10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2008.

OR

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

For the transition period from              to             .

Commission File Number 0-27570

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.

(Exact name of registrant as specified in its charter)

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

929 North Front Street

Wilmington, North Carolina

(Address of principal executive offices)

28401

(Zip Code)

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

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

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

Large accelerated filer    x	Accelerated filer    ¨
Non-accelerated filer    ¨	Smaller reporting company    ¨

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 119,646,055 shares of common stock, par value $0.05 per share, as of April 30, 2008.

IND EX

	Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations for the Three Months Ended March 31, 2007 and 2008 (unaudited)	3
Consolidated Condensed Balance Sheets as of December 31, 2007 and March 31, 2008 (unaudited)	4
Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2008 (unaudited)	5
Notes to Consolidated Condensed Financial Statements (unaudited)	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3. Quantitative and Qualitative Disclosures about Market Risk	34
Item 4. Controls and Procedures	36
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	37
Item 6. Exhibits	37
Signatures	38

2

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

	Three Months Ended March 31,
	2007			2008
Net Revenue:
Development	$	300,156		$	347,798
Discovery Sciences		4,383			19,767
Reimbursed out-of-pockets		27,713			28,681
Total net revenue		332,252			396,246
Direct Costs:
Development		151,915			177,190
Discovery Sciences		2,358			2,708
Reimbursable out-of-pocket expenses		27,713			28,681
Total direct costs		181,986			208,579
Research and development expenses		1,905			4,330
Selling, general and administrative expenses		75,738			98,930
Depreciation and amortization		12,586			14,871
Impairment of intangible asset		—			1,607
Total operating expenses		272,215			328,317
Income from operations		60,037			67,929
Interest income, net		4,636			5,628
Other income (expense), net		(77	)		89
Impairment of investments		—			(16,319	)
Income before provision for income taxes		64,596			57,327
Provision for income taxes		22,609			17,198
Net income	$	41,987		$	40,129
Net income per common share:
Basic	$	0.36		$	0.34
Diluted	$	0.35		$	0.33
Dividends declared per common share	$	0.03		$	0.10
Weighted average number of common shares outstanding:
Basic		117,875			119,386
Dilutive effect of stock options and restricted stock		1,454			1,610
Diluted		119,329			120,996

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

3

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands)

Assets
	December 31, 2007		March 31, 2008
			(unaudited)
Current assets:
Cash and cash equivalents	$	171,427	$	372,977
Short-term investments		330,957		118,912
Accounts receivable and unbilled services, net		481,477		446,820
Income tax receivable		517		722
Investigator advances		15,318		17,281
Prepaid expenses and other current assets		49,835		52,934
Deferred tax assets		23,682		24,833
Total current assets		1,073,213		1,034,479
Property and equipment, net		356,189		357,241
Goodwill		215,620		218,268
Long-term investments		—		110,000
Equity investments		23,387		15,615
Intangible assets		1,702		18
Deferred tax assets		11,717		13,086
Other assets		2,547		2,649
Total assets	$	1,684,375	$	1,751,356
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	24,984	$	28,803
Payables to investigators		58,952		55,008
Accrued income taxes		16,182		16,686
Other accrued expenses		167,235		160,721
Deferred tax liabilities		101		438
Unearned income		205,779		217,174
Total current liabilities		473,233		478,830
Accrued income taxes		29,223		30,769
Accrued additional pension liability		9,763		10,057
Deferred tax liabilities		3,814		4,513
Deferred rent and other		18,246		17,729
Total liabilities		534,279		541,898
Shareholders’ equity:
Common stock		5,955		5,981
Paid-in capital		502,898		523,864
Retained earnings		626,025		654,184
Accumulated other comprehensive income		15,218		25,429
Total shareholders’ equity		1,150,096		1,209,458
Total liabilities and shareholders’ equity	$	1,684,375	$	1,751,356

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

4

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Three Months Ended March 31,
	2007			2008
Cash flows from operating activities:
Net income	$	41,987		$	40,129
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,586			14,871
Impairment of investments		—			16,319
Impairment of intangible		—			1,607
Stock compensation expense		5,276			5,952
(Benefit) provision for doubtful accounts		(10	)		1,154
Gain on sale of investments		(46	)		—
Benefit for deferred income taxes		(106	)		(3,941	)
Gain on disposal of assets, net		(109	)		(8	)
Change in operating assets and liabilities		1,413			40,532
Net cash provided by operating activities		60,991			116,615
Cash flows from investing activities:
Purchases of property and equipment		(32,684	)		(16,650	)
Proceeds from sale of property and equipment		1,466			57
Purchases of investments		(77,174	)		(188,426	)
Maturities and sales of investments		56,289			285,186
Purchases of equity investments		(571	)		(1,901	)
Proceeds from sale of equity investments		417			—
Net cash (used in) provided by investing activities		(52,257	)		78,266
Cash flows from financing activities:
Proceeds from revolving credit facility		24,986			—
Repayment of revolving credit facility		(24,986	)		—
Repayment of construction loan		(19,410	)		—
Repayment of capital leases obligations		(190	)		—
Proceeds from exercise of stock options and employee stock purchase plan		9,641			13,223
Income tax benefit from exercise of stock options and disqualifying dispositions of stock		1,036			1,957
Cash dividends paid		(3,541	)		(11,967	)
Net cash (used in) provided by financing activities		(12,464	)		3,213
Effect of exchange rate changes on cash and cash equivalents		422			3,456
Net (decrease) increase in cash and cash equivalents		(3,308	)		201,550
Cash and cash equivalents, beginning of the period		179,795			171,427
Cash and cash equivalents, end of the period	$	176,487		$	372,977

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

5

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies

The significant accounting policies followed by Pharmaceutical Product Development, Inc. and its subsidiaries (collectively the “Company”) for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. The Company prepared these unaudited consolidated condensed financial statements in accordance with Rule 10-01 of Regulation S-X and, in management’s opinion, has included all adjustments of a normal recurring nature necessary for a fair presentation. The accompanying consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations for the three-month period ended March 31, 2008 are not necessarily indicative of the results to be expected for the full year or any other period. The amounts in the December 31, 2007 consolidated condensed balance sheet are derived from the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

Principles of consolidation

The accompanying unaudited consolidated condensed financial statements include the accounts and results of operations of the Company. All intercompany balances and transactions have been eliminated in consolidation.

Recent accounting pronouncements

In September 2006, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”, or SFAS No. 157, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the statement establishes a framework for measuring fair value and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years and interim periods beginning after November 15, 2007. However, in February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 157-1 and FAS 157-2 which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financials statements on a recurring basis (at least annually) and removes certain leasing transactions from the scope of SFAS No. 157. This FSP partially defers the effective date of SFAS 157 to fiscal years and interim periods beginning after November 15, 2008 for items within the scope of the FSP. The Company does not expect the adoption of FSP 157-1 and FSP 157-2 to have a material impact on the Company’s financial statements. See “Fair Value” below, and Note 11 for a discussion of the Company’s fair value accounting.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”, or SFAS No. 158. SFAS No. 158 requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The Company currently uses a measurement date of November 30 and will be required to change the measurement date to December 31 for the year ended December 31, 2008. The adoption of this requirement is not expected to have a material impact on the Company’s financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”, or SFAS No. 159. This standard permits, but does not require, all entities to choose to measure eligible items at fair value at specified election dates. For items for which the fair value option has been elected, an entity would report unrealized gains and losses in earnings at each subsequent reporting date. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Company has adopted the standard as of January 1, 2008 but has not elected to account for any of its eligible financial assets and liabilities using the guidance of this standard.

6

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies (continued)

Recent accounting pronouncements (continued)

In June 2007, the FASB reached a consensus on Emerging Issues Task Force, or EITF, Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”. EITF 06-11 requires companies to recognize as an increase to additional paid-in capital the income tax benefit realized from dividends or dividend equivalents that are charged to retained earnings and paid to employees for nonvested equity-classified employee share-based payment awards. EITF 06-11 is effective for fiscal years beginning after December 15, 2007. The adoption of this statement did not have an impact on the Company’s financial statements.

In June 2007, the FASB reached a consensus on EITF Issue No. 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”. EITF 07-03 requires companies to defer and capitalize, until the goods have been delivered or the related services have been rendered, non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The adoption of this statement did not have an impact on the Company’s financial statements.

In December 2007, the FASB reached a consensus on EITF Issue No. 07-01, “Accounting for Collaborative Arrangements”. EITF 07-01 defines collaborative arrangements and establishes reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. EITF 07-01 also establishes the appropriate income statement presentation and classification for joint operating activities and payments between participants, as well as the required disclosures related to these arrangements. EITF 07-01 is effective for fiscal years beginning after December 15, 2008. The Company does not expect EITF 07-01 will have a material impact on its financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations”, or SFAS 141(R). SFAS 141(R) expands the definition of a business and a business combination, requires that: the purchase price of an acquisition, including the issuance of equity securities to be determined on the acquisition date, be recorded at fair value at the acquisition date; all assets, liabilities, contingent consideration, contingencies and in-process research and development costs of an acquired business be recorded at fair value at the acquisition date; acquisition costs generally be expensed as incurred; restructuring costs generally be expensed in periods subsequent to the acquisition date; and changes be made in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. SFAS 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is currently evaluating the impact SFAS 141(R) could have on future business combinations.

7

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies (continued)

Recent accounting pronouncements (continued)

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”, or SFAS No. 160. SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. An ownership interest in subsidiaries held by parties other than the parent should be presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. SFAS No. 160 requires that changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary should be accounted for similarly to equity transactions. When a subsidiary is deconsolidated, any retained noncontrolling equity investment should be initially measured at fair value, with any gain or loss recognized in earnings. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interests. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, including interim periods within those fiscal years. The Company does not expect SFAS No. 160 will have a material impact on its financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities”, or SFAS No. 161. SFAS No. 161 requires enhanced disclosures about derivative and hedging activities including (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (3) how derivative instruments and related hedged items affect financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning on or after November 15, 2008. The Company does not expect SFAS No. 161 will have a material impact on its financial statements.

Earnings per share

The Company computes basic income per share information based on the weighted average number of common shares outstanding during the period. The Company computes diluted income per share information based on the weighted average number of common shares outstanding during the period plus the effects of any dilutive common stock equivalents. The Company excluded 2,561,300 shares and 1,148,200 shares from the calculation of earnings per diluted share during the three months ended March 31, 2007 and 2008, respectively, because they were antidilutive. The Company’s antidilutive shares include stock options, employee stock purchase plan subscriptions and restricted stock.

Stock-based compensation

The Company accounts for its share-based compensation plans using the provisions of SFAS No. 123 (revised), “Share-Based Payment”. Accordingly, the Company measures stock-based compensation cost at grant date, based on the fair value of the award, and recognizes it as expense over the employee’s requisite service period.

During the three months ended March 31, 2008, the Company granted options to purchase approximately 1,263,000 shares with a weighted-average exercise price of $44.59. This amount includes options to purchase approximately 1,177,000 shares granted in the Company’s annual grant during the first quarter of 2008. All options were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date. The fair value of the Company’s common stock on the grant date is equal to the Nasdaq closing price of the Company’s stock on the date of grant, except for shares granted under the U.K. Subplan where the fair value of the Company’s common stock on the grant date is equal to the average of the high and low price of the Company’s common stock on the date of grant as reported by Nasdaq. The weighted-average grant date fair value per share determined using the Black-Scholes option-pricing method and the aggregate fair value of options granted during the three months ended March 31, 2008 was $11.29 and $14.3 million, respectively. As of March 31, 2008, the Company had 6.9 million options outstanding.

8

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies (continued)

Fair value

The Company adopted the provisions of SFAS No. 157 as modified by FSP 157-1 and FSP 157-2, effective January 1, 2008. SFAS No. 157 defines fair value, establishes a consistent framework for measuring fair value and expands the disclosure requirements about fair value measurements.

SFAS No. 157 also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:

• Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

• Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. Therefore, even when market assumptions are not readily available the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. Many financial instruments have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the Company and others are willing to pay for an asset. Ask prices represent the lowest price that the Company and others are willing to accept for an asset. For financial instruments whose inputs are based on bid-ask prices, the Company’s policy is to set fair value at the average of the bid and ask prices.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes the level in the fair value hierarchy within which the fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Transfers between valuation levels are reported at their fair value as of the end of the month in which such charges in the fair value inputs occurs.

Derivatives—The Company’s derivative portfolio consists solely of foreign currency forwards and certain foreign currency structured derivatives. The Company’s derivative positions are valued using generally accepted developed models that use as their basis readily observable market parameters that can be validated to external sources, including industry pricing services. These models reflect the contractual terms of the derivatives, including the period to maturity, and market-based parameters such as interest rates, currency exchange rates, and the credit quality of the

9

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

1. Significant Accounting Policies (continued)

Fair value (continued)

counterparty and do not require significant judgment. These instruments are classified within Level 2 of the valuation hierarchy.

Investments, Equity investments and Cash equivalents—Where quoted prices are available in an active market, securities are classified in Level 1 of the valuation hierarchy. Level 1 securities included highly liquid debt obligations for which there are quoted prices in active markets, money market funds which trade daily based on net asset values or quoted prices in active markets, and exchange-traded equities. If quoted market prices are not available for the specific security, then fair values are estimated by using pricing models or quoted prices of securities with similar characteristics. Examples of such instruments are commercial paper, municipal debt obligations (including auction rate securities, variable rate demand notes, and fixed maturity obligations), which would generally be classified within Level 2 of the valuation hierarchy. In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy.

Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. Accounts Receivable and Unbilled Services

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

	December 31, 2007			March 31, 2008
Billed	$	302,429		$	266,669
Unbilled		186,112			188,386
Provision for doubtful accounts		(7,064	)		(8,235	)
Total accounts receivable and unbilled services, net	$	481,477		$	446,820

10

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

3. Property and Equipment

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

	December 31, 2007			March 31, 2008
Land	$	6,761		$	6,848
Buildings and leasehold improvements		214,842			217,612
Construction in progress and software under development		18,758			24,057
Furniture and equipment		194,187			196,657
Computer equipment and software		171,790			177,044
Total property and equipment		606,338			622,218
Less accumulated depreciation		(250,149	)		(264,977	)
Total property and equipment, net	$	356,189		$	357,241

The Company owns a building and land in Leicester, England, which had a net book value of $2.4 million as of March 31, 2008. This building housed employees performing work in the Phase I business unit of the Development segment of the Company prior to the closure of that business unit. The Company classified this building as available-for-sale and included it in prepaid expenses and other current assets on its consolidated condensed balance sheet as of March 31, 2008. The net book value at March 31, 2008 was based on offers from external parties. The Company is seeking to dispose of the property and expects to close on this transaction in the second quarter of 2008.

4. Goodwill and Intangible Assets

Changes in the carrying amount of goodwill for the twelve months ended December 31, 2007 and the three months ended March 31, 2008, by operating segment, were as follows:

	Development		Discovery Sciences		Total
Balance as of January 1, 2007	$	158,766	$	53,616	$	212,382
Translation adjustments		3,238		—		3,238
Balance as of December 31, 2007		162,004		53,616		215,620
Translation adjustments		2,648		—		2,648
Balance as of March 31, 2008	$	164,652	$	53,616	$	218,268

Information regarding the Company’s other intangible assets follows:

	December 31, 2007						March 31, 2008
	Carrying Amount		Accumulated Amortization		Net		Carrying Amount		Accumulated Amortization		Net
Backlog and customer relationships	$	308	$	275	$	33	$	308	$	290	$	18
License and royalty agreements		2,500		831		1,669		—		—		—
Total	$	2,808	$	1,106	$	1,702	$	308	$	290	$	18

11

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

4. Goodwill and Intangible Assets (continued)

The Company amortizes its intangible assets on a straight-line basis, based on estimated useful lives of three to five years for backlog and customer relationships. The weighted average amortization period is 5.0 years for backlog and customer relationships.

In September 2004, the Company entered into a royalty stream purchase agreement with Accentia Biopharmaceuticals, Inc. under which it paid $2.5 million to Accentia in exchange for the right to receive royalties on sales of specified antifungal products, including SinuNase™, Accentia’s primary compound that it is developing for the treatment of chronic sinusitis. The Company carried this agreement as an intangible asset in the discovery segment. During the first quarter of 2008, Accentia announced results of the SinuNase Phase III clinical trial and reported that SinuNase did not meet its goal in treating chronic sinusitis patients, resulting in a significant amount of uncertainty regarding the future clinical development of SinuNase. As a result, the Company determined that the right under its agreement with Accentia to receive royalties on future sales of SinuNase was impaired, and a non-cash charge of $1.6 million was recorded for the remaining unamortized value of its royalty interest in SinuNase.

Amortization expense for each of the three-month periods ended March 31, 2007 and 2008 was $0.1 million. As of March 31, 2008, estimated amortization expense for the remaining nine months of 2008 is $18,000.

12

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

5. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Equity Investments

Cash and cash equivalents, Short-term investments, Long-term investments and Equity investments were composed of the following as of the dates set forth below:

	Cash and cash equivalents		Short-term investments		Long-term investments		Equity investments
As of December 31, 2007
Cash	$	121,326
Money market funds		12,474
Municipal auction rate securities			$	209,475
Municipal debt securities		23,665		111,230
Time deposits		10,177
Commercial paper		3,785
Other investments				10,252
Marketable equity securities:
BioDelivery Sciences International, Inc.							$	1,653
Accentia Biopharmaceuticals, Inc.								14,006
Cost basis investments:
Bay City Capital Funds								5,449
A.M. Pappas Funds								1,529
Other equity investments								750
Total	$	171,427	$	330,957	$	—	$	23,387
As of March 31, 2008
Cash	$	153,961
Money market funds		183,452
Municipal auction rate securities			$	66,351	$	110,000
Municipal debt securities				34,011
Time deposits		35,564		16,300
Other investments				2,250
Marketable equity securities:
BioDelivery Sciences International, Inc.							$	1,314
Accentia Biopharmaceuticals, Inc.								4,740
Cost basis investments:
Bay City Capital Funds								6,951
A.M. Pappas Funds								1,860
Other equity investments								750
Total	$	372,977	$	118,912	$	110,000	$	15,615

13

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

5. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Equity Investments (continued)

Short-term and Long-term investments

The Company accounts for its investment in marketable securities in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities”. The Company’s short-term and long-term investments are classified as available-for-sale securities because of management’s intent regarding these securities. The Company determines realized and unrealized gains and losses on short-term and long-term investments on a specific identification basis. As of December 31, 2007 and March 31, 2008, the Company had unrealized gains of $0.4 million and $0.2 million and unrealized losses of $2.1 million and $2.7 million, respectively, associated with its investments in municipal debt securities and other investments. There were gross realized gains of $0 and $0.7 million on the Company’s other municipal debt securities and $0 and $4.6 million of realized losses associated with municipal debt securities and other investments in the three months ended March 31, 2007 and 2008, respectively.

One of the investments in the Company’s short-term investment portfolio incurred a loss of $7.0 million. This was an investment in a AAA-rated tax advantaged investment fund that performed well until late 2007 and early first quarter 2008. The Company elected to liquidate a majority of this investment during the first quarter and have a remaining balance of $8.7 million. The fund has announced that it is dissolving and anticipates distributing all remaining cash proceeds to investors by the end of May 2008. The $7.0 million impairment includes an estimate of the loss on the remaining $8.7 million balance.

The Company held approximately $209.5 million and $176.4 million in tax-exempt auction rate securities at December 31, 2007 and March 31, 2008, respectively. The Company portfolio of investments in auction rate securities consists principally of interests in government guaranteed student loans, insured municipal debt obligations and municipal preferred auction rate securities. During the three months ended March 31, 2008, a significant number of auction rate securities auctions failed. As of April 30, 2008, the Company held approximately $137.5 million in auction rate securities. As a result of these failed auctions or future failed auctions, the Company may not be able to liquidate these securities until a future auction is successful, the issuer redeems the outstanding securities or the securities mature. Due to the uncertainties about the liquidity in this market, the Company reclassified $110.0 million of its auction rate securities to long-term assets at March 31, 2008. The Company evaluated the market conditions and credit worthiness of the issuers of its auction rate securities and determined the par value approximated market value as of March 31, 2008. If an issuer’s financial stability or credit rating deteriorates or adverse developments occur in the bond insurance market, the Company might be required to adjust the carrying value of its auction rate securities through a future impairment charge.

Equity investments

The Company has equity investments in publicly traded entities. The Company classifies investments in marketable equity securities as available-for-sale securities and measures them at market value. The Company determines realized and unrealized gains and losses on equity investments in publicly traded entities on a specific identification basis. The Company records net unrealized gains or losses associated with investments in publicly traded entities as a component of shareholders’ equity until they are realized or until an other-than-temporary decline has occurred. The market value of the Company’s equity investments in publicly traded entities is based on the closing price as quoted by the applicable stock exchange or market on the last trading day of the reporting period. The Company classifies its equity investments in publicly traded companies as long-term assets due to the Company’s ability to hold its investments long-term, the strategic nature of the investments and the lack of liquidity in the public markets for these securities. As of December 31, 2007 and March 31, 2008, gross unrealized gains on investments in marketable securities were $0.3 million and $0, respectively. As of December 31, 2007 and March 31, 2008, gross unrealized losses on investments in marketable securities were $0 and $0.1 million, respectively.

14

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

5. Cash and Cash Equivalents, Short-term Investments, Long-term Investments and Equity Investments (continued)

Equity investments (continued)

During the three months ended March 31, 2008, the Company recorded a charge to earnings of $9.3 million for an other-than-temporary decline in the fair market value of its equity investments in Accentia. The write-down was based on a decrease in the publicly quoted market price that Company management believes was other-than-temporary due to the length of time the stock had been trading below the Company’s cost basis and Accentia’s projected near-term performance based on the results of its Phase III clinical trial for SinuNase as discussed in Note 4.

The Company also has equity investments in privately held entities that are not publicly traded and for which fair values are not readily determinable. The Company records all of its investments in privately held entities at cost. The Company determines realized and unrealized gains and losses on a specific identification basis. The Company assesses the net realizable value of these entities on a quarterly basis to determine if there has been a decline in the fair value of these entities, and if so, if the decline is other-than-temporary. This quarterly review includes an evaluation of the entity, including, among other things, the market condition of its overall industry, historical and projected financial performance, expected cash needs and recent funding events, as well as the Company’s expected holding period and the length of time and the extent to which the fair value of the investment has been less than cost.

In November 2003, the Company became a limited partner in A. M. Pappas Life Science Ventures III, L.P., a venture capital fund established for the purpose of making investments in equity securities of privately held companies in the life sciences, healthcare and technology industries. In October 2007, the Company executed a Subscription Agreement to become a limited partner in A. M. Pappas Life Science Ventures IV, L.P. The Company has committed to invest up to a maximum of $4.8 million and $6.0 million, respectively, in these funds. Aggregate capital calls through March 31, 2008 were $2.3 million and $0, respectively. Because no capital call can exceed 10% of the Company’s aggregate capital commitment in each fund and the Company’s capital commitment will expire in May 2009 and the fifth anniversary of the fund’s first investment, respectively, the Company anticipates that its remaining capital commitment of $2.5 million and $6.0 million, respectively, will be made through a series of future capital calls over the term of its commitment. The Company owned approximately 4.7% and less than 3.0% of Pappas Fund III and Pappas Fund IV, respectively, as of March 31, 2008.

In September 2005, the Company became a limited partner in Bay City Capital Fund IV, L.P., a venture capital fund established for the purpose of investing in life sciences companies. In May 2007, the Company became a limited partner in Bay City Capital Fund V, L.P. The Company has committed to invest up to a maximum of $10.0 million in each of these funds. Aggregate capital calls through March 31, 2008 totaled $6.0 million and $0.9 million, respectively. Because no capital call can exceed 20% of the Company’s aggregate capital commitment in each fund and the Company’s capital commitment will expire in June 2009 and October 2012, respectively, the Company anticipates its remaining capital commitment of $4.0 million and $9.1 million, respectively, will be made through a series of future capital calls over the next several years. The Company owned approximately 2.9% and 2.0% of Bay City Fund IV and Bay City Fund V, respectively, as of March 31, 2008.

15

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

6. Comprehensive Income

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

	Three Months Ended March 31,
	2007			2008
Net income, as reported	$	41,987		$	40,129
Other comprehensive income:
Cumulative translation adjustment		1,175			8,986
Change in fair value of hedging transaction, net of taxes of $0 and $92, respectively		—			234
Reclassification adjustment for hedging results included in direct costs, net of taxes of $0 and $91, respectively		—			261
Net unrealized gain on investments, net of taxes of $92 and $698, respectively		208			730
Total other comprehensive income		1,383			10,211
Comprehensive income	$	43,370		$	50,340
Accumulated other comprehensive income consisted of the following amounts on the dates set forth below:
	December 31,			March 31,
	2007			2008
Translation adjustment	$	24,487			33,472
Pension liability, net of tax benefit of $2,814		(7,235	)		(7,235	)
Fair value on hedging transaction, net of tax benefit of $439 and $255, respectively		(1,095	)		(599	)
Net unrealized loss on investments, net of tax benefit of $513 and $182, respectively		(939	)		(209	)
Total	$	15,218		$	25,429

16

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

7. Accounting for Derivative Instruments and Hedging Activities

The Company enters into foreign exchange forward and option contracts that are designated and qualify as cash flow hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”. The Company recognizes changes in the fair value of the effective portion of these outstanding forward and option contracts in accumulated other comprehensive income, or OCI. The Company reclassifies these amounts from OCI and recognizes them in earnings when either the forecasted transaction occurs or it becomes probable that the forecasted transaction will not occur.

The Company recognizes changes in the ineffective portion of a derivative instrument in earnings in the current period. The Company measures effectiveness for forward cash flow hedge contracts by comparing the fair value of the forward contract to the change in the forward value of the anticipated transaction. The fair market value of the hedged exposure is presumed to be the market value of the hedge instrument when critical terms match. The Company’s hedging portfolio ineffectiveness during the first three months of 2007 and 2008 was $0 and $0.2 million, respectively. The Company records the ineffectiveness as a component of direct costs.

The Company has significant international revenues and expenses, and related receivables and payables, denominated in non-functional currencies in the Company’s foreign subsidiaries. As a result, from time to time the Company purchases currency option and forward contracts as cash flow hedges to help manage certain foreign currency exposures that can be identified and quantified. Pursuant to its foreign exchange risk hedging policy, the Company may hedge anticipated and recorded transactions, and the related receivables and payables denominated in non-functional currencies, using forward foreign exchange rate contracts and foreign currency options. The Company’s policy is to only use foreign currency derivatives to minimize the variability in the Company’s operating results arising from foreign currency exchange rate movements. The Company does not enter into derivative financial instruments for speculative or trading purposes. Hedging contracts are measured at fair value using dealer quotes and mature within 18 months from their inception. The Company’s existing hedging contracts will expire over the course of 2008, so it expects during that time it will reclassify the current loss positions of $0.9 million from OCI into the income statement.

The Company’s hedging contracts are intended to protect against the impact of changes in the value of the U.S. dollar against other currencies and their impact on operating results. Accordingly, for forecasted transactions, subsidiaries incurring expenses in foreign currencies seek to hedge U.S. dollar revenue contracts. The Company reclassifies OCI associated with hedges of foreign currency revenue into direct costs upon recognition of the forecasted transaction in the statement of operations. At March 31, 2008, the face value of these foreign exchange hedging contracts was $88.0 million.

At March 31, 2008, the Company’s foreign currency derivative portfolio resulted in the Company recognizing an asset of $0.9 million as a component of prepaid expenses and other current assets and a liability of $2.0 million as a component of other accrued expenses.

17

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

8. Income Taxes

The Company’s provision for income taxes decreased from $22.6 million for the three months ended March 31, 2007 to $17.2 million for the three months ended March 31, 2008. The effective income tax rate for the first three months of 2008 was 30.0% compared to 35.0% for the first three months of 2007. The tax rate was 3.0% lower in the first quarter of 2008 due to a tax benefit realized from the disposal of certain assets during the quarter. The remaining difference in our effective tax rate for the first quarter of 2008 compared to the first quarter of 2007 was due to the change in the geographic distribution of our pretax earnings among locations with varying tax rates during the quarter.

As of March 31, 2008, the total gross unrecognized tax benefits were $24.9 million, of which $10.3 million, if recognized, would reduce our effective tax rate. The Company does not anticipate a significant change in total unrecognized tax benefits or our effective tax rate due to the settlement of audits and the expiration of statute of limitations within the next 12 months.

9. Pension Plan

The Company has a separate contributory defined benefit plan for its qualifying United Kingdom, or U.K., employees employed by the Company’s U.K. subsidiaries. This pension plan was closed to new participants as of December 31, 2002. The benefits for the U.K. Plan are based primarily on years of service and average pay at retirement. Plan assets consist principally of investments managed in a mixed fund.

Pension costs for the U.K. Plan included the following components on the dates set forth below:

	Three Months Ended March 31,
	2007			2008
Service cost	$	417		$	386
Interest cost		643			813
Expected return on plan assets		(669	)		(798	)
Amortization of gains and losses		135			117
Net periodic pension cost	$	526		$	518

For the three months ended March 31, 2008, the Company made contributions totaling $0.2 million and anticipates contributing an additional $2.4 million to fund this plan during the remainder of 2008.

10. Commitments and Contingencies

The Company currently maintains insurance for risks associated with the operation of its business, provision of professional services and ownership of property. These policies provide coverage for a variety of potential losses, including loss or damage to property, bodily injury, general commercial liability, professional errors and omissions, and medical malpractice. The Company’s retentions and deductibles associated with these insurance policies range from $0.25 million to $2.5 million.

The Company is self-insured for health insurance for the majority of its employees located within the United States, but maintains stop-loss insurance on a “claims made” basis for expenses in excess of $0.28 million per member per year. As of December 31, 2007 and March 31, 2008, the Company maintained a reserve of approximately $4.0 million and $3.4 million, respectively, included in other accrued expenses on the consolidated condensed balance sheets, to cover open claims and estimated claims incurred but not reported.

18

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

10. Commitments and Contingencies (continued)

The Company has commitments to invest up to an aggregate additional $21.6 million in four venture capital funds. For further details, see Note 5.

The Company has been involved in compound development and commercialization collaborations since 1997. The Company developed a risk-sharing research and development model to help pharmaceutical and biotechnology clients develop compounds. Through collaborative arrangements based on this model, the Company assists its clients by sharing the risks and potential rewards associated with the development and commercialization of drugs at various stages of development. The Company currently has four such arrangements that involve the potential future receipt of one or more of the following forms of revenue: payments upon the achievement of specified development and regulatory milestones; royalty payments if the compound is approved for sale; sales-based milestone payments; and a share of net sales up to a specified dollar limit. The compounds that are the subject of these collaborations are either still in development or are awaiting regulatory approvals in certain countries. None of the compounds have been approved for sale in any country in the world. As a result of the risks associated with drug development, including poor or unexpected clinical trial results and obtaining regulatory approval to sell in any country, the Company might not receive any further milestone payments, royalties or other payments with respect to any of the drug development collaborations.

As of March 31, 2008, the Company had two collaborations that involved potential future expenditures. The first is the Company’s collaboration with ALZA Corporation, subsequently acquired by Johnson and Johnson, for dapoxetine. In connection with this collaboration, the Company has an obligation to pay a royalty to Eli Lilly and Company of 5% on annual net sales of the compound in excess of $800 million. Johnson and Johnson received a “not approvable” letter from the FDA in October 2005, but continued its global development program. In December 2007, Johnson and Johnson submitted a marketing authorization application for dapoxetine to regulatory authorities in seven countries in the European Union. Although this regulatory application has been submitted, the Company does not know if or when Johnson and Johnson will obtain regulatory approval for dapoxetine in the United States or any other country.

The second collaboration involving future expenditures is with Ranbaxy Laboratories Ltd. In February 2007, the Company exercised an option to license from Ranbaxy a statin compound that the Company is developing as a potential treatment for dyslipidemia, a metabolic disorder often characterized by high cholesterol levels. Upon exercise of the option, the Company paid a one-time license fee of $0.25 million. Under the agreement, the Company has an exclusive license to make, use, sell, import and sublicense the compound and any licensed product anywhere in the world for any human use. Ranbaxy retained a non-exclusive right to co-market licensed products in India and generic equivalents in any country in the world in which a third party has sold the generic equivalent of a licensed product. The Company is solely responsible, and will bear all costs and expenses, for the development, manufacture, marketing and commercialization of the compound and licensed products. In addition to the one-time license fee, the Company is obligated to pay Ranbaxy milestone payments upon the occurrence of specified clinical development events. If a licensed product is approved for sale, the Company must also pay Ranbaxy royalties based on sales of the product, as well as commercial milestone payments based on the achievement of specified worldwide sales targets. If all criteria are met, the total amount of potential clinical and sales-based milestones would be $44.0 million. The Company recently completed a high dose comparator study in healthy volunteers. The drug was well-tolerated and a preliminary review of results suggests the statin compound compares favorably to currently marketed statins. The Company continues to review the data from this trial, identify potential development and commercialization partners and evaluate the future clinical development of this compound.

19

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

10. Commitments and Contingencies (continued)

In September 2007, the Company entered into a contract with a client to construct a laboratory within a leased building, to supply laboratory equipment and to provide specified laboratory services. The client has agreed to reimburse the Company for the costs of the construction of the laboratory and related equipment over a two year period. The Company expects the construction and equipment costs will be approximately $5.5 million and that construction and laboratory up-fit will be completed in mid-2008.

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

In the normal course of business, the Company is a party to various claims and legal proceedings. For example, beginning in early 2007 the Company was named as a co-defendant in various lawsuits involving claims relating to sanofi-aventis’ FDA-approved antibiotic Ketek, for which the Company provided certain clinical trial services to sanofi-aventis’ predecessor prior to FDA approval. The Company records a reserve for pending and threatened litigation matters when an adverse outcome is probable and the amount of the potential liability is reasonably estimable. Although the ultimate outcome of pending and threatened litigation matters is currently not determinable and litigation costs can be material, management of the Company, after consultation with legal counsel, does not believe that the resolution of these matters will have a material effect upon the Company’s financial condition, results of operations or cash flows.

11. Fair Value

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with SFAS No. 157. See “Fair Value” under Note 1 for a discussion of the Company’s policies regarding this hierarchy.

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2008:

	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents	$	183,452	$	11,750	$	—	$	195,202
Short-term investments		—		118,912		—		118,912
Long-term investments		—		—		110,000		110,000
Derivative contracts		—		893		—		893
Investments—marketable equity securities		6,054		—		—		6,054
Total assets	$	189,506	$	131,555	$	110,000	$	431,061
Liabilities
Derivative contracts	$	—	$	1,960	$	—	$	1,960
Total liabilities	$	—	$	1,960	$	—	$	1,960

20

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(numbers in tables in thousands)

(unaudited)

11. Fair Value (continued)

The following table provides a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2008:

	Long-term investments
Balance as of January 1, 2008	$	—
Transfers into Level 3		110,000
Balance as of March 31, 2008	$	110,000

Transfers into Level 3 result from changes in the observability of fair value inputs used in determining fair values for different types of financial assets that were previously categorized at a higher level. As a result of failed auctions of auction rate securities and the lack of liquidity in this market, the Company transferred $110.0 million of its auction rate securities into Level 3. As of March 31, 2008, there were no realized or unrealized gains or losses associated with these securities recorded during the quarter.

12. Business Segment Data

Revenue by principal business segment is separately stated in the consolidated condensed financial statements. Income (loss) from operations and identifiable assets by principal business segment were as follows:

	Three Months Ended March 31,
	2007			2008
Income (loss) from operations:
Development	$	61,556		$	58,297
Discovery Sciences		(1,519	)		9,632
Total	$	60,037		$	67,929
	December 31, 2007			March 31, 2008
Identifiable assets:
Development	$	1,596,616		$	1,674,183
Discovery Sciences		87,759			77,173
Total	$	1,684,375		$	1,751,356

21

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

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

Forward-looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements relate to future events or our future financial performance. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, assumptions and other statements that are not statements of historical facts. In some cases, you can identify forward-looking statements by terminology such as “might”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “intend”, “potential” or “continue”, or the negative of these terms, or other comparable terminology. These statements are only predictions. These statements rely on a number of assumptions and estimates that could be inaccurate and that are subject to risks and uncertainties. Actual events or results might differ materially due to a number of factors, including those listed in “Potential Volatility of Quarterly Operating Results and Stock Price” below and in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2007. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Company Overview

We are a leading global contract research organization providing drug discovery and development services, post-approval expertise and compound partnering programs. Our clients and partners include pharmaceutical, biotechnology, medical device, academic and government organizations. Our corporate mission is to help clients and partners maximize returns on their research and development investments and accelerate the delivery of safe and effective therapeutics to patients.

We have been in the drug development business for more than 22 years. Our development services include preclinical programs and Phase I to Phase IV clinical development services as well as bioanalytical product testing and clinical laboratory services. We have extensive clinical trial experience, including regional, national and global studies across a multitude of therapeutic areas and in various parts of the world. In addition, for marketed drugs, biologics and devices, we offer support such as product launch services, medical information, patient compliance programs, patient and disease registry programs, product safety and pharmacovigilance, Phase IV monitored studies and prescription-to-over-the-counter programs.

With offices in 31 countries, operations in 40 countries and more than 10,400 professionals worldwide, we have provided services to 45 of the top 50 pharmaceutical companies in the world as ranked by 2006 healthcare research and development spending. We also work with leading biotechnology and medical device companies and government organizations that sponsor clinical research. We are one of the world’s largest providers of drug development services to pharmaceutical, biotechnology, medical device companies and government organizations based on 2007 annual net revenue generated from contract research organizations.

Building on our outsourcing relationship with pharmaceutical and biotechnology clients, we established our Discovery Sciences segment in 1997. This segment primarily focuses on preclinical evaluations of anticancer therapies, biomarker discovery and patient sample analysis services, and compound development and commercialization collaborations. We have developed a risk-sharing research and development model to help pharmaceutical and biotechnology clients develop compounds. Through collaborative arrangements based on this model, we assist our clients by sharing the risks and potential rewards of the development and commercialization of drugs at various stages of development.

Our integrated drug discovery and development services offer our clients a way to identify and develop drug candidates more quickly and cost-effectively. In addition, with global infrastructure, we are able to accommodate the multinational drug discovery and development needs of our clients. As a result of having core areas of expertise in discovery and development, we provide integrated services across the drug development spectrum. We use our

22

proprietary informatics technology to support these services. For more detailed information on PPD, see our Annual Report on Form 10-K for the year ended December 31, 2007.

Executive Overview

Our revenues are dependent on a relatively small number of industries and clients. As a result, we closely monitor the market for our services. For a discussion of the trends affecting the market for our services, see “Item 1. Business – Industry Overview – Trends Affecting the Drug Discovery and Development Industry” in our Annual Report on Form 10-K for the year ended December 31, 2007. Although we cannot accurately forecast the demand for CRO services for the remainder of 2008, particularly in light of current general economic uncertainties and FDA regulatory developments, we continue to believe that the overall market for these services is strong. The volume and size of requests for proposals for our Phase II-IV clinical development services continues to grow, reflecting strong demand for outsourcing services generally and indicating that the market for these services remains intact. Our new authorizations for the first quarter of 2008 were ahead of our expectations and established a new quarterly authorization record. For the remainder of 2008, we plan to continue to focus on our business development efforts to improve our sales hit rate and market share.

We believe there are specific opportunities for growth and improvement in certain areas of our core development business. In total, the four Phase II-IV geographic regions showed continued strength in the first three months of 2008. New authorizations were strong and ahead of target, which should result in revenue growth for the remainder of the year. Our Bioanalytical Lab did not have a strong quarter, but proposal activity was strong toward the end of the quarter. Our cGMP laboratory had a very strong quarter, with a net revenue increase of 24.3% over the first quarter of 2007. This laboratory added new clients and continues to see increased demand for inhalation services. Our central laboratory’s net revenue was 35.1% above the first quarter of 2007. The central laboratory continued to diversify its client base and added new testing capabilities, and we ended the quarter with record backlog, up 39% over the first quarter of 2007.

We review various metrics to evaluate our financial performance, including period-to-period changes in backlog, new authorizations, cancellation rates, revenue, margins and earnings. In the first quarter of 2008, we had new authorizations of $689.6 million, an increase of 27.7% over the first quarter of 2007. The cancellation rate for the first quarter was 19.6%, which is lower than both the 21.6% cancellation rate in the first quarter of 2007 and our projected cancellation rate for 2008. Backlog grew to $2.8 billion as of March 31, 2008, up 20.5% over March 31, 2007. The average length of our contracts decreased to 32 months as of March 31, 2008 from 33 months as of March 31, 2007. In the first quarter of 2008, selling, general and administrative costs, or SG&A, as a percentage of net revenue was 25.0% compared to 22.8% in the first quarter of 2007. In the first quarter of 2008, income from operations as a percentage of net revenue was 17.1% compared to 18.1% in the first quarter of 2007. Income from operations margin decreased primarily due to the increase in SG&A. While a significant portion of the SG&A cost is related to growth in mature and emerging markets, we are focused on decreasing SG&A as a percentage of net revenue going forward.

Backlog by client type as of March 31, 2008 was 53.2% pharmaceutical, 35.1% biotech and 11.7% government/other, as compared to 52.0% pharmaceutical, 35.9% biotech and 12.1% government/other as of March 31, 2007. This change in the composition of our backlog is primarily a result of an increase in authorizations from pharmaceutical companies. Net revenue by client type for the quarter ended March 31, 2008 was 58.2% pharmaceutical, 30.7% biotech and 11.1% government/other compared to 60.3% pharmaceutical, 28.1% biotech and 11.6% government/other for the quarter ended March 31, 2007.

For the first quarter of 2008, net revenue contribution by service area was 77.1% for Phase II-IV services, 14.1% for laboratory services, 3.4% for the Phase I clinic and 5.4% for discovery sciences, compared to net revenue contribution for the year ended December 31, 2007 of 81.0% for Phase II-IV services, 14.1% for laboratory services, 3.3% for the Phase I clinic and 1.6% for discovery sciences. The majority of this shift in revenue is related to a $15.0 million discovery sciences milestone payment from Takeda Pharmaceutical Limited in the first quarter of 2008 triggered by the FDA’s acceptance for filing of Takeda’s new drug application for alogliptin. Top therapeutic areas by net revenue for the quarter ended March 31, 2008 were oncology, anti-infective/anti-viral, endocrine/metabolic, circulatory/cardiovascular and central nervous system. For a detailed discussion of our revenue, margins, earnings and other financial results for the quarter ended March 31, 2008, see “Results of Operations – Three Months Ended March 31, 2007 versus Three Months Ended March 31, 2008” below.

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Capital expenditures for the three months ended March 31, 2008 totaled $16.7 million. These capital expenditures were primarily for our new building in Scotland and various other leasehold improvements, computer software and hardware, and scientific equipment for our laboratory units. We made these investments to support our growing businesses and to improve the efficiencies of our operations. We expect our capital expenditures for 2008 to be approximately $80 million to $90 million, primarily associated with facility expansion and improvements, as well as investments in information technology and new laboratory equipment.

As of March 31, 2008, we had $601.9 million of cash, cash equivalents and investments. In the first quarter of 2008, we generated $116.6 million in cash from operations. The number of days’ revenue outstanding in accounts receivable and unbilled services, net of unearned income, also known as DSO, was 46.0 days for the three months ended March 31, 2008, down from 50.8 days for the year ended December 31, 2007. DSO decreased in the first quarter of 2008 due to improved cash collections, the mix of contracts performed and their payment terms at March 31, 2008 compared to December 31, 2007. We plan to continue to monitor DSO and the various factors that affect it. However, we expect DSO will continue to fluctuate from quarter to quarter depending on contract terms, the mix of contracts performed and our success in collecting receivables.

With regard to our compound partnering arrangements, we saw progress in late 2007 and the first quarter of 2008. Johnson and Johnson announced in early December that it filed a marketing authorization application to regulatory authorities in seven European countries under the decentralized filing procedure and that additional filings should follow in other regions. The dipeptidyl peptidase, or DPP-4, program in type 2 diabetes with Takeda also continues to progress. Takeda completed the Phase III trials for its lead DPP-4 inhibitor, alogliptin, and submitted the new drug application, or NDA, for this compound in December 2007. In February 2008, the NDA was accepted for filing by the FDA, triggering a $15.0 million milestone payment to us. If additional filings/approvals and launch occur for alogliptin, we will receive additional regulatory milestones, sales-based milestones and royalties. Takeda also continues to advance the development of a second DPP-4 inhibitor and a combination product with DPP-4 and Actos, Takeda’s leading diabetes drug.

In March 2008, Accentia announced the results of its SinuNase Phase III clinical trial and reported that SinuNase failed to meet its goal in treating chronic sinusitis patients. As a result of the outcome of this Phase III trial, the future clinical development of SinuNase and our collaboration with Accentia on this drug candidate is uncertain.

With regard to our collaboration on the statin compound, PPD10558, with Ranbaxy Laboratories Ltd., we recently completed a high dose comparator study in healthy volunteers. The drug was well-tolerated and a preliminary review of results suggests the statin compound compares favorably to currently marketed statins. We continue to review the data from this trial, identify potential development and commercialization partners and evaluate the future clinical development of this compound.

These drug development collaborations allow us to leverage our resources and global drug development expertise to create new opportunities for growth and to share the risks and potential rewards of drug development with our collabrators. For a background discussion of our compound partnering arrangements, see “Item 1. Business – Our Services – Our Discovery Sciences Group – Compound Collaboration Programs” in our Annual Report on Form 10-K for the year ended December 31, 2007. We believe our compound partnering strategy uses our cash resources and drug development expertise to drive mid- to long-term shareholder value. In the remainder of 2008, we plan to continue advancing our existing collaborations and evaluate new potential strategies and opportunities in this area.

New Business Authorizations and Backlog

New business authorizations, which are sales of our services, are added to backlog when we enter into a contract or letter of intent or receive a verbal commitment. Authorizations can vary significantly from quarter to quarter and contracts generally have terms ranging from several months to several years. We recognize revenue on these authorizations as services are performed. Our new authorizations for the three months ended March 31, 2007 and 2008 were $540.1 million and $689.6 million, respectively.

Our backlog consists of new business authorizations for which the work has not started but is anticipated to begin in the future and contracts in process that have not been completed. As of March 31, 2008, the remaining duration of the contracts in our backlog ranged from one to 103 months, with a weighted average duration of 32 months. We expect the weighted average duration of the contracts in our backlog to fluctuate from quarter to quarter in the future,

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based on the contracts constituting our backlog at any given time. Amounts included in backlog represent potential future revenue and exclude revenue that we have recognized. We adjust backlog on a monthly basis to account for fluctuations in exchange rates. Our backlog as of March 31, 2007 and 2008 was $2.4 billion and $2.8 billion, respectively. For various reasons discussed in “Item 1. Business – Backlog” in our Annual Report on Form 10-K for the year ended December 31, 2007, our backlog might never be recognized as revenue and is not necessarily a meaningful predictor of future performance.

Results of Operations

Revenue Recognition

We record revenue from contracts, other than time-and-material contracts, on a proportional performance basis in our Development and Discovery Sciences segments. To measure performance on a given date, we compare direct costs through that date to estimated total direct costs to complete the contract. Direct costs relate primarily to the amount of labor and labor related overhead costs for the delivery of services. We believe this is the best indicator of the performance of the contractual obligations. Changes in the estimated total direct costs to complete a contract without a corresponding proportional change to the contract value result in a cumulative adjustment to the amount of revenue recognized in the period the change in estimate is determined. For time-and-material contracts in both our Development and Discovery Sciences segments, we recognize revenue as hours are worked, multiplied by the applicable hourly rate. For our Phase I, laboratory and biomarker businesses, we recognize revenue from unitized contracts as subjects or samples are tested, multiplied by the applicable unit price. We offer volume discounts to our large customers based on annual volume thresholds. We record an estimate of the annual volume rebate as a reduction of revenue throughout the period based on the estimated total rebate to be earned for the period.

In connection with the management of clinical trials, we pay, on behalf of our clients, fees to investigators and test subjects as well as other out-of-pocket costs for items such as travel, printing, meetings and couriers. Our clients reimburse us for these costs. Amounts paid by us as a principal for out-of-pocket costs are included in direct costs as reimbursable out-of-pocket expenses and the reimbursements we receive as a principal are reported as reimbursed out-of-pocket revenue. In our statements of operations, we combine amounts paid by us as an agent for out-of-pocket costs with the corresponding reimbursements, or revenue, we receive as an agent. During the three months ended March 31, 2007 and 2008, fees paid to investigators and other fees we paid as an agent and the associated reimbursements were approximately $80.8 million and $68.9 million, respectively.

Most of our contracts can be terminated by our clients either immediately or after a specified period following notice. These contracts typically require the client to pay us the fees earned to date, the fees and expenses to wind down the study and, in some cases, a termination fee or some portion of the fees or profit that we could have earned under the contract if it had not been terminated early. Therefore, revenue recognized prior to cancellation generally does not require a significant adjustment upon cancellation. If we determine that a loss will result from the performance of a contract, the entire amount of the estimated loss is charged against income in the period in which such determination is made.

The Discovery Sciences segment also generates revenue from time to time in the form of milestone payments in connection with licensing of compounds. We only recognize milestone payments as revenue if the specified milestone is achieved and accepted by the client, and continued performance of future research and development services related to that milestone is not required.

Recording of Expenses

We generally record our operating expenses among the following categories:

• direct costs;

• research and development;

• selling, general and administrative;

• depreciation and amortization.

Direct costs consist of amounts necessary to carry out the revenue and earnings process, and include direct labor and related benefit charges, other costs directly related to contracts, an allocation of facility and information technology costs, and reimbursable out-of-pocket expenses. Direct costs, as a percentage of net revenue, tend to and are

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expected to fluctuate from one period to another as a result of changes in labor utilization and the mix of service offerings involved in the hundreds of studies being conducted during any period of time.

Research and development, or R&D, expenses consist primarily of patent expenses, labor and related benefit charges associated with personnel performing internal research and development work, supplies associated with this work, consulting services and an allocation of facility and information technology costs.

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

We record depreciation expenses on a straight-line method, based on estimated useful lives of 40 years for buildings, five years for laboratory equipment, two to five years for software, computers and related equipment, and five to ten years for furniture and equipment, except for aircrafts, which we depreciate over 30 years. We depreciate leasehold improvements over the shorter of the life of the relevant lease or the useful life of the improvement. We depreciate property under capital leases over the life of the lease or the service life, whichever is shorter. We record amortization expenses on intangible assets on a straight-line method over the life of the intangible assets.

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Three Months Ended March 31, 2007 versus Three Months Ended March 31, 2008

The following table sets forth amounts from our consolidated condensed financial statements along with the dollar and percentage change for the three months ended March 31, 2007 compared to the three months ended March 31, 2008.

	Three Months Ended March 31, (unaudited)
(in thousands, except per share data)	2007		2008			$ Inc (Dec)			% Inc (Dec)
Net revenue:
Development	$	300,156	$	347,798		$	47,642		15.9	%
Discovery Sciences		4,383		19,767			15,384		351.0
Reimbursed out-of-pockets		27,713		28,681			968		3.5
Total net revenue		332,252		396,246			63,994		19.3
Direct costs:
Development		151,915		177,190			25,275		16.6
Discovery Sciences		2,358		2,708			350		14.8
Reimbursable out-of-pocket expenses		27,713		28,681			968		3.5
Total direct costs		181,986		208,579			26,593		14.6
Research and development expenses		1,905		4,330			2,425		127.3
Selling, general and administrative expenses		75,738		98,930			23,192		30.6
Depreciation and amortization		12,586		14,871			2,285		18.2
Impairment of intangible asset		—		1,607			1,607		N/A
Income from operations		60,037		67,929			7,892		13.2
Impairment of investments		—		(16,319	)		(16,319	)	N/A
Interest and other income, net		4,559		5,717			1,158		25.4
Income before provision for income taxes		64,596		57,327			(7,269	)	(11.3	)
Provision for income taxes		22,609		17,198			(5,411	)	(23.9	)
Net income	$	41,987	$	40,129		$	(1,858	)	(4.4	)
Net income per diluted share	$	0.35	$	0.33		$	0.02		(5.7	)

Total net revenue increased $64.0 million to $396.2 million in the first quarter of 2008. The increase in total net revenue resulted primarily from an increase in our Development segment revenue. The Development segment generated net revenue of $347.8 million, which accounted for 87.8% of total net revenue for the first quarter of 2008. The 15.9% increase in Development segment net revenue was primarily attributable to an increase in the level of Phase II-IV services we provided in the first quarter of 2008 as compared to 2007. Also, revenue from our laboratory units and Phase I clinic increased in the first quarter of 2008 as compared to 2007 at a higher percentage rate than our overall increase in Development segment net revenue of 15.9% and contributed to the percentage increase in aggregate revenue from this segment.

The Discovery Sciences segment generated net revenue of $19.8 million in the first quarter of 2008, an increase of $15.4 million from the first quarter of 2007. The higher 2008 Discovery Sciences net revenue was mainly attributable to the $15.0 million milestone payment we earned from Takeda in the first quarter of 2008 as a result of the FDA’s acceptance of the NDA for Takeda’s lead DPP-4 inhibitor, alogliptin.

Total direct costs increased $26.6 million to $208.6 million in the first quarter of 2008 primarily as the result of an increase in the Development segment direct costs. Development segment direct costs increased $25.3 million to $177.2 million in the first quarter of 2008. The primary reason for this was an increase in personnel costs of $17.3 million due to the addition of new employees in our Global Phase II-IV division. The remaining increase in the

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Development segment direct costs was primarily due to increased facility costs of $3.6 million as a result of our headcount growth and an increase in contract labor for clinical personnel of $2.4 million.

R&D expenses increased $2.4 million to $4.3 million in the first quarter of 2008. The increase in R&D expense was primarily due to development costs associated with the statin compound we licensed from Ranbaxy and are developing as a potential treatment for dyslipidemia. We are solely responsible for all costs and expenses for the development, manufacture, marketing and commercialization of the compound and licensed products. As a result, we expect to incur additional R&D expenses in future periods as we continue to advance the development of this compound. We also plan to continue evaluating other compound partnering strategies and opportunities, which could result in additional R&D expenses.

SG&A expenses increased $23.2 million to $98.9 million in the first quarter of 2008. As a percentage of total net revenue, SG&A expenses increased to 25.0% in the first quarter of 2008 as compared to 22.8% for the same quarter in 2007. The increase in SG&A expenses in absolute terms includes additional personnel costs of $17.9 million due to lower utilization rates and hiring additional operations infrastructure and administrative personnel to support expanding operations and revenue growth. The remaining increase in SG&A was primarily due to increased facility costs of $1.3 million and an increase in administrative and training travel costs of $1.1 million.

Depreciation and amortization expenses increased $2.3 million to $14.9 million in the first quarter of 2008. The increase was related to property and equipment we acquired to accommodate our growth. Capital expenditures were $16.7 million in the first quarter of 2008. Our capital expenditures in the first three months of 2008 primarily consisted of $5.3 million for our new building in Scotland and various other leasehold improvements, $3.7 million for computer software and hardware, and $4.6 million for additional scientific equipment for our laboratory units. We expect depreciation to increase in 2008 as a result of substantial investments over the past couple years in information technology systems to support our Global Phase II-IV business.

In March 2008, Accentia announced the results of its SinuNase Phase III clinical trial and reported that SinuNase failed to meet its goal in treating chronic sinusitis patients, resulting in a significant amount of uncertainty regarding the future clinical development of SinuNase. As a result, we wrote-off the $1.6 million of remaining unamortized value of our royalty interest in SinuNase.

Income from operations increased $7.9 million from $60.0 million in the first quarter of 2007 to $67.9 million in the first quarter of 2008. As mentioned above, income from operations in the first quarter of 2008 includes a $15.0 million milestone payment from Takeda under the DPP-4 collaboration agreement.

Impairment of investments of $16.3 million in the first quarter of 2008 consisted of a $9.3 million write-down for an other-than-temporary decline in the fair market value of our equity investment in Accentia. The write-down was based on the closing market price of Accentia’s common stock on March 31, 2008. For further details, see Note 5 in the Notes to consolidated condensed financial statements. The remaining $7.0 million impairment was related to one of our investments in our short-term investment portfolio. This was an investment in a AAA-rated tax advantaged investment fund that performed well until late 2007 and early first quarter 2008. We elected to liquidate a majority of this investment during the first quarter and have a remaining balance of $8.7 million. The fund has announced that it is dissolving and anticipates distributing all remaining cash proceeds to investors by the end of May 2008. The $7.0 million impairment includes an estimate of the loss on the remaining $8.7 million balance.

Interest and other income, net increased $1.2 million to $5.7 million in the first quarter of 2008. This increase was due primarily to increased interest income resulting from a 24.2% increase in our average cash, cash equivalents and investment balances.

Our provision for income taxes decreased $5.4 million to $17.2 million in the first quarter of 2008. Our effective income tax rate for the first three months of 2008 was 30.0% compared to 35.0% for the first three months of 2007. The tax rate was 3.0% lower in the first quarter of 2008 due to a tax benefit realized from the disposal of certain assets during the quarter. The remaining difference in our effective tax rate for the first quarter of 2008 compared to the first quarter of 2007 was due to the change in the geographic distribution of our pretax earnings among locations with varying tax rates.

Net income of $40.1 million in the first quarter of 2008 represents a decrease of 4.4% from $42.0 million in 2007. Net income per diluted share of $0.33 for the first three months of 2008 represents a 5.7% decrease from $0.35 net income per diluted share for the first three months of 2007. Earnings per diluted share for the first three months of

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2008 included a $15.0 million milestone payment from Takeda under our DPP-4 collaboration agreement, a $1.6 million impairment of an intangible asset and a $16.3 million impairment of investments discussed above.

Liquidity and Capital Resources

As of March 31, 2008, we had $373.0 million of cash and cash equivalents and $228.9 million of investments. Our cash, cash equivalents and investments are invested in financial instruments that are rated A or better by Standard & Poor’s or Moody’s and earn interest at market rates. Our expected primary cash needs on both a short- and long-term basis are for capital expenditures, expansion of services, possible acquisitions, investments and compound partnering collaborations, geographic expansion, dividends, working capital and other general corporate purposes. We have historically funded our operations, dividends and growth, including acquisitions, primarily with cash flow from operations.

We held approximately $209.5 million and $176.4 million in tax-exempt auction rate securities at December 31, 2007 and March 31, 2008, respectively. Our portfolio of investments in auction rate securities consists principally of interests in government guaranteed student loans, insured municipal debt obligations and municipal preferred auction rate securities. During the three months ended March 31, 2008, a significant number of auction rate securities auctions failed. As of April 30, 2008, we held approximately $137.5 million in auction rate securities. As a result of these failed auctions or future failed auctions, we might not be able to liquidate these securities until a future auction is successful, the issuer redeems the outstanding securities or the securities mature. Due to uncertainties about the liquidity in this market, we reclassified $110.0 million of our auction rate securities to long-term assets at March 31, 2008. We evaluated the market conditions and credit worthiness of the issuers of our auction rate securities and determined the par value approximated market value as of March 31, 2008. If an issuer’s financial stability or credit rating deteriorates or adverse developments occur in the bond insurance market, we might be required to adjust the carrying value of its auction rate securities through a future impairment charge.

One of the investments in our short-term investment portfolio incurred a loss of $7.0 million. This was an investment in a AAA-rated tax advantaged investment fund that performed well until late 2007 and early first quarter 2008. We elected to liquidate a majority of this investment during the first quarter and have a remaining balance of $8.7 million. The fund has announced that it is dissolving and anticipates distributing all remaining cash proceeds to investors by the end of May 2008. The $7.0 million impairment includes an estimate of the loss on the remaining $8.7 million balance.

In the first three months of 2008, our operating activities provided $116.6 million in cash as compared to $61.0 million for the same period last year. The change in cash flow was due primarily to (1) $22.2 million increase in noncash items relating to investing or financing activities, including an impairment of investment of $16.3 million and an increase in depreciation and amortization of $2.3 million, and (2) deferrals of past, and accruals of expected future, operating cash receipts and payments totaling $35.3 million. The change in adjustments for accruals of expected future operating cash receipts and payments include accounts receivable and unbilled services of $50.0 million and accounts payable and other accrued expenses and deferred rent of $7.9 million. The change in adjustments for deferrals of past operating cash receipts and payments include accrued and deferred income taxes of $(14.1) million, payables to investigators of $(4.7) million and prepaid expenses and investigator advances of $(3.2) million. Fluctuations in receivables and unearned income occur on a regular basis as we perform services, achieve milestones or other billing criteria, send invoices to clients and collect outstanding accounts receivable. Such activity varies by individual client and contract. We attempt to negotiate payment terms which provide for payment of services prior to or soon after the provision of services, but the levels of unbilled services and unearned revenue can vary significantly.

In the first three months of 2008, our investing activities provided $78.3 million in cash. We used cash to purchase investments of $188.4 million, make capital expenditures of $16.7 million and purchase equity investments of $1.9 million. These amounts were offset by maturities and sales of investments of $285.2 million. Our capital expenditures in the first three months of 2008 primarily consisted of $5.3 million for our new building in Scotland and various other leasehold improvements, $3.7 million for computer software and hardware, and $4.6 million for additional scientific equipment for our laboratory units. We expect our capital expenditures for 2008 to be approximately $80 million to $90 million, primarily associated with facility expansions and improvements, as well as investments in information technology and new laboratory equipment.

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In the first three months of 2008, our financing activities provided $3.2 million of cash. We paid dividends of $12.0 million, offset by proceeds of $13.2 million from stock option exercises and purchases under our employee stock purchase plan and $2.0 million in income tax benefits from the exercise of stock options and disqualifying dispositions of stock.

The following table sets forth amounts from our consolidated balance sheet affecting our working capital, along with the dollar amount of the change from December 31, 2007 to March 31, 2008.

(in thousands)	December 31, 2007		March 31, 2008		$ Inc (Dec)
Current assets:
Cash and cash equivalents	$	171,427	$	372,977	$	201,550
Short-term investments		330,957		118,912		(212,045	)
Accounts receivable and unbilled services, net		481,477		446,820		(34,657	)
Income tax receivable		517		722		205
Investigator advances		15,318		17,281		1,963
Prepaid expenses and other current assets		49,835		52,934		3,099
Deferred tax assets		23,682		24,833		1,151
Total current assets	$	1,073,213	$	1,034,479	$	(38,734	)
Current liabilities:
Accounts payable	$	24,984	$	28,803	$	3,819
Payables to investigators		58,952		55,008		(3,944	)
Accrued income taxes		16,182		16,686		504
Other accrued expenses		167,235		160,721		(6,514	)
Deferred tax liabilities		101		438		337
Unearned income		205,779		217,174		11,395
Total current liabilities	$	473,233	$	478,830	$	5,597
Working capital	$	599,980	$	555,649	$	(44,331	)

Working capital as of March 31, 2008 was $555.6 million compared to $600.0 million at December 31, 2007. The decrease in working capital was due primarily to an increase in cash and cash equivalents partially offset by a decrease in accounts receivable and unbilled services, net and a decrease in short-term investments. Short-term investments decreased primarily due to the reclassification of $110.0 million in auction rate securities from short-term investments to long-term investments and the sale of investments.

The number of days’ revenue outstanding in accounts receivable and unbilled services, net of unearned income, also known as DSO, decreased to 46.0 days for the three months ended March 31, 2008 from 50.8 days for the year ended December 31, 2007. We calculate DSO by dividing accounts receivable and unbilled services less unearned income by average daily gross revenue for the applicable period. We expect DSO will continue to fluctuate in the future depending on contract terms, the mix of contracts performed within a quarter, the levels of investigator advances and unearned income, and our success in collecting receivables.

Effective July 1, 2007, we renewed our $50.0 million revolving credit facility with Bank of America, N. A. Indebtedness under the facility is unsecured and subject to covenants relating to financial ratios and restrictions on certain types of transactions. This credit facility does not expressly restrict or limit the payment of dividends. We were in compliance with all loan covenants as of March 31, 2008. Outstanding borrowings under the facility bear interest at an annual fluctuating rate equal to the one-month London Interbank Offered Rate, or LIBOR, plus a margin of 0.6%. Borrowings under this credit facility are available to provide working capital and for general corporate purposes. This credit facility is currently scheduled to expire in June 2008, at which time any outstanding balance will be due. As of March 31, 2008, no borrowings were outstanding under this credit facility, although the aggregate amount available for borrowing had been reduced by $1.8 million due to outstanding letters of credit issued under this facility.

In October 2007, our Board of Directors amended the annual cash dividend policy to increase the annual dividend rate from $0.12 to $0.40 per share, payable quarterly at a rate of $0.10 per share. The new dividend rate was effective beginning in the fourth quarter of 2007. The cash dividend policy and the payment of future quarterly cash dividends under that policy are not guaranteed and are subject to the discretion of and continuing determination by our

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Board of Directors that the policy remains in the best interests of our shareholders and in compliance with applicable laws and agreements.

In February 2008, we announced our plan to begin a stock repurchase program whereby up to $350 million of our common stock may be purchased from time to time in the open market. We decided to adopt a share repurchase program in view of the current price at which stock is trading, the strength of our balance sheet and our ability to generate cash, as well as to minimize earnings dilution from future equity compensation awards. We had not purchased any shares as of March 31, 2008. We expect to finance potential repurchases of stock, if any, from existing cash and cash flows from operations.

We have commitments to invest up to an aggregate additional $21.6 million in four venture capital funds. For further details, see Note 5 in the Notes to consolidated condensed financial statements.

As of March 31, 2008, the total gross unrecognized tax benefits were $24.9 million, of which $10.3 million, if recognized, would reduce our effective tax rate. We do not anticipate a significant change in total unrecognized tax benefits or our effective tax rate due to the settlement of audits and the expiration of statute of limitations within the next 12 months.

We have been involved in compound development and commercialization collaborations since 1997. We developed a risk-sharing research and development model to help pharmaceutical and biotechnology clients develop compounds. Through collaborative arrangements based on this model, we assist our clients by sharing the risks and potential rewards associated with the development and commercialization of drugs at various stages of development. As of March 31, 2008, we had four such arrangements that involve the potential future receipt of one or more of the following forms of revenue: payments upon the achievement of specified development and regulatory milestones; royalty payments if the compound is approved for sale; sales-based milestone payments; and a share of net sales up to a specified dollar limit. The compounds that are the subject of these collaborations are either still in development or are awaiting regulatory approvals in certain countries. None of the compounds have been approved for sale in any country in the world. As a result of the risks associated with drug development, including poor or unexpected clinical trial results and obtaining regulatory approval to sell in any country, we might not receive any further milestone payments, royalties or other payments with respect to any of our drug development collaborations.

As of March 31, 2008, we had two collaborations that involved potential future expenditures. The first is our collaboration with ALZA Corporation, subsequently acquired by Johnson and Johnson, for dapoxetine. In connection with this collaboration, we have an obligation to pay a royalty to Eli Lilly and Company of 5% on annual net sales of the compound in excess of $800 million. Johnson and Johnson received a “not approvable” letter from the FDA in October 2005, but continued its global development program. In December 2007, Johnson and Johnson submitted a marketing authorization application for dapoxetine to regulatory authorities in seven countries in the European Union. Although this regulatory application has been submitted, we do not know if or when Johnson and Johnson will obtain regulatory approval for dapoxetine in the United States or any other country.

The second collaboration involving future expenditures is with Ranbaxy. In February 2007, we exercised an option to license from Ranbaxy a statin compound that we are developing as a potential treatment for dyslipidemia, a metabolic disorder often characterized by high cholesterol levels. Upon exercise of the option, we paid a one-time license fee of $0.25 million. Under the agreement, we have an exclusive license to make, use, sell, import and sublicense the compound and any licensed product anywhere in the world for any human use. Ranbaxy retained a non-exclusive right to co-market licensed products in India and generic equivalents in any country in the world in which a third party has sold the generic equivalent of a licensed product. We are solely responsible, and will bear all costs and expenses, for the development, manufacture, marketing and commercialization of the compound and licensed products. In addition to the one-time license fee, we are obligated to pay Ranbaxy milestone payments upon the occurrence of specified clinical development events. If a licensed product is approved for sale, we must also pay Ranbaxy royalties based on sales of the product, as well as commercial milestone payments based on the achievement of specified worldwide sales targets. If all criteria are met, the total amount of potential clinical and sales-based milestones would be $44.0 million. We recently completed a high dose comparator study in healthy volunteers. The drug was well-tolerated and a preliminary review of results suggests the statin compound compares favorably to currently marketed statins. We continue to review the data from this trial, identify potential development and commercialization partners and evaluate the future clinical development of this compound.

In September 2007, we entered into a contract with a client to construct a laboratory within a leased building, to supply laboratory equipment and to provide specified laboratory services. The client has agreed to reimburse us for the

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costs of construction of the laboratory and related equipment over a two year period. We expect the construction and equipment costs will be approximately $5.5 million and that construction and laboratory up-fit will be completed in mid-2008.

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

We expect to continue expanding our operations through internal growth, strategic acquisitions and investments. For example, we announced in February 2008, that we had entered into an agreement to acquire InnoPharm Ltd., an independent contract research organization with offices in Russia and Ukraine. We expect to fund these activities, the payment of future cash dividends and potential repurchases of stock, if any, from existing cash, cash flows from operations and, if necessary or appropriate, borrowings under our existing or future credit facilities. We believe that these sources of liquidity will be sufficient to fund our operations, dividends and stock repurchases, if any, for the foreseeable future. From time to time, we evaluate potential acquisitions, investments and other growth and strategic opportunities that might require additional external financing, and we might seek funds from public or private issuances of equity or debt securities. While we believe we have sufficient liquidity to fund our operations for the foreseeable future, our sources of liquidity and ability to pay dividends or repurchase our stock could be affected by our dependence on a small number of industries and clients; compliance with regulations; reliance on key personnel; breach of contract, personal injury or other tort claims; international risks; environmental or intellectual property claims; or other factors described below under “Potential Liability and Insurance”, “Potential Volatility of Quarterly Operating Results and Stock Price” and “Quantitative and Qualitative Disclosures about Market Risk”. In addition, see “Risk Factors,” “Contractual Obligations” and “Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2007.

Contractual Obligations

There have been no significant changes to the Contractual Obligation table included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our 2007 Annual Report on Form 10-K. There were no material changes to our critical accounting policies and estimates in the first three months of 2008. For detailed information on our critical accounting policies and estimates, see our Annual Report on Form 10-K for the year ended December 31, 2007.

Recent Accounting Pronouncements

Recently issued accounting standards relevant to our financial statements, which are described in “Recent Accounting Pronouncements” in Note 1 in the Notes to our consolidated condensed financial statements are:

Date	Title	Effective Date
September 2006	SFAS No. 157, “Fair Value Measurements”	Fiscal years beginning after November 15, 2007 and interim periods within those years except those specified in FAS 157-1 and FAS 157-2 which are effective for fiscal years beginning after November 15, 2008

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September 2006	SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”	Measurement date provision – fiscal years ending after December 15, 2008
February 2007	SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”	Fiscal years beginning after November 15, 2007
June 2007	EITF Issue 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards”	Fiscal years beginning after December 15, 2007
June 2007	EITF Issue 07-03, “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”	Fiscal years beginning after December 15, 2007
December 2007	EITF Issue 07-01, “Accounting for Collaborative Arrangements”	Fiscal years beginning after December 15, 2008.
December 2007	SFAS No. 141 (revised 2007), “Business Combinations”	Fiscal years beginning after December 15, 2008
December 2007	SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51”	Fiscal years beginning after December 15, 2008
March 2008	SFAS No. 161, “Disclosure about Derivative Instruments and Hedging Activities”	Fiscal years beginning after November 15, 2008

Income Taxes

Because we conduct operations on a global basis, our effective tax rate has and will continue to depend upon the geographic distribution of our pretax earnings among locations with varying tax rates. Our profits are also impacted by changes in the tax rates of the various tax jurisdictions. In particular, as the geographic mix of our pretax earnings among various tax jurisdictions changes, our effective tax rate might vary from period to period. The effective rate will also change due to the discrete recognition of tax benefits when tax positions are effectively settled or as a result of specific transactions, such as the disposal of certain assets in the first quarter of 2008.

Inflation

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

Potential Liability and Insurance

Drug development services involve the testing of potential drug candidates on human volunteers pursuant to a study protocol. This testing exposes us to the risk of liability for personal injury or death to volunteers and patients resulting from, among other things, possible unforeseen adverse side effects or improper administration of the study drug or use of the drug following regulatory approval. For example, we have been named as a defendant in a number of lawsuits relating to the antibiotic Ketek, as described below in Part II, Item 1 – “Legal Proceedings”. We attempt to manage our risk of liability for personal injury or death to volunteers and patients from administration of study products through standard operating procedures, patient informed consent, contractual indemnification provisions with clients and

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insurance. We monitor clinical trials in compliance with government regulations and guidelines. We have established global standard operating procedures intended to satisfy regulatory requirements in all countries in which we have operations and to serve as a tool for controlling and enhancing the quality of drug development services. The contractual indemnifications generally do not protect us against all our own actions, such as gross negligence. We currently maintain professional liability insurance coverage with limits we believe are adequate and appropriate.

Potential Volatility of Quarterly Operating Results and Stock Price

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

• the timing and level of new business authorizations;

• the timing of our Discovery Sciences segment milestone payments or other revenue, if any;

• our ability to properly manage our growth;

• the timing of the initiation, progress or cancellation of significant projects;

• our ability to recruit and retain experienced personnel;

• impairment of investments or intangible assets;

• the timing and amount of costs associated with R&D and compound partnering collaborations;

• litigation costs;

• the timing of the opening of new offices;

• the timing of other internal expansion costs;

• exchange rate fluctuations between periods;

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

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

• pricing pressure in the market for our services;

• rapid technological change;

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

• the timing and extent of new government regulations;

• intellectual property risks; and

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

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

Fluctuations in quarterly results, actual or anticipated changes in our dividend policy, stock repurchase plan or other factors could affect the market price of our common stock. These factors include ones beyond our control, such as changes in revenue and earnings estimates by analysts, market conditions in our industry, disclosures by product development partners and actions by regulatory authorities with respect to potential drug candidates, changes in pharmaceutical, biotechnology and medical device industries and the government sponsored clinical research sector and general economic conditions. Any effect on our common stock could be unrelated to our longer-term operating performance. For further details, see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to foreign currency risk by virtue of our international operations. We derived approximately 33.7% and 36.5% of our net revenues for the three months ended March 31, 2007 and 2008, respectively, from operations outside the United States. We generally reinvest funds generated by each subsidiary in the country where they are earned. Our operations in the United Kingdom generated 36.7% of our net revenue from international operations during the three months ended March 31, 2008. Accordingly, we are exposed to adverse movements in foreign currencies, predominately in the pound sterling, euro and Brazilian real.

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The vast majority of our contracts are entered into by our U.S. or U.K. subsidiaries. The contracts entered into by the U.S. subsidiaries are almost always denominated in U.S. dollars. Contracts entered into by our U.K. subsidiaries are generally denominated in U.S. dollars, pounds sterling or euros, with the majority in U.S. dollars. Although an increase in exchange rates for the pound sterling or euro relative to the U.S. dollar would increase net revenue from contracts denominated in these currencies, a negative impact on income from operations results from dollar-denominated contracts for services rendered in countries other than the United States. In these cases, revenue is not impacted by the weakening of the U.S. dollar, but the costs associated with performing these contracts, which are paid in local currency, are negatively impacted when translated into U.S. dollars.

We also have currency risk resulting from the passage of time between the invoicing of clients under contracts and the collection of client payments against those invoices. If a contract is denominated in a currency other than the subsidiary’s local currency, we recognize a receivable at the time of invoicing for the local currency equivalent of the foreign currency invoice amount. Changes in exchange rates from the time the invoice is prepared until payment from the client will result in our receiving either more or less in local currency than the local currency equivalent of the receivable. We recognize this difference as a foreign currency transaction gain or loss, as applicable, and report it in other income, net. If the exchange rate on accounts receivable balances denominated in pounds sterling and euros had increased by 10%, our foreign currency transaction loss would have increased by $4.2 million in the quarter ended March 31, 2008.

Our strategy for managing foreign currency risk relies primarily on receiving payment in the same currency used to pay expenses. If the U.S. dollar had weakened an additional 10% relative to the pound sterling, euro and Brazilian real in the first quarter of 2008, net income would have been approximately $1.1 million lower excluding the impact of hedging for the quarter based on revenues and the costs related to our foreign operations. From time to time, we also enter into foreign currency hedging activities in an effort to manage our potential foreign exchange exposure. At March 31, 2008, the face amount of these foreign exchange hedging contracts was $88.0 million.

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

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

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

• we translate equity accounts at historical exchange rates.

Translation of the balance sheet in this manner affects shareholders’ equity through the cumulative translation adjustment account. This account exists only in the foreign subsidiary’s U.S. dollar balance sheet and is necessary to keep the foreign balance sheet, stated in U.S. dollars, in balance. We report translation adjustments with accumulated other comprehensive income (loss) as a separate component of shareholders’ equity. To date, cumulative translation adjustments have not been material to our consolidated financial position. However, future translation adjustments could materially and adversely affect us.

Currently, there are no material exchange controls on the payment of dividends or otherwise prohibiting the transfer of funds out of any country in which we conduct operations. Although we perform services for clients located in a number of jurisdictions, we have not experienced any material difficulties in receiving funds remitted from foreign countries. However, new or modified exchange control restrictions could have an adverse effect on our financial condition. If the Company were to repatriate dividends from the cumulative amount of undistributed earnings in foreign entities, the Company would incur a tax liability which is not currently provided for in the Company’s balance sheet.

We are exposed to changes in interest rates on our cash, cash equivalents, investments and amounts outstanding under notes payable and lines of credit. We invest our cash and cash equivalents in financial instruments with interest rates based on market conditions. If the interest rates on cash, cash equivalents and investments decreased by 10%, our interest income would have decreased by approximately $0.6 million in the quarter ended March 31, 2008.

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

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Internal Control Over Financial Reporting

No change to our internal control over financial reporting occurred during the first quarter of 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

Beginning early 2007, we were named as a co-defendant in lawsuits involving claims relating to patients who took sanofi-aventis’ FDA-approved antibiotic Ketek, for which we provided certain clinical trial services to sanofi-aventis’ predecessor prior to FDA approval. Lawsuits have been filed in New Jersey, North Carolina, Alabama, Wisconsin and New York. These suits allege multiple causes of action, including negligence, fraud, misrepresentation, breach of warranty, conspiracy, wrongful death and violations of various state and federal statutes, including unfair and deceptive trade practices acts. Generally, the plaintiffs are seeking unspecified damages from alleged injuries from the ingestion of Ketek, and in some of the cases claim damages of at least $20.0 million. It is possible that additional suits will be filed. While there can be no assurance of a successful outcome and litigation costs can be material, we do not believe that these claims against us have merit and intend to vigorously defend ourself in these matters.

Item 6. Exhibits

(a) Exhibits

10.258	Third Amendment dated December 13, 2007, to Lease Agreement, dated June 18, 2004, by and between NNN Met Center 10, LLC and PPD, Inc.
10.259	Second Amendment dated January 10, 2008, to Lease Agreement, dated July 1, 2001, by and between Brandywine Grande C, L.P. and PPD Development, LLC
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 – Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 – Chief Financial Officer

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SIGNATURES

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

PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
(Registrant)
By	/s/ Fredric N. Eshelman
	Chief Executive Officer
	(Principal Executive Officer)
By	/s/ Daniel G. Darazsdi
	Chief Financial Officer
	(Principal Financial Officer)
By	/s/ Peter Wilkinson
	Chief Accounting Officer
	(Principal Accounting Officer)

Date: May 9, 2008

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EX-10.258

Exhibit 10.258

THIRD AMENDMENT TO LEASE AGREEMENT

THIS THIRD AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is entered into effective as of December 13, 2007, by and between NNN MET CENTER 10, LLC (as successor-in-interest to Met Center Partners-6, Ltd.) (“Landlord”) acting by and through Triple Net Properties Realty, Inc. (“Agent”) for Landlord, PPD DEVELOPMENT, LP (“Tenant”) and PHARMACEUTICAL PRODUCT DEVELOPMENT, INC. (“Guarantor”).

WITNESSETH:

WHEREAS, Landlord and Tenant entered into that certain Industrial/Warehouse Lease Agreement dated effective June 18, 2004 (as amended by that First Amendment To Lease Agreement and that Second Amendment To Lease Agreement, the “Lease”), pertaining to the lease of certain premises located in Travis County, Texas, consisting of approximately 211,269 gross square feet of space in Building Ten in the MetCenter development (the “Project”);

WHEREAS, Tenant desires to lease and demise from Landlord, and Landlord desires to lease and demise to Tenant, certain additional space in the Building in accordance with the terms and provisions hereinafter provided.

NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1. 2^nd Expansion Space. Landlord hereby leases and demises to Tenant the area (the “2^nd Expansion Space”) containing approximately 13,710 gross square feet of space on the first floor of the Building, the 2^nd Expansion Space being more particularly described in Exhibit A attached hereto, for a term commencing on March 1, 2008 (the “2^nd Expansion Space Commencement Date”) and continuing until the Expiration Date (June 30, 2015). The 2^nd Expansion Space shall, for all purposes, be deemed to be included within the term “Leased Premises” as used in the Lease and shall be subject in all respects to the terms, provisions and conditions set forth therein; provided, however, that the 2^nd Expansion Space hereby demised to Tenant is accepted by Tenant in an “AS-IS, WHERE-IS” condition. Notwithstanding the foregoing, Landlord shall use commercially reasonable efforts to cause the current occupant of the 2^nd Expansion Space, the Texas Parks & Wildlife Department, to vacate and surrender the 2^nd Expansion Space prior to March 1, 2008 (the date of expiration of the Texas Parks & Wildlife Department lease). In the event the Texas Parks & Wildlife Department vacates and surrenders the 2^nd Expansion Space prior to March 1, 2008, Landlord shall deliver the 2^nd Expansion Space to Tenant on the first (1^st) business day following the date upon which the Texas Parks & Wildlife Department vacates and surrenders the 2^nd Expansion Space to Landlord and such date of delivery to Tenant shall be deemed to be the 2^nd Expansion Space Commencement Date; but only so long as (i) Landlord has given Tenant at least thirty (30) days prior written notice of such earlier 2^nd Expansion Space Commencement Date and (ii) such earlier 2^nd Expansion Space Commencement Date does not occur prior to February 1, 2008.

2. Base Rent. Notwithstanding anything to the contrary in the Lease, Landlord and Tenant hereby agree that, as of the 2^nd Expansion Space Commencement Date, the Base Rent applicable to the 2 ^nd Expansion Space shall be as follows:

Period	Monthly Base Rent		Annual Base Rent
03/01/08 - 10/31/08	$	10,853.75	$	130,245.00	1
11/01/08 - 10/31/09	$	11,425.00	$	137,100.00	2
11/01/09 - 10/31/10	$	11,996.25	$	143,955.00	3
11/01/10 - 10/31/11	$	12,567.50	$	150,810.00	4
11/01/11 - 10/31/12	$	13,138.75	$	157,665.00	5
11/01/12 - 10/31/13	$	13,710.00	$	164,520.00	6
11/01/13 - 10/31/14	$	14,281.25	$	171,375.00	7
11/01/14 - 06/30/15	$	14,852.50	$	178,230.00	8

¹ (being $9.50 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

² (being $10.00 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

³ (being $10.50 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

⁴ (being $11.00 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

⁵ (being $11.50 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

⁶ (being $12.00 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

⁷ (being $12.50 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

⁸ (being $13.00 multiplied by the approximate number of total 13,710 gross square feet of the total second Expansion Space)

Total Base Rent applicable to the 2^nd Expansion Space shall be paid in accordance with the terms of the Lease.

3. Tenant’s Proportionate Share; Tenant’s Additional Rent. Landlord and Tenant acknowledge and agree that, as of the 2^nd Expansion Space Commencement Date, Tenant’s Proportionate Share shall be increased to 65.10%. On the 2^nd Expansion Space Commencement Date, Tenant shall commence to pay Additional Rent for the 2^nd Expansion Space in accordance with the terms of the Lease. The square feet in the 2^nd Expansion Space has been calculated and is hereby stipulated for all purposes hereof to be as set forth herein, whether the same should be more or less as a result of minor variations.

4. Tenant’s Parking. As of the 2^nd Expansion Space Commencement Date, the number of parking space for Tenant within the parking lot as shown on Exhibit A attached to the Lease shall be 1,102 parking spaces, Tenant’s parking being increased by the addition of 46 parking spaces (the 23 reserved spaces formerly used by Texas Parks and Wildlife as depicted on Exhibit A-2 attached to this Amendment and 23 unreserved spaces within the parking lot as shown on Exhibit A attached to the Lease).

5. Broker’s Commissions. Landlord and Tenant each warrant to the other that it has not dealt with any broker or agent in connection with the negotiation or execution of this

Amendment other than Atlantis Properties and Equis Corporation, whose commissions shall be paid by Landlord pursuant to a separate written agreement. Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, and other liability for commissions or other compensation claimed by any other broker or agent claiming the same by, through, or under the indemnifying party.

6. Miscellaneous.

a. All terms and conditions of the Lease not expressly modified by this Amendment shall remain in full force and effect, and, in the event of any inconsistencies between this Amendment and the terms of the Lease, the terms set forth in this Amendment shall govern and control. Except as expressly amended hereby, the Lease shall remain in full force and effect as of the date thereof.

b. This Amendment may be executed in one or more counterparts which shall be construed together as one document.

c. Captions used herein are for convenience only and are not to be utilized to ascribe any meaning to the contents thereof. Unless defined differently herein or the context clearly requires otherwise, all terms used in this Amendment shall have the meanings ascribed to them under the Lease.

d. This Amendment (i) shall be binding upon and shall inure to the benefit of each of the parties and their respective successors, assigns, receivers and trustees; (ii) may be modified or amended only by a written agreement executed by each of the parties; and (iii) shall be governed by and construed in accordance with the laws of the State of Texas.

e. Except for the Lease, there are no other agreements, oral or in writing, between Landlord and Tenant with respect to the Premises

f. The Lease is in full force and effect and Tenant is in possession of the Premises.

g. To Tenant’s actual knowledge no default exists under the Lease by Landlord. All improvements required to be made by the Landlord under the terms of the Lease have been satisfactorily completed. Except as expressly set forth in this Amendment, there are no remaining concessions, bonuses, free months’ rental, rebates, or other matters affecting the rental for Tenant.

h. To Tenant’s actual knowledge, Tenant has no claim or demand against Landlord.

i. Notwithstanding anything stated above, Tenant does not waive any of its rights contained in Section 3.1 (c) of the Lease or the ability to make any claims against Landlord under such provisions.

[SIGNATURE PAGE(S) FOLLOW]

[Signature Page for that Third Amendment To Lease Agreement]

EXECUTED as of the date first written above.

LANDLORD:
TRIPLE NET PROPERTIES REALTY, INC., AGENT FOR LANDLORD
By:	/s/ Ross Crow
Name:	Ross Crow
Title:	Regional Asset Manager
TENANT:
PPD DEVELOPMENT, LP
By:	PPD GP, LLC, a Delaware limited liability company, its general partner
By:	/s/ William J. Sharbaugh
Name:	William J. Sharbaugh
Title:	President
GUARANTOR:
PHARMACEUTICAL PRODUCT DEVELOPMENT, INC.
By:	/s/ William J. Sharbaugh
Name:	William J. Sharbaugh
Title:	Chief Operating Officer

EX-10.259

Exhibit 10.259

SECOND AMENDMENT TO LEASE

THIS SECOND AMENDMENT TO LEASE (this “Amendment) is made and entered into as of November 5, 2007, by and between BRANDYWINE GRANDE C, L.P., a Delaware limited partnership (“Landlord”), and PPD DEVELOPMENT, LP, a Texas limited partnership (“Tenant”).

A. Landlord and Tenant, as successor-in-interest to PPD Development, LLC, are parties to a certain Lease (as amended, the “Lease”) dated as of July 1, 2001, as amended by a First Amendment to Lease dated as of March 9, 2007, for approximately 81,710 rentable square feet of space (the “Original Premises”) at 2240-2246 Dabney Road, Richmond, Virginia 23230, as more particularly described in the Lease.

B. Tenant desires to lease from Landlord, and Landlord desires to lease to Tenant, certain additional premises known as Suites B and L (the “Suites B and L Premises”) in the Dabney IX building located at 2248 Dabney Road, Richmond, Virginia 23230 (the “Dabney IX Building”), which additional premises are shown on the location plan attached hereto as Exhibit A. The parties hereby confirm that the Suites B and L Premises are 3,714 rentable square feet of space in the aggregate.

C. The portion of the Suites B and L Premises comprising Suite B contains 2,134 rentable square feet and is referred to herein as “Suite B”. The portion of the Suites B and L Premises comprising Suite L contains 1,580 rentable square feet and is referred to herein as “Suite L”.

D. Landlord and Tenant wish to amend the Lease to, among other things, expand the Original Premises to include the Suites B and L Premises upon the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, Landlord and Tenant hereby agree as follows:

1. Incorporation of Recitals; Definitions. The recitals set forth above are hereby incorporated herein by reference as if set forth in full in the body of this Amendment. Capitalized terms used but not otherwise defined in this Amendment shall have the respective meanings given to them in the Lease.

2. Premises.

(a) Effective on the Suite B Commencement Date (as defined in Section 3(a) below), as used in the Lease: (i) “Premises” shall mean, collectively, the Original Premises and Suite B; (ii) “Tenant’s Allocated Share” with respect to the Dabney IX Building shall mean 7.07%; (iii) “Buildings” shall mean collectively the Dabney A-1 Building, the Dabney A-2 Building, the Dabney VII Building, and the Dabney IX Building; (iv) “Project” shall mean the Buildings, the land and all other improvements located at 2240-2248 Dabney Road, Richmond, Virginia 23230; and (v) “Rentable Area” with respect to the Premises shall mean 83,844, and with respect to the Project shall mean 111,894.

(b) Effective on the Suite L Commencement Date (as defined in Section 3(b) below), as used in the Lease: (i) “Premises” shall mean, collectively, the Original Premises and Suite L; (ii) “Tenant’s Allocated Share” with respect to the Dabney IX Building shall mean 5.23%; (iii) “Buildings” shall mean collectively the Dabney A-1 Building, the Dabney A-2 Building, the Dabney VII Building, and the Dabney IX Building; (iv) “Project” shall mean the Buildings, the land and all other improvements located at 2240-2248 Dabney Road, Richmond, Virginia 23230; and (v) “Rentable Area” with respect to the Premises shall mean 83,290, and with respect to the Project shall mean 111,894.

(c) Notwithstanding the foregoing, effective on the later of the Suite B Commencement Date and the Suite L Commencement Date, as used in the Lease: (i) “Premises” shall mean, collectively, the Original Premises, Suite L, and Suite B; (ii) “Tenant’s Allocated Share” with respect to the Dabney IX Building shall mean 12.30%; (iii) “Buildings” shall mean collectively the Dabney A-1 Building, the Dabney A-2 Building, the Dabney VII Building, and the Dabney IX Building; (iv) “Project” shall mean the Buildings, the land and all other improvements located at 2240-2248 Dabney Road, Richmond, Virginia 23230; and (v) “Rentable Area” with respect to the Premises shall mean 85,424, and with respect to the Project shall mean 111,894.

(d) Tenant acknowledges and agrees that, notwithstanding any provision of the Lease to the contrary, Landlord shall have no obligation to make any improvements to the Suites B and L Premises in connection with this Amendment, and Tenant accepts them in their current “AS IS” condition.

3. Term.

(a) The Term for Suite B shall commence on the date Landlord delivers possession of the Suite B to Tenant (the “Suite B Commencement Date”); provided if Landlord is unable to deliver possession of Suite B to Tenant on any particular date for any reason, including without limitation the holdover of the current tenant, the Lease as amended hereby shall continue in effect and Landlord shall not be liable to Tenant or any third party for such inability. The Suite B Commencement Date and expiration date of the Term shall be confirmed by Landlord and Tenant by the execution of a Confirmation of Lease Term (the “COLT”) in the form attached hereto as Exhibit B. If Tenant fails to execute or object to the COLT within ten (10) business days of its delivery, Landlord’s determination of such dates shall be deemed accepted.

(b) The Term for Suite L shall commence on the date Landlord executes this Amendment and delivers possession of Suite L to Tenant (the “Suite L Commencement Date”). The Suite L Commencement Date and expiration date of the Term shall be confirmed by Landlord and Tenant by the execution of a Confirmation of Lease Term (the “COLT”) in the form attached hereto as Exhibit B. If Tenant fails to execute or object to the COLT within ten (10) business days of its delivery, Landlord’s determination of such dates shall be deemed accepted.

(c) The Term for the Premises (collectively, the Original Premises and the Suites B and L Premises) shall terminate on June 30, 2015.

4. Fixed Rent. Fixed Rent for Suite B is set forth below, payable in the monthly installments as set forth below and otherwise in accordance with the terms of the Lease, as amended hereby:

TIME PERIOD	MONTHLY INSTALLMENTS
Suite B Commencement Date - 6/30/08	$	1,155.92
7/1/08 - 6/30/09	$	1,184.37
7/1/09 - 6/30/10	$	1,214.60
7/1/10 - 6/30/11	$	1,244.83
7/1/11 - 6/30/12	$	1,276.84
7/1/12 - 6/30/13	$	1,308.85
7/1/13 - 6/30/14	$	1,340.86
7/1/14 - 6/30/15	$	1,374.65

2

Fixed Rent for Suite L is set forth below, payable in the monthly installments as set forth below and otherwise in accordance with the terms of the Lease, as amended hereby:

TIME PERIOD	MONTHLY INSTALLMENTS
Suite L Commencement Date - 6/30/08	$	855.83
7/1/08 - 6/30/09	$	876.90
7/1/09 - 6/30/10	$	899.28
7/1/10 - 6/30/11	$	921.67
7/1/11 - 6/30/12	$	945.37
7/1/12 - 6/30/13	$	969.07
7/1/13 - 6/30/14	$	992.76
7/1/14 - 6/30/15	$	1,017.78

Fixed Rent shall be payable by: (i) check to Landlord at P.O. Box 8538-363, Philadelphia, PA 19171; or (ii) wire transfer of immediately available funds to the account at Wachovia Bank, NA, at Philadelphia, PA, account no. 2030000359075, ABA wire routing number 031201467 (ACH ARA routing number 031000503), or as otherwise directed in writing by Landlord to Tenant.

5. Landlord’s Notice Address. Landlord’s “Notice Address/Contact” set forth in Section 1(k) of the Lease is hereby deleted in its entirety and replaced with the following in lieu thereof:

Landlord:	Brandywine Grande C, L.P.	With a copy to:
	c/o Brandywine Realty Trust	Brandywine Realty Trust
	300 Arboretum Place, Suite 330	555 East Lancaster Ave., Suite 100
	Richmond, VA 23236	Radnor, PA 19087
	Attn: William D. Redd	Attn: Brad A. Molotsky, General Counsel

6. Brokerage Commission. Landlord and Tenant each represents and warrants to the other that such party has had no dealings, negotiations or consultations with respect to the Premises or this transaction with any broker or finder. Each party shall indemnify and hold the other harmless from and against all liability, cost and expense, including attorney’s fees and court costs, arising out of any misrepresentation or breach of warranty under this Section.

7. OFAC. Tenant represents, warrants and covenants that neither Tenant nor any of its partners, officers, directors, members or shareholders: (i) is listed on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (“Order”) and all applicable provisions of Title III of the USA Patriot Act (Public Law No. 107-56 (October 26, 2001)); (ii) is listed on the Denied Persons List and Entity List maintained by the United States Department of Commerce; (iii) is listed on the List of Terrorists and List of Disbarred Parties maintained by the United States Department of State; (iv) is listed on any list or qualification of “Designated Nationals” as defined in the Cuban Assets Control Regulations 31 C.F.R. Part 515; (v) is listed on any other publicly available list of terrorists, terrorist organizations or narcotics traffickers maintained by the United States Department of State, the United States Department of Commerce or any other governmental authority or pursuant to the Order, the rules and regulations of OFAC (including without limitation the Trading with the Enemy Act, 50 U.S.C. App. 1-44; the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06; the unrepealed provision of the Iraq Sanctions Act, Publ.L. No. 101-513; the United Nations Participation Act, 22 U.S.C. § 2349 as-9; The Cuban Democracy Act, 22 U.S.C. §§ 6001-10; The Cuban Liberty and Democratic Solidarity Act, 18 U.S.C. §§ 2332d and 233; and The Foreign Narcotic Kingpin Designation Act, Publ. L. No. 106-120 and 107-108, all as may be amended from time to time); or any other applicable requirements contained in any enabling legislation or other Executive Orders in respect of the Order (the Order and such other rules, regulations, legislation or orders are collectively called the “Orders”); (vi) is engaged in

3

activities prohibited in the Orders; or (vii) has been convicted, pleaded nolo contendere, indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering, drug trafficking, terrorist-related activities or other money laundering predicate crimes or in connection with the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq.). Tenant shall defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities, and expenses (including attorney's fees and costs) arising from or related to any breach of the foregoing representation, warranty and covenant. The breach of this representation, warranty and covenant by Tenant shall be an immediate Event of Default under this Lease without cure.

8. Effect of Amendment; Ratification. Landlord and Tenant hereby acknowledge and agree that, except as provided in this Amendment, the Lease has not been modified, amended, canceled, terminated, released, superseded or otherwise rendered of no force or effect. The Lease as hereby amended is hereby ratified and confirmed by the parties hereto, and every provision, covenant, condition, obligation, right, term and power contained in and under the Lease, as amended herein, shall continue in full force and effect, affected by this Amendment only to the extent of the amendments and modifications set forth above, and each shall continue to be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of each party hereto.

9. Authority. Each of Landlord and Tenant represents and warrants to the other that the individual executing this Amendment on such party’s behalf is authorized to do so.

[SIGNATURES ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the date first above written.

WITNESS:	LANDLORD:
	BRANDYWINE GRANDE C, L.P.
	By:	Brandywine Grande C Corp.,
		its general partner
/s/ Bridget Shannon	By:	/s/ K. Suzanne Stumpl
Bridget Shannon	Name:	K. Suzanne Stumpl
Regional Accountant	Title:	Vice President Asset Management
	Date:	January 10, 2008
WITNESS:	TENANT:
	PPD DEVELOPMENT, LP
/s/ Chuck Munn	By:	/s/ William J. Sharbaugh
Chuck Munn	Name:	William J. Sharbaugh
Assistant General Counsel	Title:	Chief Operating Officer
	Date:	February 19, 2008

5

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Fredric N. Eshelman, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 9, 2008	By:	/s/ Fredric N. Eshelman
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Daniel G. Darazsdi, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: May 9, 2008	By:	/s/ Daniel G. Darazsdi
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

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

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Pharmaceutical Product Development, Inc. (“PPD”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fredric N. Eshelman, Chief Executive Officer of PPD, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Date: May 9, 2008

/s/ Fredric N. Eshelman

Fredric N. Eshelman

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

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

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Pharmaceutical Product Development, Inc. (“PPD”) on Form 10-Q for the period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel G. Darazsdi, Chief Financial Officer of PPD, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Date: May 9, 2008

/s/ Daniel G. Darazsdi

Daniel G. Darazsdi

Chief Financial Officer