notes
          Intermediate Holding is a holding company with no operations and no assets other than its investment in Quintiles. Intermediate Holding may not have access to the cash flow and other assets of its subsidiaries that may be needed to make payment on the notes.
      Intermediate Holding is a holding company that currently conducts all of its operations through Quintiles and Quintiles’ subsidiaries and affiliates. As a result, all operating profit and cash flows are generated by Quintiles and Quintiles’ subsidiaries and affiliates. The notes, however, are the exclusive obligation of Intermediate Holding, and none of Intermediate Holding’s subsidiaries is obligated to make funds available for payment on the notes. Intermediate Holding’s ability to make payments on the notes is nevertheless dependent on its subsidiaries’ earnings and cash flows and their ability to make distributions in the form of dividends or other advances and transfers to Intermediate Holding. The ability of Intermediate Holding’s subsidiaries to pay these dividends and make these advances and transfers is subject to applicable federal, state and non-United States laws. Furthermore, the terms of Quintiles’ senior secured credit facility and the indenture for Quintiles’ senior subordinated notes significantly restrict distributions, dividends and other advances to Intermediate Holding from Quintiles. See “Description of Other Indebtedness — Quintiles’ Senior Secured Credit Facility” and “— Quintiles’ Senior Subordinated Notes.” In addition, Intermediate Holding’s subsidiaries are permitted to incur additional indebtedness under specified circumstances, and the agreements governing future indebtedness of its subsidiaries may also restrict such distributions, dividends and other advances. We cannot assure you that the agreements governing the current and future indebtedness of Intermediate Holding’s subsidiaries will permit such subsidiaries to provide Intermediate Holding with sufficient funds to make payments on the notes when due or repurchase the notes when so required.
          The notes are not obligations of Quintiles and your right to receive payments on the notes is structurally subordinated to the claims of the creditors of Intermediate Holding’s subsidiaries.
      Intermediate Holding’s subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on the notes or to provide Intermediate Holding with funds for its payment obligations, whether by dividends, distributions, loans or other payments. Intermediate Holding’s right to receive any assets of any of its subsidiaries, upon such subsidiaries’ foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, and therefore the right of the holders of the notes to receive a share of those assets, is structurally subordinated to the claims of such subsidiaries’ creditors, including holders of Quintiles’ senior subordinated notes and the lenders under Quintiles’ senior

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secured credit facility and trade creditors. In addition, even if Intermediate Holding were deemed to be a general creditor of any of its subsidiaries, Intermediate Holding’s rights as a general creditor would be subordinate to the rights of holders of any indebtedness of such subsidiaries that are senior to general creditors and to holders of any secured indebtedness of such subsidiaries to the extent of the value of the assets securing such indebtedness. Further, holders of the notes would participate ratably with all of the other general creditors of Intermediate Holding’s subsidiaries, based upon the respective amounts owed to each holder or creditor, in the distribution and payment of the remaining assets.
      As of December 31, 2004, the notes were effectively subordinated to $794.9 million of indebtedness, including $450.0 million of Quintiles’ senior subordinated notes, $306.1 million of borrowings under Quintiles’ senior secured credit facility and $38.8 million of other indebtedness of Quintiles.
          Your right to receive payments on the notes is effectively subordinated to the right of Intermediate Holding’s existing and future secured creditors.
      Intermediate Holding is a guarantor of the indebtedness of Quintiles under Quintiles’ senior secured credit facility. The guaranty is a senior obligation of Intermediate Holding and is secured by all of Intermediate Holding’s assets, including the capital stock of Quintiles. The guaranty and the notes constitute Intermediate Holding’s only indebtedness. Holders of Intermediate Holding’s secured indebtedness will have claims that are prior to the claims of holders of the notes. In the event of any distribution or payment of Intermediate Holding’s assets in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured debt will have a prior claim to the assets that constitute their collateral. Additionally, holders of the notes will participate ratably with all of Intermediate Holding’s other general creditors, based upon the respective amounts owed to each holder or creditor, in the distribution and payment of its remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the notes. As a result, holders of notes may receive less, ratably, than holders of secured debt.
          Our subsidiaries may not be able to generate sufficient cash to service all of our indebtedness, including the notes, and we may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.
      Intermediate Holding’s and its subsidiaries’ ability to make scheduled or other payments on or to refinance their debt obligations depends on their financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. After April 1, 2009, interest on the notes will accrue at the rate of 111/2% per annum until maturity, and generally will be payable, semiannually in arrears, on April 1 and October 1 of each year, commencing on October 1, 2009. We cannot assure you that Intermediate Holding’s subsidiaries will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the notes.
      If Intermediate Holding’s subsidiaries’ cash flows and capital resources are insufficient to fund our debt service obligations, Intermediate Holding and its subsidiaries may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance their indebtedness, including the notes. These alternative measures may not be successful and may not permit Intermediate Holding and its subsidiaries to meet their scheduled or other debt service obligations. In the absence of such operating results and resources, Intermediate Holding and its subsidiaries could face substantial liquidity problems and might be required to dispose of material assets or operations to meet their debt service and other obligations. Quintiles’ senior secured credit facility and the indenture governing Quintiles’ senior subordinated notes restrict Intermediate Holding’s subsidiaries’ ability to dispose of assets and use the proceeds from the disposition. Intermediate Holding’s subsidiaries may not be able to consummate those dispositions or to obtain the proceeds which could be realized from them and these proceeds may not be adequate to meet any debt service obligations then due.

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          The interests of Pharma Services’ stockholders may not be aligned with your interests as a holder of the notes.
      Pharma Services and its equity holders control all of the voting power of our outstanding common stock and all of our affairs and policies. Circumstances may occur in which the interests of Pharma Services and its equity holders could be in conflict with the interests of the holders of the notes. Moreover, Pharma Services’ equity holders may have interests in their other respective investments that could also be in conflict with the interests of the holders of the notes. In addition, Pharma Services may have an interest in pursuing acquisitions, divestitures or other transactions that, in its judgment, could enhance its equity investment, even though such transactions might involve risks to holders of the notes. For example, Pharma Services and its equity holders may cause us to pursue a growth strategy (including acquisitions which are not accretive to earnings), which could impact our ability to make payments under the indentures and Quintiles’ senior secured credit facility or cause a change of control. In addition, to the extent permitted by the indenture governing the notes, the indenture governing Quintiles’ senior subordinated notes and Quintiles’ senior secured credit facility, Pharma Services may cause us to pay dividends rather than make capital expenditures, including for purposes of servicing debt obligations, if any, of Pharma Services or Quintiles.
          Intermediate Holding may not have the ability to raise the funds to purchase the notes upon a change of control as required by the indenture governing the notes.
      Upon the occurrence of certain change of control events, each holder of the notes may require Intermediate Holding to purchase all or a portion of its notes at a purchase price equal to 101% of the accreted value thereof, plus accrued and unpaid interest to the date of purchase. Intermediate Holding’s ability to repurchase the notes upon a change of control will be limited by the terms of Quintiles’ senior secured credit facility, the indenture governing Quintiles’ senior subordinated notes and our other debt. Upon a change of control, Intermediate Holding may be required immediately to repay the outstanding principal, any accrued interest and any other amounts owed by Quintiles under its senior secured credit facility and make an offer to purchase all of the outstanding Quintiles’ senior subordinated notes. Intermediate Holding cannot assure you that it would be able to repay amounts outstanding under the senior secured credit facility, obtain necessary consents under the senior secured credit facility or fulfill our obligations under Quintiles’ senior subordinated notes, in order to repurchase the notes. Any requirement to offer to purchase any outstanding notes may result in us having to refinance our other outstanding debt, including Quintiles’ senior subordinated notes, which we may not be able to do. In addition, even if we were able to refinance this debt, the refinancing may not be on terms favorable to us.
          You will be required to pay United States federal income tax on the original issue discount on the notes even when Intermediate Holding does not pay cash interest.
      The private notes were issued with “original issue discount” for United States federal income tax purposes because interest on the notes accretes to principal for the first five years of the term of the notes. Although there will be no periodic payments of cash interest on the notes prior to October 1, 2009, holders of the notes will be required to include original issue discount in gross income for United States federal income tax purposes in advance of their receipt of the cash payments to which the income is attributable. Such amounts in the aggregate will be equal to the difference between the stated redemption price at maturity (inclusive of stated interest on the notes) and the adjusted issue price of the notes. See “United States Taxation.”
          Federal and state statutes could allow courts, under specific circumstances, to void the notes and require noteholders to return payments received from us.
      Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer laws, the notes could be voided, or claims in respect of the notes could be subordinated to all of our other debts if, among other things, Intermediate Holding, at the time it incurred the indebtedness evidenced by the notes:
  •  was insolvent or rendered insolvent by reason of such indebtedness; or

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  •  was engaged in a business or transaction for which Intermediate Holding’s remaining assets constituted unreasonably small capital; or
 
  •  intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
      In addition, any payment by Intermediate Holding pursuant to the notes could be voided and required to be returned to Intermediate Holding, or to a fund for the benefit of Intermediate Holding’s creditors.
      The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, we would be considered insolvent if:
  •  the sum of our debts, including contingent liabilities, were greater than the fair saleable value of all of our assets; or
 
  •  if the present fair saleable value of our assets were less than the amount that would be required to pay our probable liability on existing debts, including contingent liabilities, as they become absolute and mature; or
 
  •  we could not pay our debts as they become due.
      We believe that we, after giving effect to the indebtedness incurred in the offering and the application of the proceeds therefrom, will not be insolvent, will not have unreasonably small capital for the business in which we are engaged and will not have incurred debts beyond our ability to pay such debts as they mature. There can be no assurance, however, as to what standard a court would apply in making such determinations or that a court would agree with our conclusions in this regard.
      There may be no active trading market for the exchange notes.
      The exchange notes will constitute a new issue of securities for which there is no established trading market. We do not intend to list the exchange notes on any national securities exchange or to seek the admission of the exchange notes for quotation through the National Association of Securities Dealers Automated Quotation System. Although the initial purchaser has advised us that it currently intends to make a market in the exchange notes, it is not obligated to do so and may discontinue such market-making activity at any time without notice. In addition, market-making activity will be subject to the limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and may be limited during the exchange offer and the pendency of any shelf registration statement.
      Given the risks inherent in an investment in the exchange notes and the lack of an active trading market, you may have difficulty finding willing buyers for the exchange notes. Consequently, you may not be able to liquidate your investment readily, and the exchange notes may not be readily accepted as collateral for loans. In addition, in response to prevailing interest rates and market conditions generally, the exchange notes could trade at a price lower than their initial offering price. Therefore, you should be aware that you may bear the economic risk of an investment in the exchange notes until maturity.
      The market price for the exchange notes may be volatile.
      Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the exchange notes offered hereby. The market for the exchange notes, if any, may be subject to similar disruptions. Any such disruptions may adversely affect the value of your exchange notes.

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      If you wish to tender your private notes for exchange notes, you must comply with the requirements described in this prospectus.
      You will receive exchange notes in exchange for private notes only after the exchange agent receives such private notes, a properly completed and duly executed letter of transmittal and all other required documentation within the time limits described below under the subheading “Exchange Offer — Procedures for Tendering.” If you wish to tender your private notes in exchange for exchange notes, you should allow sufficient time for delivery. Neither we nor the exchange agent has any duty to give you notice of defects or irregularities with respect to tenders of private notes for exchange. Private notes that are not tendered or are tendered but not accepted will, following consummation of the exchange offer, continue to be subject to the existing restrictions upon transfer relating to the private notes.
      In addition, if you tender your private notes in the exchange offer for the purpose of participating in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer who holds private notes acquired for its own account as a result of market-making or other trading activities and who receives exchange notes for its own account in exchange for such private notes pursuant to the exchange offer must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of such exchange notes.
      If you do not exchange your private notes, you may have difficulty in transferring them at a later time.
      We will issue exchange notes in exchange for the private notes after the exchange agent receives your private notes, the letter of transmittal and all related documents. You should allow adequate time for delivery if you choose to tender your private notes for exchange. Private notes that are not exchanged will remain subject to restrictions on transfer and generally will not have rights to registration.
      If you do not participate in the exchange offer, you must comply with the registration and prospectus delivery requirements of the Securities Act for any resale of the private notes. Each broker-dealer who holds private notes for its own account due to market-making or other trading activities and who receives exchange notes for its own account must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. If any private notes are not tendered in the exchange or are tendered but not accepted, the trading market for such notes could be negatively affected due to the limited amount of private notes expected to remain outstanding following the completion of the exchange offer.

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THE EXCHANGE OFFER
Purpose of the Exchange Offer
      We sold the private notes on March 18, 2004 to Citigroup Global Markets Inc., as initial purchaser, in a private offering pursuant to a purchase agreement. The initial purchaser subsequently sold the private notes to:
  •  “qualified institutional buyers,” or QIBs, as defined in Rule 144A under the Securities Act, in reliance on Rule 144A; and
 
  •  persons in offshore transactions in reliance on Regulation S under the Securities Act.
      As a condition to the initial sale of the private notes, we and the initial purchaser entered into a registration rights agreement on March 18, 2004. Pursuant to the registration rights agreement, we agreed to use our reasonable best efforts to:
  •  no later than 360 days after the issue date of the private notes, file a registration statement with the SEC with respect to a registered offer to exchange the private notes for the exchange notes having terms substantially identical in all material respects to the private notes (except that the exchange notes will not contain terms with respect to transfer restrictions, registration rights and additional notices);
 
  •  cause the exchange offer registration statement to become effective under the Securities Act not later than 420 days after the issue date of the private notes; and
 
  •  cause the exchange offer to be consummated not later than 450 days after the issue date of the private notes.
      Upon the effectiveness of the exchange offer registration statement, we will offer the exchange notes in exchange for the surrender of the private notes. We will keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders.
      We agreed to issue and exchange the exchange notes for all private notes properly surrendered and not withdrawn before the expiration of the exchange offer. The summary in this document of the registration rights agreement is not complete and is subject to, and is qualified in its entirety by, all the provisions of the registration rights agreement. WE URGE YOU TO READ THE ENTIRE REGISTRATION RIGHTS AGREEMENT CAREFULLY. A copy of the registration rights agreement has been filed as an exhibit to the registration statement which includes this prospectus. The registration statement is intended to satisfy some of our obligations under the registration rights agreement and the purchase agreement.
      There is no assurance as to the willingness of the SEC to declare our registration statement effective with respect to the exchange notes or whether the SEC may impose conditions on such declaration of effectiveness that are not acceptable to us, in which event the registration statement may be delayed, perhaps significantly. There is no assurance that the registration of the exchange notes will be accomplished on a timely basis, or at all.
      Under existing SEC interpretations, the exchange notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the exchange notes represents that it is acquiring the exchange notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the exchange notes and that it is not our affiliate, as such terms are interpreted by the SEC; provided that a broker-dealer receiving exchange notes for its own account in exchange for private notes, where such private notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, will have a prospectus delivery requirement with respect to resales of such exchange notes. While the SEC has not taken a position with respect to this particular transaction, under existing SEC

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interpretations relating to transactions structured substantially like the exchange offer, participating broker-dealers may fulfill their prospectus delivery requirements with respect to exchange notes (other than a resale of an unsold allotment from the original sale of the notes) with the prospectus contained in the exchange offer registration statement. Under the registration rights agreement, we are required to allow participating broker-dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the exchange offer registration statement in connection with the resale of such exchange notes.
      A holder of private notes who wishes to exchange such private notes for exchange notes in the exchange offer will be required to represent that any exchange notes to be received by it will be acquired in the ordinary course of its business, that at the time of the commencement of the exchange offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes and that it is not our “affiliate,” as defined in Rule 405 of the Securities Act, or if it is our affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable.
      Each broker-dealer that receives exchange notes for its own account in exchange for private notes, where such private notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes. See “Plan of Distribution.”
Shelf Registration
      In the event that:
  (1)  due to any change in law or applicable interpretations or policy of the staff of the SEC, we are not permitted to effect the exchange offer;
 
  (2)  for any other reason the exchange offer is not declared effective within 420 days, or consummated within 450 days, after the issuance of the private notes; or
 
  (3)  prior to the 20th day following consummation of the exchange offer:
  (A)  the initial purchaser so requests with respect to private notes not eligible to be exchanged for exchange notes in the exchange offer;
  (B)  any holder of private notes (other than the initial purchaser) notifies us that it is not eligible to participate in the exchange offer; or
 
  (C)  an initial purchaser that participates in the exchange offer notifies us that it did not receive freely tradeable exchange notes in exchange for notes constituting any portion of an unsold allotment,
we will, subject to certain conditions, at our cost:
  •  as promptly as reasonably practicable, file a shelf registration statement covering resales of the private notes or the exchange notes, as the case may be;
 
  •  use our reasonable best efforts to cause the shelf registration statement to be declared effective under the Securities Act; and
 
  •  use our reasonable best efforts to keep the shelf registration statement continuously effective until the earlier of two years from the issue date of the private notes or the date on which all private notes registered thereunder are disposed of in accordance therewith or cease to be outstanding.
      We will, in the event a shelf registration statement is filed, among other things, provide to each holder for whom such shelf registration statement was filed copies of the prospectus which forms a part of the shelf registration statement, notify each such holder when the shelf registration statement has become effective and take certain other actions as are required to permit unrestricted resales of the private notes or the exchange notes, as the case may be. A holder selling such private notes or exchange notes pursuant to

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the shelf registration statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the registration rights agreements which are applicable to such holder (including certain indemnification obligations).
Additional Interest
      In the event that:
  (1)  within 360 days after the issue date of the private notes, neither the exchange offer registration statement nor, if required to be filed pursuant to clause (1) or clause (2) under “— Shelf Registration” above, the shelf registration statement has been filed with the SEC;
 
  (2)  within 30 days after a shelf registration statement is required to be filed pursuant to clause (1) or clause (2) under “— Shelf Registration” above, so long as such 30th day is a date after the 180th day following the issue of the private notes, the shelf registration statement has not been filed with the SEC;
 
  (3)  within 420 days after the issue date of the private notes, the exchange offer registration statement has not been declared effective;
 
  (4)  within 450 days after the issue date of the private notes, neither the exchange offer has been consummated nor, if required to be filed pursuant to clause (1) or clause (2) under “— Shelf Registration” above, the shelf registration statement has been declared effective;
 
  (5)  within 60 days of the day on which the obligation to file a shelf registration statement arises pursuant solely to clause (3) under “— Shelf Registration” above, we fail to file such shelf registration statement with the SEC;
 
  (6)  within 60 days of the day on which the obligation to have a shelf registration statement declared effective arises pursuant solely to clause (3) under “— Shelf Registration” above, such shelf registration statement has not been declared effective; or
 
  (7)  after either the exchange offer registration statement or the shelf registration statement has been declared effective, such registration statement thereafter ceases to be effective or usable (subject to certain exceptions) in connection with resales of private notes or exchange notes in accordance with and during the period specified in the registration rights agreement,
(each such event a “registration default”) then, additional interest will accrue on the aggregate principal amount of the private notes and the exchange notes subject to such registration statement from and including the date on which any such registration default has occurred to, but excluding, the date on which all registration defaults have been cured or all such private notes or exchange notes be freely transferable. Additional interest will accrue at an initial rate of 0.25% per annum, which rate shall increase by 0.25% per annum for each subsequent 90-day period during which such registration default continues up to a maximum of 1.0% per annum and shall be payable in cash to holders of the notes on the earliest date on which interest on the notes is payable.
Terms of the Exchange Offer
      Based on the terms and conditions in this prospectus and in the letter of transmittal, we will issue $1,000 principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding private notes properly surrendered pursuant to the exchange offer and not withdrawn prior to the expiration date. Private notes may be surrendered only in integral multiples of $1,000. The form and terms of the exchange notes are the same as the form and terms of the private notes except that:
  •  the exchange notes will have a different Committee on Uniform Security Identification Procedures (CUSIP) number from the private notes;

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  •  the exchange notes will be registered for the exchange offer under the Securities Act and, therefore, the exchange notes will not bear legends restricting the transfer of the exchange notes; and
 
  •  holders of the exchange notes generally will not be entitled to any of the registration rights of holders of private notes under the registration rights agreement.
      The exchange notes will evidence the same indebtedness as the private notes which they replace and will be issued under, and be entitled to the benefits of, the same indenture that authorized the issuance of the private notes. As a result, both series of notes will be treated as a single class of debt securities under the indenture.
      As of the date of this prospectus, $219.0 million in aggregate principal amount at maturity of the private notes is outstanding. All of it is registered in the name of Cede & Co., as nominee for The Depository Trust Company (“DTC”). Solely for reasons of administration, we have fixed the close of business on April 4, 2005 as the record date for the exchange offer for purposes of determining the persons to whom this prospectus and the letter of transmittal will be mailed initially. There will be no fixed record date for determining holders of the private notes entitled to participate in this exchange offer.
      In connection with the exchange offer, neither the Delaware General Corporation Law nor the indenture governing the private notes gives you any appraisal or dissenters’ rights nor any other right to seek monetary damages in court. We intend to conduct the exchange offer in accordance with the provisions of the registration rights agreement and the applicable requirements of the Securities Act and the related SEC rules and regulations.
      For all relevant purposes, we will be regarded as having accepted properly surrendered private notes if and when we give oral or written notice of our acceptance to the exchange agent. The exchange agent will act as agent for the surrendering holders of private notes for the purposes of receiving the exchange notes from us.
      If you surrender private notes in the exchange offer, you will not be required to pay brokerage commissions or fees. In addition, subject to the instructions in the letter of transmittal, you will not have to pay transfer taxes for the exchange of private notes. We will pay all charges and expenses, other than certain applicable taxes described under “ — Fees and Expenses” below.
      By executing or otherwise becoming bound by the letter of transmittal, you will be making the representations described under “ — Representations on Tendering Private Notes” below.
     Expiration Date; Extensions; Amendments
      We will keep the exchange offer open for not less than 30 days, or longer if required by applicable law, after the date on which notice of the exchange offer is mailed to the holders of the private notes. The “expiration date” is 5:00 p.m., New York City time on May 6, 2005, unless we, in our sole discretion, extend the exchange offer, in which case the expiration date is the latest date and time to which we extend the exchange offer.
      In order to extend the exchange offer, we will:
  •  notify the exchange agent of any extension by oral or written notice; and
 
  •  issue a press release or other public announcement which will include disclosure of the approximate number of private notes deposited; such press release or announcement would be issued prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date.
      We expressly reserve the right:
  •  to delay accepting any private notes;
 
  •  to extend the exchange offer;

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  •  to terminate the exchange offer; or
 
  •  amend the terms of the exchange offer in any manner.
      Any delay in acceptance, extension, termination or amendment will be followed as soon as practicable by oral or written notice to holders of the private notes, by means of a press release, public announcement or otherwise. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly disclose that amendment by means of a prospectus supplement that will be distributed to the holders. If we make such an amendment, we will also extend the expiration date of the exchange offer, as necessary.
      We will have no obligation to publish, advertise, or otherwise communicate any public announcement of any delay, extension, amendment or termination that we may choose to make, other than by making a timely release to an appropriate news agency.
     Interest on the Exchange Notes
      The exchange notes will accrete and accrue interest on the same terms as the private notes, i.e., the exchange notes will accrete interest at the rate of 111/2% per year, compounded semi-annually on April 1 and October 1 of each year to, but not including, April 1, 2009; thereafter, cash interest on the notes will accrue at the rate of 111/2% per annum and, subject to specified limitations, will be payable semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2009.
     Resale of the Exchange Notes
      We believe that you will be allowed to resell the exchange notes to the public without registration under the Securities Act, and without delivering a prospectus that satisfies the requirements of the Securities Act, if you can make the following representations:
  •  you are acquiring the exchange notes in the ordinary course of business;
 
  •  you are not engaged in, do not intend to engage in or have any arrangement or understanding with any person to participate in, the distribution of the private notes or exchange notes;
 
  •  you are not an “affiliate” (as defined in Rule 405 under the Securities Act) of ours or, if you are such an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable;
 
  •  if you are a broker-dealer, you have not entered into any arrangement or understanding with us or any “affiliate” of ours (within the meaning of Rule 405 under the Securities Act) to distribute the exchange notes; and
 
  •  if you are a broker-dealer receiving exchange notes for your own account in exchange for unregistered private notes that were acquired as a result of market-making activities or other trading activities, you will deliver a prospectus in connection with any resale of such exchange notes.
      You are required to represent to us in the letter of transmittal accompanying this prospectus that you meet these conditions exempting you from the registration requirements before you will be allowed to participate in the exchange offer.
      We base our view on interpretations by the staff of the SEC in no-action letters issued to other issuers in exchange offers like ours. We have not, however, asked the SEC to consider this particular exchange offer in the context of a no-action letter. Therefore, you cannot be sure that the SEC will treat this exchange offer in the same way as it has treated others in the past. If our belief is wrong, or if you cannot truthfully make the representations described above, and you transfer any exchange notes issued to you in the exchange offer without meeting the registration and prospectus delivery requirements of the Securities Act, or without an exemption from such requirements, you could incur liability under the

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Securities Act. We are not indemnifying you for any such liability and we will not protect you against any loss incurred as a result of any such liability under the Securities Act.
      A broker-dealer that has bought private notes for market-making or other trading activities has to deliver a prospectus in order to resell any exchange notes it has received for its own account in the exchange. This prospectus may be used by such a broker-dealer to resell any of its exchange notes. In addition, a broker-dealer which has acquired the private notes for its own account as a result of market-making or other trading activities may participate in the exchange offer if it has not entered into any arrangement or understanding with us or an affiliate of ours to distribute the exchange notes. We have agreed in the registration rights agreement to make this prospectus, and any amendment or supplement to this prospectus, available to any such broker-dealer that requests copies in the letter of transmittal for a period of up to 90 days after the registration statement relating to this exchange offer is declared effective. See “Plan of Distribution” for more information regarding broker-dealers.
Procedures for Tendering
      If you wish to surrender private notes you must do the following:
  •  properly complete, sign and date the letter of transmittal (or a facsimile of the letter of transmittal);
 
  •  have the signatures on the letter of transmittal (or facsimile) guaranteed if required by the letter of transmittal; and
 
  •  mail or deliver the letter of transmittal (or facsimile) together with your private notes and any other required documents to the exchange agent at the address appearing below under “ — Exchange Agent” for receipt prior to 5:00 p.m., New York City time, on the expiration date.
      In addition, either:
  •  certificates for such private notes must be received by the exchange agent along with the letter of transmittal;
 
  •  a timely confirmation of a book-entry transfer of the private notes into the exchange agent’s account at DTC pursuant to the procedure for book-entry transfer described below under “ — Book-Entry Transfer,” must be received by the exchange agent prior to the expiration date; or
 
  •  you must comply with the procedures described below under “—Guaranteed Delivery Procedures.”
      In order for the tender to be effective, the exchange agent must receive the private notes, a completed letter of transmittal and all other required documents before 5:00 p.m., New York City time, on the expiration date.
      THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT.
      As an alternative to delivery by mail, you may wish to consider overnight or hand delivery service, properly insured. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. Do not send the letter of transmittal or any private notes to us. You may ask your broker, dealer, commercial bank, trust company or nominee to perform these transactions for you.
      If you do not withdraw your surrender of private notes prior to the expiration date, you will be regarded as agreeing to surrender the private notes in accordance with the terms and conditions in this exchange offer.
      If you are a beneficial owner of the private notes and your private notes are held through a broker, dealer, commercial bank, trust company or other nominee and you want to surrender your private notes,

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you should contact your intermediary promptly and instruct it to surrender the private notes on your behalf. If you wish to tender on your own behalf, you must, before completing and executing the letter of transmittal for the exchange offer and delivering your private notes, either arrange to have your private notes registered in your name or obtain a properly completed bond power from the registered holder or a DTC participant listed on a securities position listing furnished by DTC with respect to the private notes. The transfer of registered ownership may take a long time.
      By tendering, you will make the representations described below under “ — Representations on Tendering Private Notes.” In addition, each participating broker-dealer who receives exchange notes for its own account in exchange for private notes that were acquired by the broker-dealer as a result of market-making activities or other trading activities must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.”
      Your tender and our acceptance of the tender will constitute the agreement between you and us set forth in this prospectus and in the letter of transmittal.
     Signature on Letter of Transmittal
      Signatures on a letter of transmittal or a notice of withdrawal described below under “ — Withdrawal of Tenders,” as the case may be, must generally be guaranteed by an eligible institution. You can submit the letter of transmittal without guarantee if you surrender your private notes (i) as a registered holder and you have not completed the box titled “Special Delivery Instruction” on the letter of transmittal or (ii) for the account of an eligible institution. In the event that signatures on a letter of transmittal or a notice of withdrawal are required to be guaranteed, the guarantee must be made by:
  •  a member firm of a registered national securities exchange or of the NASD;
 
  •  a commercial bank or trust company having an office or correspondent in the United States; or
 
  •  an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of the recognized signature guarantee programs identified in the letter of transmittal.
      If you sign the letter of transmittal even though you are not the registered holder of any private notes listed in the letter of transmittal, your private notes must be endorsed or accompanied by a properly completed bond power. The bond power must authorize you to tender the private notes on behalf of the registered holder and must be signed by the registered holder as the registered holder’s name appears on the private notes.
      In connection with any surrender of private notes in definitive certificated form, if you sign the letter of transmittal or any private notes or bond powers in your capacity as trustee, executor, administrator, guardian, attorney-in-fact or officer of a corporation or if you are otherwise acting in a fiduciary or representative capacity, you should indicate this when signing. Unless waived by us, you must submit with the letter of transmittal evidence satisfactory to us of your authority to act in the particular capacity.
     Acceptance of Tendered Notes
      All questions as to the validity, form, acceptance, withdrawal and eligibility, including time of receipt of surrendered private notes, will be determined by us in our sole discretion, which will be final and binding.
      We reserve the absolute right:
  •  to reject any and all private notes not properly surrendered;
 
  •  to reject any private notes if our acceptance of them would, in the opinion of our counsel, be unlawful; and
 
  •  to waive any defects, irregularities or conditions of surrender as to particular private notes.

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      Unless waived, you must cure any defects or irregularities in connection with surrenders of private notes within the time period we will determine. Although we intend to notify holders of defects or irregularities in connection with surrenders of private notes, neither we, the exchange agent nor anyone else will be liable for failure to give such notice. Surrenders of private notes will not be deemed to have been made until any defects or irregularities have been cured or waived.
      We do not currently intend to acquire any private notes that are not surrendered in the exchange offer or to file a registration statement to permit resales of any private notes that are not surrendered pursuant to the exchange offer. We reserve the right in our sole discretion to purchase or make offers for any private notes that remain outstanding after the expiration date. To the extent permitted by applicable law, we also reserve the right in our sole discretion to purchase private notes in the open market, in privately negotiated transactions or otherwise. The terms of any future purchases or offers could differ from the terms of the exchange offer.
     Representations on Tendering Private Notes
      By surrendering private notes pursuant to the exchange offer, you will be telling us that, among other things,
  •  you have full power and authority to surrender, sell, assign and transfer the private notes tendered;
 
  •  you are acquiring the exchange notes in the ordinary course of your business;
 
  •  you are not an “affiliate”, as defined in Rule 405 under the Securities Act, of ours, or a broker-dealer tendering the private notes acquired directly from us for its own account;
 
  •  you are not participating, do not intend to participate and have no arrangement or understanding with any person to participate in the distribution of the private notes or exchange notes;
 
  •  you understand that a secondary resale transaction described above and any resales of exchange notes obtained by you in exchange for private notes acquired by you directly from us should be covered by an effective registration statement containing the selling security holder information required by Item 507 or Item 508, as applicable, of Regulation S-K of the SEC; and
 
  •  we will acquire good, marketable and unencumbered title to the private notes being tendered, free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sale agreements or other obligations relating to their sale or transfer, and not subject to any adverse claim when the private notes are accepted by us.
      If you are a broker-dealer and you receive exchange notes for your own account in exchange for private notes that were acquired as a result of market-making activities or other trading activities, you will be required to acknowledge in the letter of transmittal that you will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes received in the exchange offer.
     Return of Private Notes
      If any surrendered private notes are not accepted for any reason described here or if private notes are withdrawn or are submitted for a greater principal amount than you desire to exchange, those private notes will be returned, at our cost, to (i) the person who surrendered them or (ii) in the case of private notes surrendered by book-entry transfer, the exchange agent’s account at DTC. Any such private notes will be returned promptly to the surrendering person or credited to an account maintained with DTC.
Book-Entry Transfer
      The exchange agent will make a request to establish an account with respect to the private notes at DTC for purposes of facilitating the exchange offer within two business days after the date of this prospectus. Subject to the establishment of the account, any financial institution that is a participant in

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DTC’s systems may make book-entry delivery of private notes by causing DTC to transfer the private notes into the exchange agent’s account at DTC in accordance with DTC’s procedures for transfer. However, although delivery of private notes may be effected through book-entry transfer at DTC, you must transmit the letter of transmittal with any required signature guarantees and any other required documents to the exchange agent at the address appearing below under “ — Exchange Agent” for its receipt on or prior to the expiration date or pursuant to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
      If you wish to surrender your private notes and (i) your private notes are not readily available so you cannot meet the expiration date deadline or (ii) you cannot deliver your private notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date, you may still participate in the exchange offer if:
  •  the surrender is made through an eligible institution;
 
  •  prior to the expiration date, the exchange agent receives from such eligible institution a properly completed and duly executed notice of guaranteed delivery substantially in the form provided by us, by facsimile transmission, mail or hand delivery, containing:
  •  the name and address of the holder, the certificate number(s) of the private notes, if applicable, and the principal amount of private notes surrendered;
 
  •  a statement that the surrender is being made thereby;
 
  •  a guarantee that, within three business days after the expiration date, the letter of transmittal, together with the certificate(s) representing the private notes in proper form for transfer or a book-entry confirmation, and any other required documents, will be deposited by the eligible institution with the exchange agent; and
 
  •  the properly executed letter of transmittal, as well as the certificate(s) representing all surrendered private notes in proper form for transfer or a book-entry confirmation, and all other documents required by the letter of transmittal are received by the exchange agent within three business days after the expiration date.
      The exchange agent will send you a notice of guaranteed delivery upon your request if you wish to surrender your private notes according to the guaranteed delivery procedures set forth above.
Withdrawal of Tenders
      Except as otherwise provided in this prospectus, you may withdraw your surrender of private notes at any time prior to 5:00 p.m., New York City time, on the expiration date.
      To withdraw a surrender of private notes in the exchange offer, the exchange agent must receive a written or facsimile transmission notice of withdrawal at its address set forth below under “ — Exchange Agent” prior to 5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal must:
  •  specify the name of the person having deposited the private notes to be withdrawn;
 
  •  identify the private notes to be withdrawn, including the certificate number or numbers, if applicable, and principal amount of the private notes or, in the case of original notes transferred by book-entry transfer, the name and number of the account at DTC to be credited; and
 
  •  be signed by the holder in the same manner as the original signature on the letter of transmittal by which the private notes were tendered.
      All questions as to the validity, form, eligibility and time of receipt of notices will be determined by us, in our sole discretion, and our determination shall be final and binding upon all parties. Any private notes so withdrawn will be deemed not to have been validly surrendered for purposes of the exchange

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offer, and no exchange notes will be issued unless the private notes so withdrawn are validly re-tendered. Properly withdrawn private notes may be re-tendered by following one of the procedures described above under “ — Procedures for Tendering” at any time prior to the expiration date.
Conditions
      Notwithstanding any other term of the exchange offer, we will not be required to accept for exchange, or exchange the exchange notes for, any private notes, and we may terminate the exchange offer as provided in this prospectus before the acceptance of those private notes if, in our judgment, any of the following conditions has occurred or exists or has not been satisfied or waived prior to the expiration of the exchange offer:
  •  any law, statute, rule or regulation is proposed, adopted or enacted, or the staff of the SEC interprets any existing law, statute, rule or regulation in a manner, which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer;
 
  •  any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the exchange offer which, in our reasonable judgment, would materially impair our ability to proceed with the exchange offer; or
 
  •  any governmental approval, which we deem necessary for the consummation of the exchange offer, has not been obtained.
      If we determine in our sole discretion that any of these conditions are not satisfied, we may:
  •  refuse to accept any private notes and return all tendered private notes to the tendering holders;
 
  •  extend the exchange offer and retain all private notes tendered prior to the expiration of the exchange offer, subject, however, to the rights of holders who tendered the private notes to withdraw their tendered private notes; or
 
  •  waive the unsatisfied conditions, if permissible, with respect to the exchange offer and accept all properly tendered private notes which have not been withdrawn. If that waiver constitutes a material change to the exchange offer, we will promptly disclose the waiver by means of a prospectus supplement that will be distributed to the registered holders, and we will extend the exchange offer to the extent required by law.
      The conditions listed above are for our sole benefit and we may assert these rights regardless of the circumstances giving rise to any of these conditions. We may waive these conditions in our reasonable discretion in whole or in part at any time and from time to time. If we fail at any time to exercise any of the above rights, the failure will not be deemed a waiver of these rights, and these rights will be deemed ongoing rights which may be asserted at any time and from time to time.
      The exchange offer is not conditioned upon any minimum principal amount of private notes being submitted for exchange.
Termination of Certain Rights
      All registration rights under the registration rights agreement benefiting the holders of the private notes that are eligible to participate in the exchange offer will terminate when we consummate the exchange offer. That includes all rights to receive additional interest in the event of a registration default under the registration rights agreement. In any case, we have agreed, for a period of up to 90 days after the exchange offer is consummated, to make this prospectus, and any amendment or supplement to this prospectus, available to any broker-dealer for use in a resale.

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Exchange Agent
      We have appointed Wells Fargo Bank, N.A. as the exchange agent for the exchange offer. You should direct any questions and requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for notice of guaranteed delivery to the exchange agent, addressed as follows:
         
By Registered and Certified Mail

Wells Fargo Bank, N.A.
Corporate Trust Operations
MAC N9303-121
P.O. Box 1517
Minneapolis, MN 55480
Attention: Reorg.
  By Overnight Courier or Regular Mail:

Wells Fargo Bank, N.A.
Corporate Trust Operations
MAC N9303-121
6th & Marquette Avenue
Minneapolis, MN 55479
Attention: Reorg.
  By Hand Delivery

Well Fargo Bank, N.A.
Corporate Trust Services
608 2nd Avenue South
Northstar East Building —
12th Floor
Minneapolis, MN 55402
Attention: Reorg.
or
Facsimile: (612) 667-4927

Telephone: (612) 667-9764
      Delivery of the letter of transmittal to an address, or transmission via telegram, telex or facsimile, other than to the exchange agent as set forth above, will not constitute a valid delivery.
Fees and Expenses
      We will pay for the expenses of this exchange offer. The principal solicitation for tenders of private notes is being made by mail. However, additional solicitation may be made by telegraph, facsimile transmission, e-mail, telephone or in person by our officers and regular employees.
      We have not retained a dealer-manager in connection with the exchange offer, and will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. We will, however, pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection with providing the services.
      We will pay all transfer taxes, if any, applicable to the exchange of private notes in connection with the exchange offer. If, however, a transfer tax is imposed for any reason other than the exchange of private notes in connection with the exchange offer, then the amount of any transfer taxes will be payable by the person surrendering the notes. If you do not submit satisfactory evidence of payment of taxes or of an exemption payment of any applicable transfer taxes with the letter of transmittal, the amount of those transfer taxes will be billed directly to you.
Accounting Treatment
      We will record the exchange notes at the same carrying value as the private notes as reflected in our accounting records on the date of exchange. Therefore, we will not recognize a gain or loss for accounting purposes. We will amortize the expenses of the exchange offer and the unamortized expenses related to the issuance of the private notes over the remaining term of the exchange notes.
Consequences of Failure to Exchange
      You do not have to participate in the exchange offer. You should carefully consider whether to accept the terms and conditions of this exchange offer. We urge you to consult your financial and tax advisors in deciding what action to take with respect to the exchange offer.

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      Private notes that are not exchanged will remain “restricted securities” within the meaning of Rule 144(a)(3)(iii) of the Securities Act. Accordingly, they may not be offered, sold, pledged or otherwise transferred except:
  •  to a person whom the purchaser reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A;
 
  •  in an offshore transaction complying with Rule 903 or Rule 904 of Regulation S;
 
  •  pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available);
 
  •  in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel acceptable to us, if we so request);
 
  •  to us; or
 
  •  pursuant to an effective registration statement under the Securities Act, and, in each case, in accordance with all applicable United States state securities or “blue sky” laws.
      See “Risk Factors” for more information about the risks of not participating in the exchange offer.
Regulatory Approvals
      We do not believe that the receipt of any material federal or state regulatory approval will be necessary in connection with the exchange offer, other than the effectiveness of the exchange offer registration statement under the Securities Act.

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THE PHARMA SERVICES TRANSACTION
      On September 25, 2003, Pharma Services acquired all of the issued and outstanding common stock of Quintiles. Intermediate Holding currently owns 99.2% of the outstanding common stock of Quintiles with Pharma Services owning the remainder. Intermediate Holding is wholly owned by Pharma Services. Pharma Services was formed by Dennis B. Gillings, Ph.D., Executive Chairman, Chief Executive Officer and founder of Quintiles, and One Equity.
      Dr. Gillings and his affiliates own approximately 19.6% of the outstanding shares of common stock of Pharma Services and 17.0% of the outstanding preferred stock. Pharma Services also has an equity incentive plan under which its employees and directors may purchase up to 9,634,805 restricted shares of Pharma Services common stock, or be granted options to purchase up to 4,817,403 shares of Pharma Services common stock. As of February 11, 2005, 8,528,500 restricted shares of Pharma Services common stock have been purchased under the equity incentive plan and remain outstanding, and 3,812,500 options to purchase shares of Pharma Services common stock have been granted under the equity incentive plan.
      The total amount of consideration necessary to consummate the Pharma Services transaction and the related transactions was approximately $1.88 billion, consisting of (i) approximately $1.74 billion to acquire the outstanding shares of Quintiles (including equity rollover) and payments in respect of the cancellation of outstanding stock options, (ii) approximately $912,000 to repay certain existing indebtedness of Quintiles and (iii) approximately $146.4 million to pay transaction fees and expenses. These funds were obtained from equity and debt financings together with cash of Quintiles of $592.0 million. The financing for the Pharma Services transaction consisted of the following:
  •  cash equity financing in the aggregate amount of $424.4 million, including investments of $222.3 million from One Equity, $90.0 million from TPG and $90.0 million from Temasek;
 
  •  equity rollover in the aggregate amount of $107.1 million, of which $93.7 million consisted of Quintiles common stock and options to purchase Quintiles common stock held by Dr. Gillings and his affiliates;
 
  •  a six-year $310.0 million term loan and a five-year $75.0 million revolving credit facility, provided as part of Quintiles’ $385.0 million senior secured credit facility; and
 
  •  $450.0 million raised through the issuance of senior subordinated notes by Quintiles.
USE OF PROCEEDS
      The exchange offer is intended to satisfy certain obligations under our registration rights agreement. We will not receive any cash proceeds from the issuance of the exchange notes. Because we are exchanging the private notes for the exchange notes, which have substantially identical terms, the issuance of the exchange notes will not result in any increase in our indebtedness. The issuance of the private notes in March 2004 increased our indebtedness as described more fully in Note 15, Credit Arrangements to our Consolidated Financial Statements. The private notes surrendered in exchange for the exchange notes will be retired and canceled and cannot be re-issued. We used the net proceeds from the sale of the private notes to pay a dividend on our common stock to Pharma Services. Pharma Services used such funds for the repurchase of certain outstanding shares of its preferred stock on a pro rata basis and for the payment of accrued and unpaid dividends on the stock repurchased. We have agreed to pay for the expenses of the exchange offer.

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CAPITALIZATION
      The following table sets forth our capitalization as of December 31, 2004. You should read this table in conjunction with the consolidated financial statements and the related notes included elsewhere in this prospectus.
           
    As of December 31, 2004
     
    (dollars in thousands)
Cash and cash equivalents
  $ 535,732  
Investments in debt securities
    12,121  
Investments in marketable equity securities
    24,425  
       
Total cash and cash equivalents and investments in debt and marketable equity securities
  $ 572,278  
       
Total debt (including current portion):
       
 
Revolving credit facility(1)
  $  
 
Term loan B
    306,125  
 
11.5% senior discount notes
    136,231  
 
10% senior subordinated notes
    450,000  
 
Other indebtedness
    38,756  
       
Total debt
    931,112  
Total stockholders’ equity
    307,470  
       
Total capitalization
  $ 1,238,582  
       
 
(1)  The revolving credit facility provides for borrowings of up to $75.0 million, all of which are available to us for working capital and general corporate purposes.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
      The following unaudited pro forma condensed consolidated financial information is derived by the application of pro forma adjustments to our historical consolidated financial statements for the fiscal year ended December 31, 2004, which are included elsewhere herein. The unaudited pro forma condensed consolidated statement of operations from continuing operations for the year ended December 31, 2004 gives effect to the March 18, 2004 issuance of the notes and the March 31, 2005 amendment of Quintiles’ senior secured credit facility, including the prepayment of $150.0 million of the outstanding principal balance, as if those transactions had occurred on January 1, 2004. The pro forma adjustments are based upon available information, preliminary estimates and certain assumptions that we believe are reasonable, but which are subject to change and are described in the accompanying notes. The pro forma financial statements do not purport to indicate results of operations as of any future date or any future period. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and notes thereto included elsewhere herein.

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Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2004
(dollars in thousands)
                             
        Adjustments    
    Pharma   for    
    Services   Amendment    
    Intermediate   to Credit    
    Holding   Facility   Pro forma
             
Current Assets:
                       
 
Cash and cash equivalents
  $ 535,732     $ (152,300 )(1)   $ 383,432  
 
Trade accounts receivable and unbilled services, net
    300,407             300,407  
 
Other current assets and receivables
    79,277             79,277  
                   
   
Total current assets
    915,416       (152,300 )     763,116  
 
Property and equipment, net
    291,145             291,145  
 
Intangibles and other assets:
                       
 
Investments
    213,402             213,402  
 
Commercial rights and royalties related
    185,212             185,212  
 
Goodwill
    116,013             116,013  
 
Other identifiable intangibles, net
    274,457             274,457  
 
Deferred income taxes
    2,877             2,877  
 
Deposits and other assets
    54,927       2,300  (1)     57,227  
                   
      846,888       2,300       849,188  
                   
Total assets
  $ 2,053,449     $ (150,000 )   $ 1,903,449  
                   
Liabilities and Shareholders’ Equity:
                       
Current liabilities:
                       
 
Accounts payable and accrued expenses
  $ 348,213     $     $ 348,213  
 
Unearned income
    199,450             199,450  
 
Income taxes payable
    25,354             25,354  
 
Credit arrangements
    20,319             20,319  
 
Other current liabilities
    6,993             6,993  
                   
   
Total current liabilities
    600,329             600,329  
 
Long-term liabilities:
                       
 
Credit arrangements, less current liabilities
    910,793       (150,000 )(2)     760,793  
 
Deferred income taxes
    41,898             41,898  
 
Payable to Parent Company
    128,470             128,470  
 
Minority interest
    43,347             43,347  
 
Other liabilities
    21,142             21,142  
                   
      1,145,650       (150,000 )     995,650  
                   
 
Total liabilities
    1,745,979       (150,000 )     1,595,979  
 
Shareholders’ Equity
    307,470             307,470  
                   
Total liabilities and shareholders’ equity
  $ 2,053,449     $ (150,000 )   $ 1,093,449  
                   

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Unaudited Pro Forma Condensed Consolidated Statement
of Operations From Continuing Operations
for the Year Ended December 31, 2004
(dollars in thousands)
                                   
        Adjustments        
        for   Adjustments    
    Pharma Services   Amendment to   for Debt    
    Intermediate Holding   Credit Facility   Issuance   Pro Forma
                 
Net revenues
  $ 1,782,254     $           $ 1,782,254  
Add: reimbursed service costs
    364,080                   364,080  
                         
Gross revenues
    2,146,334                   2,146,334  
 
Costs, expenses and other:
                               
 
Costs of revenues
    1,547,444                   1,547,444  
 
Selling, general and administrative
    637,197                   637,197  
 
Interest (income) expense, net
    70,547       (6,877 )(3)     3,152  (5)     66,822  
 
Other (income) expense, net
    (1,079 )                 (1,079 )
 
Transaction and restructuring
    6,577                   6,577  
 
Gain on sale of portion of an investment in a subsidiary
    (24,688 )                 (24,688 )
 
Non-operating gain on change of interest transaction
    (10,030 )                 (10,030 )
                         
      2,225,968       (6,877 )     3,152       2,222,243  
                         
 
Loss before income taxes
    (79,634 )     6,877       (3,152 )     (75,909 )
Income tax (benefit) expense
    (10,564 )     2,407  (4)     (1,103 )(6)     (9,260 )
                         
 
Loss before equity in losses of unconsolidated affiliates and other
    (69,070 )     4,470       (2,049 )     (66,649 )
Equity in losses of unconsolidated affiliates
    (149 )                 (149 )
Minority interests
    (1,362 )                 (1,362 )
                         
 
Loss from continuing operations
  $ (70,581 )   $ 4,470     $ (2,049 )   $ (68,160 )
                         

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Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
for the Year Ended December 31, 2004
(dollars in thousands)
Balance Sheet:
Adjustments for amendment to Quintiles’ credit facility
  (1)  Cash and cash equivalents: This reflects the net effect of the amendment to Quintiles’ credit facility on the cash balance as follows:
         
Uses:
       
Prepayment of principal
  $ (150,000 )
Fees paid to lenders
    (2,300 )
       
Change in cash and cash equivalents
  $ (152,300 )
       
  (2)  Long-Term Debt: Reflects the repayment of principal as follows:
         
Non-current portion:
       
Repayment of principal
  $ (150,000 )
       
Adjustment to non-current portion of long-term debt
  $ (150,000 )
       
Statement of Operations:
Adjustments for amendment to Quintiles’ credit facility
  (3)  Interest expense: The pro forma adjustment to interest expense reflects the estimated difference in the interest expense on the Term Loan B due to a change in the interest rate as though the change in interest rates were in effect as of January 1, 2004 and the decrease in interest income as though the payment of principal and fees occurred on January 1, 2004.
         
Pro forma estimated interest income on $152.3 million earned for the year ended December 31, 2004
  $ 3,793  
Interest expense for term loan for the year ended December 31, 2004
    (17,885 )
Pro forma estimated interest expense on term loan for year ended December 31, 2004 (4.31% at December 31, 2004)
    6,813  
Pro forma estimated amortization of approximately $2.3 million of fees paid to the lenders as part of the modification
    402  
       
Pro forma adjustment for interest expense
  $ (6,877 )
       
  (4)  Income taxes: The pro forma income adjustments consist of items that would be taxed in the United States. Accordingly, we reflected the income tax impact of these adjustments using our Federal income tax rate of 35.0%.
Adjustments for debt issuance
  (5)  Interest expense: The pro forma adjustment to interest expense reflects the estimated interest expense on the notes and the estimated debt issuance costs. The issuance date on the notes is March 18, 2004. The adjustment is to add interest expense on the debt as if it was outstanding from January 1, 2004 through March 18, 2004.
         
Pro forma estimated interest expense for the notes ($124.7 million at 11.50%)
  $ 3,028  
Pro forma estimated amortization of approximately $5.8 million debt issuance costs
    124  
       
Pro forma adjustment for interest expense
  $ 3,152  
       
  (6)  Income taxes: The pro forma income adjustments consist of items that would be taxed in the United States. Accordingly, we reflected the income tax impact of these adjustments using our federal income tax rate of 35.0%.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
      The Selected Consolidated Statement of Operations Data set forth below for the year ended December 31, 2004, the periods from January 1, 2003 through September 25, 2003 and September 26, 2003 through December 31, 2003 and for the year ended December 31, 2002 and the Consolidated Balance Sheet Data set forth below as of December 31, 2004 and 2003 are derived from our audited consolidated financial statements and notes thereto as included elsewhere herein. The Selected Consolidated Statement of Operations Data set forth below for the years ended December 31, 2001 and 2000, and the Consolidated Balance Sheet Data set forth below as of December 31, 2002, 2001 and 2000 are derived from our consolidated financial statements not included herein. During 2004, we completed the sale of certain assets representing our Bioglan business, and, as such, the results of the Bioglan business, for all periods presented, have been reported separately as a discontinued operation in the consolidated financial statements. During 2000, Quintiles completed the sale of its electronic data interchange unit, ENVOY, and, as such, the results of ENVOY, for that year, have been reported separately as a discontinued operation in the consolidated financial statements. The selected consolidated financial data presented below should be read in conjunction with our audited consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
                                                   
        September 26,     January 1,            
        2003     2003            
    Year Ended   Through     Through   Year Ended   Year Ended   Year Ended
    December 31,   December 31,     September 25,   December 31,   December 31,   December 31,
    2004   2003     2003   2002   2001   2000
                           
    Successor   Successor     Predecessor   Predecessor   Predecessor   Predecessor
                    (dollars in thousands)
Statement of Operations Data:
                                                 
Net revenues
  $ 1,782,254     $ 431,626       $ 1,196,247     $ 1,570,383     $ 1,620,483     $ 1,660,489  
Gross revenues
    2,146,334       527,881         1,464,930       1,970,033       1,883,912       1,871,077  
(Loss) income from continuing operations before income taxes
    (79,634 )     (2,306 )       59,755       122,770       (262,496 )     (51,005 )
(Loss) income from continuing operations
    (70,581 )     (12,128 )       32,535       81,222       (175,873 )     (34,174 )
Income from discontinued operations, net of income taxes
    9,543       4,760         4,626       442             16,770  
Gain from sale of discontinued operation, net of income taxes
    53,987                                  
Extraordinary gain from sale of discontinued operation, net of income taxes
                              142,030       436,327  
Cumulative effect on prior years (to December 31, 2001) of changing to a different method of recognizing deferred income taxes
                        45,659              
Net (loss) income
  $ (7,051 )   $ (7,368 )     $ 37,161     $ 127,323     $ (33,843 )   $ 418,923  
                                       
Other Financial Data:
                                                 
Ratio of earnings to fixed charges(1)
    0.27x       0.92x         4.01x       5.56x              

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    As of December 31,
       
    2004   2003     2002   2001   2000
                       
    Successor   Successor     Predecessor   Predecessor   Predecessor
    (in thousands, except employee data)
Balance Sheet Data:
                                         
Cash and cash equivalents
  $ 535,732     $ 373,622       $ 644,255     $ 565,063     $ 330,214  
Working capital, excluding discontinued operation
    315,087       131,490         569,784       617,552       308,684  
Total assets
    2,053,449       1,992,711         2,054,195       1,853,794       1,961,578  
Long-term debt and capital leases including current portion
    931,112       794,256         40,574       37,866       38,992  
Stockholders’ equity
  $ 307,470     $ 402,347       $ 1,598,386     $ 1,455,088     $ 1,404,706  
Full-time equivalent employees
    17,015       15,662         15,801       17,639       18,060  
 
(1)  The ratio of earnings to fixed charges set forth above is computed in accordance with Item 503(d) of Regulation S-K under the Securities Act and may differ from the fixed charge coverage ratio computed for purposes of the indenture governing the notes, the indenture governing Quintiles’ senior subordinated notes and the credit agreement governing Quintiles’ senior secured credit facility. Deficiency in earnings available to cover fixed charges for the year ended December 31, 2004, the period from September 26, 2003 through December 31, 2003 and the years ended December 31, 2001 and 2000 was $79.9 million, $2.3 million, $262.5 million and $51.0 million, respectively.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
      Intermediate Holding is a holding company with no income from operations or physical assets. Intermediate Holding operates its business through and receives all of its income from Quintiles and its subsidiaries. Intermediate Holding was incorporated in the State of Delaware on August 18, 2003 in anticipation of the acquisition of Quintiles by Pharma Services. Intermediate Holding owns 99.2% of the outstanding common stock of Quintiles, with Pharma Services owning the remainder.
      Quintiles helps improve healthcare worldwide by providing a broad range of professional services, information and partnering solutions to the pharmaceutical, biotechnology and healthcare industries. Based on our competitors’ press releases and public filings with the SEC, we are the largest company in the pharmaceutical outsourcing services industry as ranked by 2004 gross revenues. The gross revenues of the second largest company were approximately $1.09 billion less than our 2004 gross revenues.
      In August 2004, we completed our sale of certain assets representing our Bioglan Pharmaceuticals business, or Bioglan, to Bradley for approximately $188.3 million including approximately $5.3 million of direct costs for transferred inventory. We recognized a gain from the sale of Bioglan during 2004 of approximately $54.0 million, net of income taxes of approximately $36.3 million. The results of operations, assets and liabilities of the Bioglan business have been reported separately in our financial statements as a discontinued operation. All historical periods presented herein have been restated to reflect the Bioglan business as a discontinued operation.
      In April 2003, following the unanimous recommendation of a special committee of independent directors, Quintiles’ Board of Directors approved a merger transaction with Pharma Services for Quintiles’ public shareholders to receive $14.50 per share in cash. In order to finance the Pharma Services transaction, Pharma Services sold equity units consisting of preferred and common stock for $390.5 million. In addition, Quintiles entered into a secured credit facility which consists of a $310.0 million principal senior term loan and a $75.0 million revolving loan facility. Quintiles also issued $450.0 million of 10% Senior Subordinated Notes due 2013. Pharma Services also used approximately $578.7 million of Quintiles’ cash to fund the Pharma Services transaction.
      The Pharma Services transaction was completed on September 25, 2003, after receiving regulatory and shareholder approval. As a result of the Pharma Services transaction, Pharma Services Acquisition Corp., a subsidiary of Pharma Services, was merged with and into Quintiles, and Quintiles, as the surviving corporation, became an indirect wholly owned subsidiary of Pharma Services. Consequently, our results of operations, financial condition and cash flows prior to the date of the Pharma Services transaction are the same as Quintiles and are presented as the “predecessor.” The financial effects of the Pharma Services transaction and our results of operations, financial position and cash flows as the surviving corporation following the Pharma Services transaction are presented as the “successor.” To clarify and emphasize that the successor company has been presented on an entirely new basis of accounting, we have separated predecessor and successor operations with a vertical black line, where appropriate.
Results of Operations
      In accordance with generally accepted accounting principles in the United States, or GAAP, our predecessor results have not been aggregated with our successor results and, accordingly, our Condensed Consolidated Financial Statements do not show results of operations or cash flows for the twelve months ended December 31, 2003. However, in order to facilitate an understanding of our results of operations for the twelve months ended December 31, 2003 in comparison with the twelve months ended December 31, 2004 and 2002, we present and discuss our predecessor results and our successor results on a combined basis. The combined results of operations are non-GAAP financial measures and should not be used in isolation or as a substitution for the predecessor and successor results.

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      Below is a reconciliation of the combined results of operations for the year ended December 31, 2003:
                           
    September 26,   January 1,    
    2003   2003    
    Through   Through   Year Ended
    December 31,   September 25,   December 31,
    2003   2003   2003
             
    Successor   Predecessor   Combined
    (in thousands)
Net revenues
  $ 431,626     $ 1,196,247     $ 1,627,873  
Add: reimbursed service costs
    96,255       268,683       364,938  
                   
Gross revenues
    527,881       1,464,930       1,992,811  
Costs, expenses and other:
                       
 
Costs of revenues
    362,012       969,474       1,331,486  
 
Selling, general and administrative
    154,688       397,318       552,006  
 
Interest income
    (4,761 )     (12,112 )     (16,873 )
 
Interest expense
    20,651       1,738       22,389  
 
Other income, net
    (2,403 )     (5,391 )     (7,794 )
 
Transaction and restructuring
          54,148       54,148  
                   
      530,187       1,405,175       1,935,362  
                   
(Loss) income before income taxes
    (2,306 )     59,755       57,449  
Income tax expense
    9,810       27,224       37,034  
                   
(Loss) income before minority interests and equity in (losses) earnings of unconsolidated affiliates
    (12,116 )     32,531       20,415  
Equity in earnings (losses) of unconsolidated affiliates
    13       (8 )     5  
Minority interests
    (25 )     12       (13 )
                   
(Loss) income from continuing operations
    (12,128 )     32,535       20,407  
Income from discontinued operation
    4,760       4,626       9,386  
                   
Net (loss) income
  $ (7,368 )   $ 37,161     $ 29,793  
                   
      Below is a reconciliation of the results by segment on a combined basis for the year ended December 31, 2003:
                           
    September 26,   January 1,    
    2003   2003    
    Through   Through   Year Ended
    December 31,   September 25,   December 31,
    2003   2003   2003
             
    Successor   Predecessor   Combined
    (in thousands)
Net revenues:
                       
 
Product Development
  $ 270,247     $ 734,729     $ 1,004,976  
 
Commercial Services
    141,163       392,050       533,213  
 
PharmaBio Development
    30,674       99,245       129,919  
 
Eliminations
    (10,458 )     (29,777 )     (40,235 )
                   
    $ 431,626     $ 1,196,247     $ 1,627,873  
                   
Contribution:
                       
 
Product Development
  $ 141,046     $ 375,125     $ 516,171  
 
Commercial Services
    55,353       142,144       197,497  
 
PharmaBio Development
    4,040       37,455       41,495  
                   
    $ 200,439     $ 554,724     $ 755,163  
                   

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      Below is a reconciliation of certain items of the combined statement of cash flows for the year ended December 31, 2003:
                           
    September 26,   January 1,    
    2003   2003    
    Through   Through   Year Ended
    December 31,   September 25,   December 31,
    2003   2003   2003
             
    Successor   Predecessor   Combined
    (in thousands)
Net cash provided by operating activities
  $ 96,010     $ 165,137     $ 261,147  
Investing activities:
                       
 
Acquisition of property and equipment
    (14,779 )     (39,143 )     (53,922 )
 
Payment of transaction costs in Transaction
          (2,896 )     (2,896 )
 
Acquisition of businesses, net of cash acquired
    (1,684,206 )     (1,379 )     (1,685,585 )
 
Acquisition of intangible assets
          (3,739 )     (3,739 )
 
Acquisition of commercial rights and royalties
    (3,000 )     (17,710 )     (20,710 )
 
Proceeds from disposition of property and equipment
    1,960       6,219       8,179  
 
(Purchases of) proceeds from debt securities, net
    (886 )     25,267       24,381  
 
Purchases of equity securities and other investments
    (6,020 )     (10,830 )     (16,850 )
 
Proceeds from sale of equity securities
    7,633       61,926       69,559  
                   
Net cash (used in) provided by investing activities
    (1,699,298 )     17,715       (1,681,583 )
Financing activities:
                       
 
Proceeds from issuance of debt, net of expenses, in Transaction
    733,433             733,433  
 
Principal payments on credit arrangements
    (5,647 )     (13,248 )     (18,895 )
 
Dividend from discontinued operation
    8,336       3,138       11,474  
 
Capital contribution in Transaction
    389,091             389,091  
 
Issuance of common stock
          7,042       7,042  
                   
Net cash provided by (used in) financing activities
  $ 1,125,213     $ (3,068 )   $ 1,122,145  
                   

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Year Ended December 31, 2004 Compared with Year Ended December 31, 2003
      Gross Revenues. Gross revenues for the year ended December 31, 2004 were $2.15 billion versus $1.99 billion for the year ended December 31, 2003. Gross revenues include service revenues, revenues from commercial rights and royalties and revenues from investments. Net revenues exclude reimbursed service costs. Reimbursed service costs may fluctuate due, in part, to the payment provisions of the respective service contract. Below is a summary of revenues (in thousands):
                 
    2004   2003
         
Service revenues — external
  $ 2,093,437     $ 1,862,892  
Less: reimbursed service costs
    364,080       364,938  
             
Net service revenues — external
    1,729,357       1,497,954  
Net service revenues — intersegment
    65,687       40,235  
             
Net service revenues — combined
    1,795,044       1,538,189  
Commercial rights and royalties
    62,517       98,986  
Investments
    (9,620 )     30,933  
Eliminations: service revenues — intersegment
    (65,687 )     (40,235 )
             
Total net revenues
  $ 1,782,254     $ 1,627,873  
             
Reimbursed service costs
    364,080       364,938  
             
Gross revenues
  $ 2,146,334     $ 1,992,811  
             
  •  Service Revenues — External. Service revenues — external, which represent services we provide to third parties, were $2.09 billion for 2004 compared to $1.86 billion for 2003. Service revenues — external less reimbursed service costs, or net service revenues — external, for 2004 were $1.73 billion, an increase of $231.4 million or 15.4% over net service revenues — external of $1.50 billion in 2003. Net service revenues — external for 2004 were positively impacted by approximately $101.4 million due to the effect of the weakening of the United States dollar relative to the euro, the British pound, the South African rand and the Japanese yen. Net service revenues — external increased in the Asia Pacific and Africa region $45.5 million or 16.2% to $326.4 million in 2004 from 2003 as a result of strong growth in our Commercial Services Group. Net service revenues — external in the Asia Pacific and Africa region were positively impacted by approximately $24.3 million due to the effect of foreign currency fluctuations. Net service revenues — external increased $140.5 million or 22.8% to $755.7 million in 2004 from 2003 in the Europe region, including a positive impact of approximately $75.6 million due to the effect of foreign currency fluctuations. We experienced strong growth in our Clinical Development Services, or CDS, and an improvement in the business conditions for our Commercial Services Group in Europe, primarily Germany, Italy and the United Kingdom. Net service revenues — external increased $45.3 million or 7.5% to $647.3 million for 2004 from 2003 in the Americas region, including a positive impact of approximately $1.4 million due to the effect of foreign currency fluctuations. The increase in the Americas region is primarily a result of strong growth in CDS revenues.
 
  •  Net Service Revenues — Intersegment. Net service revenues — intersegment represents the revenues from services provided by our service segments, primarily commercial services, to our PharmaBio Development Group under risk-based arrangements in which we provide services to customers at our cost in exchange for royalties. Net service revenues — intersegment increased to $65.7 million for 2004 versus $40.2 million for 2003 primarily as a result of the incremental services provided under our Cymbaltatm contract and our February 2004 contract with a large pharmaceutical customer. These increases were partially offset by a reduction in the services provided under our contract with Kos Pharmaceuticals, Inc., or Kos, which concluded in December 2003.

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  •  Net Service Revenues — Combined. Net services revenues — combined for 2004 were $1.80 billion versus $1.54 billion for 2003 for reasons stated above.
 
  •  Commercial Rights and Royalties Revenues. Commercial rights and royalties revenues, which include product revenues, royalties and commissions, for 2004 were $62.5 million, a decrease of $36.5 million from 2003 commercial rights and royalties revenues of $99.0 million. Commercial rights and royalties revenues were positively impacted by approximately $4.0 million due to the effect of foreign currency fluctuations related to the weakening of the United States dollar relative to the euro. Commercial rights and royalties revenues were reduced by approximately $17.0 million in 2004 relating to the amortization of payments we made to our customers versus $3.5 million for 2003. These payments are considered incentives and are amortized against revenues over the service period of the contract. The decrease in commercial rights and royalties revenues is due to (1) our contracts with Columbia Laboratories, Inc., or Columbia, which decreased revenue by $407,000 in 2004, compared to a $11.9 million contribution to revenues in 2003, due to an impairment of the Columbia receivable of approximately $7.8 million representing a decline in fair value of the related commercial rights and royalties asset which we believed to be other than temporary; (2) the conclusion of our service contract in December 2003 with Kos which contributed approximately $24.9 million of revenue in 2003; (3) a decrease in revenues under our contracts in Europe with two large pharmaceutical customers to $38.7 million in 2004 as compared to $40.4 million in 2003; and (4) a decline in revenues from miscellaneous contracts and activities to $1.6 million in 2004 from $3.1 million in 2003. In addition, 2003 included $15.9 million of revenues related to our contract and subsequent termination agreement with Scios, Inc., or Scios. These decreases were partially offset by increases resulting from (1) our contract for Cymbaltatm, which contributed $11.6 million of revenues in 2004 and (2) our September 2003 acquisition of a controlling interest in Pharmaplan Limited, or Pharmaplan, which contributed $11.1 million of revenues in 2004 versus $2.7 million in 2003. Commercial rights and royalties revenues for 2004 were attributable to the following: (1) approximately 61.9% to our contracts with two large pharmaceutical customers in Europe; (2) approximately 18.5% to our Cymbaltatm contract; (3) approximately 17.7% to the Pharmaplan operations acquired during September 2003; (4) approximately 2.6% related to miscellaneous contracts and activities and (5) approximately (0.7%) related to our contracts with Columbia.
 
  •  Investment Revenues. Investment revenues which relate to our PharmaBio Development Group’s financing arrangements and include gains and losses from the sale of equity securities and impairments from other than temporary declines in the fair values of our direct and indirect investments, were a loss of $9.6 million for 2004 versus a gain of $30.9 million for 2003. Investment revenues for 2004 included $2.8 million of net gains on marketable securities versus $42.7 million for 2003. During 2004 and 2003, we recognized $12.5 million and $11.8 million, respectively, of impairment losses on investments whose decline in fair value was considered to be other than temporary.
      Costs of Revenues. Costs of revenues were $1.55 billion in 2004 and $1.33 billion in 2003. Below is a summary of these costs (in thousands):
                 
    2004   2003
         
Reimbursed service costs
  $ 364,080     $ 364,938  
Service costs
    986,927       824,521  
Commercial rights and royalties costs
    137,219       88,424  
Depreciation and amortization
    124,905       93,838  
Eliminations — intersegment costs
    (65,687 )     (40,235 )
             
    $ 1,547,444     $ 1,331,486  
             

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  •  Reimbursed Service Costs. Reimbursed service costs were $364.1 million and $364.9 million for 2004 and 2003, respectively.
 
  •  Service Costs. Service costs, which include compensation and benefits for billable employees, and certain other expenses directly related to service contracts, were $986.9 million or 55.0% of 2004 net service revenues — combined versus $824.5 million or 53.6% of 2003 net service revenues — combined. Compensation and related expenses increased approximately $119.0 million primarily as a result of salary and wage increases, including an increase in the number of billable employees. Other expenses directly related to our service contracts increased approximately $43.4 million. Service costs were negatively impacted by approximately $52.2 million from the effect of foreign currency fluctuations.
 
  •  Commercial Rights and Royalties Costs. Commercial rights and royalties costs, which include compensation and related benefits for employees, amortization of commercial rights, infrastructure costs of the PharmaBio Development Group and other expenses directly related to commercial rights and royalties, were $137.2 million for 2004 versus $88.4 million for 2003. The increase in commercial rights and royalties costs is primarily due to (1) an increase in costs related to Cymbaltatm of approximately $36.2 million to $43.7 million in 2004; (2) costs of approximately $21.4 million related to our February 2004 contract with a large pharmaceutical company; and (3) an increase in costs incurred by our Pharmaplan operations by approximately $7.0 million to $9.6 million as a result of the September 2003 transaction in which we acquired a controlling interest. These increases were partially offset by a decrease of approximately $16.0 million in costs related to our service contract with Kos which was terminated in December 2003.
 
  •  Depreciation and Amortization. Depreciation and amortization, which include depreciation of our property and equipment and amortization of our definite-lived intangible assets except commercial rights, increased to $124.9 million for 2004 versus $93.8 million for 2003. Amortization expense increased approximately $30.2 million as a result of the increase in intangible assets with finite lives that were recorded in connection with the Pharma Services transaction. We have approximately $109.7 million of identifiable intangible assets that have indefinite lives and therefore are not being amortized. Depreciation expense remained relatively constant increasing approximately $850,000.
 
  •  Eliminations — Intersegment Costs. Eliminations represent the services provided by our service segments, primarily commercial services, to our PharmaBio Development Group under risk-based arrangements in which we provide services to customers at our cost in exchange for royalties. Eliminations increased to $65.7 million for 2004 versus $40.2 million for 2003 primarily as a result of the incremental services provided under our Cymbaltatm contract and our February 2004 contract with a large pharmaceutical customer. These increases were partially offset by a reduction in the services provided under our contract with Kos which concluded in December 2003.
      Selling, general and administrative expenses, which include compensation and benefits for administrative employees, non-billable travel, professional services, and expenses for advertising, information technology and facilities, were $637.2 million or 35.8% of total net revenues in 2004 versus $552.0 million or 33.9% of total net revenues in 2003. Travel expenses increased approximately $17.5 million in 2004 when compared to 2003, primarily as a result of increased activities associated with our global operations. These travel expenses include reimbursements made to our Executive Chairman and Chief Executive Officer for business related travel services he provides for himself and other employees with the use of his own airplane. Professional services increased approximately $14.8 million during this same time period, including approximately $3.8 million of management fees to our parent company’s investor group. In addition, compensation and related expenses were negatively impacted by approximately $33.1 million as a result of salary and wage increases including an increase in the number of administrative employees. Selling, general and administrative expenses were negatively impacted by approximately $34.4 million from the effect of foreign currency fluctuations.
      Interest income decreased approximately $5.5 million to $11.3 million in 2004 as compared to $16.9 million in 2003 as a result of the decline in the average monthly balance of investable cash.

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      Interest expense was $81.9 million in 2004 as compared to $22.4 million in 2003 as a result of the interest on the debt we incurred to fund the Pharma Services transaction and the accretion of interest on the 11.5% senior discount notes we issued in March 2004.
      Other income was $1.1 million in 2004 versus $7.8 million in 2003. Included in 2004 was approximately $2.4 million of income from the settlement of litigation. We recognized approximately $2.3 million of foreign currency translation losses in 2004 versus foreign currency translation gains of approximately $6.3 million in 2003.
      In November 2004, Quintiles’ Board of Directors approved the first phase of a new initiative to review aspects of Quintiles’ current operating and future strategic direction regarding corporate initiatives, including utilization of shared services and strategic sourcing initiatives. In conjunction with this review, we recognized $6.6 million of restructuring charges in 2004 for termination benefits related to the elimination of 230 positions globally. Although positions will be eliminated in the Commercial Services Group, most of eliminated positions are in the Product Development Group. As of December 31, 2004, 153 individuals had been notified with 116 positions eliminated. We have targeted substantial completion of the cash expenditures related to the first phase to be during the first half of 2005.
      We recognized $54.1 million of transaction expenses and restructuring charges in 2003 which included $48.7 million of transaction related expenses and a $5.5 million restructuring charge. The transaction related expenses included expenses of the special committee of Quintiles’ Board of Directors and its financial and legal advisors. During the third quarter of 2003, we reviewed our estimates of the restructuring plans adopted in prior years. This review resulted in a net increase of approximately $5.5 million in our accruals, including an increase of $6.8 million in exit costs for abandoned leased facilities and a decrease of approximately $1.3 million for severance payments. The increase in exit costs was due to several factors including, depending on the applicable facility: (1) an increase in our estimated time required to sublet, (2) a decrease in the expected price per square foot to sublet or (3) an increase in the estimated cost to otherwise terminate our obligations under those leases brought about by prolonged stagnant conditions in local real estate markets. The decrease in severance payments was a result of an increase in the number of actual voluntary employee terminations beyond our estimates.
      During the second quarter of 2004, we sold 3,556 ordinary shares, or approximately 11.1% of our ownership interest in our Japanese subsidiary, QJPN, to Mitsui for approximately 4.0 billion yen (approximately $37.0 million) of gross proceeds. We incurred approximately $1.1 million of costs related to the sale. As a result, we recognized a gain on the sale of a portion of an investment in a subsidiary of approximately $24.7 million.
      In addition, our Japanese subsidiary issued 1,778 ordinary shares and 1,778 preference shares directly to Mitsui for an aggregate amount of approximately 4.7 billion yen (approximately $42.9 million) of gross proceeds. We incurred approximately $463,000 of costs related to the issuance of the ordinary shares and approximately $652,000 of costs related to the issuance of the preference shares. The issuance of the new ordinary shares further reduced our ownership interest in our subsidiary by an additional 4.7%. As a result, we recognized a non-operating gain of approximately $10.0 million for the change in interest transaction. We did not recognize any gain or loss associated with the new issuance of preference shares which decreased our voting interest in this subsidiary by an additional 4.2% to 80% and accounted for approximately 2.8 billion yen (approximately $25.1 million) of gross proceeds.
      Loss before income taxes was $79.6 million for 2004 versus income before income taxes of $57.4 million for 2003.
      The effective income tax rate was 13.3% for 2004 versus 64.5% for 2003 (on a combined basis). Our effective income tax rate was negatively impacted by income taxes provided on approximately $29.0 million of earnings of our foreign subsidiaries. The earnings of our foreign subsidiaries will be subject to taxation in the United States for income tax purposes when repatriated. However, for financial reporting purposes, income taxes are provided on the earnings of our foreign subsidiaries as though they have currently been repatriated. Our effective income tax rate for 2004 was negatively impacted due to the gains

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on the transactions with Mitsui. Our effective income tax rate for the period from January 1, 2003 through September 25, 2003 was 45.6% due to the negative impact of transaction related expenses which are not deductible for income tax purposes. Our effective income tax rate for the period from September 26, 2003 through December 31, 2003 was (425.4%). Our effective income tax rate was negatively impacted by providing deferred income taxes on earnings of our foreign subsidiaries and transaction related expenses which were not deductible for income tax purposes. In October 2004, the enactment of the American Jobs Creation Act of 2004, or the Jobs Act, created a temporary incentive for United States corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and uncertainty remains as to how to interpret numerous provisions in the Jobs Act. In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB staff position Statement of Financial Accounting Standards, or SFAS, No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004.” SFAS No. 109-2 allows companies to evaluate the effect of the law on their prior treatment of unrepatriated foreign earnings before giving effect of the Jobs Act in their provision for income taxes. As of December 31, 2004, we had not decided on whether, and to what extent, we might repatriate earnings under the Jobs Act, and accordingly we provided deferred income taxes on these earnings. Subsequent to December 31, 2004, we partially completed our analysis on the impact of the Jobs Act on our plans for repatriation. Based on this analysis, we plan to repatriate $117.5 million in extraordinary dividends, as defined in the Jobs Act, during the first quarter of 2005, and accordingly we anticipate recording an income tax benefit within a range between approximately $0 to $37.0 million depending on the profitability of our operations in the countries from which the earnings are repatriated. We have not decided whether any additional amounts of foreign earnings will be repatriated as we are continuing our assessment which we expect to complete by December 1, 2005. Since we conduct operations on a global basis, our effective income tax rate may vary. See “— Critical Accounting Policies — Income Taxes.”
      During 2004 and 2003, we recognized ($149,000) and $5,000, respectively, of (losses) earnings from equity in unconsolidated affiliates, which represents our pro rata share of the net (loss) earnings of unconsolidated affiliates, primarily Verispan.
      During 2004 and 2003, our earnings were reduced by $1.4 million and $13,000, respectively, for minority interests in certain of our consolidated subsidiaries. The increase in the reductions is a result of the transactions with Mitsui in which our interest in our Japanese subsidiary decreased to 80%.
      Loss from continuing operations was $70.6 million for 2004 versus income from continuing operations of $20.4 million for 2003.
      Income from our discontinued operation, Bioglan, which we sold in August 2004, was $9.5 million for 2004 versus $9.4 million for 2003. Gross revenues of the discontinued operation were approximately $38.6 million and $53.2 million for 2004 and 2003, respectively.
      We completed the August 2004 sale of our Bioglan operations to Bradley for approximately $188.3 million in cash, including approximately $5.3 million of direct costs for transferred inventory. Based on certain purchase price adjustment provisions in the asset purchase agreement, we paid Bradley approximately $1.9 million. As a result of the completion of the transaction, we recognized a gain from the sale of Bioglan during 2004 of $54.0 million, net of income taxes of $36.3 million.
      Net loss was $7.1 million for 2004 versus net income of $29.8 million for 2003.

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Analysis by Segment:
      The following table summarizes the operating activities for our reportable segments for the years ended December 31, 2004 and 2003. In August 2004, we completed our sale of certain assets related to our Bioglan business. The results of operations for the Bioglan business have been separately reported as a discontinued operation and are no longer included in the PharmaBio Development Group. All historical periods presented herein have been restated to reflect the Bioglan business as a discontinued operation. We do not include reimbursed service costs, selling, general and administrative expenses, depreciation and amortization expense except the amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated, and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).
                                                         
    Total Net Revenues   Contribution
         
                % of Net       % of Net
    2004   2003   Growth %   2004   Revenues   2003   Revenues
                             
Product Development
  $ 1,126.7     $ l,005.0       12.1 %   $ 554.4       49.2 %   $ 516.2       51.4 %
Commercial Services
    668.4       533.2       25.3       253.7       38.0       197.5       37.0  
PharmaBio Development
    52.9       129.9       (59.3 )     (84.3 )     (159.4 )     41.5       31.9  
Eliminations
    (65.7 )     (40.2 )     (63.3 )                        
                                           
    $ 1,782.3     $ 1,627.9       9.5 %   $ 723.8       40.6 %   $ 755.2       46.4 %
                                           
      Product Development Group. Net service revenues for the Product Development Group were $1.13 billion for 2004 compared to $1.01 billion for 2003. Net services revenues for 2004 were positively impacted by approximately $62.5 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific and Africa region $3.4 million or 2.1% to $163.8 million as a result of a positive impact of approximately $12.8 million due to the effect of foreign currency fluctuations. The Asia Pacific and Africa region experienced a decline in the Early Development and Laboratory Services, or EDLS, revenues primarily due to the sale of our reference laboratory in South Africa. Net service revenues increased $79.8 million or 20.0% to $478.7 million in the Europe region primarily as a result of the positive impact of approximately $47.9 million due to the effect of foreign currency fluctuations and strong growth in CDS revenues. Net service revenues increased $38.5 million or 8.6% to $484.1 million in the Americas region, primarily due to the strong growth in CDS revenues and a positive impact of approximately $1.8 million due primarily to the effect of the strengthening United States dollar relative to the Canadian dollar.
      Contribution for the Product Development Group was $554.4 million for 2004 compared to $516.2 million for 2003. As a percentage of net service revenues, contribution margin was 49.2% for 2004 compared to 51.4% for 2003. The contribution margin was negatively impacted by the timing of project start ups in the CDS business, the incremental costs in our EDLS business due to a realignment of resources and an increase in compensation and related expenses.
      Commercial Services Group. Net service revenues for the Commercial Services Group were $668.4 million for 2004 compared to $533.2 million for 2003. Net service revenues for 2004 were positively impacted by approximately $39.6 million due to the effect of foreign currency fluctuations. We experienced strong growth in net revenues in the Asia Pacific and Africa region, primarily Japan, with net service revenues increasing $43.8 million or 36.9.% to $162.5 million including a positive impact of approximately $11.5 million due to the effect of foreign currency fluctuations. Net service revenues increased $59.5 million or 26.3% to $286.0 million in the Europe region, including a positive impact of approximately $28.5 million due to the effect of foreign currency fluctuations. The increase is primarily the result of improved business conditions in the United Kingdom, Germany and Italy. Net service revenues increased $31.8 million or 16.9% to $219.8 million in the Americas region primarily as a result of an increase in the services provided under our PharmaBio Development contracts, primarily with respect to the Cymbaltatm contract and the February 2004 contract with a large pharmaceutical customer.

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      Contribution for the Commercial Services Group was $253.7 million for 2004 compared to $197.5 million for 2003. As a percentage of net service revenues, contribution margin was 38.0% for 2004 compared to 37.0% for 2003 as a result of (1) an improvement in the difficult market conditions for our syndicated sales forces in the United Kingdom which contributed to the increase in contribution as the costs for the syndicated sales forces are relatively constant and do not fluctuate in proportion to the revenues, (2) the strong growth in the Asia Pacific and Africa region, primarily Japan, and (3) the increase in services provided under our Cymbaltatm contract.
      PharmaBio Development Group. Net revenues for the PharmaBio Development Group decreased approximately $77.0 million during 2004 as compared to 2003 due to a $40.6 million decrease in investment revenues and a $36.5 million decrease in commercial rights and royalties revenues. The commercial rights and royalties costs increased approximately $48.8 million during the same period as a result of several factors including (1) increased costs associated with our contract for Cymbaltatm and our February 2004 contract with a large pharmaceutical company and (2) increased costs associated with our Pharmaplan operations as a result of the September 2003 transaction in which we acquired a controlling interest. These increases were partially offset by a decrease of approximately $16.0 million in costs related to our service contract with Kos which was terminated in December 2003.
      The contribution for the PharmaBio Development Group decreased by $125.8 million for 2004 compared to 2003. The commercial rights and royalties revenues (net of related costs) in 2004 decreased the contribution of this group by approximately $85.3 million when compared to 2003 due to the decrease in revenues coupled with the increase in related costs. Our expenses incurred in 2004 included approximately $21.4 million of costs related to our contract with a large pharmaceutical company for which no revenues were recognized. The contribution from investment revenues decreased by approximately $40.6 million for 2004 to ($9.6) million versus $30.9 million for 2003 as a direct result of the decrease in the investment revenues.
Year Ended December 31, 2003 Compared with Year Ended December 31, 2002
      Gross Revenues. Gross revenues for the year ended December 31, 2003 were $1.99 billion versus $1.97 billion for the year ended December 31, 2002. Below is a summary of revenues (in thousands):
                 
    2003   2002
         
Service revenues — external
  $ 1,862,892     $ 1,868,324  
Less: reimbursed service costs
    364,938       399,650  
             
Net service revenues — external
    1,497,954       1,468,674  
Net service revenues — intersegment
    40,235       54,548  
             
Net service revenues — combined
    1,538,189       1,523,222  
Commercial rights and royalties
    98,986       88,005  
Investments
    30,933       13,704  
Eliminations: service revenues — intersegment
    (40,235 )     (54,548 )
             
Total net revenues
  $ 1,627,873     $ 1,570,383  
             
Reimbursed service costs
    364,938       399,650  
             
Gross revenues
  $ 1,992,811     $ 1,970,033  
             
  •  Service Revenues — External. Service revenues — external were $1.86 billion for 2003 compared to $1.87 billion for 2002. Net service revenues — external for 2003 were $1.50 billion, an increase of $29.3 million or 2.0% over net service revenues — external of $1.47 billion in 2002. Included in net service revenues — external for 2002 was $20.3 million from our Informatics Group, which was transferred to a joint venture during May 2002 and, therefore, there were no net service revenues from that group for 2003. Net service revenues — external for 2003 were positively impacted by approximately $101.2 million due to the effect of the weakening of the United States dollar relative

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  to the euro, the British pound, the South African rand and the Japanese yen. Net service revenues — external increased in the Asia Pacific and Africa region $51.2 million or 22.3% to $280.8 million, which was positively impacted by approximately $28.5 million due to the effect of foreign currency fluctuations. Net service revenues — external increased $42.6 million or 7.4% to $615.1 million in the Europe region, although they were positively impacted by $71.6 million due to the effect of foreign currency fluctuations. During 2003, our Commercial Services Group experienced difficult business conditions due to the under-utilization of its syndicated sales forces in primarily two markets, the United Kingdom and France. Net service revenues — external decreased $64.5 million or 9.7% to $602.0 million in the Americas primarily as a result of increased competition in the Product Development Group and the absence of informatics revenue in 2003.
 
  •  Net Service Revenues — Intersegment. Net service revenues — intersegment decreased to $40.2 million for 2003 versus $54.5 million for 2002 primarily as a result of the reduction in services provided under our contract with Scios, which was terminated in the fourth quarter of 2002. This decrease was partially offset by increases resulting from the services provided under our Columbia and Cymbaltatm contracts.
 
  •  Net Service Revenues — Combined. Net services revenues — combined for 2003 were $1.54 billion versus $1.52 billion for 2002 for reasons stated above.
 
  •  Commercial Rights and Royalties Revenues. Commercial rights and royalties revenues for 2003 were $99.0 million, an increase of $11.0 million over 2002 commercial rights and royalties revenues of $88.0 million. Commercial rights and royalties revenues were positively impacted by approximately $5.4 million due to the effect of foreign currency fluctuations related to the weakening of the United States dollar relative to the euro. Commercial rights and royalties revenues for 2003 were reduced by approximately $3.5 million, versus $19.8 million in 2002, for the amortization of payments made by us to our customers. These payments are considered incentives and are amortized against revenues over the service period of the contract. The $11.0 million increase in commercial rights and royalties revenues is primarily the result of (1) our contracts with Kos and Columbia, which contributed approximately $36.9 million of revenues for 2003 versus $22.3 million for 2002, and (2) our contracts in Europe with two large pharmaceutical customers which contributed approximately $40.4 million of revenues for 2003 versus $18.9 million for 2002. These increases were partially offset by a reduction in revenue of approximately $25.6 million as a result of the completion of the services portion of our Scios contract during the fourth quarter of 2002. For 2003, approximately 40.8% of our commercial rights and royalties revenues was attributable to our contracts with two large pharmaceutical customers in Europe, approximately 37.2% was attributable to our contracts with Kos and Columbia, approximately 16.1% was attributable to the termination of the Scios contract and the remaining 5.9% was attributable to miscellaneous contracts and activities.
 
  •  Investment Revenues. Investment revenues related to our PharmaBio Development Group’s financing arrangements were $30.9 million for 2003 versus $13.7 million for 2002. Investment revenues for 2003 included $23.6 million of gain on the sale of equity investments in Triangle Pharmaceuticals, Inc., or Triangle, The Medicines Company and CV Therapeutics, Inc. and a $12.1 million gain on warrants to acquire 700,000 shares of Scios as a result of the acquisition of Scios by Johnson & Johnson, Inc. During 2003 and 2002, we recognized $11.8 million and $4.3 million, respectively, of impairment losses on investments whose decline in fair value was considered to be other than temporary.

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      Costs of Revenues. Costs of revenues were $1.33 billion in 2003 and $1.35 billion in 2002. Below is a summary of these costs (in thousands):
                 
    2003   2002
         
Reimbursed service costs
  $ 364,938     $ 399,650  
Service costs
    824,521       829,995  
Commercial rights and royalties costs
    88,424       83,933  
Investment costs
          320  
Depreciation and amortization
    93,838       86,148  
Eliminations — intersegment costs
    (40,235 )     (54,548 )
             
    $ 1,331,486     $ 1,345,498  
             
  •  Reimbursed Service Costs. Reimbursed service costs were $364.9 million and $399.7 million for 2003 and 2002, respectively.
 
  •  Service Costs. Service costs were $824.5 million or 53.6% of 2003 net service revenues — combined versus $830.0 million or 54.5% of 2002 net service revenues — combined. Service costs were negatively impacted by approximately $52.3 million from the effect of foreign currency fluctuations. Bonus expense included in service costs increased approximately $3.2 million in 2003 as compared to 2002 as a result of our migration to a cash-based incentive program for our employees. The reduction in service costs, as a percentage of net service revenues — combined, is primarily a result of the residual effect of our process enhancements and cost reduction efforts.
 
  •  Commercial Rights and Royalties Costs. Commercial rights and royalties costs were $88.4 million for 2003 versus $83.9 million for 2002. These costs include services and products provided by third parties, as well as services provided by our other service groups totaling approximately $40.2 million for 2003 and $54.5 million for 2002. The year 2003 includes approximately $7.6 million of expenses relating to our Cymbaltatm contract.
 
  •  Investment Costs. Investment costs, which include costs directly related to direct and indirect investments in our customers or other strategic partners as part of the PharmaBio Development Group’s financing arrangements, were $320,000 in 2002.
 
  •  Depreciation and Amortization. Depreciation and amortization increased to $93.8 million for 2003 versus $86.1 million for 2002. Amortization expense increased approximately $14.3 million as a result of the amortization of the identifiable intangible assets with finite lives that were recorded in connection with the Pharma Services transaction. This increase was partially offset by a decrease in depreciation expense of approximately $6.7 million primarily resulting from the transfer of our Informatics Group to Verispan.
 
  •  Eliminations — Intersegment Costs. Eliminations decreased to $40.2 million for 2003 versus $54.5 million for 2002 primarily as a result of the reduction in services provided under our contract with Scios which was terminated in the fourth quarter of 2002. This decrease was partially offset by increases resulting from the services provided under our Columbia and Cymbaltatm contracts.
      Selling, general and administrative expenses were $552.0 million or 33.9% of total net revenues in 2003 versus $508.1 million or 32.4% of total net revenues in 2002. Selling, general and administrative expenses increased approximately $43.9 million primarily due to a negative impact of approximately $34.9 million as a result of the effect of foreign currency fluctuations and a $4.0 million increase in expenses associated with changes to our employee cash-based incentive program. These increases offset the reduction of approximately $8.6 million due to the transfer of our Informatics Group into the Verispan joint venture.
      Interest income increased slightly in 2003 to $16.9 million as compared to $16.7 million in 2002.

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      Interest expense was $22.4 million in 2003 as compared to $2.6 million in 2002. The increase is a result of the interest on the debt we incurred at the end of September 2003, totaling approximately $760.0 million, to fund the Pharma Services transaction.
      Other income was $7.8 million in 2003 versus other expense of $4.5 million in 2002. Included in 2003 was approximately $6.3 million in foreign currency translation gains compared to $5.2 million in 2002. Included in 2002 is approximately $2.7 million of expenses associated with the formation of the Verispan joint venture.
      We recognized $54.1 million of transaction expenses and restructuring charges in 2003 as compared to $3.4 million during 2002. These amounts included $48.7 million and $3.4 million of transaction related expenses, including expenses of the special committee of Quintiles’ Board of Directors and its financial and legal advisors during 2003 and 2002, respectively. In addition, 2003 included a $5.5 million restructuring charge. During the third quarter of 2003, we reviewed our estimates of the restructuring plans adopted in prior years. This review resulted in a net increase of approximately $5.5 million in our accruals, including an increase of $6.8 million in exit costs for abandoned leased facilities and a decrease of approximately $1.3 million for severance payments. The increase in exit costs was due to several factors including, depending on the particular facility: (1) an increase in our estimated time required to sublet, (2) a decrease in the expected price per square foot to sublet or (3) an increase in the estimated cost to otherwise terminate our obligations under those leases brought about by prolonged stagnant conditions in local real estate markets. The decrease in severance payments was a result of an increase in the number of actual voluntary employee terminations beyond our estimates.
      Income before income taxes was $57.4 million or 3.5% of total net revenues for 2003 versus $122.8 million or 7.8% of total net revenues for 2002.
      The effective income tax rate was 64.5% for 2003 (on a combined basis) versus 33.4% for 2002. Our effective income tax rate for the period from January 1, 2003 through September 25, 2003 was 45.6% due to the negative impact of transaction related expenses which are not deductible for income tax purposes. Our effective income tax rate for the period from September 26, 2003 through December 31, 2003 was (425.4%). Our effective income tax rate was negatively impacted by providing deferred income taxes on earnings of our foreign subsidiaries and transaction related expenses which were not deductible for income tax purposes. Due to the Pharma Services transaction, we no longer consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, in connection with recording the Pharma Services transaction, we provided a deferred income tax liability related to those undistributed earnings. Since we conduct operations on a global basis, our effective income tax rate may vary. See “— Critical Accounting Policies — Income Taxes.”
      During 2003 and 2002, we recognized $5,000 and ($526,000), respectively, of earnings (losses) from equity in unconsolidated affiliates, which represents our pro rata share of the net loss of unconsolidated affiliates, primarily Verispan’s net income (loss).
      During 2003 and 2002, we recognized $13,000 and $43,000, respectively, of reductions for minority interests in certain of our consolidated subsidiaries.
      Income from continuing operations was $20.4 million for 2003 versus $81.2 million for 2002.
      Income from our discontinued operation, Bioglan, which we sold on August 10, 2004, was $9.4 million for 2003 versus $442,000 for 2002. Gross revenues of the discontinued operation were approximately $53.2 million and $22.4 million for 2003 and 2002, respectively.
      Effective January 2002, we changed our method for calculating deferred income taxes related to our multi-jurisdictional tax transactions. Under the previous method, we followed an incremental approach to measuring the deferred income tax benefit of our multi-jurisdictional transactions. Under this approach, we considered the income tax benefit from the step-up in tax basis, net of any potential incremental foreign income tax consequences determined by projecting taxable income, foreign source income, foreign tax credit provisions and the interplay of these items among and between their respective tax jurisdictions,

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based on different levels of intercompany foreign debt. Under the new method, we record deferred income taxes only for the future income tax impact of book and tax basis differences created as a result of multi-jurisdictional transactions. We believe the new method had become more widely used in practice and is preferable because it eliminates the subjectivity and complexities involved in determining the timing and amount of the release or reversal of the valuation allowance under the prior method. In order to effect this change, we recorded a cumulative effect adjustment of $45.7 million in 2002 which represents the reversal of the valuation allowance related to deferred income taxes on these multi-jurisdictional income tax transactions.
      Net income was $29.8 million for 2003 versus $127.3 million for 2002.
Analysis by Segment:
      The following table summarizes the operating activities for our reportable segments for the years ended December 31, 2003 and 2002. In August 2004, we completed our sale of certain assets related to our Bioglan business. The results of operations for the Bioglan business have been separately reported as a discontinued operation and are no longer included in the PharmaBio Development Group. All historical periods presented herein have been restated to reflect the Bioglan business as a discontinued operation. We do not include reimbursed service costs, selling, general and administrative expenses, depreciation and amortization expense except the amortization of commercial rights, interest (income) expense, other (income) expense and income tax expense (benefit) in our segment analysis. Intersegment revenues have been eliminated and the profit on intersegment revenues is reported within the service group providing the services (dollars in millions).
                                                         
    Total Net Revenues   Contribution
         
                % of Net       % of Net
    2003   2002   Growth %   2003   Revenues   2002   Revenues
                             
Product Development
  $ 1,005.0     $ 944.9       6.4 %   $ 516.2       51.4 %   $ 477.5       50.5 %
Commercial Services
    533.2       558.0       (4.4 )     197.5       37.0       207.7       37.2  
PharmaBio Development
    129.9       101.7       27.7       41.5       31.9       17.5       17.2  
Informatics
          20.3       (100.0 )                 8.0       39.4  
Eliminations
    (40.2 )     (54.5 )     (26.2 )                        
                                           
    $ 1,627.9     $ 1,570.4       3.7 %   $ 755.2       46.4 %   $ 710.7       45.3 %
                                           
      Product Development Group. Net service revenues for the Product Development Group were $1.01 billion for 2003 compared to $944.9 million for 2002. Net services revenues for 2003 were positively impacted by approximately $65.9 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific and Africa region $22.0 million or 15.9% to $160.4 million including a positive impact of approximately $17.0 million due to the effect of foreign currency fluctuations. Net service revenues increased $49.0 million or 14.0% to $398.9 million in the Europe region primarily as a result of the positive impact of approximately $47.1 million due to the effect of foreign currency fluctuations. Net service revenues decreased $10.9 million or 2.4% to $445.6 million in the Americas region primarily as a result of increased competition. The Americas region was positively impacted by approximately $1.8 million due to the effect of the strengthening United States dollar relative to the Canadian dollar.
      Contribution for the Product Development Group was $516.2 million for 2003 compared to $477.5 million for 2002. As a percentage of net service revenues, contribution margin was 51.4% for 2003 compared to 50.5% for 2002. Our Product Development Group experiences slight fluctuations in contribution as a percent of net service revenues from period to period as a result of executed contract scope changes and the timing of project expenses for which revenue is not recognized, such as start-up or setup costs.

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      Commercial Services Group. Net service revenues for the Commercial Services Group were $533.2 million for 2003 compared to $558.0 million for 2002. Net service revenues for 2003 were positively impacted by approximately $36.9 million due to the effect of foreign currency fluctuations. Net service revenues increased in the Asia Pacific and Africa region $29.6 million or 33.3% to $118.7 million including a positive impact of approximately $11.5 million due to the effect of foreign currency fluctuations. Net service revenues decreased $5.7 million or 2.5% to $226.5 million in the Europe region, although it was positively impacted by $26.1 million due to the effect of foreign currency fluctuations. Difficult business conditions due to the under-utilization of our syndicated sales forces in primarily two of the markets, the United Kingdom and France, contributed to the decrease in net revenues for this region in 2003. Net service revenues decreased $48.7 million or 20.6% to $188.0 million in the Americas region primarily as a result of a decrease in the services provided under our PharmaBio Development contracts during the year including the effect of the settlement of the services element of our contract with Scios.
      Contribution for the Commercial Services Group was $197.5 million for 2003 compared to $207.7 million for 2002. As a percentage of net service revenues, contribution margin was 37.0% for 2003 compared to 37.2% for 2002.
      PharmaBio Development Group. Net revenues for the PharmaBio Development Group increased approximately $28.2 million during 2003 as compared to 2002 due to an $11.0 million increase in commercial rights and royalties revenues and a $17.2 million increase in investment revenues. The commercial rights and royalties costs increased approximately $4.5 million due to the following key factors: (1) approximately $7.6 million of expenses relating to Cymbaltatm, (2) an increase of approximately $7.8 million of expenses relating to our risk-sharing contracts in Europe, including the 2003 termination of the contracts in Germany and Belgium, and (3) increases in costs associated with miscellaneous contracts and activities. These increases were partially offset by a $25.7 million decrease in service costs provided by our Commercial Services Group resulting primarily from the termination of the services portion of our contract with Scios in the fourth quarter of 2002.
      The contribution for the PharmaBio Development Group increased by $24.0 million from 2002 to 2003. The commercial rights and royalties revenues (net of related costs) in 2003 increased the contribution of this group by approximately $6.5 million when compared to 2002 due to the successful performance of our commercial rights and royalties contracts. The contribution from the commercial rights and royalties revenues was negatively impacted by costs of approximately $7.6 million related to the Cymbaltatm contract for which no revenues were recognized. Investment revenues (net of related costs) in 2003 increased the contribution of this group by approximately $17.5 million when compared to 2002 as a direct result of the increase in investment revenues.
      The Informatics Group was transferred into the Verispan joint venture in May 2002 and is no longer a segment in 2003.
Liquidity and Capital Resources
      Cash and cash equivalents were $535.7 million at December 31, 2004 as compared to $373.6 million at December 31, 2003.
      Cash used in operations was $17.8 million in 2004 versus cash provided by operations of $261.1 million and $244.0 million in 2003 and 2002, respectively.
      Cash provided by investing activities was $121.9 million in 2004 versus cash used in investing activities of $1.68 billion and $151.4 million in 2003 and 2002, respectively. Investing activities for 2004 included the proceeds from the disposal of our discontinued operation, certain assets and a minority interest in one of our subsidiaries. Investing activities in 2003 consisted primarily of the payments relating to the Pharma Services transaction including the repurchase of Quintiles’ common stock and the payment of transaction costs. Investing activities for all periods include the purchases and sales of equity securities and other investments, capital asset purchases and the acquisition of commercial rights.

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      During August 2004, we completed the sale of certain assets relating to our Bioglan operations to Bradley for approximately $188.3 million in cash including approximately $5.3 million of direct costs for transferred inventory. Based on certain purchase price adjustment provisions in the asset purchase agreement, we paid Bradley approximately $1.9 million in 2004. Our proceeds, net of expenses, were approximately $170.3 million in 2004.
      During 2004, we sold 3,556 ordinary shares or approximately 11.1% of our ownership in our Japanese subsidiary, QJPN, to Mitsui. We received net proceeds from this sale of approximately $36.0 million net of related costs, which is included as a source of cash in the cash provided by investing activities. We also received approximately $41.8 million of net proceeds from the issuance of ordinary and preference shares by our Japanese subsidiary, which is included as a source of cash in the cash provided by financing activities, for total net proceeds received from Mitsui of approximately $77.7 million.
      Capital asset purchases required cash outlays of $50.1 million, $53.9 million, and $39.9 million in 2004, 2003 and 2002, respectively.
      During 2004, cash used to acquire commercial rights and royalties related assets was $53.0 million versus $24.4 million during 2003 and $88.3 million during 2002. The 2004 acquisitions included payments of $25.0 million pursuant to our contract with Eli Lilly and Company, or Lilly, for Cymbaltatm, $25.0 million pursuant to our contract with Cell Therapeutics, Inc., or Cell Therapeutics, and $3.0 million pursuant to a contract with Columbia. The 2003 acquisitions included payments of $14.3 million for the contracts with Columbia, $6.5 million for the contract with Scios, $3.2 million for the contract with a large pharmaceutical customer in Belgium and approximately $500,000 for the acquisition of product and marketing rights. The 2002 acquisitions included $70.0 million of advances to a customer representing payments under our agreement with Lilly.
      Cash used in the acquisition of businesses, net of cash acquired, was $2.3 million, $1.69 billion and $27.2 million during 2004, 2003 and 2002, respectively. Included in 2003 is the Pharma Services transaction. In 2002, we acquired certain assets of Bioglan Pharma, Inc., including its management team and sales force and approximately $1.6 million in cash, for approximately $27.9 million.
      On September 25, 2003, we completed the Pharma Services transaction with a total purchase price of approximately $1.88 billion. Quintiles used approximately $578.7 million of cash to fund this transaction and received $390.5 million in cash for capital contributions. In addition, Quintiles entered into a secured credit facility which consists of a $310.0 million principal senior term loan and a $75.0 million revolving loan facility. Quintiles also issued $450.0 million principal amount of 10% Senior Subordinated Notes due 2013. As of December 31, 2004, Quintiles did not have any outstanding balance on the revolving loan facility.
      Purchases of equity securities and other investments required an outlay of cash of $14.9 million for 2004 compared to an outlay of $16.9 million for 2003 and $18.1 million for 2002. Proceeds from the sale of equity securities and other investments were $40.7 million during 2004 as compared to $69.6 million for 2003 and $27.5 million for 2002.
      The following table is a summary of our net service receivables outstanding (amounts in thousands, except days):
                 
    December 31,
     
    2004   2003
         
Trade accounts receivable, net
  $ 151,981     $ 122,496  
Unbilled services
    138,347       102,802  
Unearned income
    (202,148 )     (190,918 )
             
Net service receivables outstanding
  $ 88,180     $ 34,380  
             
Number of days of service revenues outstanding
    14       7  
             

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      The increase in the number of days of service revenues outstanding is a result in large part due to a change in the mix of business from large pharmaceutical customers under master service agreements.
      Investments in debt securities were $12.1 million at December 31, 2004 versus $11.0 million at December 31, 2003. Our investments in debt securities consist primarily of state and municipal securities.
      Investments in marketable equity securities decreased $33.9 million to $24.4 million at December 31, 2004 as compared to $58.3 million at December 31, 2003 as a result of sales of equity securities and losses due to impairment. In accordance with our policy to continually review declines in fair value of our marketable equity securities for declines that may be other than temporary, during 2004, we recognized $11.4 million of losses due to the impairment of marketable equity securities.
      Investments in non-marketable equity securities and loans at December 31, 2004 were $56.4 million, as compared to $48.6 million at December 31, 2003. In accordance with our policy to review the carrying values of our non-marketable equity securities and loans if the facts and circumstances suggest that a potential impairment, representing an other than temporary decline in fair value, may have occurred, we recorded losses totaling approximately $1.1 million in 2004 to establish a new cost basis for certain of these investments.
      Investments in unconsolidated affiliates, primarily Verispan, were $121.0 million at December 31, 2004 as compared to $121.2 million at December 31, 2003.
      Cash provided by financing activities was $32.9 million and $1.12 billion for 2004 and 2003, respectively, versus cash used by financing activities of $31.7 million for 2002. Financing activities included approximately $18.8 million, $18.9 million and $15.5 million of principal payments on credit arrangements for 2004, 2003 and 2002, respectively.
      In March 2004, we issued senior discount notes with an aggregate principal at maturity of $219.0 million (with gross proceeds of $124.7 million) due 2014. The discount notes accrete at a rate of 11.5% per annum, compounded semiannually on April 1 and October 1 of each year to, but not including April 1, 2009. Thereafter cash interest on the discount notes will accrue at a rate of 11.5% per annum and, subject to specified limitations, will be payable semiannually in arrears on April 1 and October 1 of each year, commencing on October 1, 2009 until maturity. The discount notes are unsecured obligations, are not guaranteed and are structurally subordinated in right of payment to all obligations of our subsidiaries. We used the net proceeds to pay a dividend of approximately $119.3 million on our common stock to our parent company, Pharma Services.
      Our various long-term debt agreements contain usual and customary negative covenants that, among other things, place limitations on our ability to: (1) incur additional indebtedness, including capital leases and liens; (2) pay dividends and repurchase our capital stock; (3) enter into mergers, consolidations, acquisitions, asset dispositions and sale-leaseback transactions; (4) make capital expenditures; and (5) issue capital stock of our subsidiaries. The agreements also contain financial covenants requiring us to maintain minimum interest coverage ratios and maximum consolidated leverage and senior leverage ratios as defined therein. As of December 31, 2004, we are in compliance with these covenants.

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      Below is a summary of our future payment commitments by year under contractual obligations as of December 31, 2004 (in thousands):
                                                             
    2005   2006   2007   2008   2009   Thereafter   Total
                             
Long-term debt
  $ 71,496     $ 70,868     $ 69,701     $ 69,143     $ 76,556     $ 1,245,824     $ 1,603,588  
Obligations under capital leases
    16,060       14,341       1,341       704       421       242       33,109  
Operating leases
    63,669       46,909       30,834       18,696       10,158       43,495       213,761  
Service agreements
    27,186       22,582       20,877       15,658                   86,303  
Management fee agreement
    3,750       3,750       3,750       3,750                   15,000  
PharmaBio funding commitments in various commercial rights and royalties:
                                                       
 
Service commitments
    130,729       99,086       97,431       88,593       66,932             482,771  
 
Milestone payments
    20,000                                     20,000  
 
Licensing and distribution rights
    2,183                                     2,183  
PharmaBio funding commitments to purchase non-marketable equity securities and loans:
                                                       
 
Venture capital funds
    12,419                                     12,419  
 
Equity investments
    1,023                                     1,023  
 
Convertible loans
    19                                     19  
 
Loans
    2,564                                     2,564  
                                           
   
Total
  $ 351,098     $ 257,536     $ 223,934     $ 196,544     $ 154,067     $ 1,289,561     $ 2,472,740  
                                           
      We also have additional future PharmaBio Development Group funding commitments that are contingent upon satisfaction of certain milestones by the third party such as receiving FDA approval, obtaining funding from additional third parties, agreement of a marketing plan and other similar milestones. Due to the uncertainty of the amounts and timing of these commitments, they are not included in the commitment amounts above. If all of these contingencies were satisfied over approximately the same time period, then we estimate these commitments to be a minimum of approximately $4-16 million per year over the next three years, subject to certain limitations and varying time periods.
      In March 2001, Quintiles’ Board of Directors authorized the repurchase of up to $100 million of Quintiles’ common stock from time to time until March 1, 2002, which was subsequently extended to March 1, 2003. During the first half of 2002, Quintiles entered into agreements to repurchase approximately 1.6 million shares for an aggregate price of $22.2 million. Quintiles did not enter into any agreements to repurchase its common stock during the second half of 2002 or during the period from January 1, 2003 through September 25, 2003.
      Stockholders’ equity at December 31, 2004 was $307.5 million versus $402.3 million at December 31, 2003.
      Based on our current operating plan, we believe that our available cash and cash equivalents, together with future cash flows from operations and borrowings available under the revolving portion of Quintiles’ senior credit facility will be sufficient to meet our foreseeable cash needs in connection with our operations and debt repayment obligations. We regularly evaluate our debt arrangements, as well as market conditions, and we actively explore opportunities to modify our existing debt arrangements or pursue additional debt financing arrangements that could result in the issuance of new debt securities by us, our subsidiaries or our affiliates in the near future or at a later time. We may use our existing cash, cash generated from operations or dispositions of assets or businesses and/or the proceeds from any new financing arrangements to pay off or reduce some of our outstanding obligations or to pay dividends to our parent which could be used to repurchase equity securities or for other purposes. As part of our ongoing business strategy, we also are continually evaluating new acquisition and expansion possibilities, as well as potential dispositions of assets or businesses, as appropriate, and we may seek to obtain debt or equity financing to facilitate possible acquisitions or expansion. Our ability to enter into any of these

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contemplated or potential transactions and our use of cash or proceeds is limited to varying degrees by the terms and restrictions contained in the credit agreement governing Quintiles’ senior secured credit facility, Quintiles’ indenture governing Quintiles’ senior subordinated notes and the indenture governing our senior discount notes. We cannot assure you that we will be able to complete any such alternative financing arrangements or other transactions or that the terms of any financing transactions would be more favorable to us than our existing obligations.
Critical Accounting Policies
      As we believe these policies require difficult, subjective and complex judgments, we have identified the following critical accounting policies which we use in the preparation of our financial statements.
Revenue Recognition
      We recognize revenue for service contracts based upon (1) the ratio of outputs or performance obligations completed to the total contractual outputs or performance obligations to be provided for fixed-fee contracts, (2) contractual per diem or hourly rate basis as work is performed for fee-for-service contracts or (3) completion of units of service for unit-of-service contracts. We do not recognize revenue with respect to start-up activities associated with contracts, which include contract and scope negotiation, feasibility analysis and conflict of interest review. We expense these costs as incurred. We estimate the total expected revenues, costs, profitability, duration of the contract and outputs for each contract to evaluate for anticipated losses. If anticipated losses result from this evaluation, we recognize the loss in earnings in the period identified. These estimates are reviewed periodically and, if any of these estimates change, then an adjustment for the anticipated loss is recorded. These adjustments could have a material effect on our results of operations.
      Certain of our commercial rights and royalty contracts provide for us to receive minimum guaranteed payments. These contracts often contain provisions requiring us to make payments to the customer and to receive payments from the customer. We account for the contracts as single element contracts. We recognize revenue over the related service period of the contract based on the present value of the guaranteed payments. As revenues are recognized and payments are made between the customer and us, we record an asset, which represents the obligation owed to us by the customer. Cash milestone payments, which we make to the customer, are amortized as a reduction to revenue over the service period of the contract. We also impute interest on the asset balance and record interest income as the contract progresses. We expect to fully realize the asset balance when we receive the guaranteed minimum level of cash flows. We recognize royalty revenues in excess of the guaranteed minimums as we obtain sufficient information to reasonably estimate the net sales of the underlying product. The inherent subjectivity of determining the present values of the guaranteed payments could have a significant impact on the revenues recognized in any period.
      We recognize product revenues upon shipment when title passes to the customer. Revenues are net of allowances for estimated returns, rebates and discounts. We are obligated to accept from customers the return of products that are nearing or have reached their expiration date. We also monitor product ordering patterns and actual returns and analyze wholesale inventory levels to estimate potential product return rates. When we lack sufficient historical basis to estimate return rates, we recognize revenues and the related cost of revenues when we receive end-user prescription data from third-party providers. Although we believe the product return allowances are adequate, if actual product returns exceed our estimates, our results of operations could be adversely affected.
Accounts Receivable and Unbilled Services
      Accounts receivable represents amounts billed to customers. Revenues recognized in excess of billings are classified as unbilled services. The realization of these amounts is based on the customer’s willingness and ability to pay us. We have an allowance for doubtful accounts based on management’s estimate of probable incurred losses resulting from a customer failing to pay us. If any of these estimates change or

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actual results differ from expected results, then an adjustment is recorded in the period in which they become reasonably estimable. These adjustments could have a material effect on our results of operations.
Marketable Debt and Equity Investments
      We have investments in debt securities and investments in marketable equity securities. Periodically, we review our investments for declines in fair value that we believe may be other than temporary. When we identify such a decline in fair value we record a loss through earnings to establish a new cost basis for the investment. In addition, we may experience future material declines in the fair value of our investments which would require us to record additional losses. These adjustments could have a material adverse effect on our results of operations.
Non-Marketable Equity Investments and Loans
      We have investments in non-marketable equity securities and loans. These arrangements typically involve funding, either by direct investment or in the form of a loan, which we commit to provide. Any securities we may acquire as a result of our investment or upon conversion of the loan may not be readily marketable, and we will bear the risk of carrying these investments for an indefinite period of time. We may not be able to recover our cost of the investment or loan at any time in the future, and we could experience an impairment in the carrying value of these investments, which would require us to record additional losses and could have a material adverse effect on our results of operations.
Income Taxes
      Certain items of income and expense are not recognized on our income tax returns and financial statements in the same year, which creates timing differences. The income tax effect of these timing differences results in (1) deferred income tax assets that create a reduction in future income taxes and (2) deferred income tax liabilities that create an increase in future income taxes. Recognition of deferred income tax assets is based on management’s belief that it is more likely than not that the income tax benefit associated with certain temporary differences, income tax operating loss and capital loss carry forwards and income tax credits, would be realized. We recorded a valuation allowance to reduce our deferred income tax assets for those deferred income tax items for which it was more likely than not that realization would not occur. We determined the amount of the valuation allowance based, in part, on our assessment of future taxable income and in light of our ongoing prudent and feasible income tax strategies. Due to the significant debt service requirements and other costs relating to the Pharma Services transaction, we changed our estimate of the valuation allowance for deferred income tax assets. Accordingly, in connection with recording the Pharma Services transaction, we increased our valuation allowance substantially. If our estimate of future taxable income or tax strategies change at any time in the future, we would record an adjustment to our valuation allowance. Recording such an adjustment could have a material effect on our financial position.
      Prior to the Pharma Services transaction, we considered undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no deferred income tax liabilities were recorded. Due to the significant debt service requirements and other costs relating to the Pharma Services transaction, we no longer consider the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, in connection with recording the Pharma Services transaction, we provided a deferred income tax liability related to those undistributed earnings. With its enactment in October 2004, the Jobs Act created a temporary incentive for United States corporations to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and uncertainty remains as to how to interpret numerous provisions in the Jobs Act. In November 2004, FASB issued proposed FASB staff position SFAS No. 109-2 which allows companies to evaluate the effect of the law on their prior treatment of unrepatriated foreign earnings before they give effect of the new law in their provision for income taxes. As of December 31, 2004, we had not decided on whether, and to what extent, we might repatriate earnings under the Jobs Act, and accordingly provided deferred income taxes on all

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our foreign earnings at tax rates that were in effect prior to the Jobs Act. Subsequently, we have partially completed our analysis of the impact of the Jobs Act on our plans for repatriation. Based on this analysis, we plan to repatriate $117.5 million in extraordinary dividends, as defined in the Jobs Act, during the first quarter of 2005, and accordingly anticipate recording an income tax benefit within a range between approximately $0 to $37.0 million depending on the profitability of our operations in the countries from which the earnings are repatriated. We have not decided whether any additional amounts of foreign earnings will be repatriated as we are continuing our assessment and we expect to complete our assessment by December 1, 2005.
Foreign Currencies
      We derive a large portion of our net revenue from international operations. Our financial statements are denominated in United States dollars; thus, factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect our results of operations and financial condition. Exchange rate fluctuations between local currencies and the United States dollar create risk in several ways, including the risk of translating revenues and expenses of foreign operations into United States dollars, known as translation risk, and the risk that we incur expenses in a currency other than that in which the contract revenues are paid, known as transaction risk. Gains and losses on foreign currency transactions are reported in results of operations, while translation adjustments are reported as a component of accumulated other comprehensive income within stockholders’ equity. If certain balances owed by our foreign subsidiaries are deemed to be not of a long-term investment nature, then the translation effects related to those balances would not be classified as translation adjustments but rather transaction adjustments, which could have a material effect on our results of operations.
Goodwill, Tangible and Identifiable Intangible Assets
      In connection with recording the Pharma Services transaction, we conducted a study of the fair value of our tangible and identifiable intangible assets as of September 25, 2003. Accordingly, the excess of the cost over the fair value of the net assets acquired, known as goodwill, was recorded and allocated to our reportable business segments. The recoverability of the goodwill and indefinite-lived intangible assets are evaluated annually for impairment or if and when events or circumstances indicate a possible impairment. Goodwill and indefinite-lived intangible assets are not amortized. We review the carrying values of other identifiable intangible assets if the facts and circumstances indicate a possible impairment. Other identifiable intangible assets are amortized over their estimated useful lives. The inherent subjectivity of applying a discounted cash flow and market comparables approach to valuing our assets and liabilities could have a significant impact on our analysis. Any future impairment could have a material adverse effect on our financial condition or results of operations.
      Periodically, we review the carrying values of property and equipment if the facts and circumstances suggest that a potential impairment may have occurred. If this review indicates that carrying values will not be recoverable, as determined based on undiscounted cash flows over the remaining depreciation or amortization period, we will reduce carrying values to estimated fair value. The inherent subjectivity of our estimates of future cash flows could have a significant impact on our analysis. Any future write-offs of long-lived assets could have a material adverse effect on our financial condition or results of operations.
Backlog Reporting
      We report revenue backlog based on anticipated net revenue from uncompleted projects that our customers have authorized and we believe to be firm. We report only service-related revenue as backlog, and we do not include product revenue or commercial rights-related revenue (royalties and commissions) in backlog. Our backlog is calculated based upon our estimate of forecasted currency exchange rates. Annually, we adjust the beginning balance of our backlog to reflect changes in our forecasted currency exchange rates. Our backlog at anytime can be affected by:
  •  the variable size and duration of projects,

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  •  the loss or delay of projects, and
 
  •  a change in the scope of work during the course of a project.
If customers delay projects, the projects will remain in backlog, but the timing of revenue generated may differ from the timing originally expected. Accordingly, historical indications of the relationship of backlog to revenues may not be indicative of the future relationship. The reporting of revenue backlog is not authoritatively prescribed; therefore, practices tend to vary among competitors and reported amounts are not necessarily comparable.
Inflation
      We believe the effects of inflation generally do not have a material adverse impact on our operations or financial condition.
Market Risk
      Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates, interest rates and other relevant market rate or price changes. In the ordinary course of business, we are exposed to various market risks, including changes in foreign currency exchange rates, interest rates and equity price changes, and we regularly evaluate our exposure to such changes. Our overall risk management strategy seeks to balance the magnitude of the exposure and the cost and availability of appropriate financial instruments. From time to time, we have utilized forward exchange contracts to manage our foreign currency exchange rate risk. The following analyses present the sensitivity of our financial instruments to hypothetical changes in interest rates and equity prices that are reasonably possible over a one-year period.
Foreign Currency Exchange Rates
      Approximately 66.0%, 60.3% and 55.1% of our total net revenues for the years ended December 31, 2004, 2003 and 2002, respectively, was derived from our operations outside the United States. We do not have significant operations in countries in which the economy is considered to be highly-inflationary. Our financial statements are denominated in United States dollars and, accordingly, changes in the exchange rate between foreign currencies and the United States dollar will affect the translation of our subsidiaries’ financial results into United States dollars for purposes of reporting our consolidated financial results. Accumulated currency translation adjustments recorded as a separate component of stockholders’ equity were $45.3 million at December 31, 2004 as compared to $19.8 million at December 31, 2003.
      We may be subject to foreign currency transaction risk when our service contracts are denominated in a currency other than the currency in which we earn fees or incur expenses related to such contracts. At December 31, 2004 and 2003, our most significant foreign currency exchange rate exposures were in the British pound, Japanese yen and the euro. We limit our foreign currency transaction risk through exchange rate fluctuation provisions stated in our contracts with customers, or we may hedge our transaction risk with foreign currency exchange contracts or options. At December 31, 2004, we had 12 open foreign exchange forward contracts relating to service contracts with various amounts maturing monthly through September 2005 totaling approximately $10.9 million. There were no open foreign exchange contracts or options relating to service contracts at December 31, 2003.
Interest Rates
      We are subject to market risk associated with changes in interest rates. Our principal interest rate exposure relates to the term loans outstanding under Quintiles’ senior secured credit facility. At December 31, 2004 and 2003, we had $306.1 million and $309.2 million, respectively, outstanding under the senior secured credit facility subject to variable rates. Each quarter point increase or decrease in the applicable interest rate at December 31, 2004 and 2003 would change our interest expense by approximately $765,000 per year and $775,000 per year, respectively.

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      At December 31, 2004 and 2003, our investment in debt securities portfolio consisted primarily of United States Government securities, of which most are callable by the issuer at par, and money funds. The portfolio is primarily classified as available-for-sale and therefore these investments are recorded at fair value in the financial statements. These securities are exposed to market price risk which also takes into account interest rate risk. As of December 31, 2004 and 2003, the fair value of the investment portfolio was $12.1 million and $11.0 million, respectively, based on quoted market prices. The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted market price was approximately $1.2 million at December 31, 2004 and $1.1 million at December 31, 2003.
Equity Prices
      At December 31, 2004 and 2003, we held investments in marketable equity securities. These investments are classified as available-for-sale and are recorded at fair value in the financial statements. These securities are subject to equity price risk. As of December 31, 2004 and 2003, the fair value of these investments was $24.4 million and $58.3 million, respectively, based on quoted equity prices. The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted equity price was approximately $2.4 million at December 31, 2004 and $5.8 million at December 31, 2003.
Recently Issued Accounting Standards
      In December 2004, FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets an amendment of APB Opinion No. 29,” which eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS No. 153 indicates that a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS No. 153 becomes effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. We are currently evaluating the impact that the adoption of SFAS No. 153 will have on us.
      In December 2004, FASB issued SFAS No. 123(R), “Share-Based Payment,” which requires that the cost resulting from all share-based payments be recognized in the financial statements. In addition, SFAS No. 123(R) establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees. We adopted SFAS No. 123 utilizing the modified prospective approach during 2004. The adoption did not have a material effect on our results of operations or financial position.
      In October 2004, the Jobs Act was signed into law. The Jobs Act creates a temporary incentive for United States multinationals to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations and uncertainty remains as to how to interpret numerous provisions in the Jobs Act. In December 2004, FASB issued FASB staff position SFAS No. 109-2 which allows companies to evaluate the effect of the Jobs Act on their provision for income taxes. As of December 31, 2004, we had not decided on whether, and to what extent, we might repatriate earnings under the Jobs Act, and accordingly provided deferred income taxes on all our foreign earnings at tax rates that were in effect prior to the Jobs Act. Subsequently, we have partially completed our analysis of the impact of the Jobs Act on our plans for repatriation. Based on our analysis, we plan to repatriate $117.5 million in extraordinary dividends, as defined in the Jobs Act, during the first quarter of 2005, and accordingly anticipate recording an income tax benefit within a range between approximately $0 to $37.0 million depending on the profitability of our operations in the countries from which the earnings are repatriated. We have not decided whether any additional amounts of foreign earnings will be repatriated as we are continuing our assessment which we expect to complete by December 1, 2005.
      In January 2003, FASB issued Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities”, which requires the assets, liabilities and results of operations of variable interest entities, or

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VIEs, to be consolidated into the financial statements of the company that has controlling financial interest. FIN 46 also provides the framework for determining whether a VIE should be consolidated based on voting interest or significant financial support provided to the VIE. In December 2003, the FASB published a revision to FIN 46, or FIN 46R, to clarify some of the provisions of the interpretation and to defer the effective dates of implementation for certain entities. We adopted these provisions, as required, with respect to VIEs created after December 31, 2003. We have determined that we are a non-public entity as defined by accounting guidance in FIN 46R. The effective date for applying the provisions of FIN 46R for interests held by non-public entities in VIEs or potential VIEs created after December 31, 2003 is January 1, 2005. We are currently evaluating the impact of FIN 46R on these interests created after December 31, 2003.
Subsequent Events
      In January 2005, Quintiles’ Board of Directors approved the second phase of our review of aspects of Quintiles’ current operating and future strategic direction. We expect that certain costs will be incurred in both our Product Development and Commercial Services Groups to implement this phase, including restructuring and exit costs. We expect to incur over the first three quarters of 2005 aggregate restructuring charges of approximately $35.7 million. The estimated cash expenditures total approximately $25.1 million and include termination benefits of approximately $12.3 million to eliminate approximately 316 positions globally, and exit costs of approximately $12.7 million. In addition, we anticipate incurring non-cash charges consisting primarily of asset impairments related to buildings, plant and equipment write-downs due to potential future facility closings. We estimate the charge not to exceed approximately $10.7 million. We have targeted substantial completion of the cash expenditures previously announced relating to the second phase by the end of 2005.
      In March 2005, Quintiles’ Board of Directors approved the third phase of our review. We expect that certain costs will be incurred in both our Product Development and Commercial Services Groups to implement this phase, including restructuring and exit costs. We expect to incur over the last three quarters of 2005 and the first quarter of 2006 aggregate restructuring charges of approximately $16.5 million. The estimated cash expenditures total approximately $15.8 million and include termination benefits of approximately $15.3 million to eliminate approximately 384 positions globally, and exit costs of approximately $500,000. In addition, we anticipate incurring non-cash charges consisting primarily of asset impairments. We are in the process of performing the asset impairment tests and estimate the charge not to exceed approximately $700,000. We have targeted substantial completion of the cash expenditures relating to the third phase for the end of 2005.
      We anticipate that additional costs will be incurred in later quarters, as subsequent phases of this review are completed. At this time, we estimate that anticipated additional costs relating to the remaining phases will be substantially less than the aggregate costs we previously announced relating to this review.
      On March 31, 2005, Quintiles amended its senior secured credit agreement. The amendment (1) decreases the interest rate under the Term Loan B facility by 2.50%; (2) lessens the Interest Expense Coverage Ratio and Total Leverage Ratio requirements for selected future periods; (3) adjusts the Senior Leverage Ratio from 2.0 to 1.75 through December 31, 2005, which could further limit Quintiles’ ability to incur additional Senior Indebtedness during 2005; (4) increases Quintiles’ capacity for additional Asset Sales by $150.0 million; (5) increases Quintiles’ capacity to make certain investments outside the United States by $100.0 million; (6) increases Quintiles’ capacity to make Permitted PharmaBio Investments by $100.0 million; (7) permits Quintiles to include certain restructuring charges in the calculation of its Consolidated EBITDA; (8) permits Quintiles to offset its Consolidated Indebtedness by an additional $50.0 million of available cash; and (9) makes other clarifying or correcting changes. On March 31, 2005, Quintiles paid down $150.0 million of the approximately $306.1 million outstanding under the Term Loan B facility and paid approximately $2.3 million to the administrative agent and lenders in connection with the amendment. Capitalized terms included in this paragraph have the meanings defined in Quintiles’ senior secured credit agreement.

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BUSINESS
General
      We operate our business through Quintiles and its subsidiaries, which provide a full range of integrated product development and commercial development services to the pharmaceutical and biotechnology industries. Dr. Gillings founded Quintiles in 1982 to offer biostatistics and data management services to the pharmaceutical industry. Since that time, we have grown to become a market leader in providing a full range of integrated product development and commercial development solutions to the pharmaceutical, biotechnology and medical device industries. Based on our competitors’ press releases and public filings with the SEC, we are the largest company in the pharmaceutical outsourcing services industry as ranked by 2004 gross revenues. We also provide market research services and strategic analyses to support healthcare decisions and healthcare policy consulting to governments and other organizations worldwide. This broad range of services helps our customers lower their costs, reduce the length of time from the beginning of development to peak sales of a new drug or medical device and increase the sales of their products.
      Our business is organized into three segments: the Product Development Group, the Commercial Services Group and the PharmaBio Development Group. The combination of these three business segments, together with Verispan, our joint venture with McKesson, which provides research and market data to help drug sponsors better market their products, enables us to provide a broad range of outsourcing services to the pharmaceutical and biotechnology industries. We believe this comprehensive suite of services offers customers the opportunity to outsource through Quintiles all key phases of a product’s development and sales from the preclinical phase through patent expiration and beyond.
      Product Development Group. Our Product Development Group provides global expertise in drug development from early compound analysis through regulatory submission. Our capabilities span preclinical and all phases of clinical testing with particular strength in Phase I, Phase II and Phase III clinical studies. The Product Development Group has been divided into two lines of business: EDLS, which focuses on early stage pharmaceutical development and laboratory services for the later phases, and CDS, which specializes in clinical trials for regulatory approval of products under investigation. We also emphasize and target strong opportunity in Phase IIIb and Phase IV clinical and marketing studies, traditionally known as Late Phase studies, which are developing into a third line of business in the Product Development Group called Strategic Research Services. Late Phase studies may be recommended by regulators and utilized by our customers to assess safety issues and responses to drug therapy for commonly occurring patient profiles.
      Commercial Services Group. Our Commercial Services Group provides our customers with a comprehensive range of specialized pre-launch, launch and post-launch fee-for-service contract sales and strategic marketing services. The Commercial Services Group is comprised of our Commercialization business and our Medical Communications and Consulting business. Our Commercial Services Group not only provides contract sales, but also provides contract marketing and other services. This group delivers integrated, strategic and tactical solutions in sales and marketing across the product life cycle for pharmaceutical and biotechnology companies as well as for other entities across the healthcare spectrum. In addition, our Commercial Services Group provides strategic health and human services consulting for customers including hospitals, long-term care facilities, foundations, managed care organizations, employers, the military and federal and state governments.
      PharmaBio Development Group. Our PharmaBio Development Group enters into partnering arrangements with certain of our customers. These arrangements typically involve providing funding to the customer, either through direct payments or loans (sometimes convertible into capital stock of the customer) to help customers develop and/or market their particular drug(s). We also may invest in customers’ equity and/or provide services through our Commercial Services Group, sometimes at our cost, in connection with these arrangements. These arrangements often grant us royalties or commissions based on sales of the customer’s product. We believe these partnering arrangements allow us to explore new

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opportunities and areas for incremental growth in a controlled manner that draws upon our skill and industry knowledge. Our professional clinical staff numbers in the thousands and provides a very broad base of knowledge and experience with considerable numbers of pharmaceutical products. This expertise enables us to conduct an in-depth assessment of a product’s potential in the marketplace before we enter into partnering arrangements with any of our customers. At the end of 2001, the PharmaBio Development Group expanded its scope of activities to include the acquisition of rights to market products.
Pharma Services Transaction
      On September 25, 2003, Pharma Services acquired all of the issued and outstanding shares of Quintiles’ common stock. Intermediate Holding currently holds 99.2% of Quintiles’ outstanding common stock with Pharma Services owning the remainder. Intermediate Holding is wholly owned by Pharma Services. Pharma Services was formed for purposes of the going private transaction by Dennis B. Gillings, Ph.D., the Executive Chairman, Chief Executive Officer and founder of Quintiles, and One Equity.
Services
      We provide globally integrated contract research, sales, marketing and healthcare policy consulting and health information management services to the worldwide pharmaceutical, biotechnology, medical device and healthcare industries. Additionally, we offer our customers the possibility of a strategic partnering relationship. We can support our customers through the entire life cycle of a drug from initial testing to patent expiration. We currently operate in three reportable segments: Product Development, Commercial Services and PharmaBio Development. We provide our customers with a continuum of services that spans these three segments. We believe that the broad scope of our services allows us to help our customers rapidly assess the viability of a growing number of new drugs, cost-effectively accelerate development of the most promising drugs, launch new drugs to the market quickly and evaluate their impact on healthcare. Note 27 of the notes to our consolidated financial statements, included elsewhere in this prospectus, provides financial information regarding each segment.
      The following discussion describes our service offerings in greater detail.
Product Development Offerings
      Our Product Development Group provides a broad range of services to support our customers throughout the development cycle of a pharmaceutical product or medical device. This cycle includes the following steps to obtaining regulatory approval from the Food and Drug Administration, or the FDA:
  •  Preclinical, which involves testing to identify, quantify and evaluate biological activity and safety;
 
  •  Phase I, which involves determining how a drug is processed by the body and the duration of the drug’s actions on the body;
 
  •  Phase II, which involves controlled testing of a drug to determine the safe dosage range of a drug and a broader safety profile;
 
  •  Phase IIIa, which involves extensive testing to confirm the effectiveness and safety of a drug;
 
  •  Phase IIIb, which involves conducting additional studies following submission to the FDA and/or foreign regulatory authorities and agencies; and
 
  •  Phase IV, which involves conducting additional studies to further evaluate the effectiveness, side effects and cost effectiveness of a drug following regulatory approval.
      Our Product Development Group historically has been divided into two lines of business: EDLS, which focuses on early stage pharmaceutical development and laboratory services for the later phases, and CDS, which specializes in clinical trials for regulatory approval of products under investigation. We also emphasize and target a strong opportunity in Phase IIIb and Phase IV clinical and marketing studies,

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traditionally known as Late Phase studies, which are developing into a third line of business in the Product Development Group, known as SRS. SRS studies may be recommended by regulators and utilized by our customers to assess safety issues and responses to drug therapy for commonly occurring patient profiles.
Early Development and Laboratory Services
      Preclinical Services. Our preclinical unit provides customers with a wide array of early development services. These services are designed to produce the data required to identify, quantify and evaluate the risks to humans resulting from the manufacture or use of pharmaceutical and biotechnology products. Such services include general toxicology, carcinogenicity testing, pathology, efficacy and safety pharmacology, bioanalytical chemistry, drug metabolism and pharmacokinetics. During 2001, we opened a safety pharmacology unit in Kansas City, Missouri. The development of this capability in the United States, in combination with our Edinburgh, Scotland unit, has allowed us to provide full service safety pharmacology to our United States customers while further strengthening our global position.
      Pharmaceutical Services. We offer services in the design, development, analytical testing and commercial manufacture of pharmaceutical dose forms. We provide study medications for preclinical and clinical studies along with necessary good manufacturing practice, or GMP, chemistry, manufacturing and controls, or CMC, and regulatory documentation. We recently completed construction of a new GMP sterile clinical supplies manufacturing facility in Kansas City, Missouri.
      Clinical Trial Services. At our clinical trial supplies facilities, medications for use in clinical (both pre- and post-marketing) studies are received, packaged according to the appropriate protocol, labeled and distributed globally. We also provide services to reconcile these drugs in connection with a particular clinical trial. These services can expedite the drug development process because clinical trials are often postponed by delays in the manufacture and distribution of study drug materials.
      Phase I Services. Phase I clinical trials involve testing a new drug on a limited number of healthy individuals. Our Phase I services include dose ranging, bioavailability/ bioequivalence studies, pharmacokinetic/ pharmacodynamic modeling, first administration to humans, multiple dose tolerance, dose effect relationship and metabolism studies.
      Centralized Clinical Trial Laboratories. Our centralized laboratories provide globally integrated clinical laboratory services to support all phases of clinical trials with facilities in the United States, Europe, South Africa and Singapore. Services include the provision of protocol-specific study materials, customized lab report design and specimen archival and management for study sponsors. In addition to providing comprehensive safety and efficacy testing for clinical trials, our centralized laboratories allow for global standardization of clinical testing, database development and electronic data transfer and provide direct electronic integration of laboratory data into safety and efficacy reports for new drug application, or NDA, submissions.
Clinical Development Services
      Clinical Trial Services. We offer comprehensive clinical trial services throughout the life cycle of a pharmaceutical product or medical device, primarily from Phase II to Phase IV in the drug development life cycle. In addition to Phase I through III clinical studies, which are the basis for obtaining initial regulatory approval for drugs and medical devices, we provide expertise in the development and execution of Phase IIIb and IV clinical studies. Services provided include project management, clinical monitoring, patient recruitment, pharmacovigilance, medical affairs, regulatory affairs, data management, biostatistics and quality assurance.
      Our employees have drug development and medical device experience spanning the therapeutic areas of the cardiovascular, central nervous system, allergy/respiratory, genitourinary, anti-infectives, ophthalmology, gastrointestinal, oncology, endocrinology, immunology and dermatology. Other specialized offerings include development services in neonatal, pediatric and adolescent care. Because of our global presence and ability to coordinate clinical staff to service customers on an international basis, we are experienced in

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managing trials involving several thousand patients at hundreds of sites concurrently in the Americas, Europe, the Asia-Pacific region and South Africa.
      We provide our customers with one or more of the following core clinical trial services:
        Study Design. We assist our customers in preparing the study protocol and designing case report forms, or CRFs. The study protocol defines the medical issues to be examined, the number of patients required to produce statistically valid results, the period of time over which they must be tracked, the frequency and dosage of drug administration and the study procedures.
 
        Investigator Recruitment. During clinical trials, the drug is administered to patients by physicians, referred to as investigators, at hospitals, clinics or other sites. We have access to several thousand investigators who conduct our clinical trials worldwide.
 
        Patient Recruitment. We assist our customers in recruiting patients to participate in clinical trials through investigator relationships, media advertising, use of Web-based techniques and other methods. We also help to ensure patients are retained for the duration of the studies.
 
        Study Monitoring. We provide study monitoring services which include investigational site initiation, patient enrollment assistance and data collection and clarification. Site visits help to assure the quality of the data, which are gathered according to good clinical practice, or GCP, and International Conference on Harmonization, or ICH, regulations and guidelines, and to meet the sponsors’ and regulatory agencies’ requirements according to the study protocol.
 
        Clinical Data Management and Biostatistical Services. We have extensive experience in the creation and statistical analysis of scientific databases for all phases of the drug development process. These databases include customized databases to meet customer-specific formats, integrated databases to support NDA submissions and databases in accordance with ICH guidelines.
      Regulatory Affairs Services. We provide comprehensive medical and regulatory services for our pharmaceutical and biotechnology customers. Our medical services include medical oversight of studies, review and interpretation of adverse experiences, medical writing of reports and study protocols and strategic planning of drug development programs. Regulatory services for product registration include regulatory strategy design, document preparation, publishing, consultation and liaison with various regulatory agencies. Our regulatory affairs professionals help to define the steps necessary to obtain registration as quickly as possible. We are one of the few companies able to provide such services in numerous countries, including the key regions of focus for pharmaceutical companies, to meet our customers’ needs to launch products in multiple countries simultaneously.
      Late Phase Clinical Studies. Designed to meet the increasing demand for information from patients, prescribers, payors and regulators and to deepen customers’ understanding of physician practices and product adoption patterns, SRS provides non-registration research and consulting services. SRS specializes in providing strategic Phase IIIb and Phase IV clinical services such as post-marketing pharmacovigilance programs, health outcomes studies and other market-relevant research activities to accelerate the commercialization process. This group also offers specialized reimbursement support services and patient assistance programs to facilitate coverage and payment for treatment, utilizing our proprietary new technologies. SRS studies are developing into a third line of business in the Product Development Group.
      Medical Device Services. We offer medical device services similar to our offerings for the development and introduction of pharmaceutical products. Our core medical device services include identification of regulatory requirements in targeted markets; global clinical study design, planning, management and monitoring, including data management and statistical analysis of report preparations; preparation of regulatory filings and compliance with regulatory requirements for market access and long range planning for product launches, including pricing strategies.

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Commercial Services Offerings
      The Commercial Services Group is comprised of our Innovex-branded commercialization business, which includes the largest global contract sales organization, or CSO, based on reported revenues in 2004, and the integrated strategic solutions business. We entered the CSO industry in 1996 when we acquired Innovex, a United Kingdom-based company with global operations, and have since grown the business organically as well as through acquisitions. We continue to operate our CSO business under the Innovex brand. We have specialized therapeutic expertise in the areas of cardiovascular, central nervous system, gastrointestinal, women’s health, endocrinology, allergy-respiratory, anti-infectives and oncology.
Commercialization Offerings
      Our customized sales and marketing services are designed to accelerate the commercial success of pharmaceutical, biotechnology, veterinary and other health-related products.
      Contract Sales. Skilled, Web-integrated primary care, specialty, and innovative promotional alternative sales teams provide our customers with a flexible resource which is able to respond quickly and effectively to a changing marketplace at a variable cost to the customer. We provide our customers with a variety of staffing options, including direct hire, flexible work arrangement, leave of absence, and “strike force” arrangements (in which a team is deployed to a particular territory to capitalize on a market niche opportunity). We use a proprietary review process and a variety of techniques, including our extensive computerized databases and candidate referrals, to recruit candidates for our contract sales teams. Our training and development services integrate traditional and Web-based services. Our contract sales unit helps our customers design or revamp their existing sales programs to meet marketplace demands.
      Customers may contract for dedicated or syndicated sales teams. When dedicated teams are deployed, we take on a primary management role or a supporting role to the customer’s field management, depending on the customer’s needs. In certain circumstances, dedicated teams may be transferred to the customer for an additional placement fee included in the contract. Our syndicated teams promote a number of non-competing drugs for different customers simultaneously. We always maintain direct management of our syndicated sales teams.
      Health Management Services. We also provide teams of healthcare professionals, including nurses, pharmacists and physicians, who are dedicated to assisting customers with disease management issues. Our health management services offer customized clinical solutions to bridge the gap between the clinical and commercial phases of product development and to provide expertise across a broad range of pre-launch, launch and post-launch opportunities. We believe that our clinical and promotional expertise, commercial orientation and international experience enable us to tailor these programs to meet the diverse needs of the global pharmaceutical industry across a wide range of disciplines and local market conditions.
      Marketing Services. We provide customized product marketing services for pharmaceutical and biotechnology companies designed to influence the decisions of patients and physicians and accelerate the acceptance of drugs into treatment guidelines and formularies. We assess markets, conduct research, develop strategies and tactics, assist in discussions with regulatory bodies, identify distribution channels and coordinate vendors in every region of the country. Our industry experts, with experience in many therapeutic areas, can provide marketing insight into a wide range of geographic markets while working to optimize commercial success.
      Internet-Based Sales and Marketing Services. Innovex eSolutions Group provides Internet-based sales and marketing services for the pharmaceutical, biotechnology and medical device industries. The group has three main products. iQLearning.com is an Internet service portal that further expands our range of healthcare information resources and services to physicians in the United States and currently has a membership of more than 117,000 United States physicians and 3,000 general practitioners in the United Kingdom. The second product that the eSolutions Group maintains is the iQRepConnect portal, which is a Web-based sales representative portal that allows field-based representatives to access all of their support

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services with a single sign-on and in one place. The third product that the eSolutions Group maintains is the Beansprout Network, which is one of the leading pediatrician websites with both a physician facing side and a direct to consumer side. The Beansprout Network hosts thousands of private practice websites for its members.
      Training. In various countries around the world we offer industry specific training to professionals working in retail pharmacy, manufacture, distribution, regulatory, sales and marketing. The training in many instances is outcomes based, covers both knowledge and skills, and may be delivered via the Internet or email, as well as hard copy.
Quintiles Medical Communications and Consulting
      Strategic Marketing Services. Our expert consultants support pharmaceutical and biotechnology product commercialization through a continuum of services. We begin in the conceptualization phase of development with strategic market research. Through a combination of secondary data and qualitative primary research, we assist customers in making development decisions. Once a product proceeds to large scale clinical trials, this group creates product positioning, pricing and formulary access/reimbursement strategies based on extensive primary research with providers, patients, payors and other administrative decision-makers. Finally, in support of product marketing at launch, we create health economic models to justify price to formulary decision-makers, and, post-launch, we track actual product costs and outcomes through medical claims data, medical records and patient interviews. The combination of these services provides our customers with the marketing, economic and reimbursement support they need to help to maximize commercial potential at each stage of the product lifecycle.
      Healthcare Policy Research and Consulting. Our management consulting services focus on improving the quality, availability and cost-effectiveness of healthcare in the highly regulated and rapidly changing healthcare industry. These services include corporate strategic planning and management, program and policy development, financial and cost-effectiveness analyses, evaluation design, microsimulation modeling and data analysis. These services represent the core competencies of The Lewin Group, an internationally recognized management consulting firm with more than three decades of experience solving problems for organizations in the public, non-profit and private sectors.
      Regulatory and Compliance Consulting. We supply regulatory and compliance consulting services to the pharmaceutical, biotechnology, medical device development and manufacturing industries. Services include global regulatory consulting, quality systems and engineering and validation. We assist companies in preparing for interactions with the FDA, and other foreign regulatory authorities or agencies, including inspections and resolution of enforcement actions, complying with current GMP, GCP and quality systems regulations, meeting process and software validation requirements, and bringing new medical devices to market.
      Strategic Medical Communications. Our strategic medical communications group offers a range of pre-launch, launch and post-launch services, beginning in the early stages of product development and continuing until the product reaches peak penetration. Services include communications strategies and planning, product positioning and branding, opinion leader development, faculty training, symposia, continuing medical education programs, promotional programs, sponsored publications, new media-based programs, patient education and clinical experience programs (e.g., patient starter programs and compliance programs). As early as Phase I and Phase II clinical trials, we can begin to disseminate scientific information and develop and present educational forums to help gain opinion leader support for a new drug.
PharmaBio Development Offerings
      Our PharmaBio Development Group manages our investment portfolio and enters into partnering arrangements with certain of our customers. These arrangements typically involve providing funding to the customer, either through direct payments or loans (sometimes convertible into capital stock of the customer) or through the provision of services to the customer. We also may invest in our customers’

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equity and/or provide services through our Commercial Services Group, sometimes at our cost, in connection with these arrangements. These arrangements often grant us royalties or commissions based on sales of the customer’s product.
      In all cases, the PharmaBio Development Group engages in a rigorous due diligence and internal review process, involving the relevant aspects of our organization, prior to making investments and entering partnering arrangements. This process helps us to develop transaction structures that are designed to balance targeted returns with our perceived risk.
      In addition to the rigorous due diligence and internal review process, we further attempt to mitigate the risk of PharmaBio Development Group arrangements by:
  •  Focusing primarily on compounds that already have regulatory approval or are in the later stages of clinical development, thus reducing regulatory risk;
 
  •  Structuring all transactions in a prudent manner which, in some instances, may include structuring financial commitments in the form of milestone payments, whereby payments are made based on the successful completion of different stages of the development cycle; and
 
  •  In some instances, requiring an option to reduce our financial commitment if the drug sponsor does not invest a certain minimum amount on promotion of the drug.
      Overall, our revenues and operating income from these arrangements depend on the performance of the customer’s capital stock and/or its product. Since we created the PharmaBio Development Group in 2000, it has entered into numerous transactions. The PharmaBio Development Group recognized revenues of approximately $52.9 million for the year ended December 31, 2004, $30.7 million for the period from September 26, 2003 to December 31, 2003, $99.2 million for the period from January 1, 2003 through September 25, 2003 ($129.9 million on a combined basis for 2003) and $101.7 million for the year ended December 31, 2002. The contribution for the PharmaBio Development Group was ($84.3) million for the year ended December 31, 2004, $4.0 million for the period from September 26, 2003 through December 31, 2003, $37.5 million for the period from January 1, 2003 through September 25, 2003 ($41.5 million on a combined basis for 2003) and $17.5 million for the year ended December 31, 2002.
Transaction Models
      Our PharmaBio Development Group enters into the following types of arrangements:
  •  Risk-Based Commercialization Arrangements. Risk-based commercialization arrangements include transactions in which we provide commercialization services in exchange for fees and/or product royalty rights. In these transactions, we receive from our customers the right to royalties on the sales of the products covered by the agreements. We use a variety of contract structures in our risk-based commercialization transactions. Certain transactions may include contractual minimum and/or maximum royalty amounts. In other instances, we may have no guaranteed minimum royalty. Regardless of the structure, we always seek to earn financial returns commensurate with the risks presented by the transaction.
 
  •  Strategic Investments. The PharmaBio Development Group makes a variety of strategic investments, including direct investments in both marketable and non-marketable equities, as well as debt, and indirect investments through such vehicles as venture capital funds. In some cases, PharmaBio Development may make investments in connection with risk-based commercialization agreements. As of December 31, 2004, the PharmaBio Development Group had a total of $80.8 million in such investments, including $24.4 million of investments in marketable equities and $56.4 million of investments in non-marketable equity securities and loans.
 
    In addition, the PharmaBio Development Group occasionally acquires the rights to market certain pharmaceutical products. In 2004, we sold the assets relating to our Bioglan Pharmaceuticals business, which primarily included the rights to certain dermatology products marketed in the United States, including Solaraze® and ADOXA®. We acquired the assets relating to our Bioglan

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business in 2001 and 2002 for a total consideration of $54.6 million and sold the Bioglan operations in 2004 for net proceeds before taxes of $170.3 million. The PharmaBio Development Group continues to hold the rights to several products in Europe, via licensing or distribution agreements, which involve a variety of up-front or ongoing payments to the licensors. In these arrangements, third parties manufacture the products for us and Innovex sells the products. The PharmaBio Development Group recognizes the revenues from the sales of these pharmaceutical products.
 
  •  Risk-Based Development Services. In these types of arrangements we provide some or all of the clinical development services costs on behalf of a partner in exchange for milestone payments and/or royalty rights in the product. Our September 2004 transaction with Solvay Pharmaceuticals B.V., or Solvay, is an example of such an arrangement and is structured to mitigate our risk through the ability to earn milestone payments from our work on multiple projects.
Recent Strategic Alliances
      The PharmaBio Development Group has entered into the following recent arrangements:
  •  In January 2002, we entered into a series of agreements with Kos to commercialize in the United States Kos’ treatments for cholesterol disorders, Advicor® and Niaspan®. We provided a dedicated sales force at our own expense who, in combination with Kos’ sales force, commercialized Advicor® and Niaspan® for two years. In return, we received warrants to purchase shares of Kos’ common stock at an agreed price. We will receive commissions, subject to a minimum and maximum amount over the life of the agreement, based on net sales of the product from 2002 through 2006.
 
  •  During the second quarter of 2002, we finalized an agreement with a large pharmaceutical customer to market pharmaceutical products in Belgium, Germany and Italy. We will provide, at our own expense, sales and marketing resources over the eight-year life of the agreement, in return for which the customer will pay us royalties on product sales in excess of certain baselines. In the first quarter of 2003 and the third quarter of 2003, the agreements in Germany and Belgium, respectively, were terminated.
 
  •  In July 2002, we entered into an agreement with Lilly to support its commercialization efforts for Cymbaltatm in the United States. In return for providing sales representatives and making marketing and milestone payments to Lilly totaling $115 million, we receive an 8.25% percent-of-sales royalty over the five-year service period followed by a three percent royalty over the subsequent three years.
 
  •  In July 2002, we entered into a series of agreements with Columbia to assist them in the United States commercialization of the following women’s health products: Prochievetm 8%, Prochievetm 4%, Advantage-S® and RepHreshtm Vaginal Gel. Under the terms of these agreements, we have paid Columbia an aggregate of $4.5 million in exchange for royalties on the sales of the four Columbia products for a five-year period beginning in the first quarter of 2003. In addition, we will provide to Columbia, at Columbia’s expense on a fee-for-service basis, a sales force to commercialize the products. We also purchased shares of Columbia common stock as part of these arrangements. During January 2004, we restructured the sales force agreement to allow for an accelerated transfer of responsibility to Columbia.
 
  •  In December 2002, we entered into an agreement with a large pharmaceutical customer to market two products in Belgium. Under the terms of the agreement, we acquired the marketing and distribution rights to one of the products and entered into a six-year distribution agreement for the other product.
 
  •  In March 2003, we entered into an additional agreement with Columbia to assist them in the commercialization of Strianttm, Columbia’s testosterone buccal bioadhesive product, in the United States. We have paid Columbia an aggregate of $15.0 million in exchange for royalties on the sales of Strianttm for a seven-year period beginning in the third quarter of 2003. In addition we will provide to Columbia, at Columbia’s expense on a fee-for-service basis, a sales force to

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  commercialize the products. During January 2004, we restructured the sales force agreement to allow for an accelerated transfer of responsibility to Columbia.
 
  •  In February 2004, we entered into an agreement with a large pharmaceutical customer to provide services in connection with the customer’s development and the United States launch of a Phase III product, or the new product, which is related to one of the customer’s currently marketed pharmaceutical products, or the existing product. The existing product has historically achieved multi-hundred million dollars in sales annually. Under the agreement, we will provide up to $90.0 million of development and commercialization services for the new and existing products. Our customer has agreed that at least $67.5 million of those services will be performed by our affiliates, at agreed upon rates. The customer, though, may direct us to use third parties to perform up to $22.5 million of the $90.0 million of services. The agreement contains quarterly limits on our service obligations with a maximum of $10.0 million of services in any quarter. Without revising the overall limits of the agreement, the agreement was amended to allow for $11.0 million of spending in the second quarter of 2004 and $13.0 million in each of the third and fourth quarters of 2004. Our service obligations are anticipated to occur through the end of 2006, but may run longer depending on the customer’s actual use of services and when, and if, FDA approval of the new product occurs. Until the FDA approves the new product, we are obligated to provide no more than $57.5 million in services. In return for performing our obligations, we will receive (1) beginning in the first quarter of 2005, a low, single-digit royalty on the United States net sales of the existing product and (2) beginning on the United States launch of the new product, a declining tiered royalty (beginning in the low teens) on the United States net sales of the new product. Our royalty period under the agreement lasts for approximately 9 years; however, the agreement limits the amount of royalties we receive each year and also caps the aggregate amount of royalties we can receive under the agreement at $180.0 million. We will also receive a $20.0 million payment from the customer upon the United States launch of the new product. If the new product is not approved by the FDA or a significant delay occurs in its approval process, we may terminate our remaining service obligations and continue to receive the royalty on the existing product subject to a return ceiling of no less than 8%. The agreement also provides for royalty term extensions, in the event of certain other specified unfavorable circumstances such as product shortages or recalls. The customer may terminate the agreement at any time subject to the customer’s payment to us of the then-present value of its remaining expected royalties.
 
  •  In September 2004, we entered into an agreement with Solvay to provide clinical development services valued at $25.0 million for ten Solvay clinical Phase II projects, thereby sharing the costs and uncertainties of the outcomes for these projects. The agreement specifies project and annual spending limits. Spending beneath these limits may be carried over to one of the other ten projects or another year, but may not exceed the overall $25.0 million limit. In return, we will receive a milestone payment from Solvay for each of the compounds reaching positive clinical proof-of-principle and moving into further development. The agreement terminates upon the final determination of the successful or unsuccessful completion of the ten projects.
 
  •  In December 2004, we entered into an agreement with Cell Therapeutics involving its cancer therapy, TRISENOX® (arsenic trioxide). Under the agreement, we paid Cell Therapeutics $25.0 million in cash and will make available $5.0 million in services. In return, Cell Therapeutics will pay us royalties based on a percentage of net sales of TRISENOX® in the United States and certain European countries over a five year period beginning January 1, 2006 and provide us with a security interest in Cell Therapeutics’ TRISENOX® assets related to the royalty payment obligations. The royalty payments from Cell Therapeutics are subject to minimum and maximum amounts of $53.0 million and $69.0 million, respectively, over the life of the agreement. Under certain termination events, including product divestiture by Cell Therapeutics, the minimum amounts due from Cell Therapeutics may be adjusted to ensure we maintain a certain internal rate of return.

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  •  In December 2004, we entered into a co-promotion agreement with Yamanouchi Pharma Limited, or Yamanouchi, to support Yamanouchi in its commercialization efforts for Vesicaretm in the United Kingdom. Vesicaretm, or solifenacin, is currently approved for the treatment of overactive bladder. Under the terms of the agreement, we will provide, at our expense, a £500,000 (approximately $963,000) marketing contribution and a sales force to supplement Yamanouchi’s sales force for three years. Our sales force will promote Vesicaretm in its primary, or P1, position within sales calls and will be required to make a minimum number of sales calls each year. In return for the P1 position for Vesicaretm, Yamanouchi will pay us a royalty based on the net sales of Vesicaretm over six years.
      We review many candidates for strategic alliances under our PharmaBio Development Group business models. In addition to the arrangements already under way, we are continually evaluating new strategic possibilities, and we may enter into additional arrangements in the future.
Informatics Offerings
      Prior to May 2002, we had a fourth business segment, consisting of our informatics services. Our Informatics Group provided a broad range of knowledge-rich products and services for use by the pharmaceutical, biotechnology, and medical and surgical device industries, and healthcare providers, payors and patients to improve the quality of care and to efficiently manage the delivery of care at multiple points along the continuum of healthcare delivery.
      In May 2002, we completed the formation of our healthcare informatics joint venture, Verispan, with McKesson. The joint venture is designed to leverage the operational strengths of the healthcare information businesses of each company. We are an equal co-owner with McKesson of a majority of the equity of Verispan. A minority portion of the equity in Verispan is owned by key providers of de-identified healthcare data and Verispan employees. We contributed the net assets of our Informatics Group and funded $10.0 million to Verispan.
      Several major data providers have contracted to provide de-identified prescription or medical data to the joint venture. Verispan has licensed its data products to McKesson and us for use in our respective core businesses. Under the license arrangement, we continue to have access to Verispan’s commercially available market information and products, at no further cost to us, to enhance service to and partnering with our customers.
Customers and Marketing
      In order to coordinate the multiple contracts and service offerings we may have with each customer and leverage these into new business opportunities, we operate our business development efforts across our service offerings through integrated business development functions. These integrated business development functions direct the activities of business development employees in each of our United States locations, as well as other key locations throughout Europe, Asia-Pacific, Canada and Latin America. In each of the last four years, we provided services to all of the world’s 20 largest pharmaceutical companies and to many of the world’s leading biotechnology and smaller and mid-sized pharmaceutical companies.
      For the year ended December 31, 2004, approximately 34.9% of our net service revenue from external customers was attributed to operations in the United States and 65.1% to operations outside the United States. Please refer to the notes to our consolidated financial statements included elsewhere in this prospectus for further details regarding our foreign and domestic operations. Approximately 45.6%, 43.5% and 42.7% of our net revenue was attributed to our clinical development services in 2004, 2003 and 2002, respectively; approximately 17.6%, 18.2% and 17.4% of our net revenue was attributed to our early development and laboratory services in 2004, 2003 and 2002, respectively; and approximately 28.4%, 24.7% and 26.0% of our net revenue was attributed to our commercialization services in 2004, 2003 and 2002, respectively. Neither our medical communications and consulting services, our commercial rights and royalties, nor our informatics services accounted for more than 10% of our net revenue in any of these years.

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      In the past, we have derived, and may in the future derive, a significant portion of our service revenue from a relatively limited number of major projects or customers. As pharmaceutical companies continue to outsource large projects and studies to fewer full-service providers, the concentration of business could increase; for example, Aventis S.A. accounted for approximately 11% of our consolidated net service revenue in 2002. No single customer accounted for 10% of our consolidated net revenue for 2004 or any 2003 period presented herein. However, for the quarter ended December 31, 2004, we did have one customer who is approaching 10% of our consolidated net revenues.
Competition
      The market for our product development services is highly competitive, and we compete against traditional contract research organizations, or CROs, and the in-house research and development departments of pharmaceutical companies, as well as universities and teaching hospitals. Among the traditional CROs, there are several hundred small, limited-service providers, several medium-sized firms, and only a few full-service companies with global capabilities. Consolidation among CROs likely will result in greater competition among the larger contract research providers for customers and acquisition candidates. Our primary CRO competitors include Covance Inc., PPD Inc., PAREXEL International Corporation, ICON plc and PRA International. Competitive factors for product development services include:
  •  previous experience,
 
  •  medical and scientific expertise in specific therapeutic areas,
 
  •  the quality of contract research,
 
  •  speed to completion,
 
  •  the ability to organize and manage large-scale trials on a global basis,
 
  •  the ability to manage large and complex medical databases,
 
  •  the ability to provide statistical and regulatory services,
 
  •  the ability to recruit investigators,
 
  •  the ability to deploy and integrate information technology systems to improve the efficiency of contract research,
 
  •  an international presence with strategically located facilities and
 
  •  financial viability and price.
      Our Commercial Services Group competes against the in-house sales and marketing departments of pharmaceutical companies and other CSOs in each country in which we operate. We also compete against national consulting firms offering healthcare consulting and medical communications services, including boutique firms specializing in the healthcare industry and the healthcare departments of large firms. Our primary CSO competitors in the United States include Ventiv Health, Inc. and PDI, Inc. Outside of the United States, we typically compete against single country or regionally-focused commercial service providers. The primary competitive factors affecting commercial services are the proven ability to quickly assemble, train and manage large qualified sales forces to handle broad scale launches of new drugs and price. Competitive factors affecting healthcare consulting and medical communications services include experience, reputation and price.
      Because our PharmaBio Development Group custom tailors its risk-based service arrangements to meet our customers’ financial and strategic needs, it is more difficult to assess its potential competitors. Theoretically, a financing party could choose to provide such risk-based commercialization or development efforts, as does the PharmaBio Development Group. However, such a group would have to contract with third parties for the provision of services. We are aware that several commercial service firms, such as Ventiv Health, Inc. and PDI, Inc., have entered into risk-based commercialization transactions. Our

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PharmaBio Development Group has a large number of competitors for specialty pharmaceutical products. The key competitive factors for PharmaBio Development include access to capital, the quality of the services provided by our other business units in connection with PharmaBio Development’s transactions, and the ability to perform detailed and accurate scientific, strategic, and financial due diligence prior to completing transactions.
      Competitors for our informatics services included IMS Health Incorporated and NDC Health Corporation.
      Notwithstanding all these competitive factors, we believe that the synergies arising from integrating product development services with commercial services, supported by global operations and information technology differentiate us from our competitors.
Employees
      As of January 31, 2005, we had approximately 16,986 full-time equivalent employees, comprised of approximately 5,920 in the Americas, 7,343 in Europe and 3,723 in the Asia-Pacific and Africa region. As of January 31, 2005, our Product Development Group had 9,452 full-time equivalent employees, our Commercial Services Group had 6,889 full-time equivalent employees and our PharmaBio Development Group had 62 full-time equivalent employees. In addition, our centralized operations/corporate office had 583 full-time equivalent employees.
Backlog Reporting
      We report backlog based on anticipated net revenue from uncompleted projects that our customers have authorized and we believe to be firm. Once work begins on a project, net revenue is recognized over the duration of the project. Using this method of reporting backlog, at December 31, 2004, backlog was approximately $2.6 billion, as compared to approximately $1.9 billion at December 31, 2003. The backlog at December 31, 2004 and 2003 includes approximately $357.3 million and $28.8 million, respectively, of backlog related to services contracted from our service groups, primarily commercialization, in connection with the strategic alliances forged by our PharmaBio Development Group. Backlog does not include any product revenues, royalties or commissions related to our commercial rights. We estimate that we will recognize approximately $1.3 billion to $1.5 billion of our December 31, 2004 backlog as revenue in 2005, with the remaining $1.1 billion to $1.3 billion to be recognized in future years.
      Net new business, which is anticipated net revenue from contracts which we entered into during the period and adjusted for contracts that were canceled during the period, for the twelve months ended December 31, 2004 and 2003, was $2.3 billion and $1.6 billion, respectively. Included in net new business was approximately $388.0 million and ($23.3) million of net wins (cancellations), respectively, of internal service contracts for the same periods. Net new business during the same period was $1.3 billion and $1.0 billion, respectively, for our Product Development Group and $1.00 billion and $519.8 million, respectively, for our Commercial Services Group.
      We believe that backlog may not be a consistent indicator of future results because it has been and likely will be affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and changes to the scope of work during the course of projects. Additionally, projects may be terminated or delayed by the customer or delayed by regulatory authorities. Projects that have been delayed remain in backlog, but the timing of the revenue generated may differ from the timing originally expected. Accordingly, historical indications of the relationship of backlog to revenues may not be indicative of the future relationship. If our product revenues, royalties and commissions related to our commercial rights increase, an increasing proportion of our revenues will not be reflected in our reported backlog.

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Potential Liability
      In conjunction with our product development services, we contract with physicians to serve as investigators in conducting clinical trials to test new drugs on human volunteers in those clinical trials. Such testing creates risk of liability for personal injury to or death of participants, particularly to participants with life-threatening illnesses, resulting from adverse reactions to the drugs administered. Although we do not believe we are legally accountable for the medical care rendered by third party investigators, it is possible that we could be held liable for the claims and expenses arising from any professional malpractice of the investigators with whom we contract or in the event of personal injury to or death of persons participating in clinical trials.
      In the context of the conduct of Phase I clinical trials at our Phase I facilities, we could be liable for the general risks associated with a Phase I facility including, but not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of Phase I medical care providers. We also could be held liable for errors or omissions in connection with the services we perform through each of our service groups. For example, we could be held liable for injury, errors or omissions or breach of contract if one of our labs inaccurately reports or fails to report lab results, or if direct or indirect contact with a patient or clinical trial participant causes harm. We believe that some of our risks are reduced by one or more of the following: (1) indemnification provisions and provisions seeking to limit or exclude liability contained in our contracts with customers and investigators, (2) insurance maintained by customers and investigators and by us and (3) various regulatory requirements, including the use of institutional review boards and the procurement of each participant’s informed consent to participate in the study. The contractual indemnifications generally do not fully protect us against certain of our own actions such as negligence. Contractual arrangements are subject to negotiation with customers and the terms and scope of any indemnification or limitation or exclusion of liability may vary from customer to customer and from contract to contract. Additionally, financial performance of these indemnities is not secured. We do, however, seek to ensure through the contracting process that our customers and vendors are contractually obliged to carry certain minimum amounts of applicable liability insurance and provide evidence of insurance upon request or prior to commencement of work. Because of the volume of contracts and geographic breadth of operations, it is not always possible to obtain such certificates of insurance nor do we have ability to confirm that such insurance remains in place or whether it may have been reduced in the aggregate by ongoing claims. Therefore, we bear the risk that the indemnifying party may not have the financial ability to fulfill its indemnification obligations.
      We maintain professional liability insurance that covers our worldwide operations in the countries in which we currently do business. We could be materially and adversely affected if we were required to pay damages or bear the costs of defending any claim outside the scope of or in excess of a contractual indemnification provision or beyond the level of insurance coverage or for which coverage is not provided by our insurance program. For example, we were among the defendants in a purported class action brought by participants in an Alzheimer’s study seeking to hold us liable for alleged damages to the participants arising from the study, since settled by the parties subject to court approval. Our former insurance carrier to whom we paid premiums to cover this type of risk subsequently filed suit against us seeking to rescind the insurance policies or to have coverage denied for some or all of the claims arising from the Alzheimer’s study litigation, which were the only claims outstanding under the policies. This suit has since been settled, resulting in no payment by us.
      Our rights to commercialize and sell certain pharmaceutical products also expose us to potential liabilities typically associated with pharmaceutical companies. For example, we could face product liability claims in the event users of any of the products we market or distribute now, or in the future, experience negative reactions or adverse side effects or in the event any of these products causes injury or death, is found to be unsuitable for its intended purpose or is otherwise defective. While we believe we currently have adequate insurance in place to protect against these risks, we may nevertheless be unable to satisfy any claims for which we may be held liable as a result of the use or misuse of products which we manufacture or sell. These risks may be augmented by certain risks relating to our outsourcing of the

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manufacturing and distribution of these products or any pharmaceutical product rights we may acquire in the future.
Government Regulation
      Our preclinical, laboratory and clinical trial supply services are subject to various regulatory requirements designed to ensure the quality and integrity of the data or products of these services. The industry standard for conducting preclinical laboratory testing is embodied in the good laboratory practice, or GLP, regulations. The requirements for facilities engaging in clinical trial supplies preparation, labeling and distribution are set forth in the current good manufacturing practices, or cGMP, regulations. GLP and cGMP regulations have been mandated by the FDA and the Department of Health in the United Kingdom, and adopted by similar regulatory authorities in other countries. GLP and cGMP stipulate requirements for facilities, equipment, supplies and personnel engaged in the conduct of studies to which these regulations apply. The regulations require adherence to written, standardized procedures during the conduct of studies and the recording, reporting and retention of study data and records. To help assure compliance, we have established quality assurance programs at our preclinical, laboratory and clinical trial supply facilities which monitor ongoing compliance with GLP and cGMP regulations by auditing study data and conducting regular inspections of testing procedures. Our clinical laboratory services, to the extent they are carried out in the United States, are subject to the requirements of the Clinical Laboratory Improvement Amendments of 1988.
      Many regulatory authorities, including those in the EU, require that study results and data submitted to such authorities be based on studies conducted in accordance with what are called GCP. These provisions represent the global industry standards for the conduct of clinical research and development studies. These provisions include:
  •  complying with specific regulations governing the selection of qualified investigators,
 
  •  obtaining specific written commitments from the investigators,
 
  •  ensuring the protection of human subjects by verifying that Institutional Review Board or independent Ethics Committee approval and patient informed consent are obtained,
 
  •  instructing investigators to maintain records and reports,
 
  •  verifying drug or device accountability,
 
  •  reporting of adverse events,
 
  •  adequate monitoring of the study for compliance with GCP requirements and
 
  •  permitting appropriate regulatory authorities access to data for their review.
      Records for clinical studies must be maintained for specified periods for inspection by the FDA and other regulators. Significant non-compliance with GCP requirements can result in the disqualification of data collected during the clinical trial. We are also obligated to comply with regulations issued by national and supra-national regulators such as the FDA and the European Medicines Agency, or EMEA. By way of example, these regulations include the FDA’s regulations on electronic records and signatures (21 CFR Part 11) which set out requirements for data in electronic format regarding submissions made to the FDA, and the EMEA’s Note for Guidance “Good Clinical Practice for Trials on Medicinal Products in the European Community.”
      We write our standard operating procedures related to clinical studies in accordance with regulations and guidelines appropriate to the region where they will be used, thus helping to ensure compliance with GCP. Within Europe, we perform our work subject to the EMEA’s Note for Guidance “Good Clinical Practice for Trials on Medicinal Products in the European Community.” All clinical trials (other than those defined as “non-interventional”) to be submitted to the EMEA must meet the requirements of the ICH — GCP. In addition, FDA regulations and guidelines serve as a basis for our North American standard operating procedures. Our offices in the Asia-Pacific region and in Latin America have developed

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standard operating procedures in accordance with their local requirements and in harmony with those adopted by North American and European operations.
      Our commercial services are subject to detailed and comprehensive regulation in each geographic market in which we operate. Such regulation relates, among other things, to the distribution of drug samples, the qualifications of sales representatives and the use of healthcare professionals in sales functions. In the United States, our commercial services are subject to the Prescription Drug Marketing Act, or PDMA, with regard to the distribution of drug samples. In the United Kingdom, they are subject to the Association of the British Pharmaceutical Industry Code of Practice for the Pharmaceutical Industry, which prescribes, among other things, an examination that must be passed by sales representatives within two years of their assuming or beginning employment. We follow similar regulations currently in effect in the other countries where we offer commercial services.
      Our United States laboratories are subject to licensing and regulation under federal, state and local laws relating to hazard communication and employee right-to-know regulations, the handling and disposal of medical specimens and hazardous waste and radioactive materials, as well as the safety and health of laboratory employees. All of our United States laboratories are subject to applicable federal and state laws and regulations relating to the storage and disposal of all laboratory specimens including the regulations of the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Transportation, the National Fire Protection Agency and the Resource Conservation and Recovery Act. Companies holding or distributing controlled substances are subject to regulation by the DEA. For example, accounting for controlled substances is subject to regulation by the DEA. Some of our facilities have been audited by the DEA. In one case, the DEA indicated that it found that we miscounted certain drugs, which was resolved to the DEA’s satisfaction by our providing a corrected accounting of these drugs to the DEA. Since the inspection, we have reviewed and strengthened our procedures relating to the handling, storage and record keeping for controlled drugs. These new procedures have been reviewed at our request by a reputed firm of independent experts. The regulations of the United States Department of Transportation, the Public Health Service and the Postal Service apply to the surface and air transportation of laboratory specimens. Our laboratories also are subject to International Air Transport Association regulations, which govern international shipments of laboratory specimens. Furthermore, when the materials are sent to a foreign country, the transportation of such materials becomes subject to the laws, rules and regulations of such foreign country. Our laboratories outside the United States are subject to applicable national laws governing matters such as licensing, the handling and disposal of medical specimens, hazardous waste and radioactive materials, as well as the health and safety of laboratory employees.
      Moreover, from time to time one or more of our customers may be investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials and programs. In these situations, we often have provided services to our customers with respect to the trials and programs being investigated, and we are called upon to respond to requests for information by these authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for trial or program compliance. For example, our customer Biovail Corporation became the subject of government inquiries relating to the Cardizem LA P.L.A.C.E., late phase clinical program and asserted publicly that we had warranted that this program complied with all laws and regulations, to which we took exception. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to substantial damages, fines or penalties.
      In addition to its comprehensive regulation of safety in the workplace, the United States Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. These regulations, among other things, require work practice controls, protective clothing and equipment, training, medical follow-up, vaccinations and other measures designed to minimize exposure to chemicals and transmission of blood-borne and airborne pathogens. Furthermore, certain employees receive initial and periodic training to ensure compliance with applicable hazardous materials

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regulations and health and safety guidelines. Although we believe that we are currently in compliance in all material respects with such federal, state and local laws, failure to comply with such laws could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.
      Our disease management and healthcare information management services relate to the diagnosis and treatment of disease and are, therefore, subject to substantial governmental regulation. In addition, the confidentiality of patient-specific information and the circumstances under which such patient-specific records may be released for inclusion in our databases or used in other aspects of our business are heavily regulated. Legislation has been proposed at both the state and federal levels that may require us to implement security measures that could involve substantial expenditures or limit our ability to offer some of our products and services. In addition, privacy legislation in non-United States jurisdictions could have a limiting effect on some of our services, including, for example, the European Data Protection Directive, the Directive, which applies in each member state of the EU. The Directive seeks to protect the personal data of individuals and, among other things, places restrictions on the manner in which such personal data can be collected, processed and disclosed and the purposes for which such data can be used.
      HIPAA requires the use of standard transactions, privacy and security standards and other administrative simplification provisions by covered entities, which includes many healthcare providers, health plans and healthcare clearinghouses. The United States law instructs the Secretary of the HHS to promulgate regulations implementing these standards in the United States.
      On December 28, 2000, the Secretary issued the final rule on Standards for Privacy of Individually Identifiable Health Information to implement the privacy requirements for HIPAA. These regulations, as amended on August 14, 2002, generally (1) impose standards for covered entities transmitting or maintaining protected data in an electronic, paper or oral form with respect to the rights of individuals who are the subject of protected health information; and (2) establish procedures for (a) the exercise of those individuals’ rights, (b) the uses and disclosure of protected health information by the covered entity, and (c) the methods permissible for de-identification of health information. The final rule had an effective date of April 14, 2001 and a compliance date of April 14, 2003. The final regulation for the HIPAA security standards was issued by HHS on February 20, 2003 with a compliance date of April 21, 2005.
      We are not a “covered entity” under the HIPAA Standards for Privacy of Individually Identifiable Health Information (also known as the HIPAA Privacy Rule). We receive identifiable health information from various sources, including from investigators on research studies who are covered entities or who are employed by covered entities. In order for covered entities to disclose identifiable health information to us for research purposes, there must be an applicable permission from the research participant or an exception under the HIPAA Privacy Rule. Depending on the facts, the possible permissions include where a research participant signs an authorization for research; an institutional review board waives the authorization requirement; the review of the information is conducted under specific conditions preparatory to research or with respect to decedents or other exception; or the information is stripped of direct identifiers and is disclosed to us pursuant to a limited data set agreement. Covered entities may also provide “deidentified” health information to us. Based on our communications with our investigators and other covered entities from whom we receive identifiable health information, we believe that we will continue to be able to obtain such information, consistent with requirements of the HIPAA Privacy Rule. However, if the covered entities do not understand the permissions for disclosure of information for research purposes, it is possible that they could object to providing identifiable health information to us, which could have an adverse effect on our ability to obtain such information in a timely manner for our business operations relating to research.
      The impact of such legislation and regulations relating to identifiable health information in the United States cannot be predicted. Other countries have or are in the process of putting privacy laws into place affecting similar areas of our business. For instance, the Directive applies standards for the protection of all personal data, not just health information, in the EU and requires the EU member states to enact national laws implementing the Directive. Such legislation or regulations could materially affect our business.

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      Various aspects of the United States Medicare program may also apply to certain drug and device research and marketing practices. In 1977, Congress adopted the Medicare and Medicaid Anti-Fraud and Abuse Amendments of 1977, or the Anti-Fraud and Abuse Law, which have been strengthened by subsequent amendments and the creation of the Office of Inspector General, or OIG, to enforce compliance with the statute, as amended. The Anti-Fraud and Abuse Law prohibits the knowing and willful offer, payment, solicitation, or receipt of any remuneration in any form as an inducement or reward for either the referral of patients or the arranging for reimbursable services. For example, the Anti-Fraud and Abuse Law prohibits the use of research grants or clinical trials if the purpose is to induce the purchase or prescription of products or services paid for by Medicare or Medicaid, rather than the collection of research data. A violation of the statute may result in criminal and/or civil penalties, including exclusion from the Medicare program, even if no criminal prosecution is initiated.
      HHS has issued regulations from time to time setting forth so-called “safe harbors,” which would protect certain limited types of arrangements from prosecution under the statute. To date, twenty-one final safe harbors have been developed. Failure to comply with each element of a particular safe harbor does not mean that an arrangement is per se in violation of the Anti-Fraud and Abuse Law. Nevertheless, if an arrangement implicates the Anti-Fraud and Abuse Law and no safe harbor is available, we risk greater scrutiny from OIG and, potentially, civil and/or criminal sanctions. Federal law also provides for minimum periods of exclusion from federal and state healthcare programs for certain offenses and frauds.
      In addition to the Anti-Fraud and Abuse Law, the federal Civil False Claims Act may apply to certain drug and device research and marketing practices. The Civil False Claims Act prohibits knowingly presenting or causing to be presented a false, fictitious or fraudulent claim for payment to the United States. Actions under the Civil False Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of the Civil False Claims Act can result in significant monetary penalties. The federal government is using the Civil False Claims Act, and the threat of significant liability, in its investigations of healthcare providers, suppliers and drug and device manufacturers throughout the country for a wide variety of drug and device marketing and research practices, and has obtained multi-million dollar settlements. The government may continue to devote substantial resources toward investigating healthcare providers’, suppliers’ and drug and device manufacturers’ compliance with the Civil False Claims Act and other fraud and abuse laws.
Properties
      As of January 31, 2005, we had approximately 105 offices located in 50 countries. Our executive headquarters is located adjacent to Research Triangle Park, North Carolina. We maintain substantial offices serving our Product Development Group in Durham, North Carolina; Kansas City, Missouri; Smyrna, Georgia; Bracknell, England; Irene, South Africa; Tokyo, Japan; Bangalore, India and Singapore. We also maintain substantial offices serving our Commercial Services Group in Parsippany, New Jersey; Falls Church, Virginia; Hawthorne, New York; Bracknell, England and Tokyo, Japan. We own facilities that serve our Product Development Group in Lenexa, Kansas; Kansas City, Missouri; Riccarton, Scotland; Bathgate, Scotland; Glasgow, Scotland; Livingston, Scotland and Freiburg, Germany. We also own a facility in Gotenba City, Japan, which is subject to a mortgage, that serves our Product Development and Commercial Services Groups. All of our other offices are leased. We believe that our facilities are adequate for our operations and that suitable additional space will be available when needed.
Legal Proceedings
      On January 22, 2002, Federal Insurance Company, or Federal, and Chubb Custom Insurance Company, or Chubb, filed suit against Quintiles, Quintiles Pacific, Inc. and Quintiles Laboratories Limited, three of our subsidiaries, in the United States District Court for the Northern District of Georgia. In the suit, Chubb, Quintiles’ primary commercial general liability carrier for coverage years 2000-2001 and 2001-2002, and Federal, Quintiles’ excess liability carrier for coverage years 2000-2001 and 2001-2002, seek to rescind the policies issued to Quintiles based on an alleged misrepresentation by Quintiles on the policy application. Alternatively, Chubb and Federal seek a declaratory judgment that there is no coverage

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under the policies for some or all of the claims asserted against Quintiles and its subsidiaries in a class action lawsuit that was settled earlier this year involving an Alzheimer’s study and, if one or more of such claims is determined to be covered, Chubb and Federal request an allocation of the defense costs between the claims they contend are covered and non-covered claims. Quintiles has filed an answer with counterclaims against Federal and Chubb in response to their complaint. Additionally, Quintiles has amended its pleadings to add AON Risk Services, or AON, as a counterclaim defendant, as an alternative to its position that Federal and Chubb are liable under the policies. In order to preserve its rights, on March 27, 2003, Quintiles also filed a separate action against AON in the United States District Court for the Middle District of North Carolina. Quintiles signed a settlement agreement with Federal and Chubb, which did not result in Quintiles making any payments. The case against Quintiles by Federal and Chubb was dismissed on December 30, 2004. Quintiles and AON also have agreed to a settlement in principle, which does not result in Quintiles making any payments.
      On June 13, 2003, ENVOY and Federal filed suit against Quintiles in the United States District Court for the Middle District of Tennessee. One or both plaintiffs in this case have alleged claims for breach of contract, contractual subrogation, equitable subrogation, and equitable contribution. The plaintiffs reached settlement in principle, in the amount of $11.0 million, of the case pending in the same court captioned In Re Envoy Corporation Securities Litigation, Case No. 3-98-0760, or the Envoy Securities Litigation. The plaintiffs claim that Quintiles is responsible for payment of the settlement amount and associated fees and costs in the Envoy Securities Litigation based on merger and settlement agreements between WebMD, ENVOY and Quintiles. Quintiles has filed a motion to dismiss the suit, and the plaintiffs have filed motions for summary judgment. These motions are pending before the court. All parties have agreed to a stay of discovery. We believe that the allegations made by ENVOY and Federal are without merit and intend to defend the case vigorously.
      On June 28, 2004, ML Laboratories PLC, or ML, filed a request to the International Chamber of Commerce seeking arbitration in connection with a contract dispute with Novex Pharma Limited, or Novex, one of our subsidiaries. This claim relates to a contract entered into by Novex with ML for the marketing and sales promotion of ML’s medical device product known as Adept, a solution used for the treatment and prevention of adhesions in abdominal surgery. ML’s claim alleges breach of contract by Novex by failing to provide an adequate United Kingdom sales force, failing to implement marketing efforts in European countries as required by the contract, and repudiatory breach of the contract. The claim by ML is for damages of £55.1 million (approximately $100.5 million). On December 17, 2004, Novex filed an answer and counterclaim asserting breach of contract. We believe that the allegations made by ML are without merit and intend to defend the case vigorously.
      On May 26, 2000, Quintiles completed the sale of its electronic data interchange unit, ENVOY, to Healtheon/ WebMD Corp., which subsequently changed its name to WebMD. Prior to the sale, ENVOY transferred its informatics subsidiary, Synergy Health Care, Inc., to Quintiles. Quintiles received $400 million in cash and 35 million shares of WebMD common stock in exchange for its entire interest in ENVOY and a warrant to acquire 10 million shares of Quintiles’ common stock at $40 per share, exercisable for four years. Quintiles recorded an extraordinary gain on the sale of $436.3 million, net of estimated taxes of $184.7 million. Because the original acquisition of ENVOY qualified as a tax-free reorganization, Quintiles’ tax basis in the acquisition was allowed to be determined by substituting the tax basis of the previous shareholders of ENVOY. However, when Quintiles sold ENVOY to WebMD during 2000, the tax basis of the previous shareholders was not available to Quintiles since ENVOY had been a publicly traded corporation at the time of the original acquisition. Therefore, Quintiles had to estimate its tax basis in ENVOY by reviewing financial statements, tax returns and other public documents which were available to Quintiles at that time. In September 2001, Quintiles received the results of a tax basis study completed by its external tax advisors, which was prepared so that Quintiles could prepare and file its 2000 United States Corporate income tax return. Using the tax basis determined in that study, income taxes from the sale totaled approximately $42.7 million, or approximately $142 million less than the estimate previously used to determine the extraordinary gain on the sale. This resulted in an increase of $142 million in the extraordinary gain on the sale of ENVOY. In January 2004, Quintiles received a

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communication from the Internal Revenue Service proposing an increase in its income taxes owed for 2000 by approximately $153.1 million. After further discussions, the Internal Revenue Service revised and reissued its prior communication, reducing the proposed assessment to $84.6 million. The increase relates to the Internal Revenue Service challenging Quintiles’ method for determining the basis it applied to the sale of ENVOY. Quintiles is contesting the proposed increase and is presently in the appeals process with the Internal Revenue Service.
      Quintiles is also party to other legal proceedings incidental to its business. While Quintiles currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on its consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations for the period in which the ruling occurs.

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MANAGEMENT
Directors and Executive Officers of the Registrant
      Set forth below is certain information with respect to each of our executive officers and directors. There are no family relationships between any of our directors or executive officers. Each of our directors holds office until their respective successors are elected and qualified or until their earlier resignation or removal. Each of our directors also serves as a director of Pharma Services and Quintiles.
                     
            First Year
            Elected
Name   Position with Company   Age   Director
             
Dennis B. Gillings, Ph.D. 
  Executive Chairman, Chief Executive Officer and Director     60       1982  
John D. Ratliff
  Executive Vice President and Chief Financial Officer     45       N/A  
John S. Russell
  Executive Vice President and Corporate Secretary     50       N/A  
Richard M. Cashin, Jr. 
  Director     51       2003  
Clateo Castellini(3)
  Director     69       2004  
Jonathan J. Coslet(1)(2)
  Director     40       2004  
Jack M. Greenberg(1)(2)
  Director     62       2004  
Robert A. Ingram(2)(3)
  Director     62       2004  
S. Iswaran(2)
  Director     42       2003  
Jacques Nasser(2)
  Director     58       2003  
James S. Rubin(1)(3)
  Director     37       2003  
 
(1)  Member of Audit Committee
 
(2)  Member of Compensation and Nominations Committee
 
(3)  Member of Quality/ Regulatory Committee
      Our Board of Directors and the committees of our Board of Directors are comprised of the same individuals that comprise each of Pharma Services’ and Quintiles’ Boards of Directors and the committees of their respective Board of Directors. The composition of all other Boards of Directors and committees of other Quintiles’ or Pharma Services’ subsidiaries are determined by the Board of Directors of Pharma Services, provided that One Equity has the right to be represented on all such committees.
      Set forth below is a brief description of the business experience of each of our executive officers and directors.
      Dennis B. Gillings, Ph.D. has served as the Executive Chairman and Chief Executive Officer, as well as a Director of each of Quintiles, Pharma Services and Intermediate Holding, since the Pharma Services transaction. Dr. Gillings began providing statistical consulting and data management services to pharmaceutical customers in 1974 during his tenure as professor of biostatistics at the University of North Carolina at Chapel Hill. Quintiles arose from these consulting services and was founded by Dr. Gillings in 1982. Dr. Gillings also has served as the Chairman of Quintiles’ Board of Directors since its inception and served as Quintiles’ Chief Executive Officer from its inception until April 2001. Dr. Gillings currently oversees Quintiles’ corporate strategic planning, as chair of its strategy committee, and is active in the continued international expansion of Quintiles, particularly in Japan and the Asia-Pacific region. Dr. Gillings serves on several other Boards and councils, including ICAgen, Inc., the UNC School of Public Health Dean’s Advisory Council, the Graduate Education Advancement Board of UNC, the North Carolina Institute of Medicine and the UNC Health Care Systems. He formerly served as the founding Chairman of the Association of Clinical Research Organizations, a Washington-based trade group formed in 2002. Dr. Gillings received a diploma in Mathematical Statistics from Cambridge University in 1967

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and a Ph.D. in Mathematics from the University of Exeter, England, in 1972. He served for more than 15 years as a professor at the University of North Carolina at Chapel Hill and received the Honorary Degree of Doctor of Science from the University in May 2001.
      John D. Ratliff has served as the Executive Vice President and Chief Financial Officer of each of Quintiles, Pharma Services and Intermediate Holding since June 2004. He joined Acterna Corporation, a global communications equipment company, in June 2000 and served as its Corporate Vice President and Chief Financial Officer from January 2002 through October 2003. In May 2003, Acterna and its domestic subsidiaries commenced a prearranged bankruptcy and emerged five months later as a privately held company. Prior to joining Acterna, Mr. Ratliff held several senior executive positions over 19 years at IBM, including most recently, Vice President of Finance and Planning, Personal Systems Group, Vice President of Finance and Planning, Latin America and IBM Assistant Controller. Mr. Ratliff received his Bachelor of Industrial and Systems Engineering from Georgia Institute of Technology and a Master of Business Administration from Duke University.
      John S. Russell has served as the Executive Vice President, General Counsel and Chief Administrative Officer of Quintiles and Executive Vice President and Corporate Secretary of each of Pharma Services and Intermediate Holding since the Pharma Services transaction. Prior to the Pharma Services transaction, Mr. Russell had served as Quintiles’ General Counsel since 1998. Mr. Russell’s duties include acting as General Counsel, Board Secretary and manager of global Quality Assurance and Regulatory Matters as well as Government Relations. Previously, he also served as Quintiles’ Head of Global Human Resources. Prior to joining Quintiles in 1998, Mr. Russell practiced law for 12 years in the Research Triangle Park area of North Carolina, concentrating in the creation and acquisition of high technology and life sciences companies, and worked for four years at Houghton Mifflin Company in New York. He has served as a director of public and private companies and as founding Board Secretary of the Association of Clinical Research Organizations in Washington, D.C. He also serves on the Dean’s Advisory Council for the UNC School of Public Health. Mr. Russell holds degrees from the University of North Carolina at Chapel Hill (B.A., 1977), Columbia University (M.A., 1978), and Harvard Law School (J.D., 1985).
      Richard M. Cashin, Jr. has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since the Pharma Services transaction. Mr. Cashin is the Managing Partner of One Equity. One Equity manages $2.0 billion of investments and commitments. Prior to joining One Equity, Mr. Cashin was at Citicorp Venture Capital from 1980 to 2000 (President 1994 — 2000), where he led investments in approximately 100 companies. Mr. Cashin serves on the Board of Directors of Titan International, Inc., Remy International Inc. and Fairchild Semiconductor International Inc. Mr. Cashin received his BA from Harvard University and his MBA from Harvard Business School.
      Clateo Castellini has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since January 2004. Mr. Castellini served as the Chairman, President and CEO of Becton, Dickinson and Company from 1994 until 1999 and also served as the Chairman of its Board of Directors from 1999 until 2003 and continues to serve as Director Emeritus. Prior to joining Becton, Dickinson and Company in 1978, Mr. Castellini served in various management positions at Dow-Lepetit Pharmaceuticals, a subsidiary of the Dow Chemical Company. Mr. Castellini has also served as a director for Bestfoods, Inc., a leading manufacturer of food products in the United States and Canada, from 1997 until 1999 and currently serves on the Board of Directors of A-Bio Pharma Pte. Ltd, a biologics contract manufacturer located in Singapore, and EDB and A-Bio, two other companies located in Singapore. Mr. Castellini received a degree from Bocconi University in Milan, Italy and an MBA from Harvard Business School.
      Jonathan J. Coslet has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since the Pharma Services transaction. Mr. Coslet is a Senior Partner of TPG, responsible for the firm’s generalist and healthcare investment activities. Mr. Coslet is also a member of the firm’s Investment Committee and Management Committee. Prior to joining TPG in 1993, Mr. Coslet was in the Investment Banking department of Donaldson, Lufkin & Jenrette, specializing in leveraged acquisitions and high yield finance from 1991 to 1993. From 1987 to 1989, Mr. Coslet worked at Drexel Burnham Lambert.

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Mr. Coslet serves on the Boards of Directors of Oxford Health Plans, Inc., Petco Animal Supplies, Inc., Endurance Specialty Holdings Ltd. and J.Crew Group, Inc. Mr. Coslet received his MBA from Harvard Graduate School of Business Administration in 1991, where he was a Baker Scholar and a Loeb Fellow. Mr. Coslet received his Bachelor of Science in Economics (Finance) from the University of Pennsylvania Wharton School, where he was Valedictorian, summa cum laude, a Gordon Fellow and a Steur Fellow.
      Jack M. Greenberg has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since January 2004. At the end of 2002, Mr. Greenberg retired as Chairman and Chief Executive Officer of McDonald’s Corporation. Mr. Greenberg had served as McDonald’s Chairman since May 1999 and its Chief Executive Officer since August 1998. Mr. Greenberg served as McDonald’s President from August 1998 to May 1999, and as its Vice-Chairman from December 1991 to 1998. Mr. Greenberg also served as Chairman (from October 1996) and Chief Executive Officer (from July 1997) of McDonald’s USA, a division of McDonald’s Corporation, until August 1998. Mr. Greenberg is a member of the American Institute of Certified Public Accountants, the Illinois CPA Society and the Chicago Bar Association. Mr. Greenberg is a director of The Allstate Corporation, Abbott Laboratories, First Data Corporation, Hasbro, Inc. and Manpower, Inc. Mr. Greenberg is also a member of the board of trustees of Ronald McDonald House Charities, DePaul University, where he previously served as Chairman, the Field Museum, the Chicago Symphony Orchestra and the Institute of International Education. Mr. Greenberg is a graduate of DePaul University’s School of Commerce and School of Law.
      Robert A. Ingram has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since February 2004. Mr. Ingram has been the Vice Chairman of Pharmaceuticals of GlaxoSmithKline plc since January 2003. Mr. Ingram was the Chief Operating Officer and President, Pharmaceutical Operations of GlaxoSmithKline plc from January 2001 to January 2003. Mr. Ingram was Chief Executive of Glaxo Wellcome plc from October 1997 to December 2000 and Chairman of Glaxo Wellcome Inc., Glaxo Wellcome plc’s United States subsidiary, from January 1999 to December 2000. Mr. Ingram was Chairman, President and Chief Executive Officer of Glaxo Wellcome plc from October 1997 to January 1999. Mr. Ingram serves on the Board of Directors of Edwards Life Sciences, Lowe’s Companies, Inc., Misys plc, Nortel Networks, OSI Pharmaceuticals, Valent Pharmaceuticals International and Wachovia Corporation. Mr. Ingram received his Bachelor of Science in Business Administration from Eastern Illinois University.
      S. Iswaran has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since November 2003. Mr. Iswaran is the Managing Director at Temasek. Mr. Iswaran was previously Director (Strategic Development) at Singapore Technologies Pte Ltd. Prior to that, Mr. Iswaran was Director for Trade in the Ministry of Trade & Industry. Mr. Iswaran is a Member of Parliament of the West Coast GRC of Singapore. Mr. Iswaran serves on the Board of Directors of Sunningdale Precision Industries Ltd., Hyflux Ltd and SciGen Ltd. Mr. Iswaran graduated with a Bachelor of Economics (First Class Honours) from the University of Adelaide, Australia in 1986 and a Master of Public Administration from Harvard University in 1995.
      Jacques Nasser has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since September 2003. Mr. Nasser is a Senior Partner with One Equity and also serves as the Non-Executive Chairman of Polaroid Corporation, the instant-imaging company based in Waltham, Mass., which was acquired by an affiliate of One Equity in July 2002 following Polaroid’s voluntary bankruptcy filing in 2001. Mr. Nasser also serves on the International Advisory Board of Allianz AG and on the Board of Directors of News Corporation’s British Sky Broadcasting Group and Brambles Industries Ltd. Prior to joining One Equity, Mr. Nasser served as the President and Chief Executive Officer of Ford Motor Company, Inc. from January 1999 until October 2001 and served as a member of Ford’s Board of Directors from 1998 until 2001. Mr. Nasser’s 33-year career with Ford covered a variety of positions and assignments including senior leadership responsibilities in Europe, Australia, Asia and South America. Mr. Nasser also oversaw the growth and acquisition of Jaguar, Aston Martin, Volvo, Land Rover and Hertz. Mr. Nasser holds an honorary Doctorate and a Business degree from the Royal Melbourne Institute of Technology.

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      James S. Rubin has served as a Director of each of Quintiles, Pharma Services and Intermediate Holding since September 2003. Mr. Rubin is a Partner with One Equity. Prior to joining One Equity, Mr. Rubin was a Vice President with Allen & Company, Incorporated, a New York investment bank specializing in media and entertainment transactions and advisory work. From 1996 to 1998, he held a number of senior positions with the Federal Communications Commission under Chairman Reed Hundt, including Executive Director of the Education Technology Task Force and General Counsel to the Chief of the Wireless Bureau. Mr. Rubin received his Bachelor of Arts in History from Harvard University and received his Juris Doctor from Yale Law School.
Quintiles
      The following table sets forth information about Quintiles’ executive officers, their ages and positions.
             
Name   Age   Position
         
Dennis B. Gillings, Ph.D. 
    60     Executive Chairman, Chief Executive Officer and Director
John D. Ratliff
    45     Executive Vice President and Chief Financial Officer
John S. Russell
    50     Executive Vice President, General Counsel and Chief Administrative Officer
Ronald J. Wooten
    45     Executive Vice President, Corporate
Oppel Greeff, M.D.
    56     President and CEO, AAA Region
Michael Mortimer
    44     Executive Vice President, Global Human Resources
      Set forth below is a brief description of the business experience of each of these executive officers, other than Dr. Gillings and Messrs. Ratliff and Russell, each of whom is previously described.
      Ronald J. Wooten has served as the Executive Vice President, Corporate Development of Quintiles since June 2003. Mr. Wooten joined Quintiles in July 2000 as Senior Vice President, Finance to manage the formation of the PharmaBio Development Group and to contribute to the execution of its merger and acquisition and corporate finance strategies. Mr. Wooten’s previous experience includes nine years with First Union Securities, now Wachovia Securities, Inc., where Mr. Wooten most recently served as a Managing Director in Investment Banking. His capital markets and corporate finance experience includes mergers and acquisitions, public and private equity finance and fixed income advisory. Mr. Wooten earned his Bachelors degree in Chemistry from the University of North Carolina at Chapel Hill and a Masters degree in Finance from Boston University.
      Oppel Greeff, M.D. has served as Quintiles’ President and CEO, AAA Region since 2004. Prior to his current position, Dr. Greeff worked in various capacities within our Africa-India region. Before joining Quintiles, Dr. Greeff founded or co-founded several corporations, including Clindepharm International, which he sold to Quintiles in 1997, and PharmaNet, Inc., a retail pharmacy franchise. Dr. Greeff received an M.D. in Psychiatry at the University of Natal and received his MpharmMed and MBChB degrees from the University of Pretoria. Dr. Greeff was elected a Fellow of the Faculty of Pharmaceutical Medicine of the Royal Colleges of Physicians of the United Kingdom in 1997.
      Michael Mortimer has served as Quintiles’ Executive Vice President, Global Human Resources since July 2003 and began serving as an executive officer as of February 9, 2005. Mr. Mortimer’s previous experience includes ten years at Charles Schwab Corp., where he was Senior Vice President of Human Resources for the company’s international and United States domestic retail organizations. Prior to joining Charles Schwab, Mr. Mortimer began his human resources career in 1986 with United Telecommunications, a division of GTE that later became Sprint Corporation. Mr. Mortimer received a Bachelors degree in Behavioral Sciences from Ohio State University.
      Dr. Gillings is also the Executive Chairman and Chief Executive Officer of Pharma Services and Intermediate Holding and Messrs. Ratliff and Russell are also executive officers of Pharma Services and Intermediate Holding. The compensation described below is paid to each of Dr. Gillings and Messrs. Ratliff and Russell in connection with their services as executive officers of each of Quintiles, Pharma Services and Intermediate Holding. All compensation has been, and will be, paid by Quintiles.

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Nomination of Directors
      Pharma Services entered into a stockholders agreement in connection with the Pharma Services transaction that requires each stockholder who is party to that agreement to vote his/her/its respective shares of common stock of Pharma Services in favor of ten nominees to the Board of Directors of Pharma Services. The stockholders agreement also provides that the constituents on our Board of Directors and the committees thereof are the same as Pharma Services. Each stockholder has agreed to vote all shares for the following directors: (i) one individual to be designated by Dr. Gillings, who is currently Dr. Gillings; (ii) three individuals to be designated by One Equity, who are currently Messrs. Cashin, Nasser and Rubin; (iii) one member of management who shall be the chief financial officer until a chief executive officer (other than Dr. Gillings) or a new chief operating officer is hired, which seat is currently vacant; (iv) two individuals who are not affiliates or associates of any stockholder or employee of Pharma Services or any of its subsidiaries to be designated by the Compensation and Nominations Committee of the Board of Directors, who are currently Messrs. Greenberg and Ingram; (v) two individuals to be designated by Temasek, who are currently Messrs. Iswaran and Castellini; and (vi) one individual to be designated by TPG, who is currently Mr. Coslet. In addition, the Pharma Services Plan requires each holder of shares of Pharma Services common stock issued under the Pharma Services Plan to vote in the election of directors as directed by the Pharma Services Board of Directors, which shall be consistent with the provisions of the stockholders agreement. The rollover agreements entered by certain of our executive officers (among others) in connection with the Pharma Services transaction include similar provisions.
      Our Board has determined that Mr. Greenberg is an independent director who qualifies as an audit committee financial expert, as that term is defined in Item 401(h) of Regulation S-K. The Board also has determined that Messrs. Rubin and Coslet, who serve with Mr. Greenberg on the Audit Committee, also qualify as audit committee financial experts. As to Messrs. Rubin and Coslet, who serve as Board representatives for One Equity and TPG, respectively, the Board made no determination of their independence and without that determination, they should not be assumed to be independent.
Code of Ethics
      Our executive officers are subject to a code of ethics that complies with standards mandated by the Sarbanes-Oxley Act of 2002. The complete code of ethics is available on Quintiles’ website at www.quintiles.com. At any time it is not available on Quintiles’ website, Quintiles will provide a copy upon written request made to its Corporate Communication Department, at 4709 Creekstone Drive, Suite 200, Durham, North Carolina 27703-8411. Information on Quintiles’ website is not part of this prospectus. If we amend or grant any waiver from a provision of our code of ethics that applies to our executive officers, we will publicly disclose such amendment or waiver as required by applicable law, including by posting such amendment or waiver on Quintiles’ website at www.quintiles.com or by filing a Current Report on Form 8-K.

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Executive Compensation
      The following table shows the annual and long-term compensation paid to, or accrued by Quintiles for, its Chief Executive Officer, the next four most highly compensated executive officers serving at the end of the 2004 fiscal year and its former Chief Financial Officer (collectively, the “named executive officers”) for services rendered to Quintiles, Pharma Services and Intermediate Holding during the fiscal years indicated. Each of Dr. Gillings and Messrs. Ratliff and Russell also serves as an executive officer of Pharma Services and Quintiles, but the compensation referenced above is for service to all three companies and is not duplicated as a result of their service to such other companies.
Summary Compensation Table
                                                                   
    Annual Compensation   Long Term Compensation    
             
            Number of        
            Shares of        
            Common        
            Stock        
            Underlying        
        Restricted   Options        
Name and       Other Annual   Stock       Pharma   All Other
Principal Position   Year   Salary   Bonus   Compensation   Awards   Quintiles(1)   Services   Compensation
                                 
Dennis B. Gillings(2)
    2004     $ 1,000,000     $ 650,000     $ 81,380 (3)   $                 $ 503,549 (4)
  Executive Chairman and     2003       706,061       0       (5)           242,692 (6)           1,705,704 (7)
  Chief Executive Officer     2002       600,000 (8)     80,067 (9)     (5)           339,733 (10)           847,422 (11)
John D. Ratliff(12)
    2004     $ 219,697     $ 125,000     $ 628,956 (13)   $ (14)           150,000     $ 405 (15)
  Executive Vice President and
Chief Financial Officer
                                                               
John S. Russell
    2004     $ 400,000 (16)   $ 150,000     $ 738 (17)   $ (18)               $ 76,206 (19)
  Executive Vice President,     2003       316,227 (20)     709,000       (5)     0 (21)     97,076       225,000       590,587 (22)
  General Counsel, and Chief     2002       283,250 (23)     24,694 (24)     394 (25)           142,743             10,058 (26)
  Administrative Officer                                                                
Ronald J. Wooten(27)
    2004     $ 400,000 (28)   $ 600,000 (29)   $ (5)   $ (30)               $ 60,565 (31)
  Executive Vice President,     2003       295,833 (32)   $ 825,000       (5)     0 (33)     54,363       225,000       252,288 (34)
  Corporate Development                                                                
Oppel Greeff(35)
    2004     $ 400,000 (36)   $ 150,000 (37)   $ 52,457 (38)   $ (39)               $ 88,842 (40)
  President and CEO, AAA     2003       333,864 (41)     690,000       51,357 (42)     0 (43)     97,076       225,000       389,053 (44)
  Region                                                                
James L. Bierman(45)
    2004     $ 275,000     $ 4,715,582     $ (5)                     $ 9,846 (46)
  Former Executive Vice     2003       371,000       92,750       (5)           97,076             595,235 (47)
  President, Chief Financial     2002       365,750       65,956       (5)           144,387             5,782 (48)
  Officer                                                                
 
  (1)  In connection with the Pharma Services transaction, all options to purchase shares of our common stock, or the Quintiles options, became fully vested and exercisable. Messrs. Russell and Wooten and Dr. Greeff were each given the opportunity to roll over the “in-the-money value” of their Quintiles options for a combination of shares of common stock and Series A Preferred Stock of Pharma Services, referred to together as the Pharma Services Units. The “in-the-money value” of such options means the excess of $14.50 over the exercise price of the option to purchase shares of Quintiles common stock, multiplied by the number of shares subject to each such option, less any applicable withholding taxes. Messrs. Russell and Wooten and Dr. Greeff elected to roll over $300,000, $232,028 and $361,569, respectively, of the “in-the-money value” of their Quintiles options to acquire Pharma Services Units. Apart from the rollover arrangements described above, in connection with the Pharma Services transaction, Dr. Gillings rolled over $1,456,768 of the value of his Quintiles options (other than those options issued to Dr. Gillings as reimbursement for the business use of his airplane) to acquire Pharma Services Units. Quintiles options held by named executive officers prior to the Pharma Services transaction and not rolled over for Pharma Services Units, including those held by Mr. Bierman, were canceled in exchange for a cash payment equal to the “in-the-money value” of such options. The value of the Quintiles options rolled over in the Pharma Services transaction is reflected in the “All Other Compensation” column for fiscal year 2003.

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  (2)  Dr. Gillings became our Executive Chairman and Chief Executive Officer effective September 25, 2003.
 
  (3)  Includes $11,664 for automobile allowance, $47,093 for country club dues and $22,623 for reimbursement of taxes incurred by Dr. Gillings as a result of Quintiles’ payment of country club dues.
 
  (4)  Includes $9,225 of matching contributions under the 401(k) Plan, $10,051 for the present value of the benefit to Dr. Gillings of the premiums we paid in prior years under a split-dollar life insurance arrangement (we paid no premiums in 2004), $3,564 of other life insurance premiums and $480,709 relating to the repurchase of shares of Series A Preferred Stock of Pharma Services for which Dr. Gillings deferred receipt in connection with his initial purchase thereof. See “Certain Relationships and Related Transactions” for additional information regarding the repurchase of such shares.
 
  (5)  Perquisites and other personal benefits received did not exceed the lesser of $50,000 or 10% of salary and bonus compensation for the named executive officer.
 
  (6)  In 2003, Dr. Gillings used his own airplane to provide extensive business-related travel services for himself and other of Quintiles’ employees. To reimburse Dr. Gillings for the business use of his airplane prior to the Pharma Services transaction, Quintiles made cash payments of $2,328,724, which is in addition to the amounts shown in the table, and on March 17, 2003, Quintiles granted Dr. Gillings Quintiles options with an aggregate Black-Scholes value of approximately $350,000. These options to purchase 49,869 shares at an exercise price of $12.27 per share are not included in the table because they were not treated as long-term compensation. To reimburse Dr. Gillings for the use of his airplane after the Pharma Services transaction, Quintiles made a cash payment of $1,096,455, which is in addition to the amounts shown in the table. The terms of our arrangement to reimburse Dr. Gillings for business use of his airplane are described in “Certain Relationships and Related Transactions.”
 
  (7)  Includes $5,625 of matching contributions under the 401(k) Plan, $105 of estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $240,884 for the present value of the benefit to Dr. Gillings of the premiums Quintiles paid in prior years under a split-dollar life insurance arrangement (Quintiles paid no premiums in 2003) (see “Certain Relationships and Related Transactions” for additional information), $2,322 of other life insurance premiums and $1,456,768 related to the cancellation of options (other than those options issued to Dr. Gillings for the use of his airplane) in connection with the Pharma Services transaction, all of which Dr. Gillings used to acquire Pharma Services Units.
 
  (8)  Includes $540,000 deferred during 2002 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
  (9)  Includes $31,875 deferred during 2002 pursuant to the Quintiles Elective Deferred Compensation Plan.
(10)  In 2002, Dr. Gillings used his own airplane to provide extensive business-related travel services for himself and other of Quintiles’ employees. To reimburse Dr. Gillings for these services, the Human Resources and Compensation Committee of Quintiles’ former Board of Directors authorized cash payments up to approximately $1.4 million, which is in addition to the amounts shown in this table. Quintiles also granted Quintiles options to Dr. Gillings with an aggregate Black-Scholes value of approximately $1.4 million in quarterly installments with an exercise price on March 31, 2002 of $17.75 per share; on June 15, 2002 of $13.09 per share; on September 16, 2002 of $9.76 per share; and on December 16, 2002 of $12.11 per share. These options to purchase 190,250 shares are not included in the table because they were not treated as long-term compensation.
 
(11)  Includes $1,688 of matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $158 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan, $843,255 for the present value of the benefit to Dr. Gillings of the premiums Quintiles paid under a split-dollar life insurance arrangement and $2,322 of other life insurance premiums.

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(12)  Mr. Ratliff became Quintiles’ Executive Vice President and Chief Financial Officer in June 2004. We have not provided information about any compensation paid to Mr. Ratliff for any periods in which he did not serve as an executive officer.
 
(13)  Includes $424,860 representing the difference between the discounted price paid by Mr. Ratliff upon his purchase of restricted shares of Pharma Services common stock pursuant to the Pharma Services Plan and the fair market value of such shares and $204,096 for reimbursement of taxes incurred by Mr. Ratliff as a result of such purchase.
 
(14)  As of December 31, 2004, Mr. Ratliff held 300,000 restricted shares of Pharma Services common stock. The aggregate fair market value of such shares at the end of fiscal year 2004 was $1,062,000. These restricted shares vest, but remain subject to repurchase, over five years from the date of purchase, with 20% of such shares vesting on each anniversary of the date of purchase. Dividends will be paid on the restricted shares on the same basis as common stock to the extent declared by the Pharma Services Board of Directors. Mr. Ratliff purchased these restricted shares at a discount to fair market value, and the aggregate value of the discount is reflected under Other Annual Compensation.
 
(15)  Includes $405 in life insurance premiums.
 
(16)  Includes $20,000 deferred during 2004 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(17)  Includes $738 for reimbursement of taxes incurred by Mr. Russell as a result of our payment of his tax preparation expenses. Perquisites and other personal benefits received by Mr. Russell did not exceed the lesser of $50,000 or 10% of his salary and bonus.
 
(18)  As of December 31, 2004, Mr. Russell held 450,000 restricted shares of Pharma Services common stock. The aggregate fair market value of such shares at the end of fiscal year 2004 was $1,593,000. These restricted shares vest, but remain subject to repurchase, over five years from the date of purchase, with 20% of such shares vesting on each anniversary of the date of purchase. Dividends will be paid on the restricted shares on the same basis as common stock to the extent declared by the Pharma Services Board of Directors.
 
(19)  Includes $9,225 in matching contributions under the 401(k) Plan, $2,392 in life insurance premiums and $64,589 relating to the repurchase of shares of Series A Preferred Stock of Pharma Services for which Mr. Russell deferred receipt in connection with his initial purchase thereof. See “Certain Relationships and Related Transactions” for additional information regarding the repurchase of such shares.
 
(20)  Includes $15,215 deferred during 2003 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(21)  Pharma Services granted Mr. Russell the right to purchase 450,000 shares of its restricted common stock at a purchase price of $0.2438, or fair market value, per share. $0 represents the dollar value at the date of the grant, less the amounts paid by Mr. Russell for the award.
 
(22)  Includes $9,000 in matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $1,225 in life insurance premiums, $579,110 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $300,000 of which Mr. Russell used to acquire Pharma Services Units and $1,147 in disqualifying dispositions under the Employee Stock Purchase Plan as a result of the Pharma Services transaction.
 
(23)  Includes $28,325 deferred during 2002 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(24)  Includes $945 deferred during 2002 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(25)  Includes $394 for reimbursement of taxes incurred by Mr. Russell as a result of our payment of his tax preparation expenses. Perquisites and other personal benefits received by Mr. Russell did not exceed the lesser of $50,000 or 10% of his salary and bonus.

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(26)  Includes $8,250 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $603 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan and $1,205 in life insurance premiums.
 
(27)  Mr. Wooten became Quintiles’ Executive Vice President, Corporate Development in June 2003. We have not provided information about any compensation paid to Mr. Wooten for any periods in which he did not serve as an executive officer.
 
(28)  Includes $40,000 deferred during 2004 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(29)  Includes approximately $120,000 deferred during 2004 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(30)  As of December 31, 2004, Mr. Wooten held 450,000 restricted shares of Pharma Services common stock. The aggregate fair market value of such shares at the end of fiscal year 2004 was $1,593,000. These restricted shares vest, but remain subject to repurchase, over five years from the date of purchase, with 20% of such shares vesting on each anniversary of the date of purchase. Dividends will be paid on the restricted shares on the same basis as common stock to the extent declared by the Pharma Services Board of Directors.
 
(31)  Includes $9,225 in matching contributions under the 401(k) Plan, $1,575 in life insurance premiums and $49,765 relating to the repurchase of shares of Series A Preferred Stock of Pharma Services for which Mr. Wooten deferred receipt in connection with his initial purchase thereof. See “Certain Relationships and Related Transactions” for additional information regarding the repurchase of such shares.
 
(32)  Includes $28,490 deferred during 2003 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(33)  Pharma Services granted Mr. Wooten the right to purchase 450,000 shares of its restricted common stock, at a purchase price of $0.2438, or fair market value, per share. $0 represents the dollar value at the date of the grant, less the amounts paid by Mr. Wooten for the award.
 
(34)  Includes $9,000 in matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $850 in life insurance premiums and $242,333 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $232,028 of which Mr. Wooten used to acquire Pharma Services Units.
 
(35)  Dr. Greeff became an executive officer in 2003. We have not provided information about any compensation paid to Dr. Greeff for any periods in which he did not serve as an executive officer.
 
(36)  Includes $55,200 deferred during 2004 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(37)  Includes approximately $12,000 deferred during 2004 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(38)  Includes $2,541 for automobile allowance, $2,021 for tax preparation, $46,152 for relocation expenses, $1,200 for the purchase of a personal computer and $543 relating to the reimbursement of taxes incurred by Dr. Greeff in connection with our payment of his tax preparation and relocation expenses.
 
(39)  As of December 31, 2004, Dr. Greeff held 450,000 restricted shares of Pharma Services common stock. The aggregate fair market value of such shares at the end of fiscal year 2004 was $1,593,000. These restricted shares vest, but remain subject to repurchase, over five years from the date of purchase, with 20% of such shares vesting on each anniversary of the date of purchase. Dividends will be paid on the restricted shares on the same basis as common stock to the extent declared by the Pharma Services Board of Directors.
 
(40)  Includes $9,225 in matching contributions under the 401(k) Plan, $2,322 in life insurance premiums and $77,295 relating to the repurchase of shares of Series A Preferred Stock of Pharma Services for which Dr. Greeff deferred receipt in connection with his initial purchase thereof. See “Certain

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Relationships and Related Transactions” for additional information regarding the repurchase of such shares.
 
(41)  Includes $44,291 deferred during 2003 pursuant to the Quintiles Elective Deferred Compensation Plan.
 
(42)  Includes $40,000 for housing allowance, $10,164 for automobile allowance, $750 for tax preparation services and $443 relating to the reimbursement of taxes incurred by Dr. Greeff in connection with our payment of his tax preparation expenses.
 
(43)  Pharma Services granted Dr. Greeff the right to purchase 450,000 shares of its restricted common stock, at a purchase price of $0.2438, or fair market value, per share. $0 represents the dollar value at the date of the grant, less the amounts paid by Dr. Greeff for the award.
 
(44)  Includes $9,000 in matching contributions under the 401(k) Plan, $105 for estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $2,322 in life insurance premiums and $377,626 related to the cancellation of Quintiles options in connection with the Pharma Services transaction, $361,569 of which Dr. Greeff used to acquire Pharma Services Units.
 
(45)  Mr. Bierman resigned as Executive Vice President and Chief Financial Officer effective June 30, 2004.
 
(46)  Includes $9,225 in matching contributions under the 401(k) Plan and $621 in life insurance premiums.
 
(47)  Includes $8,533 of matching contributions under the 401(k) Plan, $105 for the estimated forfeitures allocated under the profit sharing portion of the 401(k) Plan, $1,242 in life insurance premiums, $580,632 related to the cancellation of Quintiles options in connection with the Pharma Services transaction and $4,723 in disqualifying dispositions under the Quintiles Employee Stock Purchase Plan as a result of the Pharma Services transaction.
 
(48)  Includes $3,938 in matching contributions under the 401(k) portion of the ESOP and 401(k) Plan, $603 for the estimated value of forfeitures allocated under the ESOP portion of the ESOP and 401(k) Plan and $1,242 in life insurance premiums.

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Option Grants In Last Fiscal Year
Pharma Services Holding, Inc.
      The following table reflects the options to purchase shares of common stock of Pharma Services granted during the past fiscal year to the named executive officers pursuant to the Pharma Services Plan. No stock appreciation rights were granted to the named executive officers during 2004. Each option will terminate upon the tenth anniversary of the date of grant. However, except as provided in a grant certificate, upon the grantee’s termination of employment with Pharma Services and its subsidiaries for any reason, (1) options that are not then vested and exercisable shall immediately terminate, and (2) options that are vested and exercisable shall generally remain exercisable until, and terminate upon, the 91st day following such termination of employment (or the 366th day following such termination where such termination is by reason of death, or a disability, retirement or redundancy that is approved by the Compensation and Nominations Committee); provided, however, that if such termination is for cause, as defined in the Pharma Services Plan, or following such termination the grantee violates a restrictive covenant, as defined in the Pharma Services Plan, all options will terminate immediately.
                                                 
                    Potential
        Realizable Value
    Individual Grants   at Assumed
        Annual Rates of
    Number of       Stock Price
    Securities   Percent of Total       Appreciation for
    Underlying   Options Granted   Exercise or Base       Option Term(1)
    Options   to Employees in   Price per   Expiration    
Name   Granted   Fiscal Year(2)   Share($)   Date   5% ($)   10% ($)
                         
Dennis B. Gillings
    0       N/A       N/A       N/A       N/A       N/A  
John D. Ratliff
    150,000 (3)     29.7 %     14.50       7/16/14       0       0  
John S. Russell
    0       N/A       N/A       N/A       N/A       N/A  
Ronald J. Wooten
    0       N/A       N/A       N/A       N/A       N/A  
Oppel Greeff
    0       N/A       N/A       N/A       N/A       N/A  
James L. Bierman
    0       N/A       N/A       N/A       N/A       N/A  
 
(1)  Potential realizable value of each grant is calculated assuming that market price of the underlying security appreciates at annualized rates of 5% and 10%, respectively, over the respective term of the grant. The assumed annual rates of appreciation of 5% and 10% would result in the price of the Pharma Services common stock, which was $3.54 on December 31, 2004, increasing to $5.77 and $9.18 per share for the options expiring July 16, 2014. Because the exercise price per share of $14.50 is significantly greater than these appreciated prices, at stock price appreciation rates of both 5% and 10%, the options will have potential realizable values of zero.
 
(2)  Options to purchase an aggregate of 505,000 shares of Pharma Services common stock were granted to employees during 2004.
 
(3)  Nonqualified stock options granted July 16, 2004. Shares subject to the options granted vest over the next five years, with 20% of such shares vesting on June 14 of each year beginning June 14, 2005.

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Aggregated Option Exercises In Last Fiscal Year
and Fiscal Year End Option Values
Pharma Services Holding, Inc.
      As indicated by the following table, no options to purchase shares of Pharma Services common stock were exercised by the named executive officers during 2004. Further, none of such options were in-the-money on December 31, 2004.
                                                 
            Number of Securities   Value of Unexercised
            Underlying Unexercised   In-the-Money
    Shares       Options at FY-End   Options at FY-End(1)
    Acquired on   Value        
Name   Exercise (#)   Realized ($)   Exercisable   Unexercisable   Exercisable ($)   Unexercisable ($)
                         
Dennis B. Gillings
                                   
John D. Ratliff
                      150,000              
John S. Russell
                45,000       180,000              
Ronald J. Wooten
                45,000       180,000              
Oppel Greeff
                45,000       180,000              
James L. Bierman
                                   
 
(1)  The value of the options is based upon the difference between the exercise price and the fair market value per share on December 31, 2004, $3.54. As of December 31, 2004, shares of Pharma Services common stock were not publicly traded.
Director Compensation
      Messrs. Castellini, Greenberg and Ingram each will annually receive retainer fees of $40,000 (with an additional $1,000 for meetings attended in person and $500 for telephone meetings) for their service on the Board of Directors. Mr. Greenberg will receive an additional $10,000 retainer for his services as chair of the Audit Committee. Messrs. Ingram and Castellini will each receive $8,000 for their service as the chairs of the Compensation and Nominations Committee and Quality/ Regulatory Committee, respectively.
      In late December 2003, Pharma Services provided newly appointed directors an opportunity to purchase 50,000 shares of its common stock pursuant to the Pharma Services Plan. On January 6, 2004 and January 21, 2004, respectively, Messrs. Castellini and Greenberg each purchased 50,000 shares of Pharma Services common stock for an aggregate purchase price of $12,190. In early 2005, Pharma Services renewed its offer to Mr. Ingram to purchase 50,000 shares of its common stock pursuant to the Pharma Services Plan. On February 8, 2005, Mr. Ingram purchased 50,000 shares of Pharma Services common stock for an aggregate purchase price of $12,190, at a per share purchase price of $0.2438, representing a per share discount of approximately $3.30. In connection therewith, we also agreed to pay Mr. Ingram approximately $79,172.24 to offset potential tax liability arising in connection with his purchase.
      The restricted shares purchased pursuant to the Pharma Services Plan are subject to a right of repurchase exercisable by Pharma Services upon cessation of the director’s service on the Board. Unvested restricted shares can be repurchased, under certain circumstances, at a price equal to the price per share paid by the director. Restricted shares that have vested and shares received upon the exercise of a vested option can also be repurchased, but at a price equal to the fair market value of such shares. The restricted shares vest over a period of five years of continued service on the Board of Directors by Messrs. Castellini, Greenberg and Ingram. If Pharma Services does not exercise its repurchase right, One Equity, Temasek and TPG and their affiliates may elect to purchase the shares on the same terms. The restricted shares are also subject to certain drag-along rights in the event a majority of the common stockholders approve a sale of Pharma Services. In addition, the holder of such shares has agreed to vote his or her shares as directed by the Pharma Services Board of Directors, which, pursuant to the Pharma Services Plan, will be consistent with the terms of the Stockholders Agreement.

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      Each of our directors also serves as a director of Pharma Services and Quintiles, but the compensation referenced above is for service on all three Boards and is not duplicated as a result of their service on such other Boards.
Employment Agreements
      Quintiles has entered into employment agreements with Dr. Gillings, Messrs. Ratliff, Russell, Wooten and Bierman and Dr. Greeff. Except to the extent described below, the named executive officers are eligible to participate in any bonus, stock option, pension, insurance, medical, dental, 401(k), disability and other plans generally made available to Quintiles executives.
      Employment Agreement with Dr. Gillings. On September 25, 2003, in connection with the Pharma Services transaction, Dr. Gillings entered into a new employment agreement with Quintiles and Pharma Services to replace his then-existing employment agreement with Quintiles. The term of the new employment agreement commenced on September 25, 2003 and will continue until it is terminated pursuant to its terms. Under his new employment agreement, Dr. Gillings serves as Quintiles’ Executive Chairman and Chief Executive Officer for an annual base salary of $1.0 million, the opportunity to earn an annual cash bonus, and certain other benefits, which include, without limitation:
  •  participation in all of Quintiles’ general benefit programs and group health coverage for the respective lifetimes of Dr. Gillings and his wife;
 
  •  reimbursement for expenses, at the rate of $10,794 per hour, related to the use of the airplane owned and operated by GF Management Company, Inc., or GFM, a company controlled by Dr. Gillings, for business- related travel (estimated to be approximately 700 hours per year); and
 
  •  Quintiles’ agreement to modify, revise, and/or terminate, to the extent permitted by applicable law, certain insurance arrangements providing death benefits to Dr. Gillings and certain irrevocable life insurance trusts created by Dr. Gillings, as reasonably necessary or appropriate, in a manner that will ultimately result in death benefits no less favorable to the trusts and Dr. Gillings than those that would have been provided had such arrangements prior to September 25, 2003 remained in place without change.
Dr. Gillings serves as Executive Chairman and Chief Executive Officer of each of Pharma Services and Intermediate Holding for no additional compensation.
      The employment agreement provides for severance payments to Dr. Gillings equal to 2.9 times his then-current annual base salary and most recent annual bonus and for the continuation of benefits in the event Dr. Gillings’ employment is terminated by Dr. Gillings due to:
  •  his permanent disability;
 
  •  a material breach of the new employment agreement by Quintiles or by Pharma Services;
 
  •  his improper termination by Quintiles for cause if cause is found not to exist;
 
  •  a change in his position of Executive Chairman;
 
  •  the consummation of an underwritten public offering of common stock of Pharma Services registered under the Securities Act that, together with the consummation of any other prior underwritten public offering of Pharma Services common stock, results in gross proceeds to Pharma Services of at least $100 million in the aggregate, or a Qualified Offering; or
 
  •  a sale of securities representing at least 75% of the voting power of the common stock of Pharma Services or of all, or substantially all, of the assets of Pharma Services, each referred to as a Sale of Pharma Services, except when Dr. Gillings is one of the stockholders of Pharma Services holding a majority of the outstanding shares of Pharma Services common stock or votes in favor of such transaction;

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or by Quintiles for any reason other than:
  •  cause;
 
  •  a Qualified Offering; or
 
  •  a sale of Pharma Services, except when Dr. Gillings is not one of the stockholders of Pharma Services holding a majority of the outstanding shares of Pharma Services common stock or if he does not vote in favor of such transaction.
Any severance payments owed Dr. Gillings are to be paid in equal monthly installments during the three-year period following the termination of his employment. The continuation of benefits applies for the three-year period following the termination of his employment. If Dr. Gillings breaches any of the restrictive covenants (described immediately below) following his termination, then Quintiles is not obligated to provide him any severance benefits.
      The employment agreement includes certain restrictive covenants pursuant to which Dr. Gillings has agreed not to:
  •  compete with Quintiles, Pharma Services or any of Quintiles’ subsidiaries in any geographic area in which Quintiles or Pharma Services do business;
 
  •  solicit or interfere with Quintiles’, Pharma Services’ or any of Quintiles’ subsidiaries’ relationship with any person or entity doing business with Quintiles or them;
 
  •  offer employment to any person employed by Quintiles, Pharma Services or any of Quintiles’ subsidiaries; or
 
  •  disclose any of Quintiles’ confidential information
until the latest of (1) five years from the date of the Pharma Services transaction, (2) three years following the date he ceases to own any equity interest in Quintiles, Pharma Services, or any of Quintiles’ subsidiaries, and (3) three years from the date of his termination of employment. For so long as Quintiles requires Dr. Gillings to comply with these restrictive covenants, Quintiles is required to pay him during the non-competition period monthly amounts equal to his then-current annual base salary plus his most recent annual bonus divided by 12, provided however, that Quintiles is not required to make such payments during the three-year period following termination if Quintiles is paying Dr. Gillings any severance payments described above.
Employment Agreements With Messrs. Ratliff, Russell and Wooten and Dr. Greeff
      Our employment agreements with Messrs. Ratliff, Russell and Wooten and Dr. Greeff have substantially the same provisions. Mr. Ratliff’s employment agreement is dated June 14, 2004.
      Mr. Russell’s employment agreement is dated December 3, 1998 and was amended on October 26, 1999 and November 14, 2003. His employment arrangement also is affected by three letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of stock of Pharma Services by rolling over certain options to purchase shares of Quintiles common stock in connection with the Pharma Services transaction, and two letters dated November 3, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.
      Mr. Wooten’s employment agreement is dated July 25, 2000, was amended on November 5, 2003, and further amended on November 14, 2003. His employment arrangement also is affected by three letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of stock of Pharma Services by rolling over certain options to purchase shares of Quintiles common stock in connection with the Pharma Services transaction, and two letters dated October 30, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.
      Dr. Greeff’s employment agreement is dated February 8, 2002, and was amended on November 17, 2003, and further amended on December 6, 2003. His employment arrangement also is affected by three

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letters from Pharma Services to him, one dated September 12, 2003 relating to the acquisition of restricted stock of Pharma Services by rolling over certain options to purchase shares of Quintiles common stock in connection with the Pharma Services transaction, and two letters dated October 30, 2003 relating to the acquisition of restricted stock and certain option grants under the Pharma Services Plan.
      Messrs. Ratliff, Russell and Wooten and Dr. Greeff, pursuant to their employment agreements, are each entitled to receive a monthly base salary of $33,333.33, to participate in Quintiles’ annual cash bonus plan, and to enjoy certain other benefits, including participation in all of Quintiles’ general benefit plans.
      Each of their employment agreements extends for successive one year terms. Each agreement may be terminated by Quintiles:
  •  by 90 days’ written notice of Quintiles’ intent not to renew the agreement;
 
  •  without cause upon 90 days’ written notice (60 days’ written notice under Mr. Ratliff’s agreement); or
 
  •  immediately for cause, defined to include the executive’s death, disability, material breach of the agreement, acts or omissions that are materially harmful to Quintiles’ interests, or any other reason recognized as “cause” under applicable law.
The executive may terminate the agreement:
  •  by 90 days’ written notice of intent not to renew;
 
  •  without cause upon 90 days’ written notice (60 days’ written notice under Mr. Ratliff’s agreement); or
 
  •  because of Quintiles’ material breach which is not cured within 30 days of receiving notice of the breach from him.
      If the executive’s employment is terminated by Quintiles by notice of non-renewal or without cause or by him because of Quintiles’ failure to cure its material breach, then, subject to his compliance with the non-competition, confidential information, intellectual property, and release provisions of the agreement, the executive will be entitled to severance payments for 36 months (24 months under Mr. Ratliff’s agreement) with each monthly payment being equal to 1.55 times his monthly rate of pay at the time of termination. In addition, he may continue to participate during the severance period in all of Quintiles’ benefit plans in which he participated on the termination date, unless he becomes eligible for comparable coverage. The December 6, 2003 amendment to Dr. Greeff’s agreement provides that the severance payments and benefits also will be payable, subject to his compliance with his obligations under the employment agreement, if his employment terminates prior to September 25, 2006 because of his death or disability. The payments will be reduced by any disability payments he receives from Quintiles.
      The employment agreements for Messrs. Russell and Wooten and Dr. Greeff provided for a bonus payable as soon as practicable following the occurrence of the Pharma Services transaction. Mr. Russell and Dr. Greeff each were entitled to a $500,000 bonus and Mr. Wooten was entitled to a $200,000 bonus. We paid these bonuses on December 31, 2003.
      The employment agreements contain certain restrictive covenants which prohibit the executive during his employment and for one year following the termination of his employment (two years under Mr. Ratliff’s agreement), from competing with Quintiles or its affiliates in any geographic area in which Quintiles does business, soliciting from or interfering with Quintiles’ relationship with any person or entity who is its customer or a customer of its affiliates, and from soliciting for or offering employment to any person who had been employed by Quintiles or its affiliates during his last year of employment. In addition, each executive must refrain from disclosing Quintiles’ confidential information and trade secrets.
      The letters from Pharma Services to each of Messrs. Russell and Wooten and Dr. Greeff relating to the rollover of certain shares of Quintiles stock in connection with the Pharma Services transaction and issuances under the Pharma Service Plan include provisions that allow Pharma Services to repurchase the

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Pharma Services shares acquired under the applicable letter agreement upon the executive’s termination of employment in certain circumstances. If during the 18-month period following the Pharma Services transaction, the executive resigns his position under circumstances that would entitle him to severance payments as a result of a change in control, Pharma Services will reacquire the Pharma Services shares purchased pursuant to the applicable rollover letter in exchange for a cash payment equal to the purchase price. The Pharma Services shares acquired under the rollover letters are not otherwise subject to any vesting provisions or any reacquisition rights, although they are subject to certain transfer restrictions, drag-along rights with respect to the sale of Pharma Services in certain circumstances and voting requirements with respect to the election of members of the Pharma Services Board of Directors.
      The letters to Messrs. Russell and Wooten and Dr. Greeff relating to the purchase of restricted shares and grants of options under the Pharma Services Plan provide that the shares purchased and any shares received upon the exercise of vested options are subject to a right of repurchase exercisable by Pharma Services upon termination of the executive’s employment with Quintiles. Unvested restricted shares can be repurchased, under certain circumstances, at a price equal to the price per share paid by the employee. Restricted shares that have vested and shares received upon the exercise of a vested option also can be repurchased, but at a price equal to the fair market value of such shares. The restricted shares and options vest over a period of five years of continued employment from the date of grant.
      Letter Agreement with Mr. Bierman. Mr. Bierman was party to an employment agreement with Quintiles dated June 16, 1998 and amended on March 31, 2003. The terms of this employment agreement, except for certain restrictive covenants and indemnification provisions discussed below, were expressly superseded by the terms of a letter agreement entered between Mr. Bierman and Quintiles on January 21, 2004.
      Pursuant to the letter agreement, Mr. Bierman remained employed by Quintiles through June 30, 2004. Prior to June 30, 2004, Mr. Bierman could only be terminated by Quintiles for his breach of the letter agreement, his failure to perform or gross negligence in the performance of his duties, or his conviction of certain crimes. Mr. Bierman was to perform duties consistent with his position as Chief Financial Officer or the transition of his duties to his successor. Mr. Bierman’s employment with Quintiles terminated on June 30, 2004 pursuant to the terms of the letter agreement.
      Mr. Bierman received a lump sum signing bonus of $500,000 for his acceptance of the letter agreement. Until the termination of his employment, he was paid a base salary at the annual rate of $550,000 and he continued in Quintiles’ benefit plans. Because Mr. Bierman remained employed until June 30, 2004, he exercised his right to continue to participate in Quintiles’ group health plan following his termination for the earlier of 18 months or until he becomes entitled to comparable group coverage and he received retention bonus payments in the aggregate amount of $4,215,582.
      By the terms of the letter agreement, the indemnification provisions and restrictive covenants in Mr. Bierman’s employment agreement, dated June 16, 1998 as amended on March 31, 2003, remain in full force and effect, except that the non-competition period was extended from 12 to 13 months following the termination of his employment. Thus, for 13 months following his termination from employment, Mr. Bierman is prohibited from competing with Quintiles or its affiliates in any geographic area in which Quintiles does business, from soliciting or interfering with Quintiles’ relationship with any person or entity who is its customer or a customer of its affiliates, and from soliciting for or offering employment to any person who had been employed by Quintiles or its affiliates during the last year of his employment with Quintiles. Additionally, Mr. Bierman must refrain from disclosing Quintiles’ confidential information and trade secrets.
Compensation Committee Interlocks and Insider Participation
      On March 31, 2004, Mr. Greenberg purchased 61,525 shares of Pharma Services common stock and 285 shares of Pharma Services preferred stock for an aggregate purchase price of $300,000. The Pharma Services stock purchased by Mr. Greenberg is not subject to any vesting provisions or any reacquisition rights; however, such securities are subject to certain transfer restrictions, drag-along rights with respect to

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the sale of Pharma Services in certain circumstances and voting requirements with respect to the election of members of the Pharma Services Board of Directors.
      Following Intermediate Holding’s sale of the discount notes in March 2004, Intermediate Holding used the $119,216,381 of net proceeds to pay a dividend on its common stock to Pharma Services. Pharma Services used these funds for the repurchase of certain outstanding shares of its preferred stock on a pro rata basis and for the payment of accrued and unpaid dividends on the stock repurchased. Certain of our directors who serve on the Compensation and Nominations Committee participated in the repurchase as indicated below.
      Mr. Nasser received $108,001 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased. In addition, One Equity, an entity of which Mr. Nasser is a principal, received $46,732,521 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.
      TPG Quintiles Holdco LLC, an affiliated entity of TPG, of which Mr. Coslet is a principal, and Temasek Life Sciences Investment Private Limited, an affiliated entity of Temasek, of which Mr. Iswaran is a Managing Director, each received $19,485,648 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.
      Mr. Greenberg received $61,325 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.

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PRINCIPAL STOCKHOLDERS
Principal Stockholders
      Since we are a wholly owned subsidiary of Pharma Services, set forth below is certain information regarding the beneficial ownership of the outstanding preferred stock and common stock of Pharma Services. As of February 11, 2005, there were 410,770 shares of preferred stock and 127,535,979 shares of common stock of Pharma Services outstanding. Currently, there is only one series of preferred stock, Series A Redeemable Preferred Stock, authorized under Pharma Services’ certificate of incorporation. Shares of preferred stock have no voting rights except as required by law. Holders of shares of common stock are entitled to one vote per share in the election of directors and all other matters submitted to a vote of stockholders.
      On March 18, 2004, we completed the offering of private notes with aggregate gross proceeds of $124.7 million. We used the net proceeds of that offering to pay a dividend on our common stock to Pharma Services. Pharma Services used the funds for the repurchase of a portion of its outstanding shares of preferred stock on a pro rata basis and for the payment of accrued and unpaid dividends on the stock repurchased. Holders of shares of Pharma Services preferred stock participated in the repurchase, including certain of our directors and executive officers.
      Notwithstanding the beneficial ownership of common and preferred stock presented below, a stockholders agreement governs the stockholders’ exercise of their voting rights with respect to election of directors and certain other material events. The parties to the stockholders agreement have agreed to vote their shares to elect the Board of Directors as set forth therein. See “— Stockholders Agreement” below for a detailed description of the stockholders agreement.
      The following table sets forth certain beneficial ownership of Pharma Services of (1) each person or entity who is known to us to beneficially own more than 5% of Pharma Services common or preferred stock, (2) each of our named executive officers, (3) each of our directors and (4) all of our directors and executive officers, in each case as of February 11, 2005. Our directors are identical to those of Pharma Services and of Quintiles, and certain of our executive officers also serve as the executive officers of Pharma Services and Quintiles. Beneficial ownership has been determined in accordance with the applicable rules and regulations of the SEC, which generally require inclusion of shares over which a person has voting or investment power. Share ownership in each case includes shares that may be acquired within sixty days through the exercise of any options or other rights. Except as otherwise indicated, the address for each of the named individuals is 4709 Creekstone Drive, Riverbirch Building, Suite 200, Durham, North Carolina 27703.
                                 
    Common Stock   Preferred Stock
    (Voting)   (Non-Voting)
         
    Number       Number    
    of       of    
    Shares   Percent(1)   Shares   Percent(2)
                 
One Equity Partners LLC(3)
    45,416,357       35.61 %     165,097       40.19 %
Temasek Holdings (Private) Limited(4)
    18,457,752       14.47 %     67,097       16.33 %
TPG Advisors III, Inc.(5)
    18,457,752       14.47 %     67,097       16.33 %
Dennis B. Gillings, Ph.D.(6)
    24,943,777       19.56 %     69,883       17.01 %
John D. Ratliff(7)
    375,000       *              
John S. Russell(8)
    556,525       *       224       *  
Oppel Greeff, M.D.(9)
    885,009       *       1,419       *  
Ronald Wooten(10)
    542,585       *       173       *  
Richard M. Cashin, Jr.(11)
    45,293,306       35.51 %     164,649       40.08 %
Clateo Castellini(12)
    111,525       *       224       *  
Jonathan J. Coslet(13)
                       
Jack M. Greenberg(14)
    111,525       *       224       *  

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    Common Stock   Preferred Stock
    (Voting)   (Non-Voting)
         
    Number       Number    
    of       of    
    Shares   Percent(1)   Shares   Percent(2)
                 
Robert A. Ingram(15)
    50,000       *              
S. Iswaran(16)
    18,457,752       14.47 %     67,097       16.33 %
Jacques Nasser(17)
    44,370,418       34.79 %     161,294       39.27 %
James S. Rubin(18)
    44,288,384       34.73 %     160,996       39.19 %
James L. Bierman
                       
All directors and current executive officers as a group (14 persons)(19)
    91,878,068       71.95 %     304,418       74.11 %
                         
 
  * Less than 1%
  (1)  The percentage amount is based on 127,535,979 shares of common stock outstanding as of February 11, 2005. This amount includes 8,528,500 shares of restricted common stock held by certain members of management and our Board of Directors under the Pharma Services Plan, which are subject to certain repurchase rights exercisable by Pharma Services.
 
  (2)  The percentage amount is based on 410,770 shares of preferred stock outstanding as of February 11, 2005.
 
  (3)  Includes 454,615 shares of common stock and 1,652 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Includes 1,025,430 shares of common stock and 3,728 shares of preferred stock held by Mr. Cashin, the Chairman of One Equity, 102,543 shares of common stock and 373 shares of preferred stock held by Mr. Nasser, a senior partner of One Equity, and 20,508 shares of common stock and 75 shares of preferred stock held by Mr. Rubin, a partner of One Equity. One Equity disclaims beneficial ownership of all shares held by Messrs. Cashin, Nasser and Rubin. The principal business address of One Equity is 320 Park Avenue, 18th Floor, New York, New York 10022.
 
  (4)  The shares of common stock and shares of preferred stock indicated as beneficially owned by Temasek are directly held by Temasek Life Sciences Investments Private Limited. The foregoing entity is affiliated with Temasek. The principal business address of Temasek and of Temasek Life Sciences Investments Private Limited is 60 B. Orchard Road #06-18, Tower 2 The Atrium Orchard Singapore 238891.
 
  (5)  The shares of common stock and shares of preferred stock indicated as beneficially owned by TPG Advisors III, Inc. are directly held by TPG Quintiles Holdco LLC. The foregoing entity is affiliated with TPG Advisors III, Inc. The principal business address of TPG Advisors III, Inc. and TPG Quintiles Holdco LLC is 301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.
 
  (6)  Includes 4,195,155 shares of common stock subject to a repurchase right exercisable by Pharma Services under certain circumstances (such restricted amount to be reduced to zero over a period of five years from the original date of issuance). Also includes 1,656 shares of preferred stock that Dr. Gillings purchased but deferred receipt. Dr. Gillings does not currently exercise voting or investment control over such preferred shares, but he could receive the shares, including full power to vote and dispose of them, in the next sixty days under certain circumstances. Also includes: (i) 39,678 shares of common stock and 144 shares of preferred stock owned by Dr. Gillings’ daughter; (ii) 713,699 shares of common stock and 2,595 shares of preferred stock owned by the Gillings Family Limited Partnership, of which Dr. Gillings and his wife are the general partners; (iii) 42,227 shares of common stock and 195 shares of preferred stock owned by the GFEF Limited Partnership, of which Dr. Gillings is the general partner; (iv) 771,027 shares of common stock and 2,806 shares of preferred stock owned by Dr. Gillings’ wife; (v) 163,556 shares of common stock and 757 shares of preferred stock owned by the Gillings Family Foundation, of which Dr. Gillings is the general partner; and (vi) 1,000,000 shares of common stock owned by the Dennis

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  B. Gillings Grantor Retained Annuity Trust, of which Dr. Gillings is trustee. Dr. Gillings shares voting and investment power over certain of these shares. Dr. Gillings disclaims beneficial ownership of all shares owned by his wife and daughter, all shares in the Gillings Family Limited Partnership, all shares owned by the Gillings Family Foundation, all shares owned by the GFEF Limited Partnership and all shares owned by the Dennis B. Gillings Grantor Retained Annuity Trust, except to the extent of his interest therein.
 
  (7)  Includes 375,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances.
 
  (8)  Includes 45,000 shares subject to presently exercisable stock options. Also includes 61,525 shares of common stock and 224 shares of preferred stock subject to repurchase rights exercisable by Pharma Services under certain circumstances through March 25, 2005. Mr. Russell has deferred receipt of the 224 shares of preferred stock and does not currently exercise voting or investment control over such shares. Mr. Russell disclaims beneficial ownership of such shares of preferred stock. Also includes 450,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances.
 
  (9)  Includes 45,000 shares subject to presently exercisable stock options. Also includes 390,009 shares of common stock and 1,419 shares of preferred stock held by The Oppel Greeff Family Trust subject to repurchase rights exercisable by Pharma Services under certain circumstances through March 25, 2005. Dr. Greeff has deferred receipt of 270 of such shares of preferred stock and does not currently exercise voting or investment control over these shares. Dr. Greeff disclaims beneficial ownership of such shares of preferred stock. Also includes 450,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances.

(10)  Includes 45,000 shares subject to presently exercisable stock options. Also includes 47,585 shares of common stock and 173 shares of preferred stock subject to repurchase rights exercisable by Pharma Services under certain circumstances through March 25, 2005. Mr. Wooten has deferred receipt of the 173 shares of preferred stock and does not currently exercise voting or investment control over these shares. Mr. Wooten disclaims beneficial ownership of such shares of preferred stock. Also includes 450,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances.
 
(11)  Includes 43,813,659 shares of common stock and 159,268 shares of preferred stock held by One Equity, of which Mr. Cashin is the Chairman. Includes 454,615 shares of common stock and 1,652 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Cashin disclaims beneficial ownership of any shares held by either One Equity or OEP Co-Investors, LLC, except to the extent of his pecuniary interest therein. Mr. Cashin’s principal business address is 320 Park Avenue, 18th Floor, New York, New York 10022.
 
(12)  Includes 50,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances. Mr. Castellini’s principal business address is Via Foletti 6, 6900 Massagno, Switzerland.
 
(13)  Mr. Coslet does not exercise voting or investment control over, and disclaims beneficial ownership of, the shares held by TPG Advisors III, Inc. Mr. Coslet’s principal business address is 301 Commerce Street, Suite 3300, Fort Worth, Texas 76102.
 
(14)  Includes 46,525 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances. Also includes 61,525 shares of common stock owned by the Greenberg Irrevocable Descendants Trust, or the Greenberg Trust, and 3,475 shares of restricted stock acquired pursuant to the Pharma Services Plan owned by the Greenberg Trust which are subject to a repurchase right exercisable by Pharma Services under certain circumstances. Mr. Greenberg disclaims beneficial ownership of the shares owned by the Greenberg Trust, except to the extent of his pecuniary interest therein. Mr. Greenberg’s principal business address is 333 W. Wacker Drive, Suite 1015, Chicago, Illinois 60606.

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(15)  Includes 50,000 shares of restricted common stock acquired pursuant to the Pharma Services Plan that are subject to a repurchase right exercisable by Pharma Services under certain circumstances. Mr. Ingram’s principal business address of Five Moore Drive, Research Triangle Park, North Carolina 27709.
 
(16)  Includes 18,457,752 shares of common stock and 67,097 shares of preferred stock held by Temasek, of which Mr. Iswaran is a Managing Director. Mr. Iswaran disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. Mr. Iswaran’s principal business address is c/o Temasek Holdings (Private) Limited, 60 B. Orchard Road #06-18, Tower 2 The Atrium Orchard Singapore 238891.
 
(17)  Includes 43,813,259 shares of common stock and 159,268 shares of preferred stock held by One Equity, of which Mr. Nasser is a senior partner. Includes 454,615 shares of common stock and 1,652 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Nasser disclaims beneficial ownership of any shares held by either One Equity or OEP Co-Investors, LLC, except to the extent of his pecuniary interest therein. Mr. Nasser’s principal business address is 100 Bloomfield Hills Parkway, Suite 175, Bloomfield Hills, Michigan 48304.
 
(18)  Includes 43,813,259 shares of common stock and 159,268 shares of preferred stock held by One Equity, of which Mr. Rubin is a partner. Includes 454,615 shares of common stock and 1,652 shares of preferred stock held by OEP Co-Investors, LLC, an entity affiliated with One Equity. Mr. Rubin disclaims beneficial ownership of any shares held by either One Equity or OEP Co-Investors, LLC, except to the extent of his pecuniary interest therein. Mr. Rubin’s principal business address is 320 Park Avenue, 18th Floor, New York, New York 10022.
 
(19)  Includes shares of restricted common stock and beneficially owned shares as described in footnotes (6)-(18). Also includes 75 shares of preferred stock, 395,508 shares of common stock, 375,000 shares of which are restricted common stock acquired pursuant to the Pharma Services Plan subject to a repurchase right exercisable by Pharma Services under certain circumstances, and 32,500 shares of common stock subject to presently exercisable stock options held by Michael Mortimer, who became an executive officer of Quintiles as of February 9, 2005.
Stockholders Agreement
      In connection with the Pharma Services transaction, Pharma Services entered into a stockholders agreement with One Equity, Dr. Gillings and his affiliates, Temasek, TPG and certain other investors who acquired equity securities of Pharma Services, dated as of the closing. Messrs. Cashin, Nasser and Rubin are parties to the stockholders agreement in their individual capacities. The stockholders agreement will terminate upon the earlier to occur of (1) a Qualifying Offering, as defined in the stockholders agreement or (2) a sale of Pharma Services.
Transfer Restrictions
      The stockholders agreement prohibits transfers of securities of Pharma Services except (1) to certain “Permitted Transferees,” (2) in a registered public offering, (3) pursuant to certain drag-along rights that require stockholders to sell all or part of their equity interest in Pharma Services to third parties along with certain sales by stockholders holding a majority of the outstanding shares of common stock or a majority of the outstanding shares of preferred stock and on the same terms, and subject to the same conditions, as such sales, (4) pursuant to certain duty of first offer requirements and tag-along rights that require a stockholder wishing to sell all or part of its equity interest in Pharma Services to first offer its shares on the same terms to Pharma Services and the other stockholders of Pharma Services who are party to the stockholders agreement, and if not purchased by Pharma Services or such stockholders, to include shares of such stockholders, at their option, in the event of a sale to a third party, and (5) on the terms, and subject to the conditions, set forth in the restricted stock purchase agreement entered into with Dr. Gillings in connection with his purchase of additional shares of Pharma Services’ outstanding common stock at the effective time of the Pharma Services transaction.

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      The stockholders agreement also restricts transfers of securities to our competitors, except pursuant to a sale of Pharma Services.
      Under the stockholders agreement, Dr. Gillings and his affiliates are permitted to enter into a bona fide pledge of preferred stock of Pharma Services to financial institutions that agree to be bound by certain provisions of the stockholders agreement.
      The stockholders agreement provides for a right to purchase additional securities allowing stockholders of Pharma Services to maintain their respective ownership percentage in Pharma Services upon certain sales of stock by Pharma Services.
Corporate Governance
      The stockholders agreement also provides that the constituents on our Board of Directors and committees thereof are the same as those of Pharma Services. In addition, as described in more detail under “Management — Nomination of Directors”, the stockholders agreement requires each stockholder to vote their respective shares of Pharma Services in favor of the ten specified nominees to the Board of Directors.
      All decision making by the Board of Directors generally requires the affirmative vote of a majority of the members of the entire Board of Directors, except that any transactions entered into between Pharma Services or any of its subsidiaries and any stockholder or affiliate or associate of any stockholder will require the affirmative vote of a majority of the Board of Directors of Pharma Services with the nominee(s) of the interested stockholder abstaining from such vote.
Registration Rights Agreement
      Pharma Services and its stockholders that are parties to the stockholders agreement are also parties to a registration rights agreement dated as of September 25, 2003. Pursuant to the registration rights agreement, at any time after the first anniversary of the registration rights agreement, the holders of a majority of the registrable securities of Pharma Services will have the right to require that Pharma Services effect an initial public offering. After the earlier of six months following the completion of an initial public offering or the date on which Pharma Services merges with a publicly held company whereby the common stock of Pharma Services is exchanged for publicly held stock or the common stock of Pharma Services otherwise becomes registered under the Exchange Act, each stockholder of Pharma Services that is a party to the registration rights agreement will be entitled to demand registration of their registrable securities under certain circumstances, and Pharma Services will be required to establish and maintain, as soon as eligible to do so, a “shelf” registration statement for sale of registrable securities by the stockholders until all registrable securities held by them have been sold or are freely transferable. In addition, in most circumstances when Pharma Services proposes (other than pursuant to a demand registration) to register any of its equity securities under the Securities Act, the stockholders that are parties to the registration rights agreement will have the opportunity to register their registrable securities on such registration statement.
Exchange Agreement
      The holders of the Pharma Services preferred stock entered into an exchange agreement pursuant to which transferees of the Series A preferred stock who are unaffiliated with the initial holders of such stock may, under certain circumstances, exchange their shares of Series A preferred stock at any time and from time to time for notes of Intermediate Holding.

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Equity Compensation Plans
      As of December 31, 2004, we do not have any compensation plans (including individual compensation arrangements) under which our equity securities are authorized for issuance. The following table summarizes information regarding compensation plans (including individual compensation arrangements) under which the equity securities of our parent company, Pharma Services, are authorized for issuance as of December 31, 2004.
                         
            Number of
            Securities
    Number of   Weighted   Remaining Available
    Securities to Be   Average Exercise   for Future Issuance
    Issued upon   Price of   Under Equity
    Exercise of   Outstanding   Compensation Plans
    Outstanding   Options,   (Excluding
    Options, Warrants   Warrants and   Securities Reflected
Plan Category   and Rights   Rights   in Column (a))
             
    (a)   (b)   (c)
Equity compensation plans approved by security holders
    3,755,000 (1)   $ 14.50       2,192,708 (2)
Equity compensation plans not approved by security holders
    N/A       N/A       N/A  
Total
    3,755,000     $ 14.50       2,192,708  
 
(1)  Includes 3,755,000 shares issuable upon exercise of outstanding options granted under the Pharma Services Plan. Does not include 8,353,500 restricted shares of Pharma Services common stock granted under the Pharma Services Plan that are issued and outstanding as of December 31, 2004.
 
(2)  As of December 31, 2004, Pharma Services has a total of 14,452,208 shares of its common stock reserved for issuance under the Pharma Services Plan, 4,817,403 shares of which are reserved for issuance as options to purchase shares of Pharma Services common stock and 9,634,805 shares of which are reserved for issuance as restricted shares. The amount shown above includes 1,062,403 shares of common stock remaining for future issuance as options under the Pharma Services Plan, assuming solely for the purposes hereof that the total number of shares reserved for issuance as options under the Pharma Services Plan is reduced by all outstanding but unexercised options, and 1,130,305 shares of common stock remaining for future issuance as restricted shares under the Pharma Services Plan.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Director Share Purchases
      In late December 2003, Pharma Services provided newly appointed directors an opportunity to purchase shares of its common and preferred stock. Effective as of March 31, 2004, Messrs. Greenberg and Castellini each purchased 61,525 shares of Pharma Services common stock and 285 shares of Pharma Services preferred stock for an aggregate purchase price of $300,000. The Pharma Services stock purchased by these directors is not subject to any vesting provisions or any reacquisition rights; however, such securities are subject to certain transfer restrictions, drag-along rights with respect to the sale of Pharma Services in certain circumstances and voting requirements with respect to the election of members of the Pharma Services Board of Directors.
Repurchase of Pharma Services Series A Preferred Stock
      Following our sale of the discount notes in March 2004, we used the $119,268,522 of net proceeds to pay a dividend on our common stock to Pharma Services. Pharma Services used these funds for the repurchase of certain outstanding shares of its Series A preferred stock on a pro rata basis and for the payment of accrued and unpaid dividends on the stock repurchased. Certain of our directors and executive officers (and executive officers of Quintiles) participated in the repurchase as indicated below.
      Dr. Gillings and his affiliates received $20,289,300 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased. Messrs. Russell, Wooten and Mortimer received $64,589, $49,765 and $20,107 of total consideration, respectively, in exchange for their shares of Pharma Services preferred stock that were repurchased. The Oppel Greeff Family Trust received $409,767 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased. Upon initial purchase in September 2003, Doctors Gillings and Greeff deferred receipt of certain of their shares of Pharma Services preferred stock and Messrs. Russell and Wooten deferred receipt of all of their shares of Pharma Services preferred stock. Amounts received with respect to deferred shares in the repurchase by these executive officers and the Oppel Greeff Family Trust, which owned deferred shares at the time of the repurchase as a result of a transfer from Dr. Greeff, are included as compensation in the Summary Compensation Table under “Management.”
      Messrs. Cashin, Nasser and Rubin received $1,082,124, $108,001 and $21,177 of total consideration, respectively, in exchange for shares of Pharma Services preferred stock that were repurchased. In addition, One Equity, an entity of which Messrs. Cashin, Nasser and Rubin are principals, received $46,732,521 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.
      TPG Quintiles Holdco LLC, an affiliated entity of TPG, of which Mr. Coslet is a principal, and Temasek Life Sciences Investment Private Limited, an affiliated entity of Temasek, of which Mr. Iswaran is a Managing Director, each received $19,485,648 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.
      Messrs. Castellini and Greenberg each received $61,325 of total consideration in exchange for shares of Pharma Services preferred stock that were repurchased.
Fee Agreements
      Pharma Services entered into agreements with GFM and certain of the other equity investors of Pharma Services, including One Equity, pursuant to which Pharma Services paid GFM, a company controlled by Dr. Gillings, and One Equity a one-time transaction fee of $5.0 million and $15.0 million, respectively, at the effective time of the Pharma Services transaction and agreed to pay GFM and such investors an annual management service fee of approximately $3.8 million, of which GFM, TPG and Cassia Fund Management Pte Ltd., an affiliate of Temasek, each receive approximately $750,000 and One Equity receives approximately $1.5 million until 2008.

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Other Transactions
      Dr. Gillings provides extensive use of his own airplane for business-related travel services for himself and other Quintiles employees. Under the terms of Dr. Gillings’ employment agreement with Quintiles, GFM, a company controlled by Dr. Gillings, will be reimbursed for business use of Dr. Gillings’ airplane on behalf of Pharma Services and its subsidiaries at an hourly rate of $10,794. For the year ended December 31, 2004, Quintiles reimbursed GFM for the business use of Dr. Gillings’ airplane with cash payments totaling approximately $7,454,000.
      As of May 16, 1996, Quintiles entered into split-dollar life insurance agreements with certain trusts created by Dr. Gillings whereby Quintiles and the trusts shared in the premium costs of certain variable and whole life insurance policies that will pay an aggregate death benefit to the trusts upon the death of Dr. Gillings or his wife, Joan Gillings, whichever occurs later. The trusts paid premiums on the policies as if each policy were a one year term life policy, and Quintiles paid the remaining premiums. On December 19, 2003, Quintiles terminated three of the six policies that were then in place and, commensurate with that, received repayment from the trusts of $7,652,126 of the cumulative premiums previously paid by Quintiles with respect to those policies. On December 23, 2003, the trusts also repaid $6,000,000 or approximately 70% of the cumulative premiums previously paid by Quintiles with respect to the remaining policies. Quintiles did not make any premium payments with respect to the remaining policies in 2003 or 2004, nor will it in the future. To the extent those arrangements remain in place, any ongoing funding obligations will be the responsibility of Dr. Gillings. Upon any surrender of a remaining policy, the liability of the related trust to Quintiles is limited to the cash value of the policy. See footnotes (4), (7) and (11) to the Summary Compensation Table under “Management” for additional information on premium payments Quintiles made under the policies.
      Quintiles uses the facilities of several buildings in South Africa owned and operated by two South African entities. Dr. Greeff serves on the Board of Directors and his trust owns 40% of the outstanding shares of stock of one of these entities. Dr. Greeff’s trust owns 40% of a 50% interest in the other entity. Quintiles leases these buildings from these entities pursuant to separate lease agreements on market standard terms. The initial term of each of the three leases is six years and four months, expiring in March 2006, three years and one month, expiring in March 2005, and five years, expiring in March 2006, respectively, and each lease is renewable for one 5-year term. Under the terms of the lease arrangements covering those facilities, Quintiles paid these entities approximately $935,102 in rent during 2004.
      In connection with his purchase of shares of Pharma Services stock in early 2004, Quintiles loaned Mr. Mortimer a net amount of $159,761, which he repaid in 2005 prior to becoming one of Quintiles’ executive officers.

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DESCRIPTION OF OTHER INDEBTEDNESS
Quintiles’ Senior Secured Credit Facility
      Summary. Quintiles’ senior secured credit agreement provides for the following:
  •  a six-year $310 million Term Loan B facility the proceeds of which were used to finance, in part, the merger and certain related costs and expenses and to refinance certain existing indebtedness of Quintiles; and
 
  •  a five-year $75 million revolving loan facility the proceeds of which will (i) be used for working capital, capital expenditures and other general corporate purposes and (ii) include sublimits to be available for letters of credit and certain foreign currency borrowings.
      Prepayments. The loans under the Term Loan B facility are required to be permanently repaid, and after the repayment in full of such loans under the Term Loan B facility, the commitments under the revolving loan facility are required to be permanently reduced, with:
  •  100% of the net cash proceeds of asset sales and dispositions, subject to certain exceptions;
 
  •  100% of the net cash proceeds of issuances of certain debt obligations, subject to certain exceptions;
 
  •  50% of the net cash proceeds from issuances of equity by Quintiles or Pharma Services, subject to certain exceptions;
 
  •  50% of annual Excess Cash Flow (as defined in the credit agreement) subject to certain exceptions; and
 
  •  100% of net insurance proceeds, subject to certain exceptions.
      The senior secured credit agreement requires us to make annual amortization payments (payable in quarterly installments) equal to 1% per annum with respect to loans under the Term Loan B facility with the remaining amount due at final maturity.
      Voluntary prepayments and commitment reductions are permitted, in whole or in part, subject to minimum prepayment or reduction requirements; provided that voluntary prepayments of certain loans (i) on a date other than the last day of the relevant interest period will be subject to the payment of customary breakage costs, if any, or (ii) prior to the second anniversary of the closing date are subject to a prepayment penalty. In connection with an amendment to its senior secured credit agreement effective in March 2005, Quintiles made an optional prepayment of $150.0 million on its outstanding Term Loan B facility. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events.”
      Interest Rates and Fees. The interest rates under the new senior secured credit agreement are calculated, at our option, at either the base rate or the Eurodollar rate, plus, in each case, a margin.
      Quintiles may elect interest periods of 1, 2, 3 or 6 months, or to the extent available to each lender with outstanding loans and/or commitments under the respective tranche of loans, 9 or 12 months, for Eurodollar loans. With respect to loans bearing interest at a London interbank offered rate or Eurodollar loans, interest is payable at the end of each interest period and, in any event, at least every 3 months for interest periods longer than 3 months. With respect to base rate loans, interest is payable quarterly on the last business day of each fiscal quarter. The calculation of interest for Eurodollar loans is on the basis of actual number of days elapsed in a year of 360 days. The calculation of interest for base rate loans is on the basis of 365 or 366 days, as the case may be, and in some circumstances, 360 days.
      For each letter of credit Quintiles issues, Quintiles is required to pay (i) a per annum participation fee equal to the margin over the Eurodollar rate for the revolving loan facility from time to time in effect plus, (ii) a per annum fronting fee equal to 0.250% on the aggregate outstanding stated amounts of such letters of credit plus, (iii) customary administrative charges. Quintiles is also required to pay a commitment fee equal to 0.5% per annum on the unutilized portion of the revolving loan facility.

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      Collateral and Guarantees. The obligations under the senior secured credit agreement are guaranteed by Pharma Services, Intermediate Holding, and all of Quintiles’ existing and future direct and indirect subsidiaries that are organized in the United States (subject to certain exceptions in the case of inactive and unrestricted subsidiaries). The loans are secured by a first-priority perfected security interest in substantially all of our assets and assets of Quintiles’ direct and indirect United States restricted subsidiaries, in each case, now owned or later acquired, including a pledge of all equity interests (subject to certain exceptions) and notes owned by Quintiles and its United States restricted subsidiaries; provided that only 65% of the voting equity interests of Quintiles’ and its domestic restricted subsidiaries’ “first-tier” non-United States subsidiaries are pledged in respect of the obligations under the senior secured credit agreement. The loans also are secured by all of the assets of Pharma Services and Intermediate Holding.
      Covenants. The senior secured credit agreement documentation contains certain customary covenants that are subject to significant exceptions restricting Quintiles’ (other than certain unrestricted subsidiaries) ability to, among other things:
  •  declare dividends or redeem or repurchase equity interests;
 
  •  prepay, redeem or purchase debt;
 
  •  incur liens and engage in sale-leaseback transactions;
 
  •  make loans and investments;
 
  •  incur additional indebtedness;
 
  •  amend or otherwise alter debt and other material agreements;
 
  •  make capital expenditures;
 
  •  engage in mergers, acquisitions and asset sales;
 
  •  transact with affiliates; and
 
  •  engage in businesses that are not related to our existing business.
The senior secured credit agreement also includes specified financial covenants, requiring Quintiles to maintain certain consolidated leverage and interest coverage ratios and limiting its ability to make capital expenditures in excess of specified amounts.
      Events of Default. Events of default, which are subject to customary grace periods and exceptions, as defined under the senior secured credit agreement include, but are not limited to:
  •  Quintiles’ failure to pay principal or interest when due;
 
  •  Quintiles’ material breach of any representation or warranty;
 
  •  covenant defaults;
 
  •  events of bankruptcy; and
 
  •  a change of control.
Quintiles’ Senior Subordinated Notes
      Summary. In connection with its acquisition by Pharma Services, Quintiles issued $450 million 10% senior subordinated notes pursuant to an indenture with Wells Fargo Bank, N.A., as trustee. Interest on the senior subordinated notes accrues at a rate of 10% per annum and is payable semiannually in arrears on April 1 and October 1, commencing on April 1, 2004. Quintiles will pay interest to those persons who were holders of record on the March 15 or September 15 immediately preceding each interest payment date. Quintiles’ senior subordinated notes will mature on October 1, 2013. Quintiles’ senior subordinated notes are guaranteed, jointly and severally, on an unsecured senior subordinated basis, by all

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of Quintiles’ existing domestic subsidiaries in addition to any future domestic subsidiaries of Quintiles and any Quintiles subsidiary that guarantees Quintiles’ or any of its domestic subsidiaries’ debt.
      Ranking. Quintiles’ senior subordinated notes are:
  •  general unsecured obligations of Quintiles;
 
  •  unconditionally guaranteed on a joint and several basis by Quintiles’ domestic subsidiaries;
 
  •  pari passu in right of payment with all other existing and future senior subordinated debt of Quintiles and the subsidiary guarantors;
 
  •  senior in right of payment to all existing and future debt of Quintiles and Quintiles’ subsidiary guarantors that is, by its terms, expressly subordinated to the senior subordinated notes or subsidiary guarantees, as applicable; and
 
  •  subordinated in right of payment to the prior payment of all existing and future senior debt of Quintiles and Quintiles’ subsidiary guarantors, including their obligations and guarantees of obligations under Quintiles’ senior secured credit agreement.
      As indebtedness of our subsidiary, Quintiles’ senior subordinated notes are structurally senior in right of payment to the exchange notes offered by this prospectus.
      Redemption. Except as set forth in the next succeeding paragraphs, Quintiles’ senior subordinated notes are not redeemable at the option of Quintiles prior to October 1, 2008. Starting on that date, Quintiles may redeem all or any portion of the senior subordinated notes, at any time or from time to time, after giving the required notice under the indenture. Quintiles’ senior subordinated notes may be redeemed at the redemption prices set forth below plus accrued and unpaid interest, if any, to the redemption date.
      The following prices are for Quintiles’ senior subordinated notes redeemed during the 12-month period commencing on October 1 of the years set forth below, and are expressed as percentages of principal amount:
         
Redemption Year   Price
     
2008
    105.000 %
2009
    103.333 %
2010
    101.667 %
2011 and thereafter
    100.000 %
      At any time prior to October 1, 2008, Quintiles’ senior subordinated notes may also be redeemed or repurchased, by or on behalf of Quintiles, in whole, or any portion thereof, at Quintiles’ option, at a price equal to 100% of the principal amount thereof plus an applicable premium equal to the excess of (A) the present value at such pre-2008 redemption date of (1) the redemption price of such note on October 1, 2008 (as set forth in the table above) plus (2) all required remaining scheduled interest payments due on such notes through October 1, 2008, computed using a discount rate equal to the Treasury Rate plus 50 basis points over (B) the principal amount of such note on such pre-2008 redemption date and accrued but unpaid interest, if any, to the date of redemption.
      In addition, from time to time prior to October 1, 2006, Quintiles may redeem up to a maximum of 40% of the aggregate principal amount of the senior subordinated notes, with the proceeds of one or more qualified equity offerings, at a redemption price equal to 110% of the principal amount thereof, plus accrued and