Item 1. Business

Overview

We are the world’s largest provider of biopharmaceutical development services and commercial outsourcing services. We are positioned at the intersection of business services and healthcare and generated $3.8 billion of service revenues in 2013, conduct business in approximately 100 countries and have approximately 28,200 employees. We use the breadth and depth of our service offerings, our global footprint and our therapeutic, scientific and analytics expertise to help our biopharmaceutical customers, as well as other healthcare customers, to be more successful in an increasingly complex healthcare environment.

Since our founding more than 30 years ago, we have grown to become a leader in the development and commercialization of new pharmaceutical therapies. Our Product Development segment is the world’s largest contract research organization, or CRO, as ranked by 2013 reported service revenues, and is focused primarily on Phase II-IV clinical trials and associated laboratory and analytical activities. Our Integrated Healthcare Services segment includes one of the leading global commercial pharmaceutical sales and service organizations. Integrated Healthcare Services provides a broad array of services, including commercial services, such as providing contract pharmaceutical sales forces in key geographic markets, as well as a growing number of healthcare business services for the broader healthcare sector, such as outcome-based, consulting and real-world research and other healthcare solutions. Product Development contributed approximately 77% and Integrated Healthcare Services contributed approximately 23% to our 2013 service revenues. Additional information regarding our segments is presented in Note 21 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Our global scale and capabilities enable us to work with the leading companies in the biopharmaceutical sector that perform trials and market their products all around the world. During each of the last 11 years, we have worked with the 20 largest biopharmaceutical companies ranked by 2012 reported revenues. We have provided services in connection with the development or commercialization of the top 50 best-selling biopharmaceutical products and the top 50 best-selling biologic products, from 2012 as measured by reported sales. Of the new molecular entities, or NMEs, and new biologic applications, or BLAs, approved from 2004 through 2012, we helped develop or commercialize 97% of the central nervous system drugs, 93% of the oncology drugs and 89% of the cardiovascular drugs.

We have extensive scientific and therapeutic expertise, including more than 950 employees globally who are medical doctors with experience across a number of fields. We also have substantial statistical, quantitative, analytical and applied technology skills, with more than 900 employees possessing a Ph.D. or equivalent. Our experts enable us to add sophisticated statistical, process development and advanced technology applications into our clinical development services to meet the needs of the broader healthcare industry for appropriate endpoints, adaptive trials, drug therapy analysis, outcomes and real-world research and evidence-based medicine. Our scientific and medical expertise allows us to conduct biomarker discovery, perform gene sequencing and expression analysis, create assays that can be duplicated on a global scale and support the evolving fields of translational science and personalized medicine. Moreover, our flexible business solutions and commitment to our customers’ objectives enable us to provide our customers with customized operational delivery models to meet their particular needs.

In 2013, our service revenues were $3.8 billion and our net income attributable to our shareholders was $226.6 million. In addition, our 2013 net new business was $4.9 billion, and we ended the year with $9.9 billion in backlog. See Part I, Item 1 “Business—Net New Business Reporting and Backlog” for more detail. During each of the last six years, we have had at least eight customers from whom we earned more than $100 million in service revenues. No single customer represented more than 10% of our 2013 revenues.

Our Markets

The market served by Product Development consists primarily of biopharmaceutical companies, including medical device and diagnostics companies, that are seeking to outsource clinical trials and other product development activities. We estimate that total biopharmaceutical spending on drug development was approximately $93 billion in 2013, of which we estimate that our addressable market (clinical development spending excluding preclinical spending) was approximately $51 billion. The portion of this $51 billion that was outsourced in 2013, based on our estimates, was approximately $19 billion. We estimate that the potential market for Product Development’s services will experience a compound annual growth rate, or CAGR, of 6%-8% from 2013 through 2016 as a result of increased research and development, or R&D, spending by biopharmaceutical companies and the increased outsourcing of this spending as compared to 2012. In addition, many compounds in the global product development pipeline relate to the therapeutic areas of oncology, central nervous system and cardiovascular diseases and disorders, which are our largest therapeutic areas as measured by service revenues.

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Integrated Healthcare Services primarily addresses markets related to the use of approved biopharmaceutical products. We estimate that total spending related to approved drugs, including biopharmaceutical spending on commercialization of these drugs and expenditures by participants in the broader healthcare market on real-world research and evidence-based medicine, exceeded $94 billion in 2013. Integrated Healthcare Services links product development to healthcare delivery. This segment’s services include commercial services such as recruiting, training, deploying and managing a global sales force, channel management, patient engagement services, market access consulting, brand communication, consulting and medical education. In addition, Integrated Healthcare Services offers outcome-based services such as observational studies, comparative effectiveness studies and product and disease registry services which are intended to help increase the quality and cost-effectiveness of healthcare and provider payer solutions. We believe that a combination of cost pressure in healthcare systems around the world and the increasing focus on the value and efficacy of pharmaceutical therapy provide us many opportunities to grow our revenues and expand our service offerings by improving the cost-effectiveness of drug therapies.

We believe that we are well-positioned to benefit from current trends in the biopharmaceutical and healthcare industries that affect our markets, including:

Trends in R&D Spending. We estimate that R&D spending was approximately $137 billion in 2013 and will grow to approximately $145 billion in 2016, with development accounting for approximately 68% of total expenditures. R&D spending trends are impacted as a result of several factors, including major biopharmaceutical companies’ efforts to replenish revenues lost from the so-called “patent cliff” of recent years, increased access to capital by the small and midcap biotechnology industry, and recent increases in pharmaceutical approvals by regulatory authorities. In 2013, there were approximately 4,060 drugs in the Phase I-III pipeline, an increase of 19% since 2008, and there were 27 NME approvals by the United States Food and Drug Administration, or FDA, in 2013 which for the two year period of 2012 to 2013 showed the highest number of approvals since the late 1990’s. We believe that further R&D spending, combined with the continued need for cost efficiency across the healthcare landscape, will create new opportunities for biopharmaceutical services companies, particularly those with a global reach and broad service offerings, to help biopharmaceutical companies with their pre- and post-launch product development and commercialization needs.

Growth in Outsourcing. We estimate that clinical development spending outsourced to CROs in Phases I-IV in 2013 was approximately $19 billion and will grow to approximately $23 billion by 2016. We expect outsourced clinical development to CROs to grow 6%-8% annually during this period. Of this annual growth, we believe that up to 2% will be derived from increased R&D expenditures, with the remainder coming from increased outsourcing penetration. We estimate that overall outsourcing penetration in 2013 was 37%. The market served by Integrated Healthcare Services is diverse, which makes it difficult to estimate the current amount of outsourced integrated healthcare services and the expected growth in such services. However, based on our knowledge of these markets we believe that, while the rate of outsourcing penetration varies by market within Integrated Healthcare Services, the current outsourcing penetration of the estimated $94 billion addressable market is not more than 20%. As business models continue to evolve in the healthcare sector, we believe that the growth rate for outsourcing across the Integrated Healthcare Services markets will be similar to the growth in clinical development.

Over the longer term, we believe that we are well positioned for the future evolution of the healthcare sector as increasing demand from governments and other payers around the world for quality, accountability and value for money drive biopharmaceutical companies, providers and other healthcare organizations to transform their value chain away from a vertically integrated model and focus on their core competencies. In order to do this, we believe that healthcare organizations will need to move towards variable cost structures to lower risk and improve returns. In particular, we believe that the following trends will result in increased outsourcing to global biopharmaceutical services companies, of which we are the largest and most global:

	•		Maximizing Productivity and Lowering Costs. Declining R&D productivity, increased development costs and diminished returns on marketing and sales have negatively impacted biopharmaceutical companies’ margins and short-term earnings. We believe that the need for biopharmaceutical companies to maximize productivity and lower costs in their product development and commercial operations will cause them to look to partners as they enter into outsourcing arrangements to improve efficiency, increase sales force utilization and effectiveness, improve clinical success rates and turn fixed costs into variable costs across their R&D and commercial operations.

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	•		Managing Complexity. Biopharmaceutical companies face environments in which it has become increasingly difficult to operate. Improved standards of care in many therapeutic areas and the emergence of new types of therapies, such as biologics, genetically targeted therapies, gene and stem cell therapies, and other treatment modalities have led to more complex development and regulatory pathways, such as recently released guidelines in the United States and Europe for the development of “biosimilar” products. We believe that companion diagnostics, genomics and biomarker expertise will become a more critical part of the development process as biopharmaceutical companies require more customized clinical trials and seek to develop treatments that are more tailored to an individual’s genetic profile or a disease’s profile. As biopharmaceutical companies are increasingly devoting a larger percentage of their R&D budgets and resources to the development of personalized medicines, we believe they will need to partner with service providers that can apply data and analytics expertise, particularly in the planning stages, and provide highly productive and reliable delivery solutions that integrate more sophisticated approaches to managing complexity. We believe that our global clinical development capabilities, including our expertise in biomarkers and genomics and our global laboratory network, position us well to help biopharmaceutical companies manage the complexities inherent in an environment where this type of expertise is important.

	•		Providing Enhanced Value for Patients. As healthcare costs rise globally, governments and third-party payers have looked for ways both to control healthcare expenditures and increase the quality, safety and effectiveness of drug therapies. Governments and regulatory bodies have adopted, and may continue to adopt, healthcare legislation and regulations that may significantly impact the healthcare industry by demanding more value for money spent and financial accountability for patient outcomes. Such legislation and regulations may tie reimbursement to the demonstrated clinical efficacy of a therapy, require payers and providers to demonstrate efficacy in the delivery of healthcare services and require more evidence-based decisions, all of which we believe will increase the demand for innovative and cost-effective commercialization strategies and outcome research and data analytics services.

	•		Increased Importance of Product Development in Local Markets. Increasingly, regulators require trials involving local populations as part of the process for approving new pharmaceutical products, especially in certain Asian and emerging markets. Understanding the epidemiological and physiological differences in different ethnic populations and being able to conduct trials locally in certain geographies will be important to pharmaceutical product growth strategies, both for multinational and local/regional biopharmaceutical companies. We believe that our global clinical development capabilities and unmatched presence in Asia make us a strong partner for biopharmaceutical companies managing the complexities of international drug development.

	•		Increasing Number of Phase II-IV Clinical Trials. Biopharmaceutical companies are devoting increasing resources to Phase II-IV trials. Based on the current and expected composition of the global drug development pipeline, we believe that spending on Phase II-IV clinical trials will continue to increase. As the number of large Phase II-IV trials increases, especially those that focus on rare diseases or that continue to require large numbers of patients with very specific disease conditions, trial sponsors will increasingly seek to recruit patients on a global basis. We believe that this increased spending and the demand for global patient recruitment will favor the limited number of biopharmaceutical services companies that have both the capabilities to administer large, complex global clinical trials and relationships with thought-leading investigators and trial sites around the world. In addition, as these drugs come to market, we believe that biopharmaceutical companies will also seek to outsource an increasing amount of the commercial and other integrated healthcare services necessary to effectively launch and market these drugs, including integrated channel management, contract sales (including recruiting, training, deploying and managing field based resources and e-detailing), branding of products, medical science liaisons, nurse educators, observational research and patient registries.

Increase in Strategic Collaborations. Larger CROs are able to provide a greater variety of services of value to the biopharmaceutical community. Biopharmaceutical companies are continuing to enter into long-term strategic collaborations with global service providers that enable them to utilize flexible business models and integrated end to end solutions to deliver on their strategic priorities. We believe that biopharmaceutical companies have historically preferred, and will continue to prefer, financially sound, global service providers with broad therapeutic and functional expertise such as our company when selecting strategic providers.

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Our Competitive Strengths

We believe that we are positioned to be the partner of choice to biopharmaceutical companies worldwide and a key resource to other healthcare industry participants who are looking to improve operational, therapeutic and patient outcomes. We differentiate ourselves from others in our industry through our competitive strengths, which include:

Leadership and Global Scale. We believe that our industry leading size, global scale and significant technology and process capabilities differentiate us by enabling us to effectively manage increasingly complex and global clinical trials with continuous clinical data monitoring and niche pools of patients from around the world. Based on reported 2013 consolidated service revenues, we are nearly 1.6 times the size of our closest public CRO competitor. We have earned a reputation as an industry and thought leader, which is reflected in our financial and operational performance. We believe we have the largest share of the outsourced global clinical and commercialization markets. With our broad geographic diversification, represented by operations in approximately 100 countries, we are able to deliver services to our customers in each of the most significant biopharmaceutical markets in the world. Based on our public competitors’ 2013 reported service revenues, we believe we are the market leader in the United States, Japan and Europe, the three largest biopharmaceutical markets in the world. In 2013, we had revenues of approximately $774 million in the Asia-Pacific region, where we have had a presence since 1993. In addition, as of December 31, 2013, we had approximately 28,200 employees with the majority located outside the United States, including significant numbers in Japan and Europe. We also have a significant presence in emerging markets, such as Brazil, Russia, India and China, or BRIC, markets. Our scale allows us to leverage our global capabilities while maintaining customer confidentiality, and our significant technology and process capabilities enable the seamless transfer of data between global trials running simultaneously to allocate resources, reduce costs and speed the time to market. For more information regarding the geographic scope of our business, see Note 20 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. For more information regarding our employee base, see “Employees.”

Broad, Deep and Diverse Relationships. Our customer, investigator and other provider relationships contribute to our industry leading position in the biopharmaceutical services market. During each of the last 11 years, we have worked with the 20 largest biopharmaceutical companies, as measured by their respective 2012 reported revenues. In 2013, we had ten customers from whom we earned at least $100 million in service revenues. During each of the last six years, we have had at least eight customers from whom we earned more than $100 million in service revenues. We also work with over 500 small, mid-size and other biopharmaceutical companies outside the 20 largest by revenues. These customers accounted for approximately 51% of our net new business in 2013. In 2013, we provided services across both our Product Development and Integrated Healthcare Services segments to all of our top 25 key customers. Under our global prime site and partner programs, we also have broad, deep and diverse relationships with clinics, large hospitals and health systems through which we have access to thousands of investigators and other providers worldwide.

Therapeutic and Scientific Expertise. We have continued to invest in developing world-class scientific capabilities to help our customers leverage rapidly changing science to better understand disease causality, develop drugs and diagnostics, and deliver safer, more effective therapies. Underpinning our investments and service delivery is a focus on delivering consistent, high-quality services to our customers across all business groups throughout the world, including a centralized ethics and compliance office dedicated to facilitating adherence to quality standards and ethical behavior. We have created 14 therapeutic centers of excellence in our company that are designed to bring together the scientific expertise across our service lines as needed to achieve an optimal therapeutic solution for our customers. These capabilities, coupled with our biomarker development research labs and assay development and validation services, provide a comprehensive set of services to support the development of drug therapies across the therapeutic spectrum, including the emerging field of personalized medicine. We have employees with substantial scientific, quantitative, analytical and applied technology skills and substantial expertise in numerous therapeutic areas, with over 2,100 Ph.D.s, medical doctors and statisticians on our staff worldwide. We have product development capabilities across a range of therapeutic areas, with a focus on oncology, cardiovascular, central nervous system, diabetes and internal medicine. These five therapeutic areas represented more than 50% of the total biopharmaceutical product pipeline in 2013 and are generally more complex and require significant scientific expertise and global scale.

Integrated Services to Enable Better Decision-making in the Broader Healthcare Market. Our core market is product development, and we have deep and global expertise across the phases of this market from first-in-man trials through post-marketing studies. Our services are designed to provide integrated solutions that address the complex challenges faced by a broad range of healthcare industry participants. We believe that our significant capabilities in analytics, clinical science and real-world data, combined with our broad commercial, consulting and post-launch expertise, will enable us to meet the research and analytical needs of healthcare industry participants from the development and commercialization organizations within traditional and emerging biopharmaceutical companies to payers, providers and other stakeholders. As the healthcare market continues to demand greater accountability for outcomes and value for money, we intend to increasingly deploy our capabilities in the broader healthcare market to help healthcare industry participants rapidly assess the viability of new drugs, cost-effectively accelerate development of the most promising drugs, launch and promote drugs to the market effectively, evaluate their impact on healthcare, and make better reimbursement and prescription decisions.

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Experienced, Highly Trained Management and Staff. Our senior management team includes executives with experience from inside and outside the biopharmaceutical and biopharmaceutical services industries who use their decades of experience to serve our customers and grow our company. Our founder, Dennis Gillings, CBE, Ph.D., a pioneer of the biopharmaceutical services industry, continues to serve as our Executive Chairman. Thomas H. Pike, our Chief Executive Officer, joined us with 30-plus years of strategic and operational experience in healthcare and technology, much of it gained in leadership positions at Accenture. Each of our other executive officers has more than 25 years of experience in large, multinational organizations. Our management and staff are comprised of approximately 28,200 employees worldwide, of whom more than 950 are medical doctors and more than 900 possess a Ph.D. or equivalent. Our employees contribute to a company-wide culture focused on delivering services and information that meet or exceed the quality standards demanded by customers, doctors, patients and regulatory authorities. At this time, we have over 5,600 contract medical sales representatives, a sales force that is comparable in size to the sales forces of many large biopharmaceutical companies. In support of our growth, we regularly review our capabilities and make adjustments to our workforce to ensure we have the right mix of expertise to meet the demand for our services. During the past several years we have continued to hire employees in many areas to enhance our capabilities and expertise, even as we have implemented restructuring plans, including targeted workforce reductions, to respond to the evolving nature of our industry, make our service delivery more efficient and ultimately help further our business objectives and improve shareholder returns. Our recent restructuring activities have included plans approved by our Board of Directors, or our Board, that we initiated in February 2013, May 2012 and July 2011, with approved costs of up to approximately $15.0 million, $20.0 million and $25.3 million, respectively. We strive to maintain a culture that reinforces collaboration, motivation and innovation which is consistent with our core values and Code of Conduct: Doing the Right Thing. To that end, in 2013, we were named as one of the 25 best multinational places to work by the Great Place to Work® Institute for the third consecutive year.

Technology Solutions and Process/Data Capabilities. For over 30 years, we have been devoted to advancing state of the art technology, processes and analytics to optimize our service offerings and provide our customers with the information they need to quickly make critical decisions regarding the development and commercialization of their products. We have focused on investment in quality data, including de-identified electronic health records, or EHR, and we currently have access to EHR data representing more than 60 million patient lives. In addition, we have established a substantial digital network of registered users with whom we communicate regularly. More than 3 million people are registered users of these digital services that provide opportunities to seek information and participate in clinical trials and observational studies. Because data are only as good as the analytics used to analyze them, we have also invested heavily in data analytics products, services and professionals. As part of this investment, we created our proprietary data integration tool, Quintiles Infosario®, which is a suite of services that integrates data from across multiple source systems to provide us and our customers with current, quality and comprehensive information regarding clinical trials, allowing decisions to be made quickly and efficiently. In addition, we have developed a planning and design platform and other software solutions to enable improvements to the drug development process and to demonstrate the value of biopharmaceutical products in the real world. We have obtained or applied for more than 60 patents in connection with the development of our proprietary technology, systems and processes.

Our Growth Strategy

The key elements of our growth strategy across Product Development and Integrated Healthcare Services include:

Leverage Our Leadership Position and Scale. We are the global market leader in providing drug development, commercialization and outcome analytics services, and we have substantially larger service revenues and more employees around the world than reported by any of our public CRO competitors. We plan to continue to grow organically and through selected acquisitions to expand our services and capabilities. We believe our portfolio of services enables us to provide a wide range of solutions for customers by taking an integrated view of the healthcare landscape. We intend to leverage our global scale from our scientific and therapeutic expertise, global investigator network, central laboratory and data library to help our customers reduce costs, improve efficiency and effectiveness, and deliver better healthcare outcomes.

Build Upon Our Customer Relationships. We believe that the breadth and depth of our global operations, service offerings, therapeutic expertise, analytics experience and technology, combined with our existing relationships with participants across the healthcare industry, position us well to capture a significant share of the large “untapped” biopharmaceutical spending not historically available to biopharmaceutical services companies. For example, over the past several years, we have built dedicated customer relationship teams around each of our largest customers, allowing us to proactively help them identify additional ways our services can enable them to further improve their R&D productivity and focus on variable cost structures. In addition, we continue to evolve our relationships with small, mid-size and other biopharmaceutical customers outside the 20 largest by revenues, of which we have over 500 around the world. The breadth and depth of our service offerings allow us to develop relationships with key decision makers throughout our customers’ organization. We intend to leverage our strong customer relationships to further penetrate new opportunities as our customers seek to reduce and variabalize their cost structures.

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Continue to Enable Innovative and Flexible Business Solutions. We use our extensive scope of services to design innovative and flexible solutions tailored for our customers’ needs in an increasingly complex environment. We believe that sustainable and growing revenue can be achieved through differentiation of services, coupled with deeper and broader relationships and a commitment to structuring flexible and innovative solutions to meet the diversified and changing needs of the healthcare industry. For example, in 2013, we entered into a first-of-its kind sole provider strategic collaboration for development and clinical trial execution with Merck KGaA, known as Merck Serono. This new model is designed to leverage the knowledge and insights from both organizations and will span the full spectrum of clinical development from Phase I through to post-marketing approvals. We also have a historical track record of innovative solutions as demonstrated by an alliance with Eisai Pharmaceuticals, or Eisai, to conduct 11 proof-of-concept studies on six oncology compounds, resulting in a relationship that helped Eisai extend its capacity and accelerate the development of these compounds at half of Eisai’s original budgeted cost. We leverage our people, processes and technologies to provide significant value to our customers through customized outsourcing, shifting more of the responsibility for managing development to us and other arrangements that can save our customers time and money and contribute to our profitable growth.

Use Our Therapeutic, Scientific and Domain Expertise to Improve Outcomes. We believe our deep scientific, therapeutic and domain expertise enables us to help customers deliver and demonstrate enhanced value for patients and solve the complex challenges inherent in drug development and commercialization. For example, we recently undertook a study with the participation of United States Oncology, supported by McKesson Specialty Health and The US Oncology Network, to explore the operational feasibility and clinical benefits of an upfront approach to the genomic sequencing of tumors from metastatic colorectal cancer patients. The study will investigate how pre-profiling and genomic sequencing data may support physician treatment decisions, including the identification of appropriate clinical trials for patients. We also believe that the breadth of our expertise, from expert consulting to data-driven planning and design, enables us to help biopharmaceutical companies improve operational efficiency and outcomes by transforming processes. Our thought and scientific leadership in the area of observational research is demonstrated by our leadership role in the Good ReseArch for Comparative Effectiveness (GRACE) initiative, which is developing a core set of good practice principles to address the design, conduct, analysis and reporting of observational studies of comparative effectiveness. We use our therapeutic, scientific and domain expertise to help our customers reach optimal outcomes in the ever-changing healthcare landscape. For example, we implemented a program for a large biopharmaceutical company to educate over 670,000 patients and staff to increase patient compliance with a customer’s diabetes drug. Our ability to link observational research, patient education and compliance data in diabetes is one example of our ability to connect clinical data to improve outcomes for our customers. We leverage our scientific expertise and innovative technologies to improve value for our customers.

Leverage Our Global Footprint and Presence in Significant Emerging Markets. We have some of the broadest global capabilities in the biopharmaceutical services industry, with a presence in all of the major biopharmaceutical markets, including the United States, Japan, Europe and each of the BRIC countries. Our extensive global footprint provides us substantial local expertise in multinational patient populations and regulatory schemes that allows us to effectively serve customers worldwide. We believe there is a significant opportunity to increase our penetration and grow our revenues in both developed and developing markets as we adapt to meet the evolving needs of the biopharmaceutical industry as it seeks to serve the needs of an expanding and aging global population. Our business model allows us to react quickly to the unique market needs of multinational biopharmaceutical companies as well as regional and local market participants. For example, we are able to support our customers in the Asia-Pacific region as well as our global customers with, we believe, the largest regional workforce which has significant healthcare domain expertise. Further, our revenues in the Asia-Pacific region have increased 10% from 2011 to 2013. We are also able to use our global footprint to help biopharmaceutical companies in developed markets leverage their costs. For example, we implemented a global monitoring solution based in Bangalore, India, for a United States biopharmaceutical company to provide monitoring for over 1,000 products. We intend to continue to leverage our global footprint to deliver services broadly and effectively as the needs of our customers evolve.

Capitalize on Emerging Growth Opportunities in the Broader Healthcare Market. We believe that healthcare stakeholders, such as regulatory authorities, payers, providers and patients, are transforming the delivery of healthcare by increasingly seeking evidence to support drug approval, reimbursement, prescribing and consumption decisions in a manner that will afford us opportunities to use our competitive strengths in new markets, including other healthcare services. We believe that in the new healthcare landscape payers and providers will increasingly need to measure the value of services and patient outcomes. We plan to leverage our deep experience in interventional Phase IIIb/IV trials, our broad array of consulting expertise and our observational research capabilities to help meet the increasing need for real-world and late phase research to assist our customers in monitoring safety, proving efficacy, evaluating benefit-risk, demonstrating effectiveness and gaining market access. We also plan to continue to focus on integrating data to enable more successful development of compounds and solutions. We intend to utilize our existing capabilities to expand our reach into adjacent market opportunities that are complementary to our historical focus.

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Our History

We were founded in 1982 by Dr. Gillings, who was a biostatistics professor at the University of North Carolina at Chapel Hill. Dr. Gillings and his cofounder pioneered the use of sophisticated statistical algorithms to improve the quality of data used to determine the efficacy of various drug therapies. We expanded internationally into Europe in 1987 and into Asia in 1993. In 1994, we had grown to over $90 million in revenues and completed an initial public offering, or IPO, through Quintiles Transnational Corp., or Quintiles Transnational, our wholly owned subsidiary through which we conduct our operations. As a public company, we grew both organically and through acquisitions, adding a variety of new capabilities. By the end of 1996, we significantly expanded our service offerings by acquiring companies that added commercial and consulting capabilities to our business. In September 2003, we completed a going private transaction, with Quintiles Transnational becoming owned by a group of investors that included Dr. Gillings.

In January 2008, Quintiles Transnational engaged in what we refer to as the Major Shareholder Reorganization, which resulted in our ownership by Dr. Gillings (and his affiliates), funds advised by Bain Capital Partners, LLC, together with their affiliates, Bain Capital, affiliates of TPG Global, LLC, or the TPG Funds (we refer to TPG Global, LLC as “TPG Global” and together with its affiliates, “TPG”), affiliates of 3i Corporation, or 3i, and certain other shareholders who participated in the going private transaction, and various members of our management.

In December 2009, we completed what we refer to as the Holding Company Reorganization, whereby we formed Quintiles Transnational Holdings Inc., or Quintiles Holdings, as the parent company of Quintiles Transnational. In May 2013, we returned to the public markets by completing an IPO on the New York Stock Exchange, or NYSE.

Services

We address the needs of healthcare industry participants by providing product development and integrated healthcare services to help our customers navigate the complex healthcare environment and improve outcomes. We can support our biopharmaceutical customers from first-in-man trials through patent expiration, from strategy through planning and execution. We also offer a growing number of services designed to address the outcomes and analytical needs of the broader healthcare industry. The broad scope of our services allows us to help our customers rapidly assess the viability of a growing number of potential new therapies, cost-effectively accelerate development of the most promising ones, launch new products to the market quickly, and evaluate their impact and appropriate use on patients.

We offer our services through two reportable segments: Product Development and Integrated Healthcare Services. The figure below displays the range of our services across both of our segments.

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Product Development

Product Development provides services and expertise that enable biopharmaceutical companies to outsource the clinical development process from first-in-man trials to post-launch monitoring. Our comprehensive service offerings provide the support and functional expertise necessary at each stage of development, as well as the systems and analytical capabilities to help our customers improve product development efficiency and effectiveness. We plan to continue to add to and change our service offerings, both organically and through targeted acquisitions, as the product development and associated clinical trial processes continue to evolve. For example, we acquired Novella Clinical Inc., or Novella, in September 2013 to enhance our small biopharmaceutical, oncology and medical device offerings.

Product Development is comprised of Clinical Solutions & Services and Consulting. Clinical Solutions & Services provides services necessary to develop biopharmaceutical products, including project management and clinical monitoring functions for conducting multi-site trials (generally Phase II-IV) and clinical trial support services that improve clinical trial decision making and data management and strategic planning and design services that improve decisions and performance. Consulting provides strategy and management consulting services based on deep life science expertise and advanced analytics as well as regulatory and compliance consulting services.

Clinical Solutions & Services

Project Management and Clinical Monitoring

Drawing upon our 30 years of experience, our site databases, our site relationships and our highly trained staff, Clinical Solutions & Services enables the efficient conduct and coordination of multi-site trials (generally Phase II-IV). To assist our customers with Phase IIIb clinical trials, we deliver cost-effective solutions through multidisciplinary, data-driven trial design and recruitment approaches, flexible delivery models and proven processes, dedicated, specially trained late phase project managers and experts in health outcomes, epidemiology, biostatistics and post-marketing regulations. Our Phase IV services provide additional trials to further evaluate the effectiveness, side effects and cost effectiveness of a drug following regulatory approval. Clinical Solutions & Services’ service offerings include protocol design, feasibility and operational planning, site start up, patient recruitment, project management and monitoring of the investigator sites and data from patient visits.

Study Design and Operational Planning. We assist our customers in preparing the study protocol, designing clinical report forms and identifying appropriate patients, sites and the optimal country mix to meet their objectives, among other key upfront decisions. The study protocol defines the medical hypotheses to be examined, the number of patients required to produce statistically valid results, the period of time over which they must be tracked, the frequency and dosage of drug administration and the study procedures.

Investigator/Site Recruitment. During clinical trials, the drug is administered to patients by physicians, referred to as investigators, at hospitals, clinics or other sites. The quality of a clinical trial is dependent on the quality of the investigators who perform the trials. Through our global prime site and partner programs, we have established relationships with thousands of investigators who conduct our clinical trials worldwide. We provide our investigators the resources and tools they need to effectively conduct the trials.

Site and Regulatory Start Up. The process of identifying, training and contracting with sites while also securing regulatory and ethics approval is a complex and time-consuming aspect of clinical trials. We have a dedicated unit that draws upon our experience from participating in trials globally across multiple therapeutic areas for the last 30 years. We utilize technology and analytics to simplify and streamline this process, reducing time to first patient in and laying the groundwork for successful trial execution.

Patient Recruitment. We assist our customers in recruiting patients for clinical trials through investigator relationships, media advertising, use of web-based techniques and other methods. We also help to ensure patients are retained for the duration of the trials. We use informatics tools and media-based recruitment methods to identify, reach and recruit the appropriate patients. Our patient recruitment system includes informatics tools and media-based recruitment methods to provide broad pools of prescreened patients as well as an efficient enrollment process and a call center. Through our global prime site programs, in which we form research partnerships with large hospitals and health systems, we are capable of enrolling thousands of patients in clinical trials each year. We have enrolled on average over 100,000 patients in clinical trials annually during the last six years.

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Clinical Monitoring. We deploy and manage clinical research associates, or CRAs, to work with and monitor sites to assure the quality of the data, which we gather according to Good Clinical Practice, or GCP, and International Conference on Harmonization, or ICH, regulations and guidelines, and to meet the customers’ and regulatory authorities’ requirements according to the study protocol. CRAs also assist with site initiation, training, patient enrollment and retention. Regulatory authorities are encouraging the use of innovative approaches in trial monitoring, and we have deployed targeted, data-driven, risk-based, monitoring techniques to improve monitoring efficiency and effectiveness, focusing on the areas most likely to impact the quality of the data and safety of the patients in their particular trial. To support more efficient approaches to monitoring, we have established a project coordination center, which performs remote monitoring activities.

Project Management. Our project managers help customers navigate the complexity of the clinical trial process and coordinate all of the various activities, data streams and timelines associated therewith. Aligned by therapeutic experience, our project managers highlight risks before they become issues, while managing budgets and timelines. As trials become more complex, project managers are becoming increasingly important in ensuring trials are completed successfully.

Clinical Trial Support Services

Each clinical trial requires a number of concurrent services and data streams. We offer a broad range of functional services and consultation to support clinical trials through specialized expertise that help customers efficiently collect, analyze and report the quality data and evidence they need to gain regulatory approval. Our clinical trial support services include:

Clinical Data Management. With almost 30 years of experience, our data management services provide support for the collection, organization, validation and analysis of clinical data. Data used can be captured via electronic data capture, or EDC, or from paper. These databases include customized databases to meet customer-specific formats, integrated databases to support regulatory submissions to numerous regulatory authorities around the world, including, for example, to the FDA to support new drug applications, or NDAs, BLAs, and premarket approval applications, or PMAs, for medical devices.

Biostatistical Services. We provide statistical analyses of scientific databases for all phases of the drug development process. Biostatistics is at the core of every clinical trial, and we have been pioneering the use of biostatistics since our founding in 1982. We have more than 600 biostatisticians around the world, of whom more than 50% have advanced degrees. We use biostatistics to assist our customers in speeding drug development, staying current with evolving best practices, navigating regulatory requirements and developing and qualifying biomarkers.

Central Laboratories. We support the laboratory testing and reporting needs inherent in all phases of clinical trials, offering globally harmonized safety and efficacy biomarker testing through the world’s largest, wholly owned network of central laboratories with individual College of American Pathologists accreditations. Services include assay development and validation, the provision of protocol-specific trial materials, customized lab report design, and specimen management and archival. We support trials anywhere in the world through wholly owned facilities in the United States, the United Kingdom, South Africa, India, China, Singapore and Japan, and a tightly coordinated network of affiliated laboratories in Argentina and Brazil. Our global processes and harmonization scheme are designed to help ensure the standardization of laboratory test results and integrated, comparable data collection, management and transfer, including providing direct electronic integration of laboratory data into safety and efficacy reports for NDA submissions. To this end, each of our central laboratories in the United States is Clinical Laboratory Improvement Amendments, or CLIA, certified, and we have designed the protocols for each of our central laboratories around the world to adhere to the CLIA requirements.

Genomic Laboratory. Originating with our August 2012 acquisition of Expression Analysis, Inc., or Expression Analysis, we provide a broad range of solutions in support of our customers’ clinical trial and research efforts, including experiment design, sample analysis, nucleic acid isolation, gene expression profiling, genotyping, next generation sequencing and advanced bioinformatics. Our services include whole genome to focused set gene expression profiling and genotyping assays along with DNA and RNA sequencings services, sequence enrichment technologies and bioinformatics support. Our quality system is designed to adhere to Clinical and Laboratory Standards Institute guidelines, and our CLIA-certified laboratory supports GLP compliance.

Bioanalytical Laboratories. Originating with our November 2011 acquisition of Advion BioServices, Inc. (now Quintiles BioSciences, Inc.), or Quintiles BioSciences, we offer our customers a broad range of Good Laboratory Practice, or GLP, and non-GLP bioanalytical testing to support pharmacokinetic/pharmacodynamic, or PK/PD, studies, and absorption, distribution, metabolism and elimination, or ADME, studies in the early phases of clinical testing. Utilizing our global Phase I network, we can provide our customers with a rapid turnaround of bioanalytical/PK data to support the efficient completion of Phase I trials. By combining our global central laboratories and our Phase I networks, we believe that we can help biopharmaceutical companies make better decisions faster.

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Cardiac Safety and ECG Laboratory Services. Our centralized electrocardiogram, or ECG, laboratory in India provides continuous global collection and analysis of ECGs by trained cardiologists as part of clinical trials. Our laboratory logs, tracks and analyzes ECGs from around the world, and stores and transmits reports in near real time. We believe that integrating our ECG laboratory capabilities into clinical trials helps customers identify and adjust to cardiac safety signals earlier in the drug development process.

Safety and Pharmacovigilance Operations. Conducting clinical trials requires a dedicated, separate process to collect, analyze and report safety events. We have extensive experience, scale and geographic coverage for case management services. Our safety management system combines our expertise, standard operating procedures and best practices derived from thousands of projects. Underpinned by this technology, we help customers efficiently manage fluctuating case loads, streamline global operations and compliance, and gain better insights into clinical trial operations. The system offers advanced data intelligence features that integrate multiple data sets to help identify and understand trends more quickly and manage safety risks more proactively. We customize our lifecycle safety suite of services to monitor drug safety, including managing case reports, performing safety risk profiling and improving operational efficiency, quality and regulatory compliance.

Phase I Clinical Pharmacology Services. Phase I trials often involve testing a new drug on a limited number of volunteers and patients. For such Phase I trials, we own and operate three clinical pharmacology units (Phase I clinics) where we perform the core clinical functions related to these trials, with support from the specialized expertise and functions from other members of Clinical Solutions & Services. Our Phase I trial capabilities include dose ranging, bioavailability/bioequivalence studies, PK/PD modeling, first administration to humans, multiple dose tolerance, dose effect relationship and metabolism studies. Our global Phase I network includes 190 beds with operations in Overland Park, Kansas (United States) and London, United Kingdom.

Strategic Planning and Design

Through our strategic planning and design services, we offer consultation services to improve decisions and performance including portfolio, program and protocol planning and design, biomarker consultation, benefit-risk management, regulatory affairs, biostatistics, modeling and simulation, and personalized medicine.

Biomarkers, Genomics and Personalized Medicine. Personalized medicine is an emerging practice of medicine that uses information about a person’s genes, proteins and environment to prevent, diagnose and treat disease. We have focused heavily over the past several years on developing world-class capabilities in the areas of biomarker and genomics research, testing and analysis. In August 2012, we acquired Expression Analysis, which provides whole genome to focused-set gene expression and genotyping assays, along with next-generation sequencing services, sequence enrichment technologies and bioinformatics support. In addition, in January 2012, we helped form and entered into a strategic alliance to develop biomarkers using a proprietary DNA- and protein-based assay technology platform to enhance the development, placement, conduct and analysis of early phase oncology clinical trials. In November 2011, we acquired Quintiles BioSciences, which provides laboratory solutions and technical expertise in drug bioanalytical, immunogenicity, immunoassays and in vitro ADME studies. We believe that our investments in biomarker, genomics and personalized medicine capabilities will enable our customers to access leading science expertise to better understand diseases, develop drugs and diagnostics, and deliver safer, more effective therapies based on an individual’s genetic makeup.

Through these investments and the addition of key industry experts, we support biopharmaceutical companies with deep expertise in these complex and groundbreaking efforts with a comprehensive suite of services, including biomarker discovery and development, assay development and validation, genomics, digital pathology and consultation on the use of biomarkers to improve patient selection for clinical trials.

Model-Based Drug Development. We have extensive capabilities in the development and use of modeling and simulation techniques to improve decision-making through scenario analysis at key points in the drug development process. Services include population PK/PD modeling and simulation to identify the concentration-response relationship and best doses to pursue in later testing, and clinical trial simulation to test various trial design options simulated on computers before performing the actual trial.

Planning and Design. Our Center for Integrated Drug Development is developing an innovative approach to strategic clinical research planning with a design platform that includes a modeling and simulation process for scenario planning and risk assessment to support portfolio, program development and protocol planning.

Regulatory Affairs Services. We provide comprehensive medical and regulatory affairs services for our biopharmaceutical customers. Our medical services include medical oversight of trials, review and interpretation of adverse experiences, medical writing of reports and trial protocols and strategic planning of drug development programs. Regulatory services for product registration include regulatory strategy design, document preparation, publishing, consultation and liaison with various regulatory authorities. Our regulatory affairs professionals help to define the steps necessary to obtain registration as quickly as possible. Our depth of services, scale and geographic coverage, including the key regions of focus for biopharmaceutical companies, enables us to meet customers’ needs to launch products in multiple countries simultaneously.

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Consulting Services

We offer our customers consulting services based on our experience with the product life cycle. By operating at the intersection of three core capabilities—strategy, data and analytics—and by providing access to the deep domain expertise offered by our various service lines, we can develop pragmatic solutions that help biopharmaceutical companies anticipate and address their myriad challenges and opportunities.

Product Development Strategy Consulting. Our expert consultants support biopharmaceutical customers to improve the effectiveness and efficiency of their product development operations. We provide objective, industry vetted recommendations to help customers bring safer, differentiated products to market faster and more cost effectively. We begin in the conceptualization phase of development with strategic market research to bring a commercially minded approach to clinical design. Through a combination of secondary data and clinical analytics, we support customers in making informed development decisions. Additionally, we assist customers in optimizing their product development processes through best practices and new development models.

Regulatory and Compliance Consulting. We supply regulatory and compliance consulting services to the biopharmaceutical industry related to Good Manufacturing Practice, or GMP, GCP and GLP, global regulatory affairs, and quality systems engineering and validation. We assist customers in preparing for interactions with the FDA and foreign regulatory authorities or agencies, including inspections and resolution of enforcement actions, and complying with current GMP, and quality systems regulations, meeting process and software validation requirements and bringing new medical devices to market.

Process and IT Implementation Consulting. Realizing that strategy is only as good as how effectively it is implemented, we both design highly executable strategies and help implement them. Our consultants help customers optimize clinical and business processes to accelerate timelines and eliminate waste. Change management experts help implement new processes and organizational initiatives. Finally, we develop technology and information technology, or IT, strategies and help ensure their successful implementation.

Integrated Healthcare Services

Integrated Healthcare Services provides the healthcare industry with both broad geographic presence and commercial capabilities. Our customized commercialization services are designed to accelerate the commercial success of biopharmaceutical and other health-related products by promoting, delivering and proving value. When integrated with our product development services, our commercialization services enable solutions across the full lifecycle of a product.

Commercial Services

Contract Sales. Skilled primary care, specialty and multi-channel integrated sales teams provide our customers with a flexible resource that is able to respond quickly and effectively to the changing marketplace. We provide our customers with a variety of staffing options, including direct hire, flexible work arrangements, leave of absence and “strike force” arrangements (in which a team is deployed to a particular territory to capitalize on a market niche opportunity) in both full-time and flex-time solutions. We can supplement our sales forces with remote e-detailing capabilities. We use a proprietary review process and a variety of techniques, including extensive computerized databases and candidate referrals, to recruit candidates for our contract sales teams. Our training and development services integrate traditional, distance-learning and web-based services. Our contract sales unit helps customers design or revamp their existing sales training programs to meet marketplace demands. This service includes not only design, but also delivery and strategic meeting planning.

Market Entry/Market Exit. Market entry services help biopharmaceutical companies quickly and successfully launch products in new markets (including the high-growth BRIC markets) before or in lieu of establishing a long-term commercial infrastructure. Market exit services help biopharmaceutical companies manage the regulatory, quality and governance issues that arise when exiting unprofitable or less profitable markets. Market entry and market exit services are integrated solutions that can include assistance with regulatory compliance, market access, brand strategy, import and distribution logistics, and sales and marketing programs.

Integrated Multichannel Management. Integrated multichannel solutions leverage market-based analytics to help biopharmaceutical companies optimize channel mix (including sales force mix) so that the sales and marketing strategy for individual drugs can be effectively executed across multiple channels, including the use of sales representatives, e-detailing, video, mail, call center, webinars and online portals. Our integrated multichannel management services allow our customers to access key healthcare stakeholders and tailor the channels used to optimize results.

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Patient Engagement Services. Our health management services professionals offer customized clinical and educational solutions to bridge the gap between the clinical and commercial phases of product development and provide expertise across a broad range of pre-launch, launch and post-launch opportunities. We provide customers with solutions in a broad-based spectrum, from patient adherence programs to clinical trial educators that assist in recruitment, education and retention of patients in clinical trials. We assist biopharmaceutical companies in evaluating the therapy from the perspective of the patient, not just the prescriber, supporting patient compliance and product dosing compliance therapy adherence and patient retention, which we believe can increase commercial success. Patients are increasingly involved in decisions regarding healthcare in general and drug therapy in particular. Our professionals assist in the process of developing patient-centric strategies and implementing them for or side by side with customers. We believe that our clinical and promotional expertise, commercial orientation and international experience enable us to tailor these programs to meet the diverse needs of the global biopharmaceutical industry across a wide range of disciplines and local market conditions. While broad-based in experience, we have specific expertise in oncology, multiple sclerosis, diabetes, neurology and pain management.

Market Access and Commercialization Consulting. Market access services support biopharmaceutical customers in the development and execution of a strategy for bringing products into the market based on value. Once a product proceeds from large scale clinical trials to commercialization, our consultants help customers create product positioning, pricing and formulary access and reimbursement strategies based on extensive primary research with providers, patients, payers and other decision-makers. In support of product marketing at launch, we conduct multi-stakeholder research to assist in developing go-to-market plans and drive payer usage through deployment of our key account managers, supporting this decision-making with health economic models and health technology assessments to justify price to formulary decision-makers. Finally, post-launch, we track actual product costs and outcomes through medical claims data analysis, comparative effectiveness research, medical records and patient interviews. The combination of these services provides our customers with the marketing, economic and reimbursement support they need to help maximize commercial potential throughout the entire product lifecycle.

Medical Education. We have a dedicated medical education team that assists the healthcare industry in providing appropriate continuing medical education to a diverse group of healthcare professionals. Our education professionals design programs to address medical needs, based on the approaches that will work best with clinicians in specific therapeutic areas. They incorporate the latest advances in outcomes measurement to demonstrate how each program improves physician competencies and behavior and the quality of patient care.

Communication and Health Engagement Services

Digital Patient Services. Our digital patient services are designed to find and mobilize patients into clinical research, observational studies and disease management programs, retain patients through engagement strategies, and generate evidence such as patient reported outcomes, lab data and device diagnostics directly from patients. Formed in 2012, our digital patient services draw upon our proprietary communities of more than 3 million registered users, our four therapeutically aligned communities on Facebook which receive more than 10 million unique patient views/month, and users of the global internet to facilitate recruitment across the development spectrum.

Brand and Scientific Communications. Our communications group offers a range of pre-launch, launch and post-launch services, beginning in the early stages of product development and continuing until the product reaches peak penetration. Services include communications strategies and planning, product positioning and branding, opinion leader development, faculty training, symposia, promotional programs, sponsored publications, new media-based programs, patient education and clinical experience programs (either standalone or supporting their health management services). As early as Phase I and Phase II clinical trials, we can begin to develop and disseminate scientific information, and develop and present educational forums to help gain opinion leader support for a new drug.

Real-World and Late Phase Research

In October 2011, we acquired Outcome Sciences, Inc., or Outcome, which has designed and implemented more than 350 patient registries and post-approval programs. Through our acquisition of Outcome, we improved our ability to offer real-world and observational expertise in approximately 100 countries across numerous therapeutic areas, as well as patented technology designed specifically for real-world research. These services include real-world and late phase research to monitor safety and evaluate benefit-risk, demonstrate effectiveness, gain market access and expand labeling and approved indications. Its programs involve observational studies, product and disease registries, safety and surveillance, risk management and risk evaluation and mitigation strategies, comparative and cost effectiveness, expanded labeling, health economics and outcomes, patient-reported outcomes, quality of life, medical record review, and electronic medical record and electronic health record studies.

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Other Healthcare Solutions

Recently, we began to utilize our global integrated health service platform, together with our scientific and clinical expertise, to offer a range of specialized services to organizations and users across the care continuum, including governments, hospitals, physician offices and pharmacies. In addition to enabling higher quality and more efficient hospital-based clinical research, we offer a variety of services and tools that help payers and providers increase the quality and cost-effectiveness of healthcare. These services include comparative and cost-effectiveness research capabilities, clinical management analytics, decision support services, medication adherence and health outcome optimization services, and web-based systems for measuring quality improvement.

Customers and Marketing

To provide and coordinate service offerings to our customers, we have business development efforts across our service offerings and within many individual service offerings, and we also maintain an integrated business development group. To foster accountability in key service offering areas, each offering area has a designated leader who drives the financial contribution of that offering area. These two axes of business development direct the selling and business development personnel in each of our major locations in the United States and throughout Europe, the Asia-Pacific, Canada and Latin America, providing coverage of both multi-national and regional/domestic biopharmaceutical companies.

We take a holistic customer-oriented view toward business development. Our integrated business development group is responsible for assessing our customers’ current and future needs and helping to define the right service offerings to be delivered at the right time. This group includes dedicated customer teams that deliver customized solutions from the full breadth and depth of our service offerings for the world’s leading biopharmaceutical companies. In addition, we continue to evolve our relationships with our small, mid-size and other biopharmaceutical customers outside the 20 largest biopharmaceutical companies based on 2012 reported revenues.

In 2013, we earned service revenues of over $100 million in seven countries in North America, Europe and Asia. Please refer to Note 20 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details regarding our foreign and domestic operations in 2013, 2012 and 2011. For a discussion of risks attendant to our foreign operations, see “Risk Factors—Our business is subject to international economic, political and other risks that could negatively affect our results of operations and financial condition.”

Our service revenues were attributed to our segments as follows:

		Year Ended December 31,
		2013				2012				2011
Product Development			76.7	%			73.9	%			74.0	%
Integrated Healthcare Services			23.3				26.1				26.0
Total			100.0	%			100.0	%			100.0	%

Additional information regarding our segments is presented in Note 21 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

No single customer accounted for 10.0% or more of our consolidated service revenues in 2013, 2012 or 2011. In the past, we have derived, and may in the future derive, a significant portion of our service revenues from a relatively limited number of major projects or customers. As biopharmaceutical companies continue to outsource large projects and/or functions to fewer providers, this concentration of business could increase.

Competition

The market for our product development services is highly competitive, and we compete against traditional CROs, the in-house R&D departments of biopharmaceutical companies, universities and teaching hospitals. Among the traditional CROs, there are several-hundred small, limited-service providers, several medium-sized firms and only a few full-service companies with global capabilities. Consolidation among CROs likely will result in greater competition among the larger CROs for customers, clinical personnel and acquisition candidates. Product Development’s primary competitors include Covance, Inc., Pharmaceutical Product Development, Inc., PAREXEL International Corporation, ICON plc, inVentiv Health, Inc., or inVentiv, INC Research and PRA International, among others. Competitive factors for product development services include:

	•		previous experience and relationships;

	•		medical and scientific experience in specific therapeutic areas;

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	•		the quality of contract research;

	•		speed to completion;

	•		the ability to organize and manage large scale trials on a global basis;

	•		the ability to manage large and complex medical databases;

	•		the ability to provide statistical, regulatory and consulting services;

	•		the ability to recruit investigators and patients expeditiously;

	•		the ability to deploy and integrate IT systems to improve the efficiency of contract research;

	•		risk and reward sharing;

	•		the ability to form strategic alliances;

	•		a global presence with strategically located facilities and breadth of service offerings;

	•		financial strength and stability; and

	•		price.

Integrated Healthcare Services competes in the post-approval and commercialization arenas. In the post-approval arena our solutions compete against real-world and late phase research providers including boutique firms, divisions of biopharmaceutical companies and divisions of traditional CRO’s (noted above). Our commercial solutions compete against the in-house sales and marketing departments of biopharmaceutical companies, other contract pharmaceutical sales and service organizations and consulting firms. Integrated Healthcare Services’ primary commercial competitors in the United States include inVentiv, PDI, Inc. and Publicis Selling Solutions. Outside of the United States, Integrated Healthcare Services commercial teams typically compete against single country or more regionally focused commercial service providers, such as United Drug plc, inVentiv, EPS Corporation and CMIC HOLDINGS Co., Ltd in Japan. The primary competitive factors affecting Integrated Healthcare Services are breadth of service offering and ability to deploy in an integrated manner, quality and track record, i.e. the proven ability to quickly assemble, train and manage large qualified commercial teams on a global footprint and price.

Notwithstanding these competitive factors, we believe that the synergies arising from integrating product development services with commercial services, supported by global operations, data analysis and the ability to form long term strategic alliances with biopharmaceutical companies, differentiate us from our competitors.

Government Regulation

Good Clinical Practice

GCP regulations and guidelines contain the industry standards for the conduct of clinical trials with respect to the integrity of the data and safety of the research subjects. The FDA, the European Medicines Agency, or EMA, and many other regulatory authorities require that study results and data submitted to such authorities be based on trials conducted in accordance with GCP provisions. Records for clinical trials must be maintained for specified periods for inspection by the FDA and other regulators. Significant non-compliance with GCP requirements can result in the disqualification by regulators of data collected during the clinical trial.

Our standard operating procedures related to clinical trials are written in accordance with regulations and guidelines appropriate to the region where they are used, thus helping to ensure compliance with GCP. FDA regulations and guidelines serve as a basis for our North American standard operating procedures. Within Europe, we perform our work subject to the EMA’s Note for Guidance “Good Clinical Practice for Trials on Medicinal Products in the European Community.” All clinical trials (other than those defined as “non-international”) to be submitted to the EMA must meet the requirements of the International Conference on Harmonisation GCP standards. Our offices in the Asia-Pacific region and in Latin America have developed standard operating procedures in accordance with their local requirements and in harmony with our North American and European operations.

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Regulation of Drugs, Biologics and Medical Devices

In the United States, pharmaceutical, biological and medical device products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act, or the FDC Act, the Public Health Service Act, or the PHS Act, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical, biological and medical device products. Failure to comply with applicable United States requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve a pending New Drug Application (NDA) for a new drug, a Biological License Application (BLA) for a new biological product, or Premarket Approval (PMA) or clearance for a new medical device, warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

Before a new drug or biologic may be marketed, it must undergo extensive testing and regulatory review to determine that it is safe and effective and be approved by the FDA or other regulatory authority. Even after approval, a new PMA or PMA supplement may be required in the event of a modification to the device, its labeling or its manufacturing process.

Regulation of Patient Information

Our information management services relate to the diagnosis and treatment of disease and are, therefore, subject to substantial governmental regulation. In addition, the confidentiality of patient-specific information and the circumstances under which such patient-specific records may be released for inclusion in our databases or used in other aspects of our business is heavily regulated. Federal, state and foreign governments are contemplating or have proposed or adopted additional legislation governing the possession, use and dissemination of personal data, such as personal health information and personal financial data, as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement new security measures and processes or bring within the legislation or regulation de-identified health or other personal data, each of which may require substantial expenditures or limit our ability to offer some of our services.

In particular, personal health-related information is recognized in many countries such as the United States and the European Union as a special, sensitive category of personal information, subject to additional mandatory protections. Violations of data protection regulations are subject to administrative penalties, civil money penalties and criminal prosecution, including corporate fines and personal liability.

In order to comply with these evolving laws and regulations, we may need to implement new data protection, privacy and data security measures, which may require us to make substantial expenditures or cause us to discontinue or limit the products and services we offer. In addition, if we violate applicable laws, regulations, contractual commitments or other duties relating to the use, privacy or security of health information, we could be subject to regulatory sanctions, civil liability or criminal prosecution or suffer reputational harm, and it may be necessary to modify our business practices.

Regulation of Promotion, Marketing and Distribution of Pharmaceutical Products and Medical Devices

Our integrated healthcare services are subject to detailed and comprehensive regulation in each geographic market in which we operate. Such regulation relates, among other things, to the distribution of drug samples, the marketing and promotion of approved products, the qualifications of sales representatives and the use of healthcare professionals in sales functions.

In the United States, our integrated healthcare services are subject to numerous federal and state laws pertaining to promotional activities involving pharmaceutical products and medical devices, such as the FDA’s regulations against “off-label promotion,” which require sales representatives to restrict promotion of the approved product they are detailing to the approved labeling for the product, and the Prescription Drug Marketing Act which imposes licensing, personnel record keeping, packaging, labeling, product handling and facility storage and security requirements. Other federal and state laws prohibit manufacturers, suppliers and providers from offering, giving or receiving kickbacks or other remuneration in connection with ordering or recommending the purchase or rental of healthcare items and services. The sale or distribution of pharmaceutical products and devices is also governed by the United States Federal Trade Commission Act and state consumer protection laws. We are subject to similar regulations currently in effect in the other countries where we offer integrated healthcare services.

We are also subject to various laws and regulations that may apply to certain drug and device promotional practices, including, among others, various aspects of the Medicare program. Violations of these laws and regulations may result in criminal and/or civil penalties, including possibly as an “aider and abettor.”

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Regulation of Laboratories

Our United States laboratories are subject to licensing and regulation under federal, state and local laws relating to hazard communication and employee right-to-know regulations, and the safety and health of laboratory employees. Additionally, our United States laboratories are subject to applicable federal and state laws and regulations and licensing requirements relating to the handling, storage and disposal of hazardous waste, radioactive materials and laboratory specimens, including the regulations of the Environmental Protection Agency, the Nuclear Regulatory Commission, the Department of Transportation, the National Fire Protection Agency and the United States Drug Enforcement Administration, or DEA. The use of controlled substances in testing for drugs with a potential for abuse is regulated in the United States by the DEA and by similar regulatory bodies in other parts of the world. Our United States laboratories using controlled substances for testing purposes are licensed by the DEA. The regulations of the United States Department of Transportation, Public Health Service and Postal Service apply to the surface and air transportation of laboratory specimens. Our laboratories also are subject to International Air Transport Association regulations, which govern international shipments of laboratory specimens. Furthermore, when the materials are sent to a foreign country, the transportation of such materials becomes subject to the laws, rules and regulations of such foreign country. Our laboratories outside the United States are subject to applicable national laws governing matters such as licensing, the handling and disposal of medical specimens, hazardous waste and radioactive materials, as well as the health and safety of laboratory employees.

In addition to its comprehensive regulation of safety in the workplace, the United States Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. Although we believe that we are currently in compliance in all material respects with such federal, state and local laws, failure to comply with such laws could subject us to denial of the right to conduct business, fines, criminal penalties and other enforcement actions.

Further, laboratories that analyze human blood or other biological samples for the diagnosis and treatment of clinical trial subjects must comply with CLIA, as well as requirements established by various states. The failure to meet these requirements may result in civil penalties and suspension or revocation of the CLIA certification.

Intellectual Property

We develop and use a number of proprietary methodologies, analytics, systems, technologies and other intellectual property in the conduct of our business. We rely upon a combination of confidentiality policies, nondisclosure agreements, invention assignments and other contractual arrangements to protect our trade secrets, and patent, copyright and trademark laws to protect other intellectual property rights. We have obtained or applied for more than 60 patents in connection with the development of our proprietary technology, systems and processes. We have also registered or applied for trademarks and service marks in the United States and a number of foreign countries, and our trademark “Quintiles®” is of material importance to us. Although the duration of trademark and service mark registrations varies from country to country, trademarks and service marks generally may be renewed indefinitely so long as they are in use and/or their registrations are properly maintained, and so long as they have not been found to have become generic. Although we believe the ownership of our patents, trademarks and service marks is an important factor in our business and that our success does depend in part on the ownership thereof, we rely primarily on the innovative skills, technical competence and marketing abilities of our employees. Other than our Quintiles® trademark, we do not have any material patents, trademarks, service marks, licenses, franchises or concessions.

Net New Business Reporting and Backlog

Net new business is the value of services awarded during the period from projects under signed contracts, letters of intent and, in some cases, pre-contract commitments, which are supported by written communications and adjusted for contracts that were modified or canceled during the period. Net new business under sole provider arrangements are recorded over the life of the arrangement as projects are awarded. Under sole provider arrangements, we are considered the exclusive provider for the contracted service or services.

Consistent with our methodology for calculating net new business during a particular period, backlog represents, at a particular point in time, future service revenues from work not yet completed or performed under signed contracts, letters of intent and, in some cases, pre-contract commitments that are supported by written communications. Once work begins on a project, service revenues are recognized over the duration of the project. Included within backlog at December 31, 2013 is approximately $6,342 million of backlog that we do not expect to generate revenue in the next 12 months.

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Backlog was as follows:

		December 31,
		2013				2012
		(in millions)
Backlog		$	9,855			$	8,704

Net new business was as follows:

		Year Ended December 31,
		2013				2012				2011
		(in millions)
Product Development		$	3,772			$	3,474			$	3,040
Integrated Healthcare Services			1,127				1,027				1,004
Total		$	4,899			$	4,501			$	4,044

We believe that backlog and net new business may not be consistent indicators of future revenues because they have been and likely will be affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, cancellations, and changes to the scope of work during the course of projects. Additionally, projects may be terminated or delayed by the customer or delayed by regulatory authorities. Projects that have been delayed remain in backlog, but the timing of the revenue generated may differ from the timing originally expected. If a customer cancels an order, we may be reimbursed for the costs we have incurred. Typically, however, we have no contractual right to the full amount of the revenue reflected in our backlog or net new business contracts in the event of cancellation. Revenue recognition occurs over extended periods of time and is subject to unanticipated delays. Fluctuations in our reported backlog and net new business levels also result from the fact that we may receive a small number of relatively large orders in any given reporting period that may be included in our backlog and net new business. Because of these large orders, our backlog and net new business in that reporting period may reach levels that may not be sustained in subsequent reporting periods. As we increasingly compete for and enter into large contracts that are more global in nature, we expect the rate at which our backlog and net new business convert into revenue to increase, or lengthen. For more details regarding risks related to our backlog, see “Risk Factors—The relationship of backlog to revenues varies over time.” Projects that have been delayed remain in backlog, but the timing of the revenue generated may differ from the timing originally expected. Accordingly, historical indications of the relationship of backlog and net new business to revenues may not be indicative of the future relationship.

Employees

As of December 31, 2013, we had approximately 28,200 full-time equivalent employees in approximately 60 countries, comprised approximately of 10,400 in the Americas, 9,600 in the Europe and Africa region and 8,200 in the Asia-Pacific region, with at least 500 employees in 10 countries around the world. As of December 31, 2013, Product Development and Integrated Healthcare Services had approximately 19,400 and 7,200 full-time equivalent employees, respectively. In addition, our centralized operations/corporate office had approximately 1,600 full-time equivalent employees.

The success of our business depends upon our ability to attract and retain qualified professional, scientific and technical staff. The level of competition among employers in the United States and overseas for skilled personnel, particularly those with Ph.D., M.D. or equivalent degrees or training, is high. We believe that our brand recognition and our multinational presence, are an advantage in attracting qualified candidates. In addition, we believe that the wide range of clinical trials in which we participate allows us to offer broad experience to clinical researchers. None of our employees are covered by a collective bargaining agreement or are represented by a labor union. Employees in some of our non-United States locations are represented by works councils as required by local laws. We believe that our relations with our employees are good.

Available Information

Our website address is www.quintiles.com, and our investor relations website is located at http://investor.quintiles.com. Information on our website is not incorporated by reference herein. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our Proxy Statements for our annual meetings of shareholders, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission, or the SEC. Our SEC filings are also available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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