IQVIA Holdings (IQV) 10-K risk factor changes: FY2014 vs FY2013

Change orders typically occur when the scope of work we perform needs to be modified from that originally contemplated by [removed: our contract with the customer.]

Backlog represents future service revenues from work not yet completed or performed under signed contracts, letters of intent and, in some cases, [removed: pre-contract commitments that are supported by] written [removed: communications.][added: pre-contract commitments.]

Our backlog at December 31, [removed: 2013] [added: 2014] was [removed: $9,855] [added: $11,244] million compared to backlog of [removed: $8,704] [added: $9,855] million at December 31, [removed: 2012.][added: 2013.]

Our [removed: $9,855] [added: $11,244] million of backlog at December 31, [removed: 2013] [added: 2014] included approximately [removed: $6,342] [added: $7,593] million of backlog that we do not expect to generate revenue in [removed: 2014] [added: 2015] as compared to our [removed: $8,704] [added: $9,855] million of backlog at December 31, [removed: 2012,] [added: 2013,] which included approximately [removed: $5,601] [added: $6,342] million of backlog that we did not expect to generate revenue in [removed: 2013.][added: 2014.]

[removed: Additionally,] [added: Further,] delayed projects will remain in backlog, unless otherwise canceled by the customer, and will not generate revenue at the rate originally expected.

We also provide access to similar information systems to certain of our customers in connection with the services [removed: we provide them.]

Although we did not have any customer that represented 10% or more of our service revenues in [added: 2014,] 2013, [removed: 2012] or [removed: 2011,] [added: 2012,] we derive the majority of our revenues from a number of large customers.

| | • | | [added: the United States or] foreign countries could enact legislation or impose regulations or other restrictions, including unfavorable labor [removed: regulations or] [added: regulations,] tax [removed: policies,] [added: policies or economic sanctions,] which could have an adverse effect on our ability to conduct business in or expatriate profits from [removed: those countries;] [added: the countries in which we operate;] |

| | • | | potential violations of local laws or anti-bribery laws, such as the United States Foreign Corrupt Practices Act, [added: or the FCPA, and the UK Bribery Act,] may cause difficulty in staffing and managing foreign [removed: operations;] [added: operations, as well as significant consequences to us if those laws are violated;] |

Our services include monitoring clinical trials, data and laboratory analysis, [removed: electronic data capture,] [added: EDC,] patient recruitment and other related services.

[removed: If we fail to perform our services in accordance with] these requirements, regulatory agencies may take action against us for failure to comply with applicable regulations governing clinical trials or sales and marketing practices.

[removed: For example, we have from time to time been sued and may be sued in the future by] individuals alleging personal injury due to their participation in clinical trials and seeking damages from us under a variety of legal theories.

In [removed: 2013,] [added: 2014,] approximately [removed: 37.8%] [added: 38%] of our service revenues were denominated in currencies other than the United States dollar.

[removed: Further, the steps we take in this regard might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property by competitors, former] employees or other third parties, and we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights.

As of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: $42.0] [added: $38.0] million of such arrangements, and we were also committed to invest an additional [removed: $34.2] [added: $25.0] million in the NovaQuest Pharma Opportunities Fund III, L.P., [removed: or the Fund,] a private equity fund that seeks to enter into similar risk-based arrangements.

As of December 31, [removed: 2013,] [added: 2014,] we had goodwill and net intangible assets of [removed: $707.7] [added: $744.7] million, which constituted approximately [removed: 23.1%] [added: 22.5%] of our total assets at the end of this period.

[removed: For example, in] [added: In] February 2013, our Board approved a restructuring plan of up to [removed: $15.0] [added: $15] million [removed: that is expected to result] [added: which resulted] in a reduction of approximately 400 positions.

We also compete with universities and [removed: teaching hospitals.]

[removed: In addition, there] [added: There] are few barriers to entry for smaller specialized companies considering entering the industry.

[removed: In March 2010, the] [added: The] United States Congress [removed: enacted] [added: continues to consider] healthcare reform legislation [removed: intended to expand, over time, health insurance coverage] and impose health industry cost containment [removed: measures.][added: measures, which may significantly impact the biopharmaceutical industry.]

For example, United States federal regulations under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, [added: and as amended in 2014 by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act,] require individuals’ written authorization, in addition to any required informed consent, before Protected Health Information may be used for [removed: research and such regulations specify standards for deidentifications and for limited data sets.][added: research.]

[removed: Because of amendments to the HIPAA data security and privacy rules that were promulgated on January 25, 2013 and effective March 26, 2013,] [added: As] there are some instances where we are a HIPAA “business associate” of a “covered [removed: entity”, so that] [added: entity,”] we [removed: will] [added: can also] be directly liable for mishandling protected health information.

[removed: These amendments will subject us to] [added: Under] HIPAA’s enforcement scheme, [removed: which, as amended,] [added: we] can [removed: yield] [added: be subject to] up to $1.5 million in annual civil penalties for each HIPAA violation.

The United States, the EU and its member states, and other countries where we have operations, such as Japan, [added: South Korea, Malaysia, the Philippines, Russia and Singapore,] continue to issue new privacy and data protection rules and regulations that relate to personal data and health information.

As of December 31, [removed: 2013,] [added: 2014,] we had [removed: $3.067] [added: $3.306] billion in total assets, [removed: $3.734] [added: $4.010] billion in total liabilities and a shareholders’ deficit of [removed: $667] [added: $704] million.

Included within total liabilities was [removed: $2.046] [added: $2.293] billion of total indebtedness, excluding [removed: $300.0] [added: $400.0] million of additional available borrowings under our revolving credit [added: facility and $25.0 million of additional available borrowings under our receivables financing] facility.

Although our credit agreement, which governs the [removed: Quintiles Transnational] senior credit [removed: facilities, contains] [added: facilities of our wholly owned subsidiary through which we conduct our operations, Quintiles Transnational Corp., or Quintiles Transnational, contain] restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could increase.

We have [removed: approximately $300.0] [added: $400.0] million available for borrowing under our senior secured revolving credit [added: facility and $25.0 million of additional available borrowings under our receivables financing] facility.

The credit agreement governing our [added: senior secured] credit facilities requires us to comply with certain covenants.

If we default on our [added: senior secured] credit agreement [added: or our receivables financing agreement] as a result of our failure to pay principal or interest when due, our material breach of any representation, warranty or covenant, or any other reason, all outstanding amounts could become immediately due and [removed: payable.][added: payable under either or both of such agreements.]

In addition, or in the alternative, the lenders under our [added: senior secured] credit agreement could exercise their rights under the security documents entered into in connection with the [added: senior secured] credit agreement.

Any acceleration of amounts due under the credit agreement governing our outstanding indebtedness or the substantial exercise by the lenders [added: under our senior secured credit agreement] of their rights under the security documents would likely have a material adverse effect on us.

We have entered into interest rate swaps with financial institutions that have reset dates and critical terms that match those of our [added: senior secured] term loan credit facility.

As of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: $2.061] [added: $2.0] billion of total indebtedness with variable interest at the greater of the three month LIBOR or 1.25%, plus 2.50%, or 3.75% at December 31, [removed: 2013,] [added: 2014,] of which [removed: $945.0] [added: $910.0] million, or [removed: 45.9%,] [added: 44.8%,] was hedged at a fixed rate of [removed: 2.55%,] [added: 2.57%,] leaving approximately [removed: $1.116] [added: $1.1] billion of unhedged variable rate debt.

Because we do not attempt to hedge all of our variable rate debt, we may incur higher interest costs for the [removed: portion of our variable rate debt which is not hedged.]

Each quarter-point increase or decrease in the variable interest rate would result in our interest expense changing by approximately [removed: $2.8] [added: $3.5] million per year under our unhedged variable rate debt.

_The parties to the Shareholders Agreement have significant influence over us, including [removed: control over] decisions that require the approval of our shareholders, which could limit your ability to influence the outcome of matters submitted to shareholders for a vote._

[removed: The Shareholders Agreement, among] [added: Among] other things, [added: the Shareholders Agreement] requires such shareholders to vote in favor of certain nominees to our Board.

[removed: _We] [added: _Although we] are [added: no longer] a “controlled company” within the meaning of the NYSE [removed: rules and, as a result, qualify for, and rely on,] [added: rules, we are relying on] exemptions from certain corporate governance [removed: requirements.][added: requirements during a one year transition period._]

[removed: Our shareholders] [added: Accordingly, you] do [removed: not] [added: not, and during these transition periods you will not,] have the same protections afforded to shareholders of companies that are subject to [removed: such requirements._][added: all of the corporate governance requirements of the NYSE.]

our contract with the customer.

Additionally, the increased complexity of trials and the need to enroll precise patient populations could extend the length of trials causing revenue to be recognized over a longer period of time.

we provide them.

_Due to the global nature of our business, we may be exposed to liabilities under the United States Foreign Corrupt Practices Act and various non-U.S. anti-corruption laws, and any allegation or determination that we violated these laws could have a material adverse effect on our business._

We are required to comply with the United States Foreign Corrupt Practices Act, or the FCPA, and other U.S. and non-U.S. anti-corruption laws, which prohibit companies from engaging in bribery including corruptly or improperly offering, promising, or providing money or anything else of value to non-U.S. officials and certain other recipients.

In addition, the FCPA imposes certain books, records, and accounting control obligations on public companies and other issuers.

We operate in parts of the world in which corruption can be common and compliance with anti-bribery laws may conflict with local customs and practices.

Our global operations face the risk of unauthorized payments or offers being made by employees, consultants, sales agents, and other business partners outside of our control or without our authorization.

It is our policy to implement safeguards to prohibit these practices by our employees and business partners with respect to our operations.

However, irrespective of these safeguards, or as a result of monitoring compliance with such safeguards, it is possible that we or certain

other parties may discover or receive information at some point that certain employees, consultants, sales agents, or other business partners may have engaged in corrupt conduct for which we might be held responsible.

Violations of the FCPA or other non-U.S. anti-corruption laws may result in restatements of, or irregularities in, our financial statements as well as severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition.

In some cases, companies that violate the FCPA may be debarred by the U.S. government and/or lose their U.S. export privileges.

Changes in anti-corruption laws or enforcement priorities could also result in increased compliance requirements and related costs which could adversely affect our business, financial condition and results of operations.

In addition, the U.S. or other governments may seek to hold us liable for successor liability FCPA violations or violations of other anti-corruption laws committed by companies in which we invest or that we acquired or will acquire.

If we fail to perform our services in accordance with

For example, we have from time to time been sued and may be sued in the future by

Further, the steps we take in this regard might not be adequate to prevent or deter infringement or other misappropriation of our intellectual property by competitors, former

For example, in 2014, our Board approved restructuring plans of up to $13 million which resulted in a reduction of approximately 250 positions.

teaching hospitals.

Such regulations specify standards for deidentifications and for limited data sets.

In addition, the receivables financing agreement for our special purpose subsidiary, Quintiles Funding, LLC, or Quintiles Funding, limits borrowing based on the amount of receivables purchased by Quintiles Funding from certain of our other subsidiaries, but when supported by the value of such purchased receivables, the debt under

our receivables financing facility can increase.

The receivables financing agreement for our receivables financing facility requires certain of our subsidiaries to transfer receivables with adequate value to the lender under that facility to support repayment of amounts outstanding.

In the event such transferred receivables are insufficient to support such outstanding amounts, we will be required to make prepayments under the receivables financing agreement.

Failure to make such prepayments or violations of the covenants in the receivables financing agreement could cause an event of default under the receivables financing agreement.

As of December 31, 2014, we also had $275.0 million of total indebtedness under our receivables financing facility with variable interest at LIBOR plus 1.05%, or 1.22% at December 31, 2014.

portion of our variable rate debt which is not hedged.

Consequently, as of November 10, 2014 the NYSE rules require that we:

| | • | | appoint at least a majority of independent directors to our compensation and nominating and governance committees within 90 days; |

| | • | | appoint a majority of independent directors to our Board within one year; and |

| | • | | appoint compensation and nominating and governance committees composed entirely of independent directors within one year. |

We intend to utilize the transition periods described above to achieve full compliance with these NYSE requirements.

As a result, at this time, we do not have a majority of independent directors, and our compensation and nominating and governance committees do not consist entirely of independent directors.

In addition, if we are unable to comply with the heightened corporate governance requirements prior to the prescribed NYSE deadlines, we may incur penalties or our shares could be delisted.

As a result, this group potentially has the ability to influence, or in some situations, possibly control our decisions to enter into any corporate transaction (and the terms thereof) and the ability to prevent any change in the composition of our Board and any transaction that requires shareholder approval regardless of whether others believe that such change or transaction is in our best interests.

Additionally, the parties to the Shareholders Agreement are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us.

One or more of the parties to the Shareholders Agreement may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.

So long as the parties to the Shareholders Agreement continue to own a significant amount of our equity, if they exercise their shareholder rights collectively, they will be able to significantly influence our decisions.

| --- | --- | --- | --- |

| --- | --- | --- | --- |

| --- | --- | --- | --- |

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

_Interactive Response Technology malfunction._ Cenduit LLC, our joint venture with Thermo Fisher Scientific Inc., or Cenduit, provides Interactive Response Technology, or IRT, services.

IRT enables the randomization of patients in a given clinical trial to different treatment arms and regulates the supply of an investigational drug, all by means of interactive voice response and interactive web response systems.

If IRT malfunctions and, as a result, patients are incorrectly randomized or supplied with an incorrect drug during the course of the clinical trials, then any such event would create a risk of liability to Cenduit, which could have an adverse impact on the value of our investment in Cenduit, and could also result in a contractual claim against us for failure to properly perform the clinical trial.

Furthermore, negative publicity associated with an IRT malfunction could have an adverse effect on our business and reputation.

Additionally, errors in randomization may require us to repeat the trial at no further cost to our customer, but at a substantial cost to us.

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

We recognized approximately $14.2 million of total restructuring costs related to this plan in 2013.

In May 2012, our Board approved a restructuring plan of up to $20.0 million that resulted in the reduction of approximately 280 positions, primarily in Europe.

As a result of competitive pressures, in recent years our industry has experienced consolidation and “going private” transactions.

This trend is likely to produce more competition from the resulting larger companies, and ones without the cost pressures of being public, for both customers and acquisition candidates.

##### [Table of Contents](#toc)

This legislation may significantly impact the biopharmaceutical industry.

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

We and certain of our shareholders are party to a shareholders agreement dated January 22, 2008, as amended, or the Shareholders Agreement.

The shareholders party to the Shareholders Agreement beneficially owned approximately 65% of our common stock as of February 6, 2014.

As long as this group owns or controls at least a majority of our outstanding voting power, it has the ability to exercise substantial control over all corporate actions requiring shareholder approval, irrespective of how our other shareholders may vote, including:

| | • | | the election and removal of directors and the size of our Board; |

| | • | | any amendment of our articles of incorporation or bylaws; or |

| | • | | the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets. |

Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that, within one year of the date of the listing of our common stock:

| | • | | we have a board that is composed of a majority of “independent directors,” as defined under the rules of such exchange; |

| | • | | we have a compensation committee that is composed entirely of independent directors; and |

| | • | | we have a nominating and corporate governance committee that is composed entirely of independent directors. |

Because we utilize these exemptions, we do not have a majority of independent directors on our Board.

In addition, our Compensation and Talent Development Committee and our Governance, Quality and Nominating Committee do not consist entirely of independent directors and are not subject to annual performance evaluations.

Accordingly, our shareholders do not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the NYSE.

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

Our comprehensive service [removed: offering provides] [added: 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.

[removed: Service offerings include commercial services (sales representatives, strategy, marketing communications and other areas related to commercialization), outcome research (drug therapy analysis, real-world research and] evidence-based medicine, including research studies to prove a drug’s [removed: value) and] [added: value),] other healthcare services (comparative and cost-effectiveness research capabilities, [removed: clinical management analytics,] decision support services, medication adherence and health outcome optimization services, and web-based systems for measuring quality [removed: improvement).][added: improvement), and EHR implementation and advisory services.]

We estimate that overall outsourcing penetration in [removed: 2013] [added: 2014] was [removed: 37%.][added: 39%.]

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 overall outsourcing penetration of the estimated [removed: $94] [added: $98] billion addressable market is [removed: not more than 20%.][added: approximately 23%.]

We believe that the market for real-world and late phase research and other healthcare services will evolve and expand, and as a result, there will be opportunities to grow our revenues and expand our service [removed: offerings, including to payers who are looking to improve the cost-effectiveness of drug therapies and providers who are looking to make evidence-based decisions regarding treatment decisions.][added: offerings.]

As business models continue to evolve in the healthcare sector, we believe that the growth rate for outsourcing across the Integrated Healthcare Services markets [removed: will be similar] to [removed: the growth in clinical development.][added: increase 6%-8% annually from 2014 to 2017.]

We completed a number of acquisitions in [removed: 2011, 2012 and] [added: 2012,] 2013 [added: and 2014] to enhance our capabilities and offerings in certain areas.

In August 2012, we acquired Expression [removed: Analysis] [added: Analysis, Inc.] for $39.7 million to enhance our genetic sequencing and advanced bioinformatics expertise.

In September 2013, we acquired Novella [added: Clinical Inc., or Novella,] for approximately $146.6 million (net of approximately $26.2 million of acquired cash) (with contingent consideration of up to $21.0 million) to complement our clinical service offerings through its focus on emerging companies and by adding expertise in oncology and medical devices.

Service revenues primarily include the revenue we earn from providing product development and commercialization services to our customers, with Product Development services representing [removed: 76.7%] [added: 74.4%] of our [removed: 2013] [added: 2014] service revenues and [removed: commercialization services representing 22.2% of our 2013 service revenues.]

[removed: Foreign] [added: _Foreign] Currency [removed: Fluctuations][added: Fluctuations_]

_Year ended December 31, [removed: 2013] [added: 2014] compared to the year ended December 31, [removed: 2012] [added: 2013] and the year ended December 31, [removed: 2012] [added: 2013] compared to the year ended December 31, [removed: 2011_][added: 2012_]

We began [removed: 2013] [added: 2014] with backlog [removed: in place at the beginning] of [removed: the year of $8,704] [added: $9,855] million, which was [removed: 9%] [added: 13%] higher than at the beginning of [removed: 2012.][added: 2013.]

Net new business [removed: (as defined under “Net New Business Reporting and Backlog” in Part I, Item 1 of this report)] grew 9% in 2013 to $4,899 million from $4,501 million in 2012, driven by growth in both Product Development and Integrated Healthcare Services.

Our backlog at December 31, [removed: 2013] [added: 2014] was [removed: $9,855] [added: $11,244] million compared to backlog of [removed: $8,704] [added: $9,855] million at December 31, [removed: 2012.][added: 2013.]

Our [removed: $9,855] [added: $11,244] million of backlog at December 31, [removed: 2013] [added: 2014] included approximately [removed: $6,342] [added: $7,593] million of backlog that we do not expect to generate revenue in [removed: 2014] [added: 2015] as compared to our [removed: $8,704] [added: $9,855] million of backlog at December 31, [removed: 2012,] [added: 2013,] which included approximately [removed: $5,601] [added: $6,342] million of backlog that we did not expect to generate revenue in [removed: 2013.][added: 2014.]

| | | Year Ended December 31, | | | | | | | | | | | | [removed: 2013] [added: 2014] vs. [removed: 2012] [added: 2013] | | | | | | | | [removed: 2012] [added: 2013] vs. [removed: 2011] [added: 2012] | | | | | | |

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | $ | | | | % | | | | $ | | | | % | | |

In [removed: 2012,] [added: 2014,] our service revenues increased [removed: $397.3] [added: $357.5] million, or [removed: 12.1%,] [added: 9.4%,] as compared to [removed: 2011.][added: 2013.]

This increase is comprised of constant currency revenue growth of approximately [removed: $459.0] [added: $383.2] million, or [removed: 13.9%, partially] [added: 10.1%,] offset by a negative impact of approximately [removed: $61.7] [added: $25.7] million from the effects of foreign currency fluctuations.

The constant currency [added: service] revenue [removed: growth resulted] [added: growth, which includes the impact] from [added: the Novella and Encore acquisitions, is comprised of] a [removed: $328.6] [added: $183.2] million increase in Product Development and a [removed: $130.4] [added: $200.0] million increase in Integrated Healthcare Services.

[removed: _Service] [added: _Costs of Revenue, Service] Costs_

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| % of service revenues | | | [removed: 64.9] [added: 64.4] | % | | | [removed: 66.6] [added: 64.9] | % | | | [removed: 65.3] [added: 66.6] | % |

When compared to 2012, service costs in 2013 increased [removed: $12.1] [added: $12.0] million.

The increase included a constant currency increase in expenses of approximately [removed: $85.1] [added: $85.0] million, or 3.5%, partially offset by a positive impact of approximately $73.0 million from the effects of foreign currency fluctuations.

These increases were partially offset by a decline in other expenses directly related to our service contracts, as well as by a reduction of an accrual for statutory profit sharing of approximately $5.4 million [added: in 2013] as a result of guidance handed down by an administrative court in France.

When compared to [removed: 2011,] [added: 2013,] service costs in [removed: 2012] [added: 2014] increased [removed: $306.4] [added: $212.7] million.

The increase included a constant currency increase in expenses of approximately [removed: $375.1] [added: $253.5] million, or [removed: 17.4%,] [added: 10.3%,] partially offset by a positive impact of approximately [removed: $68.8] [added: $40.8] million from the effects of foreign currency fluctuations.

[removed: The] [added: This] increase [added: was primarily caused by the impact from the Novella acquisition, increases] in compensation and related expenses [removed: was primarily as a result of a growth-related increase in billable headcount,] [added: resulting from] annual merit increases and an increase in [removed: incentive compensation.][added: headcount, and a growth related increase in IT costs.]

_Selling, General and [removed: Administrative Expenses_][added: Administrative_]

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| % of service revenues | | | [removed: 22.6] [added: 21.2] | % | | | [removed: 22.1] [added: 22.6] | % | | | [removed: 23.1] [added: 22.1] | % |

The [removed: $42.8] [added: $42.7] million increase in selling, general and administrative expenses in 2013 was [removed: caused by] [added: due to] a constant currency increase of [removed: $59.1] [added: $59.0] million, or 7.2%, partially offset by a decrease of $16.3 million from a positive foreign currency impact.

[removed: The constant currency increase was primarily due to (1) expenses incurred related to a] $25.0 million fee paid in connection with the termination of our management agreement with affiliates of certain of our shareholders, and a $1.5 million fee paid in connection with the modification of an agreement for the business usage of an airplane owned by GFM, (2) severance accruals of approximately $10.0 million related to overhead cost reduction programs to be carried out in 2014, (3) executive separation costs of approximately $5.3 million, (4) the impact from the business combinations completed in 2012 and 2013, (5) increases in compensation and related expenses resulting primarily from annual merit increases, and (6) growth related increases in facilities costs and depreciation and amortization.

The [removed: remaining] [added: constant currency] increase was primarily [added: due to] the [removed: result of] [added: impact from the Encore acquisition and] increases in compensation and related expenses [removed: including the impact of merit increases,] [added: resulting from] an increase in [added: billable] headcount [removed: and] [added: needed to support the] higher [removed: incentive compensation.][added: volume of revenue and annual merit compensation increases.]

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

[removed: We] [added: During 2013, we] recognized $14.1 million of restructuring charges, net of reversals for changes in [removed: estimates, in 2013,] [added: estimates] which was primarily related to our February 2013 restructuring plan to migrate the delivery of services and to reduce anticipated overcapacity in selected [removed: areas.][added: areas, which resulted in a reduction of approximately 400 positions.]

We believe that this plan [removed: will result] [added: has resulted] in annual cost savings of approximately $15.0 to $20.0 million.

[removed: We] [added: During 2012, we] recognized $18.7 million of restructuring charges, net of reversals for changes in [removed: estimates, in 2012,] [added: estimates] which was primarily related to our May 2012 restructuring plan to reduce staffing overcapacity and to rationalize non-billable support [removed: roles.][added: roles, which resulted in a reduction of approximately 280 positions, primarily in Europe.]

For the year ended December 31, 2014, our service revenues increased $357.5 million, or 9.4%, to $4.2 billion at actual foreign exchange rates compared to 2013.

Our growth in service revenues excluding the impact of foreign currency fluctuations (“constant currency”) was $383.2 million, or 10.1%, with $183.2 million, or 6.3%, growth in the Product Development segment and $200.0 million, or 22.5%, growth in the Integrated Healthcare Services segment.

For the year ended December 31, 2014, income from operations was $590.4 million; net income attributable to Quintiles Transnational Holdings Inc. was $356.4 million; and diluted earnings per share was $2.72.

Net new business was $5,602 million for the year ended December 31, 2014.

This net new business contributed to an ending backlog of $11,244 million at December 31, 2014.

“Net new business” and “backlog” are defined under “Net New Business Reporting and Backlog” in Part I, Item 1, “Business” of this Annual Report on Form 10-K.

We also provide functional resourcing services that cover a range of areas.

Service offerings include commercial services (sales representatives, strategy, marketing communications and other areas related to commercialization), real-world and late phase research (drug therapy analysis, real-world research and

On July 1, 2014, we completed the acquisition of Encore for approximately $91.5 million in cash (net of approximately $2.2 million of acquired cash).

We expect outsourced clinical development to CROs to increase 6%-8% annually from 2014 to 2017.

In July 2014, we completed the acquisition of Encore for approximately $91.5 million in cash (net of approximately $2.2 million of acquired cash) to enhance our EHR expertise.

Integrated Healthcare Services representing 25.6% of our 2014 service revenues.

Backlog at December 31, 2014 was $11,244 million.

Net new business grew 14% in 2014 to $5,602 million from $4,899 million in 2013, driven by growth in both Product Development and Integrated Healthcare Services.

Product Development’s net new business increased 16% to $4,374 million in 2014 as compared to $3,772 million in 2013, led by higher growth in net new business for functional resourcing services, which included the renewal of two five-year contracts for clinical services and data management services, growth in net new business for core clinical services in Asia, as well as net new business generated from the Novella acquisition and clinical trial support services, including early clinical development and lifecycle safety.

Integrated Healthcare Services’ net new business increased 9% to $1,228 million in 2014 as compared to $1,127 million in 2013, related primarily to growth in commercial services in North America, an increase in new business from real-world and late phase research services, and net new business from the Encore acquisition.

Revenue recognition occurs over extended periods of time and is subject to unanticipated delays.

Fluctuations in our reported backlog and net new business levels may 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.

| | | (dollars in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Service revenues | | $ | 4,165.8 | | | $ | 3,808.3 | | | $ | 3,692.3 | | | $ | 357.5 | | | | 9.4 | % | | $ | 116.0 | | | | 3.1 | % |

| | | (dollars in millions) | | | | | | | | | | |

| Costs of revenue, service costs | | $ | 2,684.1 | | | $ | 2,471.4 | | | $ | 2,459.4 | |

These increases in compensation and related expenses were partially offset by a $10.6 million increase in the benefit from research and development grants primarily from France and Austria as well as efficiencies gained from restructuring activities taken in prior years.

| | | (dollars in millions) | | | | | | | | | | |

| Selling, general and administrative | | $ | 882.3 | | | $ | 860.5 | | | $ | 817.8 | |

The $21.8 million increase in selling, general and administrative expenses in 2014 was due to a constant currency increase of $29.3 million, or 3.4%, partially offset by a decrease of $7.5 million from a positive foreign currency impact.

These increases were partially offset by expenses incurred in 2013 that did not recur in 2014 including a $25.0 million fee paid in connection with the termination of our management agreement with affiliates of certain of our shareholders, $10.0 million of severance expense associated with cost reduction programs, executive separation costs of approximately $5.3 million, and a $1.5 million fee paid in connection with the modification of an agreement for the business usage of an airplane owned by GF Management Company, LLC, or GFM, a company controlled by our Executive Chairman.

The constant currency increase was primarily due to (1) expenses incurred related to a

| | | (in millions) | | | | | | | | | | |

During 2014, we recognized $9.0 million of restructuring charges, net of reversals for changes in estimates which was primarily related to our 2014 restructuring plans to better align our resources with our strategic direction, which resulted in a reduction of approximately 250 positions.

We believe that these plans will result in annualized cost savings of approximately $20.0 to $25.0 million.

| | | (in millions) | | | | | | | | | | |

| Interest income | | $ | (3.4 | ) | | $ | (3.9 | ) | | $ | (3.1 | ) |

| Interest expense | | $ | 100.6 | | | $ | 123.5 | | | $ | 134.4 | |

Interest expense during 2014 was lower than 2013 in part due to a decrease in the average rate of interest.

The average rate of interest on the term loan under our senior secured credit facility during 2014 was lower than it was during 2013 due to a reduction in the interest rate pursuant to the terms and conditions in the credit agreement as well as from the refinancing transaction we completed in the fourth quarter of 2013.

In addition to the lower average rate of interest, interest expense during 2014 also benefited from a decrease in the average debt outstanding as a result of the repayment of the $300.0 million term loan, which Quintiles Transnational Holdings

Inc. obtained in February 2012 and paid in full in May 2013, the pay down of $50.0 million of outstanding indebtedness under our senior secured credit facilities in May 2013, the mandatory prepayment of $33.8 million of outstanding indebtedness under our senior secured credit facilities in the first quarter of 2013, and the $25.0 million prepayment of outstanding indebtedness under our senior secured credit facilities in December 2014.

On September 16, 2013, we completed the acquisition of Novella for approximately $146.6 million in cash (net of approximately $26.2 million of acquired cash) plus potential earn-out payments totaling up to $21.0 million contingent upon the achievement of certain revenue and net new business targets for approximately three years following closing.

Integrated Healthcare Services provides the healthcare industry with both broad geographic presence and commercial capabilities.

Despite continued softness in the economy and concern about global credit markets, we expect outsourced clinical development to CROs to grow 6%-8% annually from 2013 to 2016.

##### [Table of Contents](#toc)

In October 2011, we acquired Outcome, for approximately $164.9 million (net of approximately $12.1 million of acquired cash) to strengthen our late phase research offerings and VCG&A, Inc. and its wholly owned subsidiary, VCG BIO, Inc., or collectively VCG, for $8.7 million to strengthen our commercial services.

In November 2011, we acquired Advion BioServices, Inc., for $54.9 million to enhance our biomarker and other advanced testing capabilities.

Our service revenues also include, or have historically included, product sales and commercial rights and royalties revenues.

Product sales, which are approximately 1% or less of consolidated service revenues for all periods presented, represent sales of pharmaceutical products pursuant to distribution agreements.

##### [Table of Contents](#toc)

Net new business grew 11% in 2012 to $4,501 million, of which $1,507 million was generated in the fourth quarter, from $4,044 million in 2011, with the growth driven by Product Development.

Product Development’s net new business increased 14% to $3,474 million in 2012, of which $1,088 million was generated in the fourth quarter, as compared to $3,040 million in 2011, led by increases in core clinical in Europe and North America and increases in our late phase, global laboratory and consulting service offerings.

Factors contributing to Product Development’s net new business growth in 2012 included increases in our core clinical service offerings in Europe and North America resulting from overall growth in those markets, our ability to leverage our expanding breadth of service offerings in late phase as well as global laboratories due in part to acquisitions made in 2011 and 2012, and net new business for consulting services related to assisting a customer on a regulatory compliance project.

These increases were partially offset by lower net new business in the Asia-Pacific and Latin America and from our early clinical development service offerings.

Integrated Healthcare Services’ net new business was $1,027 million and $1,004 million in 2012 and 2011, respectively.

| | | (dollars in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Service revenues | | $ | 3,808,340 | | | $ | 3,692,298 | | | $ | 3,294,966 | | | $ | 116,042 | | | | 3.1 | % | | $ | 397,332 | | | | 12.1 | % |

##### [Table of Contents](#toc)

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Year Ended December 31, | | | | | | | | | | |

| | | (dollars in thousands) | | | | | | | | | | |

| Service costs | | $ | 2,471,426 | | | $ | 2,459,367 | | | $ | 2,153,005 | |

The constant currency service costs growth was due to an increase in compensation and related expenses and other expenses directly related to our service contracts, as well as incremental costs resulting from the business combinations completed in 2011 and 2012.

Also contributing to the increase in costs of service revenues was a $16.7 million reduction in the benefit from R&D grants received from France and Austria, an increase in third party costs, primarily related to a new agreement to distribute pharmaceutical products in Italy, and various other individually insignificant factors.

| | | (dollars in thousands) | | | | | | | | | | |

| Selling, general and administrative expenses | | $ | 860,510 | | | $ | 817,755 | | | $ | 762,299 | |

The $55.5 million increase in selling, general and administrative expenses in 2012 was caused by (1) incremental costs resulting from the business combinations completed in the fourth quarter of 2011 and the third quarter of 2012, (2) increased spending on business development and IT costs (including higher depreciation and amortization expense related to an increase in assets in service) and (3) expenses related to the repricing of certain stock options in connection with dividends paid to our shareholders (resulting in incremental share-based compensation expense of $13.6 million) and a bonus paid to certain option holders (totaling $11.3 million).

These increases were partially offset by a positive foreign currency impact of approximately $17.9 million and a reduction in facility costs due to a consolidation of offices in Europe (including lower depreciation and amortization expense due to fewer assets in service).

##### [Table of Contents](#toc)

| | | (in thousands) | | | | | | | | | | |

| Restructuring costs | | $ | 14,071 | | | $ | 18,741 | | | $ | 22,116 | |

These actions are expected to result in severance for approximately 400 positions.

This restructuring action has resulted in the elimination of approximately 280 positions, primarily in Europe.

We recognized $22.1 million of restructuring charges, net of immaterial reversals for changes in estimates, in 2011, primarily related to our July 2011 restructuring plan to reduce staffing overcapacity and to rationalize non-billable support roles.

As part of our July 2011 plan, approximately 290 positions were eliminated, primarily in North America and Europe.

_Impairment Charges_

| | | (in thousands) | | | | | | | | | | |

| Impairment charges | | $ | — | | | $ | — | | | $ | 12,295 | |

In 2011, we recognized a $12.2 million impairment on long-lived assets used in our early clinical development services due to a decline in revenue as well as overcapacity in the market for early clinical development services.

| | | (in thousands) | | | | | | | | | | |

Approximately [removed: 37.8% and 38.9%] [added: 38%] of our service revenues for [removed: the] [added: both] years ended December 31, [removed: 2013] [added: 2014] and [removed: 2012, respectively,] [added: 2013] were denominated in currencies other than the United States dollar.

[removed: Our financial statements are reported in United] States dollars and, accordingly, fluctuations in exchange rates will affect the translation of our revenues and expenses denominated in foreign currencies into United States dollars for purposes of reporting our consolidated financial results.

In [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] the most significant currency exchange rate exposures were the Euro, British pound, Singapore [removed: dollar, Indian rupee] [added: dollar] and [removed: South African rand.][added: Indian rupee.]

[removed: A] [added: Excluding the impacts from any outstanding or future hedging transactions, a] hypothetical change of 10% in average exchange rates used to translate all foreign currencies to United States dollars would have impacted income before income taxes for [removed: 2013] [added: 2014] by approximately [removed: $45.0] [added: $40.5] million.

Accumulated currency translation adjustments recorded as a separate component of shareholders’ deficit were [removed: ($5.8)] [added: ($55.7)] million and [removed: $19.3] [added: ($5.8)] million at December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively.

At December 31, [removed: 2012,] [added: 2014,] we had [removed: 12] [added: 13] open foreign exchange forward contracts relating to service contracts with various amounts maturing monthly through September [removed: 2013] [added: 2015] with a notional value totaling approximately [removed: $38.9] [added: $76.0] million.

As of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: $2.061] [added: $2.0] billion of total indebtedness with variable interest at the greater of the three month LIBOR or 1.25%, plus 2.50%, or 3.75% at December 31, [removed: 2013,] [added: 2014,] of which [removed: $945.0] [added: $910.0] million, or [removed: 45.9%,] [added: 44.8%,] was hedged at a fixed rate of [removed: 2.55%,] [added: 2.57%,] leaving approximately [removed: $1.116] [added: $1.1] billion of unhedged variable rate debt.

Each quarter-point increase or decrease in the variable interest rate would result in our interest expense changing by approximately [removed: $2.8] [added: $3.5] million per year under our unhedged variable rate debt.

At December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] we held investments in marketable equity securities.

As of December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] the fair value of these investments was [removed: $7.7 million] [added: $831,000] and [removed: $2.4] [added: $7.7] million, respectively, based on quoted equity prices.

The potential loss in fair value resulting from a hypothetical decrease of 10% in quoted equity price was approximately [removed: $767,000] [added: $83,000] and [removed: $243,000] [added: $767,000] at December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] respectively.

Our financial statements are reported in United

As of December 31, 2014, we also had $275.0 million of total indebtedness under our receivables financing facility with variable interest at LIBOR plus 1.05%, or 1.22% at December 31, 2014.

##### [Table of Contents](#toc)

We are positioned at the intersection of business services and healthcare and generated [removed: $3.8] [added: $4.2] billion of service revenues in [removed: 2013,] [added: 2014,] conduct business in approximately 100 countries and have approximately [removed: 28,200] [added: 32,600] employees.

Since our founding [removed: more than 30 years ago,] [added: in 1982,] 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, [removed: as ranked by 2013] [added: based upon the most recently available public information of] reported service revenues, and is focused primarily on Phase II-IV clinical trials and associated laboratory and analytical activities.

Integrated Healthcare Services provides a broad array of services, including commercial services, such as [removed: providing] contract pharmaceutical sales [removed: forces in key geographic markets, as well as a growing number of] [added: forces, and] healthcare business services for the broader healthcare sector, such as [removed: outcome-based, consulting and] real-world [removed: research] and [added: late phase research, market access and consulting, health information analytics and technology consulting, and] other healthcare solutions.

Product Development contributed approximately [removed: 77%] [added: 74%] and Integrated Healthcare Services contributed approximately [removed: 23%] [added: 26%] to our [removed: 2013] [added: 2014] service revenues.

Additional information regarding our segments is presented in Note [removed: 21] [added: 20] 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 [removed: sector that perform trials and market their products all around the world.][added: sector.]

During each of the last [removed: 11] [added: 12] years, we have worked with the 20 largest biopharmaceutical companies ranked by [removed: 2012] [added: 2013] reported revenues.

We have provided services in connection with the development or commercialization of the top [removed: 50] [added: 100] best-selling biopharmaceutical products and the top 50 best-selling biologic products, from [removed: 2012] [added: 2013] as measured by reported sales.

Of the new molecular entities, or NMEs, and new [removed: biologic] [added: biological license] applications, or BLAs, approved [added: by the United States Food and Drug Administration, or FDA,] from 2004 through [removed: 2012,] [added: 2013,] we helped develop or commercialize [removed: 97%] [added: 100%] of the central nervous system drugs, [removed: 93%] [added: 92%] of the oncology drugs and [removed: 89%] [added: 87%] of the cardiovascular drugs.

In [removed: 2013,] [added: 2014,] our service revenues were [removed: $3.8] [added: $4.2] billion and our net income attributable to our shareholders was [removed: $226.6] [added: $356.4] million.

In addition, our [removed: 2013] [added: 2014] net new business was [removed: $4.9] [added: $5.6] billion, and we ended the year with [removed: $9.9] [added: $11.2] billion in backlog.

See Part I, Item [removed: 1] [added: 1,] “Business—Net New Business Reporting and Backlog” for more detail.

During each of the last [removed: six] [added: seven] 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 [removed: 2013] [added: 2014] revenues.

The market served by Product Development consists primarily of biopharmaceutical companies, including medical device and diagnostics companies, that [removed: are seeking to] outsource [removed: clinical trials and other product] [added: services associated with the] development [removed: activities.][added: of pharmaceutical products, such as clinical trials.]

We estimate that total [removed: biopharmaceutical] [added: research and development, or R&D,] spending [removed: on drug development] was approximately [removed: $93] [added: $140] billion in [removed: 2013,] [added: 2014] of which [added: biopharmaceutical spending on drug development was approximately $95 billion, and] we estimate that our addressable market (clinical development spending excluding preclinical spending) was approximately [removed: $51] [added: $52] billion.

The portion of this [removed: $51] [added: $52] billion that was outsourced in [removed: 2013,] [added: 2014,] based on our estimates, was approximately [removed: $19] [added: $21] 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 [removed: 2013] [added: 2014] through [removed: 2016] [added: 2017] as a result of increased [removed: research and development, or R&D,] [added: R&D] spending by biopharmaceutical companies and the increased outsourcing of this spending as compared to [removed: 2012.][added: 2013.]

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 [removed: research] [added: research, healthcare technology implementation analytics,] and evidence-based medicine, exceeded [removed: $94] [added: $98] billion in [removed: 2013.][added: 2014.]

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, [removed: consulting] [added: consulting,] and [removed: medical education.][added: health information analytics and technology consulting.]

In addition, Integrated Healthcare Services offers [removed: outcome-based] [added: real-world late phase] services such as observational studies, comparative effectiveness studies and product and disease registry [removed: services] [added: services,] which are intended to help increase the quality and cost-effectiveness of healthcare and [removed: provider] payer [added: provider] solutions.

_Trends in R&D Spending._ We estimate that R&D spending was approximately [removed: $137] [added: $140] billion in [removed: 2013] [added: 2014] and will grow to approximately [removed: $145] [added: $150] billion in [removed: 2016,] [added: 2017,] with [added: drug] development accounting for approximately 68% of total expenditures.

In [removed: 2013,] [added: 2014,] there were approximately [removed: 4,060] [added: 4,620] drugs in the Phase I-III [added: development] pipeline, an increase of [removed: 19%] [added: 35%] since 2008, and there were [removed: 27] [added: 41] NME approvals by the [removed: United States Food and Drug Administration, or FDA,] [added: FDA] in [removed: 2013] [added: 2014] which [removed: for the two year period of 2012 to 2013 showed] [added: was] the highest number of approvals [removed: since] [added: in any of] the [removed: late 1990’s.][added: past 18 years.]

We believe that further R&D spending, combined with the continued need for cost efficiency across the healthcare landscape, will [added: continue to] create [removed: 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 [removed: 2013] [added: 2014] was approximately [removed: $19] [added: $21] billion and will grow to approximately [removed: $23] [added: $26] billion by [removed: 2016.][added: 2017.]

We estimate that overall outsourcing penetration in [removed: 2013] [added: 2014] was [removed: 37%.][added: 39%.]

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 [removed: $94] [added: $98] billion addressable market is [removed: not more than 20%.][added: approximately 23%.]

[removed: Over the longer term, we] [added: 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 [removed: and focus] [added: to one that is more focused] on their core competencies.

In particular, we believe that the following trends will result in increased outsourcing to global biopharmaceutical services [removed: companies, of which we are the largest and most global:][added: companies:]

| | [removed: • | | 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. |

| | • | | 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 [removed: 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. |

| | • | | 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 [added: and other emerging markets] make us a strong partner for biopharmaceutical companies managing the complexities of international drug development. |

| | • | | Increasing Number of Phase II-IV Clinical Trials. [removed: 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 [removed: number] [added: complexity and cost] of [removed: large] Phase II-IV trials [removed: increases, especially those that focus on rare diseases or that continue to require large numbers of patients with very specific disease conditions,] [added: grow,] trial sponsors will [removed: increasingly] [added: continue to] 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 [removed: sites around the world.] [added: sites.] 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 [removed: 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.] [added: drugs.] |

[added: | | • | | Increase in Strategic Collaborations. Larger CROs are able to provide a greater variety of services and therapeutic expertise to the biopharmaceutical community. Biopharmaceutical companies continue to enter into long-term strategic collaborations with global service providers.] 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. [added: |]

We differentiate ourselves from others in our industry through our competitive [removed: strengths,] [added: strengths and strategies,] which include:

[removed: _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 [removed: reported 2013 consolidated] [added: the most recent publicly available information, our] service [removed: revenues, we are] [added: revenues were] nearly 1.6 times the size of our closest public CRO competitor.

Based on our public competitors’ [removed: 2013] [added: most recently available information of] 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 addition, as of December 31, [removed: 2013,] [added: 2014,] we had approximately [removed: 28,200] [added: 32,600] employees with the majority located outside the United States, including significant numbers in Japan and Europe.

Our backlog is diversified with 37% from top 10 biopharmaceutical companies, 22% representing contracts with biopharmaceutical companies ranked as 11-20, 19% representing contracts with biopharmaceutical companies ranked as 21-50, and 22% representing contracts with biopharmaceutical companies outside the top 50, in each case, as ranked by 2013 sales.

| | • | | Maximizing Productivity and Lowering Costs. Declining R&D productivity, increased development costs and diminished returns on marketing and sales have negatively impacted biopharmaceutical companies. We believe that the need for biopharmaceutical companies to maximize productivity and |

| --- | --- |

Our broad geographic diversification is represented by operations in approximately 100 countries.

We have continued to invest in developing world-class scientific capabilities underpinned with a focus on delivering consistent, high-quality services to our customers throughout the world.

We use our extensive scope of services to design innovative and

We were founded in 1982 by Dennis B.

In 1994, we completed an initial public offering, or IPO, and in 2003 we exited the public markets through a going private transaction.

The quality of a clinical trial is dependent on the

Since 2011, our Real World and Late Phase Research group has designed and implemented nearly 400 patient registries and post-approval programs with expertise across approximately 100 countries and numerous therapeutic areas.

demonstrate effectiveness, gain market access and expand labeling and approved indications.

Our July 2014 acquisition of Encore Health Resources, or Encore, enhanced our EHR expertise, which is becoming increasingly important as biopharmaceutical customers, payers, and providers focus on measuring outcomes based on real-world performance in terms of clinical effectiveness and value.

2012.

| --- | --- | --- | --- |

| | | 2014 | | | | 2013 | | |

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 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.

##### [Table of Contents](#toc)

In order to do this, we believe that healthcare organizations will need to move towards variable cost structures to lower risk and improve returns.

##### [Table of Contents](#toc)

_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.

##### [Table of Contents](#toc)

Our Competitive Strengths

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.

In 2013, we had revenues of approximately $774 million in the Asia-Pacific region, where we have had a presence since 1993.

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.

_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 six years, we have had at least eight customers from whom we earned more than $100 million in service revenues.

In 2013, we provided services across both our Product Development and Integrated Healthcare Services segments to all of our top 25 key customers.

_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 product development capabilities across a range of therapeutic areas, with a focus on oncology, cardiovascular, central nervous system, diabetes and internal medicine.

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.

##### [Table of Contents](#toc)

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.

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.

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.

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.

We have obtained or applied for more than 60 patents in connection with the development of our proprietary technology, systems and processes.

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.

For the fiscal year ended December 31, [removed: 2013][added: 2014]

Yes [removed: ¨ No] x [added: No ¨]

Indicate by check mark whether the [removed: Registrant] [added: registrant] is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer] [added: filer,] or a smaller reporting company.

See [removed: definition] [added: the definitions] of [removed: “accelerated filer”,] “large accelerated [added: filer,” “accelerated] filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

| Large accelerated filer | | [removed: ¨] [added: x] | | Accelerated filer | | ¨ |

| Non-accelerated filer | | [removed: x] [added: ¨] (Do not check if a smaller reporting company) | | Smaller reporting company | | ¨ |

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant, based upon the closing sale price as reported on the New York Stock Exchange on June [removed: 28, 2013,] [added: 30, 2014,] the last business day of the registrant’s most recently completed second quarter, was approximately [removed: $1,419,937,239.][added: $3,275,274,595.]

| [removed: Common] [added: Common] Stock $0.01 par [removed: value] [added: value] | | [removed: 129,842,707] [added: 124,315,113] shares outstanding as of February [removed: 6, 2014] [added: 5, 2015] |

Portions of the registrant’s Proxy Statement for the [removed: 2014] [added: 2015] Annual Meeting of Shareholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, [removed: 2013.][added: 2014.]

| 1A. | | [Risk [removed: Factors](#tx635141_2)] [added: Factors](#tx831296_2)] | | | 21 | |

| 1B. | | [Unresolved Staff [removed: Comments](#tx635141_3)] [added: Comments](#tx831296_3)] | | | [removed: 35] [added: 38] | |

| 3. | | [Legal [removed: Proceedings](#tx635141_5)] [added: Proceedings](#tx831296_5)] | | | [removed: 35] [added: 39] | |

| 4. | | [Mine Safety [removed: Disclosures](#tx635141_6)] [added: Disclosures](#tx831296_6)] | | | [removed: 35] [added: 39] | |

| 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#tx635141_7)] [added: Securities](#tx831296_7)] | | | [removed: 36] [added: 40] | |

| 6. | | [Selected Financial [removed: Data](#tx635141_8)] [added: Data](#tx831296_8)] | | | [removed: 39] [added: 43] | |

| 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#tx635141_9)] [added: Operations](#tx831296_9)] | | | [removed: 41] [added: 45] | |

| 7A. | | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#tx635141_10)] [added: Risk](#tx831296_10)] | | | [removed: 59] [added: 65] | |

| 8. | | [Financial Statements and Supplementary [removed: Data](#tx635141_11)] [added: Data](#tx831296_11)] | | | [removed: 60] [added: 67] | |

| 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#tx635141_12)] [added: Disclosure](#tx831296_12)] | | | [removed: 100] [added: 114] | |

| 9A. | | [Controls and [removed: Procedures](#tx635141_13)] [added: Procedures](#tx831296_13)] | | | [removed: 100] [added: 114] | |

| 9B. | | [Other [removed: Information](#tx635141_14)] [added: Information](#tx831296_14)] | | | [removed: 100] [added: 114] | |

| 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#tx635141_15)] [added: Governance](#tx831296_15)] | | | [removed: 101] [added: 115] | |

| 11. | | [Executive [removed: Compensation](#tx635141_16)] [added: Compensation](#tx831296_16)] | | | [removed: 101] [added: 115] | |

| 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#tx635141_17)] [added: Matters](#tx831296_17)] | | | [removed: 101] [added: 115] | |

| 13. | | [Certain Relationships and Related Transactions and Director [removed: Independence](#tx635141_18)] [added: Independence](#tx831296_18)] | | | [removed: 101] [added: 115] | |

| 14. | | [Principal Accountant Fees and [removed: Services](#tx635141_19)] [added: Services](#tx831296_19)] | | | [removed: 101] [added: 115] | |

| 15. | | [Exhibits and Financial Statement [removed: Schedules](#tx635141_20)] [added: Schedules](#tx831296_20)] | | | [removed: 102] [added: 116] | |

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in [removed: “Risk Factors” in] Part I, Item [removed: 1A of this report.][added: 1A, “Risk Factors.” Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.]

10-K 1 d831296d10k.htm 10-K

| 1. | | [Business](#tx831296_1) | | | 4 | |

| 2. | | [Properties](#tx831296_4) | | | 38 | |

| | | [Signatures](#tx831296_21) | | | 117 | |

| | | [Exhibit Index](#tx831296_22) | | | 125 | |

10-K 1 d635141d10k.htm 10-K

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

| 1. | | [Business](#tx635141_1) | | | 4 | |

| 2. | | [Properties](#tx635141_4) | | | 35 | |

| | | [Signatures](#tx635141_21) | | | 103 | |

| | | [Exhibit Index](#tx635141_22) | | | 110 | |

##### [Table of Contents](#toc)

Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.

##### [Table of Contents](#toc)

As of December 31, [removed: 2013,] [added: 2014,] we had approximately 120 offices located in approximately 60 countries.

We maintain substantial offices serving Product Development in Durham, North Carolina; Marietta, Georgia; [added: Overland Park, Kansas;] Reading, England; West Lothian, Scotland; Centurion, South Africa; Tokyo, Japan; Bangalore, India; and Singapore.

We also maintain substantial offices serving Integrated Healthcare Services in Parsippany, New [removed: Jersey; Hawthorne, New York; Reading, England; and Tokyo, Japan.]

Jersey; Mannheim, Germany; Reading, England; and Tokyo, Japan.

The facility in Barcelona, Spain is subject to mortgages.

##### [Table of Contents](#toc)

On May 9, 2013, our common stock began trading on the NYSE under the symbol [removed: “Q”.][added: “Q.” Prior to that time, there was no public market for our common stock.]

We do not currently intend to pay dividends on our common [removed: stock.][added: stock, and no dividends were declared or paid in 2014 or 2013.]

The following table summarizes the equity repurchase program activity for the three months ended December 31, [removed: 2013] [added: 2014] and the approximate dollar value of shares that may yet be purchased pursuant to [removed: our equity repurchase program:][added: the Repurchase Program (as defined below):]

| Period | | Total Number of Shares Purchased | | | | Average Price Paid per Share | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or [removed: Programs (2)] [added: Programs(1)] | | |

| | | (in thousands, except [added: share and] per share data) | | | | | | | | | | | | | | |

| [removed: (2)] [added: 1.] | On October 31, 2013, we announced that on October 30, 2013 our Board approved an equity repurchase [removed: program] [added: program, or the Repurchase Program,] authorizing the repurchase of up to $125.0 million of either our common stock or vested in-the-money employee stock options, or a combination thereof. We have used and intend to continue to use cash on hand to fund the [removed: equity repurchase program.] [added: Repurchase Program.] The [removed: equity repurchase program] [added: Repurchase Program] does not obligate us to repurchase any particular amount of common stock or vested in-the-money employee stock options, and it could be modified, suspended or discontinued at any time. The timing and amount of repurchases are determined by our management based on a variety of factors such as the market price of our common stock, our corporate requirements, and overall market conditions. Purchases of our common stock may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or in privately negotiated transactions. We may also repurchase shares of our common stock pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, which would permit shares of our common stock to be repurchased when we might otherwise be precluded from doing so by law. Repurchases of vested in-the-money employee stock options were made through transactions between us and our employees (other than our executive officers, who were not eligible to participate in the program), and this aspect of the [removed: equity repurchase program] [added: Repurchase Program] expired in November 2013. The [removed: equity repurchase program] [added: Repurchase Program] for common stock does not have an end date. |

The following graph shows a comparison from May 9, 2013 (the date our common stock commenced trading on the NYSE) through December 31, [removed: 2013] [added: 2014] of the cumulative total return for our common stock, the Standard & Poor’s 500 Stock Index, or S&P 500 Index, and the Standard & Poor’s Healthcare Sector Index, or S&P 500 Healthcare.

[removed: ][added: ]

| Fiscal Year 2014 | | | | | | | | |

| Fourth Quarter | | $ | 60.79 | | | $ | 51.09 | |

| Third Quarter | | $ | 58.89 | | | $ | 53.03 | |

| Second Quarter | | $ | 53.55 | | | $ | 46.27 | |

| First Quarter | | $ | 55.00 | | | $ | 45.25 | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | High | | | | Low | | |

On February 5, 2015, we had approximately 45 shareholders of record.

We did not sell any unregistered equity securities in 2014.

| October 1, 2014 – October 31, 2014 | | | — | | | $ | — | | | | — | | | $ | 59,486 | |

| November 1, 2014 – November 30, 2014 (2) | | | 4,303,666 | | | $ | 58.09 | | | | — | | | $ | 59,486 | |

| December 1, 2014 – December 31, 2014 | | | — | | | $ | — | | | | — | | | $ | 59,486 | |

| | | | 4,303,666 | | | | | | | | — | | | | | |

| 2. | On November 10, 2014, we completed the repurchase of 4,303,666 shares of our common stock for $58.09 per share for an aggregate purchase price of approximately $250.0 million in connection with a secondary offering by certain of our shareholders. We funded this repurchase transaction with a combination of cash on hand and a $150.0 million draw on our revolving credit facility. This repurchase transaction was separate from and in addition to the Repurchase Program. |

Prior to that time, there was no public market for our common stock.

On February 6, 2014, we had approximately 205 common stock holders of record.

In October 2012, our Board declared a $2.09 per share dividend to shareholders of record on October 24, 2012.

The dividend totaled approximately $241.7 million and was paid on November 1, 2012.

In February 2012, our Board declared a $2.82 per share dividend to shareholders of record on February 29, 2012.

The dividend totaled approximately $326.1 million and was paid on March 9, 2012.

No dividends were declared or paid in 2013.

There were no unregistered sales of equity securities in 2013 that have not been previously reported in a Quarterly Report on Form 10-Q.

As contemplated in the prospectus filed pursuant to Rule 424(b) under the Securities Act with the SEC on May 9, 2013, or the Prospectus, we used the net proceeds from the IPO as follows: (1) $308.9 million to pay all amounts outstanding under the $300.0 million term loan we obtained in February 2012, including accrued interest and related fees and expenses, (2) $50.0 million to repay indebtedness under our senior secured credit facilities, and (3) $25.0 million to pay a one-time fee to terminate our management agreement with GF Management Company, LLC (an entity controlled by Dennis B.

Gillings, CBE, our Executive Chairman and a significant shareholder), or GFM, and the private investment firms of Bain Capital Partners, LLC, TPG Capital, L.P., 3i Corporation, Aisling Capital, LLC and Cassia Fund Management (Private) Limited, which are affiliates of certain of our shareholders.

On September 16, 2013, we used the remaining $105.7 million of net proceeds from the IPO, together with cash on hand, to complete the acquisition of Novella as described elsewhere in this Annual Report on Form 10-K.

There have been no material differences between the actual use of proceeds and intended use of proceeds as originally described in the Prospectus.

As of December 31, 2013, we have used all of the proceeds from the IPO.

No payments were made by us to directors, officers or persons owning 10% or more of our common stock or to their associates, or to our affiliates, other than the proceeds used to terminate the management agreement.

##### [Table of Contents](#toc)

| October 1, 2013 – October 31, 2013 | | | — | | | $ | — | | | | — | | | $ | 125,000 | |

| November 1, 2013 – November 30, 2013 (1) | | | 1,996 | | | $ | 43.42 | | | | 1,996 | | | $ | 65,718 | |

| December 1, 2013 – December 31, 2013 | | | 148 | | | $ | 41.96 | | | | 148 | | | $ | 59,500 | |

| | | | 2,144 | | | | | | | | 2,144 | | | | | |

| (1) | Included in November 2013 were 1.991 million vested in-the-money employee stock options repurchased with an average exercise price per share of $13.74, an average market price per share of $43.42 and an intrinsic value of $29.68 per share, or $59.1 million in the aggregate. We purchased these options for their intrinsic value. We purchased the remaining 5,000 shares of common stock at an average market price per share of $43.46. |

##### [Table of Contents](#toc)

##### [Table of Contents](#toc)

We have derived the following consolidated statement of income data for [removed: 2013, 2012] [added: 2014, 2013] and [removed: 2011] [added: 2012] and consolidated balance sheet data as of December 31, [removed: 2013] [added: 2014] and [removed: 2012] [added: 2013] from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We have derived the following consolidated statement of income data for [removed: 2010] [added: 2011] and [removed: 2009] [added: 2010] and consolidated balance sheet data as of December 31, [removed: 2011, 2010] [added: 2012, 2011] and [removed: 2009] [added: 2010] from our audited consolidated financial statements not included in this Annual Report on Form 10-K.

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | |

| Service revenues | | $ | [removed: 3,808,340] [added: 4,165,822] | | | $ | [removed: 3,692,298] [added: 3,808,340] | | | $ | [removed: 3,294,966] [added: 3,692,298] | | | $ | [removed: 3,060,950] [added: 3,294,966] | | | $ | [removed: 3,010,793] [added: 3,060,950] | |

| Reimbursed expenses | | | [removed: 1,291,205] [added: 1,294,176] | | | | [removed: 1,173,215] [added: 1,291,205] | | | | [removed: 1,032,782] [added: 1,173,215] | | | | [removed: 863,070] [added: 1,032,782] | | | | [removed: 888,795] [added: 863,070] | |

| Total revenues | | | [removed: 5,099,545] [added: 5,459,998] | | | | [removed: 4,865,513] [added: 5,099,545] | | | | [removed: 4,327,748] [added: 4,865,513] | | | | [removed: 3,924,020] [added: 4,327,748] | | | | [removed: 3,899,588] [added: 3,924,020] | |

| Costs of revenue, service costs | | | [removed: 2,471,426] [added: 2,684,106] | | | | [removed: 2,459,367] [added: 2,471,426] | | | | [removed: 2,153,005] [added: 2,459,367] | | | | [removed: 1,941,767] [added: 2,153,005] | | | | [removed: 1,894,796] [added: 1,941,767] | |

| Costs of revenue, reimbursed expenses | | | [removed: 1,291,205] [added: 1,294,176] | | | | [removed: 1,173,215] [added: 1,291,205] | | | | [removed: 1,032,782] [added: 1,173,215] | | | | [removed: 863,070] [added: 1,032,782] | | | | [removed: 888,795] [added: 863,070] | |

| Selling, general and administrative | | | [removed: 860,510] [added: 882,338] | | | | [removed: 817,755] [added: 860,510] | | | | [removed: 762,299] [added: 817,755] | | | | [removed: 698,406] [added: 762,299] | | | | [removed: 684,466] [added: 698,406] | |

| Restructuring costs | | | [removed: 14,071] [added: 8,988] | | | | [removed: 18,741] [added: 14,071] | | | | [removed: 22,116] [added: 18,741] | | | | [removed: 22,928] [added: 22,116] | | | | [removed: (141] [added: 22,928] | [removed: )] |

| Impairment charges (1) | | | — | | | | — | | | | [removed: 12,295] [added: —] | | | | [removed: 2,844] [added: 12,295] | | | | [removed: 15,453] [added: 2,844] | |

| Income from operations | | | [removed: 462,333] [added: 590,390] | | | | [removed: 396,435] [added: 462,333] | | | | [removed: 345,251] [added: 396,435] | | | | [removed: 395,005] [added: 345,251] | | | | [removed: 416,219] [added: 395,005] | |

| Interest expense, net | | | [removed: 119,571] [added: 97,179] | | | | [removed: 131,304] [added: 119,571] | | | | [removed: 105,126] [added: 131,304] | | | | [removed: 137,631] [added: 105,126] | | | | [removed: 106,037] [added: 137,631] | |

| Loss on extinguishment of debt | | | [removed: 19,831] [added: —] | | | | [removed: 1,275] [added: 19,831] | | | | [removed: 46,377] [added: 1,275] | | | | [removed: —] [added: 46,377] | | | | — | |

| Other (income) expense, net | | | [removed: (185] [added: (8,978] | ) | | | [removed: (3,572] [added: (185] | ) | | | [removed: 9,073] [added: (3,572] | [added: )] | | | [removed: 15,647] [added: 9,073] | | | | [removed: 9,622] [added: 15,647] | |

| Income before income taxes and equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates | | | [removed: 323,116] [added: 502,189] | | | | [removed: 267,428] [added: 323,116] | | | | [removed: 184,675] [added: 267,428] | | | | [removed: 241,727] [added: 184,675] | | | | [removed: 300,560] [added: 241,727] | |

| Income tax expense | | | [removed: 95,965] [added: 150,056] | | | | [removed: 93,364] [added: 95,965] | | | | [removed: 15,105] [added: 93,364] | | | | [removed: 77,582] [added: 15,105] | | | | [removed: 88,253] [added: 77,582] | |

| Income before equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates | | | [removed: 227,151] [added: 352,133] | | | | [removed: 174,064] [added: 227,151] | | | | [removed: 169,570] [added: 174,064] | | | | [removed: 164,145] [added: 169,570] | | | | [removed: 212,307] [added: 164,145] | |

| Equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates (2) | | | [added: 4,368 | | | |] (1,124 | ) | | | 2,567 | | | | 70,757 | | | | 1,110 | | [removed: | | (2,729 | ) |]

| Net income | | | [removed: 226,027] [added: 356,501] | | | | [removed: 176,631] [added: 226,027] | | | | [removed: 240,327] [added: 176,631] | | | | [removed: 165,255] [added: 240,327] | | | | [removed: 209,578] [added: 165,255] | |

| Net [removed: loss] (income) [added: loss] attributable to noncontrolling interests | | | [added: (118 | ) | | |] 564 | | | | 915 | | | | 1,445 | | | | (4,659 | ) | [removed: | | 485 | |]

| Net income attributable to Quintiles Transnational Holdings Inc. | | $ | [removed: 226,591] [added: 356,383] | | | $ | [removed: 177,546] [added: 226,591] | | | $ | [removed: 241,772] [added: 177,546] | | | $ | [removed: 160,596] [added: 241,772] | | | $ | [removed: 210,063] [added: 160,596] | |

| Basic | | $ | [removed: 1.83] [added: 2.78] | | | $ | [removed: 1.53] [added: 1.83] | | | $ | [removed: 2.08] [added: 1.53] | | | $ | [removed: 1.38] [added: 2.08] | | | $ | [removed: 1.80] [added: 1.38] | |

| Diluted | | $ | [removed: 1.77] [added: 2.72] | | | $ | [removed: 1.51] [added: 1.77] | | | $ | [removed: 2.05] [added: 1.51] | | | $ | [removed: 1.36] [added: 2.05] | | | $ | [removed: 1.79] [added: 1.36] | |

| Cash dividends declared per common share | | $ | — | | | $ | [removed: 4.91] [added: —] | | | $ | [removed: 2.48] [added: 4.91] | | | $ | [removed: 0.58] [added: 2.48] | | | $ | [removed: 4.57] [added: 0.58] | |

| Basic | | | [removed: 124,147] [added: 127,994] | | | | [removed: 115,710] [added: 124,147] | | | | [removed: 116,232] [added: 115,710] | | | | [removed: 116,418] [added: 116,232] | | | | [removed: 116,499] [added: 116,418] | |

| Diluted | | | [removed: 127,862] [added: 131,083] | | | | [removed: 117,796] [added: 127,862] | | | | [removed: 117,936] [added: 117,796] | | | | [removed: 118,000] [added: 117,936] | | | | [removed: 117,509] [added: 118,000] | |

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | |

| Operating activities | | $ | [removed: 397,370] [added: 431,754] | | | $ | [removed: 335,701] [added: 393,371] | | | $ | [removed: 160,953] [added: 335,701] | | | $ | [removed: 378,160] [added: 160,953] | | | $ | [removed: 484,474] [added: 378,160] | |

| Investing activities | | | [removed: (240,175] [added: (173,114] | ) | | | [removed: (132,233] [added: (236,176] | ) | | | [removed: (224,838] [added: (132,233] | ) | | | [removed: (141,434] [added: (224,838] | ) | | | [removed: (90,465] [added: (141,434] | ) |

| Financing activities | | | [removed: 70,957] [added: (130,344] | [added: )] | | | [removed: (146,873] [added: 70,957] | [removed: )] | | | [removed: (59,309] [added: (146,873] | ) | | | [removed: (153,081] [added: (59,309] | ) | | | [removed: (270,189] [added: (153,081] | ) |

| Capital expenditures | | $ | [removed: (92,346] [added: (82,650] | ) | | $ | [removed: (71,336] [added: (88,347] | ) | | $ | [removed: (75,679] [added: (71,336] | ) | | $ | [removed: (80,236] [added: (75,679] | ) | | $ | [removed: (85,932] [added: (80,236] | ) |

| Cash dividends paid to common shareholders | | | — | | | | [removed: (567,851] [added: —] | [removed: )] | | | [removed: (288,322] [added: (567,851] | ) | | | [removed: (67,493] [added: (288,322] | ) | | | [removed: (532,327] [added: (67,493] | ) |

| Net new business [added: (unaudited)] (3) | | | [removed: 4,898,851] [added: 5,602,400] | | | | [removed: 4,501,200] [added: 4,898,900] | | | | [removed: 4,044,100] [added: 4,501,200] | | | | [removed: 3,551,500] [added: 4,044,100] | | | | [removed: 3,641,400] [added: 3,551,500] | |

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | | | [removed: 2010] [added: 2011] | | | | [removed: 2009] [added: 2010] | | |

| Cash and cash equivalents | | $ | [removed: 778,143] [added: 867,358] | | | $ | [removed: 567,728] [added: 778,143] | | | $ | [removed: 516,299] [added: 567,728] | | | $ | [removed: 646,615] [added: 516,299] | | | $ | [removed: 565,774] [added: 646,615] | |

| Investments in debt, equity and other securities | | | [removed: 40,349] [added: 34,503] | | | | [removed: 35,951] [added: 40,349] | | | | [removed: 22,106] [added: 35,951] | | | | [removed: 1,557] [added: 22,106] | | | | [removed: 61,713] [added: 1,557] | |

| Trade accounts receivable and unbilled services, net | | | [removed: 924,205] [added: 975,255] | | | | [removed: 745,373] [added: 924,205] | | | | [removed: 691,038] [added: 745,373] | | | | [removed: 570,160] [added: 691,038] | | | | [removed: 584,200] [added: 570,160] | |

| Property and equipment, net | | | [removed: 199,578] [added: 190,297] | | | | [removed: 193,999] [added: 199,578] | | | | [removed: 185,772] [added: 193,999] | | | | [removed: 184,494] [added: 185,772] | | | | [removed: 199,415] [added: 184,494] | |

| Total assets | | | [removed: 3,066,797] [added: 3,305,832] | | | | [removed: 2,499,153] [added: 3,066,797] | | | | [removed: 2,322,917] [added: 2,499,153] | | | | [removed: 2,064,887] [added: 2,322,917] | | | | [removed: 2,112,734] [added: 2,064,887] | |

| (1) | In 2011, we wrote down $12.2 million related to long-lived assets, and we incurred other than temporary losses of $145,000 related to a non-marketable equity security. In 2010, we incurred other than temporary losses on equity securities of $2.8 million. |

| (4) | Excludes $12.4 million, $15.0 million, $22.9 million, $18.3 million and $8.3 million of unamortized discounts as of December 31, 2014, 2013, 2012, 2011 and 2010, respectively. |

| Costs, expenses and other: | | | | | | | | | | | | | | | | | | | | |

##### [Table of Contents](#toc)

| (1) | We incurred other than temporary losses on marketable and non-marketable equity securities of $4.4 million and $9.4 million, respectively, and an impairment of a long-lived asset of $1.7 million in 2009. We incurred other than temporary losses on equity securities of $2.8 million in 2010. Refer to our audited financial statements included elsewhere in this Annual Report on Form 10-K for information on other than temporary losses and long-lived asset impairments in 2013, 2012 and 2011. |

| (4) | Excludes $15.0 million, $22.9 million, $18.3 million, $8.3 million and $10.4 million of unamortized discounts as of December 31, 2013, 2012, 2011, 2010 and 2009, respectively. 2010 and 2009 include $7.5 million and $164.9 million, respectively, of debt related to activities in our former Capital Solutions segment, which primarily consisted of our former subsidiary PharmaBio Development Inc., or PharmaBio, that was deconsolidated in 2010. |

##### [Table of Contents](#toc)

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Quintiles Transnational Holdings Inc. and its subsidiaries at December 31, [removed: 2013] [added: 2014] and [removed: 2012,] [added: 2013,] and the results of their operations and their cash flows for each of the three years in the period ended December 31, [removed: 2013] [added: 2014] in conformity with accounting principles generally accepted in the United States of America.

Our responsibility is to express [removed: an opinion] [added: opinions] on these financial [removed: statements and] [added: statements, on the] financial statement [removed: schedules] [added: schedules, and on the Company’s internal control over financial reporting] based on our [removed: audits.][added: audits (which was an integrated audit in 2014).]

We conducted our audits [removed: of these statements] in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the [removed: audit] [added: audits] to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement and whether effective internal control over financial reporting was maintained in all material respects.]

[removed: An audit includes] [added: Our audits of the financial statements included] examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.

We believe that our audits provide a reasonable basis for our [removed: opinion.][added: opinions.]

| | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| Service revenues | | $ | [removed: 3,808,340] [added: 4,165,822] | | | $ | [removed: 3,692,298] [added: 3,808,340] | | | $ | [removed: 3,294,966] [added: 3,692,298] | |

| Reimbursed expenses | | | [removed: 1,291,205] [added: 1,294,176] | | | | [removed: 1,173,215] [added: 1,291,205] | | | | [removed: 1,032,782] [added: 1,173,215] | |

| Total revenues | | | [removed: 5,099,545] [added: 5,459,998] | | | | [removed: 4,865,513] [added: 5,099,545] | | | | [removed: 4,327,748] [added: 4,865,513] | |

| Costs of revenue, service costs | | | [removed: 2,471,426] [added: 2,684,106] | | | | [removed: 2,459,367] [added: 2,471,426] | | | | [removed: 2,153,005] [added: 2,459,367] | |

| Costs of revenue, reimbursed expenses | | | [removed: 1,291,205] [added: 1,294,176] | | | | [removed: 1,173,215] [added: 1,291,205] | | | | [removed: 1,032,782] [added: 1,173,215] | |

| Selling, general and administrative | | | [removed: 860,510] [added: 882,338] | | | | [removed: 817,755] [added: 860,510] | | | | [removed: 762,299] [added: 817,755] | |

| Restructuring costs | | | [removed: 14,071] [added: 8,988] | | | | [removed: 18,741] [added: 14,071] | | | | [removed: 22,116] [added: 18,741] | |

| Income from operations | | | [removed: 462,333] [added: 590,390] | | | | [removed: 396,435] [added: 462,333] | | | | [removed: 345,251] [added: 396,435] | |

| Interest income | | | [removed: (3,937] [added: (3,410] | ) | | | [removed: (3,067] [added: (3,937] | ) | | | [removed: (3,939] [added: (3,067] | ) |

| Interest expense | | | [removed: 123,508] [added: 100,589] | | | | [removed: 134,371] [added: 123,508] | | | | [removed: 109,065] [added: 134,371] | |

| Loss on extinguishment of debt | | | [removed: 19,831] [added: —] | | | | [removed: 1,275] [added: 19,831] | | | | [removed: 46,377] [added: 1,275] | |

| Other (income) expense, net | | | [removed: (185] [added: (8,978] | ) | | | [removed: (3,572] [added: (185] | ) | | | [removed: 9,073] [added: (3,572] | [added: )] |

| Income before income taxes and equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates | | | [removed: 323,116] [added: 502,189] | | | | [removed: 267,428] [added: 323,116] | | | | [removed: 184,675] [added: 267,428] | |

| Income tax expense | | | [removed: 95,965] [added: 150,056] | | | | [removed: 93,364] [added: 95,965] | | | | [removed: 15,105] [added: 93,364] | |

| Income before equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates | | | [removed: 227,151] [added: 352,133] | | | | [removed: 174,064] [added: 227,151] | | | | [removed: 169,570] [added: 174,064] | |

| Equity in [removed: (losses)] earnings [added: (losses)] of unconsolidated affiliates | | | [removed: (1,124] [added: 4,368] | [removed: )] | | | [removed: 2,567] [added: (1,124] | [added: )] | | | [removed: 70,757] [added: 2,567] | |

| Net income | | | [removed: 226,027] [added: 356,501] | | | | [removed: 176,631] [added: 226,027] | | | | [removed: 240,327] [added: 176,631] | |

| Net [added: (income)] loss attributable to noncontrolling interests | | | [removed: 564] [added: (118] | [added: )] | | | [removed: 915] [added: 564] | | | | [removed: 1,445] [added: 915] | |

| Net income attributable to Quintiles Transnational Holdings Inc. | | $ | [removed: 226,591] [added: 356,383] | | | $ | [removed: 177,546] [added: 226,591] | | | $ | [removed: 241,772] [added: 177,546] | |

| Basic | | $ | [removed: 1.83] [added: 2.78] | | | $ | [removed: 1.53] [added: 1.83] | | | $ | [removed: 2.08] [added: 1.53] | |