10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2011.

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from              to             .

Commission File Number 0-27570

PHARMACEUTICAL PRODUCT

DEVELOPMENT, INC.

(Exact name of registrant as specified in its charter)

North Carolina	56-1640186
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

929 North Front Street

Wilmington, North Carolina

(Address of principal executive offices)

28401

(Zip Code)

Registrant’s telephone number, including area code: (910) 251-0081

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

Indicate by check mark whether the registrant has submitted electronically and posted on its Corporate website every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 113,685,115 shares of common stock, par value $0.05 per share, as of October 26, 2011.

INDEX

	Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income for the Three and Nine Months Ended September  30, 2010 and 2011 (unaudited)		3
Consolidated Condensed Balance Sheets as of December 31, 2010 and September 30, 2011 (unaudited)		4
Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September  30, 2010 and 2011 (unaudited)		5
Notes to Consolidated Condensed Financial Statements (unaudited)		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
Item 3. Quantitative and Qualitative Disclosures about Market Risk		43
Item 4. Controls and Procedures		45
Part II. OTHER INFORMATION
Item 1. Legal Proceedings		46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 6. Exhibits		48
Signatures		49

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Net revenue:
Service revenue	$	339,390		$	382,873		$	1,005,006		$	1,115,237
Reimbursed revenue		25,985			32,522			77,054			91,063
Total net revenue		365,375			415,395			1,082,060			1,206,300
Direct costs		189,979			223,507			564,948			651,720
Research and development expenses		470			2,069			15,253			6,081
Selling, general and administrative expenses		102,365			107,579			327,381			322,981
Depreciation and amortization		15,726			16,821			49,877			50,504
Total operating expenses		308,540			349,976			957,459			1,031,286
Operating income		56,835			65,419			124,601			175,014
(Loss) income from equity method investment		(4,562	)		1,915			(8,351	)		15,103
Gain (loss) on investments		—			(17,703	)		2,541			(18,808	)
Other income (expense), net		877			1,069			2,358			1,129
Income from continuing operations before provision for income taxes		53,150			50,700			121,149			172,438
Provision for income taxes		15,148			15,083			41,303			54,039
Income from continuing operations		38,002			35,617			79,846			118,399
Loss from discontinued operations, net of income taxes		—			—			(3,662	)		—
Net income		38,002			35,617			76,184			118,399
Net (income) loss attributable to noncontrolling interests		—			(181	)		—			1,157
Net income attributable to shareholders	$	38,002		$	35,436		$	76,184		$	119,556
Income per common share from continuing operations:
Basic	$	0.32		$	0.31		$	0.67		$	1.04
Diluted	$	0.32		$	0.31		$	0.67		$	1.03
Basic and diluted loss per common share from discontinued operations	$	—		$	—		$	(0.03	)	$	—
Net income per common share
Basic	$	0.32		$	0.31		$	0.64		$	1.04
Diluted	$	0.32		$	0.31		$	0.64		$	1.03
Dividends declared per common share	$	0.15		$	0.15		$	0.45		$	0.45
Weighted-average number of common shares outstanding:
Basic		118,814			113,891			118,607			114,708
Dilutive effect of stock options and restricted stock		991			1,298			964			1,320
Diluted		119,805			115,189			119,571			116,028

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

3

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

(unaudited)

	December 31, 2010			September 30, 2011
Assets
Current assets:
Cash and cash equivalents	$	479,574		$	416,746
Short-term investments		79,976			63,580
Accounts receivable and unbilled services, net		435,876			505,007
Income tax receivable		12,327			17,469
Investigator advances		16,032			13,008
Prepaid expenses		24,535			25,699
Deferred tax assets		30,910			41,334
Cash held in escrow		10,304			2,288
Other current assets		44,172			17,979
Total current assets		1,133,706			1,103,110
Property and equipment, net		385,863			404,369
Goodwill		291,217			292,914
Long-term investments		78,747			—
Other investments		47,833			77,577
Intangible assets		31,444			28,207
Other assets		23,236			44,765
Total assets	$	1,992,046		$	1,950,942
Liabilities and Equity
Current liabilities:
Accounts payable	$	29,858		$	37,726
Payables to investigators		56,612			65,468
Accrued income taxes		1,918			6,064
Other accrued expenses		208,128			204,936
Unearned income		317,191			337,086
Total current liabilities		613,707			651,280
Accrued income taxes		32,924			34,924
Accrued pension liability		10,989			11,858
Deferred rent		16,411			15,285
Deferred tax liabilities		16,552			28,782
Other liabilities		10,796			8,118
Total liabilities		701,379			750,247
Redeemable noncontrolling interests		1,657			2,125
Total equity:
Shareholders’ equity:
Common stock		5,952			5,680
Paid-in capital		609,281			619,756
Retained earnings		682,160			583,411
Accumulated other comprehensive loss		(17,140	)		(17,593	)
Total shareholders’ equity		1,280,253			1,191,254
Noncontrolling interests		8,757			7,316
Total equity		1,289,010			1,198,570
Total liabilities and equity	$	1,992,046		$	1,950,942

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

4

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended September 30,
	2010			2011
Cash flows from operating activities:
Net income	$	76,184		$	118,399
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		49,791			50,504
Equity compensation expense		13,728			15,332
Loss (income) from equity investment, net of taxes		5,403			(9,712	)
Provision (benefit) for deferred income taxes		221			(4,878	)
Impairment of investments		—			18,627
Net (gain) loss on sale of investments		(3,291	)		425
Other		2,382			(1,162	)
Net change in operating assets and liabilities		24,953			(36,793	)
Net cash provided by operating activities		169,371			150,742
Cash flows from investing activities:
Purchases of property and equipment		(41,295	)		(61,703	)
Proceeds from sale of property and equipment		98			67
Proceeds from sale of business		3,464			—
Purchases of investments		(46,590	)		(1,527	)
Maturities and sales of investments		109,294			91,801
Purchases of other investments		(7,893	)		(8,017	)
Proceeds from sale of other investments		3,339			539
Net cash paid for acquisitions		(10,169	)		(7,936	)
Changes in restricted cash		3,000			7,936
Advances to related party		(7,700	)		(7,550	)
Net cash provided by investing activities		5,548			13,610
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan		11,387			31,477
Income tax benefit from exercise of stock options and disqualifying dispositions of stock		197			1,236
Cash and cash equivalents contributed to Furiex Pharmaceuticals, Inc.		(100,000	)		—
Repurchase of common stock		—			(200,000	)
Cash dividends paid		(53,423	)		(52,821	)
Net cash used in financing activities		(141,839	)		(220,108	)
Effect of exchange rate changes on cash and cash equivalents		(1,541	)		(7,072	)
Net increase (decrease) in cash and cash equivalents		31,539			(62,828	)
Cash and cash equivalents, beginning of the period		408,903			479,574
Cash and cash equivalents, end of the period	$	440,442		$	416,746

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

5

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies

The significant accounting policies followed by Pharmaceutical Product Development, Inc. and its subsidiaries (collectively, the “Company”) for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. The Company prepared these unaudited consolidated condensed financial statements in accordance with Rule 10-01 of Regulation S-X and, in management’s opinion, has included all adjustments of a normal recurring nature necessary for a fair presentation. The accompanying consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. The results of operations for the three-month and nine-month periods ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year or any other period. The amounts in the December 31, 2010 consolidated condensed balance sheet are derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

On June 14, 2010, the Company spun off its compound partnering business into a new independent, publicly traded company, Furiex Pharmaceuticals, Inc. (Nasdaq: FURX). Substantially all of the operating business components of the Discovery Sciences segment were included in the spin-off. The Company contributed $100.0 million of cash and cash equivalents to Furiex and distributed all outstanding shares of Furiex to the Company’s shareholders as a pro-rata, tax-free dividend, issuing one share of Furiex common stock for every twelve shares of the Company’s common stock to shareholders of record on June 1, 2010. The results of operations for the former compound partnering business conducted by the Company until June 14, 2010 are included as part of this report as continuing operations because the Company believes this transaction does not qualify for discontinued operations treatment due to the ongoing master development services agreement between the Company and Furiex. The Company does not have any equity or other form of ownership interest in Furiex subsequent to the separation.

Prior to the Company’s June 2010 spin-off, the Discovery Sciences segment included the compound partnering business, a preclinical toxicology research business, and a biomarker discovery services business. In 2009, the Company sold both its preclinical toxicology research and biomarker discovery businesses, which were part of the Discovery Sciences segment. In 2010, the Company discontinued the operations of its wholly owned subsidiary PPD Dermatology, Inc. The Company’s Discovery Sciences revenues were all generated in the United States.

Principles of consolidation

The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and include the accounts of Pharmaceutical Product Development, Inc. and its majority-owned subsidiaries that it controls. Amounts pertaining to the noncontrolling ownership interests held by third parties in the operating results and financial position of the Company’s majority-owned subsidiaries are reported as noncontrolling interests. All intercompany balances and transactions have been eliminated in consolidation.

In connection with the formation of the Company’s subsidiary BioDuro Biologics Pte. Ltd., or BioDuro Biologics, the Company has contractual rights and restrictions related to certain activities of MAB Discovery GmbH, or MAB, a variable interest entity that provides services to BioDuro Biologics. The Company determined that it has a controlling financial interest in MAB because it directs the most significant activities that impact MAB’s economic performance and has an obligation to absorb certain losses that could potentially be significant to MAB. As a result, the Company consolidates the financial results of MAB into its financial statements. MAB creditors have no recourse against the Company in the event of a default by MAB. As of September 30, 2011, MAB had total assets of $6.1 million and total liabilities of $5.7 million, and the Company had a commitment to provide up to $8.7 million of credit to MAB for purposes of acquiring equipment, of which $3.9 million had been advanced.

6

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies

Recently issued accounting standards

In May 2011, the Financial Account Standards Board, or FASB, issued updated fair value measurement and disclosure guidance that clarifies how to measure fair value and requires additional disclosures regarding Level 3 fair value measurements, as well as any transfers between Level 1 and Level 2 fair value measurements. The updated accounting guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. The Company is currently evaluating the impact of adopting the updated fair value guidance, and it does not expect the adoption to have a material impact on its consolidated condensed financial statements.

In June 2011, the FASB amended the manner in which an entity presents the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single, continuous statement of comprehensive income or in two separate but consecutive statements. The amendment eliminates the option to present the components of other comprehensive income as part of the statement of equity. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a retrospective basis. The adoption of this guidance will not change the previously reported amounts of comprehensive income but will change the Company’s presentation of comprehensive income in the consolidated condensed financial statements for the period ending March 31, 2012.

In September 2011, the FASB issued an accounting standards update that amends the two-step goodwill impairment test by permitting an entity to first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill impairment test is unnecessary. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. The Company does not believe the adoption of this guidance will have an impact on its consolidated condensed financial statements.

Recently adopted accounting standards

In October 2009, the FASB issued a new accounting standard related to accounting for revenue arrangements with multiple deliverables. This standard applies to all deliverables in contractual arrangements in all industries in which the vendor will perform multiple revenue-generating activities. This standard also addresses the unit of accounting for an arrangement involving multiple deliverables and how arrangement consideration should be allocated. This standard was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated condensed financial statements, other than requiring additional disclosures included below under “Revenue recognition.”

In March 2010, the FASB issued a new accounting standard, the objective of which is to establish a revenue recognition model for contingent consideration that is payable upon the achievement of an uncertain future event, referred to as a milestone. This standard applies to milestones in single or multiple-deliverable arrangements involving research and development transactions and was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on the Company’s consolidated condensed financial statements, other than requiring additional disclosures included below under “Revenue recognition.”

In April 2011, the FASB issued an accounting standard update clarifying the guidance as to whether a restructuring of accounts receivable constitutes a troubled debt restructuring. The guidance applies to modifications of receivables when a debtor is experiencing financial difficulties. The updated guidance was effective on July 1, 2011 on a retrospective basis to January 1, 2011. The adoption of this standard did not have a material impact on the Company’s consolidated condensed financial statements because the Company did not modify any of its receivables.

7

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies

Revenue recognition

The Company generally enters into contracts with clients to provide services with payments based on fixed and variable fee arrangements. The Company recognizes revenue for services, as rendered, only after persuasive evidence of an arrangement exists, the sales price is determinable and collectability is reasonably assured. Once the above criteria have been met, the Company recognizes revenue for the services provided based on the proportional performance methodology, which determines the proportion of outputs or performance obligations that have been completed or delivered compared to the total contractual outputs or performance obligations.

Some of the Company’s contractual arrangements with clients involve multiple service deliverables, such as developing testing methodologies, database management, investigator recruitment and clinical trial monitoring, among others. Upon entering into the contractual arrangement, the Company determines whether each deliverable has standalone value to the client. If the multiple deliverables within the arrangement each have standalone value to the client, then a separate unit of accounting is assigned to each separate deliverable. If the multiple deliverables are not considered to each have standalone value to the client because the separate deliverables can only be used together, then the deliverables are considered bundled and only one unit of accounting is assigned to the entire arrangement.

A newly adopted accounting standard related to the accounting for revenue arrangements with multiple deliverables requires the allocation of the contractual arrangement’s value based on the relative selling price of the separately identified units of accounting within the arrangement. The standard requires a hierarchy of evidence to be followed when determining the best evidence of the selling price of an item. The best evidence of selling price for a unit of accounting is vendor-specific objective evidence, or VSOE, or the price charged when a deliverable is sold routinely on a standalone basis. When VSOE is not available to determine selling price, relevant third-party evidence, or TPE, of selling price should be used, such as prices competitors charge for interchangeable services to similar clients. When neither VSOE nor TPE of selling price for similar deliverables exists, the Company must use its best estimate of selling price, or BESP, considering all relevant information that is available.

The Company generally is not able to establish TPE for its services, as its deliverables are highly customized and competitor pricing is not available. VSOE can often be established for certain deliverables based on the Company’s standard price lists used for unitized services or the unit price or hourly rates set forth in the customer arrangement. BESP for deliverables is generally established based on labor costs, risks, and expected profit margins developed from the competitive bidding process for client contracts. The Company allocates the contractual arrangement’s value at the inception of the arrangement using the relative selling prices of the deliverable services within the contract based upon VSOE when available but primarily upon BESP. Consistent with the Company’s accounting policies prior to the adoption of this standard, the Company recognizes revenue for the separate elements of its contracts in accordance with the revenue recognition criteria above. The adoption of this standard did not have a material impact on the Company’s consolidated condensed financial statements.

Under a small number of client contracts, a portion of the payments owed to the Company are contingent upon successful achievement of performance standards or research and development success milestones. These payments are not included in the total contract value used for the proportional performance calculations until the achievement of the performance standard or milestone is reasonably assured. Milestone payments on contracts entered into subsequent to January 1, 2011 were immaterial.

8

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies

Fair value

The accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value measurement of a financial instrument and its classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

• Level 1 – Valuations based on quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Items valued using Level 1 inputs include money market funds, U.S. treasury securities and exchange-traded equity securities.

• Level 2 – Valuations based on quoted prices in markets that are not active, or for which all significant inputs are observable, either directly or indirectly. Level 2 valuations include the use of matrix pricing models, quotes for comparable securities and valuation models using observable market inputs. Items valued using Level 2 inputs include derivative instruments, corporate and municipal debt securities and asset-backed securities.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Items valued using Level 3 inputs include auction rate securities valued using unobservable inputs such as time to market liquidity and appropriate rates of return for comparable securities, and equity method investments valued at net asset value as determined by the fund manager based on the most recent financial information available.

Earnings per share

The Company computes basic income per common share based on the weighted-average number of common shares outstanding during the period. The Company computes diluted income per common share information based on the weighted-average number of common shares outstanding during the period plus the effects of any dilutive common stock equivalents. The Company excluded 7,033,229 shares and 6,651,821 shares from the calculation of diluted earnings per common share during the three months ended September 30, 2010 and 2011, respectively, and 8,644,124 shares and 6,681,751 shares from the calculation of diluted earnings per share during the nine months ended September 30, 2010 and 2011, respectively, because they were antidilutive. The antidilutive shares consist of shares underlying stock options, employee stock purchase plan subscriptions and restricted stock units that were antidilutive for the period.

Use of estimates in preparation of the financial statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

9

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

2. Acquisitions and Dispositions

Acquisitions

In October 2010, the Company acquired 64 percent of the outstanding securities of X-Chem, Inc., which is developing proprietary small molecule drug discovery services capabilities, for total consideration of $15.5 million. The Company paid $7.0 million to acquire existing outstanding equity interests and $8.5 million to acquire newly issued shares. The Company recorded the transaction as an acquisition of a controlling interest and consolidates X-Chem’s operating results in the financial statements of the Company. As of the acquisition date, the Company recorded the assets, liabilities and noncontrolling interests at fair value, including accounts receivable, net of $0.6 million. The Company estimated the fair value of the noncontrolling interests in X-Chem by applying the income approach using discounted cash flows. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. At any time prior to October 31, 2014, the Company has the option to purchase the remaining 36 percent of X-Chem at an entity valuation of $70.0 million. If the Company does not exercise its option, the noncontrolling interest holders will have the right to purchase the Company’s ownership interests at an entity valuation of $20.0 million between November 1, 2015 and November 30, 2015. X-Chem is required to declare and pay dividends in the future based on a formula agreed to by the Company and the noncontrolling interest holders. As of September 30, 2011, the Company had paid $4.5 million of the total $7.0 million purchase price to acquire outstanding equity interests. The Company deposited the remaining $2.5 million of the purchase price into an escrow account to secure indemnification claims and the payment of other obligations. As of September 30, 2011, the Company recorded a liability to pay the escrowed funds, which are scheduled to be released in April 2013, as a component of other liabilities. Through the acquisition, the Company expanded its drug discovery services capabilities. This acquisition is included in the Company’s Laboratory Services segment.

Acquisition costs related to X-Chem were not significant and were included in selling, general and administrative costs in the consolidated condensed statements of income. The factors that contributed to the recognition of goodwill included securing new technologies and synergies that are specific to the Company’s business, access to new market segments which are expected to increase revenues and profits, and acquisition of a talented workforce. The Company will not be able to deduct this goodwill for tax purposes.

The Company accounted for this acquisition under the acquisition method of accounting. The total purchase price for this acquisition was allocated based on the estimated fair value of assets acquired and liabilities assumed, which are set forth in the following table:

	X-Chem
Current assets	$	9,309
Property and equipment, net		22
Current liabilities		(1,011	)
Other liabilities		(3,592	)
Noncontrolling interests		(8,297	)
Identifiable intangible assets		9,030
Goodwill		10,039
Total	$	15,500

The purchase price allocation of X-Chem was completed as of September 30, 2011. Pro forma results of operations prior to the date of acquisition have not been presented because those results are not materially different from the actual results presented.

10

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

2. Acquisitions and Dispositions

As of September 30, 2011, the Company held $6.5 million in escrow relating to payments to be made for previous acquisitions, of which $2.3 million is reflected as cash held in escrow and $4.2 million is reflected as a component of other assets in the accompanying consolidated condensed balance sheet. These escrows secure the indemnification obligations contained in the definitive agreements governing these transactions. The Company recorded $6.5 million in liabilities related to these acquisitions of which $2.3 million is recorded as a component of other accrued expenses and $4.2 million is recorded as a component of other liabilities. The Company classified these balances as current or long-term based on the expected date of the release of the funds.

In December 2010, the Company formed BioDuro Biologics Pte. Ltd. to develop proprietary biological drug discovery services capabilities. The Company invested $5.0 million and sold a 25 percent interest in the entity in exchange for $1.7 million in intangible assets. The Company recorded the exchange of the 25 percent noncontrolling interests in the entity at the fair value of the intangible assets acquired. At any time between December 2014 and December 2016, the Company has the right to acquire the noncontrolling interests at fair value. If the Company fails to exercise its purchase option, then during the 183-day period following the expiration of this option the minority owners have the right to require the Company to purchase their noncontrolling interests at fair value. BioDuro Biologics is included in the Company’s Laboratory Services segment.

Dispositions

In May 2010, the Company discontinued the operations of its wholly owned subsidiary PPD Dermatology, Inc., which was part of the Company’s Discovery Sciences segment.

The results of PPD Dermatology are reported as discontinued operations within the consolidated condensed statements of income as set forth in the following table:

	Three Months Ended September  30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Loss from discontinued operations	$	—	$	—	$	(4,444	)	$	—
Benefit for income taxes		—		—		782			—
Loss from discontinued operations, net of income taxes		—		—		(3,662	)		—

11

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

3. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

Cash and cash equivalents, short-term investments, long-term investments and other investments were composed of the following as of the dates set forth below:

	Cash and Cash Equivalents		Short-term Investments		Long-term Investments		Other Investments		Unrealized Gains		Unrealized Losses
As of December 31, 2010
Cash	$	246,843
Money market funds		232,731
Auction rate securities					$	78,747					$	14,203
Municipal debt securities			$	32,707					$	122		24
Corporate debt securities – FDIC insured				9,160						105		1
Treasury securities				38,109						118		2
Equity method investment:
Celtic Therapeutics Holdings, L.P.							$	30,724
Cost method investments:
Bay City Capital Funds								7,069
A.M. Pappas Funds								3,486
Liquidia Technologies, Inc.								5,000
Other investments								1,554
Total	$	479,574	$	79,976	$	78,747	$	47,833	$	345	$	14,230
As of September 30, 2011
Cash	$	197,077
Money market funds		210,759
Certificates of deposit		8,910
Auction rate securities			$	50,374
Asset-backed securities				13,206
Equity method investments:
Celtic Therapeutics Holdings, L.P.							$	58,347
venBio Global Strategic Fund, L.P.								200
Cost method investments:
Bay City Capital Funds								8,751
A.M. Pappas Funds								3,546
Liquidia Technologies, Inc.								5,000
Other investments								1,733
Total	$	416,746	$	63,580	$	—	$	77,577	$	—	$	—

12

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

3. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

For the three and nine months ended September 30, 2010 and 2011, the Company had the following gross realized gains and losses on investments:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010		2011
Gross realized gains on short-term investments	$	—	$	—	$	4	$	422
Gross realized gains on cost method investments		—		—		3,340		244
Gross realized losses on short-term investments		—		—		53		5
Gross realized losses on long-term investments		—		—		—		842
Gross realized losses on cost method investments		—		—		750		924

Short-term and long-term investments

The Company classifies its short-term and long-term investments as available-for-sale securities. The Company determines realized and unrealized gains and losses on short-term and long-term investments on a specific identification basis.

At December 31, 2010, the Company held $78.7 million, net of unrealized losses of $14.2 million, in auction rate securities. The Company classified these securities as long-term investments. The Company concluded that the unrealized losses were temporary because of its ability and intent to hold the auction rate securities until the fair value recovered. In May 2011, the Company converted $14.2 million par value of its government-guaranteed student loan auction rate securities to $14.2 million par value of government-guaranteed student loan asset-backed securities from the same issuer. As a result of the pending Merger Agreement more fully described in Note 16, which requires the Company, at the request of Jaguar Holdings, LLC, or Parent, to sell all or part of the asset-backed and auction rate securities at a price equal or greater than the price proposed by the Parent, the Company classified all of these securities as short-term investments and recorded them at an estimated fair value as of September 30, 2011. Amounts ultimately received upon sale could vary from their estimated fair value; however, the Company does not believe the difference between the estimated fair value and the amounts ultimately received upon sale will be material. In addition, the Company concluded that the previously unrealized losses were other-than-temporary because the Company no longer had the intent to hold these securities until maturity or until their face value recovered. As a result, for the three and nine months ended September 30, 2011, the Company recognized other-than-temporary impairment losses of $17.7 million.

13

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

3. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

Equity method investment

In 2009, the Company committed to invest up to $102.7 million in Celtic Therapeutics Holdings, L.P., or Celtic, as a limited partner. Celtic is an investment partnership organized for the purpose of identifying, acquiring and investing in a diversified portfolio of novel therapeutic product candidates, with a focus on mid-stage compounds that have progressed through human proof of concept studies and that are targeted to address unmet medical needs. As of September 30, 2011, the Company owned 49.6% of the outstanding partnership interests of Celtic. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $55.0 million, which it expects to fund over a period of up to four years. During 2010, the Company loaned Celtic $10.0 million, of which $2.0 million was repaid in 2010 and the remaining $8.0 million was converted to additional equity in connection with the settlement of a $10.0 million capital call during the first quarter of 2011. For the three months ended September 30, 2010 and 2011, the Company recognized a loss of $4.6 million and income of $1.9 million, respectively, based on the allocation of profits and losses to the partners’ capital accounts. For the nine months ended September 30, 2010 and 2011, the Company recognized a loss of $8.4 million and income of $15.1 million, respectively, based on the allocation of profits or losses to the partners’ capital accounts. As of September 30, 2011, the Company had an investment balance of $58.3 million.

In April 2011, the Company committed to invest up to $50.0 million in venBio Global Strategic Fund, L.P., or venBio, as a limited partner over the next five years. venBio invests in early stage life sciences companies. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $49.8 million. As of September 30, 2011, the Company had an investment balance of $0.2 million and had an ownership interest in venBio of 28.6%.

Cost method investments

The Company is a limited partner in several venture capital funds established for the purpose of investing in life science and healthcare companies. These funds require the Company to commit to make investments in the funds over a period of time. The Company accounts for these funds as cost method investments, determining realized and unrealized losses on a specific identification method.

The Company is a stockholder in Accelerator III Corporation and certain of its incubator companies. Accelerator III requires the Company to make investments upon request up to its committed capital amount. The Company accounts for this investment as a cost method investment, determining realized and unrealized losses on a specific identification method.

14

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

3. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

The Company’s capital commitments in these funds as of September 30, 2011 were as follows:

Fund	Ownership			Total Capital Commitment		Remaining Commitment		Commitment Expiration
Bay City Capital Fund IV, L.P.		2.9	%	$	10,000	$	705	September  2010(2)
Bay City Capital Fund V, L.P.		2.0	%		10,000		5,552	October 2012
A.M. Pappas Life Science Ventures III, L.P.		4.7	%		4,750		594	December  2009(2)
A.M. Pappas Life Science Ventures IV, L.P.		3.0	%		2,935		1,702	February 2014
Accelerator III and incubator companies(1)		19.9	%		4,802		819	None

⁽¹⁾  The Company’s percentage ownership of Accelerator III and incubator companies might vary but will not exceed 19.9%.

⁽²⁾  The funding commitments to Bay City Capital Fund IV, L.P. and A.M. Pappas Life Science Ventures III, L.P. have expired for new investments. The Company may still be required to fund additional investments in existing fund portfolio companies and the ongoing operations of these funds up to the amount of the remaining capital commitment.

In May 2010, the Company invested $5.0 million for an ownership interest in Liquidia Technologies, Inc. As of September 30, 2011, the Company’s ownership interest in Liquidia was 8.6%.

4. Accounts Receivable and Unbilled Services

Accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Billed	$	276,240		$	320,167
Unbilled		168,037			190,081
Allowance for doubtful accounts		(8,401	)		(5,241	)
Total accounts receivable and unbilled services, net	$	435,876		$	505,007

15

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

5. Property and Equipment

Property and equipment, stated at cost, consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Land	$	8,201		$	8,201
Buildings and leasehold improvements		274,716			294,944
Fixed assets not placed in service		13,843			10,163
Information technology systems under development		28,808			32,636
Furniture and equipment		234,132			257,312
Computer equipment and software		203,867			222,854
Total property and equipment		763,567			826,110
Less accumulated depreciation		(377,704	)		(421,741	)
Property and equipment, net	$	385,863		$	404,369

Depreciation expense was $14.8 million and $15.8 million for the three months ended September 30, 2010 and 2011, respectively, and $47.1 million and $47.5 million for the nine months ended September 30, 2010 and 2011, respectively.

6. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2011, by operating segment, were as follows:

	Clinical Development Services
			Laboratory
			Services			Total
Balance as of December 31, 2010	$	106,671	$	184,546		$	291,217
Adjustments to goodwill for prior year acquisitions		—		(825	)		(825	)
Translation adjustments		543		1,979			2,522
Balance as of September 30, 2011	$	107,214	$	185,700		$	292,914

16

During 2011, the Company recorded a $0.8 million adjustment to goodwill related to X-Chem resulting from information regarding the valuation estimates that became available after the preliminary purchase price allocation was established.

17

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

6. Goodwill and Intangible Assets

The Company reviews goodwill for impairment annually on October 1st, and more frequently if impairment indicators arise. An impairment indicator represents an event or change in circumstances that would more likely than not reduce the fair value of a goodwill reporting unit below its carrying amount. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. The Company monitors events and changes in circumstances in between annual testing dates to determine if any events or changes in circumstances indicate impairment. In connection with the most recent annual impairment test on October 1, 2010, the Company reviewed goodwill for impairment and the analysis indicated a significant amount of fair value in excess of carrying value for each goodwill reporting unit. However, the fair value of goodwill could be impacted by future adverse changes such as a significant decline in operating results, a sustained decline in the valuation of pharmaceutical and biotechnology company stocks, including the valuation of the Company’s own common stock, a significant adverse change in legal factors or in the business climate, a further significant slowdown in the worldwide economy or the pharmaceutical and biotechnology industry, or the sustained failure to meet the performance projections included in the forecasts of future operating results for any of the Company’s goodwill reporting units. Any adverse change in these factors could have a significant impact on the recoverability of goodwill, and could have a material impact on the Company’s consolidated condensed financial statements. There were no such indicators of impairment during the first nine months of 2011.

The Company’s amortized intangible assets were composed of the following as of the dates set forth below:

	December 31, 2010							September 30, 2011
	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	17,658	$	(2,844	)	$	14,814	$	18,013	$	(4,416	)	$	13,597
Non-compete agreements		2,047		(84	)		1,963		1,291		(261	)		1,030
Trade name		150		(150	)		—		140		(140	)		—
Backlog		7,217		(2,770	)		4,447		7,342		(3,982	)		3,360
Total	$	27,072	$	(5,848	)	$	21,224	$	26,786	$	(8,799	)	$	17,987

The Company had total non-amortizing intangible assets of $10.2 million as of December 31, 2010 and September 30, 2011. Unamortized intangible assets consist of $8.2 million of in-process research and development and $2.0 million of other intangible asset.

Amortization expense for the three months ended September 30, 2010 and 2011 was $0.9 million and $1.0 million, respectively. Amortization expense for the nine months ended September 30, 2010 and 2011 was $2.8 million and $3.0 million, respectively. As of September 30, 2011, expected amortization expense for each of the next five years is as follows:

2011 (remaining three months)	$	977
2012		3,274
2013		3,097
2014		2,344
2015		1,769

18

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

7. Debt Instruments

In April 2011, the Company entered into a $50.0 million revolving line of credit facility with Barclays Bank PLC. The facility has a term of one-year and the Company can use borrowings for general corporate purposes. The credit facility contains affirmative, negative and financial covenants. Outstanding borrowings under the credit facility bear interest at an annual fluctuating rate tied to certain financial indices plus an agreed upon margin. The credit facility is currently scheduled to expire in April 2012, at which time any outstanding balance will be due. As of September 30, 2011, no borrowings were outstanding under this credit facility.

8. Shareholders’ Equity

Stock options

The Company estimates the fair value of each award on the grant date using the Black-Scholes option-pricing model and recognizes it as expense over the employee’s requisite service period.

During the nine months ended September 30, 2011, the Company granted options to purchase approximately 1,896,000 shares with a weighted-average exercise price of $27.47. This amount includes options to purchase approximately 1,554,500 shares granted in the Company’s annual grant during the first quarter of 2011. All options have an exercise price equal to the fair value of the Company’s common stock on the grant date. The fair value of the Company’s common stock on the grant date is equal to the Nasdaq closing price of the Company’s stock on the date of grant. The weighted-average grant date fair value per share and the aggregate fair value of options granted during the nine months ended September 30, 2010 and 2011 was $5.15 and $6.81 per share, and $16.5 million and $12.9 million, respectively. As of September 30, 2011, the Company had options outstanding to purchase 11.8 million shares of its common stock.

Restricted stock units

The Company has issued restricted stock units that are subject to a three-year linear vesting schedule with one-third of the grant vesting on each of the first, second and third anniversaries of the award date. The Company determines expense based on the market value of the restricted stock units on the award date, and recognizes expense on a straight-line basis over the vesting period.

During the nine months ended September 30, 2011, the Company awarded approximately 367,000 restricted stock units to employees. This amount includes restricted stock units of approximately 359,000 granted in the Company’s annual grant during the first quarter of 2011. The weighted-average award date fair value per unit and the aggregate fair value of units during the nine months ended September 30, 2011 was $27.31 per share and $10.0 million, respectively. As of September 30, 2011, approximately 355,000 restricted stock units were outstanding.

19

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

8. Shareholders’ Equity

Stock repurchase program

In February 2008, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $350.0 million of its common stock from time to time. In February 2011, the Company entered into an accelerated share repurchase, or ASR, arrangement with Barclays Capital Inc., or Barclays, under which the Company used $200.0 million of the remaining amount to repurchase additional shares of its common stock. During the first quarter of 2011, the Company repurchased approximately 6.5 million shares of its common stock under this arrangement for an aggregate purchase price of $200.0 million. The agreement with Barclays for the ASR included a forward sale contract settlement date in December 2011, but it could be settled prior to that date. Under the terms of the forward sale contract, Barclays was required to purchase, in the open market, $200.0 million of the Company’s common stock during the term of the contract to fulfill its obligation and cover its position related to 6.5 million shares borrowed from third parties and sold to the Company during the first quarter of 2011 and for any additional shares payable upon settlement. The forward contract was settled in September 2011, and the Company received approximately 503,000 shares.

As of September 30, 2011, $60.7 million remained available for stock repurchases authorized by the Board of Directors. The manner of the purchases, the amount the Company spends and the number of shares repurchased will vary based on a variety of factors, including the stock price and blackout periods in which the Company is restricted from repurchasing shares. The Company’s October 2, 2011 Merger Agreement with Jaguar Holdings (see Note 16) does not allow it to repurchase additional shares.

9. Comprehensive Income (Loss)

Comprehensive income (loss) consisted of the following amounts on the dates set forth below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Net income, as reported	$	38,002		$	35,617		$	76,184		$	118,399
Other comprehensive income (loss):
Cumulative translation adjustment		25,867			(26,530	)		(6,585	)		(3,015	)
Change in fair value of hedging transactions, net of tax (expense) benefit of ($2,240), $2,093, ($784) and $1,059, respectively		5,360			(4,455	)		1,376			(2,461	)
Reclassification adjustment for hedging results included in direct costs, net of tax benefit of $673, $609, $1,609 and $1,904, respectively		(1,274	)		(1,198	)		(2,835	)		(3,963	)
Net unrealized gain (loss) on investments, net of tax benefit (expense) of $73, $1,956, ($1,089) and $1,347, respectively		(131	)		(3,598	)		2,102			(2,471	)
Reclassification to net income of other-than- temporary impairment on investments, net of tax expense of $0, ($6,235), $0 and ($6,245), respectively		—			11,467			—			11,457
Total other comprehensive income (loss)		29,822			(24,314	)		(5,942	)		(453	)
Comprehensive income (loss)	$	67,824		$	11,303		$	70,242		$	117,946

20

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

9. Comprehensive Income (Loss)

Accumulated other comprehensive loss consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Translation adjustment	$	28		$	(2,987	)
Pension liability, net of tax benefit of $4,865		(11,705	)		(11,705	)
Fair value on hedging transactions, net of tax (expense) benefit of ($1,714) and $1,188, respectively		3,523			(2,901	)
Net unrealized losses on investments, net of tax benefit of $4,899 and $0, respectively		(8,986	)		—
Total	$	(17,140	)	$	(17,593	)

The Company recognized an other-than-temporary impairment on its remaining asset-backed and auction rate securities as of September 30, 2011. As a result, the total accumulated unrealized losses and related tax benefits associated with the investment portfolio were recognized in earnings.

10. Accounting for Derivative Instruments and Hedging Activities

The Company has significant international revenues and expenses, and related receivables and payables, denominated in currencies other than the functional currency of the related subsidiary. As a result, the Company’s operating results can be affected by changes in foreign currency exchange rates. In an effort to minimize this risk, from time to time, the Company purchases foreign currency option and forward contracts as hedges against anticipated and recorded transactions, and the related receivables and payables denominated in foreign currencies. The Company only uses foreign currency option and forward contracts as hedges to minimize the variability in the Company’s operating results arising from foreign currency exchange rate movements and not for speculative or trading purposes.

The Company recognizes changes in the fair value of the effective portion of foreign exchange derivatives that are designated and qualify as cash flow hedges of forecasted revenue and expense transactions in accumulated other comprehensive income, or OCI. The Company reclassifies these amounts from OCI and recognizes them in earnings when either the forecasted transaction occurs or it becomes probable that the forecasted transaction will not occur. The Company reclassifies OCI associated with hedges of foreign currency revenue into direct costs upon recognition of the forecasted transaction in the statements of income. The Company recognizes the ineffective portion of a derivative instrument in earnings in the current period as a component of other income, and measures it by comparing the fair value of the forward contract to the change in the forward value of the anticipated transaction. Hedging portfolio ineffectiveness during the three months ended September 30, 2010 and 2011 was a gain of $0.3 million and a loss of $0.1 million, respectively. Hedging portfolio ineffectiveness during the nine months ended September 30, 2010 and 2011 was a gain of $0.1 million and $44,000, respectively.

The Company also manages its exposure on receivables and payables denominated in currencies other than the entity’s functional currency through the use of natural hedges and foreign currency options and forwards, if necessary. The Company records foreign currency derivatives at fair value, with fluctuations in the fair value being included in the statements of income as a component of other income. There were two outstanding foreign currency options and forwards related to receivables and payables hedging outstanding as of September 30, 2011. The fair value of the derivative liability and the gains and losses reported in the statements of income were not significant.

21

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

10. Accounting for Derivative Instruments and Hedging Activities

As of September 30, 2011, the Company’s outstanding hedging contracts were scheduled to expire over the next 15 months. The Company expects to reclassify the current loss positions of $2.1 million, net of tax, within the next 12 months from OCI into the statement of income. As of December 31, 2010 and September 30, 2011, the Company’s foreign currency derivative portfolio resulted in the Company recognizing an asset of $6.7 million and $1.3 million, respectively, as a component of other current assets and a liability of $1.4 million and $5.4 million, respectively, as a component of other accrued expenses.

11. Pension Plan

Net periodic pension costs for the U.K. pension plan included the following components:

	Three Months Ended September  30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Interest cost	$	794		$	816		$	2,357		$	2,456
Expected return on plan assets		(619	)		(745	)		(1,837	)		(2,242	)
Amortization of losses		265			212			787			639
Net periodic pension cost	$	440		$	283		$	1,307		$	853

During the nine months ended September 30, 2011, the Company did not make any contributions to the plan but expects to contribute approximately $3.0 million during the remainder of 2011.

12. Commitments and Contingencies

From time to time, the Company causes letters of credit to be issued to provide credit support for guarantees, contractual commitments and insurance policies. The fair values of the letters of credit reflect the amount of the underlying obligation and are subject to fees payable to the issuers of the letters of credit competitively determined in the marketplace. As of September 30, 2011, the Company had four letters of credit outstanding for a total of $1.8 million.

The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice. The Company’s retentions and deductibles associated with these insurance policies range in amounts up to $5.0 million.

The Company is self-insured for health insurance for the majority of its employees located within the United States, but maintains stop-loss insurance on a “claims made” basis for expenses in excess of $0.4 million per member per year.

As of September 30, 2011, the Company had commitments to invest up to an aggregate additional $8.6 million in several venture capital funds, $0.8 million in other cost method investments and $104.8 million in equity method investments. For further details, see Note 3.

22

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

12. Commitments and Contingencies

In 2010, the Company entered into a non-revolving line of credit agreement to loan Celtic Pharma Development Services Bermuda Ltd., a subsidiary of Celtic Pharmaceutical Holdings L.P., up to $18.0 million to finance trade payables in connection with a specified drug candidate. Celtic Pharma Development Services Bermuda Ltd. has appointed the Company to conduct certain clinical studies on the drug candidate. Principal and interest are due and payable no later than June 30, 2013 and are secured by a guarantee of an affiliate of the borrower. As of September 30, 2011, the Company had advanced $16.8 million to the borrower which is recorded as a component of other assets.

In 2010, the Company sold a noncontrolling interest in its BioDuro Biologics Pte. Ltd. subsidiary. During the 183-day period commencing in December 2016, the minority equity holders have the right to require the Company to purchase their noncontrolling interests at fair value.

As of September 30, 2011, the Company’s total gross unrecognized tax benefits were $29.4 million, of which $16.9 million, if recognized, would reduce its effective tax rate. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $5.7 million within the next twelve months due to the settlement of audits and the expiration of statutes of limitations.

The Company’s policy for recording interest and penalties associated with tax audits is to record them as a component of provision for income taxes. As of September 30, 2011, the Company accrued $4.1 million of interest and $0.9 million of penalties with respect to uncertain tax positions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the Company will reduce amounts accrued and reflect them as a reduction of the overall income tax provision.

Under most of its agreements for services, the Company typically agrees to indemnify and defend the sponsor against third-party claims based on the Company’s negligence or willful misconduct. Any successful claims could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

In the normal course of business, the Company is a party to various claims and legal proceedings. A number of putative shareholder class actions have also been filed against the Company in connection with the merger described in Note 16. The Company records a reserve for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable. Although the ultimate outcome of pending and threatened litigation is currently not determinable and litigation costs can be material, management of the Company, after consultation with legal counsel, does not believe that the resolution of these matters will have a material effect upon the Company’s financial condition, results of operations or cash flows.

23

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

13. Fair Value of Financial Instruments

The Company has categorized its assets and liabilities recorded at fair value based upon a fair value hierarchy in accordance with the applicable accounting standards.

The following table presents information about the Company’s assets and liabilities required to be measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
As of December 31, 2010
Assets
Cash equivalents	$	232,731	$	—	$	—	$	232,731
Short-term investments:
Treasury securities		38,109		—		—		38,109
Municipal debt securities		—		32,707		—		32,707
Corporate debt securities		—		9,160		—		9,160
Long-term investments		—		—		78,747		78,747
Equity method investment		—		—		30,724		30,724
Derivative contracts		—		6,668		—		6,668
Total assets	$	270,840	$	48,535	$	109,471	$	428,846
Liabilities
Derivative contracts	$	—	$	1,373	$	—	$	1,373
Total liabilities	$	—	$	1,373	$	—	$	1,373

	Level 1		Level 2		Level 3		Total
As of September 30, 2011
Assets
Cash equivalents	$	219,669	$	—	$	—	$	219,669
Short-term investments		—		13,206		50,374		63,580
Equity method investments		—		—		58,547		58,547
Derivative contracts		—		1,331		—		1,331
Total assets	$	219,669	$	14,537	$	108,921	$	343,127
Liabilities
Derivative contracts	$	—	$	5,376	$	—	$	5,376
Total liabilities	$	—	$	5,376	$	—	$	5,376

24

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

13. Fair Value of Financial Instruments

The following table provides a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3, for the nine months ended September 30, 2011:

	Short-term Investments		Long-term Investments			Equity Method Investments
Balance as of December 31, 2010	$	—	$	78,747		$	30,724
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		(1,119	)		—
Income from equity method investment		—		—			2,549
Additional investment in equity method investment		—		—			8,012
Liquidation of investments		—		(75	)
Balance as of March 31, 2011		—		77,553			41,285
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		3,129
Realized loss on investments		—		(842	)
Income from equity method investment		—		—			10,639
Additional investment in equity method investments		—		—			200
Liquidation of investments		—		(10,625	)
Transfers out of Level 3(1)		—		(13,357	)
Balance as of June 30, 2011		—		55,858			52,124
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		12,192
Other-than-temporary impairment on auction rate securities		—		(17,551	)
Liquidation of investments		—		(125	)
Transfers between long term and short term		50,374		(50,374	)
Income from equity method investment		—		—			1,915
Additional investment in equity method investments		—		—			4,508
Balance as of September 30, 2011	$	50,374	$			$	58,547

⁽¹⁾  Transferred from Level 3 to Level 2 which has more observable market data due to increased market activity for asset-backed securities.

25

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

14. Business Segment Data

The Company evaluates segment performance and allocates resources based on net revenue and operating income (loss). Depreciation and amortization expense is allocated to the business unit based on various operational metrics, such as headcount and space. In addition, net revenue and operating income (loss) by segment exclude reimbursed revenue. The Company has a global infrastructure supporting its business segments, and therefore, assets are not identified by reportable segment.

Net revenue and operating income (loss) by business segment were as follows as of the dates set forth below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Net revenue:
Clinical Development Services	$	260,345	$	292,025	$	765,075		$	863,230
Laboratory Services		79,045		90,848		231,921			252,007
Discovery Sciences		—		—		8,010			—
Reimbursed revenue		25,985		32,522		77,054			91,063
Total	$	365,375	$	415,395	$	1,082,060		$	1,206,300
Operating income (loss):
Clinical Development Services	$	43,681	$	53,771	$	101,830		$	148,748
Laboratory Services		13,154		11,648		34,631			26,266
Discovery Sciences		—		—		(11,860	)		—
Total	$	56,835	$	65,419	$	124,601		$	175,014

15. Related Party Transactions

As of September 30, 2011, the Company provided services to and owned 49.6% of Celtic Therapeutics Holdings, L.P., or Celtic, which is accounted for under the equity method. During 2010, the Company loaned Celtic $10.0 million, of which $2.0 million was repaid in 2010. During the first quarter of 2011, the outstanding loan was converted to additional equity in connection with the settlement of a $10.0 million capital call. The Company recognized $0.8 million and $1.3 million of net revenue from Celtic for the three months ended September 30, 2010 and 2011, respectively, and $1.3 million and $3.9 million in net revenue from Celtic for the nine months ending September 30, 2010 and 2011, respectively.

26

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

16. Subsequent Event

On October 2, 2011, the Company entered into an Agreement and Plan of Merger, or Merger Agreement, with Jaguar Holdings, LLC, or Parent, and Jaguar Merger Sub, Inc., a wholly-owned subsidiary of Parent, providing for the merger of Merger Sub with and into the Company. At the effective time of the merger, each outstanding share of the Company’s common stock (other than (i) shares owned by Parent, Merger Sub, the Company or any of their respective subsidiaries, (ii) equity awards previously agreed to roll over in the merger and (iii) shares owned by shareholders who have perfected appraisal pursuant to Article 13 of the North Carolina Business Corporation Act) shall be automatically cancelled and converted into the right to receive $33.25 in cash, without interest, on the terms and subject to the conditions set forth in the Merger Agreement. As a result, the Company will become a wholly-owned subsidiary of Parent and the Company’s common stock will cease to be publicly traded. Parent and Merger Sub were formed by affiliates of The Carlyle Group and affiliates of Hellman & Friedman LLC.

The closing of the merger transaction is subject to normal and customary conditions, including approval by the Company’s shareholders. Contingent upon the closing of the merger, the Company will be obligated to pay a financial advisor fee in connection with the merger of approximately $22.5 million. The Company expects the merger to close during the fourth quarter of 2011. However, the Merger Agreement may be terminated and the merger abandoned at any time prior to the effective time of the merger. If the Merger Agreement is terminated, the Company may be obligated to pay a termination fee of $58.1 million or $116.2 million, depending on the basis of the termination.

The Company has been notified of putative shareholder class action lawsuits by persons alleging to be shareholders of the Company, individually and on behalf of all others similarly situated, against the Company, the Sponsors, and each of the directors of the Company, seeking damages in unspecified amounts and injunctive relief. These lawsuits are alleging that the directors breached their fiduciary duties in entering into the Merger Agreement with Sponsors.

Additional similar lawsuits might arise. The Company and its board of directors believe these lawsuits are without merit and intend to vigorously defend them.

27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is provided to increase the understanding of, and should be read in conjunction with, our consolidated condensed financial statements and accompanying notes. In this discussion, the words “PPD”, “we”, “our” and “us” refer to Pharmaceutical Product Development, Inc., together with its subsidiaries where appropriate.

Forward-looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements relate to future events or our future financial performance. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, assumptions and other statements that are not statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as “might”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “intend”, “potential” or “continue”, or the negative of these terms, or other comparable terminology. These statements are only predictions. These statements rely on a number of assumptions and estimates that could be inaccurate and that are subject to risks and uncertainties. Actual events or results might differ materially due to a number of factors, including those listed in “Potential Volatility of Quarterly Operating Results and Stock Price” below and in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2010. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Company Overview

We are a leading global contract research organization providing drug discovery, development and lifecycle management services. Our clients include pharmaceutical, biotechnology, medical device, academic, non-profit and government organizations. We apply innovative technologies, therapeutic expertise and a commitment to quality to help our clients accelerate the development of safe and effective therapeutics and maximize the returns on their research and development investments.

We have been in the drug development business for more than 25 years. Our development services include preclinical drug discovery services, Phase I through Phase IV clinical development services and post-approval services, as well as bioanalytical, cGMP, global central laboratory and vaccines and biologics laboratory services. We have extensive clinical trial experience, including regional, national and global studies across a wide spectrum of therapeutic areas in over 100 countries, spanning six continents. In addition, for marketed drugs, biologics and devices, we offer support such as medical information, patient compliance programs, patient and disease registry programs, product safety and pharmacovigilance, standard response document development, observational studies, Phase IV monitored studies and prescription-to-over-the-counter, or Rx to OTC, programs. Our services offer our clients a way to identify and develop drug candidates more quickly and cost-effectively.

With 86 offices in 44 countries and more than 11,000 employees worldwide, our global infrastructure enables us to accommodate the multinational drug development needs of our clients. We have provided services to 47 of the top 50 pharmaceutical companies in the world as ranked by 2010 healthcare research and development spending. We also work with leading biotechnology companies and government organizations that sponsor clinical research. We are one of the world’s largest providers of drug development services based on 2010 annual net revenue generated from contract research organizations. For more detailed information on PPD, see our Annual Report on Form 10-K for the year ended December 31, 2010.

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Executive Overview

On October 2, 2011, we entered into an Agreement and Plan of Merger, or Merger Agreement, with Jaguar Holdings, LLC, or Parent, and Jaguar Merger Sub, Inc., a wholly-owned subsidiary of Parent, providing for the merger of Merger Sub with and into the Company. At the effective time of the merger, each outstanding share of our common stock (other than (i) shares owned by Parent, Merger Sub, us or any of their respective subsidiaries, (ii) equity awards previously agreed to roll over in the merger and (iii) shares owned by shareholders who have perfected appraisal pursuant to Article 13 of the North Carolina Business Corporation Act) shall be automatically cancelled and converted into the right to receive $33.25 in cash, without interest, on the terms and subject to the conditions set forth in the Merger Agreement. As a result, we will become a wholly-owned subsidiary of Parent and our common stock will cease to be publicly traded. Parent and Merger Sub were formed by affiliates of The Carlyle Group and affiliates of Hellman & Friedman LLC.

The closing of the merger transaction is subject to normal and customary conditions, including approval by our shareholders. We expect the merger to close in the fourth quarter of 2011.

Our revenues depend on a relatively small number of industries and clients. As a result, we closely monitor the market for our services. For a discussion of the trends affecting the market for our services, see “Item 1. Business – Trends Affecting the Drug Discovery and Development Industry” in our Annual Report on Form 10-K for the year ended December 31, 2010. We continue to believe in the fundamentals of the CRO services market. We expect many clinical trial sponsors to continue to narrow their drug discovery and development services vendor lists and outsource a greater percentage of their research and development budgets in the years ahead. For the remainder of 2011, we plan to continue to pursue and establish innovative and strategic client relationships, while enhancing our focus on execution and quality to differentiate our company and create value for our clients and our shareholders. We also expect to expand the scope of our discovery services offerings through new technologies that should differentiate us from our competitors. We continue to focus on all selling, general and administrative, or SG&A, expenses and on driving efficiencies, while selectively investing for future growth and productivity gains.

We review various metrics to evaluate our financial performance, including period-to-period changes in backlog, new authorizations, cancellation rates, revenue, revenue conversion, margins and earnings. In the third quarter of 2011, we had net authorizations, defined as new authorizations less cancellations and adjustments, of $542.2 million, a 22.4% increase over the same period in 2010. The cancellation rate for the third quarter of 2011 was 6.3% of beginning backlog compared to 6.9% for the same period in 2010. The average length of our contracts in backlog was 34 months as of September 30, 2011 and December 31, 2010. In the third quarter of 2011, revenue conversion, defined as revenue divided by prior periods’ ending backlog, averaged 10.4% compared to 10.5% for the same period in 2010.

Backlog by client type as of September 30, 2011 was 79.0%, pharmaceutical, 15.5% biotech and 5.5% government/other, as compared to 76.8% pharmaceutical, 16.6% biotech and 6.6% government/other as of September 30, 2010. Net revenue by client type for the quarter ended September 30, 2011 was 78.3% pharmaceutical, 16.7% biotech and 5.0% government/other, compared to 77.4% pharmaceutical, 18.7% biotech and 3.9% government/other for the same period in 2010.

For the third quarter of 2011, net revenue contribution by business segment was 76.3% from Clinical Development Services and 23.7% from Laboratory Services, compared to net revenue contribution for the third quarter of 2010 of 76.7% from Clinical Development Services and 23.3% from Laboratory Services. Our top therapeutic areas by net revenue for the quarter ended September 30, 2011 were oncology, infectious diseases, circulatory/cardiovascular, endocrine/metabolic and central nervous system. For a detailed discussion of our revenue, margins, earnings and other financial results for the third quarter of 2011, see “Results of Operations – Three Months Ended September 30, 2010 versus Three Months Ended September 30, 2011” below.

Our operating margin increased to 15.8% in the third quarter of 2011 from 15.6% in the third quarter of 2010. Our Clinical Development Services segment operating margin increased sequentially to 18.4% from 16.6% in the second quarter of 2011 and our Laboratory Services segment operating margin increased sequentially to 12.8% from 10.2% in the second quarter of 2011. Continued investment to support anticipated future growth of our drug discovery services business, BioDuro, and lower than expected net revenue in our Vaccine and Biologics unit continued to pressure the Laboratory Services segment gross and operating margins in the third quarter of 2011. We expect our Laboratory Services segment operating margin to continue to increase during the remainder of the year, driven by net revenue growth and operating efficiency.

29

Capital expenditures for the three months ended September 30, 2011 totaled $13.6 million. These capital expenditures were primarily for scientific equipment for our laboratory units and computer software and hardware. We made these investments to support growth in our businesses and to improve the efficiencies of our operations.

As of September 30, 2011, we had $480.3 million of cash, cash equivalents and short-term investments. In the third quarter of 2011, we generated $91.1 million in cash from operations. The number of days’ revenue outstanding in accounts receivable and unbilled services, net of unearned income, also known as DSO, was 27 days for the nine months ended September 30, 2011, compared to 22 days for the year ended December 31, 2010. We plan to continue to monitor DSO and the various factors that affect it. However, we expect DSO will continue to fluctuate in the future depending on contract terms, the mix of contracts performed and our success in collecting receivables.

New Business Authorizations and Backlog

We add new business authorizations, which are sales of our services, to backlog when we enter into a contract or letter of intent or receive a verbal commitment. Authorizations have and will continue to vary significantly from quarter to quarter and contracts generally have terms ranging from several months to several years. We recognize revenue on these authorizations as services are performed. Our new authorizations for the three months ended September 30, 2010 and 2011 were $663.8 million and $775.9 million, respectively.

The dollar amount of our backlog consists of anticipated future net revenue from contracts, letters of intent and verbal commitments we consider highly reliable, that either have not started but are anticipated to begin in the future, or are in process and have not been completed. As of September 30, 2011, the remaining duration of the contracts in our backlog ranged from one to 173 months, with a weighted-average duration of 34 months. The weighted-average duration of the contracts in our backlog will fluctuate from period to period in the future based on the contracts constituting our backlog at any given time. The dollar amount of our backlog excludes net revenue that has been recognized previously in our statements of income and is adjusted each quarter for foreign currency fluctuations. Our backlog as of September 30, 2010 and 2011 was $3.4 billion and $3.8 billion, respectively. For various reasons discussed in “Item 1. Business – Backlog” of our Form 10-K, our backlog might never be fully recognized as net revenue and is not necessarily a meaningful predictor of future performance.

Results of Operations

Revenue Recognition

We generally enter into contracts with clients to provide services with payments based on fixed and variable fee arrangements. We recognize revenue for services, as rendered, only after persuasive evidence of an arrangement exists, the sales price is determinable and collectability is reasonably assured. Once the above criteria have been met, we recognize revenue for the services provided based on the proportional performance methodology, which determines the proportion of outputs or performance obligations that have been completed or delivered compared to the total contractual outputs or performance obligations.

Some of our contractual arrangements with clients involve multiple service deliverables, such as developing testing methodologies, database management, investigator recruitment and clinical trial monitoring, among other services. Upon entering into the contractual arrangement, we determine whether each deliverable has standalone value to the client. If the multiple deliverables within the arrangement each have standalone value to the client, then a separate unit of accounting is assigned to each separate deliverable. If the multiple deliverables are not considered to each have standalone value to the client because the separate deliverables can only be used together, then the deliverables are considered bundled and only one unit of accounting is assigned to the entire arrangement.

A newly adopted accounting standard related to the accounting for revenue arrangement with multiple deliverables requires the allocation of the contractual arrangement’s value based on the relative selling price of the separately identified units of accounting within the arrangement. The standard requires a hierarchy of evidence to be followed when determining the best evidence of the selling price of an item. The best evidence of selling price for a unit of accounting is vendor-specific objective evidence, or VSOE, or the price charged when a deliverable is sold routinely on a standalone basis. When VSOE is not available to determine selling price, relevant third-party evidence, or TPE, of selling price should be used, such as prices competitors charge for interchangeable services to similar clients. When neither VSOE nor TPE of selling price for similar deliverables exists, we must use our best estimate of selling price, or BESP, considering all relevant information that is available.

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We generally are not able to establish TPE for our services, as our deliverables are highly customized and competitor pricing is not available. VSOE can often be established for certain deliverables based on our standard price lists used for unitized services or the unit price or hourly rates set forth in the customer arrangement. BESP for deliverables is generally established based on labor costs, risks, and expected profit margins developed from the competitive bidding process for client contracts. We allocate the contractual arrangement’s value at the inception of the arrangement using the relative selling prices of the deliverable services within the contract based upon VSOE when available but primarily upon BESP. Consistent with our accounting policies prior to the adoption of this standard, we recognize revenue for the separate elements of our contracts in accordance with the revenue recognition criteria above. The adoption of this standard did not have a material impact on our consolidated condensed financial statements.

Under a small number of client contracts, a portion of the payments owed to us are contingent upon successful achievement of performance standards or research and development success milestones. These payments are not included in the total contract value used for the proportional performance calculations until the achievement of the performance standard or milestone is reasonably assured. Milestone payments on contracts entered into subsequent to January 1, 2011 were immaterial.

For most clinical trial related service contracts in our Clinical Development Services segment and our Laboratory Services segment, we base measurement of performance on a comparison of direct costs through that date to estimated total direct costs to complete the contract. Direct costs relate primarily to the amount of labor and related overhead costs for the delivery of services. We believe this is the best indicator of the performance of the contractual obligations. Changes in the estimated total direct costs to complete a contract without a corresponding proportional change to the contract value result in a cumulative adjustment to the amount of revenue recognized in the period in which the change in estimate is determined. For time-and-material contracts, we recognize revenue as hours are worked, multiplied by the applicable hourly rate.

Additionally, the Laboratory Services segment enters into arrangements in which the performance obligation is a specified laboratory test. We recognize revenue under these arrangements based upon the number of samples tested times the contracted unit price.

In the event of changes in the scope, nature, duration, or volume of services of the contract with a client, we negotiate to modify our existing contract or establish a new contract to reflect the changes. We recognize renegotiated amounts as revenue by revision to the total contract value resulting from the renegotiated contract.

We often offer volume rebates to our large clients based on annual volume thresholds. We record an estimate of the annual volume rebate as a reduction of revenue throughout the period based on the estimated total rebate to be earned for the period.

In connection with the management of clinical trials, we pay, on behalf of our clients, fees to investigators and test subjects as well as other out-of-pocket costs for items such as travel, printing, meetings and couriers. Our clients reimburse us for these costs. Amounts paid by us as a principal for out-of-pocket costs are included in direct costs and the reimbursements we receive as a principal are reported as reimbursed revenue. In our statements of income, we combine amounts paid by us as an agent for out-of-pocket costs with the corresponding reimbursements, or revenue, we receive as an agent. During the three months ended September 30, 2010 and 2011, fees paid to investigators and other fees we paid as an agent and the associated reimbursements were approximately $104.9 million and $119.0 million, respectively.

Most of our contracts can be terminated by our clients either immediately or after a specified period following notice. Upon early termination, these contracts typically require the client to pay us the fees earned through the termination date, the fees and expenses to wind down the study and, in some cases, a termination fee or some portion of the fees or profit that we could have earned under the contract if it had not been terminated early. Therefore, revenue recognized prior to cancellation generally does not require a significant adjustment upon cancellation.

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Prior to our June 2010 spin-off of the Discovery Sciences segment, we generated Discovery Sciences segment revenue from our compound partnering business in the form of upfront payments, development and regulatory milestone payments, and royalties. Upfront payments were generally paid within a short period of time following the execution of an out-license and collaboration agreement. Milestone payments were typically one-time payments to us triggered by the collaborator’s achievement of specified development and regulatory events such as the commencement of Phase III trials or regulatory submission or approval. Royalties were payments received by us based on net product sales of a collaboration. We recognized these various forms of payment from our collaborators when the event which triggered the obligation of payment had occurred, there were no further obligations on our part in connection with the payment and collection was reasonably assured.

Recording of Expenses

We record our operating expenses among the following categories:

• direct costs;

• research and development;

• selling, general and administrative; and

• depreciation and amortization.

Direct costs consist of amounts necessary to carry out the revenue and earnings process, and include direct labor and related benefit charges, other costs directly related to contracts, an allocation of facility and information technology costs, and reimbursable out-of-pocket expenses. Direct costs, as a percentage of net revenue, will fluctuate from one period to another as a result of changes in labor utilization and the mix of service offerings involved in the hundreds of studies being conducted during any period of time.

Research and development, or R&D, expenses for the Clinical Development Services and Laboratory Services segments consist of labor and related benefits charges, materials, supplies and technology costs related to the development of new services offerings for clients. R&D costs for the Discovery Sciences segment consisted primarily of costs associated with preclinical studies and the clinical trials of our product candidates, development materials, patent costs, labor and related benefit charges associated with personnel performing research and development work, supplies associated with this work, consulting services and an allocation of facility and information technology costs.

SG&A expenses consist primarily of administrative payroll and related benefit charges, sales, advertising and promotional expenses, recruiting and relocation expenses, training costs, administrative travel, an allocation of facility and information technology costs and costs related to operational employees performing administrative tasks.

Depreciation and amortization expenses consist of facility and equipment depreciation and amortization of intangible assets. We record property and equipment at cost less accumulated depreciation. We record depreciation expense on a straight-line method. We depreciate leasehold improvements over the shorter of the respective lives of the leases or the useful lives of the improvements.

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Three Months Ended September 30, 2010 versus Three Months Ended September 30, 2011

The following table sets forth amounts from our consolidated condensed financial statements along with the dollar and percentage change for the three months ended September 30, 2010 compared to the three months ended September 30, 2011.

	Three Months Ended September  30,
(in thousands, except per share data)	2010			2011			$ Inc (Dec)			% Inc (Dec)
Net revenue:
Service revenue	$	339,390		$	382,873		$	43,483			12.8	%
Reimbursed revenue		25,985			32,522			6,537			25.2
Total net revenue		365,375			415,395			50,020			13.7
Direct costs		189,979			223,507			33,528			17.6
Research and development expenses		470			2,069			1,599			340.2
Selling, general and administrative expenses		102,365			107,579			5,214			5.1
Depreciation and amortization		15,726			16,821			1,095			7.0
Operating income		56,835			65,419			8,584			15.1
(Loss) income from equity method investment		(4,562	)		1,915			6,477			142.0
Loss on investments		—			(17,703	)		(17,703	)		NA
Other income (expense), net		877			1,069			192			21.9
Income from operations before provision for income taxes		53,150			50,700			(2,450	)		(4.6	)
Provision for income taxes		15,148			15,083			(65	)		(0.4	)
Net income		38,002			35,617			(2,385	)		(6.3	)
Net income attributable to noncontrolling interests		—			(181	)		(181	)		NA
Net income attributable to shareholders	$	38,002		$	35,436		$	(2,566	)		(6.8	)
Net income per diluted share	$	0.32		$	0.31		$	(0.01	)		(3.1	)

Total net revenue increased $50.0 million to $415.4 million in the third quarter of 2011. Service revenue was $382.9 million, which accounted for 92.2% of total net revenue for the third quarter of 2011. The $43.5 million increase in service revenue was attributable to a $31.7 million increase in net revenue from our Clinical Development Services segment and an $11.8 million increase in net revenue from our Laboratory Services segment. The increase in net revenue from our Clinical Development Services segment was primarily related to an increase in authorizations over the last several quarters. Converting our third quarter of 2011 net revenue at third quarter of 2010 average foreign exchange rates, our Clinical Development Services segment net revenue would have been $3.6 million lower. The increase in net revenue from our Laboratory Services segment was primarily the result of the strong authorizations in our bioanalytical and cGMP laboratories over the last several quarters.

Direct costs increased $33.5 million to $223.5 million in the third quarter of 2011. The increase was mainly attributable to a $20.4 million increase in direct personnel costs, a $6.5 million increase in reimbursable out-of-pocket expenses, a $2.3 million increase in equipment and supply costs related to our laboratories and a $2.0 million increase in facilities costs. Direct personnel costs increased primarily due to an increase in utilization of resources for projects and additional employees to support revenue growth. Converting our third quarter of 2011 direct costs at third quarter of 2010 average foreign exchange rates, our direct costs would have been $4.2 million lower.

R&D expenses increased $1.6 million to $2.1 million in the third quarter of 2011. The increase in R&D expense was primarily due to increased spending in drug discovery services.

33

SG&A expenses increased $5.2 million to $107.6 million in the third quarter of 2011. The increase in SG&A expenses was primarily related to a $2.4 million increase in accounting and legal expenses primarily related to costs associated with our pending acquisition by Carlyle and Hellman & Freidman, a $1.3 million increase in other taxes related to foreign revenue, a $1.2 million increase in facilities and information systems costs and a $1.1 million increase in personnel costs. These costs were partially offset by a $1.3 million decrease in bad debt expense due to collections of previously reserved accounts receivables. The increase in personnel costs is the result of normal salary increases, partially offset by the increase in utilization of resources for projects noted above. Converting our third quarter of 2011 SG&A expenses at third quarter of 2010 average foreign exchange rates, our SG&A expenses would have been $2.3 million lower.

Depreciation and amortization expense increased $1.1 million to $16.8 million in the third quarter of 2011 related to property and equipment we acquired to accommodate growth.

(Loss) income from equity investment increased $6.5 million to income of $1.9 million in the third quarter of 2011. During the third quarter of 2011, we recorded a $1.9 million increase in our equity investee, Celtic Therapeutics Holdings, L.P., primarily due to an increase in the fair value of our share of the underlying investments in the fund. This increase was the result of the progress Celtic made on the development of the programs in its portfolio. As a result of the fact that the investments held by Celtic are recorded at fair value, we anticipate the potential for significant volatility in the amount of income or loss from equity method investments in the future.

Loss on investments was $17.7 million in the third quarter of 2011. At September 30, 2011, we classified all of our asset-backed and auction rate securities as short-term investments because of the provision in the Merger Agreement that requires us to sell all or part of these securities. In addition we concluded that the previously unrealized losses were other-than-temporary and recognized other-than-temporary impairment losses during the third quarter of 2011.

Other income (expense), net increased $0.2 million to income of $1.1 million in the third quarter of 2011.

Our provision for income taxes from continuing operations decreased $0.1 million to $15.1 million in the third quarter of 2011. Our effective income tax rate for the third quarter of 2010 and 2011 was 28.5% and 29.8%, respectively. Our effective rate was higher in the third quarter of 2011 primarily due to higher U.S. profitability taxed at a higher effective tax rate as compared to the tax rates applicable to our foreign operations.

Net income attributable to shareholders of $35.4 million in the third quarter of 2011 represents a decrease of 6.8% from $38.0 million in the third quarter of 2010. Net income per diluted share of $0.31 in the third quarter of 2011 represents a 3.1% decrease from $0.32 net income per diluted share in the third quarter of 2010. Net income changed for various reasons as explained above.

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Nine Months Ended September 30, 2010 versus Nine Months Ended September 30, 2011

The following table sets forth amounts from our consolidated condensed financial statements along with the dollar and percentage change for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2011.

	Nine Months Ended September  30,
(in thousands, except per share data)	2010			2011			$ Inc (Dec)			% Inc (Dec)
Net revenue:
Service revenue	$	1,005,006		$	1,115,237		$	110,231			11.0	%
Reimbursed revenue		77,054			91,063			14,009			18.2
Total net revenue		1,082,060			1,206,300			124,240			11.5
Direct costs		564,948			651,720			86,772			15.4
Research and development expenses		15,253			6,081			(9,172	)		(60.1	)
Selling, general and administrative expenses		327,381			322,981			(4,400	)		(1.3	)
Depreciation and amortization		49,877			50,504			627			1.3
Operating income		124,601			175,014			50,413			40.5
(Loss) income from equity method investment		(8,351	)		15,103			23,454			280.9
Gain (loss) on investments		2,541			(18,808	)		(21,349	)		(840.2	)
Other income (expense), net		2,358			1,129			(1,229	)		(52.1	)
Income from continuing operations before provision for income taxes		121,149			172,438			51,289			42.3
Provision for income taxes		41,303			54,039			12,736			30.8
Income from continuing operations		79,846			118,399			38,553			48.3
Loss from discontinued operations, net of income taxes		(3,662	)		—			3,662			NA
Net income		76,184			118,399			42,215			55.4
Net loss attributable to noncontrolling interests		—			1,157			1,157			NA
Net income attributable to shareholders	$	76,184		$	119,556		$	43,372			56.9
Income per diluted share from continuing operations	$	0.67		$	1.03		$	0.36			53.7
Loss per diluted share from discontinued operations	$	(0.03	)	$	—		$	0.03			NA
Net income per diluted share	$	0.64		$	1.03		$	0.39			60.9

Total net revenue increased $124.2 million to $1.2 billion in the first nine months of 2011. Service revenue was $1.1 billion, which accounted for 92.5% of total net revenue for the first nine months of 2011. The $110.2 million increase in service revenue was attributable to a $98.2 million increase in net revenue from our Clinical Development Services segment and a $20.1 million increase in net revenue from our Laboratory Services segment. The first nine months of 2010 included $8.0 million in net revenue from our Discovery Sciences segment. The increase in net revenue from our Clinical Development Services segment was primarily related to an increase in authorizations over the last several quarters. Converting the first nine months of 2011 net revenue at the first nine months of 2010 average foreign exchange rates, our Clinical Development Services segment net revenue would have been $9.1 million lower. The increase in net revenue from our Laboratory Services segment was primarily the result of the strong authorizations in our bioanalytical and cGMP laboratories over the last several quarters.

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Direct costs increased $86.8 million to $651.7 million in the first nine months of 2011. The increase was mainly attributable to a $60.9 million increase in direct personnel costs, a $14.0 million increase in reimbursable out-of-pocket expenses, a $4.1 million increase in supply costs related to our laboratories, a $3.6 million increase in facilities costs and a $2.5 million increase in contract labor and subcontractor costs. These costs were partially offset by a $1.5 million decrease in hedging gains in the first nine months of 2011 compared to the first nine months of 2010. Direct personnel costs increased primarily due to an increase in utilization of resources for projects and additional employees to support revenue growth. Converting the first nine months of 2011 direct costs at the first nine months of 2010 average foreign exchange rates, our direct costs would have been $10.8 million lower.

R&D expenses decreased $9.2 million to $6.1 million in the first nine months of 2011. The decrease in R&D expense was primarily due to the spin-off of the compound partnering business in June 2010, partially offset by increased spending in drug discovery services.

SG&A expenses decreased $4.4 million to $323.0 million in the first nine months of 2011. The decrease in SG&A expenses was primarily related to a $5.9 million decrease in SG&A expenses related to the spin-off of the compound partnering business, a $3.5 million decrease in non-billable travel and training costs and a $1.5 million decrease in bad debt expense due to collections of previously reserved accounts receivables. These costs were partially offset by a $3.0 million increase in personnel costs, a $2.4 million increase in accounting and legal expenses primarily related to costs associated with our pending acquisition by Carlyle and Hellman & Friedman, a $1.7 million increase in recruitment and relocation expense partially related to the recruitment of our new CEO and a $1.4 million increase in other taxes related to foreign revenue. The increase in personnel costs is the result of normal salary increases, partially offset by the increase in utilization of resources for projects noted above. Converting the first nine months of 2011 SG&A expenses at the first nine months of 2010 average foreign exchange rates, our SG&A expenses would have been $7.0 million lower.

Depreciation and amortization expense increased $0.6 million to $50.5 million in the first nine months of 2011 related to property and equipment we acquired to accommodate growth.

(Loss) income from equity investment increased by $23.5 million to income of $15.1 million in the first nine months of 2011. During the first nine months of 2011, we recorded a $15.1 million increase in our equity investee, Celtic Therapeutics Holdings, L.P., primarily due to an increase in the fair value of our share of the underlying investments in the fund. This increase was the result of the progress Celtic made on the development of the programs in its portfolio. As a result of the fact that the investments held by Celtic are recorded at fair value, we anticipate the potential for significant volatility in the amount of income or loss from equity method investments in the future.

Gain (loss) on investments decreased $21.3 million to a loss of $18.8 million due primarily to a $18.6 million investment impairment mainly attributable to our classification of our asset-backed and auction rate securities as short-term investments because of the provision in the Merger Agreement that requires us to sell all or part of these securities, and a $0.3 million net loss on the sale of investments in the first nine months of 2011, compared to a gain of $3.3 million on the sale of investments and a $0.8 million investment impairment in the first nine months of 2010.

Other income (expense), net decreased $1.2 million to income of $1.1 million in the first nine months of 2011. Changes in exchange rates from the time we recognize revenue until the client pays resulted in a net loss of $4.3 million in the first nine months of 2011, up from break even in the first nine months of 2010. This loss was partially offset by a $2.2 million increase in interest income due to higher interest rates earned on higher average cash balances.

Our provision for income taxes from continuing operations increased $12.7 million to $54.0 million in the first nine months of 2011. Our effective income tax rate for the first nine months of 2010 and 2011 was 34.1% and 31.3%. Our effective rate was higher in the first nine months of 2010 primarily due to $3.8 million of tax expense related to a valuation allowance for deferred tax assets for the compound partnering spin-off.

In the first nine months of 2010, we incurred a loss from discontinued operations, net of income taxes of $3.7 million. This loss was attributable to discontinuing the operations of our wholly owned subsidiary PPD Dermatology, Inc.

Net income attributable to shareholders of $119.6 million in the first nine months of 2011 represents an increase of 56.9% from $76.2 million in the first nine months of 2010. Net income per diluted share of $1.03 in the first nine months of 2011 represents a 60.9% increase from $0.64 net income per diluted share in the first nine months of 2010. Net income changed for various reasons as explained above.

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Liquidity and Capital Resources

As of September 30, 2011, we had $416.7 million in total cash and cash equivalents and $63.6 million of short-term investments. We invest our cash and cash equivalents in bank deposits and financial instruments that are issued or guaranteed by the U.S. government. Our expected primary cash needs are for capital expenditures, expansion of services, possible acquisitions, investments, geographic expansion, dividends, working capital and other general corporate purposes. We have historically funded our operations, dividends and growth, including acquisitions, primarily with cash flow from operations.

Our cash balances are held in numerous locations throughout the world, most of which are currently outside of the United States. While historically our U.S. cash balances have been a much higher proportion of our total cash balances, the $200.0 million stock repurchase plan executed during the first quarter of 2011 decreased our U.S. cash balances to $119.2 million as of September 30, 2011. We intend to fund our U.S. operations from existing cash, cash flows from operations and if necessary, or appropriate, borrowings under our $50.0 million credit facility with Barclays.

Our investments are subject to general credit, liquidity, market and interest rate risks, which have been exacerbated by unusual events, such as the European sovereign debt crisis and the recent downgrade in the U.S.’s credit rating, which have led to global credit and liquidity issues. Although a downgrade in credit ratings generally is not unprecedented, a downgrade of the U.S. credit rating is, and the potential impact is uncertain. This downgrade could materially affect global and domestic financial markets and economic conditions, which may affect our financial condition and liquidity. Our short-term investment securities are classified as “available-for-sale” and, consequently, are recorded on our condensed consolidated balance sheet at fair value.

At December 31, 2010, we held $78.7 million net of unrealized losses of $14.2 million, in auction rate securities. We classified these securities as long-term investments. We concluded that the unrealized losses were temporary because of our ability and intent to hold the auction rate securities until the fair value recovered. In May 2011, we converted $14.2 million par value of our government-guaranteed student loan auction rate securities to $14.2 million par value of government-guaranteed student loan asset-backed securities from the same issuer. As a result of the Merger Agreement more fully described in Note 16 of the consolidated condensed financial statements, which requires us, at the request of Jaguar Holdings, LLC, or Parent, to sell all or part of the asset-backed and auction rate securities at a price equal or greater than the price proposed by the Parent, we classified all of these securities as short-term investments and recorded them at an estimated fair value as of September 30, 2011. Amounts ultimately received upon sale could vary from estimated fair value; however, we do not believe the difference between the estimated fair value and the amounts ultimately received upon sale will be material. In addition, we concluded that the previously unrealized losses were other-than-temporary because we no longer had the intent to hold these securities until maturity or until their face value recovered. As a result, for the three and nine months ended September 30, 2011, we recognized other-than-temporary impairment losses of $17.7 million.

In the first nine months of 2011, our operating activities provided $150.7 million in cash as compared to $169.4 million for the same period last year. The change in operating cash flow was due primarily to a net change in operating cash receipts and payments totaling $61.7 million, a net-of-tax gain from equity investment of $9.7 million in the current period as compared to a net-of-tax loss from equity investment of $5.4 million in the nine months ended September 30, 2010, a $5.1 million decrease in deferred tax asset and a $1.5 million decrease in the provision for doubtful accounts partially offset by a $42.2 million increase in net income in the first nine months of 2011 compared to the same period of 2010, a $17.7 million increase in impairment of investments, a $2.3 million increase in equity compensation expense and a $0.4 million gain on the sale of investments in the current period as compared to a $3.3 million gain in the nine months ended September 30, 2010. The change in adjustments for accruals of expected future operating cash receipts and payments includes unearned income of $26.3 million and payables to investigators of $9.1 million. The change in adjustments to deferrals of past operating cash receipts and payments includes accounts receivable and unbilled services, net, of ($71.6) million, accrued income taxes of ($13.7) million, other assets of ($4.2) million, accounts payable, other accrued expenses and deferred rent of ($4.2) million, and prepaid expenses, other current assets and advance payments of ($3.4) million. Fluctuations in receivables and unearned income occur on a regular basis as we perform services, achieve billing criteria, send invoices to clients and collect outstanding accounts receivable. This activity varies by individual client and contract. We attempt to negotiate payment terms that provide for payment of services prior to or soon after the provision of services, but the levels of unbilled services and unearned revenue can vary significantly from period to period.

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In the first nine months of 2011, our investing activities provided $13.6 million in cash. We used cash of $61.7 million for capital expenditures, $9.5 million to purchase investments and $7.6 million for advances to a related party. These amounts were offset by maturity and sale of investments of $91.8 million. Our capital expenditures in the first nine months of 2011 primarily consisted of $24.3 million for additional scientific equipment for our laboratory units, $20.0 million for various facility improvements and furnishings and $17.4 million for computer software and hardware.

In the first nine months of 2011, our financing activities used $220.1 million of cash. In the first nine months of 2011, we paid $200.0 million to repurchase common stock and $52.8 million of dividends to shareholders, which were partially offset by proceeds of $31.5 million from stock option exercises and purchases under our employee stock purchase plan.

The following table sets forth amounts from our consolidated condensed balance sheet affecting our working capital, along with the dollar amount of the change from December 31, 2010 to September 30, 2011.

(in thousands)	December 31, 2010		September 30, 2011		$ Inc (Dec)
Current assets:
Cash and cash equivalents	$	479,574	$	416,746	$	(62,828	)
Short-term investments		79,976		63,580		(16,396	)
Accounts receivable and unbilled services, net		435,876		505,007		69,131
Income tax receivable		12,327		17,469		5,142
Investigator advances		16,032		13,008		(3,024	)
Prepaid expenses		24,535		25,699		1,164
Deferred tax assets		30,910		41,334		10,424
Cash held in escrow		10,304		2,288		(8,016	)
Other current assets		44,172		17,979		(26,193	)
Total current assets	$	1,133,706	$	1,103,110	$	(30,596	)
Current liabilities:
Accounts payable	$	29,858	$	37,726	$	7,868
Payables to investigators		56,612		65,468		8,856
Accrued income taxes		1,918		6,064		4,146
Other accrued expenses		208,128		204,936		(3,192	)
Unearned income		317,191		337,086		19,895
Total current liabilities	$	613,707	$	651,280	$	37,573
Working capital	$	519,999	$	451,830	$	(68,169	)

Working capital as of September 30, 2011 was $451.8 million, compared to $520.0 million at December 31, 2010. The decrease in working capital was due primarily to a decrease in cash and cash equivalents and short-term investments of $62.8 million and $16.4 million, respectively, related to the repurchase of additional shares of our common stock and additional losses recognized on our auction rate securities, a decrease in other assets of $26.2 million, an increase in unearned income of $19.9 million, an increase in payables to investigators of $8.9 million and an increase in accounts payable of $7.9 million, partially offset by an increase in accounts receivable and unbilled services, net of $69.1 million.

For the nine months ended September 30, 2011, DSO was 27 days, compared to 22 days for the year ended December 31, 2010. We calculate DSO by dividing accounts receivable and unbilled services less unearned income by average daily gross revenue for the applicable period. DSO will continue to fluctuate in the future depending on contract terms, the mix of contracts performed within a period, the levels of investigator advances and unearned income, and our success in collecting receivables.

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In April 2011, we entered into a $50.0 million revolving line of credit facility with Barclays Bank PLC. The facility has a term of one-year and we can use borrowings for general corporate purposes. The credit facility contains customary affirmative, negative and financial covenants. Outstanding borrowings under the credit facility bear interest at an annual fluctuating rate tied to certain financial indices plus an agreed upon margin. The credit facility is currently scheduled to expire in April 2012, at which time any outstanding balance will be due. As of September 30, 2011, no borrowings were outstanding under this credit facility.

The annual cash dividend policy and the payment of future quarterly cash dividends under that policy are not guaranteed and are subject to the discretion of and continuing determination by our board of directors that the policy remains in the best interests of our shareholders and in compliance with applicable laws and agreements.

In February 2008, our Board of Directors approved a stock repurchase program authorizing us to repurchase up to $350.0 million of its common stock from time to time. In February 2011, we entered into an accelerated share repurchase, or ASR, arrangement with Barclays Capital Inc., under which we used $200.0 million of the remaining amount to repurchase additional shares of our common stock. During the first quarter of 2011, we repurchased approximately 6.5 million shares of our common stock under this arrangement for an aggregate purchase price of approximately $200.0 million. The agreement with Barclays for the ASR included a forward sale contract settlement date in December 2011, but it could be settled prior to that date. Under the terms of the forward sale contract, Barclays was required to purchase, in the open market, $200.0 million of our common stock during the term of the contract to fulfill its obligation and cover its position related to 6.5 million shares borrowed from third parties and sold to us during the first quarter of 2011 and for any additional shares payable upon settlement. The forward contract was settled in September 2011, and the Company received approximately 503,000 shares.

As of September 30, 2011, $60.7 million remained available for stock repurchases authorized by the Board of Directors. The manner of purchases, the amount we spend and the number of shares repurchased will vary based on a variety of factors including the stock price and blackout periods in which we are restricted from repurchasing shares. Our October 2, 2011 Merger Agreement with Jaguar Holdings (see Note 16 of our consolidated condensed financial statements) does not allow us to repurchase additional shares.

In 2009, we committed to invest up to $102.7 million in Celtic Therapeutics Holdings L.P., or Celtic, as a limited partner. Celtic is an investment partnership organized for the purpose of identifying, acquiring and investing in a diversified portfolio of novel therapeutic product candidates, with a focus on mid-stage compounds that have progressed through human proof of concept studies that are targeted to address unmet medical needs. As of September 30, 2011, we had a remaining commitment of $55.0 million, which we expect to fund over a period of up to four years and had an investment balance of $58.3 million.

In April 2011, we committed to invest up to $50.0 million in venBio Global Strategic Fund, L.P., or venBio, as a limited partner over the next five years. venBio invests in early stage life sciences companies. We account for this investment under the equity method of accounting because we are a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, we are deemed to lack the control of the entity required for consolidation. As of September 30, 2011, we had a remaining commitment of $49.8 million.

As of September 30, 2011, we had commitments to invest up to an aggregate additional $8.6 million in several venture capital funds and $0.8 million in other cost method investments. For further details, see Note 3 of our consolidated condensed financial statements.

In 2010, we entered into a non-revolving line of credit agreement to loan Celtic Pharma Development Services Bermuda Ltd., a subsidiary of Celtic Pharmaceutical Holdings L.P., up to $18.0 million to finance trade payables in connection with a specified drug candidate. Celtic Pharma Development Services Bermuda Ltd. has appointed us to conduct certain clinical studies on the drug candidate. Principal and interest are due and payable no later than June 30, 2013 and are secured by a guarantee of an affiliate of the borrower. As of September 30, 2011, we had advanced $16.8 million to the borrower.

As of September 30, 2011, our total gross unrecognized tax benefits were $29.4 million, of which $16.9 million, if recognized, would reduce our effective tax rate. We believe that it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $5.7 million within the next twelve months due to the settlement of audits and the expiration of statutes of limitations.

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Our policy for recording interest and penalties associated with tax audits is to record them as a component of provision for income taxes. As of September 30, 2011, we accrued $4.1 million of interest and $0.9 million of penalties with respect to uncertain tax positions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, we will reduce amounts accrued and reflect them as a reduction of the overall income tax provision.

We are subject to examination for the tax years between 2007 and 2011 in our primary tax jurisdictions and several of our foreign and state income tax returns are under examination by taxing authorities. We do not believe that the outcome of any examination will have a material impact on our financial condition or results of operations.

Under most of our agreements for services, we typically agree to indemnify and defend the sponsor against third-party claims based on our negligence or willful misconduct. Any successful claims could have a material adverse effect on our financial condition, results of operations or cash flows.

We expect to continue expanding our operations through internal growth, strategic acquisitions and investments. We expect to fund these activities and future cash dividends from existing cash, cash flows from operations and, if necessary or appropriate, borrowings under credit facilities. We believe that these sources of liquidity will be sufficient to fund our operations, dividends and stock repurchases for the foreseeable future. From time to time, we evaluate potential acquisitions, investments and other growth and strategic opportunities that might require additional external financing, and we might seek funds from public or private issuances of equity or debt securities. While we believe we have sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity and ability to pay any dividends or repurchase our stock could be affected by current and anticipated difficult economic conditions; our dependence on a small number of industries and clients; compliance with regulations; reliance on key personnel; breach of contract, personal injury or other tort claims; international risks; environmental or intellectual property claims; or other factors described below under “Potential Liability and Insurance”, “Potential Volatility of Quarterly Operating Results and Stock Price” and “Quantitative and Qualitative Disclosures about Market Risk”. In addition, see “Risk Factors,” “Contractual Obligations” and “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2010.

Off-Balance Sheet Arrangements

From time to time, we cause letters of credit to be issued to provide credit support for guarantees, contractual commitments and insurance policies. The fair values of the letters of credit reflect the amount of the underlying obligation and are subject to fees payable to the issuers of the letters of credit competitively determined in the marketplace. As of September 30, 2011, we had four letters of credit outstanding for a total of $1.8 million. We have no other off-balance sheet arrangements except for operating leases entered into in the normal course of business.

Contractual Obligations

Other than the financial advisor fee in connection with the merger of approximately $22.5 million which is contingent upon the closing of the merger and the potential termination fee of $58.1 million or $116.2 million, depending on the basis of the termination, if the Merger Agreement is terminated, there have been no significant changes to the Contractual Obligation table included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, 2010. Other than the adoption of the new accounting standard related to accounting for revenue arrangements with multiple deliverables and milestone payments, which requires additional disclosures, there were no material changes to our critical accounting policies and estimates in the first nine months of 2011. For detailed information on our critical accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, 2010.

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Recently Issued Accounting Standards

In May 2011, the Financial Account Standards Board, or FASB, issued updated fair value measurement and disclosure guidance that clarifies how to measure fair value and requires additional disclosures regarding Level 3 fair value measurements, as well as any transfers between Level 1 and Level 2 fair value measurements. The updated accounting guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. We are currently evaluating the impact of adopting the updated fair value guidance, and we do not expect the adoption to have a material impact on our consolidated condensed financial statements.

In June 2011, the FASB amended the manner in which an entity presents the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single, continuous statement of comprehensive income or in two separate but consecutive statements. The amendment eliminates the option to present the components of other comprehensive income as part of the statement of equity. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a retrospective basis. The adoption of this guidance will not change the previously reported amounts of comprehensive income but will change our presentation of comprehensive income in the consolidated condensed financial statements for the period ending March 31, 2012.

In September 2011, the FASB issued an accounting standards update that amends the two-step goodwill impairment test by permitting an entity to first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill impairment test is unnecessary. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. We do not believe the adoption of this guidance will have an impact on our consolidated condensed financial statements.

Recently Adopted Accounting Standards

In October 2009, the FASB issued a new accounting standard related to accounting for revenue arrangements with multiple deliverables. This standard applies to all deliverables in contractual arrangements in all industries in which the vendor will perform multiple revenue-generating activities. This standard also addresses the unit of accounting for an arrangement involving multiple deliverables and how arrangement consideration should be allocated. This standard was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated condensed financial statements, other than requiring additional disclosures.

In March 2010, the FASB issued a new accounting standard, the objective of which is to establish a revenue recognition model for contingent consideration that is payable upon the achievement of an uncertain future event, referred to as a milestone. This standard applies to milestones in single or multiple-deliverable arrangements involving research and development transactions and was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on our consolidated condensed financial statements, other than requiring additional disclosures.

In April 2011, the FASB issued an accounting standard update clarifying the guidance as to whether a restructuring of accounts receivable constitutes a troubled debt restructuring. The guidance applies to modifications of receivables when a debtor is experiencing financial difficulties. The updated guidance was effective on July 1, 2011 on a retrospective basis to January 1, 2011. The adoption of this standard did not have a material impact on our consolidated condensed financial statements because we did not modify any of our receivables.

Income Taxes

Because we conduct operations on a global basis, our effective tax rate has and will continue to depend upon the geographic distribution of our pretax earnings among locations with varying tax rates. Our profits are also impacted by changes in the tax rates and tax laws of the various tax jurisdictions as applied to certain items of income and loss recognized for U.S. GAAP purposes. In particular, as the geographic mix of our pretax earnings among various tax jurisdictions changes, our effective tax rate might vary from period to period. The effective rate will also change due to the discrete recognition of tax benefits when tax positions are effectively settled or as a result of specific transactions, such as the receipt of nontaxable research benefits.

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Inflation

Our long-term contracts, those in excess of one year, generally include an inflation or cost of living adjustment for the portion of the services to be performed beyond one year from the contract date. In the event that actual inflation rates are greater than our contractual inflation rates or cost of living adjustments, inflation could have a material adverse effect on our operations or financial condition.

Potential Liability and Insurance

Drug development services involve the testing of potential drug candidates on human volunteers pursuant to a study protocol. This testing exposes us to the risk of liability for personal injury or death to study volunteers, participants and patients resulting from, among other things, possible unforeseen adverse side effects, improper administration of the study drug or use of the drug following regulatory approval. We attempt to manage our risk of liability for personal injury or death to volunteers and participants from administration of study products through standard operating procedures, patient informed consent, contractual indemnification provisions with clients and insurance. We monitor clinical trials in compliance with government regulations and guidelines. We have established global standard operating procedures intended to satisfy regulatory requirements in all countries in which we have operations and to serve as a tool for controlling and enhancing the quality of clinical drug development and laboratory services. The contractual indemnifications generally do not protect us against all our own actions, such as gross negligence. We currently maintain professional liability insurance coverage with limits we believe are adequate and appropriate.

Potential Volatility of Quarterly Operating Results and Stock Price

Our quarterly and annual operating results have fluctuated in the past, and we expect that they will continue to fluctuate in the future. Factors that could cause these fluctuations to occur include:

• general economic risks, including from the U.S. debt downgrade and the ongoing European sovereign debt crisis;

• the timing of and potential closing of, or failure to close, the merger transaction with The Carlyle Group and Hellman & Friedman LLC;

• the timing and level of new business authorizations;

• project cancellations;

• the timing of the initiation and progress of significant projects;

• our dependence on a small number of industries and clients;

• our ability to properly manage our growth or contraction in our business;

• our ability to recruit and retain experienced personnel;

• the timing and amount of costs associated with integrating acquisitions;

• the timing and extent of new government regulations;

• impairment of investments or intangible assets;

• variability of equity method investments;

• litigation costs;

• the timing of the opening of new offices;

• the timing of other internal expansion costs;

• exchange rate fluctuations between periods;

• the mix of products and services sold in a particular period;

• pricing pressure in the market for our services;

• rapid technological change;

• the timing and amount of start-up costs incurred in connection with the introduction of new products and services; and

• intellectual property risks.

Delays and terminations of trials are often the result of actions taken by our clients or regulatory authorities, and are not typically controllable by us. Because a large percentage of our operating costs are relatively fixed while revenue is subject to fluctuation, variations in the timing and progress of large contracts can materially affect our quarterly operating results. For these reasons, we believe that comparisons of our quarterly financial results are not necessarily meaningful and should not be relied upon as an indication of future performance.

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Fluctuations in quarterly results, actual or anticipated changes in our dividend policy or stock repurchase plan or other factors, including recent general economic and financial market conditions, could affect the market price of our common stock. These factors include ones beyond our control, such as announcements by competitors, stock market speculation about us, changes in revenue and earnings estimates by analysts, market conditions in our industry, disclosures by product development partners and actions by regulatory authorities with respect to potential drug candidates, changes in pharmaceutical, biotechnology and medical device industries and the government sponsored clinical research sector and general economic conditions. Any effect on our common stock could be unrelated to our longer-term operating performance. For further details, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to foreign currency risk by virtue of our international operations. We derived 42.6% and 44.4% of our net revenue for the three months ended September 30, 2010 and 2011, respectively, from operations outside the United States. We generally reinvest funds generated by each subsidiary in the country where they are earned. Accordingly, we are exposed to adverse movements in foreign currencies, predominately in the pound sterling, euro, Brazilian real and Argentina peso.

The vast majority of our contracts are entered into by our U.S., U.K. or Singapore subsidiaries. The contracts entered into by the U.S. subsidiaries are almost always denominated in U.S. dollars. Contracts entered into by our U.K. and Singapore subsidiaries are generally denominated in U.S. dollars, pounds sterling or euros, with the majority in U.S. dollars. Although an increase in exchange rates for the pound sterling or euro relative to the U.S. dollar increases net revenue from contracts denominated in these currencies, operating income is negatively affected due to an increase in operating expenses that occurs when we convert our expenses from local currencies into the U.S. dollar equivalent.

We also have currency risk resulting from the passage of time between the recognition of revenue, invoicing of clients under contracts and the collection of client payments against those invoices. If a contract is denominated in a currency other than the subsidiary’s local currency, we recognize an unbilled receivable at the time of revenue recognition and a receivable at the time of invoicing for the local currency equivalent of the foreign currency invoice amount. Changes in exchange rates from the time we recognize revenue until the time the client pays will result in our receiving either more or less in local currency than the amount that was originally invoiced. We recognize this difference as a foreign currency transaction gain or loss, as applicable, and report it in other income, net. If the exchange rate on accounts receivable balances denominated in pounds sterling and euros had increased by 10%, our foreign currency transaction loss would have increased by $4.7 million at September 30, 2011.

Our strategy for managing foreign currency risk relies primarily on receiving payment in the same currency used to pay expenses and other non-derivative hedging strategies. From time to time, we also enter into foreign currency hedging activities in an effort to manage our potential foreign exchange exposure. If the U.S. dollar had weakened an additional 10% relative to the pound sterling, euro, Brazilian real and Argentina peso in the third quarter of 2011, income from continuing operations, including the impact of hedging, would have been approximately $0.6 million lower for the quarter based on revenues and the costs related to our foreign operations. From time to time, we also enter into foreign currency hedging activities in an effort to manage our potential foreign exchange exposure. We have entered into hedges designed to cover a significant portion of our foreign currency exposure for 2011.

Changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of foreign subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated condensed financial results. The process by which we translate each foreign subsidiary’s financial results to U.S. dollars is as follows:

• we translate statement of income accounts at average exchange rates for the period;

• we translate balance sheet asset and liability accounts at end of period exchange rates; and

• we translate equity accounts at historical exchange rates.

Translation of the balance sheet in this manner affects shareholders’ equity through the cumulative translation adjustment account. This account exists only in the foreign subsidiary’s U.S. dollar balance sheet and is necessary to keep the foreign balance sheet, stated in U.S. dollars, in balance. We report translation adjustments with accumulated other comprehensive income (loss) as a separate component of shareholders’ equity.

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Although we perform services for clients located in a number of jurisdictions, we have not experienced any material difficulties in receiving funds remitted from foreign countries. However, new or modified exchange control restrictions could have an adverse effect on our financial condition. If we were to repatriate dividends from the cumulative amount of undistributed earnings in foreign entities, we would incur a tax liability not currently provided for in our consolidated condensed balance sheet.

We are exposed to changes in interest rates on our cash, cash equivalents, investments and advances to and lines of credit with related parties. We invest our cash and investments in financial instruments with interest rates based on market conditions. If the interest rates on cash, cash equivalents and investments decreased by 10%, our interest income would have decreased by approximately $0.1 million in the third quarter of 2011.

We are also exposed to market risk related to our investments in auction rate securities. For further details, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” on our Form 10-K.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) are designed only to provide reasonable assurance that information to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that the information is accumulated and communicated to management to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide the reasonable assurance discussed above.

Internal Control Over Financial Reporting

No change to our internal control over financial reporting occurred during the third quarter of 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

45

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

In connection with the merger, five putative shareholder class action lawsuits have been filed in The General Court of Justice, Superior Court Division of New Hanover County, in Wilmington, North Carolina seeking damages in unspecified amounts and injunctive relief. The first, styled Hilary Coyne v. Pharmaceutical Product Development, Inc., et al., No. 11 CVS 4186 was filed on October 5, 2011 against the Company, each member of the Company’s board of directors, Carlyle Partners V, LP and The Carlyle Group, LP (collectively “Carlyle”), and Hellman & Friedman LLC and Hellman & Friedman Capital Partners VII, LP (collectively “H&F”), asserting that the members of our board of directors breached their fiduciary duties and asserting that the Company, Carlyle and H&F aided and abetted the alleged breaches of fiduciary duties. The second lawsuit, styled The Edward J. Goodman Life Income Trust et al. v. Pharmaceutical Product Development, Inc., et al., No. 11 CVS 4252, was filed on October 10, 2011 against the Company, each member of the Company’s board of directors, Carlyle and H&F asserting that the members of our board of directors breached their fiduciary duties and asserting that the Company, Carlyle and H&F aided and abetted the alleged breaches of fiduciary duties. The third, fourth and fifth lawsuits, styled York County Employees’ Retirement Board v. Pharmaceutical Product Development, Inc., et al., No. 11 CVS 4331, Harold Litwin v. Pharmaceutical Product Development, Inc., et al., No. 11 CVS 4333, and Judah Neiditch v. Pharmaceutical Product Development, Inc., et al., No. 11 CVS 4334, were each filed on October 17, 2011 against the Company, each member of the Company’s board of directors, Carlyle and H&F, asserting that the members of our board of directors breached their fiduciary duties and asserting that the Company, Carlyle and H&F aided and abetted the alleged breaches of fiduciary duties. Certain of these actions also allege that the disclosures made in the Company’s proxy statement are deficient. These cases have been designated as Mandatory Complex Business Cases pursuant to N.C. Gen. Stat. § 7A-45.4 and transferred to the North Carolina Business Court, where each is assigned to North Carolina Business Court Judge James L. Gale.

On October 11, 2011, another putative shareholder class action lawsuit relating to the merger was filed against us and our board of directors in the United States District Court for the Eastern District of North Carolina, styled Mark Hendriks v. Pharmaceutical Product Development, Inc., et al., Case 4:11-cv-00176-BO and alleging that members of our board of directors breached their fiduciary duties in connection with the transaction. The lawsuit was amended on October 18, 2011 to seek a preliminary injunction against the merger, add Carlyle and H&F as defendants, assert claims against the individual defendants and the Company for violation of §§ 14(a) and 20(a) of the Securities Exchange Act of 1934, add a claim against the Company, Carlyle and H&F for aiding and abetting the alleged breaches of fiduciary duties, and raise additional allegations purportedly in support of the breach of fiduciary duty claims.

Additional similar lawsuits might arise. The Company and its board of directors believe these lawsuits are without merit and intend to vigorously defend them.

46

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

Issuer purchases of equity securities

In February 2008, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $350.0 million of its common stock from time to time. The timing and amount of any share repurchases under this program is determined by the Company’s management based on their evaluation of market conditions and other factors. The Company is not required to repurchase any specific number of shares or to make repurchases by any certain date under this program.

As of December 31, 2010, $260.7 million remained available under the stock repurchase program. In February 2011, the Company entered into an accelerated share arrangement with Barclays Capital Inc., as agent for Barclays Bank PLC, pursuant to which the Company paid $200.0 million from cash on hand to Barclays to repurchase outstanding shares of the Company’s common stock. The accelerated share arrangement was settled on September 26, 2011. The following table summarizes the Company’s repurchases for the three months ended September 30, 2011:

	Total Number of Shares Purchased			Average Price Paid Per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)			Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(1)
Period
July 1, 2011 to July 31, 2011		—		$	—			—		$	60,700,000
August 1, 2011 to August 31, 2011		—			—			—			60,700,000
September 1, 2011 to September 30, 2011		502,526	(2)		28.70	(2)		502,526	(2)		60,700,000
Total		502,526		$	28.70			502,526		$	60,700,000

⁽¹⁾  On February 14, 2011, the Company announced that it entered into an accelerated share repurchase arrangement under which the Company committed to repurchase $200.0 million of its common stock. The $200.0 million was delivered to Barclays in February 2011, and the initial shares were repurchased by the Company in February and March 2011.

⁽²⁾  On September 26, 2011, the Company settled the accelerated share repurchase arrangement with Barclays and received additional shares for no additional consideration. The average price per share represents the final volume weighted average price paid by Barclays to obtain the shares it borrowed and delivered to the Company in the first quarter of 2011.

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Item 6. Exhibits

(a) Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes- Oxley Act of 2002 – Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes- Oxley Act of 2002 – Chief Financial Officer
10.162	Severance Agreement dated January 1, 2001, between Pharmaceutical Product Development, Inc. and various individuals.
10.280	Thirteenth Amendment dated September 29, 2011, to Lease Agreement, dated April 30, 2001, by and between Greenway Office Center L.L.C. and PPD Development, LP.
10.281	Employment agreement, effective September 16, 2011, between Pharmaceutical Product Development, Inc. and Raymond H. Hill
10.282	Severance agreement, effective September 16, 2011, between Pharmaceutical Product Development, Inc. and Raymond H. Hill
101	Financials provided in XBRL format

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SIGNATURES

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

	PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
	(Registrant)
By	/s/    Raymond H. Hill
	Chief Executive Officer
	(Principal Executive Officer)
By	/s/    Daniel G. Darazsdi
	Chief Financial Officer
	(Principal Financial Officer)
By	/s/    Peter Wilkinson
	Chief Accounting Officer
	(Principal Accounting Officer)

Date: November 2, 2011

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EX-10.162

Exhibit 10.162

Employee	Section 2.01 Base Salary and Bonus Multiplier		Section 2.03 Welfare Benefit Period
Fredric N. Eshelman		3.0	2 years
Raymond H. Hill*		2.99	2 years
William Sharbaugh		2.0	2 years
Daniel G. Darazsdi		2.0	2 years
Christine A. Dingivan		2.0	2 years
Brainard Judd Hartman		2.0	2 years
Michael O. Wilkinson		1.0	1 year
Edward J. Murray		1.0	1 year
Paul D. Colvin		1.0	1 year
Lee E. Babiss		1.0	1 year
Henrietta N. Ukwu		1.0	1 year
William W. Richardson		1.0	1 year
Sebastian Pacios Merino		1.0	1 year
Bruce A. Petersen		1.0	1 year
Susan Atkinson		1.0	1 year

* See Exhibit 10.282 for a copy of Raymond H. Hill’s severance agreement.

SEVERANCE AGREEMENT

THIS AGREEMENT, effective the 1st day of January, 2001, by and between Pharmaceutical Product Development, Inc. and its subsidiaries and affiliates (collectively, “PPD”) and                                  (“Employee”).

WHEREAS, Employee is a valued employee of PPD and in order to induce Employee to remain in the employ of PPD, PPD desires to provide the severance benefits hereinafter described in the event of a “Change in Control”, as hereinafter defined, of PPD.

NOW, THEREFORE, it is agreed as follows:

1. Definitions

1.01 “AFR” means the interest rate determined under Section 1274 of the Code.

1.02 “Base Amount” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

1.03 “Change in Control” means (i) a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), provided that such a Change in Control shall be deemed to have occurred if any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of PPD representing 50% or more of the combined voting power of PPD’s then outstanding securities; (ii) a sale of substantially all of the assets of PPD; or (iii) a liquidation of PPD.

1.04 “Constructive Termination” means a termination of Employee’s employment by PPD during the Covered Period initiated by Employee after (i) a substantial diminution or alteration in the duties of Employee, (ii) a reduction by PPD in Employee’s base salary in effect on the date of the Change in Control, or (iii) the relocation of Employee’s primary work location to a location that is more than twenty-five (25) miles from Employee’s primary work location prior to the Change in Control. Constructive Termination specifically does not include termination of Employee by reason of death, Disability or retirement at or after age 65. Employee shall give PPD written notice of a Constructive Termination, which notice shall provide a brief

description of the circumstances which Employee asserts gives rise to a right of Constructive Termination, and PPD shall have ten (10) days from receipt of said notice within which to remedy said circumstances.

1.05 “Covered Payment” means the amounts and benefits paid to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by PPD.

1.06 “Covered Period” means the time period commencing on the date of and coincident with a Change of Control and ending one year thereafter.

1.07 “Disability” means the inability of Employee to perform his assigned duties for PPD for a period of three (3) months due to Employee’s physical or mental illness as determined by a reputable medical doctor.

1.08 “Excess Parachute Payment” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

1.09 “Excise Tax” shall mean the tax imposed under Section 4999 of the Code on an Excess Parachute Payment.

1.10 “Executive Consultant” shall mean the executive compensation or comparable consultant used from time to time by PPD in designing its compensation program for executive and senior management employees of PPD; provided, however, that in its sole discretion PPD may at any time designate its independent auditors as its Executive Consultant for the purpose of performing any calculations required under Section 2.05 of this Agreement.

1.11 “Final Determination” means a final determination by a court of competent jurisdiction or a proceeding of the Internal Revenue Service or its successor agency.

1.12 “First Period” means the twelve-month period ending on the Termination Date.

1.13 “Internal Revenue Code” means the Internal Revenue Code of 1986 as heretofore or hereafter amended, and any successor code. References in this agreement to specific sections of the Code shall also include any successor sections.

1.14 “Parachute Payments” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

1.15 “Payment Cap” means the maximum amount which may be paid to Employee under the terms of this Agreement without subjecting Employee to the Excise Tax.

1.16 “Payment Date” means the date thirty (30) days following the Termination Date.

1.17 “Stock Awards” means Employee’s outstanding awards of PPD non-qualified stock options or restricted stock as of the Termination Date.

1.18 “Termination for Cause” means (i) an act or acts involving fraud, embezzlement or theft from PPD, (ii) Employee’s willful and repeated failure to follow directions of the Board of Directors that continues for at least ten (10) days following written notice of the Board of Directors of such failure to follow directions, or (iii) termination for cause as defined in and made pursuant to a then effective employment agreement, if any, between Employee and PPD.

1.19 “Termination Date” means the date on which Employee’s employment is terminated such that Employee is entitled to the compensation and benefits provided for in Section 2 of this Agreement.

2. Compensation Upon Change of Control. If during the Covered Period (i) PPD terminates Employee’s employment for reason other than Termination for Cause or (ii) Employee’s employment is terminated by reason of Constructive Termination, Employee shall be entitled to the following compensation and benefits:

2.01 Base Salary and Bonus. PPD shall pay Employee an amount equal to                      times the sum of Employee’s (i) base salary for the First Period (determined as if Employee was employed for the entire First Period if employed for less than the First Period) and (ii) the greater of (x) Employee’s target bonus under the PPD incentive cash bonus plan in which Employee is eligible to participate immediately prior to the Termination Date or (y) the average of the cash bonuses received in the First Period and in the twelve-month period immediately preceding the First Period, said amount to be paid on the Payment Date.

2.02 Unpaid and Deferred Compensation. PPD shall pay Employee any bonus or deferred compensation (whether in the form of cash, stock or otherwise) accrued but unpaid as of the Termination Date, said sum to be paid on the Payment Date.

2.03 Benefits. For a period of                      after the Termination Date, PPD shall continue to pay for and provide welfare benefits which Employee was receiving immediately prior to the Termination Date, including life insurance, health, medical, dental, vision and wellness, accidental death and dismemberment and disability benefits; provided, however, that PPD’s obligations under this clause shall terminate from the date that Employee first becomes eligible after the Termination Date for similar coverage under another employer’s plan.

2.04 Stock Awards. Notwithstanding anything to the contrary in any agreement for Stock Awards, (i) all unvested shares underlying Stock Awards granted more than six months prior to the Termination Date shall become fully vested as of the

Termination Date, and (ii) Employee shall continue to be treated under each award agreement evidencing a Stock Award as if Employee was an employee of PPD until the first to occur of (x) the third anniversary of the Termination Date, or (y) the expiration of the exercise period provided for therein; provided, however, in the event of Employee’s death or his disability (as disability is defined in the award agreement) after the Termination Date, the time for exercise after death or such disability prescribed in the award agreement shall apply. The provisions of this Section 2.04 shall also apply to any and all substitute awards for nonqualified stock options and restricted stock granted to Employee in exchange for Stock Awards to which this section applies.

2.05 Limitation on Payments.

a. Application of Section 2.05. If a Covered Payment hereunder would be an Excess Parachute Payment and would thereby subject Employee to the Excise Tax, the provisions of this Section 2.05 shall apply to determine the amounts payable to Employee pursuant to this Agreement.

b. Calculation of Benefits. At least fifteen (15) days prior to the Payment Date, PPD shall notify Employee of the aggregate present value of all amounts and benefits to which Employee would be entitled under this Agreement and any other plan, program or arrangement with PPD as of the Termination Date, together with the projected maximum payments, determined as of such Date of Termination, that could be paid without Employee being subject to the Excise Tax.

c. Imposition of Payment Cap. If (i) the aggregate value of all amounts and benefits to which Employee would be entitled under this Agreement and any other plan, program or arrangement with PPD exceeds the amount which can be paid to Employee without Employee incurring an Excise Tax and (ii) Employee would receive a greater net after-tax amount (taking into account all applicable taxes payable by Employee, including an Excise Tax) by applying the limitation contained in this Section 2.05(c), then the amounts otherwise payable to Employee under this Section 2 shall be reduced to an amount equal to the Payment Cap. If Employee receives reduced payments and benefits hereunder, Employee shall have the right to designate which of the payments and benefits otherwise provided for in this Agreement that Employee will receive in connection with the application of the Payment Cap.

d. Application of Code Section 280G. The Executive Consultant shall determine whether any part of the Covered Payment will be subject to the Excise Tax and the amount of such Excise Tax. For purposes of such determination, the Executive Consultant shall take into consideration and be guided by the following:

(i) such Covered Payment will be treated as Parachute Payments and all Parachute Payments in excess of the Base Amount shall be treated as subject to the Excise Tax, unless and except to the extent that in the good faith judgment of the Executive Consultant, PPD has a reasonable basis to conclude that such Covered Payment, in whole or in part, either do not constitute Parachute Payments or represent

reasonable compensation for personal services actually rendered (within the meaning of Section 280G of the Code) in excess of the Base Amount, or such Parachute Payments are otherwise not subject to the Excise Tax, and

(ii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Executive Consultant in accordance with the principles of Section 280G of the Code.

(e) Applicable Tax Rates. For purposes of determining whether Employee would receive a greater net after-tax benefit if the amounts payable under this Agreement are reduced in accordance with Section 2.05(c), Employee shall be deemed to pay:

(i) federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the first amounts are to be paid hereunder, and

(ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for such calendar year, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year;

provided, however, that Employee may request that such determination be made based on Employee’s individual tax circumstances, which shall govern such determination so long as Employee provides to the Executive Consultant such information and documents as the Executive Consultant shall reasonably request to determine such individual circumstances.

(f) Adjustments in Respect to Payment Cap.

(i) If Employee receives reduced payments and benefits under Section 2.05 or if Section 2.05 is determined not to be applicable to Employee because the Executive Consultant concludes that Employee is not subject to any Excise Tax, and it is established pursuant to a Final Determination that, notwithstanding the good faith of Employee and PPD in applying the terms of this Agreement, the aggregate Parachute Payments paid to Employee or for Employee’s benefit are in an amount that would result in Employee being subject to an Excise Tax and Employee would still be subject to the Payment Cap under the provisions of Section 2.05(c), then the amount in excess of the Payment Cap shall be deemed for all purposes to be a loan to Employee made on the date of the receipt of such excess payment, which Employee shall have an obligation to repay to PPD on demand, together with interest at the AFR, from the date of the payment hereunder to the date of repayment by Employee.

(ii) If Section 2.05 is not applied to reduce Employee’s entitlements under this Section 2 because the Executive Consultant determines that Employee would not receive a greater net after-tax benefit by applying Section 2.05 and

it is established pursuant to a Final Determination that, notwithstanding the good faith of Employee and PPD in applying the terms of this Agreement, Employee would have received a greater net after-tax benefit by subjecting Employee’s payments and benefits hereunder to the Payment Cap, then the aggregate Parachute Payments paid to Employee or for Employee’s benefit in excess of the Payment Cap shall be deemed for all purposes a loan to Employee made on the date of receipt of such excess payments, which Employee shall have an obligation to repay to PPD on demand, together with interest at the AFR, from the date of payment hereunder to the date of repayment by Employee.

(iii) If Employee receives reduced payments and benefits by reason of this Section 2.05 and it is established pursuant to a Final Determination that Employee could have received a greater amount without exceeding the Payment Cap, then PPD shall promptly thereafter pay Employee the aggregate additional amount which could have been paid without exceeding the Payment Cap, together with interest on such amount at the AFR, from the original payment due date to the date of actual payment by PPD.

3. Miscellaneous.

3.01 Successor-in-Interest. PPD will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PPD, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that PPD would be required to perform it if no succession had taken place.

3.02 Binding Effect. This Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

3.03 Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be given (i) by certified mail, return receipt requested, postage prepaid, (ii) by personal delivery or (iii) by recognized overnight carrier, and shall be deemed received when actually received. Notices shall be addressed as follows:

If to PPD:	Pharmaceutical Product Development, Inc.
	929 North Front Street
	Wilmington, North Carolina 28401
	Attention: Chief Executive Officer
If to Employee:

Either party hereto may change the notice address by giving notice thereof in the manner provided for herein.

3.04 Waiver. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any provision or condition of this Agreement to be performed by such other party shall be deemed a subsequent waiver of the same or similar provisions or conditions.

3.05 Entire Agreement. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this agreement, and this Agreement supersedes and replaces in its entirety all prior agreements and representations, expressed, implied, oral or otherwise, made by PPD to or with Employee, including but not limited to that certain Severance Agreement dated                      between PPD and Employee.

3.06 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of North Carolina.

3.07 Unenforceability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

3.08 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

3.09 Headings. Headings used in this Agreement are for convenience only and shall not be used to construe or interpret this Agreement.

3.10 Enforcement by Employee. All legal expenses incurred by Employee in the successful enforcement of any of the terms of this Agreement shall be paid by PPD.

IN WITNESS WHEREOF, the parties have executed this Agreement effective the date first hereinabove set forth.

Pharmaceutical Product Development, Inc.	Employee
By:
Name:	Name:
Title:

EX-10.280

Exhibit 10.280

THIRTEENTH LEASE AMENDMENT

THIS THIRTEENTH LEASE AMENDMENT (this “Thirteenth Amendment”) is made and entered into this 29th day of September 2011, by and between GREENWAY OFFICE CENTER L.L.C. (the “Landlord”) and PPD DEVELOPMENT, LP (the “Tenant”).

RECITALS:

A. Tenant (as successor to PPD Development, LLC) and Landlord (as successor to Greenway Properties, Inc. f/k/a Western Center Properties, Inc.) have entered into that certain lease with respect to space in the building located at 8551 Research Way, Middleton, Wisconsin, dated April 30, 2001 (the “Lease”), which Lease was subsequently amended on August 15, 2001, August 25, 2003, March 22, 2004, May 17, 2004, December 14, 2004, June 3, 2005, July 29, 2005, March 1, 2006, August 31, 2007, September 25, 2007, March 31, 2008, and February 10, 2011; and

B. Tenant and Landlord desire to amend the Lease as set forth herein.

AGREEMENT:

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which the parties hereby acknowledge, Landlord and Tenant agree as follows:

1. Article 1 of the Lease is hereby replaced in its entirety with the following:

“ARTICLE 1

TERMS

1.1 Date of Lease. April 30, 2001.

1.2 Landlord: Greenway Office Center L.L.C., a Delaware limited liability company, with it address at:

8215 Greenway Boulevard, Suite 500,

Middleton, WI 53562 (courier address)

P.O. Box 7700

Madison, WI 53707-7700 (mailing address)

Attn: Chief Legal Officer

The address for Landlord set forth in Section 16.6 is hereby replaced with the above.

1.3 Tenant: PPD Development, LP, a Texas limited partnership, with its address at:

929 North Front Street

Wilmington, NC 28401-3331

Attn: Corporate Lease Administration with copy to General Counsel at same address

The address for Tenant set forth in Section 16.6 is hereby replaced with the above.

1.4 Building: The Building is located at 8551 Research Way, Middleton, WI 53562. “Rentable Square Footage of the Building” is deemed to be 190,549 square feet.

1.5 Premises: The Premises shall mean the area shown on Exhibit A to this Lease. “Rentable Square Footage of the Premises” is deemed to be 125,761 square feet.

1.6 Rent: Rent shall mean the amounts payable by Tenant to Landlord as stated in Article 4.

1.7 Term: The Term commenced on May 1, 2001 (the “Commencement Date”) and, unless extended in accordance with this Lease, shall end on May 31, 2023 (the “Termination Date”).”

2. Article 2 of the Lease is hereby deleted in its entirety and replaced with the following:

“Phase IV of the Greenway Research Center has on a non-served basis approximately 5.4 parking stalls per 1,000 square feet of usable space which should provide adequate parking for employees and guests.”

3. Section 4.1 is hereby replaced in its entirety with the following:

“4.1 Rent. Tenant covenants and agrees to pay Landlord as Rent, in advance, on the first day of each month, without demand thereof, the “Monthly Base Rent” set forth in the table below, along with its prorated share of the Common Area Expenses (as defined in Section 4.4). The term “Monthly Base Rent” shall also mean and refer to “Monthly Rent” as that term is used in the Lease.

Period or Months of Term	Annual Rate Per Square Foot		Monthly Base Rent
09/01/2011 to 02/28/2012	$	15.40	$	161,393.28
03/01/2012 to 02/29/2013	$	15.86	$	166,235.08
03/01/2013 to 02/28/2014	$	16.34	$	171,222.13
03/01/2014 to 02/28/2015	$	16.83	$	176,358.80
03/01/2015 to 02/28/2016	$	17.33	$	181,649.56
03/01/2016 to 02/29/2017	$	17.85	$	187,099.05
03/01/2017 to 02/28/2018	$	18.39	$	192,712.02
03/01/2018 to 02/28/2019	$	18.94	$	198,493.38
03/01/2019 to 02/28/2020	$	19.51	$	204,448.18
03/01/2020 to 02/29/2021	$	20.09	$	210,581.63
03/01/2021 to 02/28/2022	$	20.70	$	216,899.08
03/01/2022 to 02/28/2023	$	21.32	$	223,406.05
03/01/2023 to 05/31/2023	$	21.96	$	230,108.23
					”

4. Section 4.5 is hereby replaced in its entirety with the following:

“4.5. Proration: Tenant’s “prorated share” shall mean the Rentable Square Footage of the Premises divided by the Rentable Square Footage of the Building, which equals 66.00 percent.”

5. Section 4.6 is hereby added to the Lease to read as follows:

“4.6 Rent Credit. Unless Tenant is then in default under Article 11, beginning on April 1, 2022, Tenant shall have a right to receive a credit against its future Base Rent in the amount of $3,000,000. Tenant may start offsetting the rent credit against the Base Rent due on April 1, 2022, and each subsequent month thereafter. Notwithstanding the above, if Tenant does not extend this Lease through at least May 31, 2026, Tenant will instead receive a credit against its future Base Rent in the amount of $2,250,000.

6. Section 6.2 (d) is hereby added to the Lease to read as follows:

“(d) Tenant shall be responsible for payment of electric service charges under the Madison Gas and Electric Service Agreement for Purchase of Backup Generation Service, dated December 16, 2004 (the “MGE Agreement”). On or before the termination date of the MGE Agreement, Tenant shall enter into its own service agreement for purchase of backup generation service from Madison Gas and Electric Company.”

7. Section 16.23 of the Lease is hereby replaced in its entirety with the following:

“16.23 Right of First Refusal. Throughout the Term of the Lease, Tenant shall have right of first refusal with respect to any space located in the Building (the “ROFR Space”), subject to other tenant(s) then existing rights of first refusal for the same space. In the event a third party wishes to lease the ROFR Space, Landlord shall notify Tenant of the terms upon which the third party is willing to lease the ROFR Space and

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Tenant shall have five (5) business days from the date of such notice to inform Landlord that Tenant wishes to lease the ROFR Space. If Landlord does not receive a response from Tenant within such five (5) day period, Landlord may rent the ROFR Space to the third party. If Tenant wishes to exercise its right of first refusal for the ROFR Space, Tenant must lease the ROFR Space upon the same terms and conditions as the bona-fide, negotiated proposal from the third party.”

8. Section 16.24 is hereby added to the Lease to read as follows:

“16.24. Renewal Option. Landlord hereby grants Tenant two (2) options (each, a “Renewal Option”) to extend the then current Term of this Lease with respect to the entire Premises for five (5) years each (each, a “Renewal Term”) by delivering written notice of exercise of the Renewal Option to Landlord not later than eighteen months (18) months in advance of the expiration of the then current Term. Landlord shall then provide Tenant with Landlord’s estimate of the fair market base rent for the Premises (“Fair Market Rent”). The Base Rent for the Renewal Term shall equal ninety-five percent (95%) of the estimated Fair Market Rent. Landlord shall determine the “fair market” rent and refurbishment allowance by analyzing comparable space in the Middleton/West Madison, Wisconsin area. In the event Tenant disputes Landlord’s determination of Fair Market Rent or the refurbishment allowance for the Renewal Term, Landlord and Tenant shall within thirty (30) days after the date on which the Landlord provides Tenant with its estimate of Fair Market Rent shall each simultaneously submit to the other, in writing, its good faith estimate of the Fair Market Rental Rate (“Good Faith Estimates”). If the higher of the Good Faith Estimates is not more than one hundred and five percent (105%) of the lower of the Good Faith Estimates, the Fair Market Rent in question shall be deemed to be the average of the submitted rates. If otherwise, then the rate shall be set by arbitration to be held in Madison, Wisconsin in accordance with the Real Estate Valuation Arbitration Rules of the American Arbitration Association, except that the arbitration shall be conducted by a single arbitrator as follows. Within ten (10) days after the simultaneous submittal by Landlord and Tenant of their respective Good Faith Estimates, each shall designate a recognized and independent commercial real estate attorney or MAI appraiser who has at least ten (10) years recent experience in the leasing or valuing, as applicable, of rental properties comparable to and in the vicinity of the Building, which arbitrator shall not be an affiliate of Tenant or Landlord. The two individuals so designated shall, within ten (10) business days after the last of them is designated, appoint a third independent arbitrator possessing the aforesaid qualifications to be the single arbitrator (provided that such third arbitrator shall not have been engaged by Landlord, Tenant or the local affiliates or agents of either of them during the preceding three (3) years). The third arbitrator so selected shall alone pick one of the two Good Faith Estimates, being the Good Faith Estimate that is closer to the Fair Market Rent as determined by the arbitrator using the definition set forth herein. The parties agree to be bound by the decision of the arbitrator, which shall be final and non-appealable, and shall share equally the costs of arbitration, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The phrase “Fair Market Rent” shall mean the fair market value annual rental rate that a comparable tenant would pay and a comparable landlord would accept in an arm’s length transaction, for delivery on or about the applicable delivery or effective date of the applicable Renewal Term, for comparable non-renewal, non-expansion space, for a comparable use in the Building and in comparable buildings within a one (1) mile radius of the Building (“Comparable Transactions”). In any determination of Comparable Transactions, appropriate consideration shall be given to the annual rental rates per rentable square foot; the standard of measurement by which the rentable square footage is measured; the ratio of rentable square feet to usable square feet; the type of escalation clause (e.g., whether increases in additional rent are determined on a net or gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop); provisions reflecting free or reduced rent, parking charges, length of the lease term, size, configuration and location of premises being leased, building standard work letter or tenant improvement allowances, if any; and other generally applicable conditions of tenancy for such Comparable Transactions. The intent is that Tenant will obtain the same rent and other economic benefits that a landlord would otherwise give in Comparable Transactions and that Landlord will make, and receive the same economic payments and concessions that a landlord would otherwise make, and receive in Comparable Transactions.”

9. Prior Amendments.

9.1 Except as noted in this Section 9, this Thirteenth Amendment hereby supersedes and replaces all of the terms and conditions of the first through twelfth amendments to the Lease, which were dated on or about August 15, 2001, August 25, 2003, March 22, 2004 (“Third Amendment”), May 17, 2004 (“Fourth Amendment”), December 14, 2004 (“Fifth Amendment”), June 3, 2005 (“Sixth Amendment”), July 29, 2005, March 1, 2006 (“Eighth Amendment”), August 31, 2007, September 25, 2007, March 31, 2008, and February 10, 2011 (the “Prior Amendments”). Except as noted in this Section 9, the terms and conditions of the Lease shall be construed as if the Prior Amendments were never in effect.

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9.2 The following provisions shall continue in full force and effect and are not superseded by the terms and conditions of this Thirteenth Lease Amendment:

i. Sections 15, 16 and 17 of the Eighth Amendment.

ii. Section 9 of the Sixth Amendment.

iii. Section 3 of the Fifth Amendment.

iv. Section 10 of the Fourth Amendment.

v. Section 11 of the Third Amendment.

10. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart of this Amendment. Any party so executing this Amendment by facsimile transmission or electronic mail shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart delivered by facsimile transmission or electronic mail.

11. All capitalized terms not defined herein shall have the meaning ascribed to them in the Lease.

12. In the event of conflict between the provisions of this Amendment and the terms of the Lease, the provisions of this Amendment will control.

13. The parties hereby ratify the terms and conditions of the Lease as amended by this Amendment.

IN WITNESS WHEREOF, Landlord and Tenant have entered into this Amendment as of the date set forth in the preamble.

TENANT:		LANDLORD:
PPD DEVELOPMENT, LP		GREENWAY OFFICE CENTER L.L.C.
By:	PPD GP, LLC, Its General Partner	By:	T. Wall Properties L.L.C., Its Manager
By:	/s/ William J. Sharbaugh		By:	/s/ Randall J. Guenther
Name:	William J. Sharbaugh			Randall J. Guenther,
				President & Chief Financial Officer
Title:	Chief Operating Officer	Date:	October 10, 2011
Date:	September 29, 2011

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EXHIBIT A

OUTLINE AND LOCATION OF PREMISES

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GUARANTY

THIS GUARANTY (this “Guaranty”) is made and entered into by and between PHARMACEUTICAL PRODUCT DEVELOPMENT, INC., a North Carolina corporation, (the “Landlord”) and GREENWAY OFFICE CENTER L.L.C., a Delaware limited liability company (the “Guarantor”).

RECITALS:

A. Guarantor is affiliated with PPD Development, LP, a Texas limited partnership, (the “Tenant”).

B. Landlord and Tenant entered into that certain lease, dated April 30, 2001, as amended, for the premises located at 8551 Research Way, Middleton, WI 53562 (the “Lease”).

C. Guarantor derives a financial benefit from the execution of the Lease by Landlord and Tenant.

D. Guarantor desires to guaranty all of Tenant’s obligations under the Lease.

AGREEMENT:

IN CONSIDERATION of the foregoing Recitals, and in consideration of the Landlord entering into the Lease, Guarantor does hereby covenant and agree to the following:

1. GUARANTY OF PERFORMANCE. Guarantor guarantees, unconditionally and absolutely, the full and faithful performances and observance of all the covenants, terms, and conditions of the Lease provided to be performed and observed by Tenant, expressly including, without being limited to, the payment of rent, when due, under the Lease. This is a guaranty of payment and performance and not of collection.

2. LEASE MODIFICATION, RENEWAL OR EXTENSION. If the Lease is modified, renewed or extended, or if the Tenant holds over beyond the term of the Lease, the obligations hereunder of Guarantor shall extend and apply with respect to the full and faithful performance of all of the covenants, terms and conditions of the Lease and of any such modifications, renewal or extension thereof.

3. TENANT’S SUBLET OR ASSIGNMENT. This Guaranty shall remain and continue in effect if the Tenant sublets or assigns, whether or not Guarantor or Landlord receives notice of such sublet or assignment or has consented to it.

4. BINDING ON SUCCESSORS AND ASSIGNS. This Guaranty, and all of the terms hereof, shall be binding on Guarantor and the heirs, successors, assigns, and legal representatives of Guarantor and shall inure to the benefit of the successors, assigns, and legal representatives of Landlord.

5. JOINT AND SEVERAL LIABILITY. The liability of Guarantor is co-extensive with that of Tenant and also joint and several, and action may be brought against Guarantor and carried to final judgment either with or without making Tenant a party thereto. Guarantor further agrees that in any action or proceeding brought by Landlord against Tenant, Guarantor does not have to be joined as a party thereto.

6. NO DEMAND NEEDED. Landlord may proceed against Guarantor without first making demand against Tenant and without first bringing any action or proceeding against Tenant and without joining Tenant as a party defendant.

7. WAIVER OF RIGHT TO DEFAULT NOTICE. Guarantor does not require any notice of Tenant’s nonpayment, nonperformance, or nonobservance of the covenants, terms, and conditions of the Lease. Guarantor expressly waives the right to receive such notice.

8. TENANT’S BANKRUPTCY. Neither Guarantor’s obligation to make payment in accordance with the terms of this Guaranty, nor any remedy for the enforcement thereof, shall be impaired, modified, released, or limited in any way by any impairment, modification, release, or limitation of the liability of Tenant or Tenant’s representatives in bankruptcy, resulting from the operation of any present or future provision of the Bankruptcy Code of the United States or from the decision of any court interpreting the same.

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9. SERVICE OF PROCESS. Guarantor irrevocably appoints Tenant as its agent for the service of process related to this Guaranty. Notwithstanding the proceeding, Landlord agrees to send Guarantor a copy of the legal papers served on Tenant by certified mail, return receipt requested, at the address noted by Guarantor’s signature below.

10. VENUE AND INTERPRETATION OF GUARANTY. Venue for any action or proceeding arising out of this Guaranty shall be Dane County in the State of Wisconsin. The internal laws of the State of Wisconsin shall govern the interpretation, validity, performance and enforcement of this Guaranty. The invalidity or unenforceability of any provision of this Guaranty shall not affect or impair any other provision. Both parties have been either represented by legal counsel or given the chance to review this Guaranty with legal counsel, and therefore, the provisions of this Guaranty shall be construed as their fair meaning, and not for or against any party based upon any attributes to such party of the source of the language in question.

11. WAIVER OF JURY TRIAL. Guarantor hereby waives the right to trial by jury in any action or proceeding that may hereafter be instituted by Landlord against Guarantor in respect of this Guaranty.

12. LANDLORD’S LEGAL EXPENSES. Landlord shall be entitled to all of its costs and expenses, including, without limitation, reasonable attorneys’ fees, if Landlord institutes a suit against Tenant or Guarantor for violation of, or to enforce any covenant, term or condition of, the Lease or this Guaranty.

13. NO WAIVER BY LANDLORD. Landlord’s failure or delay in exercising any rights under the Lease or this Guaranty or in sending any notices, or requests, or in requiring strict performance or observance of any term or covenant of the Lease, shall not waive any of Landlord’s rights created by this Guaranty.

14. COUNTERPARTS; FACSIMILE. This Guaranty may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by facsimile transmission or electronic mail shall be effective as delivery of a manually executed counterpart of this Guaranty. Any party so executing this Guaranty by facsimile transmission or electronic mail shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart delivered by facsimile transmission or electronic mail.

IN WITNESS WHEREOF, Landlord and Guarantor have executed this Guaranty as of the date it is executed by both of the parties.

GUARANTOR:	LANDLORD:
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.	GREENWAY OFFICE CENTER L.L.C.
	By:	T. Wall Properties L.L.C., Its Manager
X
Name:		By:
Address:		Name:
		Title:
		Date:
Date:

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EX-10.281

Exhibit 10.281

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”), is made and entered into on this 16^th day of September, 2011 (the “Effective Date”), by and between Pharmaceutical Product Development, Inc., a North Carolina corporation (the “Company”), with a mailing address for notice purposes of 929 North Front Street, Wilmington, North Carolina 28401, Attention: Executive Chairman of the Board, and Raymond H. Hill (“Employee”), an individual whose mailing address for notice purposes is 929 North Front Street, Wilmington, North Carolina 28401.

RECITALS

A. The Company is a contract research organization engaged in the business of providing drug discovery and development services to pharmaceutical, biotechnology, medical device, government and academic organizations throughout the world (the “Business”).

B. The Company desires to employ Employee and Employee desires to be employed by the Company, all upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE 1

EMPLOYMENT AND DUTIES

1.1 Employment of Employee. On the Effective Date, the Company agrees to employ Employee and Employee accepts such employment pursuant and subject to the terms and conditions of this Agreement.

1.2. Duties and Powers. During the Employment Period (as defined herein), Employee shall serve as Chief Executive Officer of the Company and will have such responsibilities, duties and authority, and will render such services for and in connection with the Company and its affiliates as are customary in such position in a comparable company and as the Executive Chairman or the Board of Directors of the Company (the “Board”) shall from time to time reasonably direct. Employee shall devote Employee’s full business time and attention exclusively to the Business of the Company and shall use best efforts to faithfully carry out Employee’s duties and responsibilities hereunder. During the Employment Period (as defined herein), Employee may serve on charitable and civic boards, subject to the prior approval of the Executive Chairman, which approval shall not be unreasonably withheld, so long as such board position(s) do not limit or interfere with Employee’s duties to the Company hereunder or breach any agreement between Employee and the Company. Employee shall comply

with all personnel policies and procedures of the Company as the same now exist or may be hereafter implemented by the Company from time to time, including those policies contained in the Company’s employee manual or handbook which sets forth policies and procedures generally for employees of the Company and its subsidiaries and affiliates (the “Handbook”) to the extent not inconsistent with this Agreement. The Company will nominate and use its reasonable best efforts to have Employee elected and re-elected to a seat on the Company’s Board of Directors during the Employment Period.

ARTICLE 2

TERM OF EMPLOYMENT

Unless sooner terminated as provided elsewhere in this Agreement, Employee’s employment under this Agreement shall begin on the Effective Date and end at 11:59 p.m. Eastern Time on September 15, 2013 (“Initial Employment Period”). Thereafter, this Agreement shall automatically renew for successive one-year periods, unless either the Company or Employee provides written notice to the other at least ninety (90) days prior to the termination of the Initial Employment Period or any renewal period stating said party’s desire to terminate this Agreement. The Initial Employment Period and any extension or renewal thereof shall be referred to herein together as the “Employment Period”. Notwithstanding anything to the contrary contained herein, the Employment Period is subject to termination pursuant to Article 4 hereof.

ARTICLE 3

COMPENSATION AND BENEFITS

3.1 Base Salary. The Company will pay Employee an annual base salary at a rate of $575,000 per annum (the “Base Salary”), payable in accordance with the Company’s regular payroll policy for salaried employees. The Base Salary of Employee may be subject to increase (but not decrease) annually during the Employment Period by the Company. Except as set forth in Section 4.2.(b) hereof, if the Employment Period is terminated “For Cause” pursuant to Article 4 hereof or is otherwise shorter than a full contract year, then the Base Salary for any partial year will be prorated and paid through the date of termination based on the number of days elapsed in such year during which services were actually performed by Employee, and the Company shall have no further obligation to pay the Employee’s Base Salary following the date of termination. Notwithstanding anything herein to the contrary, the Company shall not be obligated to pay Employee the Base Salary during any period in which Employee has exhausted Employee’s paid time off and is either (a) receiving short-term or long-term disability benefits under any policy or program maintained by the Company, (b) on Family and Medical Leave Act leave, or (c) is unable to perform Employee’s essential job duties by reason of a physical or mental incapacity or disability with or without a reasonable accommodation.

3.2 Benefits.

a. During the Employment Period, Employee shall be eligible to participate in and/or receive benefits under the health insurance, group term life/AD&D,

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short and long-term disability, retirement, paid-time off, deferred compensation and other plans maintained from time to time by the Company, subject in each instance to Employee meeting all eligibility and qualification requirements of such plans. During the Employment Period, Employee shall be entitled to twenty-seven (27) days of paid-time-off annually, subject to the provisions of the Handbook.

b. In addition to the benefits provided in (a) above, during the Employment Period, Employee shall be entitled to participate in (i) the employee incentive compensation plan maintained for employees of the Company, as the same may be amended from time to time (the “Incentive Compensation Plan”), and (ii) the 1995 Equity Compensation Plan maintained by PPD, as the same has been and may be amended from time to time, or any successor plan (the “ECP”), subject in each instance to Employee meeting all eligibility and qualification requirements of such plans.

3.3 Equity Grants.

a. Initial Stock Option Grant. The Company shall grant to Employee on the first day of the Initial Employment Period non-qualified options to purchase 150,000 shares of PPD’s common stock. Said stock options shall be granted under the terms and conditions of the ECP and subject to Employee’s execution or acceptance of all documents, terms and conditions required by PPD to effectuate the grant of stock options. In addition to all such terms and conditions, said stock options shall be (i) subject to a three-year linear vesting schedule under which one-third of the total number of stock options granted will vest on the three anniversaries of the stock option grant and will be priced based on the Nasdaq closing price of the Company’s common stock on the first day of the Initial Employment Period.

b. Restricted Stock Grant. The Company shall grant to Employee on the first day of the Initial Employment Period a restricted stock award for 30,000 shares of PPD’s common stock. Said restricted stock award shall be granted under the terms and conditions of the ECP and the Company’s standard Restricted Stock Award Agreement to be entered into by PPD and Employee. In addition to the other terms and conditions of the ECP and the Restricted Stock Award Agreement, said restricted stock award shall be subject to a three-year linear vesting schedule under which one-third of the total number of shares of restricted stock granted will vest on the three anniversaries of the restricted stock grant.

c. Restriction on Equity Grants. Employee expressly understands that should a Change in Control (as defined herein) of the Company occur within twelve months of the Effective Date, Employee will be required to contribute the equity grants referenced herein in Sections 3.3.a. and 3.3.b. to effect any such transaction. The Company will use commercially reasonable efforts to structure any Change in Control and contribution of Employee’s equity grants in a manner that will defer Employee’s tax obligations resulting from such contribution. At Employee’s election, Employee may surrender and/or sell a portion of such equity grants in order to cover any tax liability resulting from such contribution. For purposes of this Agreement, “Change in Control” means (i) a change of control of a nature that would be required to be reported in

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response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), provided that such a Change in Control shall be deemed to have occurred if any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities; (ii) a sale of substantially all of the assets of the Company; or (iii) a liquidation of the Company.

3.4 Expenses. The Company will reimburse Employee, in accordance with and subject to Employee’s compliance with the Company’s policy, for Employee’s necessary and reasonable out-of-pocket expenses incurred in the course of performance of Employee’s duties hereunder. In addition, the Company will reimburse Employee for his reasonable attorneys’ fees in connection with entering into this Agreement, up to $10,000. All reimbursement of expenses to Employee hereunder shall be conditioned upon presentation of sufficient documentation evidencing such expenses.

3.5 Working Facilities. Employee shall work out of the Company’s worldwide headquarters located in Wilmington, North Carolina. The Company shall furnish Employee with such office space, equipment, technical, secretarial and clerical assistance and such other facilities, services and supplies as shall be reasonably necessary and suitable to his position to enable Employee to perform the duties required of Employee hereunder in an efficient and professional manner.

ARTICLE 4

TERMINATION OF EMPLOYMENT

4.1 Basis for Termination. Notwithstanding any other provision in this Agreement to the contrary, the Employment Period and Employee’s employment hereunder shall terminate effective on the date indicated upon the happening of any of the following events:

a. Upon the death of Employee, effective immediately on the date of death without any notice;

b. Upon a determination by the Executive Chairman of the Company or the Board, acting in good faith but made in the Executive Chairman’s or Board’s sole discretion, that Employee has a physical or mental incapacity or disability which renders Employee unable to perform Employee’s essential job duties under this Agreement with or without reasonable accommodation for a period in excess of ninety (90) days during any twelve-month period hereunder, effective upon the date said determination is communicated in writing to Employee or such later date as specified therein; provided, however, that during any period of Disability during which the Employee is receiving compensation under the Company’s short term disability policy, the Company will pay to Employee, minus any applicable taxes and withholdings, an amount equal to the difference between such short term disability payments and Employee’s then current base salary. Company shall not have the right to terminate Employee by reason of disability if such termination would terminate Employee’s receipt of or right to receive short-term or

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long-term disability benefits under any policy or program maintained by the Company; provided, further, nothing herein shall give the Company the right to terminate Employee prior to discharging its obligations to Employee, if any, under the Family and Medical Leave Act, the Americans with Disabilities Act, or any other applicable law; or

c. Upon a determination by the Board, acting in good faith but made in the Board’s sole discretion, that there is ground for termination for “Cause.” “Cause” will exist where Employee: (i) willfully or repeatedly failed to substantially perform Employee’s reasonable and lawful duties and responsibilities for the Company and/or committed a material violation of any material Company policy or procedure (including without limitation any policy or procedure described in the Handbook); (ii) willfully, intentionally or negligently engaged in any act or omission that injures, or, in the opinion of the Board, is more likely than not to materially injure the business or reputation of the Company, including but not limited to injury to any director, employee, client or shareholder of the Company; (iii) demonstrated repeated, willful or gross negligence and/or willful misconduct in Employee’s execution of duties for the Company (including but not limited to insubordination); (iv) engaged in a form of discrimination or harassment prohibited by law (including, without limitation, discrimination or harassment based on race, color, religion, sex, national origin, age, disability, and/or genetic information); (v) misappropriated or embezzled any tangible or intangible property of the Company; (vi) breached any of the material terms of this Agreement and/or any other written agreement between Employee and the Company; and/or (vii) has been indicted on charges or convicted or pleaded guilty or no contest to a felony; in each case effective upon the date said determination is communicated in writing to Employee or such later date as specified therein.

d. Upon written notice by either Employee or the Company to the other party, effective on the date set forth in such notice or such earlier date as the Company may provide.

4.2 Compensation After Termination.

a. If (i) the Company terminates Employee’s employment during the Employment Period pursuant to Section 4.1.a, 4.1.b, or 4.1.c hereof, (ii) either party terminates this Agreement pursuant to Article 2 hereof or (iii) Employee voluntarily terminates this Agreement pursuant to Section 4.1.d hereof, then the Employment Agreement and Employee’s employment with the Company shall terminate and the Company shall have no further obligations hereunder or otherwise with respect to Employee’s employment from and after the termination or expiration date, except that the Company shall pay Employee’s Base Salary accrued through the date of termination or expiration and shall provide such benefits as are required by applicable law. Notwithstanding the foregoing, if the Company terminates Employee pursuant to Section 4.1.a or 4.1.b, the Company will pay to Employee a pro rata share of any incentive compensation earned by Employee during the year in which such termination occurs, such incentive compensation to be determined and payable in the same manner and at the same time as it would have been had Employee’s employment not been terminated pursuant to Section 4.1.a or 4.1.b.

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b. If the Company terminates the Employee’s employment pursuant to Section 4.1.d hereof, then the Company shall have no further obligations hereunder or otherwise with respect to Employee’s employment from and after the termination date, except that, subject to receiving a signed separation agreement and general release of claims from Employee substantially in the form set out in attached Exhibit 1 to this Agreement, modified as necessary so as to be fully enforceable under current applicable law, Company shall pay Employee’s Base Salary through the end of the then current Employment Period and shall provide benefits as are required by applicable law. However, any payments under this Section 4.2.b. payable after termination of employment may be delayed as may be required by Section 7.12 hereof. Provided, however, if the termination of Employee’s employment results in compensation and benefits being provided to Employee pursuant to the Severance Agreement of even date herewith, Employee shall receive no compensation under this Section 4.2, except for Base Salary and benefits accrued through the date of termination or as are otherwise required by applicable law.

4.3 Continuing Rights upon Termination of Employment Period. Notwithstanding any termination or expiration of this Agreement, the Company shall continue to have all other rights available hereunder, including without limitation all rights under the Proprietary Agreement and/or the Non-Competition Agreement (as hereinafter defined).

4.4 Resignation as Officer and Director. Upon termination or expiration of Employee’s employment by either party for any reason, Employee will also be deemed to have resigned Employee’s position(s), if any, as an officer or director of the Company, as a member of any committee the Board of Directors of the Company, as an officer, director, manager or any other office or position of any subsidiary or affiliate of the Company, and any other position(s) Employee holds at the request of, or for the benefit of, the Company or its subsidiaries or affiliates.

ARTICLE 5

PROPRIETARY INFORMATION

Prior to or coincident with the commencement date of this Agreement, Employee shall execute and deliver to the Company its standard Proprietary Information and Inventions Agreement (the “Proprietary Agreement”), a copy of which is attached hereto as Annex A.

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ARTICLE 6

NON-COMPETITION AND NON-SOLICITATION

Prior to or coincident with the commencement date of this Agreement, Employee shall execute and deliver to the Company its standard Non-Competition and Non-Solicitation Agreement (the “Non-Competition Agreement”), a copy of which is attached hereto as Annex B.

ARTICLE 7

MISCELLANEOUS

7.1 Withholding Taxes. All amounts payable under this Agreement, whether such payment is to be made in cash or other property, shall be subject to applicable withholding requirements for Federal, state and local income taxes, employment and payroll taxes, and other legally required withholding taxes and contributions to the extent appropriate in the determination of the Company, and Employee shall report all such amounts as ordinary income on Employee’s personal income returns and for all other purposes.

7.2 Assignment. No party hereto may assign or delegate any of its rights or obligations hereunder without the prior written consent of the other party hereto; provided, however, that the Company shall have the right to assign all or any part of its rights and obligations under this Agreement (i) to any member, subsidiary or affiliate of the Company or any surviving entity following any merger or consolidation of any of those entities with any entity other than the Company, or (ii) in connection with the sale of the Business by the Company.

7.3 Binding Effect. All covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall be binding upon and inure to the benefit of the respective legal representatives, heirs, successors and permitted assigns of the parties hereto.

7.4 Entire Agreement. This Agreement, together with the Proprietary Agreement, Severance Agreement and the Non-Competition Agreement of even date herewith, sets forth the entire understanding of the parties and supersedes and preempts all prior oral or written understandings and agreements with respect to the subject matter hereof.

7.5 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement.

7.6 Amendment; Modification. No amendment or modification of this Agreement and no waiver by any party of the breach of any covenant contained herein shall be binding unless executed in writing by the party against whom enforcement of such amendment, modification or waiver is sought. No waiver shall be deemed a continuing waiver or a waiver in respect of any subsequent breach or default, either of a similar or different nature, unless expressly so stated in writing.

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7.7 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of North Carolina, without giving effect to provisions thereof regarding conflict of laws.

7.8 Arbitration. Except for disputes, controversies or claims arising out of or related to the Proprietary Agreement and/or the Non-Competition Agreement attached as Annex A and B, respectively, any dispute, controversy or claim arising out of or relating to this Agreement, including but not limited to its existence, validity, interpretation, performance or non-performance, or breach, shall be decided by a single neutral arbitrator agreed upon by the parties hereto in Wilmington, North Carolina in binding arbitration pursuant to the commercial arbitration rules of the American Arbitration Association then in effect. The parties to any such arbitration shall be limited to the parties to this Agreement or any successor thereof. The written decision of the arbitrator shall be final and binding and may be entered and enforced in any court of competent jurisdiction. Each party waives any right to a jury trial in any such forum. Each party to the arbitration shall pay its fees and expenses, unless otherwise determined by the arbitrator.

7.9 Notices. All notices, demands or other communications to be given or delivered hereunder or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been properly served if (a) delivered personally, (b) delivered by a recognized overnight courier service, (c) sent by certified mail, return receipt requested and first class postage prepaid, or (d) sent by facsimile transmission followed by a confirmation copy delivered by a recognized overnight courier service the next day. Such notices, demands and other communications shall be sent to the address first set forth above, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Date of service of such notice shall be (i) the date such notice is personally delivered or sent by facsimile transmission (with issuance by the transmitting machine of a confirmation of successful transmission), (ii) the date of receipt if sent by certified mail, or (iii) the date of receipt if sent by overnight courier.

7.10 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same agreement.

7.11 Descriptive Heading; Interpretation. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement.

7.12 409A.

(a) It is intended that this Agreement and the payments hereunder will not be considered to constitute in whole or in part a nonqualified deferred compensation plan within the meaning of Code section 409A and the Treasury Regulations and

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guidance promulgated thereunder (collectively, “Section 409A”) and so will be exempt from the requirements of Section 409A, and the Agreement shall be interpreted to that end to the fullest extent possible. However, in the event that any payment or benefit (or portion thereof) provided pursuant to this Agreement is nonetheless determined to be paid from a nonqualified deferred compensation plan subject to Section 409A, the applicable terms of this Agreement shall be interpreted in a manner that complies with Section 409A to the fullest extent possible.

(b) Any payment due under the Agreement of nonqualified deferred compensation within the meaning of Section 409A that is payable on termination of employment (or similar term) shall be delayed until the Employee also has “separation from service” within the meaning of Section 409A.

(c) For purposes of Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement (including payments under Section 4.2.b. hereof) shall be treated as a right to receive a series of separate and distinct payments. Further, if an amount to be paid to the Employee under the Agreement on account of his “separation from service” while the Employee is a “specified employee” is an amount payable under a “nonqualified deferred compensation plan” (as those terms are defined under Section 409A), any such payments that would otherwise be paid within 6 months after such separation from service shall not be paid until the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Employee’s estate following his death, at which time such delayed payments shall be paid in a single payment without interest.

(d) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits that are not excluded from the Employee’s taxable income, then except as permitted by Section 409A (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided, that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of the Employee’s taxable year following the taxable year in which the expense was incurred.

7.13 No General Waivers. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced.

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7.1.4 Indemnification. The Company shall indemnify and hold Employee harmless to the fullest extent permitted by the laws of the Company’s state of incorporation in effect at the time against and in respect of any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including advancement of reasonable attorney’s fees), losses, and damages resulting from Employee’s good faith performance of Employee’s duties and obligations with the Company. Executive will be entitled to be covered, both during and, while potential liability exists, by any insurance policies the Company may elect to maintain generally for the benefit of officers and directors of the Company against all costs, charges and expenses incurred in connection with any action, suit or proceeding to which Employee may be made a party by reason of being an officer or director of the Company, or any subsidiary or affiliate, in the same amount and to the same extent as the Company covers its other officers and directors. These obligations shall survive the termination of Executive’s employment with the Company.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the day and year first above written.

COMPANY:	PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
	By:	/s/ Fred N. Eshelman
	Name:	Fred N. Eshelman
	Title:	Executive Chairman
EMPLOYEE:	/s/ Raymond H. Hill
	Raymond H. Hill

EXHIBIT 1

SEPARATION AGREEMENT AND

GENERAL RELEASE OF CLAIMS

THIS SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS (the “Agreement”) is entered into as of the date last set out below by and between Pharmaceutical Product Development, Inc., a North Carolina corporation (the

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“Company”), with a mailing address for notice purposes of 929 North Front Street, Wilmington, North Carolina 28401, Attention: Executive Chairman of the Board, and Raymond H. Hill (“Employee”), an individual whose mailing address for notice purposes is 929 North Front Street, Wilmington, North Carolina 28401. (The Company and Employee are sometimes referred to herein as each a “Party” and together as the “Parties.”)

RECITALS

A. Employee and the Company are parties to that certain Employment Agreement, effective as of September 16, 2011 (the “Employment Agreement”); and

B. Employee’s employment is being terminated by the Company pursuant to Section 4.1.d of the Employment Agreement; and

C. A condition to Employee’s receipt of certain payments post-termination is the execution of this Agreement; and

D. Unless otherwise defined herein, capitalized terms not specifically defined in this Agreement will have the same definition as provided in the Employment Agreement.

NOW, THEREFORE, in consideration of the covenants and mutual promises contained herein, as well as the payment of certain consideration to Employee as hereinafter recited, the receipt and sufficiency of which are hereby acknowledged by Employee, it is agreed as follows:

1. Termination. Employee’s employment with the Company is terminated effective as of [DATE] (the “Termination Date”). Except as set out in this Agreement, as provided by the specific terms of a benefit plan or award (or similar) agreement or as required by law, upon the termination of Employee’s employment with the Company, effective as of the Termination Date, all of Employee’s employee benefits with the Company will terminate. Employee hereby represents that he has returned to the Company all documents, records, apparatus, equipment and other physical property, or any reproduction of such property, whether or not pertaining to Proprietary Information, furnished to Employee by the Company or produced by Employee or others in connection with Employee’s employment; provided, however, that subject to the Company’s right to inspect and redact any Proprietary Information there from, Employee may retain possession of his personal rolodex. Employee hereby acknowledges that, other than as provided in this Agreement, he has been paid all wages for labor or services rendered by him for the Company or on the Company’s behalf through the Termination Date.

2. Separation Pay. If Employee signs and does not revoke this Agreement as provided in Section 10 below, the Company will pay Employee’s Base Salary (minus applicable federal, state and local payroll taxes, and other withholdings required by law or authorized by Employee) through the end of the then current Employment Period (the

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“Separation Pay”) and shall provide benefits as are required by applicable law. Employee will receive the Separation Pay in accordance with the Company’s payroll procedures beginning on the sixtieth (60^th) day following the Termination Date. However, any payments under this Section may be delayed as may be required by Section 7.12 of the Employment Agreement.

If Employee does not sign this Agreement and return it to the Company within [twenty-one (21)] [forty-five (45)] days, or if Employee revokes it pursuant to Section 10, below, Employee will not be entitled to receive the Separation Pay described above.

3. Release of Claims. In exchange for the Company’s providing Employee with the Separation Pay described in Section 2, above, by signing this Agreement, Employee hereby releases and forever discharges the Company, as well as its parent companies, affiliates, subsidiaries, divisions, officers, directors, stockholders, employees, agents, representatives, attorneys, lessors, lessees, licensors and licensees, and their respective successors, assigns, heirs, executors and administrators (collectively, the “Company Parties”), from any and all claims, demands, and causes of action of every kind and nature, whether known or unknown, direct or indirect, accrued, contingent or potential, which Employee ever had or now has, including but not limited to any claims arising out of or related to Employee’s employment with the Company and the termination thereof (except where and to the extent that such a release is expressly prohibited or made void by law). This release includes, without limitation, Employee’s release of the Company and the Company Parties from any claims by Employee for lost wages or benefits, stock options, restricted stock, compensatory damages, punitive damages, attorneys’ fees and costs, equitable relief or any other form of damages or relief. In addition, this release is meant to release the Company and the Company Parties from all common law claims, including claims in contract or tort, including, without limitation, claims for breach of contract, wrongful or constructive discharge, intentional or negligent infliction of emotional distress, misrepresentation, tortious interference with contract or prospective economic advantage, invasion of privacy, defamation, negligence or breach of any covenant of good faith and fair dealing. Employee also specifically and forever releases the Company and the Company Parties (except where and to the extent that such a release is expressly prohibited or made void by law) from any claims based on unlawful employment discrimination or harassment , including, but not limited to, the Federal Age Discrimination in Employment Act (29 U.S.C. § 621 et. seq.). This release does not include Employee’s right to indemnification, and related insurance coverage, under Section 7.1.4 of the Employment Agreement, his right to equity awards, or continued exercise, pursuant to the terms of any specific equity award (or similar) agreement between Employee and the Company nor to Employee’s right to benefits under any Company plan or program in which Employee participated and is due a benefit in accordance with the terms of the plan or program as of the date hereof.

Employee acknowledges that this release applies both to known and unknown claims that may exist between Employee and the Company and the Company Parties. Employee expressly waives and relinquishes all rights and benefits that Employee may have under any state or federal statute or common law principle that would otherwise limit the effect

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of this Agreement to claims known or suspected prior to the date Employee executes this Agreement, and does so understanding and acknowledging the significance and consequences of such specific waiver. In addition, Employee hereby expressly understands and acknowledges that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and Employee explicitly took that into account in giving this release.

By signing this Agreement, Employee agrees and acknowledges that he has no cause to believe that any violation of any local, state or federal law that has occurred with respect to his employment or separation of employment from the Company. Provided, however, that nothing in this Agreement extinguishes any claims Employee may have against the Company for breach of this Agreement.

4. No Admissions. Employee understands, acknowledges and agrees that the release set out above in Section 3 is a final compromise of any potential claims by Employee against the Company and/or the Company Parties in connection with his employment by the Company, and is not an admission by the Company or the Company Parties that any such claims exist or that the Company or any of the Company Parties are liable for any such claims. To the greatest extent permitted by law, Employee further agrees not to hereafter, directly or indirectly, sue, assist in or be a voluntary party to any litigation against Company or any one or more of the Company Parties for any claims relating to events occurring prior to or simultaneously with the execution of this Agreement, including but not limited to Employee’s termination of employment with the Company.

Notwithstanding the foregoing, nothing in this Agreement prohibits Employee from filing a charge with, or participating in any investigation or proceeding conducted by, the U.S. Equal Employment Opportunity Commission or a comparable state or federal fair employment practices agency; provided, however, that this Agreement fully and finally resolves all monetary matters between Employee and the Company and the Company Parties, and by signing this Agreement, Employee is waiving any right to monetary damages, attorneys’ fees and/or costs related to or arising from any such charge, complaint or lawsuit filed by Employee or on his behalf, individually or collectively.

5. Withholding Taxes. All amounts payable under this Agreement, whether such payment is to be made in cash or other property, shall be subject to applicable withholding requirements for Federal, state and local income taxes, employment and payroll taxes, and other legally required withholding taxes and contributions to the extent appropriate in the determination of the Company.

6. Future Conduct. Employee agrees that he will not denigrate, defame, disparage or cast aspersions upon the Company, the Company Parties, their products, services, business and manner of doing business, and that he will use his reasonable best efforts to prevent any member of his immediate family from engaging in any such activity. The Company agrees that its Board of Directors and senior executives will not denigrate, defame, disparage or cast aspersions upon Employee, his services,

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business and manner of doing business. Employee further agrees that in exchange for the Separation Pay, during any period of time when Employee is receiving such Separation Pay, Employee will make himself reasonably available to render, and to render at the request of the Company, services as are deemed reasonably necessary by the Company to effect an orderly transition of Employee’s duties to other employees of the Company. In addition, Employee further agrees to provide reasonable assistance upon the request of the Company related to any litigation in which he may be of assistance or in which his testimony is required. Executive shall be entitled to reasonable compensation and reimbursement of necessary expenses in rendering such assistance. Employee also hereby acknowledges and agrees that his post-employment duties and obligations under the Proprietary Information and Inventions Agreement and the Non-Competition and Non-Solicitation Agreement signed in connection with his employment with the Company will remain in full force and effect in accordance with their terms, and that any breach of such agreements will also constitute a breach of this present Agreement in accordance with Section 7 below.

7. Relief and Enforcement. Employee understands and agrees that if he violate the terms of Section 6 of this Agreement, he will cause injury to the Company (and/or one or more of the Company Parties) that will be difficult to quantify or repair, so that the Company (and/or the Company Parties) will have no adequate remedy at law. Accordingly, Employee agrees that if he violates Sections 6 of this Agreement, the Company (or the Company Parties) will be entitled as a matter of right to obtain an injunction from a court of law, restraining Employee from any further violation of this Agreement. The right to an injunction is in addition to, and not in lieu of, any other remedies that the Company (or the Company Parties) has at law or in equity.

8. No Modifications; Governing Law; Entire Agreement. This Agreement cannot be changed or terminated verbally, and no modification or waiver of any of the provisions of this Agreement will be effective unless it is in writing and signed by both Parties. The Parties agree that this Agreement is to be governed by and construed in accordance with the laws of the State of North Carolina, and that any suit, action or charge arising out of or relating to this Agreement will be adjudicated in the state or federal courts in Wake County, North Carolina. This Agreement sets forth the entire and fully integrated understanding between the Parties with respect to the subject matter hereof, and there are no representations, warranties, covenants or understandings regarding the subject matter hereof, oral or otherwise, that are not expressly set out herein.

9. Voluntary Execution. By signing below, Employee and the Company each acknowledge that he has read this Agreement, that he understands its contents and that he has relied upon or had the opportunity to seek the legal advice of his attorney, who is the attorney of his own choosing.

10. Right to Revoke. ONCE SIGNED BY EMPLOYEE, THIS AGREEMENT IS REVOCABLE IN WRITING FOR A PERIOD OF SEVEN (7) DAYS (THE “REVOCATION PERIOD”). IN ORDER TO REVOKE HIS ACCEPTANCE OF THIS AGREEMENT, EMPLOYEE MUST DELIVER WRITTEN NOTICE TO [NAME], AND SUCH WRITTEN NOTICE MUST ACTUALLY BE RECEIVED WITHIN THE SEVEN (7) DAY REVOCATION PERIOD.

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11. Miscellaneous.

(a) Should any portion, term or provision of this Agreement be declared or determined by any court to be illegal, invalid or unenforceable, the validity or the remaining portions, terms and provisions shall not be affected thereby, and the illegal, invalid or unenforceable portion, term or provision shall be deemed not to be part of this Agreement.

(b) The Parties agree that the failure of a Party at any time to require performance of any provision of this Agreement shall not affect, diminish, obviate or void in any way the Party’s full right or ability to require performance of the same or any other provision of this Agreement at any time thereafter.

(c) This Agreement shall inure to the benefit of and shall be binding upon Employee, his heirs, administrators, representatives, executors, successors and assigns and upon the successors and assigns of the Company.

(d) The headings of the paragraphs of this Agreement are for convenience only and are not binding on any interpretation of this Agreement. This Agreement may be executed in counterparts.

EMPLOYEE HEREBY ACKNOWLEDGES THAT HE HAS BEEN GIVEN A PERIOD OF AT LEAST TWENTY-ONE (21) DAYS TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT. EMPLOYEE IS HEREBY ADVISED BY THE COMPANY IN WRITING TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.

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IN WITNESS WHEREOF, each of the Parties hereto has executed this Separation and Agreement and General Release of Claims as of the date first above written.

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By:
Name:
Title:
Date:
EMPLOYEE
	(SEAL)
Raymond H. Hill
Date:

16

ANNEX A

PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

In consideration and as a condition of my employment by Pharmaceutical Product Development, Inc., a North Carolina corporation, or any affiliate, subsidiary, successor or assigns, as the case may be (collectively referred to herein as the “Company”), I hereby agree as follows:

1. “Proprietary Information” is information that was or is developed by, became or becomes known by, or was or is assigned or otherwise conveyed to the Company, and which has commercial value in the Company’s business. Proprietary Information includes, without limitation, trade secrets, financial information, product plans, customer lists, marketing plans and strategies, systems, manuals, forecasts and other business information, improvements, inventions, business strategies, business methods and practices, formulas, product ideas, biological material and techniques for their handling and use, chemical and/or information analysis and related products and data, computer programs and software, software designs and documentation, source codes, algorithms, techniques, schematics, know-how and data, and any other confidential or proprietary information of the Company or its customers or clients which I have been, or may be exposed to, or have learned or may learn of from time to time in connection with or as a result of my capacity as an employee of or consultant to the Company, including during the term of this Agreement. Proprietary Information shall not include information that is, through no improper action or inaction by me, generally available to the public. I understand that my employment creates a relationship of confidence and trust between me and the Company with respect to Proprietary Information of the Company or its customers which may be learned by me during the period of my employment.

2. In consideration of my employment by the Company and the compensation received by me from the Company from time to time, I hereby agree as follows:

(a) All Proprietary Information and all patents, copyrights, trade secret rights and other rights (including throughout, without limitation, any extensions, renewals, continuations or divisions of any of the foregoing) in connection therewith shall be the sole property of the Company. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information. At all times, both during my employment by the Company and after its termination, I will keep in confidence and trust and will not use or disclose any Proprietary Information or anything relating to it without the written consent of the Company, except as may be necessary in the ordinary course of performing my duties to the Company or as otherwise required by law or in any judicial or administrative process.

(b) In the event of the termination of my employment by me or by the Company for any reason, I shall return all documents, records, apparatus, equipment and

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other physical property, or any reproduction of such property, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by myself or others in connection with my employment, to the Company immediately as and when requested by the Company; provided, however, that subject to the Company’s right to inspect and redact any Proprietary Information there from, Employee may retain possession of his personal rolodex.

(c) I will promptly disclose to the Company, or any persons designated by it, all “Inventions”, which includes all improvements, inventions, formulas, ideas, works of authorship, processes, computer programs and software, software designs and documentation, algorithms, techniques, schematics, know-how data, whether or not patentable, made or conceived or reduced to practice or developed by me, either alone or jointly with others, during the term of my employment and for six (6) months thereafter. To the extent the Company does not have rights therein hereunder, such disclosure shall be received by the Company in confidence and does not extend the assignment made in Section (d) below.

(d) I agree that all Inventions which I make, conceive, reduce to practice or develop (in whole or in part, either alone or jointly with others) during my employment shall be the sole property of the Company to the maximum extent permitted by law, and, to the extent permitted by law, shall be “works made for hire”. The Company shall be the sole owner of all patents, copyrights, trade secret rights, and other intellectual property or other rights in connection therewith. I hereby assign to the Company any rights I may have or acquire in such Inventions. I agree to perform, during and after my employment, all acts deemed necessary or desirable by the Company to permit and assist it, at the Company’s expense, in obtaining and enforcing patents, copyrights, trade secret rights or other rights on such Inventions and/or any other Inventions I have or may at any time assign to the Company in any and all countries. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings. With respect to any and all matters arising out of or relating to my employment or consultancy with the Company, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents, as my agents and attorneys-in-fact to act for and in my behalf and instead of me, to execute and file any applications or related filings and do all other lawfully permitted acts to further the prosecution and issuance of patents, copyrights, trade secret rights or other rights thereon with the same legal force and effect as if executed by me.

(e) I attach hereto a complete list of all Inventions or improvements to which I claim ownership and/or that I desire to remove from the operation of this Agreement, and I covenant that such list is complete. If no such list is attached to this Agreement I represent that I have no such Inventions and improvements at the time of signing this Agreement. I understand that any such list shall not contain information that breaches an obligation of confidentiality with a former employer.

(f) I represent that my performance of all the terms of this Agreement will not breach any agreement or obligation to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith or in conflict with my employment with the Company.

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3. The Company agrees that it will not request as part of my employment that I divulge or make use of proprietary information of any of my former employers that has commercial value to the former employer who developed such information.

4. I acknowledge that in the event of my breach or threatened breach of the terms of this Agreement, the Company shall not have an adequate remedy at law and shall, in addition to any other available rights and remedies, have the right to obtain injunctive relief, including without limitation specific performance.

5. This Agreement shall be effective as of the first day of my employment by the Company, and shall be binding upon me, my heirs, executors, assigns, and administrators, and shall inure to the benefit of the Company and any current and future affiliates, subsidiaries, successors and assigns. This Agreement supersedes any agreement which may have been previously made or executed by me relating to this matter. This Agreement shall be governed by the laws of the State of North Carolina (exclusive of conflicts of law provisions), which shall be the venue for resolution of any dispute related to this Agreement. This Agreement or any part thereof shall not be modified, amended, or waived except by the written consent of the Company.

Dated: September 16, 2011

/s/ Raymond H. Hill

Raymond H. Hill

Accepted and Agreed to:

 Company

By:	/s/ Fred N. Eshelman
Name:	Fred N. Eshelman
Title:	Executive Chairman

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ANNEX B

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

THIS AGREEMENT is made this      day of September, 2011, by and between Pharmaceutical Product Development, Inc., a North Carolina corporation, having its principal place of business at 929 North Front Street, Wilmington, NC 28401, and Raymond H. Hill, an individual whose address for notice purposes is 929 North Front Street, Wilmington, NC 28401 (herein referred to as “Employee”).

RECITALS

A. Pharmaceutical Product Development, Inc., through itself, its subsidiaries, affiliates, successors and assigns (herein, collectively referred to as “PPD”) is a contract research organization engaged in the business of providing a wide-range of drug discovery and development services to pharmaceutical, biotechnology, medical device, government and academic organizations throughout the world (herein the “Business”).

B. Employee will perform a highly responsible role in PPD’s organization, have specialized knowledge of PPD’s trade secrets and proprietary information, and have contact with or knowledge of PPD’s clients and customers.

C. PPD and Employee agree that because of the information and relationships to which Employee will be exposed during the course of Employee’s employment with PPD, it would be harmful to PPD for Employee to compete with PPD or solicit its clients, customers or employees in the manner prohibited by this Agreement and that PPD has a legitimate business interest in protecting itself from such competition and solicitation.

NOW, THEREFORE, in consideration of the foregoing and the mutual promises herein contained and other valuable consideration detailed below, the parties agree as follows:

1. Restrictive Covenants. In order to protect, among other things, PPD’s interests and investments in its trade secrets and proprietary information, its relationship with its customers, clients, employees and contractors, and its goodwill, Employee agrees to the following covenants and restrictions:

1.1 Non-Competition Agreement. During the term of Employee’s employment with PPD and, for a period of twelve (12) months following termination of that employment, Employee will not, directly or indirectly, participate in or engage in any business or activity which is in competition with the Business of PPD in the Territory (as defined below), whether as an individual on his or her account or as an employee, consultant, contractor, officer, director, shareholder, partner, member, joint venturer, representative, agent or equity owner of any business entity. For the purposes of this Agreement and the Employment Agreement of even date herewith between Employee and the Company, the “Business of PPD” shall be defined as that of a contract

research organization providing drug discovery or drug development services for third parties on a fee-for-service basis. Nothing in this Agreement is intended to prohibit Employee from passively owning two percent (2%) or less of the outstanding equity interests of any privately- or publicly-held entity.

1.2 Non-Solicitation of Customers. During Employee’s employment with PPD and for a period of twelve (12) months following termination of that employment, Employee will not, directly or indirectly, (a) for any business that is in competition with the Business of PPD, solicit the business of any person, firm, corporation, partnership, limited liability company, trust or other business entity which Employee solicited, negotiated, contracted, serviced or had contact with on the Company’s behalf during the one (1) year period prior to the termination of Employee’s employment with PPD, (b) in any other manner persuade or attempt to persuade any such person, firm, corporation, partnership, limited liability company, trust or other business entity to discontinue or alter its business relationship with PPD, or (c) otherwise solicit for a competitive purpose or interfere with PPD’s relationship with any such person, firm, corporation, partnership, limited liability company, trust or other business entity.

1.3 Non-Solicitation of Employees. During the Employee’s employment with PPD, and for a period of twelve (12) months following termination of that employment, Employee shall not, directly or indirectly, in any manner, (a) solicit, hire, or offer to hire any employee or contractor of PPD (other than a clerical or administrative employee) while that person is employed or engaged by PPD and for three (3) months after the termination of that person’s employment or engagement with PPD, or (b) otherwise encourage or induce any such employee or contractor to discontinue his or her relationship with PPD.

2. Consideration. PPD and Employee acknowledge that Employee has received good and valuable consideration for Employee’s commitment to be bound by the restrictions set forth in this Agreement, which consideration includes, but is not limited to Employee’s initial employment with PPD and all of the compensation and other benefits therewith.

3. Territory. The restrictions contained in this Agreement apply to all areas of the world in which PPD conducts or engages in the Business (herein the “Territory”). Employee acknowledges that, because PPD is engaged in the Business world-wide, the Territory must be so broadly defined.

4. Remedies. Employee acknowledges and agrees that the covenants set forth in this Agreement are reasonable and necessary for the protection of PPD’s legitimate business interests, that irreparable injury will result to PPD if Employee breaches any of the terms of this Agreement and that, in the event Employee breaches or threatens to breach any provision of this Agreement, PPD will have no adequate remedy at law. Employee accordingly agrees that in the event Employee breaches or threatens to breach any of the covenants set forth herein, PPD shall be entitled to immediate, temporary and permanent injunctive or other equitable relief without bond and without the necessity of showing actual money damages, subject to a hearing as soon as possible.

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Employee further agrees that PPD shall also be entitled to pursue, separately or concurrently, any other remedies available for such breach by Employee, including the recovery of any damages it is able to prove. In the event Employee breaches any of the restrictions set forth herein, the time period during when the restrictions apply shall be extended for the period of the breach.

5. Limitations on Enforcement. Employee agrees that, if a court of competent jurisdiction determines, contrary to the Agreement of the parties, that any portion of this Agreement is unreasonable, invalid, overbroad or unenforceable, the remainder of the Agreement shall be given full effect without regard to the invalid provisions and PPD may enforce the covenant as to any lesser area, activity or time period which is deemed by the court to be reasonable and enforceable under applicable law. In this regard, the covenants shall be divisible as to activity, time and geographic area with each month deemed to be a separate period of time and each state and country, or part thereof, deemed to be a separate geographic area. Employee further agrees that PPD may, at its option, seek to enforce the covenant as to any lesser area, activity or time period which PPD deems appropriate.

6. Effect of Termination. Employee agrees that the terms of this Agreement shall be enforceable against the Employee regardless of the basis of Employee’s termination, whether voluntary or involuntary and with or without cause. Employee further agrees that the existence of a claim by Employee against PPD, whether predicated on Employee’s termination, this Agreement or otherwise, shall not constitute a defense to enforcement of the restrictions contained herein. Notwithstanding the foregoing, in the event PPD terminates Employee’s employment due to a reduction in force or layoff in connection with the discontinuation or cessation of a business line, unit, function or department, PPD shall not enforce Section 1.1 of the Agreement.

7. Notification. Employee authorizes PPD to notify others, in a non-disparaging and reasonable manner, including but not limited to, PPD’s customers and any future employer of Employee concerning the terms of this Agreement and Employee’s responsibility hereunder.

8. Jurisdiction and Venue. The parties agree that the federal or state courts sitting in Wilmington, North Carolina, shall be the exclusive jurisdiction to enforce the covenants set forth in this Agreement and to resolve any disputes or controversies under this Agreement. Employee consents to personal jurisdiction and venue in either of said courts, and waives any claims or defenses based on improper venue or jurisdiction.

9. Attorneys’ Fees and Costs. Employee agrees that, in the event Employee breaches or threatens to breach any of the provisions of this Agreement, PPD shall be entitled to recover from Employee all expenses incurred by it in enforcing the terms of this Agreement, including, but not limited to, its reasonable attorneys’ fees and costs.

10. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of North Carolina.

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11. Severability. If any of the provisions of this Agreement is held to be invalid or unenforceable by a court of competent jurisdiction, the remaining provisions shall continue to be valid and enforceable.

12. Modification. This Agreement cannot be altered, amended, or modified in any respect, except by a writing duly executed by the parties.

13. Waiver. PPD’s waiver of any violation of this Agreement or failure to enforce any provision of this Agreement shall not constitute a waiver of PPD’s rights with respect to other or future violations of this Agreement. Any waiver must be in a writing signed by PPD.

14. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties, their heirs, successors and assigns.

15. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the matters set forth herein and supercedes all previous negotiations and discussions, agreements and understandings regarding such matters, with the exception of Employee’s Proprietary Information and Inventions Agreement and any employment or severance agreement to which Employee and PPD are parties. In the event of any conflict between this Agreement and any other PPD agreements, the terms of the agreement which are most restrictive shall control. It is understood that this Agreement does not constitute an express or implied employment contract for any definite period of time and that, absent a written agreement between PPD and Employee, Employee’s employment with PPD is “at will” meaning that either PPD or Employee can end the employment relationship at any time, with or without cause.

16. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the date set forth herein.

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By:	/s/ Fred N. Eshelman
Name:	Fred N. Eshelman
Title:	Executive Chairman
/s/ Raymond H. Hill
Raymond H. Hill, Employee

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EX-10.282

Exhibit 10.282

SEVERANCE AGREEMENT

THIS SEVERANCE AGREEMENT (the “Agreement”), made as of the 16^th day of September, 2011, by and between Pharmaceutical Product Development, Inc. and its subsidiaries and affiliates (collectively, “PPD”) and Raymond H. Hill (“Employee”).

WHEREAS, Employee and PPD entered into that certain Employment Agreement of even date herewith and, in connection therewith, PPD desires to provide the severance benefits hereinafter described in the event of a “Change in Control”, as hereinafter defined, of PPD.

NOW, THEREFORE, it is agreed as follows:

1. Definitions

1.01 “AFR” means the interest rate determined under Section 1274 of the Code.

1.02 “Base Amount” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

1.03 “Change in Control” means (i) a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (“Exchange Act”), provided that such a Change in Control shall be deemed to have occurred if any “person” (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of PPD representing 50% or more of the combined voting power of PPD’s then outstanding securities; (ii) a sale of substantially all of the assets of PPD; or (iii) a liquidation of PPD.

1.04 “Constructive Termination” means a termination of Employee’s employment by PPD during the Covered Period initiated by Employee after (i) a substantial diminution or alteration in the duties of Employee (it being understood that being CEO of the Company under different ownership or capital structure, or as a private company, is not a substantial diminution or alteration in duties), (ii) a reduction by PPD in Employee’s base salary in effect on the date of the Change in Control, (iii) the relocation of Employee’s primary work location to a location that is more than twenty-five (25) miles from Employee’s primary work location prior to the Change in Control or (iv) a material breach of the Employment Agreement of even date herewith between Employee and the Company. Constructive Termination specifically does not include termination of Employee by reason of death, Disability or retirement at or after age 65. Employee shall give PPD written notice of a Constructive Termination, which notice shall provide a brief description of the circumstances which Employee asserts gives rise to a right of Constructive Termination, and PPD shall have ten (10) days from receipt of said notice within which to remedy said circumstances.

1.05 “Covered Payment” means the amounts and benefits paid to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by PPD.

1.06 “Covered Period” means the time period commencing on the date of and coincident with a Change of Control and ending one year thereafter.

1.07 “Disability” means the inability of Employee to perform his assigned duties for PPD with or without a reasonable accommodation for a period of three (3) months due to Employee’s physical or mental illness as determined by a reputable medical doctor.

1.08 “Effective Date” means the date on which that certain Employment Agreement of even date herewith between PPD and Employee becomes effective pursuant to the terms thereof.

1.09 “Excess Parachute Payment” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

1.10 “Excise Tax” shall mean the tax imposed under Section 4999 of the Code on an Excess Parachute Payment.

1.11 “Executive Consultant” shall mean the executive compensation or comparable consultant used from time to time by PPD in designing its compensation program for executive and senior management employees of PPD; provided, however, that in its sole discretion PPD may at any time designate its independent auditors as its Executive Consultant for the purpose of performing any calculations required under Section 2.05 of this Agreement.

1.12 “Final Determination” means a final determination by a court of competent jurisdiction or a proceeding of the Internal Revenue Service or its successor agency.

1.13 “First Period” means the twelve-month period ending on the Termination Date.

1.14 “Internal Revenue Code” means the Internal Revenue Code of 1986 as heretofore or hereafter amended, and any successor code. References in this agreement to specific sections of the Code shall also include any successor sections.

1.15 “Parachute Payments” shall have the meaning set forth and shall be determined as provided in Section 280G of the Code.

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1.16 “Payment Cap” means the maximum amount which may be paid to Employee under the terms of this Agreement without subjecting Employee to the Excise Tax.

1.17 “Payment Date” means the date thirty (30) days following the Termination Date.

1.18 “Stock Awards” means Employee’s outstanding awards of PPD non-qualified stock options or restricted stock as of the Termination Date.

1.19 “Termination for Cause” means (i) an act or acts involving fraud, embezzlement or theft from PPD, (ii) Employee’s willful and repeated failure to follow directions of the Board of Directors that continues for at least ten (10) days following written notice of the Board of Directors of such failure to follow directions, or (iii) termination for cause as defined in and made pursuant to a then effective employment agreement, if any, between Employee and PPD.

1.20 “Termination Date” means the date on which Employee’s employment is terminated such that Employee is entitled to the compensation and benefits provided for in Section 2 of this Agreement.

2. Compensation Upon Change of Control. This Agreement shall become effective on the Effective Date. If during the Covered Period (i) PPD terminates Employee’s employment for reason other than Termination for Cause or (ii) Employee’s employment is terminated by reason of Constructive Termination, Employee shall, subject to signing a separation agreement and general release of claims in favor of the Company substantially in the form set out in attached Exhibit 1 to this Agreement, modified as necessary so as to be fully enforceable under current applicable law, be entitled to the following compensation and benefits:

2.01 Base Salary and Bonus. PPD shall pay Employee an amount equal to two and ninety-nine one hundredths (2.99) times the sum of Employee’s (i) base salary for the First Period (determined as if Employee was employed for the entire First Period if employed for less than the First Period) and (ii) the greater of (x) Employee’s target bonus under the PPD incentive cash bonus plan in which Employee is eligible to participate immediately prior to the Termination Date or (y) the average of the cash bonuses received in the First Period and in the twelve-month period immediately preceding the First Period, said amount to be paid on the Payment Date.

2.02 Unpaid and Deferred Compensation. PPD shall pay Employee any bonus or deferred compensation (whether in the form of cash, stock or otherwise) accrued but unpaid as of the Termination Date, said sum to be paid on the Payment Date.

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2.03 Benefits.

a. Group Term Life and AD&D Insurance. PPD shall reimburse Employee for premiums if Employee elects to port the group term life and accidental death and dismemberment insurance to an individual policy by returning the portability election forms to the insurance carrier within thirty (30) days from the Termination Date. However, PPD’s reimbursement obligations under this subsection shall terminate if and when Employee becomes eligible after the Termination Date for similar coverage under another employer’s plan or 24 months from termination whichever happens sooner.

b. Healthcare Coverage (Medical, Dental and Vision). For two (2) years after the Termination Date, PPD shall make available to Employee coverage under the PPD healthcare plan (Medical, Dental and Vision) that covered the Employee immediately prior to the Termination Date, provided that Employee pays the full monthly premium for each month of coverage in accordance with the procedures applicable to the payment of COBRA premiums as set forth in Code section 4980B and the regulations thereunder (“COBRA guidance”). For purposes of clarity, the two (2) years of coverage will be provided under the PPD plan and includes the full period of coverage mandated by COBRA guidance, plus any additional period of coverage to provide a total of two (2) years of coverage. The full monthly premium payable by the Employee for the PPD health plan shall be the COBRA premium in effect for each month (or an amount equal to what the COBRA premium would be if COBRA were still mandated for the period after the period of mandated COBRA) as determined by PPD in accordance with COBRA guidance. Failure of Employee to pay the premium in a timely manner (as determined under COBRA guidance) shall result in permanent loss of coverage. In addition for so long as Employee pays the premium for healthcare coverage, PPD shall pay him an amount equal to two (2) times the difference between the full COBRA premium and the amount that Employee would have paid for such coverage if Employee had the coverage as an employee of PPD (rather than as a former employee). Payment of such amount shall be made quarterly, and such amount shall be fully taxable as compensation income subject to tax and other required withholdings. However, PPD’s obligations under this subsection shall terminate if and when Employee becomes eligible after the Termination Date for substantially comparable coverage under another employer’s healthcare plan.

2.04 Stock Awards. Employee expressly understands that should a Change in Control occur within twelve months of the Effective Date, Employee will be required to contribute the Stock Awards to effect any such transaction, and in such event Employee will not receive any consideration in respect thereof upon a termination of his employment during the Covered Period. In any other circumstance, notwithstanding anything to the contrary in any agreement for Stock Awards, (i) all unvested shares underlying Stock Awards granted more than six months prior to the Termination Date shall become fully vested as of the Termination Date, and (ii) Employee shall continue to

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be treated under each award agreement evidencing a Stock Award as if Employee was an employee of PPD until the first to occur of (x) the third anniversary of the Termination Date, or (y) the expiration of the exercise period provided for therein; provided, however, in the event of Employee’s death or his disability (as disability is defined in the award agreement) after the Termination Date, the time for exercise after death or such disability prescribed in the award agreement shall apply. The provisions of this Section 2.04 shall also apply to any and all substitute awards for nonqualified stock options and restricted stock granted to Employee in exchange for Stock Awards to which this section applies.

2.05 Limitation on Payments.

a. Application of Section 2.05. If a Covered Payment hereunder would be an Excess Parachute Payment and would thereby subject Employee to the Excise Tax, the provisions of this Section 2.05 shall apply to determine the amounts payable to Employee pursuant to this Agreement.

b. Calculation of Benefits. At least fifteen (15) days prior to the Payment Date, PPD shall notify Employee of the aggregate present value of all amounts and benefits to which Employee would be entitled under this Agreement and any other plan, program or arrangement with PPD as of the Termination Date, together with the projected maximum payments, determined as of such Date of Termination, that could be paid without Employee being subject to the Excise Tax.

c. Imposition of Payment Cap. If (i) the aggregate value of all amounts and benefits to which Employee would be entitled under this Agreement and any other plan, program or arrangement with PPD exceeds the amount which can be paid to Employee without Employee incurring an Excise Tax and (ii) Employee would receive a greater net after-tax amount (taking into account all applicable taxes payable by Employee, including an Excise Tax) by applying the limitation contained in this Section 2.05(c), then the amounts otherwise payable to Employee under this Section 2 shall be reduced to an amount equal to the Payment Cap. If Employee receives reduced payments and benefits hereunder, Employee shall have the right to designate which of the payments and benefits otherwise provided for in this Agreement that Employee will receive in connection with the application of the Payment Cap.

d. Application of Code Section 280G. The Executive Consultant shall determine whether any part of the Covered Payment will be subject to the Excise Tax and the amount of such Excise Tax. For purposes of such determination, the Executive Consultant shall take into consideration and be guided by the following:

(i) such Covered Payment will be treated as Parachute Payments and all Parachute Payments in excess of the Base Amount shall be treated as subject to the Excise Tax, unless and except to the extent that in the good faith judgment of the Executive Consultant, PPD has a reasonable basis to conclude that such Covered Payment, in whole or in part, either do not constitute Parachute Payments or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G of the Code) in excess of the Base Amount, or such Parachute Payments are otherwise not subject to the Excise Tax, and

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(ii) the value of any noncash benefits or any deferred payment or benefit shall be determined by the Executive Consultant in accordance with the principles of Section 280G of the Code.

(e) Applicable Tax Rates. For purposes of determining whether Employee would receive a greater net after-tax benefit if the amounts payable under this Agreement are reduced in accordance with Section 2.05(c), Employee shall be deemed to pay:

(i) federal income taxes at the highest applicable marginal rate of federal income taxation for the calendar year in which the first amounts are to be paid hereunder, and

(ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for such calendar year, net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year; provided, however, that Employee may request that such determination be made based on Employee’s individual tax circumstances, which shall govern such determination so long as Employee provides to the Executive Consultant such information and documents as the Executive Consultant shall reasonably request to determine such individual circumstances.

(f) Adjustments in Respect to Payment Cap.

(i) If Employee receives reduced payments and benefits under Section 2.05 or if Section 2.05 is determined not to be applicable to Employee because the Executive Consultant concludes that Employee is not subject to any Excise Tax, and it is established pursuant to a Final Determination that, notwithstanding the good faith of Employee and PPD in applying the terms of this Agreement, the aggregate Parachute Payments paid to Employee or for Employee’s benefit are in an amount that would result in Employee being subject to an Excise Tax and Employee would still be subject to the Payment Cap under the provisions of Section 2.05(c), then the amount in excess of the Payment Cap shall be deemed for all purposes to be a loan to Employee made on the date of the receipt of such excess payment, which Employee shall have an obligation to repay to PPD on demand, together with interest at the AFR, from the date of the payment hereunder to the date of repayment by Employee.

(ii) If Section 2.05 is not applied to reduce Employee’s entitlements under this Section 2 because the Executive Consultant determines that Employee would not receive a greater net after-tax benefit by applying Section 2.05 and it is established pursuant to a Final Determination that, notwithstanding the good faith of Employee and PPD in applying the terms of this Agreement, Employee would have received a greater net after-tax benefit by subjecting Employee’s payments and benefits

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hereunder to the Payment Cap, then the aggregate Parachute Payments paid to Employee or for Employee’s benefit in excess of the Payment Cap shall be deemed for all purposes a loan to Employee made on the date of receipt of such excess payments, which Employee shall have an obligation to repay to PPD on demand, together with interest at the AFR, from the date of payment hereunder to the date of repayment by Employee.

(iii) If Employee receives reduced payments and benefits by reason of this Section 2.05 and it is established pursuant to a Final Determination that Employee could have received a greater amount without exceeding the Payment Cap, then PPD shall promptly thereafter pay Employee the aggregate additional amount which could have been paid without exceeding the Payment Cap, together with interest on such amount at the AFR, from the original payment due date to the date of actual payment by PPD.

3. Miscellaneous.

3.01 Successor-in-Interest. PPD will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of PPD, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that PPD would be required to perform it if no succession had taken place.

3.02 Binding Effect. This Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executives, administrators, successors, heirs, distributees, devisees and legatees.

3.03 Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be given (i) by certified mail, return receipt requested, postage prepaid, (ii) by personal delivery or (iii) by recognized overnight carrier, and shall be deemed received when actually received. Notices shall be addressed as follows:

If to PPD:	Pharmaceutical Product Development, Inc.
	929 North Front Street
	Wilmington, North Carolina 28401
	Attention: Executive Chairman
If to Employee:	Raymond H. Hill
	929 North Front Street
	Wilmington, NC 28401

Either party hereto may change the notice address by giving notice thereof in the manner provided for herein.

3.04 Waiver. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any provision or condition of this

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Agreement to be performed by such other party shall be deemed a subsequent waiver of the same or similar provisions or conditions. The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced.

3.05 Entire Agreement. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this agreement, and this Agreement supersedes and replaces in its entirety all prior agreements and representations, expressed, implied, oral or otherwise, made by PPD to or with Employee with respect to the subject matter hereof.

3.06 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of North Carolina.

3.07 Unenforceability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

3.08 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

3.09 Headings. Headings used in this Agreement are for convenience only and shall not be used to construe or interpret this Agreement.

3.10 Enforcement by Employee. All legal expenses incurred by Employee in the successful enforcement of any of the terms of this Agreement shall be paid by PPD.

3.11 409A.

(a) It is intended that this Agreement and the payments hereunder will not be considered to constitute in whole or in part payments from a nonqualified deferred compensation plan within the meaning of Code section 409A and the Treasury Regulations and guidance promulgated thereunder (collectively, “Section 409A”) and so will be exempt from the requirements of Section 409A, and the Agreement shall be interpreted to that end to the fullest extent possible. However, in the event that any payment or benefit (or portion thereof) provided pursuant to this Agreement is nonetheless determined to be paid from a nonqualified deferred compensation plan subject to Section 409A, the applicable terms of this Agreement shall be interpreted in a manner that complies with Section 409A to the fullest extent possible.

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(b) Any payment due under the Agreement of nonqualified deferred compensation within the meaning of Section 409A that is payable on termination of employment (or similar term) shall be delayed until the Employee also has a “separation from service” within the meaning of Section 409A.

(c) For purposes of Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement (including payments under Section 2.02 hereof) shall be treated as a right to receive a series of separate and distinct payments. Further, if an amount to be paid to the Employee under the Agreement on account of his “separation from service” while the Employee is a “specified employee” is an amount payable under a “nonqualified deferred compensation plan” (as those terms are defined under Section 409A), any such payments that would otherwise be paid within 6 months after such separation from service shall not be paid until the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Employee’s estate following his death, at which time such delayed payments shall be paid in a single payment without interest.

(d) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits that are not excluded from the Employee’s taxable income, then except as permitted by Section 409A (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided, that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of the Employee’s taxable year following the taxable year in which the expense was incurred.

IN WITNESS WHEREOF, the parties have executed this Severance Agreement effective the date first hereinabove set forth.

Pharmaceutical Product Development, Inc.		Employee
By:	/s/ Fred N. Eshelman	/s/ Raymond H. Hill
Name:	Fred N. Eshelman	Raymond H. Hill
Title:	Executive Chairman

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EXHIBIT 1

SEPARATION AGREEMENT AND

GENERAL RELEASE OF CLAIMS

THIS SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS (the “Agreement”) is entered into as of the date last set out below by and between Pharmaceutical Product Development, Inc., a North Carolina corporation (the “Company”), with a mailing address for notice purposes of 929 North Front Street, Wilmington, North Carolina 28401, Attention: Executive Chairman of the Board, and Raymond H. Hill (“Employee”), an individual whose mailing address for notice purposes is 929 North Front Street, Wilmington, North Carolina 28401. (The Company and Employee are sometimes referred to herein as each a “Party” and together as the “Parties.”)

RECITALS

A. Employee and the Company are parties to that certain Severance Agreement, effective as of September 16, 2011 (the “Severance Agreement”); and

B. Employee’s employment is being terminated [by the Company during the Covered Period for reason other than Termination for Cause pursuant to Section 2 of the Severance Agreement] [during the Covered Period by reason of Constructive Termination pursuant to Section 2 of the Severance Agreement]; and

C. A condition to Employee’s receipt of certain payments post-termination is the execution of this Agreement; and

D. Unless otherwise defined herein, capitalized terms not specifically defined in this Agreement will have the same definition as provided in the Severance Agreement.

NOW, THEREFORE, in consideration of the covenants and mutual promises contained herein, as well as the payment of certain consideration to Employee as hereinafter recited, the receipt and sufficiency of which are hereby acknowledged by Employee, it is agreed as follows:

1. Termination. Employee’s employment with the Company is terminated effective as of [DATE] (the “Termination Date”). Except as set out in this Agreement, as provided by the specific terms of a benefit plan or award (or similar) agreement or as required by law, upon the termination of Employee’s employment with the Company, effective as of the Termination Date, all of Employee’s employee benefits with the Company will terminate. Employee hereby represents that he has returned to the Company all documents, records, apparatus, equipment and other physical property, or any reproduction of such property, whether or not pertaining to Proprietary Information, furnished to Employee by the Company or produced by Employee or others in

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connection with Employee’s employment; provided, however, that subject to the Company’s right to inspect and redact any Proprietary Information there from, Employee may retain possession of his personal rolodex. Employee hereby acknowledges that, other than as provided in this Agreement, he has been paid all wages for labor or services rendered by him for the Company or on the Company’s behalf through the Termination Date.

2. Compensation and Benefits. If Employee signs and does not revoke this Agreement as provided in Section 10 below, the Company will provide Employee with the compensation and benefits described in Section 2 of the Severance Agreement (the “Severance Pay and Benefits”), upon the terms and conditions of payment as set out in such Severance Agreement.

If Employee does not sign this Agreement and return it to the Company within [twenty-one (21)] [forty-five (45)] days, or if Employee revokes it pursuant to Section 10, below, Employee will not be entitled to receive the Severance Pay and Benefits described above.

3. Release of Claims. In exchange for the Company’s providing Employee with the Severance Pay and Benefits described in Section 2, above, by signing this Agreement, Employee hereby releases and forever discharges the Company, as well as its parent companies, affiliates, subsidiaries, divisions, officers, directors, stockholders, employees, agents, representatives, attorneys, lessors, lessees, licensors and licensees, and their respective successors, assigns, heirs, executors and administrators (collectively, the “Company Parties”), from any and all claims, demands, and causes of action of every kind and nature, whether known or unknown, direct or indirect, accrued, contingent or potential, which Employee ever had or now has, including but not limited to any claims arising out of or related to Employee’s employment with the Company and the termination thereof (except where and to the extent that such a release is expressly prohibited or made void by law). This release includes, without limitation, Employee’s release of the Company and the Company Parties from any claims by Employee for lost wages or benefits, stock options, restricted stock, compensatory damages, punitive damages, attorneys’ fees and costs, equitable relief or any other form of damages or relief. In addition, this release is meant to release the Company and the Company Parties from all common law claims, including claims in contract or tort, including, without limitation, claims for breach of contract, wrongful or constructive discharge, intentional or negligent infliction of emotional distress, misrepresentation, tortious interference with contract or prospective economic advantage, invasion of privacy, defamation, negligence or breach of any covenant of good faith and fair dealing. Employee also specifically and forever releases the Company and the Company Parties (except where and to the extent that such a release is expressly prohibited or made void by law) from any claims based on unlawful employment discrimination or harassment , including, but not limited to, the Federal Age Discrimination in Employment Act (29 U.S.C. § 621 et. seq.). This release does not include Employee’s right to indemnification, and related insurance coverage, under Section 7.1.4 of the Employment Agreement, his right to equity awards, or continued exercise, pursuant to the terms of any specific equity award (or similar)

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agreement between Employee and the Company nor to Employee’s right to benefits under any Company plan or program in which Employee participated and is due a benefit in accordance with the terms of the plan or program as of the date hereof.

Employee acknowledges that this release applies both to known and unknown claims that may exist between Employee and the Company and the Company Parties. Employee expressly waives and relinquishes all rights and benefits that Employee may have under any state or federal statute or common law principle that would otherwise limit the effect of this Agreement to claims known or suspected prior to the date Employee executes this Agreement, and does so understanding and acknowledging the significance and consequences of such specific waiver. In addition, Employee hereby expressly understands and acknowledges that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and Employee explicitly took that into account in giving this release.

By signing this Agreement, Employee agrees and acknowledges that he has no cause to believe that any violation of any local, state or federal law that has occurred with respect to his employment or separation of employment from the Company. Provided, however, that nothing in this Agreement extinguishes any claims Employee may have against the Company for breach of this Agreement.

4. No Admissions. Employee understands, acknowledges and agrees that the release set out above in Section 3 is a final compromise of any potential claims by Employee against the Company and/or the Company Parties in connection with his employment by the Company, and is not an admission by the Company or the Company Parties that any such claims exist or that the Company or any of the Company Parties are liable for any such claims. To the greatest extent permitted by law, Employee further agrees not to hereafter, directly or indirectly, sue, assist in or be a voluntary party to any litigation against Company or any one or more of the Company Parties for any claims relating to events occurring prior to or simultaneously with the execution of this Agreement, including but not limited to Employee’s termination of employment with the Company.

Notwithstanding the foregoing, nothing in this Agreement prohibits Employee from filing a charge with, or participating in any investigation or proceeding conducted by, the U.S. Equal Employment Opportunity Commission or a comparable state or federal fair employment practices agency; provided, however, that this Agreement fully and finally resolves all monetary matters between Employee and the Company and the Company Parties, and by signing this Agreement, Employee is waiving any right to monetary damages, attorneys’ fees and/or costs related to or arising from any such charge, complaint or lawsuit filed by Employee or on his behalf, individually or collectively.

5. Withholding Taxes. All amounts payable under this Agreement, whether such payment is to be made in cash or other property, shall be subject to applicable withholding requirements for Federal, state and local income taxes, employment and payroll taxes, and other legally required withholding taxes and contributions to the extent appropriate in the determination of the Company.

12

6. Future Conduct. Employee agrees that he will not denigrate, defame, disparage or cast aspersions upon the Company, the Company Parties, their products, services, business and manner of doing business, and that he will use his reasonable best efforts to prevent any member of his immediate family from engaging in any such activity. The Company agrees that its Board of Directors and senior executives will not denigrate, defame, disparage or cast aspersions upon Employee, his services, business and manner of doing business. Employee further agrees that in exchange for the Severance Pay and Benefits, during any period of time when Employee is receiving such Severance Pay and/or Benefits, Employee will make himself reasonably available to render, and to render at the request of the Company, services as are deemed reasonably necessary by the Company to effect an orderly transition of Employee’s duties to other employees of the Company. In addition, Employee further agrees to provide reasonable assistance upon the request of the Company related to any litigation in which he may be of assistance or in which his testimony is required. Executive shall be entitled to reasonable compensation and reimbursement of necessary expenses in rendering such assistance. Employee also hereby acknowledges and agrees that his post-employment duties and obligations under the Proprietary Information and Inventions Agreement and the Non-Competition and Non-Solicitation Agreement signed in connection with his employment with the Company will remain in full force and effect in accordance with their terms, and that any breach of such agreements will also constitute a breach of this present Agreement in accordance with Section 7 below.

7. Relief and Enforcement. Employee understands and agrees that if he violate the terms of Section 6 of this Agreement, he will cause injury to the Company (and/or one or more of the Company Parties) that will be difficult to quantify or repair, so that the Company (and/or the Company Parties) will have no adequate remedy at law. Accordingly, Employee agrees that if he violates Sections 6 of this Agreement, the Company (or the Company Parties) will be entitled as a matter of right to obtain an injunction from a court of law, restraining Employee from any further violation of this Agreement. The right to an injunction is in addition to, and not in lieu of, any other remedies that the Company (or the Company Parties) has at law or in equity.

8. No Modifications; Governing Law; Entire Agreement. This Agreement cannot be changed or terminated verbally, and no modification or waiver of any of the provisions of this Agreement will be effective unless it is in writing and signed by both Parties. The Parties agree that this Agreement is to be governed by and construed in accordance with the laws of the State of North Carolina, and that any suit, action or charge arising out of or relating to this Agreement will be adjudicated in the state or federal courts in Wake County, North Carolina. This Agreement sets forth the entire and fully integrated understanding between the Parties with respect to the subject matter hereof, and there are no representations, warranties, covenants or understandings regarding the subject matter hereof, oral or otherwise, that are not expressly set out herein.

13

9. Voluntary Execution. By signing below, Employee and the Company each acknowledge that he has read this Agreement, that he understands its contents and that he has relied upon or had the opportunity to seek the legal advice of his attorney, who is the attorney of his own choosing.

10. Right to Revoke. ONCE SIGNED BY EMPLOYEE, THIS AGREEMENT IS REVOCABLE IN WRITING FOR A PERIOD OF SEVEN (7) DAYS (THE “REVOCATION PERIOD”). IN ORDER TO REVOKE HIS ACCEPTANCE OF THIS AGREEMENT, EMPLOYEE MUST DELIVER WRITTEN NOTICE TO [NAME], AND SUCH WRITTEN NOTICE MUST ACTUALLY BE RECEIVED WITHIN THE SEVEN (7) DAY REVOCATION PERIOD.

11. Miscellaneous.

(a) Should any portion, term or provision of this Agreement be declared or determined by any court to be illegal, invalid or unenforceable, the validity or the remaining portions, terms and provisions shall not be affected thereby, and the illegal, invalid or unenforceable portion, term or provision shall be deemed not to be part of this Agreement.

(b) The Parties agree that the failure of a Party at any time to require performance of any provision of this Agreement shall not affect, diminish, obviate or void in any way the Party’s full right or ability to require performance of the same or any other provision of this Agreement at any time thereafter.

(c) This Agreement shall inure to the benefit of and shall be binding upon Employee, his heirs, administrators, representatives, executors, successors and assigns and upon the successors and assigns of the Company.

(d) The headings of the paragraphs of this Agreement are for convenience only and are not binding on any interpretation of this Agreement. This Agreement may be executed in counterparts.

EMPLOYEE HEREBY ACKNOWLEDGES THAT HE HAS BEEN GIVEN A PERIOD OF AT LEAST TWENTY-ONE (21) DAYS TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT. EMPLOYEE IS HEREBY ADVISED BY THE COMPANY IN WRITING TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.

14

IN WITNESS WHEREOF, each of the Parties hereto has executed this Separation and Agreement and General Release of Claims as of the date first above written.

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By:
Name:
Title:
Date:
EMPLOYEE
	(SEAL)
Raymond H. Hill
Date:

15

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Raymond H. Hill, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pharmaceutical Product Development, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2011	By:	/s/ Raymond H. Hill
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Daniel G. Darazsdi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Pharmaceutical Product Development, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2011	By:	/s/ Daniel G. Darazsdi
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Pharmaceutical Product Development, Inc. (“PPD”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Raymond H. Hill, Chief Executive Officer of PPD, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPD as of, and for, the periods presented in the Report.

Date: November 2, 2011

/s/    Raymond H. Hill        

Raymond H. Hill

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Pharmaceutical Product Development, Inc. (“PPD”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel G. Darazsdi, Chief Financial Officer of PPD, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PPD as of, and for, the periods presented in the Report.

Date: November 2, 2011

/s/    Daniel G. Darazsdi        

Daniel G. Darazsdi

Chief Financial Officer

XML

Pension Plan (Components Of Pension Costs, U.K. Pension Plan) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Pension Plan
Interest cost	$ 816,000	$ 794,000	$ 2,456,000	$ 2,357,000
Expected return on plan assets	(745,000)	(619,000)	(2,242,000)	(1,837,000)
Amortization of losses	212,000	265,000	639,000	787,000
Net periodic pension cost	283,000	440,000	853,000	1,307,000
Expected contributions to pension plan	$ 3,000,000		$ 3,000,000

XML

Consolidated Condensed Balance Sheets (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Assets
Cash and cash equivalents	$ 416,746	$ 479,574
Short-term investments	63,580	79,976
Accounts receivable and unbilled services, net	505,007	435,876
Income tax receivable	17,469	12,327
Investigator advances	13,008	16,032
Prepaid expenses	25,699	24,535
Deferred tax assets	41,334	30,910
Cash held in escrow	2,288	10,304
Other current assets	17,979	44,172
Total current assets	1,103,110	1,133,706
Property and equipment, net	404,369	385,863
Goodwill	292,914	291,217
Long-term investments		78,747
Other investments	77,577	47,833
Intangible assets	28,207	31,444
Other assets	44,765	23,236
Total assets	1,950,942	1,992,046
Liabilities and Equity
Accounts payable	37,726	29,858
Payables to investigators	65,468	56,612
Accrued income taxes	6,064	1,918
Other accrued expenses	204,936	208,128
Unearned income	337,086	317,191
Total current liabilities	651,280	613,707
Accrued income taxes	34,924	32,924
Accrued pension liability	11,858	10,989
Deferred rent	15,285	16,411
Deferred tax liabilities	28,782	16,552
Other liabilities	8,118	10,796
Total liabilities	750,247	701,379
Redeemable noncontrolling interests	2,125	1,657
Shareholders' equity:
Common stock	5,680	5,952
Paid-in capital	619,756	609,281
Retained earnings	583,411	682,160
Accumulated other comprehensive loss	(17,593)	(17,140)
Total shareholders' equity	1,191,254	1,280,253
Noncontrolling interests	7,316	8,757
Total equity	1,198,570	1,289,010
Total liabilities and equity	$ 1,950,942	$ 1,992,046

XML

Consolidated Condensed Statements Of Cash Flows (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income	$ 118,399	$ 76,184
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	50,504	49,791
Equity compensation expense	15,332	13,728
Loss (income) from equity investment, net of taxes	(9,712)	5,403
Provision (benefit) for deferred income taxes	(4,878)	221
Impairment of investments	18,627
Net (gain) loss on sale of investments	425	(3,291)
Other	(1,162)	2,382
Net change in operating assets and liabilities	(36,793)	24,953
Net cash provided by operating activities	150,742	169,371
Cash flows from investing activities:
Purchases of property and equipment	(61,703)	(41,295)
Proceeds from sale of property and equipment	67	98
Proceeds from sale of business		3,464
Purchases of investments	(1,527)	(46,590)
Maturities and sales of investments	91,801	109,294
Purchases of other investments	(8,017)	(7,893)
Proceeds from sale of other investments	539	3,339
Net cash paid for acquisitions	(7,936)	(10,169)
Changes in restricted cash	7,936	3,000
Advances to related party	(7,550)	(7,700)
Net cash provided by investing activities	13,610	5,548
Cash flows from financing activities:
Proceeds from exercise of stock options and employee stock purchase plan	31,477	11,387
Income tax benefit from exercise of stock options and disqualifying dispositions of stock	1,236	197
Cash and cash equivalents contributed to Furiex Pharmaceuticals, Inc.		(100,000)
Repurchase of common stock	(200,000)
Cash dividends paid	(52,821)	(53,423)
Net cash used in financing activities	(220,108)	(141,839)
Effect of exchange rate changes on cash and cash equivalents	(7,072)	(1,541)
Net increase (decrease) in cash and cash equivalents	(62,828)	31,539
Cash and cash equivalents, beginning of the period	479,574	408,903
Cash and cash equivalents, end of the period	$ 416,746	$ 440,442

XML

Fair Value Of Financial Instruments (Reconciliation Of Balances For Assets And Liabilities Measured At Fair Value) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended			3 Months Ended		3 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011 Short-Term Investments [Member]	Sep. 30, 2011 Short-Term Investments [Member]	Dec. 31, 2010 Long-Term Investments [Member]	Sep. 30, 2011 Long-Term Investments [Member]	Jun. 30, 2011 Long-Term Investments [Member]		Mar. 31, 2011 Long-Term Investments [Member]	Sep. 30, 2011 Equity Method Investment [Member]	Jun. 30, 2011 Equity Method Investment [Member]	Mar. 31, 2011 Equity Method Investment [Member]
Beginning balance								$ 55,858	$ 77,553		$ 78,747	$ 52,124	$ 41,285	$ 30,724
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income								12,192	3,129		(1,119)
Realized loss on investments									(842)
Income from equity method investment	1,915	(4,562)	15,103	(8,351)								1,915	10,639	2,549
Additional investment in equity method investments												4,508	200	8,012
Other-than-temporary impairment on auction rate securities								(17,551)
Liquidation of investments								(125)	(10,625)		(75)
Transfers between long term and short term					63,580		78,747
Transfers out of Level 3								(50,374)	(13,357)	[1]
Transfers into Level 3						50,374
Ending balance						$ 50,374			$ 55,858		$ 77,553	$ 58,547	$ 52,124	$ 41,285

[1] Transferred from Level 3 to Level 2 which has more observable market data due to increased market activity for asset-backed securities.

XML

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments (Tables)

9 Months Ended

Sep. 30, 2011

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

	Cash and Cash Equivalents		Short-term Investments		Long-term Investments		Other Investments		Unrealized Gains		Unrealized Losses
As of December 31, 2010
Cash	$	246,843
Money market funds		232,731
Auction rate securities					$	78,747					$	14,203
Municipal debt securities			$	32,707					$	122		24
Corporate debt securities – FDIC insured				9,160						105		1
Treasury securities				38,109						118		2
Equity method investment:
Celtic Therapeutics Holdings, L.P.							$	30,724
Cost method investments:
Bay City Capital Funds								7,069
A.M. Pappas Funds								3,486
Liquidia Technologies, Inc.								5,000
Other investments								1,554
Total	$	479,574	$	79,976	$	78,747	$	47,833	$	345	$	14,230
As of September 30, 2011
Cash	$	197,077
Money market funds		210,759
Certificates of deposit		8,910
Auction rate securities			$	50,374
Asset-backed securities				13,206
Equity method investments:
Celtic Therapeutics Holdings, L.P.							$	58,347
venBio Global Strategic Fund, L.P.								200
Cost method investments:
Bay City Capital Funds								8,751
A.M. Pappas Funds								3,546
Liquidia Technologies, Inc.								5,000
Other investments								1,733
Total	$	416,746	$	63,580	$	—	$	77,577	$	—	$	—

Gross Realized Gains And Losses On Investments

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010		2011
Gross realized gains on short-term investments	$	—	$	—	$	4	$	422
Gross realized gains on cost method investments		—		—		3,340		244
Gross realized losses on short-term investments		—		—		53		5
Gross realized losses on long-term investments		—		—		—		842
Gross realized losses on cost method investments		—		—		750		924

The Company's Capital Commitments

Fund	Ownership			Total Capital Commitment		Remaining Commitment		Commitment Expiration
Bay City Capital Fund IV, L.P.		2.9	%	$	10,000	$	705	September  2010(2)
Bay City Capital Fund V, L.P.		2.0	%		10,000		5,552	October 2012
A.M. Pappas Life Science Ventures III, L.P.		4.7	%		4,750		594	December  2009(2)
A.M. Pappas Life Science Ventures IV, L.P.		3.0	%		2,935		1,702	February 2014
Accelerator III and incubator companies(1)		19.9	%		4,802		819	None

⁽¹⁾  The Company's percentage ownership of Accelerator III and incubator companies might vary but will not exceed 19.9%.

⁽²⁾  The funding commitments to Bay City Capital Fund IV, L.P. and A.M. Pappas Life Science Ventures III, L.P. have expired for new investments. The Company may still be required to fund additional investments in existing fund portfolio companies and the ongoing operations of these funds up to the amount of the remaining capital commitment.

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Oct. 26, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Entity Registrant Name	PHARMACEUTICAL PRODUCT DEVELOPMENT INC
Entity Central Index Key	0001003124
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		113,685,115

XML

Comprehensive Income (Loss) (Accumulated Other Comprehensive Income (Loss)) (Details) (USD $) In Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Comprehensive Income (Loss)
Translation adjustment	$ (2,987)	$ 28
Pension liability, net of tax benefit of $4,865	(11,705)	(11,705)
Fair value on hedging transactions, net of tax (expense) benefit of ($1,714) and $1,188, respectively	(2,901)	3,523
Net unrealized losses on investments, net of tax benefit of $4,899 and $0, respectively		(8,986)
Total	(17,593)	(17,140)
Pension liability, tax benefit	4,865	4,865
Fair value on hedging transactions, net of tax (expense) benefit	1,188	(1,714)
Net unrealized losses on investments, tax benefit	$ 0	$ 4,899

XML

Goodwill And Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2011

Goodwill And Intangible Assets

Changes In Carrying Amount Of Goodwill

	Clinical Development Services
			Laboratory
			Services			Total
Balance as of December 31, 2010	$	106,671	$	184,546		$	291,217
Adjustments to goodwill for prior year acquisitions		—		(825	)		(825	)
Translation adjustments		543		1,979			2,522
Balance as of September 30, 2011	$	107,214	$	185,700		$	292,914

Schedule Of Intangible Assets

	December 31, 2010							September 30, 2011
	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	17,658	$	(2,844	)	$	14,814	$	18,013	$	(4,416	)	$	13,597
Non-compete agreements		2,047		(84	)		1,963		1,291		(261	)		1,030
Trade name		150		(150	)		—		140		(140	)		—
Backlog		7,217		(2,770	)		4,447		7,342		(3,982	)		3,360
Total	$	27,072	$	(5,848	)	$	21,224	$	26,786	$	(8,799	)	$	17,987

Schedule Of Future Period Amortization Expense

2011 (remaining three months)	$	977
2012		3,274
2013		3,097
2014		2,344
2015		1,769

XML

Comprehensive Income (Loss) (Comprehensive Income (Loss)) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Comprehensive Income (Loss)
Net income, as reported	$ 35,617	$ 38,002	$ 118,399	$ 76,184
Cumulative translation adjustment	(26,530)	25,867	(3,015)	(6,585)
Change in fair value of hedging transactions, net of tax (expense) benefit of ($2,240), $2,093, ($784) and $1,059, respectively	(4,455)	5,360	(2,461)	1,376
Reclassification adjustment for hedging results included in direct costs, net of tax benefit of $673, $609, $1,609 and $1,904, respectively	(1,198)	(1,274)	(3,963)	(2,835)
Net unrealized gain (loss) on investments, net of tax benefit (expense) of $73, $1,956, ($1,089) and $1,347, respectively	(3,598)	(131)	(2,471)	2,102
Reclassification to net income of other-than- temporary impairment on investments, net of tax expense of $0, ($6,235), $0 and ($6,245), respectively	11,467		11,457
Total other comprehensive income (loss)	(24,314)	29,822	(453)	(5,942)
Comprehensive income (loss)	11,303	67,824	117,946	70,242
Change in fair value of hedging transactions, tax (expense) benefit	2,093	(2,240)	1,059	(784)
Reclassification adjustment for hedging results included in direct costs, tax benefit	609	673	1,904	1,609
Reclassification to net income of other-than-Temporary impairment on investments, tax benefit (expense)	(6,235)	0	(6,245)	0
Net unrealized gain (loss) on investments, tax benefit (expense)	$ 1,956	$ 73	$ 1,347	$ (1,089)

XML

Shareholders' Equity

9 Months Ended

Sep. 30, 2011

Shareholders' Equity

Shareholders' Equity

8. Shareholders' Equity

Stock options

The Company estimates the fair value of each award on the grant date using the Black-Scholes option-pricing model and recognizes it as expense over the employee's requisite service period.

During the nine months ended September 30, 2011, the Company granted options to purchase approximately 1,896,000 shares with a weighted-average exercise price of $27.47. This amount includes options to purchase approximately 1,554,500 shares granted in the Company's annual grant during the first quarter of 2011. All options have an exercise price equal to the fair value of the Company's common stock on the grant date. The fair value of the Company's common stock on the grant date is equal to the Nasdaq closing price of the Company's stock on the date of grant. The weighted-average grant date fair value per share and the aggregate fair value of options granted during the nine months ended September 30, 2010 and 2011 was $5.15 and $6.81 per share, and $16.5 million and $12.9 million, respectively. As of September 30, 2011, the Company had options outstanding to purchase 11.8 million shares of its common stock.

Restricted stock units

The Company has issued restricted stock units that are subject to a three-year linear vesting schedule with one-third of the grant vesting on each of the first, second and third anniversaries of the award date. The Company determines expense based on the market value of the restricted stock units on the award date, and recognizes expense on a straight-line basis over the vesting period.

During the nine months ended September 30, 2011, the Company awarded approximately 367,000 restricted stock units to employees. This amount includes restricted stock units of approximately 359,000 granted in the Company's annual grant during the first quarter of 2011. The weighted-average award date fair value per unit and the aggregate fair value of units during the nine months ended September 30, 2011 was $27.31 per share and $10.0 million, respectively. As of September 30, 2011, approximately 355,000 restricted stock units were outstanding.

Stock repurchase program

In February 2008, the Company's Board of Directors approved a stock repurchase program authorizing the Company to repurchase up to $350.0 million of its common stock from time to time. In February 2011, the Company entered into an accelerated share repurchase, or ASR, arrangement with Barclays Capital Inc., or Barclays, under which the Company used $200.0 million of the remaining amount to repurchase additional shares of its common stock. During the first quarter of 2011, the Company repurchased approximately 6.5 million shares of its common stock under this arrangement for an aggregate purchase price of $200.0 million. The agreement with Barclays for the ASR included a forward sale contract settlement date in December 2011, but it could be settled prior to that date. Under the terms of the forward sale contract, Barclays was required to purchase, in the open market, $200.0 million of the Company's common stock during the term of the contract to fulfill its obligation and cover its position related to 6.5 million shares borrowed from third parties and sold to the Company during the first quarter of 2011 and for any additional shares payable upon settlement. The forward contract was settled in September 2011, and the Company received approximately 503,000 shares.

As of September 30, 2011, $60.7 million remained available for stock repurchases authorized by the Board of Directors. The manner of the purchases, the amount the Company spends and the number of shares repurchased will vary based on a variety of factors, including the stock price and blackout periods in which the Company is restricted from repurchasing shares. The Company's October 2, 2011 Merger Agreement with Jaguar Holdings (see Note 16) does not allow it to repurchase additional shares.

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Comprehensive Income (Loss) (Tables)

9 Months Ended

Sep. 30, 2011

Comprehensive Income (Loss)

Comprehensive Income (Loss)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Net income, as reported	$	38,002		$	35,617		$	76,184		$	118,399
Other comprehensive income (loss):
Cumulative translation adjustment		25,867			(26,530	)		(6,585	)		(3,015	)
Change in fair value of hedging transactions, net of tax (expense) benefit of ($2,240), $2,093, ($784) and $1,059, respectively		5,360			(4,455	)		1,376			(2,461	)
Reclassification adjustment for hedging results included in direct costs, net of tax benefit of $673, $609, $1,609 and $1,904, respectively		(1,274	)		(1,198	)		(2,835	)		(3,963	)
Net unrealized gain (loss) on investments, net of tax benefit (expense) of $73, $1,956, ($1,089) and $1,347, respectively		(131	)		(3,598	)		2,102			(2,471	)
Reclassification to net income of other-than- temporary impairment on investments, net of tax expense of $0, ($6,235), $0 and ($6,245), respectively		—			11,467			—			11,457
Total other comprehensive income (loss)		29,822			(24,314	)		(5,942	)		(453	)
Comprehensive income (loss)	$	67,824		$	11,303		$	70,242		$	117,946

Accumulated Other Comprehensive Income (Loss)

	December 31, 2010			September 30, 2011
Translation adjustment	$	28		$	(2,987	)
Pension liability, net of tax benefit of $4,865		(11,705	)		(11,705	)
Fair value on hedging transactions, net of tax (expense) benefit of ($1,714) and $1,188, respectively		3,523			(2,901	)
Net unrealized losses on investments, net of tax benefit of $4,899 and $0, respectively		(8,986	)		—
Total	$	(17,140	)	$	(17,593	)

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Goodwill And Intangible Assets (Schedule Of Intangible Assets) (Details) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Carrying Amount	$ 26,786,000	$ 27,072,000
Accumulated Amortization	(8,799,000)	(5,848,000)
Net	17,987,000	21,224,000
Unamortized intangible assets	10,200,000	10,200,000
Other Intangible Asset [Member]
Other intangible asset included in unamortized intangible assets	2,000,000
Unclassified Indefinite-lived Intangible Assets [Member]
Other intangible asset included in unamortized intangible assets	8,200,000
Customer Relationships [Member]
Carrying Amount	18,013,000	17,658,000
Accumulated Amortization	(4,416,000)	(2,844,000)
Net	13,597,000	14,814,000
Non-Compete Agreements [Member]
Carrying Amount	1,291,000	2,047,000
Accumulated Amortization	(261,000)	(84,000)
Net	1,030,000	1,963,000
Trade Name [Member]
Carrying Amount	140,000	150,000
Accumulated Amortization	(140,000)	(150,000)
Backlog [Member]
Carrying Amount	7,342,000	7,217,000
Accumulated Amortization	(3,982,000)	(2,770,000)
Net	$ 3,360,000	$ 4,447,000

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Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments (The Company's Capital Commitments) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2011
Remaining Commitment	$ 800
Bay City Capital Fund IV, L.P. [Member]
Ownership	2.90%
Total Capital Commitment	10,000
Remaining Commitment	705
Commitment Expiration	September  2010	[1]
Bay City Capital Fund V, L.P. [Member]
Ownership	2.00%
Total Capital Commitment	10,000
Remaining Commitment	5,552
Commitment Expiration	October 2012
A.M. Pappas Life Science Ventures III, L.P. [Member]
Ownership	4.70%
Total Capital Commitment	4,750
Remaining Commitment	594
Commitment Expiration	December  2009	[1]
A.M. Pappas Life Science Ventures IV, L.P. [Member]
Ownership	3.00%
Total Capital Commitment	2,935
Remaining Commitment	1,702
Commitment Expiration	February 2014
Accelerator III And Incubator Companies [Member]
Ownership	19.90%	[2]
Total Capital Commitment	4,802	[2]
Remaining Commitment	$ 819	[2]
Commitment Expiration	None	[2]
Accelerator III And Incubator Companies [Member] | Maximum [Member]
Maximum ownership percentage	19.90%

[1] The funding commitments to Bay City Capital Fund IV, L.P. and A.M. Pappas Life Science Ventures III, L.P. have expired for new investments. The Company may still be required to fund additional investments in existing fund portfolio companies and the ongoing operations of these funds up to the amount of the remaining capital commitment.

[2] The Company's percentage ownership of Accelerator III and incubator companies might vary but will not exceed 19.9%.

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Property And Equipment (Tables)

9 Months Ended

Sep. 30, 2011

Property And Equipment

Property And Equipment, Stated At Cost

	December 31, 2010			September 30, 2011
Land	$	8,201		$	8,201
Buildings and leasehold improvements		274,716			294,944
Fixed assets not placed in service		13,843			10,163
Information technology systems under development		28,808			32,636
Furniture and equipment		234,132			257,312
Computer equipment and software		203,867			222,854
Total property and equipment		763,567			826,110
Less accumulated depreciation		(377,704	)		(421,741	)
Property and equipment, net	$	385,863		$	404,369

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Fair Value Of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments

Fair Value Of Financial Instruments

13. Fair Value of Financial Instruments

The Company has categorized its assets and liabilities recorded at fair value based upon a fair value hierarchy in accordance with the applicable accounting standards.

The following table presents information about the Company's assets and liabilities required to be measured at fair value on a recurring basis:

	Level 1		Level 2		Level 3		Total
As of December 31, 2010
Assets
Cash equivalents	$	232,731	$	—	$	—	$	232,731
Short-term investments:
Treasury securities		38,109		—		—		38,109
Municipal debt securities		—		32,707		—		32,707
Corporate debt securities		—		9,160		—		9,160
Long-term investments		—		—		78,747		78,747
Equity method investment		—		—		30,724		30,724
Derivative contracts		—		6,668		—		6,668
Total assets	$	270,840	$	48,535	$	109,471	$	428,846
Liabilities
Derivative contracts	$	—	$	1,373	$	—	$	1,373
Total liabilities	$	—	$	1,373	$	—	$	1,373
	Level 1		Level 2		Level 3		Total
As of September 30, 2011
Assets
Cash equivalents	$	219,669	$	—	$	—	$	219,669
Short-term investments		—		13,206		50,374		63,580
Equity method investments		—		—		58,547		58,547
Derivative contracts		—		1,331		—		1,331
Total assets	$	219,669	$	14,537	$	108,921	$	343,127
Liabilities
Derivative contracts	$	—	$	5,376	$	—	$	5,376
Total liabilities	$	—	$	5,376	$	—	$	5,376

The following table provides a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs, or Level 3, for the nine months ended September 30, 2011:

	Short-term Investments		Long-term Investments			Equity Method Investments
Balance as of December 31, 2010	$	—	$	78,747		$	30,724
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		(1,119	)		—
Income from equity method investment		—		—			2,549
Additional investment in equity method investment		—		—			8,012
Liquidation of investments		—		(75	)
Balance as of March 31, 2011		—		77,553			41,285
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		3,129
Realized loss on investments		—		(842	)
Income from equity method investment		—		—			10,639
Additional investment in equity method investments		—		—			200
Liquidation of investments		—		(10,625	)
Transfers out of Level 3(1)		—		(13,357	)
Balance as of June 30, 2011		—		55,858			52,124
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		12,192
Other-than-temporary impairment on auction rate securities		—		(17,551	)
Liquidation of investments		—		(125	)
Transfers between long term and short term		50,374		(50,374	)
Income from equity method investment		—		—			1,915
Additional investment in equity method investments		—		—			4,508
Balance as of September 30, 2011	$	50,374	$			$	58,547

⁽¹⁾  Transferred from Level 3 to Level 2 which has more observable market data due to increased market activity for asset-backed securities.

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Accounts Receivable And Unbilled Services

9 Months Ended

Sep. 30, 2011

Accounts Receivable And Unbilled Services

Accounts Receivable And Unbilled Services

4. Accounts Receivable and Unbilled Services

Accounts receivable and unbilled services, net, consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Billed	$	276,240		$	320,167
Unbilled		168,037			190,081
Allowance for doubtful accounts		(8,401	)		(5,241	)
Total accounts receivable and unbilled services, net	$	435,876		$	505,007

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Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended				9 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended					1 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010	May 30, 2011 Auction Rate Securities [Member]	Sep. 30, 2011 Asset-Backed Securities [Member] Auction Rate Securities [Member]	May 30, 2011 Asset-Backed Securities [Member]	Sep. 30, 2011 Celtic Therapeutics Holdings, L.P. [Member]	Sep. 30, 2010 Celtic Therapeutics Holdings, L.P. [Member]	Sep. 30, 2011 Celtic Therapeutics Holdings, L.P. [Member]	Sep. 30, 2010 Celtic Therapeutics Holdings, L.P. [Member]	Dec. 31, 2010 Celtic Therapeutics Holdings, L.P. [Member]	Dec. 31, 2009 Celtic Therapeutics Holdings, L.P. [Member]	Mar. 31, 2011 Celtic Therapeutics Holdings, L.P. [Member]	Sep. 30, 2011 Liquidia Technologies, Inc. [Member]	May 31, 2010 Liquidia Technologies, Inc. [Member]	Apr. 30, 2011 venBio Global Strategic Fund, L.P. [Member]	Sep. 30, 2011 venBio Global Strategic Fund, L.P. [Member]
Auction rate securities held					$ 78,700,000
Unrealized losses in auction rate securities					14,230,000
Convertible securities amount					78,747,000	14,200,000		14,200,000
Amount recognized other-than-temporary impairment losses							17,700,000
Maximum investment commitments in equity method investment			104,800,000											102,700,000				50,000,000
Remaining commitment in investment									55,000,000		55,000,000								49,800,000
Loan provided to other company			7,550,000	7,700,000									10,000,000
Payment of loan													2,000,000
Loan converted into securities															8,000,000
Outstanding loan converted to additional equity in settlement															10,000,000
Recognized income (loss) on equity method investment	1,915,000	(4,562,000)	15,103,000	(8,351,000)					1,900,000	(4,600,000)	15,100,000	(8,400,000)
Commitments to invest, equity method investments									58,300,000		58,300,000								200,000
Number of years expected to commit investment											4							5
Equity method investment ownership percentage									49.60%		49.60%
Investment in equity method																	$ 5,000,000
Ownership interest percentage																8.60%			28.60%

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Accounting For Derivative Instruments And Hedging Activities

9 Months Ended

Sep. 30, 2011

Accounting For Derivative Instruments And Hedging Activities

Accounting For Derivative Instruments And Hedging Activities

10. Accounting for Derivative Instruments and Hedging Activities

The Company has significant international revenues and expenses, and related receivables and payables, denominated in currencies other than the functional currency of the related subsidiary. As a result, the Company's operating results can be affected by changes in foreign currency exchange rates. In an effort to minimize this risk, from time to time, the Company purchases foreign currency option and forward contracts as hedges against anticipated and recorded transactions, and the related receivables and payables denominated in foreign currencies. The Company only uses foreign currency option and forward contracts as hedges to minimize the variability in the Company's operating results arising from foreign currency exchange rate movements and not for speculative or trading purposes.

The Company recognizes changes in the fair value of the effective portion of foreign exchange derivatives that are designated and qualify as cash flow hedges of forecasted revenue and expense transactions in accumulated other comprehensive income, or OCI. The Company reclassifies these amounts from OCI and recognizes them in earnings when either the forecasted transaction occurs or it becomes probable that the forecasted transaction will not occur. The Company reclassifies OCI associated with hedges of foreign currency revenue into direct costs upon recognition of the forecasted transaction in the statements of income. The Company recognizes the ineffective portion of a derivative instrument in earnings in the current period as a component of other income, and measures it by comparing the fair value of the forward contract to the change in the forward value of the anticipated transaction. Hedging portfolio ineffectiveness during the three months ended September 30, 2010 and 2011 was a gain of $0.3 million and a loss of $0.1 million, respectively. Hedging portfolio ineffectiveness during the nine months ended September 30, 2010 and 2011 was a gain of $0.1 million and $44,000, respectively.

The Company also manages its exposure on receivables and payables denominated in currencies other than the entity's functional currency through the use of natural hedges and foreign currency options and forwards, if necessary. The Company records foreign currency derivatives at fair value, with fluctuations in the fair value being included in the statements of income as a component of other income. There were two outstanding foreign currency options and forwards related to receivables and payables hedging outstanding as of September 30, 2011. The fair value of the derivative liability and the gains and losses reported in the statements of income were not significant.

As of September 30, 2011, the Company's outstanding hedging contracts were scheduled to expire over the next 15 months. The Company expects to reclassify the current loss positions of $2.1 million, net of tax, within the next 12 months from OCI into the statement of income. As of December 31, 2010 and September 30, 2011, the Company's foreign currency derivative portfolio resulted in the Company recognizing an asset of $6.7 million and $1.3 million, respectively, as a component of other current assets and a liability of $1.4 million and $5.4 million, respectively, as a component of other accrued expenses.

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Related Party Transactions

9 Months Ended

Sep. 30, 2011

Related Party Transactions

Related Party Transactions

15. Related Party Transactions

As of September 30, 2011, the Company provided services to and owned 49.6% of Celtic Therapeutics Holdings, L.P., or Celtic, which is accounted for under the equity method. During 2010, the Company loaned Celtic $10.0 million, of which $2.0 million was repaid in 2010. During the first quarter of 2011, the outstanding loan was converted to additional equity in connection with the settlement of a $10.0 million capital call. The Company recognized $0.8 million and $1.3 million of net revenue from Celtic for the three months ended September 30, 2010 and 2011, respectively, and $1.3 million and $3.9 million in net revenue from Celtic for the nine months ending September 30, 2010 and 2011, respectively.

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Pension Plan

9 Months Ended

Sep. 30, 2011

Pension Plan

Pension Plan

11. Pension Plan

Net periodic pension costs for the U.K. pension plan included the following components:

	Three Months Ended September  30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Interest cost	$	794		$	816		$	2,357		$	2,456
Expected return on plan assets		(619	)		(745	)		(1,837	)		(2,242	)
Amortization of losses		265			212			787			639
Net periodic pension cost	$	440		$	283		$	1,307		$	853

During the nine months ended September 30, 2011, the Company did not make any contributions to the plan but expects to contribute approximately $3.0 million during the remainder of 2011.

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Acquisitions And Dispositions (Narrative) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2011	Dec. 31, 2010	Oct. 31, 2010 Outstanding Equity Interests [Member] X-Chem, Inc., [Member]	Oct. 31, 2010 Newly Issued Shares [Member] X-Chem, Inc., [Member]	Sep. 30, 2011 X-Chem, Inc., [Member]	Oct. 31, 2010 X-Chem, Inc., [Member]	Dec. 31, 2010 BioDuro Biologics Pte. Ltd. [Member]
Percentage of outstanding equity interest acquired						64.00%
Total purchase consideration						$ 15.5
Cash paid for purchase consideration			7.0	8.5	4.5		5.0
Business acquisition cost of acquired entity valuation for parent					70.0
Accounts receivable, net						0.6
Noncontrolling interest in entity					36.00%		25.00%
Business acquisition cost of acquired entity equity valuation for noncontrolling interest					20.0
Amount deposited in escrow account to secure indemnification claims					2.5
Cash held in escrow	2.3
Component of other assets	4.2
Liabilities related to acquisitions	6.5
Component of other accrued expenses	2.3
Component of other liabilities	4.2
Pro forma acquisition description	Pro forma results of operations prior to the date of acquisition have not been presented because those results are not materially different from the actual results presented.
Acquired fair value of the intangible assets							$ 1.7
Minority owners put expiration period		183

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Comprehensive Income (Loss)

9 Months Ended

Sep. 30, 2011

Comprehensive Income (Loss)

Comprehensive Income (Loss)

9. Comprehensive Income (Loss)

Comprehensive income (loss) consisted of the following amounts on the dates set forth below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Net income, as reported	$	38,002		$	35,617		$	76,184		$	118,399
Other comprehensive income (loss):
Cumulative translation adjustment		25,867			(26,530	)		(6,585	)		(3,015	)
Change in fair value of hedging transactions, net of tax (expense) benefit of ($2,240), $2,093, ($784) and $1,059, respectively		5,360			(4,455	)		1,376			(2,461	)
Reclassification adjustment for hedging results included in direct costs, net of tax benefit of $673, $609, $1,609 and $1,904, respectively		(1,274	)		(1,198	)		(2,835	)		(3,963	)
Net unrealized gain (loss) on investments, net of tax benefit (expense) of $73, $1,956, ($1,089) and $1,347, respectively		(131	)		(3,598	)		2,102			(2,471	)
Reclassification to net income of other-than- temporary impairment on investments, net of tax expense of $0, ($6,235), $0 and ($6,245), respectively		—			11,467			—			11,457
Total other comprehensive income (loss)		29,822			(24,314	)		(5,942	)		(453	)
Comprehensive income (loss)	$	67,824		$	11,303		$	70,242		$	117,946

Accumulated other comprehensive loss consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Translation adjustment	$	28		$	(2,987	)
Pension liability, net of tax benefit of $4,865		(11,705	)		(11,705	)
Fair value on hedging transactions, net of tax (expense) benefit of ($1,714) and $1,188, respectively		3,523			(2,901	)
Net unrealized losses on investments, net of tax benefit of $4,899 and $0, respectively		(8,986	)		—
Total	$	(17,140	)	$	(17,593	)

The Company recognized an other-than-temporary impairment on its remaining asset-backed and auction rate securities as of September 30, 2011. As a result, the total accumulated unrealized losses and related tax benefits associated with the investment portfolio were recognized in earnings.

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Fair Value Of Financial Instruments (Fair Value Of Assets And Liabilities Measured On Recurring Basis) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Cash equivalents	$ 219,669	$ 232,731
Total assets	343,127	428,846
Total liabilities	5,376	1,373
Short-Term Investments [Member]
Investments	63,580
Short-Term Investments [Member] | Treasury Securities [Member]
Investments		38,109
Short-Term Investments [Member] | Treasury Securities [Member] | Level 1 [Member]
Investments		38,109
Short-Term Investments [Member] | Municipal Debt Securities [Member]
Investments		32,707
Short-Term Investments [Member] | Municipal Debt Securities [Member] | Level 2 [Member]
Investments		32,707
Short-Term Investments [Member] | Corporate Debt Securities [Member]
Investments		9,160
Short-Term Investments [Member] | Corporate Debt Securities [Member] | Level 2 [Member]
Investments		9,160
Short-Term Investments [Member] | Level 2 [Member]
Investments	13,206
Short-Term Investments [Member] | Level 3 [Member]
Investments	50,374
Long-Term Investments [Member]
Investments		78,747
Long-Term Investments [Member] | Level 3 [Member]
Investments		78,747
Equity Method Investment [Member]
Equity method investment	58,547	30,724
Equity Method Investment [Member] | Level 3 [Member]
Equity method investment	58,547	30,724
Derivative Contracts [Member]
Derivative contracts	1,331	6,668
Derivative liabilities	5,376	1,373
Derivative Contracts [Member] | Level 2 [Member]
Derivative contracts	1,331	6,668
Derivative liabilities	5,376	1,373
Level 1 [Member]
Cash equivalents	219,669	232,731
Total assets	219,669	270,840
Level 2 [Member]
Total assets	14,537	48,535
Total liabilities	5,376	1,373
Level 3 [Member]
Total assets	$ 108,921	$ 109,471

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Acquisitions And Dispositions

9 Months Ended

Sep. 30, 2011

Acquisitions And Dispositions

Acquisitions And Dispositions

2. Acquisitions and Dispositions

Acquisitions

In October 2010, the Company acquired 64 percent of the outstanding securities of X-Chem, Inc., which is developing proprietary small molecule drug discovery services capabilities, for total consideration of $15.5 million. The Company paid $7.0 million to acquire existing outstanding equity interests and $8.5 million to acquire newly issued shares. The Company recorded the transaction as an acquisition of a controlling interest and consolidates X-Chem's operating results in the financial statements of the Company. As of the acquisition date, the Company recorded the assets, liabilities and noncontrolling interests at fair value, including accounts receivable, net of $0.6 million. The Company estimated the fair value of the noncontrolling interests in X-Chem by applying the income approach using discounted cash flows. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement. At any time prior to October 31, 2014, the Company has the option to purchase the remaining 36 percent of X-Chem at an entity valuation of $70.0 million. If the Company does not exercise its option, the noncontrolling interest holders will have the right to purchase the Company's ownership interests at an entity valuation of $20.0 million between November 1, 2015 and November 30, 2015. X-Chem is required to declare and pay dividends in the future based on a formula agreed to by the Company and the noncontrolling interest holders. As of September 30, 2011, the Company had paid $4.5 million of the total $7.0 million purchase price to acquire outstanding equity interests. The Company deposited the remaining $2.5 million of the purchase price into an escrow account to secure indemnification claims and the payment of other obligations. As of September 30, 2011, the Company recorded a liability to pay the escrowed funds, which are scheduled to be released in April 2013, as a component of other liabilities. Through the acquisition, the Company expanded its drug discovery services capabilities. This acquisition is included in the Company's Laboratory Services segment.

Acquisition costs related to X-Chem were not significant and were included in selling, general and administrative costs in the consolidated condensed statements of income. The factors that contributed to the recognition of goodwill included securing new technologies and synergies that are specific to the Company's business, access to new market segments which are expected to increase revenues and profits, and acquisition of a talented workforce. The Company will not be able to deduct this goodwill for tax purposes.

The Company accounted for this acquisition under the acquisition method of accounting. The total purchase price for this acquisition was allocated based on the estimated fair value of assets acquired and liabilities assumed, which are set forth in the following table:

	X-Chem
Current assets	$	9,309
Property and equipment, net		22
Current liabilities		(1,011	)
Other liabilities		(3,592	)
Noncontrolling interests		(8,297	)
Identifiable intangible assets		9,030
Goodwill		10,039
Total	$	15,500

The purchase price allocation of X-Chem was completed as of September 30, 2011. Pro forma results of operations prior to the date of acquisition have not been presented because those results are not materially different from the actual results presented.

As of September 30, 2011, the Company held $6.5 million in escrow relating to payments to be made for previous acquisitions, of which $2.3 million is reflected as cash held in escrow and $4.2 million is reflected as a component of other assets in the accompanying consolidated condensed balance sheet. These escrows secure the indemnification obligations contained in the definitive agreements governing these transactions. The Company recorded $6.5 million in liabilities related to these acquisitions of which $2.3 million is recorded as a component of other accrued expenses and $4.2 million is recorded as a component of other liabilities. The Company classified these balances as current or long-term based on the expected date of the release of the funds.

In December 2010, the Company formed BioDuro Biologics Pte. Ltd. to develop proprietary biological drug discovery services capabilities. The Company invested $5.0 million and sold a 25 percent interest in the entity in exchange for $1.7 million in intangible assets. The Company recorded the exchange of the 25 percent noncontrolling interests in the entity at the fair value of the intangible assets acquired. At any time between December 2014 and December 2016, the Company has the right to acquire the noncontrolling interests at fair value. If the Company fails to exercise its purchase option, then during the 183-day period following the expiration of this option the minority owners have the right to require the Company to purchase their noncontrolling interests at fair value. BioDuro Biologics is included in the Company's Laboratory Services segment.

Dispositions

In May 2010, the Company discontinued the operations of its wholly owned subsidiary PPD Dermatology, Inc., which was part of the Company's Discovery Sciences segment.

The results of PPD Dermatology are reported as discontinued operations within the consolidated condensed statements of income as set forth in the following table:

	Three Months Ended September  30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Loss from discontinued operations	$	—	$	—	$	(4,444	)	$	—
Benefit for income taxes		—		—		782			—
Loss from discontinued operations, net of income taxes		—		—		(3,662	)		—

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Property And Equipment

9 Months Ended

Sep. 30, 2011

Property And Equipment

Property And Equipment

5. Property and Equipment

Property and equipment, stated at cost, consisted of the following amounts on the dates set forth below:

	December 31, 2010			September 30, 2011
Land	$	8,201		$	8,201
Buildings and leasehold improvements		274,716			294,944
Fixed assets not placed in service		13,843			10,163
Information technology systems under development		28,808			32,636
Furniture and equipment		234,132			257,312
Computer equipment and software		203,867			222,854
Total property and equipment		763,567			826,110
Less accumulated depreciation		(377,704	)		(421,741	)
Property and equipment, net	$	385,863		$	404,369

Depreciation expense was $14.8 million and $15.8 million for the three months ended September 30, 2010 and 2011, respectively, and $47.1 million and $47.5 million for the nine months ended September 30, 2010 and 2011, respectively.

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Property And Equipment (Narrative) (Details) (USD $) In Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Property And Equipment
Depreciation expense	$ 15.8	$ 14.8	$ 47.5	$ 47.1

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Significant Accounting Policies (Details) (USD $) In Millions, except Share data	0 Months Ended	3 Months Ended		9 Months Ended
	Jun. 14, 2010	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Contribution of cash and cash equivalents to Furiex Pharmaceuticals, Inc.	$ 100.0
Stock split conversion ratio description	issuing one share of Furiex common stock for every twelve shares of the Company's common stock
Shareholders on record date	Jun. 01, 2010
Shares excluded from calculation of diluted earnings per share		7,033,229	6,651,821	8,644,124	6,681,751
MAB Discovery GmbH, [Member]
Total assets		6.1		6.1
Total liabilities		5.7		5.7
Committed to provide credit				8.7
Outstanding credit		$ 3.9		$ 3.9

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Commitments And Contingencies (Details) (USD $)

9 Months Ended

12 Months Ended

Sep. 30, 2011

Dec. 31, 2010

Number of letters of credit outstanding

4

Letters of credit outstanding, total

$ 1,800,000

Retentions and deductibles associated with insurance policies

5,000,000

Stop-loss insurance on a "claims made" basis for expenses, per member per year

400,000

Commitments to invest, venture capital funds

8,600,000

Commitments to invest in other investments

800,000

Commitments to invest in equity method investments

104,800,000

Description of noncontrolling interest

In 2010, the Company sold a noncontrolling interest in its BioDuro Biologics Pte. Ltd. subsidiary. During the 183-day period commencing in December 2016, the minority equity holders have the right to require the Company to purchase their noncontrolling interests at fair value.

Minority Owners Put Expiration Period

183

Total gross unrecognized tax benefits

29,400,000

Unrecognized tax benefits, if recognized that would reduce its effective tax rate

16,900,000

Unrecognized tax benefits, decreases resulting from settlement of audits and the expiration of statutes of limitations

5,700,000

Accrued interest with respect to uncertain tax positions

4,100,000

Accrued penalties with respect to uncertain tax positions

900,000

Celtic Pharma Development Services Bermuda Ltd. [Member]

Non-revolving line of credit agreement to finance trade payables

18,000,000

Advances to the borrower

$ 16,800,000

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Goodwill And Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill And Intangible Assets

Goodwill And Intangible Assets

6. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the nine months ended September 30, 2011, by operating segment, were as follows:

	Clinical Development Services
			Laboratory
			Services			Total
Balance as of December 31, 2010	$	106,671	$	184,546		$	291,217
Adjustments to goodwill for prior year acquisitions		—		(825	)		(825	)
Translation adjustments		543		1,979			2,522
Balance as of September 30, 2011	$	107,214	$	185,700		$	292,914

During 2011, the Company recorded a $0.8 million adjustment to goodwill related to X-Chem resulting from information regarding the valuation estimates that became available after the preliminary purchase price allocation was established.

The Company reviews goodwill for impairment annually on October 1st, and more frequently if impairment indicators arise. An impairment indicator represents an event or change in circumstances that would more likely than not reduce the fair value of a goodwill reporting unit below its carrying amount. A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. The Company monitors events and changes in circumstances in between annual testing dates to determine if any events or changes in circumstances indicate impairment. In connection with the most recent annual impairment test on October 1, 2010, the Company reviewed goodwill for impairment and the analysis indicated a significant amount of fair value in excess of carrying value for each goodwill reporting unit. However, the fair value of goodwill could be impacted by future adverse changes such as a significant decline in operating results, a sustained decline in the valuation of pharmaceutical and biotechnology company stocks, including the valuation of the Company's own common stock, a significant adverse change in legal factors or in the business climate, a further significant slowdown in the worldwide economy or the pharmaceutical and biotechnology industry, or the sustained failure to meet the performance projections included in the forecasts of future operating results for any of the Company's goodwill reporting units. Any adverse change in these factors could have a significant impact on the recoverability of goodwill, and could have a material impact on the Company's consolidated condensed financial statements. There were no such indicators of impairment during the first nine months of 2011.

The Company's amortized intangible assets were composed of the following as of the dates set forth below:

	December 31, 2010							September 30, 2011
	Carrying Amount		Accumulated Amortization			Net		Carrying Amount		Accumulated Amortization			Net
Customer relationships	$	17,658	$	(2,844	)	$	14,814	$	18,013	$	(4,416	)	$	13,597
Non-compete agreements		2,047		(84	)		1,963		1,291		(261	)		1,030
Trade name		150		(150	)		—		140		(140	)		—
Backlog		7,217		(2,770	)		4,447		7,342		(3,982	)		3,360
Total	$	27,072	$	(5,848	)	$	21,224	$	26,786	$	(8,799	)	$	17,987

The Company had total non-amortizing intangible assets of $10.2 million as of December 31, 2010 and September 30, 2011. Unamortized intangible assets consist of $8.2 million of in-process research and development and $2.0 million of other intangible asset.

Amortization expense for the three months ended September 30, 2010 and 2011 was $0.9 million and $1.0 million, respectively. Amortization expense for the nine months ended September 30, 2010 and 2011 was $2.8 million and $3.0 million, respectively. As of September 30, 2011, expected amortization expense for each of the next five years is as follows:

2011 (remaining three months)	$	977
2012		3,274
2013		3,097
2014		2,344
2015		1,769

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Goodwill And Intangible Assets (Changes In Carrying Amount Of Goodwill) (Details) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Dec. 31, 2010
Goodwill balance	$ 292,914	$ 291,217
Adjustments to goodwill for prior year acquisitions	(825)
Translation adjustments	2,522
Clinical Development Services [Member]
Goodwill balance	107,214	106,671
Translation adjustments	543
Laboratory Services [Member]
Goodwill balance	185,700	184,546
Adjustments to goodwill for prior year acquisitions	(825)
Translation adjustments	1,979
X-Chem, Inc., [Member]
Adjustments to goodwill for prior year acquisitions	$ 800

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Pension Plan (Tables)

9 Months Ended

Sep. 30, 2011

Pension Plan

Components Of Pension Costs, U.K. Pension Plan

	Three Months Ended September  30,						Nine Months Ended September 30,
	2010			2011			2010			2011
Interest cost	$	794		$	816		$	2,357		$	2,456
Expected return on plan assets		(619	)		(745	)		(1,837	)		(2,242	)
Amortization of losses		265			212			787			639
Net periodic pension cost	$	440		$	283		$	1,307		$	853

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Acquisitions And Dispositions (Estimated Fair Value Of Assets Acquired And Liabilities Assumed) (Details) (X-Chem, Inc., [Member], USD $) In Thousands	Sep. 30, 2011
X-Chem, Inc., [Member]
Current assets	$ 9,309
Property and equipment, net	22
Current liabilities	(1,011)
Other liabilities	(3,592)
Noncontrolling interests	(8,297)
Identifiable intangible assets	9,030
Goodwill	10,039
Total	$ 15,500

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Property And Equipment (Property And Equipment, Stated At Cost) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Property And Equipment
Land	$ 8,201	$ 8,201
Buildings and leasehold improvements	294,944	274,716
Fixed assets not placed in service	10,163	13,843
Information technology systems under development	32,636	28,808
Furniture and equipment	257,312	234,132
Computer equipment and software	222,854	203,867
Total property and equipment	826,110	763,567
Less accumulated depreciation	(421,741)	(377,704)
Total property and equipment, net	$ 404,369	$ 385,863

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Business Segment Data (Tables)

9 Months Ended

Sep. 30, 2011

Business Segment Data

Net Revenue And Operating Income (Loss) By Segment

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Net revenue:
Clinical Development Services	$	260,345	$	292,025	$	765,075		$	863,230
Laboratory Services		79,045		90,848		231,921			252,007
Discovery Sciences		—		—		8,010			—
Reimbursed revenue		25,985		32,522		77,054			91,063
Total	$	365,375	$	415,395	$	1,082,060		$	1,206,300
Operating income (loss):
Clinical Development Services	$	43,681	$	53,771	$	101,830		$	148,748
Laboratory Services		13,154		11,648		34,631			26,266
Discovery Sciences		—		—		(11,860	)		—
Total	$	56,835	$	65,419	$	124,601		$	175,014

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Business Segment Data

9 Months Ended

Sep. 30, 2011

Business Segment Data

Business Segment Data

14. Business Segment Data

The Company evaluates segment performance and allocates resources based on net revenue and operating income (loss). Depreciation and amortization expense is allocated to the business unit based on various operational metrics, such as headcount and space. In addition, net revenue and operating income (loss) by segment exclude reimbursed revenue. The Company has a global infrastructure supporting its business segments, and therefore, assets are not identified by reportable segment.

Net revenue and operating income (loss) by business segment were as follows as of the dates set forth below:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Net revenue:
Clinical Development Services	$	260,345	$	292,025	$	765,075		$	863,230
Laboratory Services		79,045		90,848		231,921			252,007
Discovery Sciences		—		—		8,010			—
Reimbursed revenue		25,985		32,522		77,054			91,063
Total	$	365,375	$	415,395	$	1,082,060		$	1,206,300
Operating income (loss):
Clinical Development Services	$	43,681	$	53,771	$	101,830		$	148,748
Laboratory Services		13,154		11,648		34,631			26,266
Discovery Sciences		—		—		(11,860	)		—
Total	$	56,835	$	65,419	$	124,601		$	175,014

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Subsequent Event (Details) (USD $) In Millions, except Per Share data	Sep. 30, 2011
Right to receive cash without interest subject to conditions set forth in the merger agreement for each outstanding share of common stock	$ 33.25
Obligated financial advisor fee in connection with merger	$ 22.5
Maximum [Member]
Obligated to pay termination fee if the merger agreement is terminated	116.2
Minimum [Member]
Obligated to pay termination fee if the merger agreement is terminated	$ 58.1

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Debt Instruments

9 Months Ended

Sep. 30, 2011

Debt Instruments

Debt Instruments

7. Debt Instruments

In April 2011, the Company entered into a $50.0 million revolving line of credit facility with Barclays Bank PLC. The facility has a term of one-year and the Company can use borrowings for general corporate purposes. The credit facility contains affirmative, negative and financial covenants. Outstanding borrowings under the credit facility bear interest at an annual fluctuating rate tied to certain financial indices plus an agreed upon margin. The credit facility is currently scheduled to expire in April 2012, at which time any outstanding balance will be due. As of September 30, 2011, no borrowings were outstanding under this credit facility.

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Significant Accounting Policies (Policy)

9 Months Ended

Sep. 30, 2011

Significant Accounting Policies

Principles Of Consolidation

Principles of consolidation

The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and include the accounts of Pharmaceutical Product Development, Inc. and its majority-owned subsidiaries that it controls. Amounts pertaining to the noncontrolling ownership interests held by third parties in the operating results and financial position of the Company's majority-owned subsidiaries are reported as noncontrolling interests. All intercompany balances and transactions have been eliminated in consolidation.

In connection with the formation of the Company's subsidiary BioDuro Biologics Pte. Ltd., or BioDuro Biologics, the Company has contractual rights and restrictions related to certain activities of MAB Discovery GmbH, or MAB, a variable interest entity that provides services to BioDuro Biologics. The Company determined that it has a controlling financial interest in MAB because it directs the most significant activities that impact MAB's economic performance and has an obligation to absorb certain losses that could potentially be significant to MAB. As a result, the Company consolidates the financial results of MAB into its financial statements. MAB creditors have no recourse against the Company in the event of a default by MAB. As of September 30, 2011, MAB had total assets of $6.1 million and total liabilities of $5.7 million, and the Company had a commitment to provide up to $8.7 million of credit to MAB for purposes of acquiring equipment, of which $3.9 million had been advanced.

Revenue Recognition

Revenue recognition

The Company generally enters into contracts with clients to provide services with payments based on fixed and variable fee arrangements. The Company recognizes revenue for services, as rendered, only after persuasive evidence of an arrangement exists, the sales price is determinable and collectability is reasonably assured. Once the above criteria have been met, the Company recognizes revenue for the services provided based on the proportional performance methodology, which determines the proportion of outputs or performance obligations that have been completed or delivered compared to the total contractual outputs or performance obligations.

Some of the Company's contractual arrangements with clients involve multiple service deliverables, such as developing testing methodologies, database management, investigator recruitment and clinical trial monitoring, among others. Upon entering into the contractual arrangement, the Company determines whether each deliverable has standalone value to the client. If the multiple deliverables within the arrangement each have standalone value to the client, then a separate unit of accounting is assigned to each separate deliverable. If the multiple deliverables are not considered to each have standalone value to the client because the separate deliverables can only be used together, then the deliverables are considered bundled and only one unit of accounting is assigned to the entire arrangement.

A newly adopted accounting standard related to the accounting for revenue arrangements with multiple deliverables requires the allocation of the contractual arrangement's value based on the relative selling price of the separately identified units of accounting within the arrangement. The standard requires a hierarchy of evidence to be followed when determining the best evidence of the selling price of an item. The best evidence of selling price for a unit of accounting is vendor-specific objective evidence, or VSOE, or the price charged when a deliverable is sold routinely on a standalone basis. When VSOE is not available to determine selling price, relevant third-party evidence, or TPE, of selling price should be used, such as prices competitors charge for interchangeable services to similar clients. When neither VSOE nor TPE of selling price for similar deliverables exists, the Company must use its best estimate of selling price, or BESP, considering all relevant information that is available.

The Company generally is not able to establish TPE for its services, as its deliverables are highly customized and competitor pricing is not available. VSOE can often be established for certain deliverables based on the Company's standard price lists used for unitized services or the unit price or hourly rates set forth in the customer arrangement. BESP for deliverables is generally established based on labor costs, risks, and expected profit margins developed from the competitive bidding process for client contracts. The Company allocates the contractual arrangement's value at the inception of the arrangement using the relative selling prices of the deliverable services within the contract based upon VSOE when available but primarily upon BESP. Consistent with the Company's accounting policies prior to the adoption of this standard, the Company recognizes revenue for the separate elements of its contracts in accordance with the revenue recognition criteria above. The adoption of this standard did not have a material impact on the Company's consolidated condensed financial statements.

Under a small number of client contracts, a portion of the payments owed to the Company are contingent upon successful achievement of performance standards or research and development success milestones. These payments are not included in the total contract value used for the proportional performance calculations until the achievement of the performance standard or milestone is reasonably assured. Milestone payments on contracts entered into subsequent to January 1, 2011 were immaterial.

Fair Value

Fair value

The accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value measurement of a financial instrument and its classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

• Level 1 – Valuations based on quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Items valued using Level 1 inputs include money market funds, U.S. treasury securities and exchange-traded equity securities.

• Level 2 – Valuations based on quoted prices in markets that are not active, or for which all significant inputs are observable, either directly or indirectly. Level 2 valuations include the use of matrix pricing models, quotes for comparable securities and valuation models using observable market inputs. Items valued using Level 2 inputs include derivative instruments, corporate and municipal debt securities and asset-backed securities.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Items valued using Level 3 inputs include auction rate securities valued using unobservable inputs such as time to market liquidity and appropriate rates of return for comparable securities, and equity method investments valued at net asset value as determined by the fund manager based on the most recent financial information available.

Earnings Per Share

Earnings per share

The Company computes basic income per common share based on the weighted-average number of common shares outstanding during the period. The Company computes diluted income per common share information based on the weighted-average number of common shares outstanding during the period plus the effects of any dilutive common stock equivalents. The Company excluded 7,033,229 shares and 6,651,821 shares from the calculation of diluted earnings per common share during the three months ended September 30, 2010 and 2011, respectively, and 8,644,124 shares and 6,681,751 shares from the calculation of diluted earnings per share during the nine months ended September 30, 2010 and 2011, respectively, because they were antidilutive. The antidilutive shares consist of shares underlying stock options, employee stock purchase plan subscriptions and restricted stock units that were antidilutive for the period.

Use Of Estimates In Preparation Of The Financial Statements

Use of estimates in preparation of the financial statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Accounts Receivable And Unbilled Services (Accounts Receivable And Unbilled Services, Net) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Accounts Receivable And Unbilled Services
Billed	$ 320,167	$ 276,240
Unbilled	190,081	168,037
Allowance for doubtful accounts	(5,241)	(8,401)
Total accounts receivable and unbilled services, net	$ 505,007	$ 435,876

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Fair Value Of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Fair Value Of Financial Instruments

Fair Value Of Assets And Liabilities Measured On Recurring Basis

	Level 1		Level 2		Level 3		Total
As of December 31, 2010
Assets
Cash equivalents	$	232,731	$	—	$	—	$	232,731
Short-term investments:
Treasury securities		38,109		—		—		38,109
Municipal debt securities		—		32,707		—		32,707
Corporate debt securities		—		9,160		—		9,160
Long-term investments		—		—		78,747		78,747
Equity method investment		—		—		30,724		30,724
Derivative contracts		—		6,668		—		6,668
Total assets	$	270,840	$	48,535	$	109,471	$	428,846
Liabilities
Derivative contracts	$	—	$	1,373	$	—	$	1,373
Total liabilities	$	—	$	1,373	$	—	$	1,373
	Level 1		Level 2		Level 3		Total
As of September 30, 2011
Assets
Cash equivalents	$	219,669	$	—	$	—	$	219,669
Short-term investments		—		13,206		50,374		63,580
Equity method investments		—		—		58,547		58,547
Derivative contracts		—		1,331		—		1,331
Total assets	$	219,669	$	14,537	$	108,921	$	343,127
Liabilities
Derivative contracts	$	—	$	5,376	$	—	$	5,376
Total liabilities	$	—	$	5,376	$	—	$	5,376

Reconciliation Of Balances For Assets And Liabilities Measured At Fair Value

	Short-term Investments		Long-term Investments			Equity Method Investments
Balance as of December 31, 2010	$	—	$	78,747		$	30,724
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		(1,119	)		—
Income from equity method investment		—		—			2,549
Additional investment in equity method investment		—		—			8,012
Liquidation of investments		—		(75	)
Balance as of March 31, 2011		—		77,553			41,285
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		3,129
Realized loss on investments		—		(842	)
Income from equity method investment		—		—			10,639
Additional investment in equity method investments		—		—			200
Liquidation of investments		—		(10,625	)
Transfers out of Level 3(1)		—		(13,357	)
Balance as of June 30, 2011		—		55,858			52,124
Adjustment to previously recognized unrealized loss on investments included in other comprehensive income		—		12,192
Other-than-temporary impairment on auction rate securities		—		(17,551	)
Liquidation of investments		—		(125	)
Transfers between long term and short term		50,374		(50,374	)
Income from equity method investment		—		—			1,915
Additional investment in equity method investments		—		—			4,508
Balance as of September 30, 2011	$	50,374	$			$	58,547

⁽¹⁾  Transferred from Level 3 to Level 2 which has more observable market data due to increased market activity for asset-backed securities.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Significant Accounting Policies

Significant Accounting Policies

1. Significant Accounting Policies

The significant accounting policies followed by Pharmaceutical Product Development, Inc. and its subsidiaries (collectively, the "Company") for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. The Company prepared these unaudited consolidated condensed financial statements in accordance with Rule 10-01 of Regulation S-X and, in management's opinion, has included all adjustments of a normal recurring nature necessary for a fair presentation. The accompanying consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. The results of operations for the three-month and nine-month periods ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year or any other period. The amounts in the December 31, 2010 consolidated condensed balance sheet are derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

On June 14, 2010, the Company spun off its compound partnering business into a new independent, publicly traded company, Furiex Pharmaceuticals, Inc. (Nasdaq: FURX). Substantially all of the operating business components of the Discovery Sciences segment were included in the spin-off. The Company contributed $100.0 million of cash and cash equivalents to Furiex and distributed all outstanding shares of Furiex to the Company's shareholders as a pro-rata, tax-free dividend, issuing one share of Furiex common stock for every twelve shares of the Company's common stock to shareholders of record on June 1, 2010. The results of operations for the former compound partnering business conducted by the Company until June 14, 2010 are included as part of this report as continuing operations because the Company believes this transaction does not qualify for discontinued operations treatment due to the ongoing master development services agreement between the Company and Furiex. The Company does not have any equity or other form of ownership interest in Furiex subsequent to the separation.

Prior to the Company's June 2010 spin-off, the Discovery Sciences segment included the compound partnering business, a preclinical toxicology research business, and a biomarker discovery services business. In 2009, the Company sold both its preclinical toxicology research and biomarker discovery businesses, which were part of the Discovery Sciences segment. In 2010, the Company discontinued the operations of its wholly owned subsidiary PPD Dermatology, Inc. The Company's Discovery Sciences revenues were all generated in the United States

Principles of consolidation

The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, and include the accounts of Pharmaceutical Product Development, Inc. and its majority-owned subsidiaries that it controls. Amounts pertaining to the noncontrolling ownership interests held by third parties in the operating results and financial position of the Company's majority-owned subsidiaries are reported as noncontrolling interests. All intercompany balances and transactions have been eliminated in consolidation.

In connection with the formation of the Company's subsidiary BioDuro Biologics Pte. Ltd., or BioDuro Biologics, the Company has contractual rights and restrictions related to certain activities of MAB Discovery GmbH, or MAB, a variable interest entity that provides services to BioDuro Biologics. The Company determined that it has a controlling financial interest in MAB because it directs the most significant activities that impact MAB's economic performance and has an obligation to absorb certain losses that could potentially be significant to MAB. As a result, the Company consolidates the financial results of MAB into its financial statements. MAB creditors have no recourse against the Company in the event of a default by MAB. As of September 30, 2011, MAB had total assets of $6.1 million and total liabilities of $5.7 million, and the Company had a commitment to provide up to $8.7 million of credit to MAB for purposes of acquiring equipment, of which $3.9 million had been advanced.

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Recently issued accounting standards

In May 2011, the Financial Account Standards Board, or FASB, issued updated fair value measurement and disclosure guidance that clarifies how to measure fair value and requires additional disclosures regarding Level 3 fair value measurements, as well as any transfers between Level 1 and Level 2 fair value measurements. The updated accounting guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. The Company is currently evaluating the impact of adopting the updated fair value guidance, and it does not expect the adoption to have a material impact on its consolidated condensed financial statements.

In June 2011, the FASB amended the manner in which an entity presents the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single, continuous statement of comprehensive income or in two separate but consecutive statements. The amendment eliminates the option to present the components of other comprehensive income as part of the statement of equity. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a retrospective basis. The adoption of this guidance will not change the previously reported amounts of comprehensive income but will change the Company's presentation of comprehensive income in the consolidated condensed financial statements for the period ending March 31, 2012.

In September 2011, the FASB issued an accounting standards update that amends the two-step goodwill impairment test by permitting an entity to first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the entity determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step goodwill impairment test is unnecessary. The amendment is effective for fiscal years and interim periods beginning on or after December 15, 2011 on a prospective basis. The Company does not believe the adoption of this guidance will have an impact on its consolidated condensed financial statements.

Recently adopted accounting standards

In October 2009, the FASB issued a new accounting standard related to accounting for revenue arrangements with multiple deliverables. This standard applies to all deliverables in contractual arrangements in all industries in which the vendor will perform multiple revenue-generating activities. This standard also addresses the unit of accounting for an arrangement involving multiple deliverables and how arrangement consideration should be allocated. This standard was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on the Company's consolidated condensed financial statements, other than requiring additional disclosures included below under "Revenue recognition."

In March 2010, the FASB issued a new accounting standard, the objective of which is to establish a revenue recognition model for contingent consideration that is payable upon the achievement of an uncertain future event, referred to as a milestone. This standard applies to milestones in single or multiple-deliverable arrangements involving research and development transactions and was effective on January 1, 2011 on a prospective basis. The adoption of this standard did not have a material impact on the Company's consolidated condensed financial statements, other than requiring additional disclosures included below under "Revenue recognition."

In April 2011, the FASB issued an accounting standard update clarifying the guidance as to whether a restructuring of accounts receivable constitutes a troubled debt restructuring. The guidance applies to modifications of receivables when a debtor is experiencing financial difficulties. The updated guidance was effective on July 1, 2011 on a retrospective basis to January 1, 2011. The adoption of this standard did not have a material impact on the Company's consolidated condensed financial statements because the Company did not modify any of its receivables.

Revenue recognition

The Company generally enters into contracts with clients to provide services with payments based on fixed and variable fee arrangements. The Company recognizes revenue for services, as rendered, only after persuasive evidence of an arrangement exists, the sales price is determinable and collectability is reasonably assured. Once the above criteria have been met, the Company recognizes revenue for the services provided based on the proportional performance methodology, which determines the proportion of outputs or performance obligations that have been completed or delivered compared to the total contractual outputs or performance obligations.

Some of the Company's contractual arrangements with clients involve multiple service deliverables, such as developing testing methodologies, database management, investigator recruitment and clinical trial monitoring, among others. Upon entering into the contractual arrangement, the Company determines whether each deliverable has standalone value to the client. If the multiple deliverables within the arrangement each have standalone value to the client, then a separate unit of accounting is assigned to each separate deliverable. If the multiple deliverables are not considered to each have standalone value to the client because the separate deliverables can only be used together, then the deliverables are considered bundled and only one unit of accounting is assigned to the entire arrangement.

A newly adopted accounting standard related to the accounting for revenue arrangements with multiple deliverables requires the allocation of the contractual arrangement's value based on the relative selling price of the separately identified units of accounting within the arrangement. The standard requires a hierarchy of evidence to be followed when determining the best evidence of the selling price of an item. The best evidence of selling price for a unit of accounting is vendor-specific objective evidence, or VSOE, or the price charged when a deliverable is sold routinely on a standalone basis. When VSOE is not available to determine selling price, relevant third-party evidence, or TPE, of selling price should be used, such as prices competitors charge for interchangeable services to similar clients. When neither VSOE nor TPE of selling price for similar deliverables exists, the Company must use its best estimate of selling price, or BESP, considering all relevant information that is available.

The Company generally is not able to establish TPE for its services, as its deliverables are highly customized and competitor pricing is not available. VSOE can often be established for certain deliverables based on the Company's standard price lists used for unitized services or the unit price or hourly rates set forth in the customer arrangement. BESP for deliverables is generally established based on labor costs, risks, and expected profit margins developed from the competitive bidding process for client contracts. The Company allocates the contractual arrangement's value at the inception of the arrangement using the relative selling prices of the deliverable services within the contract based upon VSOE when available but primarily upon BESP. Consistent with the Company's accounting policies prior to the adoption of this standard, the Company recognizes revenue for the separate elements of its contracts in accordance with the revenue recognition criteria above. The adoption of this standard did not have a material impact on the Company's consolidated condensed financial statements.

Under a small number of client contracts, a portion of the payments owed to the Company are contingent upon successful achievement of performance standards or research and development success milestones. These payments are not included in the total contract value used for the proportional performance calculations until the achievement of the performance standard or milestone is reasonably assured. Milestone payments on contracts entered into subsequent to January 1, 2011 were immaterial.

Fair value

The accounting standards establish a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The fair value measurement of a financial instrument and its classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

• Level 1 – Valuations based on quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Items valued using Level 1 inputs include money market funds, U.S. treasury securities and exchange-traded equity securities.

• Level 2 – Valuations based on quoted prices in markets that are not active, or for which all significant inputs are observable, either directly or indirectly. Level 2 valuations include the use of matrix pricing models, quotes for comparable securities and valuation models using observable market inputs. Items valued using Level 2 inputs include derivative instruments, corporate and municipal debt securities and asset-backed securities.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Items valued using Level 3 inputs include auction rate securities valued using unobservable inputs such as time to market liquidity and appropriate rates of return for comparable securities, and equity method investments valued at net asset value as determined by the fund manager based on the most recent financial information available.

Earnings per share

The Company computes basic income per common share based on the weighted-average number of common shares outstanding during the period. The Company computes diluted income per common share information based on the weighted-average number of common shares outstanding during the period plus the effects of any dilutive common stock equivalents. The Company excluded 7,033,229 shares and 6,651,821 shares from the calculation of diluted earnings per common share during the three months ended September 30, 2010 and 2011, respectively, and 8,644,124 shares and 6,681,751 shares from the calculation of diluted earnings per share during the nine months ended September 30, 2010 and 2011, respectively, because they were antidilutive. The antidilutive shares consist of shares underlying stock options, employee stock purchase plan subscriptions and restricted stock units that were antidilutive for the period.

Use of estimates in preparation of the financial statements

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Acquisitions And Dispositions (Tables)

9 Months Ended

Sep. 30, 2011

Acquisitions And Dispositions

Estimated Fair Value Of Assets Acquired And Liabilities Assumed

	X-Chem
Current assets	$	9,309
Property and equipment, net		22
Current liabilities		(1,011	)
Other liabilities		(3,592	)
Noncontrolling interests		(8,297	)
Identifiable intangible assets		9,030
Goodwill		10,039
Total	$	15,500

Consolidated Condensed Statements Of Income Discontinued Operations

	Three Months Ended September  30,				Nine Months Ended September 30,
	2010		2011		2010			2011
Loss from discontinued operations	$	—	$	—	$	(4,444	)	$	—
Benefit for income taxes		—		—		782			—
Loss from discontinued operations, net of income taxes		—		—		(3,662	)		—

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Goodwill And Intangible Assets (Schedule Of Future Period Amortization Expense) (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Goodwill And Intangible Assets
Amortization expense	$ 1,000,000	$ 900,000	$ 3,000,000	$ 2,800,000
2011 (remaining three months)			977,000
2012			3,274,000
2013			3,097,000
2014			2,344,000
2015			$ 1,769,000

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Accounts Receivable And Unbilled Services (Tables)

9 Months Ended

Sep. 30, 2011

Accounts Receivable And Unbilled Services

Accounts Receivable And Unbilled Services, Net

	December 31, 2010			September 30, 2011
Billed	$	276,240		$	320,167
Unbilled		168,037			190,081
Allowance for doubtful accounts		(8,401	)		(5,241	)
Total accounts receivable and unbilled services, net	$	435,876		$	505,007

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Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

9 Months Ended

Sep. 30, 2011

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments

3. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Other Investments

Cash and cash equivalents, short-term investments, long-term investments and other investments were composed of the following as of the dates set forth below:

	Cash and Cash Equivalents		Short-term Investments		Long-term Investments		Other Investments		Unrealized Gains		Unrealized Losses
As of December 31, 2010
Cash	$	246,843
Money market funds		232,731
Auction rate securities					$	78,747					$	14,203
Municipal debt securities			$	32,707					$	122		24
Corporate debt securities – FDIC insured				9,160						105		1
Treasury securities				38,109						118		2
Equity method investment:
Celtic Therapeutics Holdings, L.P.							$	30,724
Cost method investments:
Bay City Capital Funds								7,069
A.M. Pappas Funds								3,486
Liquidia Technologies, Inc.								5,000
Other investments								1,554
Total	$	479,574	$	79,976	$	78,747	$	47,833	$	345	$	14,230
As of September 30, 2011
Cash	$	197,077
Money market funds		210,759
Certificates of deposit		8,910
Auction rate securities			$	50,374
Asset-backed securities				13,206
Equity method investments:
Celtic Therapeutics Holdings, L.P.							$	58,347
venBio Global Strategic Fund, L.P.								200
Cost method investments:
Bay City Capital Funds								8,751
A.M. Pappas Funds								3,546
Liquidia Technologies, Inc.								5,000
Other investments								1,733
Total	$	416,746	$	63,580	$	—	$	77,577	$	—	$	—

For the three and nine months ended September 30, 2010 and 2011, the Company had the following gross realized gains and losses on investments:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2011		2010		2011
Gross realized gains on short-term investments	$	—	$	—	$	4	$	422
Gross realized gains on cost method investments		—		—		3,340		244
Gross realized losses on short-term investments		—		—		53		5
Gross realized losses on long-term investments		—		—		—		842
Gross realized losses on cost method investments		—		—		750		924

Short-term and long-term investments

The Company classifies its short-term and long-term investments as available-for-sale securities. The Company determines realized and unrealized gains and losses on short-term and long-term investments on a specific identification basis.

At December 31, 2010, the Company held $78.7 million, net of unrealized losses of $14.2 million, in auction rate securities. The Company classified these securities as long-term investments. The Company concluded that the unrealized losses were temporary because of its ability and intent to hold the auction rate securities until the fair value recovered. In May 2011, the Company converted $14.2 million par value of its government-guaranteed student loan auction rate securities to $14.2 million par value of government-guaranteed student loan asset-backed securities from the same issuer. As a result of the pending Merger Agreement more fully described in Note 16, which requires the Company, at the request of Jaguar Holdings, LLC, or Parent, to sell all or part of the asset-backed and auction rate securities at a price equal or greater than the price proposed by the Parent, the Company classified all of these securities as short-term investments and recorded them at an estimated fair value as of September 30, 2011. Amounts ultimately received upon sale could vary from their estimated fair value; however, the Company does not believe the difference between the estimated fair value and the amounts ultimately received upon sale will be material. In addition, the Company concluded that the previously unrealized losses were other-than-temporary because the Company no longer had the intent to hold these securities until maturity or until their face value recovered. As a result, for the three and nine months ended September 30, 2011, the Company recognized other-than-temporary impairment losses of $17.7 million.

Equity method investment

In 2009, the Company committed to invest up to $102.7 million in Celtic Therapeutics Holdings, L.P., or Celtic, as a limited partner. Celtic is an investment partnership organized for the purpose of identifying, acquiring and investing in a diversified portfolio of novel therapeutic product candidates, with a focus on mid-stage compounds that have progressed through human proof of concept studies and that are targeted to address unmet medical needs. As of September 30, 2011, the Company owned 49.6% of the outstanding partnership interests of Celtic. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $55.0 million, which it expects to fund over a period of up to four years. During 2010, the Company loaned Celtic $10.0 million, of which $2.0 million was repaid in 2010 and the remaining $8.0 million was converted to additional equity in connection with the settlement of a $10.0 million capital call during the first quarter of 2011. For the three months ended September 30, 2010 and 2011, the Company recognized a loss of $4.6 million and income of $1.9 million, respectively, based on the allocation of profits and losses to the partners' capital accounts. For the nine months ended September 30, 2010 and 2011, the Company recognized a loss of $8.4 million and income of $15.1 million, respectively, based on the allocation of profits or losses to the partners' capital accounts. As of September 30, 2011, the Company had an investment balance of $58.3 million.

In April 2011, the Company committed to invest up to $50.0 million in venBio Global Strategic Fund, L.P., or venBio, as a limited partner over the next five years. venBio invests in early stage life sciences companies. The Company accounts for this investment under the equity method of accounting because the Company is a limited partner and the general partner has all decision-making authority relating to investment decisions and fund operations. As such, the Company is deemed to lack the control of the entity required for consolidation. As of September 30, 2011, the Company had a remaining commitment of $49.8 million. As of September 30, 2011, the Company had an investment balance of $0.2 million and had an ownership interest in venBio of 28.6%.

Cost method investments

The Company is a limited partner in several venture capital funds established for the purpose of investing in life science and healthcare companies. These funds require the Company to commit to make investments in the funds over a period of time. The Company accounts for these funds as cost method investments, determining realized and unrealized losses on a specific identification method.

The Company is a stockholder in Accelerator III Corporation and certain of its incubator companies. Accelerator III requires the Company to make investments upon request up to its committed capital amount. The Company accounts for this investment as a cost method investment, determining realized and unrealized losses on a specific identification method.

The Company's capital commitments in these funds as of September 30, 2011 were as follows:

Fund	Ownership			Total Capital Commitment		Remaining Commitment		Commitment Expiration
Bay City Capital Fund IV, L.P.		2.9	%	$	10,000	$	705	September  2010(2)
Bay City Capital Fund V, L.P.		2.0	%		10,000		5,552	October 2012
A.M. Pappas Life Science Ventures III, L.P.		4.7	%		4,750		594	December  2009(2)
A.M. Pappas Life Science Ventures IV, L.P.		3.0	%		2,935		1,702	February 2014
Accelerator III and incubator companies(1)		19.9	%		4,802		819	None

⁽¹⁾  The Company's percentage ownership of Accelerator III and incubator companies might vary but will not exceed 19.9%.

⁽²⁾  The funding commitments to Bay City Capital Fund IV, L.P. and A.M. Pappas Life Science Ventures III, L.P. have expired for new investments. The Company may still be required to fund additional investments in existing fund portfolio companies and the ongoing operations of these funds up to the amount of the remaining capital commitment.

In May 2010, the Company invested $5.0 million for an ownership interest in Liquidia Technologies, Inc. As of September 30, 2011, the Company's ownership interest in Liquidia was 8.6%.

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Commitments And Contingencies

9 Months Ended

Sep. 30, 2011

Commitments And Contingencies

Commitments And Contingencies

12. Commitments and Contingencies

From time to time, the Company causes letters of credit to be issued to provide credit support for guarantees, contractual commitments and insurance policies. The fair values of the letters of credit reflect the amount of the underlying obligation and are subject to fees payable to the issuers of the letters of credit competitively determined in the marketplace. As of September 30, 2011, the Company had four letters of credit outstanding for a total of $1.8 million.

The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions and medical malpractice. The Company's retentions and deductibles associated with these insurance policies range in amounts up to $5.0 million.

The Company is self-insured for health insurance for the majority of its employees located within the United States, but maintains stop-loss insurance on a "claims made" basis for expenses in excess of $0.4 million per member per year.

As of September 30, 2011, the Company had commitments to invest up to an aggregate additional $8.6 million in several venture capital funds, $0.8 million in other cost method investments and $104.8 million in equity method investments. For further details, see Note 3.

In 2010, the Company entered into a non-revolving line of credit agreement to loan Celtic Pharma Development Services Bermuda Ltd., a subsidiary of Celtic Pharmaceutical Holdings L.P., up to $18.0 million to finance trade payables in connection with a specified drug candidate. Celtic Pharma Development Services Bermuda Ltd. has appointed the Company to conduct certain clinical studies on the drug candidate. Principal and interest are due and payable no later than June 30, 2013 and are secured by a guarantee of an affiliate of the borrower. As of September 30, 2011, the Company had advanced $16.8 million to the borrower which is recorded as a component of other assets.

In 2010, the Company sold a noncontrolling interest in its BioDuro Biologics Pte. Ltd. subsidiary. During the 183-day period commencing in December 2016, the minority equity holders have the right to require the Company to purchase their noncontrolling interests at fair value.

As of September 30, 2011, the Company's total gross unrecognized tax benefits were $29.4 million, of which $16.9 million, if recognized, would reduce its effective tax rate. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $5.7 million within the next twelve months due to the settlement of audits and the expiration of statutes of limitations.

The Company's policy for recording interest and penalties associated with tax audits is to record them as a component of provision for income taxes. As of September 30, 2011, the Company accrued $4.1 million of interest and $0.9 million of penalties with respect to uncertain tax positions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, the Company will reduce amounts accrued and reflect them as a reduction of the overall income tax provision.

Under most of its agreements for services, the Company typically agrees to indemnify and defend the sponsor against third-party claims based on the Company's negligence or willful misconduct. Any successful claims could have a material adverse effect on the Company's financial condition, results of operations or cash flows.

In the normal course of business, the Company is a party to various claims and legal proceedings. A number of putative shareholder class actions have also been filed against the Company in connection with the merger described in Note 16. The Company records a reserve for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable. Although the ultimate outcome of pending and threatened litigation is currently not determinable and litigation costs can be material, management of the Company, after consultation with legal counsel, does not believe that the resolution of these matters will have a material effect upon the Company's financial condition, results of operations or cash flows.

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Related Party Transactions (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010	Mar. 31, 2011
Loan to related parties			$ 7,550,000	$ 7,700,000
Celtic Therapeutics Holdings, L.P. [Member]
Equity method investment ownership percentage	49.60%		49.60%
Loan to related parties					10,000,000
Payment of loan					2,000,000
Outstanding loan converted to additional equity in settlement						10,000,000
Net revenue	$ 1,300,000	$ 800,000	$ 3,900,000	$ 1,300,000

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Acquisitions And Dispositions (Consolidated Condensed Statements Of Income Discontinued Operations) (Details) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2010
Acquisitions And Dispositions
Loss from discontinued operations	$ (4,444)
Benefit for income taxes	782
Loss from discontinued operations, net of income taxes	$ (3,662)

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Subsequent Event

9 Months Ended

Sep. 30, 2011

Subsequent Event

Subsequent Event

16. Subsequent Event

On October 2, 2011, the Company entered into an Agreement and Plan of Merger, or Merger Agreement, with Jaguar Holdings, LLC, or Parent, and Jaguar Merger Sub, Inc., a wholly-owned subsidiary of Parent, providing for the merger of Merger Sub with and into the Company. At the effective time of the merger, each outstanding share of the Company's common stock (other than (i) shares owned by Parent, Merger Sub, the Company or any of their respective subsidiaries, (ii) equity awards previously agreed to roll over in the merger and (iii) shares owned by shareholders who have perfected appraisal pursuant to Article 13 of the North Carolina Business Corporation Act) shall be automatically cancelled and converted into the right to receive $33.25 in cash, without interest, on the terms and subject to the conditions set forth in the Merger Agreement. As a result, the Company will become a wholly-owned subsidiary of Parent and the Company's common stock will cease to be publicly traded. Parent and Merger Sub were formed by affiliates of The Carlyle Group and affiliates of Hellman & Friedman LLC.

The closing of the merger transaction is subject to normal and customary conditions, including approval by the Company's shareholders. Contingent upon the closing of the merger, the Company will be obligated to pay a financial advisor fee in connection with the merger of approximately $22.5 million. The Company expects the merger to close during the fourth quarter of 2011. However, the Merger Agreement may be terminated and the merger abandoned at any time prior to the effective time of the merger. If the Merger Agreement is terminated, the Company may be obligated to pay a termination fee of $58.1 million or $116.2 million, depending on the basis of the termination.

The Company has been notified of putative shareholder class action lawsuits by persons alleging to be shareholders of the Company, individually and on behalf of all others similarly situated, against the Company, the Sponsors, and each of the directors of the Company, seeking damages in unspecified amounts and injunctive relief. These lawsuits are alleging that the directors breached their fiduciary duties in entering into the Merger Agreement with Sponsors.

Additional similar lawsuits might arise. The Company and its board of directors believe these lawsuits are without merit and intend to vigorously defend them.

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Consolidated Condensed Statements Of Income (USD $) In Thousands, except Per Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Net revenue:
Service revenue	$ 382,873	$ 339,390	$ 1,115,237	$ 1,005,006
Reimbursed revenue	32,522	25,985	91,063	77,054
Total net revenue	415,395	365,375	1,206,300	1,082,060
Direct costs	223,507	189,979	651,720	564,948
Research and development expenses	2,069	470	6,081	15,253
Selling, general and administrative expenses	107,579	102,365	322,981	327,381
Depreciation and amortization	16,821	15,726	50,504	49,877
Total operating expenses	349,976	308,540	1,031,286	957,459
Operating income	65,419	56,835	175,014	124,601
(Loss) income from equity method investment	1,915	(4,562)	15,103	(8,351)
Gain (loss) on investments	(17,703)		(18,808)	2,541
Other income (expense), net	1,069	877	1,129	2,358
Income from continuing operations before provision for income taxes	50,700	53,150	172,438	121,149
Provision for income taxes	15,083	15,148	54,039	41,303
Income from continuing operations	35,617	38,002	118,399	79,846
Loss from discontinued operations, net of income taxes				(3,662)
Net income	35,617	38,002	118,399	76,184
Net (income) loss attributable to noncontrolling interests	(181)		1,157
Net income attributable to shareholders	$ 35,436	$ 38,002	$ 119,556	$ 76,184
Income per common share from continuing operations:
Basic	$ 0.31	$ 0.32	$ 1.04	$ 0.67
Diluted	$ 0.31	$ 0.32	$ 1.03	$ 0.67
Basic and diluted loss per common share from discontinued operations				$ (0.03)
Net income per common share
Basic	$ 0.31	$ 0.32	$ 1.04	$ 0.64
Diluted	$ 0.31	$ 0.32	$ 1.03	$ 0.64
Dividends declared per common share	$ 0.15	$ 0.15	$ 0.45	$ 0.45
Weighted-average number of common shares outstanding:
Basic	113,891	118,814	114,708	118,607
Dilutive effect of stock options and restricted stock	1,298	991	1,320	964
Diluted	115,189	119,805	116,028	119,571

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Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments (Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments) (Details) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010	Sep. 30, 2010	Dec. 31, 2009
Cash and Cash Equivalents	$ 416,746	$ 479,574	$ 440,442	$ 408,903
Short-term Investments	63,580	79,976
Long-term Investments		78,747
Other Investments	77,577	47,833
Unrealized Gains		345
Unrealized Losses		14,230
Cash [Member]
Cash and Cash Equivalents	197,077	246,843
Money Market Funds [Member]
Cash and Cash Equivalents	210,759	232,731
Certificates Of Deposit [Member]
Cash and Cash Equivalents	8,910
Municipal Debt Securities [Member]
Short-term Investments		32,707
Unrealized Gains		122
Unrealized Losses		24
Corporate Debt Securities [Member]
Short-term Investments		9,160
Unrealized Gains		105
Unrealized Losses		1
Auction Rate Securities [Member]
Short-term Investments	50,374
Long-term Investments		78,747
Unrealized Losses		14,203
Treasury Securities [Member]
Short-term Investments		38,109
Unrealized Gains		118
Unrealized Losses		2
Asset-Backed Securities [Member]
Short-term Investments	13,206
Celtic Therapeutics Holdings, L.P. [Member]
Other Investments	58,347	30,724
venBio Global Strategic Fund, L.P. [Member]
Other Investments	200
Bay City Capital Funds [Member]
Other Investments	8,751	7,069
A.M. Pappas Funds [Member]
Other Investments	3,546	3,486
Liquidia Technologies, Inc. [Member]
Other Investments	5,000	5,000
Other Investments [Member]
Other Investments	$ 1,733	$ 1,554

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Accounting For Derivative Instruments And Hedging Activities (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2010
Accounting For Derivative Instruments And Hedging Activities
Hedging portfolio ineffectiveness	$ 100,000	$ 300,000	$ 44,000	$ 100,000
Reclassification of current loss positions from OCI into statement of income			2,100,000
Foreign currency derivative asset, recognized as a component of other current assets	1,300,000		1,300,000		6,700,000
Foreign currency derivative liability, recognized as component of other accrued expenses	$ 5,400,000		$ 5,400,000		$ 1,400,000
Number of foreign currency options and forwards related to receivables and payables hedging outstanding	2		2
Hedging contracts maturity period scheduled, months			15

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Debt Instruments (Details) (USD $)	9 Months Ended
	Sep. 30, 2011	Apr. 30, 2011
Debt Instruments
Revolving line of credit facility		$ 50,000,000
Term of credit facility, years	1
Line of credit facility, expiration date	April 2012
Borrowings outstanding under the credit facility	$ 0

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Shareholders' Equity (Details) (USD $) In Millions, except Share data	1 Months Ended	3 Months Ended	9 Months Ended
	Feb. 29, 2008	Mar. 31, 2011	Sep. 30, 2011	Sep. 30, 2011 Stock Options [Member]	Sep. 30, 2010 Stock Options [Member]	Sep. 30, 2011 Restricted Stock [Member]
Options granted to purchase, shares				1,896,000
Weighted-average exercise price of options per share				$ 27.47
Options to purchase shares granted in the Company's annual grant				1,554,500
Weighted-average grant date fair value per share				$ 6.81	$ 5.15
Weighted-average grant date fair value per share						$ 27.31
Aggregate fair value of units				$ 12.9	$ 16.5	$ 10.0
Options outstanding				11,800,000
Vesting period of restricted stock, in years						three
Restricted stock units granted						367,000
Outstanding restricted stock units						355,000
Repurchase of common stock authorized under stock repurchase program	350.0
Repurchased common stock, shares		6,500,000
Repurchased common stock, value		200.0
Forward sale contract required to purchase shares, value			200.0
Forward sale contract, additional shares received			503,000
Restricted stock units granted in annual grant						359,000
Remaining amount available for stock repurchases authorized by the Board of Directors			$ 60.7

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Business Segment Data (Net Revenue And Operating Income (Loss) By Segment) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Business Segment Data
Clinical Development Services	$ 292,025	$ 260,345	$ 863,230	$ 765,075
Laboratory Services	90,848	79,045	252,007	231,921
Discovery Sciences				8,010
Reimbursement Revenue	32,522	25,985	91,063	77,054
Total net revenue	415,395	365,375	1,206,300	1,082,060
Clinical Development Services	53,771	43,681	148,748	101,830
Laboratory Services	11,648	13,154	26,266	34,631
Discovery Sciences				(11,860)
Operating income	$ 65,419	$ 56,835	$ 175,014	$ 124,601

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Cash And Cash Equivalents, Short-Term Investments, Long-Term Investments And Other Investments (Gross Realized Gains And Losses On Investments) (Details) (USD $) In Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Gross realized gains on short-term investments			$ 422	$ 4
Gross realized gains on cost method investments			244	3,340
Gross realized losses on cost method investments			924	750
Short-Term Investments [Member]
Gross realized losses on investments			5	53
Long-Term Investments [Member]
Gross realized losses on investments			$ 842