UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended March 31, 2009

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: 000-21244

PAREXEL INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Massachusetts	04-2776269
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

200 West Street
Waltham, Massachusetts	02451
(Address of principal executive offices)	(Zip Code)

(781) 487-9900

Registrant’s telephone number, including area code

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

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

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

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

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

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As of May 4, 2009, there were 57,531,360 shares of common stock outstanding.

PAREXEL INTERNATIONAL CORPORATION

INDEX

PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Condensed Consolidated Balance Sheets (Unaudited) – March 31, 2009 and June 30, 2008		3
Condensed Consolidated Statements of Income (Unaudited) – Three and Nine Months Ended March 31, 2009 and 2008		4
Condensed Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended March 31, 2009 and 2008		5
Notes to Condensed Consolidated Financial Statements (Unaudited)		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	25
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION		26
Item 1.	Legal Proceedings	26
Item 1a.	Risk Factors	26
Item 6.	Exhibits	36
Signatures		37
Exhibit Index		38

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share data)

	March 31, 2009			June 30, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	99,512		$	51,918
Billed and unbilled accounts receivable, net		430,393			475,816
Prepaid expenses		17,682			16,789
Deferred tax assets		23,988			21,081
Income tax receivable		—			2,198
Other current assets		24,050			14,278
Total current assets		595,625			582,080
Property and equipment, net		152,041			137,133
Goodwill		226,412			147,664
Other intangible assets, net		95,782			34,608
Non-current deferred tax assets		3,984			3,393
Long-term income tax receivable		21,473			25,727
Other assets		22,478			18,265
Total assets	$	1,117,795		$	948,870
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current portion of long-term debt	$	57,100		$	66,474
Accounts payable		20,756			22,470
Deferred revenue		244,262			213,126
Accrued expenses		29,525			35,438
Accrued restructuring charges		1,032			2,834
Accrued employee benefits and withholdings		66,774			77,176
Current deferred tax liabilities		17,138			14,343
Income tax payable		2,660			—
Other current liabilities		15,047			3,684
Total current liabilities		454,294			435,545
Long-term debt, net of current portion		229,360			3,465
Non-current deferred tax liabilities		19,648			23,069
Long-term accrued restructuring charges		1,268			2,410
Long-term tax liabilities		41,499			45,467
Other liabilities		7,720			7,833
Total liabilities		753,789			517,789
Minority interest in subsidiary		3,796			2,990
Stockholders’ equity:
Preferred stock—$.01 par value; shares authorized: 5,000,000; Series A junior participating preferred; Series A junior participating preferred stock—50,000 shares designated, none issued and outstanding		—			—
Common stock—$.01 par value; shares authorized: 75,000,000; shares issued and outstanding: 57,558,292 at March 31, 2009 and 56,772,274 at June 30, 2008.		570			567
Additional paid-in capital		216,824			209,410
Retained earnings		198,916			165,885
Accumulated other comprehensive (expense) income		(56,100	)		52,229
Total stockholders’ equity		360,210			428,091
Total liabilities and stockholders’ equity	$	1,117,795		$	948,870

See notes to condensed consolidated financial statements.

3

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)

	Three Months Ended March 31						Nine Months Ended March 31
	2009			2008			2009			2008
Service revenue	$	264,457		$	245,336		$	803,349		$	692,114
Reimbursement revenue		46,504			49,387			151,165			138,929
Total revenue		310,961			294,723			954,514			831,043
Direct costs	$	165,781			161,263		$	514,440			454,316
Reimbursable out-of-pocket expenses		46,504			49,387			151,165			138,929
Selling, general and administrative		58,998			52,819			178,785			151,365
Depreciation		10,531			8,162			31,765			24,050
Amortization		2,728			1,231			7,237			3,512
Restructuring benefit		—			(860	)		—			(860	)
Other charge		—			—			15,000			—
Total costs and expenses		284,542			272,002			898,392			771,312
Income from operations		26,419			22,721			56,122			59,731
Interest income		3,126			7,022			10,138			17,780
Interest expense		(5,900	)		(7,640	)		(18,955	)		(19,163	)
Miscellaneous (expense) income		(1,942	)		970			7,066			980
Other (expense) income		(4,716	)		352			(1,751	)		(403	)
Income before income taxes		21,703			23,073			54,371			59,328
Provision for income taxes		7,400			8,586			20,240			19,149
Minority interest expense		99			301			1,100			577
Net income	$	14,204		$	14,186		$	33,031		$	39,602
Earnings per common share
Basic	$	0.25		$	0.25		$	0.57		$	0.71
Diluted	$	0.25		$	0.25		$	0.57		$	0.69
Shares used in computing earnings per common share
Basic		57,556			56,108			57,449			55,662
Diluted		57,556			57,765			57,861			57,380

See notes to condensed consolidated financial statements.

4

PAREXEL INTERNATIONAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Nine Months Ended March 31
	2009			2008
Cash flow from operating activities:
Net income	$	33,031		$	39,602
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest expense, net of tax		1,100			577
Depreciation and amortization		39,002			27,562
Gain on disposal of fixed assets		555			9
Stock-based compensation		5,409			3,736
Deferred income taxes		(4,526	)		(22,696	)
Changes in operating assets/liabilities		15,884			(31,849	)
Net cash provided by operating activities		90,455			16,941
Cash flow from investing activities:
Purchases of marketable securities		—			(49,000	)
Proceeds from sale of marketable securities		—			49,000
Purchases of property and equipment		(57,203	)		(45,113	)
Acquisition of businesses		(189,042	)		(55,337	)
Proceeds from sale of assets		155			950
Net cash used in investing activities		(246,090	)		(99,500	)
Cash flow from financing activities:
Borrowing under lines of credit		344,961			43,000
Repayments under lines of credit		(129,586	)		(25,000	)
Proceeds from issuance of common stock		3,390			9,872
Borrowings (repayments) under long-term debt		1,603			(285	)
Restricted stock surrendered		(1,382	)		—
Net cash provided by financing activities		218,986			27,587
Effect of exchange rate changes on cash and cash equivalents		(15,757	)		11,608
Net increase (decrease) in cash and cash equivalents		47,594			(43,364	)
Cash and cash equivalents at beginning of period		51,918			96,677
Cash and cash equivalents at end of period	$	99,512		$	53,313
Supplemental disclosures of cash flow information
Net cash paid during the period for:
Interest	$	17,743		$	18,779
Income taxes, net of refunds		26,405			24,170
Supplemental disclosures of investing activities
Fair value of assets acquired and goodwill	$	231,374		$	70,454
Liabilities assumed		(42,332	)		(15,117	)
Cash paid for acquisitions	$	189,042		$	55,337

See notes to condensed consolidated financial statements.

5

PAREXEL INTERNATIONAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of PAREXEL International Corporation (“PAREXEL”, “the Company”, “we”, “our” or “us”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (primarily consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended March 31, 2009 are not necessarily indicative of the results that may be expected for other quarters or the entire fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008 (the “2008 10-K”).

Certain Fiscal Year 2008 amounts have been reclassified to conform to Fiscal Year 2009 presentation.

On February 11, 2008, our board of directors approved a two-for-one stock split. The record date for the stock split was February 22, 2008. The stock split was completed on March 3, 2008. All share and per share amounts for all periods presented have been adjusted to reflect the effect of this stock split.

NOTE 2 – EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares plus the dilutive effect of outstanding stock options and shares issuable under our employee stock purchase plan. From the calculation of diluted earnings per share, we excluded all unvested restricted stock and certain outstanding options to purchase 2,669,636 and 1,401,500 shares of common stock for the three and nine months ended March 31, 2009, respectively, and we excluded all unvested restricted stock and certain outstanding options to purchase 21,000 and 24,600 shares of common stock for the three and nine months ended March 31, 2008, respectively, because they were anti-dilutive. The following table outlines the basic and diluted earnings per common share computations:

(in thousands, except per share data)	Three Months Ended March 31				Nine Months Ended March 31
	2009		2008		2009		2008
Net income	$	14,204	$	14,186	$	33,031	$	39,602
Weighted average number of shares outstanding used in computing basic earnings per share		57,556		56,108		57,449		55,662
Dilutive common stock equivalents		—		1,657		412		1,718
Weighted average number of shares outstanding used in computing diluted earnings per share		57,556		57,765		57,861		57,380
Basic earnings per share	$	0.25	$	0.25	$	0.57	$	0.71
Diluted earnings per share	$	0.25	$	0.25	$	0.57	$	0.69

NOTE 3 – COMPREHENSIVE INCOME (LOSS)

Comprehensive income has been calculated in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income.” Comprehensive income (loss) for the three and nine months ended March 31, 2009 and 2008 was as follows:

(in thousands)	Three Months Ended March 31						Nine Months Ended March 31
	2009			2008			2009			2008
Net income	$	14,204		$	14,186		$	33,031		$	39,602
Unrealized gain (loss) on derivative instruments*		2,479			(707	)		(5,780	)		(1,683	)
Foreign currency translation		(30,417	)		14,894			(102,549	)		30,449
Comprehensive (loss) income	$	(13,734	)	$	28,373		$	(75,298	)	$	68,368
* net of deferred tax amounts (liability) asset	$	(1,635	)	$	460		$	3,816		$	938

6

NOTE 4 – ACQUISITIONS

On August 14, 2008, we acquired all the outstanding shares of ClinPhone plc (“ClinPhone”), a company traded on the London Stock Exchange, for approximately $172 million in cash, and repaid approximately $20 million of ClinPhone debt. By combining ClinPhone with our Perceptive Informatics segment, Perceptive is now one of the industry’s largest providers of telecommunications and web-based (“eClinical”) technologies for clinical research. The combined business offers access to a broad array of eClinical technologies and resources, providing clients and service providers with the benefits of an extensive line of products and services throughout the entire clinical development lifecycle.

The acquisition was accounted for using the purchase method in accordance with SFAS No. 141, “Business Combinations,” and accordingly, the results of operations of ClinPhone have been included in the accompanying Condensed Consolidated Statements of Income as of the date of the acquisition.

We allocated the total purchase price to the tangible and intangible assets and liabilities acquired based on fair value, with any excess recorded as goodwill. The estimates of the fair value of certain assets and liabilities will be finalized before August 2009. The following table summarizes the purchase price allocation for ClinPhone (in thousands):

Purchase Price:
Cash paid, net of cash acquired	$	189,002
Total	$	189,002
Allocations:
Fair value of assets acquired
Accounts receivable	$	20,269
Other current assets		2,177
Property and equipment, net		10,719
Goodwill		105,860
Trade name and in-process research and development		28,210
Other intangible assets, net		64,099
Liabilities assumed
Accounts payable		(8,628	)
Current liabilities		(10,233	)
Deferred revenue		(10,764	)
Other liabilities		(12,707	)
Net assets acquired	$	189,002

The following table summarizes the details of our preliminary assessment of the intangible assets acquired in the ClinPhone transaction as of March 31, 2009 (in thousands):

Intangible Assets	Weighted Average Useful Life	Cost		Accumulated Amortization/ Foreign Currency Exchange Impact		Net
Customer relationships	13.6 years	$	31,443	$	8,695	$	22,748
Backlog	4 years		6,326		2,277		4,049
Technology	8 years		26,330		7,916		18,414
Total intangible assets		$	64,099	$	18,888	$	45,211

We will record the estimated amortization expense of intangible assets acquired in the ClinPhone transaction for the current fiscal year, including amounts amortized to date, and in future years on our Condensed Consolidated Statements of Income as follows (in thousands):

	2009		2010		2011		2012		2013
Amortization expense	$	5,509	$	7,204	$	7,204	$	7,204	$	5,996

7

The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of ClinPhone had occurred on July 1, 2007, the beginning of our Fiscal Year 2008 (in thousands, except per share data):

(in thousands)	Three Months Ended March 31		Nine Months Ended March 31
	2008		2008		2009
Service revenue	$	269,201	$	814,911	$	766,029
Net income*	$	11,963	$	29,840	$	35,528
Basic EPS*	$	0.22	$	0.52	$	0.62
Diluted EPS*	$	0.21	$	0.52	$	0.60

* Inclusive of interest expense that would have been incurred on the debt used to acquire ClinPhone at an annual interest rate of 5.0%, amortization expenses that would have been incurred in connection with acquired customer relationships, technology, and backlog, and elimination of non-recurring costs including ClinPhone interest expense and deal costs.

NOTE 5 – STOCK-BASED COMPENSATION

We account for stock-based compensation according to SFAS No. 123(R), “Share-Based Payment.” The compensation expense recognized in the three and nine months ended March 31, 2009 and 2008 is presented in the following table.

(in thousands)	Three Months Ended March 31				Nine Months Ended March 31
	2009		2008		2009		2008
Direct costs	$	552	$	480	$	1,608	$	1,110
Selling, general and administrative		1,196		914		3,801		2,626
Total stock-based compensation	$	1,748	$	1,394	$	5,409	$	3,736

NOTE 6 – SEGMENT INFORMATION

PAREXEL is managed through three business segments: Clinical Research Services (“CRS”), PAREXEL Consulting and Medical Communications Services (“PCMS”), and Perceptive Informatics, Inc. (“Perceptive”). CRS constitutes our core business and includes Early and Late Phase clinical trials management, biostatistics, and data management, as well as related medical advisory and investigator site services. PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, and bio/pharmaceutical process and management consulting; and provides a full spectrum of market development, product development, and targeted communications services in support of product launch. PCMS consultants identify alternatives and propose solutions to address clients’ product development, registration, and commercialization issues. PCMS also provides health policy consulting and strategic reimbursement services. Perceptive provides information technology solutions designed to improve clients’ product development processes. Perceptive offers a portfolio of products and services that includes medical imaging services, interactive voice response systems (“IVRS”), clinical trial management systems (“CTMS”), web-based portals, systems integration, and patient diary applications.

We evaluate our segment performance and allocate resources based on service revenue and gross profit (service revenue less direct costs), while other operating costs are allocated and evaluated on a geographic basis. Accordingly, we do not include the impact of selling, general, and administrative expenses, depreciation and amortization expense, other charge, interest income (expense), other income (loss), and income tax expense (benefit) in segment profitability. We attribute revenue to individual countries based upon the number of hours of services performed in the respective countries and inter-segment transactions are not included in service revenue. Furthermore, we have a global infrastructure supporting our business segments and therefore, do not identify assets by reportable segment.

8

($ in thousands)	Three Months Ended March 31				Nine Months Ended March 31
	2009		2008		2009		2008
Service revenue
Clinical Research Services	$	199,662	$	191,572	$	603,419	$	533,606
PAREXEL Consulting and MedCom Services		29,176		33,484		91,218		96,541
Perceptive Informatics, Inc.		35,619		20,280		108,712		61,967
Total service revenue	$	264,457	$	245,336	$	803,349	$	692,114
Direct costs
Clinical Research Services	$	127,862	$	126,565	$	390,491	$	353,374
PAREXEL Consulting and MedCom Services		17,840		22,156		58,770		64,490
Perceptive Informatics, Inc.		20,079		12,542		65,179		36,452
Total direct costs	$	165,781	$	161,263	$	514,440	$	454,316
Gross profit
Clinical Research Services	$	71,800	$	65,007	$	212,928	$	180,232
PAREXEL Consulting and MedCom Services		11,336		11,328		32,448		32,051
Perceptive Informatics, Inc.		15,540		7,738		43,533		25,515
Total gross profit	$	98,676	$	84,073	$	288,909	$	237,798

NOTE 7 – RESTRUCTURING CHARGES

Current activity charged against the restructuring accrual in the nine months ended March 31, 2009 (which is included in “Current Liabilities—Accrued Restructuring Charges” and “Long-term Accrued Restructuring Charges” in the Condensed Consolidated Balance Sheet) was as follows:

($ in thousands)	Balance at June 30, 2008		Payments/Foreign Currency Exchange			Provision Adjustments	Balance at March 31, 2009
Facilities-related charges	$	5,244	$	(2,944	)	—	$	2,300

NOTE 8 – STOCKHOLDERS’ EQUITY

On September 9, 2004, our board of directors approved a stock repurchase program authorizing the purchase of up to $20.0 million of our common stock in the open market subject to market conditions. Unless terminated earlier by resolution of our board of directors, the program will expire when the entire amount authorized has been fully utilized. Through March 31, 2009, we had acquired 620,414 shares at a total cost of $14.0 million under this program. There were no purchases under this program in the three and nine months ended March 31, 2009.

NOTE 9 – RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS 161 amends FASB Statement 133 by enhancing disclosures about an entity’s derivative and hedging activities and thereby improving financial reporting transparency. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We adopted SFAS 161 in the third quarter of Fiscal Year 2009. The adoption of this statement did not have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS 141(R), “Business Combinations—a replacement of FASB Statement No. 141,” which changes the principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies. SFAS No. 141(R) amends SFAS No. 109 such that adjustments made to valuation allowances on deferred taxes and acquired tax contingencies associated with acquisitions that closed prior to the effective date of SFAS No. 141(R) would also follow the provisions of SFAS No. 141(R). Early adoption of the provisions of SFAS No. 141(R) is not permitted. This statement will be effective for us beginning in Fiscal Year 2010. We are currently evaluating the potential impact of SFAS 141(R) on our consolidated financial statements.

9

In December 2007, the FASB issued SFAS 160, “Non-controlling Interests in Consolidated Financial Statements.” SFAS 160 clarifies that a non-controlling interest in a subsidiary should be reported at fair value as equity in the consolidated financial statements. Consolidated net income should include the net income for both the parent and the non-controlling interest with disclosure of both amounts on the consolidated statement of income. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS 160 is effective for fiscal years beginning after December 15, 2008. This statement will be effective for us beginning in Fiscal Year 2010. We are currently evaluating the potential impact, if any, of SFAS 160 on our consolidated financial statements.

NOTE 10 – INCOME TAXES

We determine our global provision for corporate income taxes in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, which requires that deferred tax assets and liabilities be recognized for the effect of temporary differences between the book and tax basis of recorded assets and liabilities.

Effective July 1, 2007, we adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a new methodology by which a company must identify, recognize, measure and disclose in its financial statements the effects of any uncertain tax return reporting positions that a company has taken or expects to take. FIN 48 requires financial statement reporting of the expected future tax consequences of uncertain tax return reporting positions on the presumption that all relevant tax authorities possess full knowledge of those tax reporting positions, as well as all of the pertinent facts and circumstances. In addition, FIN 48 mandates expanded financial statement disclosure about uncertainty in income tax reporting positions.

As of June 30, 2008, we had $63.2 million of gross unrecognized tax benefits of which $29.0 million would impact the effective tax rate if recognized. As of March 31, 2009, we had $59.9 million of gross unrecognized tax benefits of which $27.8 million would impact the effective tax rate if recognized. This reserve primarily relates to exposures for income tax matters such as changes in the jurisdiction in which income is taxable and taxation of certain investments. The $3.3 million net decrease in gross unrecognized tax benefits is composed of: a $2.3 million decrease that will not impact the effective tax rate resulting from a reduction in reserves established in conjunction with the acquisition of APEX in Fiscal Year 2008; a $2.3 million decrease that will impact the effective tax rate reflecting the resolution of several U.S. state, U.S. federal, and certain foreign examinations; and a $1.3 million increase that will impact the effective tax rate related to the jurisdiction in which income is taxable in Fiscal Year 2009.

As of March 31, 2009, we anticipate that the liability for unrecognized tax benefits for uncertain tax positions will increase by approximately $0.7 million in the next twelve months primarily as a result of the continuance of filing positions taken in prior periods.

Our historical practice has been, and continues to be, to recognize interest and penalties related to income tax matters in income tax expense. As of June 30, 2008, $7.7 million of gross interest and penalties were included in our liability for unrecognized tax benefits. Income tax expense recorded through March 31, 2009 includes approximately $2.0 million of gross interest. As of March 31, 2009, $9.7 million of gross interest and penalties were included in our liability for unrecognized tax benefits.

We are subject to U.S. federal income tax, as well as income tax in multiple state, local and foreign jurisdictions. All material U.S. state, local and federal income tax matters through 1998 have been concluded. Substantially all material foreign income tax matters have been concluded for all years through 1996.

For the three months ended March 31, 2009 and 2008, we had an effective income tax rate of 34.1% and 37.2%, respectively. For the nine months ended March 31, 2009 and 2008, we had an effective income tax rate of 37.2% and 32.3%, respectively. The decrease in the tax rate for the three months ended March 31, 2009 compared with the same period in 2008, was primarily attributable to improved profitability in two legal entities, which resulted in a reduction in valuation reserves. The low tax rate for the nine months ended March 31, 2008, was primarily attributable to a reduction in deferred tax liabilities in fiscal 2008 that was due, in part, to a decrease in German tax rates.

10

NOTE 11 – LINES OF CREDIT

2008 Credit Facility

On June 13, 2008, PAREXEL, certain subsidiaries of PAREXEL, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Europe Limited, as London Agent, and the lenders party thereto (the “Lenders”) entered into an agreement for a credit facility (as amended and restated as of August 14, 2008 and as further amended by the first amendment thereto dated as of December 19, 2008, the “2008 Credit Facility”) in the principal amount of up to $315 million (collectively, the “Loan Amount”). The 2008 Credit Facility consists of an unsecured term loan facility and an unsecured revolving credit facility. The principal amount of up to $150 million is made available through a term loan and the principal amount of up to $165 million is made available through a revolving credit facility. A portion of the revolving loan facility is available for swingline loans of up to $20 million to be made by JP Morgan Chase Bank, N.A. and for letters of credit. We may request the lenders to increase the 2008 Credit Facility by an additional amount of up to $50 million, and such increase may, but is not committed to, be provided.

Borrowings made under the 2008 Credit Facility bear interest, at our determination, at a rate based on the highest of prime, the federal funds rate plus .50% and the one-month Adjusted LIBOR Rate (as defined in the 2008 Credit Facility) plus 1.00% (such highest rate, the “Alternate Base Rate”) plus a margin (not to exceed a per annum rate of .75%) based on the Leverage Ratio, in which case it is a floating interest rate, or based on LIBOR or EURIBOR plus a margin (not to exceed a per annum rate of 1.75%) based on the Leverage Ratio, in which case the interest rate is fixed at the beginning of each interest period for the balance of the interest period. An interest period is typically one, two, three, or six months. The “Leverage Ratio” is a ratio of the consolidated total debt to consolidated net income before interest, taxes, depreciation and amortization (EBITDA). Loans outstanding under the 2008 Credit Facility may be prepaid at any time in whole or in part without premium or penalty, other than customary breakage costs, if any. The 2008 Credit Facility terminates and any outstanding loans under it mature on June 13, 2013.

Repayment of the principal borrowed under the revolving credit facility (other than a swingline loan) is due on June 13, 2013. Repayment of principal borrowed under the term loan facility is payable as follows:

• 5% of principal borrowed must be repaid by June 30, 2009;

• 20% of principal borrowed must be repaid during the one-year period from July 1, 2009 to June 30, 2010;

• 20% of principal borrowed must be repaid during the one-year period from July 1, 2010 to June 30, 2011;

• 25% of principal borrowed must be repaid during the one-year period from July 1, 2011 to June 30, 2012; and

• 30% of principal borrowed must be repaid during the one-year period from July 1, 2012 to June 13, 2013.

All payments of principal on the term loan facility made during each annual period described above are required to be made in equal quarterly installments and to be accompanied by accrued interest thereon. To the extent not previously paid, all borrowings under the term loan facility must be repaid on June 13, 2013. Swingline loans under the 2008 Credit Facility generally must be paid on the first date after such swingline loan is made that is the 15th or last day of a calendar month.

Interest due under the revolving credit facility (other than a swingline loan) and the term loan facility must be paid quarterly for borrowings with an interest rate determined at the Alternate Base Rate. Interest must be paid on the last day of the interest period selected by us for borrowings with an interest rate based on LIBOR or EURIBOR; provided that for interest periods of longer than three months, interest is required to be paid every three months. Interest under swingline loans is payable when principal is required to be repaid.

Our obligations under the 2008 Credit Facility may be accelerated upon the occurrence of an event of default under the 2008 Credit Facility, which includes customary events of default, including payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency related defaults, cross defaults to other material indebtedness, defaults relating to such matters as ERISA and judgments, and a change of control default. Our obligations under the 2008 Credit Facility are guaranteed by certain of our U.S. domestic subsidiaries, and we have guaranteed any obligations of any co-borrowers under the 2008 Credit Facility.

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In connection with the 2008 Credit Facility, we agreed to pay a commitment fee on the term loan commitment, payable quarterly calculated as a percentage of the unused amount of the term loan commitments at a per annum rate of 0.30%, and a commitment fee on the revolving loan commitment calculated as a percentage of the unused amount of the revolving loan commitments at a per annum rate of up to 0.375% (based on the Leverage Ratio). To the extent there are letters of credit outstanding under the 2008 Credit Facility, we will pay to the Administrative Agent, for the benefit of the lenders, and to the issuing bank certain letter of credit fees, a fronting fee and additional charges. We also agreed to pay various fees to JPMorgan Chase Bank, N.A. or KeyBank or both.

As of March 31, 2009, we had approximately $281.4 million in principal amount of debt outstanding under the 2008 Credit Facility, including $137.0 million of principal borrowed under the revolving credit facility and $144.4 million of principal under the term loan, and remaining borrowing availability of approximately $28.0 million under the revolving credit facility. $150 million of principal under the 2008 Credit Facility has been hedged with an interest rate swap agreement and carries an interest rate of 4.8%. Currently, the debt under the 2008 Credit Facility, including the $150 million of principal hedged with an interest swap agreement, carries an average interest rate of 3.5%.

The 2008 Credit Facility contains affirmative and negative covenants applicable to us and our subsidiaries, including financial covenants requiring us to comply with maximum leverage ratios, minimum interest coverage ratios, a minimum net worth test (which covenant allows for foreign translation adjustments of up to $50 million in connection with the calculations required under such covenant) and maximum capital expenditures requirements, as well as restrictions on liens, investments, indebtedness, fundamental changes, acquisitions, dispositions of property, making specified restricted payments (including stock repurchases exceeding an agreed to percentage of consolidated net income), and transactions with affiliates. As of March 31, 2009, we were in compliance with all covenants under the 2008 Credit Facility.

Additional Lines of Credit

We have a line of credit with ABN AMRO Bank, NV in the amount of Euro 12.0 million. This line of credit is not collateralized, is payable on demand, and bears interest at an annual rate ranging between 3% and 5%. The line of credit may be revoked or canceled by the bank at any time at its discretion. We primarily entered into this line of credit to facilitate business transactions with the bank. At March 31, 2009, we had Euro 12.0 million available under this line of credit.

We have a line of credit with HSBC UK in the amount of 2.0 million pounds sterling. This line of credit was established by ClinPhone and is guaranteed by PAREXEL International Holding BV. The line is not secured and bears interest at an annual rate ranging between 3% and 5%. At March 31, 2009, we had 2.0 million pounds sterling available under this line of credit.

We have other foreign lines of credit with banks totaling $2.0 million. These lines of credit are used as overdraft protection and bear interest at annual rates ranging from 3% to 5%. The lines of credit are payable on demand. At March 31, 2009, we had $2.0 million available under these arrangements.

We have a cash pooling arrangement with ABN AMRO Bank. Pooling occurs when debit balances are offset against credit balances and the net position is used as a basis by the bank for calculating interest. Each legal entity owned by PAREXEL and party to this arrangement remains the owner of either a credit or debit balance. Therefore, interest income is earned by legal entities with credit balances, while interest expense is charged to legal entities with debit balances. Based on the pool’s overall balance, the bank then (1) recalculates the overall interest to be charged or earned, (2) compares this amount with the sum of previously charged/earned interest amounts per account and (3) additionally pays/charges the difference.

NOTE 12 – COMMITMENTS, CONTINGENCIES AND GUARANTEES

As of March 31, 2009, we had approximately $31.7 million in purchase obligations with various vendors for the purchase of computer software and other services.

The 2008 Credit Facility, our unsecured senior credit facility, consists of a term loan facility for $150 million and a revolving credit facility for $165 million with a group of lenders (including and managed by JPMorgan Chase Bank, N.A.), and it is guaranteed by certain of our U.S. subsidiaries.

We have letter-of-credit agreements with banks totaling approximately $6.0 million guaranteeing performance under various operating leases and vendor agreements.

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In March 2006, we conducted an early-phase clinical trial on behalf of TeGenero AG, a German pharmaceutical company. During the trial, six participants experienced adverse reactions to the TeGenero compound being tested. Through March 31, 2009, we have recorded approximately $1.8 million in legal fees and other incremental costs in connection with the incident. To date, none of the participants in the clinical trial have filed suit against us. We carry insurance to cover risks such as this, but our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims against us. While we believe that TeGenero is responsible to indemnify us with respect to claims related to this matter, TeGenero filed for insolvency in July 2006, which likely will limit any recovery by us from them. In addition, while TeGenero carried insurance with respect to this type of matter, that insurance also is subject to deductibles and coverage limits.

We periodically become involved in various claims and lawsuits that are incidental to our business. We believe, after consultation with counsel, that no matters currently pending would, in the event of an adverse outcome, have a material impact on our consolidated financial position, results of operations, or liquidity.

NOTE 13 – OTHER CHARGE

In the second quarter of Fiscal Year 2009, we received notification from a small biopharma client that the client would be unable to make payments due to us in connection with an on-going service contract for a large Phase III clinical trial. The client advised us that the client encountered funding difficulties when one of its major investors defaulted on a contractual investment commitment to the client. The client informed us that, following the default, it had substantive discussions with two potential commercialization partners and its remaining investors, but was unable to secure additional funding for the trial. The client has since filed for bankruptcy protection. As a result, we recorded $15 million in reserves in the second quarter of Fiscal Year 2009 consisting of $12.3 million in bad debt expense and $2.7 million in anticipated wind-down costs and related expenses (for service fees, pass-through costs, and investigator fees).

NOTE 14 – MISCELLANEOUS (EXPENSE) INCOME

The miscellaneous (expense) income recognized in the three and nine months ended March 31, 2009 and 2008 is presented below.

(in thousands)	Three Months Ended March 31					Nine Months Ended March 31
	2009			2008		2009			2008
Foreign exchange (loss) gain	$	(2,455	)	$	229	$	12,306		$	(916	)
Other income (expense)		513			741		(5,240	)		1,896
Total miscellaneous (expense) income	$	(1,942	)	$	970	$	7,066		$	980

Other expense for the nine months ended March 31, 2009 included by a $3.0 million write-off related to a contract dispute and a $2.3 million write-off of certain impaired assets.

NOTE 15 – DERIVATIVES

It is our policy to mitigate the risks associated with fluctuations in foreign exchange rates and in market rates of interest. Accordingly, we have instituted foreign currency hedging programs and an interest rate swap program that are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”).

• Our foreign denominated intercompany debt and accounts receivable hedging program is a cash flow hedge program designed to minimize foreign currency volatility. The objective of the program is to reduce variability of cash flows with respect to forecasted billing for services provided outside of the currency underlying the service contract with our customer and the foreign exchange exposure related to payment of invoices for services provided in executing the customer contract. We primarily utilize forward exchange contracts and purchased currency options with maturities of no more than 12 months that qualify as cash flow hedges. These are intended to offset the effect of exchange rate fluctuations as services are performed and billed, and are generally expected to be reclassified to earnings in the next 12 months as the underlying transactions occur.

• Under our interest rate hedging program, we swap the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount, at specified intervals. The objective of this program is to reduce the variability of cash flows related to fluctuations in market rates of interest.

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Occasionally, we enter into other foreign currency exchange contracts to offset the impact of currency fluctuations for other currencies and intercompany billings. These hedges include cash flow hedges similar to those described above but may involve other denominations or counterparties and are not accounted for as hedges in accordance with SFAS 133.

The following table presents the notional amounts and fair values of our derivatives as of March 31, 2009 and June 30, 2008 (in thousands). All amounts are reported in other current assets and other current liabilities.

	March 31, 2009					June 30, 2008
	Notional Amount		Asset (Liability)			Notional Amount		Asset (Liability)
Derivatives designated as hedging instruments under SFAS 133
Interest rate contracts	$	150,000	$	(6,317	)	$	35,000	$	(774	)
Foreign exchange contracts		80,298		(5,918	)		126,019		(25	)
Total SFAS 133 derivatives	$	230,298	$	(12,235	)	$	161,019	$	(799	)
Derivatives not designated as hedging instruments under SFAS 133
Foreign exchange contracts	$	210,036	$	6,020		$	159,491	$	2,640
Total non-SFAS 133 derivatives	$	210,036	$	6,020		$	159,491	$	2,640
Total derivatives	$	440,334	$	(6,215	)	$	320,510	$	1,841

The change in the fair value of derivatives designated as hedging instruments under SFAS 133 is recorded to other comprehensive income (loss) on the balance sheet. The amounts recognized for the three and nine months ended March 31, 2009 and 2008 are presented below (in thousands):

	Three Months Ended						Nine Months Ended
	March 31, 2009			March 31, 2008			March 31, 2009			March 31, 2008
Derivatives designated as hedging instruments under SFAS 133
Interest rate contracts	$	(132	)	$	(754	)	$	(3,341	)	$	(1,383	)
Foreign exchange contracts		2,611			47			(2,439	)		(43	)
Total SFAS 133 derivatives	$	2,479		$	(707	)	$	(5,780	)	$	(1,426	)

The change in the fair value of derivatives not designated as hedging instruments under SFAS 133 is recorded to miscellaneous (expense) income on the income statement. The amounts recognized for the three and nine months ended March 31, 2009 and 2008 are presented below (in thousands):

	Three Months Ended					Nine Months Ended
	March 31, 2009			March 31, 2008		March 31, 2009		March 31, 2008
Derivatives not designated as hedging instruments under SFAS 133
Foreign exchange contracts	$	(16,115	)	$	1,419	$	779	$	3,973
Total non-SFAS 133 derivatives	$	(16,115	)	$	1,419	$	779	$	3,973

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial information discussed below is derived from the Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q. The financial information set forth and discussed below is unaudited but, in the opinion of management, reflects all adjustments (primarily consisting of normal recurring adjustments) considered necessary for a fair presentation of such information. Our results of operations for a particular quarter may not be indicative of results expected during subsequent fiscal quarters or for the entire year.

This quarterly report on Form 10-Q includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained in this report regarding our strategy, future operations, financial position, future revenue, projected costs, prospects, plans and objectives of management, other than statements of historical facts, are forward-looking statements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” “could,” “should,” “targets,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We cannot guarantee that we actually will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements. There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially from those expressed or implied in the forward-looking statements we make. These important factors are described under “Critical Accounting Policies and Estimates” included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2008, filed on August 28, 2008 (the “2008 10-K”), and under “Risk Factors” set forth in Part II, Item 1A below. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur and our actual performance and results may vary from those anticipated or otherwise suggested by such statements. You are cautioned not to place undue reliance on these forward-looking statements. Although we may elect to update forward-looking statements in the future, we specifically disclaim any obligation to do so, even if our estimates change, and readers should not rely on those forward-looking statements as representing our views as of any date subsequent to the date of this quarterly report.

OVERVIEW

PAREXEL is a leading biopharmaceutical services company, providing a broad range of expertise in clinical research, medical communications services, consulting, and informatics and advanced technology products and services to the worldwide pharmaceutical, biotechnology, and medical device industries. Our primary objective is to provide solutions for managing the biopharmaceutical product lifecycle with the goal of reducing the time, risk, and cost associated with the development and commercialization of new therapies. Since our incorporation in 1983, we have developed significant expertise in processes and technologies supporting this strategy. Our product and service offerings include: Early and Late Phase clinical trials management, data management, biostatistical analysis, medical communications services, patient recruitment, regulatory and product development consulting, health policy and reimbursement, performance improvement, industry training and publishing, medical imaging services, IVRS, CTMS, web-based portals, systems integration, patient diary applications, electronic data capture (“EDC”) tools, and other drug development services. We believe that our comprehensive services, depth of therapeutic area expertise, global footprint and related access to patients, and sophisticated information technology, along with our experience in global drug development and product launch services, represent key competitive strengths.

We manage our business through three business segments: CRS, PCMS and Perceptive.

• CRS constitutes our core business and includes Early and Late Phase clinical trials management, biostatistics, data management, as well as related medical advisory and investigator site services.

• PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, and bio/pharmaceutical process and management consulting, and PCMS provides a full spectrum of market development, product development, and targeted communications services in support of product launch. PCMS consultants identify alternatives and propose solutions to address clients’ product development, registration, and commercialization issues. PCMS also provides health policy consulting and strategic reimbursement services.

• Perceptive provides information technology solutions designed to improve clients’ product development processes. Perceptive offers a portfolio of products and services that includes medical imaging services, IVRS, CTMS, EDC, web-based portals, systems integration, and patient diary applications.

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We conduct a significant portion of our operations in foreign countries. Our consolidated service revenue from non-U.S. operations was approximately 63.0% and 64.9% for the nine months ended March 31, 2009 and 2008, respectively.

Because our financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates can have a significant effect on our operating results. For the nine months ended March 31, 2009 and 2008, approximately 24.5% and 28.1%, respectively, of consolidated service revenue was denominated in Euros. Consolidated service revenue, denominated in pounds sterling, was 14.6% and 13.9% for the respective periods.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and other financial information. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience and on various other factors that we believe to be reasonable under the circumstances. Our actual results may differ from these estimates under different assumptions or conditions. Our most critical accounting policies involve: revenue recognition, billed accounts receivable, unbilled accounts receivable and deferred revenue, accounting for income taxes, and goodwill. For further information, please refer to the consolidated financial statements and footnotes thereto included in our 2008 Form 10-K.

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RESULTS OF OPERATIONS

ANALYSIS BY SEGMENT

We evaluate our segment performance and allocate resources based on service revenue and gross profit (service revenue less direct costs), while other operating costs are allocated and evaluated on a geographic basis. Accordingly, we do not include the impact of selling, general, and administrative expenses, depreciation and amortization expense, other charge, interest income (expense), other income (loss), and income tax expense (benefit) in segment profitability. We attribute revenue to individual countries based upon the number of hours of services performed in the respective countries. Inter-segment transactions are not included in service revenue. Furthermore, we have a global infrastructure supporting our business segments and therefore, do not identify assets by reportable segment. Service revenue, direct costs and gross profit on service revenue for the three and nine months ended March 31, 2009 and 2008 were as follows:

($ in thousands)	Three Months Ended				Increase			%
	March 31, 2009		March 31, 2008		(Decrease)
Service revenue
Clinical Research Services	$	199,662	$	191,572	$	8,090		4.2	%
PAREXEL Consulting and MedCom Services		29,176		33,484		(4,308	)	-12.9	%
Perceptive Informatics, Inc.		35,619		20,280		15,339		75.6	%
Total service revenue	$	264,457	$	245,336	$	19,121		7.8	%
Direct costs
Clinical Research Services	$	127,862	$	126,565	$	1,297		1.0	%
PAREXEL Consulting and MedCom Services		17,840		22,156		(4,316	)	-19.5	%
Perceptive Informatics, Inc.		20,079		12,542		7,537		60.1	%
Total direct costs	$	165,781	$	161,263	$	4,518		2.8	%
Gross profit
Clinical Research Services	$	71,800	$	65,007	$	6,793		10.4	%
PAREXEL Consulting and MedCom Services		11,336		11,328		8		0.1	%
Perceptive Informatics, Inc.		15,540		7,738		7,802		100.8	%
Total gross profit	$	98,676	$	84,073	$	14,603		17.4	%
($ in thousands)	Nine Months Ended				Increase (Decrease)			%
	March 31, 2009		March 31, 2008
Service revenue
Clinical Research Services	$	603,419	$	533,606	$	69,813		13.1	%
PAREXEL Consulting and MedCom Services		91,218		96,541		(5,323	)	-5.5	%
Perceptive Informatics, Inc.		108,712		61,967		46,745		75.4	%
Total service revenue	$	803,349	$	692,114	$	111,235		16.1	%
Direct costs
Clinical Research Services	$	390,491	$	353,374	$	37,117		10.5	%
PAREXEL Consulting and MedCom Services		58,770		64,490		(5,720	)	-8.9	%
Perceptive Informatics, Inc.		65,179		36,452		28,727		78.8	%
Total direct costs	$	514,440	$	454,316	$	60,124		13.2	%
Gross profit
Clinical Research Services	$	212,928	$	180,232	$	32,696		18.1	%
PAREXEL Consulting and MedCom Services		32,448		32,051		397		1.2	%
Perceptive Informatics, Inc.		43,533		25,515		18,018		70.6	%
Total gross profit	$	288,909	$	237,798	$	51,111		21.5	%

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Three Months Ended March 31, 2009 Compared With Three Months Ended March 31, 2008:

For the three months ended March 31, 2009, PAREXEL had net income of $14.2 million which was equal to net income of $14.2 million for the three months ended March 31, 2008. On a fully diluted basis, earnings per share remained flat at $0.25 for both periods.

Revenues

Service revenue increased by $19.1 million, or 7.8%, to $264.5 million for the three months ended March 31, 2009 from $245.3 million for the three months ended March 31, 2008. On a geographic basis, service revenue was distributed as follows (in millions):

	Three months ended March 31, 2009				Three months ended March 31, 2008
Region	Service Revenue		% of Total		Service Revenue		% of Total
The Americas	$	113.6	42.9	%	$	99.7	40.7	%
Europe, Middle East & Africa	$	126.7	47.9	%	$	129.1	52.6	%
Asia/Pacific	$	24.2	9.2	%	$	16.5	6.7	%

Revenue in The Americas increased by $13.9 million, or 13.9%. Europe, Middle East & Africa revenue declined slightly by $2.4 million, or 1.9%, while revenue from Asia /Pacific increased by $7.7 million, or 46.7%.

On a segment basis, CRS service revenue increased by $8.1 million, or 4.2%, to $199.7 million for the three months ended March 31, 2009 from $191.6 million for the three months ended March 31, 2008. The $8.1 million increase was driven by a $40.5 million increase in the Late Phase portions of the business, where our status as a preferred provider with many of our clients continues to drive our growth; offset by $25.7 million attributable to the negative impact of foreign currency fluctuations and a decrease of $6.7 million in our Early Phase business.

PCMS service revenue decreased by $4.3 million, or 12.9%, to $29.2 million for the three months ended March 31, 2009 from $33.5 million for the same period in 2008. The decrease was due primarily to the negative $5.0 million impact of foreign currency fluctuations and a decrease of approximately $0.4 million from the disposition of Barnett Educational Services in Fiscal Year 2008; partially offset by a net increase in our consulting business.

Perceptive service revenue increased by $15.3 million, or 75.6%, to $35.6 million for the three months ended March 31, 2009 from $20.3 million for the three months ended March 31, 2008. This increase was due primarily to the impact of acquiring ClinPhone in August 2008, which contributed $17.0 million in revenue for the quarter, and an increase of $3.3 million in our other business units, particularly CTMS; partly offset by $5.0 million related to the negative impact of foreign currency fluctuations.

Reimbursement revenue consists of reimbursable out-of-pocket expenses incurred on behalf of and reimbursable by clients. Reimbursement revenue does not yield any gross profit to us, nor does it have an impact on net income.

Direct Costs

Direct costs increased by $4.5 million, or 2.8%, to $165.8 million for the three months ended March 31, 2009 from $161.3 million for the three months ended March 31, 2008. As a percentage of total service revenue, direct costs decreased to 62.7% from 65.7% for the respective periods.

On a segment basis, CRS direct costs increased by $1.3 million, or 1.0%, to $127.9 million for the three months ended March 31, 2009 from $126.6 million for the three months ended March 31, 2008, with an increase of approximately $20.2 million attributable to our Late Phase business (primarily increased labor costs to support a higher volume of business), offset by $13.8 million related to the positive impact of foreign currency fluctuations and $5.1 million related to lower costs in the Early Phase business. As a percentage of service revenue, CRS direct costs decreased to 64.0% for the three months ended March 31, 2009 from 66.1% for the three months ended March 31, 2008 as a result of improved productivity and efficiency in Late Phase, partly offset by under-utilization of capacity in Early Phase.

PCMS direct costs decreased by $4.3 million, or 19.5%, to $17.8 million for the three months ended March 31, 2009 from $22.2 million for the three months ended March 31, 2008. This $4.3 million decline was due primarily to $2.1 million in decreases related to lower business activity, resulting mainly from dispositions and shedding of unprofitable business lines, and $2.2 million related to the impact of positive foreign currency fluctuations. As a percentage of service revenue, PCMS direct costs decreased to 61.1% from 66.2% for the respective periods. This reduction resulted from efforts by PCMS to shed unprofitable business lines and implement substantial improvements in business processes.

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Perceptive direct costs increased by $7.5 million, or 60.1%, to $20.1 million for the three months ended March 31, 2009 from $12.5 million for the three months ended March 31, 2008. This increase was related to $7.1 million of incremental direct costs associated with ClinPhone and $2.0 million in incremental direct labor costs to support a higher volume of business; offset by $1.6 million related to foreign currency fluctuations. As a percentage of service revenue, Perceptive direct costs decreased to 56.4% for the three months ended March 31, 2009 from 61.8% for the three months ended March 31, 2008. This improvement was a direct result of successful integration efforts, the off-shoring of certain operational and research and development costs, and other productivity and efficiency improvements.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expense increased by $6.2 million, or 11.7%, to $59.0 million for the three months ended March 31, 2009 from $52.8 million for the three months ended March 31, 2008. This increase was due primarily to $9.5 million of expenses related to ClinPhone, $5.5 million from higher facilities costs, and $1.1 million from an increase in various other expenses including fees for professional services; partially offset by $9.9 million attributable to foreign exchange fluctuations. As a percentage of service revenue, SG&A increased to 22.3% for the three months ended March 31, 2009 from 21.5% for the three months ended March 31, 2008 resulting from higher facilities costs and the impact of a slowdown in service revenue growth.

Depreciation and Amortization

Depreciation and amortization (“D&A”) expense increased by $3.9 million, or 41.2%, to $13.3 million for the three months ended March 31, 2009 from $9.4 million for the three months ended March 31, 2008, primarily due to incremental D&A expense associated with ClinPhone, offset by $1.9 million attributable to foreign exchange fluctuations. As a percentage of service revenue, D&A increased to 5.0% for the three months ended March 31, 2009 from 3.8% for the same period in 2008.

Other Income and Expense

We recorded net other expense of $4.7 million for the three months ended March 31, 2009 compared with net other income of $0.4 million for the three months ended March 31, 2008. This $5.1 million decrease resulted from an increase in foreign exchange losses of approximately $2.7 million; an increase in interest expense, net of interest income, of approximately $2.2 million; and a $0.2 million decrease in miscellaneous income.

Taxes

For the three months ended March 31, 2009 and 2008, we had an effective income tax rate of 34.1% and 37.2%, respectively. The decrease in the tax rate was primarily attributable to improved profitability in two legal entities, which caused a reduction in valuation reserves. We expect our annual effective tax rate for Fiscal Year 2009 to be approximately 38.0%. Future adjustments may increase or decrease the effective tax rate.

Nine Months Ended March 31, 2009 Compared With Nine Months Ended March 31, 2008:

For the nine months ended March 31, 2009, we had net income of $33.0 million compared with net income of $39.6 million for the nine months ended March 31, 2008. This decrease was due primarily to factors that are described in the following paragraphs. On a fully diluted basis, earnings per share decreased to $0.57 from $0.69 for the corresponding periods. The prior year-to-date period included a tax benefit of $0.07 per share on a fully diluted basis, resulting from a decrease in German statutory tax rates.

Revenues

Service revenue increased by $111.2 million, or 16.1%, to $803.3 million for the nine months ended March 31, 2009 from $692.1 million for the nine months ended March 31, 2008. On a geographic basis, service revenue was distributed as follows (in millions):

	Nine months ended March 31, 2009				Nine months ended March 31, 2008
Region	Service Revenue		% of Total		Service Revenue		% of Total
The Americas	$	337.4	42.0	%	$	272.6	39.4	%
Europe, Middle East & Africa	$	398.6	49.6	%	$	370.0	53.5	%
Asia/Pacific	$	67.3	8.4	%	$	49.5	7.1	%

Revenue in The Americas increased by $64.8 million, or 23.9%; Europe, Middle East & Africa revenue increased by $28.6 million, or 7.7%; and Asia/Pacific revenue increased by $17.9 million, or 36.1%.

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On a segment basis, CRS service revenue increased by $69.8 million, or 13.1%, to $603.4 million for the nine months ended March 31, 2009 from $533.6 million for the nine months ended March 31, 2008. This increase was due primarily to $109.3 million in additional revenue in the Late Phase portions of the business as a result of continuing strong demand for our services, particularly from the large pharmaceutical segment, and approximately $5.4 million from the acquisition of APEX, which was acquired in the first quarter of Fiscal Year 2008. These increases were partially offset by the negative impact of foreign currency fluctuations of approximately $31.5 million and a decrease of $13.2 million in our Early Phase business, as a result of lower demand.

PCMS service revenue decreased by $5.3 million, or 5.5%, to $91.2 million for the nine months ended March 31, 2009 from $96.5 million for the same period in 2008. This decrease was attributable to the $2.5 million impact of the disposition of Barnett Educational Services, targeted withdrawals from certain other unprofitable service lines in the prior year in the MedCom business, and $8.5 million related to foreign currency fluctuations; partly offset by growth of approximately $5.7 million in PAREXEL Consulting.

Perceptive service revenue increased by $46.7 million, or 75.4%, to $108.7 million for the nine months ended March 31, 2009 from $62.0 million for the nine months ended March 31, 2008. This increase was due primarily to the acquisition of ClinPhone, which contributed $49.7 million in revenue, and growth of $5.1 million in other Perceptive business units; partly offset by approximately $8.1 million related to the negative impact of foreign currency fluctuations.

Reimbursement revenue consists of reimbursable out-of-pocket expenses incurred on behalf of and reimbursable by clients. Reimbursement revenue does not yield any gross profit to us, nor does it have an impact on net income.

Direct Costs

Direct costs increased by $60.1 million, or 13.2%, to $514.4 million for the nine months ended March 31, 2009 from $454.3 million for the nine months ended March 31, 2008. As a percentage of total service revenue, direct costs decreased to 64.0% from 65.6% for the respective periods.

On a segment basis, CRS direct costs increased by $37.1 million, or 10.5%, to $390.5 million for the nine months ended March 31, 2009 from $353.4 million for the nine months ended March 31, 2008. This increase resulted from approximately $95.5 million in costs to support growth in the Late Phase portions of the business, including $4.5 million related to the acquisition of APEX; partly offset by approximately $26.0 million in lower costs for the Early Phase business, resulting from lower business volume, and $32.4 million attributable to the positive impact of foreign currency fluctuations. As a percentage of service revenue, CRS direct costs decreased to 64.7% for the nine months ended March 31, 2009 from 66.2% for the nine months ended March 31, 2008 driven by improved productivity and efficiency in the Late Phase portions of the business.

PCMS direct costs decreased $5.7 million, or 8.9%, to $58.8 million for the nine months ended March 31, 2009 from $64.5 million for the nine months ended March 31, 2008. This $5.7 million decrease was caused by $4.1 million in positive foreign currency fluctuations and a $2.1 million reduction in expenses for MedCom; partially offset by an increase of approximately $0.5 million in the expenses of our consulting business. As a percentage of service revenue, PCMS direct costs decreased to 64.4% from 66.8% for the respective periods as a result of the impact of shedding unprofitable business lines and improvements in processes.

Perceptive direct costs increased by $28.7 million, or 78.8%, to $65.2 million for the nine months ended March 31, 2009 from $36.5 million for the nine months ended March 31, 2008. Of the total $28.7 million increase, $18.3 million was due to incremental direct costs of ClinPhone, $2.6 million was related to the recording of a reserve for a customer dispute, $0.6 million was associated with the termination of a pre-acquisition Perceptive supplier contract, and $9.7 million related to incremental labor costs; offset by $2.5 million related to foreign currency fluctuations. As a percentage of service revenue, Perceptive direct costs increased to 60.0% for the nine months ended March 31, 2009 from 58.8% for the nine months ended March 31, 2008, due primarily to the impact of recording a reserve for a customer dispute.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expense increased by $27.4 million, or 18.1%, to $178.8 million for the nine months ended March 31, 2009 from $151.4 million for the nine months ended March 31, 2008. This $27.4 million increase was due primarily to $26.8 million in incremental expenses resulting from the acquisitions of ClinPhone and APEX and approximately $15.6 million in costs required to support a higher business volume, primarily in personnel and facilities costs; offset by $15.0 million attributable to the positive impact of foreign exchange fluctuations. As a percentage of service revenue, SG&A increased slightly to 22.3% for the nine months ended March 31, 2009 as compared with 21.9% for the nine months ended March 31, 2008.

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Depreciation and Amortization

Depreciation and amortization (“D&A”) expense increased by $11.4 million, or 41.5%, to $39.0 million for the nine months ended March 31, 2009 from $27.6 million for the nine months ended March 31, 2008. The increase was due primarily to $6.0 million in depreciation and amortization expense associated with ClinPhone and $8.3 million related primarily to the depreciation of fixed assets; partially offset by $2.9 million attributable to foreign exchange fluctuations. As a percentage of service revenue, D&A increased to 4.9% for the nine months ended March 31, 2009 from 4.0% for the same period in 2008.

Other Charge

For the nine months ended March 31, 2009, we recorded $15 million in reserves for anticipated wind-down costs and bad debt expense related to impaired accounts receivable (for service fees, pass-through costs, and investigator fees) from a small biopharma client that filed for bankruptcy protection. See Note 13 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information.

Other Income and Expense

We recorded net other expense of $1.8 million for the nine months ended March 31, 2009 compared with $0.4 million for the nine months ended March 31, 2008. This $1.4 million increase was attributable to $7.5 million in interest expense, net of interest income, offset by an increase of $6.1 million in miscellaneous income.

The $6.1 million increase in miscellaneous income was due primarily to a positive swing in gains related to foreign currency exchange of approximately $13.2 million, $6.2 million of which was related to ClinPhone including certain intercompany loans that have since been subsequently restructured; partially offset by approximately $3.0 million related to the write-off of a contract dispute and $2.3 million related to the write-off of certain impaired assets, a gain on the sale of an investment that occurred in the 2008 period of approximately $1.0 million and approximately $0.8 million in other expenses.

Taxes

For the nine months ended March 31, 2009 and 2008, we had an effective income tax rate of 37.2% and 32.3%, respectively. The low tax rate for the nine months ended March 31, 2008 was primarily attributable to a reduction in deferred tax liabilities in fiscal 2008 due, in part, to a decrease in German tax rates. We expect our annual effective tax rate for Fiscal Year 2009 to be approximately 38.0%.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations and growth with cash flow from operations, proceeds from the sale of equity securities, and, more recently, credit facilities to fund business acquisitions. Investing activities primarily reflect acquisition costs and capital expenditures for information systems enhancements and leasehold improvements. As of March 31, 2009, we had cash and cash equivalents of approximately $99.5 million.

Approximately 90% of our contracts are fixed rate, with some variable components, and range in duration from a few months to several years. Cash flows from these contracts typically consist of a down payment required to be paid at the time of contract execution with the balance due in installments over the contract’s duration, usually based on the achievement of milestones. Revenue from these contracts is generally recognized as work is performed. As a result, cash receipts do not necessarily correspond to costs incurred and revenue recognized on contracts.

Generally, our clients can terminate their contracts with us upon thirty to sixty days’ notice or can delay execution of services. Clients may terminate or delay contracts for a variety of reasons, including merger or potential merger-related activities involving the client, the failure of products being tested to satisfy safety requirements or efficacy criteria, unexpected or undesired clinical results of the product, client cost reductions as a result of budgetary limits or changing priorities, the client’s decision to forego a particular study, insufficient patient enrollment or investigator recruitment, or clinical drug manufacturing problems resulting in shortages of the product.

In the second quarter of Fiscal Year 2009, we received notification from a small biopharma client that the client would be unable to make payments due to us in connection with an on-going service contract for a large Phase III clinical trial. The client advised us that the client encountered funding difficulties when one of its major investors defaulted on a contractual investment commitment to the client. The client informed us that, following the default, it had substantive discussions with two potential commercialization partners and its remaining investors, but was unable to secure additional funding for the trial. The client has since filed for bankruptcy protection. As a result, we recorded $15 million in reserves for anticipated wind-down costs and bad debt expense related to impaired accounts receivable (for service fees, pass-through costs, and investigator fees). We have reviewed the projects and clients in our backlog and receivables and believe that we do not have significant exposures of a similar nature from other clients at this time. Additionally, we have reviewed and tightened our credit policies to minimize this type of risk in the future.

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DAYS SALES OUTSTANDING

Our operating cash flow is heavily influenced by changes in the levels of billed and unbilled receivables and deferred revenue. These account balances as well as days sales outstanding (“DSO”) in accounts receivable, net of deferred revenue, can vary based on contractual milestones and the timing and size of cash receipts. DSO was 47 days at March 31, 2009, 63 days at June 30, 2008, and 59 days at March 31, 2008. The decrease in DSO from June 2008 was primarily due to stronger cash collections and a $12.3 million non-cash provision for bad debt related to a late-phase clinical trial for a small biopharma client described above and included in the Other Charge line for the nine months ended March 31, 2009. Accounts receivable, net of the provision for losses on receivables was $430.4 million ($214.7 million in billed accounts receivable and $215.7 million in unbilled accounts receivable) at March 31, 2009 and $475.8 million ($253.2 million in billed accounts receivable and $222.6 million in unbilled accounts receivable) at June 30, 2008. Deferred revenue was $244.3 million at March 31, 2009 and $213.1 million at June 30, 2008. We calculate DSO by adding the end-of-period balances of billed and unbilled account receivables, net of deferred revenue and the provision for losses on receivables, then dividing the resulting amount by the sum of total revenue plus investigator fees billed for the most recent quarter, and multiplying the resulting fraction by the number of days in the quarter.

CASH FLOWS

Net cash provided by operating activities for the nine months ended March 31, 2009 totaled $90.5 million and was generated from net income of $33.0 million, non-cash charges for depreciation and amortization expense in the amount of $39.0 million, a $57.9 million decrease in net receivables (net of deferred revenue and allowances for doubtful accounts), $22.4 million related to changes in prepaid assets and other current assets, $5.4 million of non-cash charges for stock-based compensation, and $1.1 million from other sources. These sources of cash were offset by a $36.6 million increase in other assets, a $15.5 million decrease in other current liabilities (mainly related to the payment of management bonuses), an $11.7 million decrease in accounts payable and other accrued expenses and other liabilities, and a $4.5 million decrease in deferred income tax liability (net of deferred tax assets).

Net cash provided by operating activities for the nine months ended March 31, 2008 totaled $16.9 million and was attributable to $39.6 million of net income, a $39.9 million increase in long-term income tax liability, $27.6 million related to non-cash charges for depreciation and amortization expense, and $3.7 million in stock-based compensation expense. These amounts were offset by a $49.6 million increase in accounts receivable (net of allowance for doubtful accounts and deferred revenue), $22.7 million decrease in deferred income taxes, a $10.8 million decrease in other current liabilities, an $8.3 million increase in other assets and a $2.5 million decrease related to changes in other operating assets and liabilities.

Net cash used in investing activities for the nine months ended March 31, 2009 totaled $246.1 million and consisted of $189.0 million for the acquisition of ClinPhone and $57.1 million of capital expenditures, primarily for leasehold improvements and computer software and hardware.

Net cash used in investing activities for the nine months ended March 31, 2008 totaled $99.5 million and consisted of $55.3 million for acquisitions, $45.1 million of capital expenditures (primarily computer software and hardware and leasehold improvements related to the expansion of the Company’s Early Phase units); offset by $0.9 million of proceeds from the sale of fixed assets.

Net cash provided by financing activities for the nine months ended March 31, 2009 totaled $219.0 million and consisted of $215.4 million of net borrowings under lines of credit, $3.4 million in proceeds related to the issuance of common stock in conjunction with stock option and employee stock purchase plans, and $0.2 million related to other activities. The increase in net borrowings was due primarily to the acquisition of ClinPhone.

Net cash provided by financing activities for the nine months ended March 31, 2008 totaled $27.6 million, and consisted of $17.7 million of net borrowings and $9.9 million in proceeds related to the issuance of common stock in conjunction with the Company’s stock option and employee stock purchase plans.

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LINES OF CREDIT

2008 Credit Facility

We have a line of credit (the “2008 Credit Facility”) with JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan Europe Limited, as London Agent, and other lenders. The 2008 Credit Facility consists of an unsecured term loan facility of $150 million and an unsecured revolving credit facility of up to $165 million. A portion of the revolving loan facility is available for swingline loans of up to $20 million to be made by JP Morgan Chase Bank, N.A. and for letters of credit. We may request the lenders to increase the 2008 Credit Facility by an additional amount of up to $50 million, and such increase may, but is not committed to, be provided. Please see Note 11 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the 2008 Credit Facility.

As of March 31, 2009, we had approximately $281.4 million in principal amount of debt outstanding under the 2008 Credit Facility, including $137.0 million of principal borrowed under the revolving credit facility and $144.4 million of principal under the term loan, and remaining borrowing availability of approximately $28.0 million under the revolving credit facility. $150 million of principal under the 2008 Credit Facility has been hedged with an interest rate swap agreement and carries an interest rate of 4.8%. Currently, the debt under the 2008 Credit Facility, including the $150 million of principal hedged with an interest swap agreement, carries an average interest rate of 3.5%.

Additional Lines of Credit

We have a line of credit with ABN AMRO Bank, NV in the amount of Euro 12.0 million. This line of credit is not collateralized, is payable on demand, and bears interest at an annual rate ranging between 3% and 5%. The line of credit may be revoked or canceled by the bank at any time at its discretion. We primarily entered into this line of credit to facilitate business transactions with the bank. At March 31, 2009, we had Euro 12.0 million available under this line of credit.

We have a line of credit with HSBC UK in the amount of 2.0 million pounds sterling. This line of credit was established by ClinPhone and is guaranteed by PAREXEL International Holding BV. The line is not secured and bears interest at an annual rate ranging between 3% and 5%. At March 31, 2009, we had 2.0 million pounds sterling available under this line of credit.

We have other foreign lines of credit with banks totaling $2.0 million. These lines of credit are used as overdraft protection and bear interest at annual rates ranging from 3% to 5%. The lines of credit are payable on demand. At March 31, 2009, we had $2.0 million available under these arrangements.

We have a cash pooling arrangement with ABN AMRO Bank. Pooling occurs when debit balances are offset against credit balances and the net position is used as a basis by the bank for calculating interest. Each legal entity owned by PAREXEL and party to this arrangement remains the owner of either a credit or debit balance. Therefore, interest income is earned by legal entities with credit balances, while interest expense is charged to legal entities with debit balances. Based on the pool’s overall balance, the bank then (1) recalculates the overall interest to be charged or earned, (2) compares this amount with the sum of previously charged/earned interest amounts per account and (3) additionally pays/charges the difference.

FINANCING NEEDS

Our primary cash needs are for operating expenses, such as salaries and fringe benefits, hiring and recruiting, business development and facilities, and for business acquisitions, capital expenditures and repayment of principal and interest on our borrowings. Our requirements for cash to pay principal and interest on our borrowings will increase significantly in future periods because we borrowed approximately $192 million under the 2008 Credit Facility in August 2008 to finance the acquisition of ClinPhone. Our only committed external source of funds is under our 2008 Credit Facility described above. Our principal source of cash is from the performance of services under contracts with our clients. If we were unable to generate new contracts with existing and new clients or if the level of contract cancellations increased, our revenue and cash flow would be adversely affected (see “Part II, Item 1A—Risk Factors” for further detail). Absent a material adverse change in the level of our new business bookings or contract cancellations, we believe that our existing capital resources together with cash flow from operations and borrowing capacity under existing lines of credit will be sufficient to meet our foreseeable cash needs over the next twelve months and on a longer term basis. Depending upon our revenue and cash flow from operations, it is possible that we will require external funds to repay amounts outstanding under our 2008 Credit Facility upon maturity in 2013.

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We expect to continue to acquire businesses to enhance our service and product offerings, expand our therapeutic expertise, and/or increase our global presence; however, we are currently focused on integrating our recent acquisitions. Depending on their size, any such acquisitions may require additional external financing, and we may from time to time seek to obtain funds from public or private issuances of equity or debt securities. We may be unable to secure such financing at all or on terms acceptable to us.

On August 14, 2008, we acquired all of the issued shares of ClinPhone for approximately $192 million, comprised of $172 million in cash for the stock of ClinPhone and approximately $20 million as repayment of ClinPhone’s existing debt. We funded the acquisition and costs related to this acquisition with borrowings made under the 2008 Credit Facility, as discussed in “Lines of Credit” and Note 11 to our consolidated financial statements above.

We expect capital expenditures to total approximately $18 to $23 million in the remainder of Fiscal Year 2009, primarily for computer software and hardware and leasehold improvements. We made capital expenditures of approximately $57.2 million during the nine months ended March 31, 2009, primarily for leasehold improvements and computer software and hardware.

On September 9, 2004, our board of directors approved a stock repurchase program authorizing the purchase of up to $20.0 million of our common stock to be repurchased in the open market subject to market conditions. As of March 31, 2009, we had acquired 1,240,828 shares at a total cost of $14.0 million under this program. There were no repurchases made during the nine months ended March 31, 2009.

COMMITMENTS, CONTINGENCIES AND GUARANTEES

As of March 31, 2009, we had approximately $31.7 million in purchase obligations with various vendors for the purchase of computer software and other services.

Our unsecured senior credit facility consisting of a term loan facility for $150 million and a revolving credit facility for $165 million with a group of lenders (including and managed by JPMorgan Chase Bank, N.A.) is guaranteed by certain of the Company’s U.S. subsidiaries.

We have letter-of-credit agreements with banks totaling approximately $6.0 million guaranteeing performance under various operating leases and vendor agreements.

In March 2006, we conducted an early-phase clinical trial on behalf of TeGenero AG, a German pharmaceutical company. During the trial, six participants experienced adverse reactions to the TeGenero compound being tested. Through March 31, 2009, we have recorded approximately $1.8 million in legal fees and other incremental costs in connection with the incident. To date, none of the participants in the clinical trial have filed suit against us. We carry insurance to cover risks such as this, but our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims against us. While we believe that TeGenero is responsible to indemnify us with respect to claims related to this matter, TeGenero filed for insolvency in July 2006, which likely will limit any recovery by us from them. In addition, while TeGenero carried insurance with respect to this type of matter, that insurance also is subject to deductibles and coverage limits.

We periodically become involved in various claims and lawsuits that are incidental to our business. We believe, after consultation with counsel, that no matters currently pending would, in the event of an adverse outcome, have a material impact on our consolidated financial position, results of operations, or liquidity.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.

INFLATION

We believe the effects of inflation generally do not have a material adverse impact on our operations or financial condition.

RECENTLY ISSUED ACCOUNTING STANDARDS

For a discussion of new accounting pronouncements, see Note 9 to our consolidated financial statements included in this Quarterly Report on Form 10-Q.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

MARKET RISK

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency rates, interest rates, and other relevant market rates or price changes. In the ordinary course of business, we are exposed to market risk resulting from changes in foreign currency exchange rates, and we regularly evaluate our exposure to such changes. Our overall risk management strategy seeks to balance the magnitude of the exposure and the costs and availability of appropriate financial instruments.

FOREIGN CURRENCY EXCHANGE RATES AND INTEREST RATES

We derived approximately 63.0% of our consolidated service revenue for the nine months ended March 31, 2009 from operations outside of the U.S., of which 24.5% was denominated in Euros and 14.6% was denominated in pounds sterling. We derived approximately 64.9% of our consolidated service revenue for the nine months ended March 31, 2008 from operations outside of the U.S., of which 28.1% was denominated in Euros and 13.9% was denominated in pounds sterling. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between foreign currencies and the U.S. dollar will affect the translation of financial results into U.S. dollars for purposes of reporting our consolidated financial results.

It is our policy to mitigate the risks associated with fluctuations in foreign exchange rates and in market rates of interest. Accordingly, we have instituted foreign currency hedging programs and an interest rate swap program. See Note 15 to our consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on our hedging programs and interest rate swap program.

As of March 31, 2009, the programs with derivatives designated as hedging instruments under SFAS 133 were deemed effective and the notional values of the derivatives were approximately $230.3 million. Under certain circumstances, such as the occurrence of significant differences between actual cash receipts and forecasted cash receipts, the program could be deemed ineffective. In that event, the unrealized gains and losses related to these derivatives, and currently reported in accumulated other comprehensive income, would be recognized in earnings. As of March 31, 2009, the estimated amount that could be recognized in other income is a loss of approximately $6.3 million.

As of March 31, 2009, the notional value of derivatives that were not designated as hedging instruments under SFAS 133 was approximately $210.0 million. The potential change in the fair value of these foreign currency exchange contracts that would result from a hypothetical change of 10% in exchange rates would be approximately $21.0 million.

During the nine months ended March 31, 2009 and 2008, we recorded foreign exchange gains of $12.3 million and losses of $0.9 million, respectively. We acknowledge our exposure to additional foreign exchange risk as it relates to assets and liabilities that are not part of the economic hedge program, but quantification of this risk is difficult to assess at any given point in time.

Our exposure to interest rate changes relates primarily to the amount of our short-term and long-term debt. Short-term debt was $57.1 million at March 31, 2009 and $66.5 million at June 30, 2008. Long-term debt was $229.4 million and $3.5 million for the corresponding periods.

In connection with the borrowings under our credit facilities as described in Note 11 to the consolidated financial statements included in Item 1 of this quarterly report, we entered into interest rate exchange agreements to swap, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. The mark-to-market values of both the hedge instrument and underlying debt obligations are recorded as equal and offsetting amounts in other comprehensive income. We had interest rate exchange agreements with a notional amount of $150 million at March 31, 2009 and $35 million at June 30, 2008.

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ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2009. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2009, our chief executive officer and chief financial officer concluded that, as of such date, PAREXEL’s disclosure controls and procedures were effective at the reasonable assurance level.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We periodically become involved in various claims and lawsuits that are incidental to our business. We believe, after consultation with counsel, that no matters currently pending would, in the event of an adverse outcome, have a material impact on our consolidated financial position, results of operations, or liquidity.

ITEM 1A. RISK FACTORS

In addition to other information in this report, the following risk factors should be considered carefully in evaluating our Company and our business. These risk factors could cause our actual results to differ from those indicated by forward-looking statements made in this report, including in the section of this report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other forward-looking statements that we may make from time to time. If any of the following risks occur, our business, financial condition, or results of operations would likely suffer.

The following discussion includes eight new or revised risk factors (“Backlog may not result in revenue, and to the extent the mix of contracts in our backlog shifts toward larger contracts with a more global component, the rate at which this backlog converts into revenue may slow when compared to historical trends;” “Our business is subject to international economic, political, and other risks that could negatively affect our results of operations or financial position;” “Our revenue and earnings are exposed to exchange rate fluctuations;” “Our operating results have fluctuated between quarters and years and may continue to fluctuate in the future, which could affect the price of our common stock;” “Our indebtedness may limit cash flow available to invest in the ongoing needs of our business;” “Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets;” “New standards or changes in existing accounting standards issued by the Financial Accounting Standards Board (FASB), SEC or other standard setting bodies may adversely affect our financial statements and could entail significant expenditures. The application of these standards often requires the use of estimates and assumptions which may materially differ from actual results;” and “Our stock price has been, and may in the future be volatile, which could lead to losses by investors.”) that reflect material developments subsequent to the discussion of risk factors included in the 2008 10-K.

Additional risks not currently known to us or other factors not perceived by us to present significant risk to our business at this time also may impair our business operations.

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The loss, modification, or delay of large or multiple contracts may negatively impact our financial performance.

Our clients generally can terminate their contracts with us upon 30 to 60 days’ notice or can delay the execution of services. The loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our operating results, possibly materially. We have in the past experienced contract cancellations, which have adversely affected our operating results, including cancellations of a late-phase contract during the first quarter of Fiscal Year 2008 and a late-phase contract during the second quarter of Fiscal Year 2007.

Clients terminate or delay their contracts for a variety of reasons, including:

• failure of products being tested to satisfy safety requirements;

• failure of products being tested to satisfy efficacy criteria;

• products having unexpected or undesired clinical results;

• client cost reductions as a result of budgetary limit or changing priorities;

• client decisions to forego a particular study, perhaps for economic reasons;

• merger or potential merger related activities involving the client;

• insufficient patient enrollment in a study;

• insufficient investigator recruitment;

• clinical drug manufacturing problems resulting in shortages of the product;

• product withdrawal following market launch; and

• shut down of manufacturing facilities.

Certain clients may default on contractual obligations, which may negatively impact our financial performance.

Some of our clients do not generate revenue and rely upon venture capital and private equity investment to meet their capital needs. Due to the poor condition of the current global economy and other factors outside of our control, these clients may lack the funds necessary to meet outstanding liabilities to us, despite contractual obligations. In the second quarter of Fiscal Year 2009, one of our small biopharma clients informed us that it had encountered funding difficulties when one of its major investors defaulted on a contractual investment commitment. As a result, we recorded approximately $15.0 million in reserves related to this late-stage trial, including $12.3 million in bad debt reserves. Although we have reviewed the projects and clients in our backlog and receivables and believe that we do not have significant exposures of a similar nature from other clients, it is possible that a similar situation could arise in the future.

Backlog may not result in revenue, and the rate at which this backlog converts into revenue may slow when compared to historical trends.

Our backlog is not necessarily a meaningful predictor of future results because backlog can be affected by a number of factors, including the size and duration of contracts, many of which are performed over several years. Additionally, as described above, contracts relating to our clinical development business are subject to early termination by the client and clinical trials can be delayed or canceled for many reasons, including unexpected test results, safety concerns, regulatory developments or economic issues. Also, the scope of a contract can change significantly during the course of a study. If the scope of a contract is revised, the adjustment to backlog occurs when the revised scope is approved by the client. For these and other reasons, we might not fully realize our entire backlog as net revenue.

The rate at which our backlog converts into revenue may slow. A slowdown in this conversion rate means that the rate of revenue recognized on contract awards may be slower than what we have experienced in the past, which could impact our net revenue and results of operations on a quarterly and annual basis.

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We face intense competition in many areas of our business; if we do not compete effectively, our business will be harmed.

The biopharmaceutical services industry is highly competitive and we face numerous competitors in many areas of our business. If we fail to compete effectively, we may lose clients, which would cause our business to suffer.

We primarily compete against in-house departments of pharmaceutical companies, other full service clinical research organizations (“CROs”), small specialty CROs, and to a lesser extent, universities, teaching hospitals, and other site organizations. Some of the larger CROs against which we compete include Quintiles Transnational Corporation, Covance, Inc., Pharmaceutical Product Development Inc., and Icon plc. In addition, our PCMS business competes with a large and fragmented group of specialty service providers, including advertising/promotional companies, major consulting firms with pharmaceutical industry groups and smaller companies with pharmaceutical industry focus. Perceptive competes primarily with CROs, information technology companies and other software companies. Some of these competitors, including the in-house departments of pharmaceutical companies, have greater capital, technical and other resources than we have. In addition, our competitors that are smaller specialized companies may compete effectively against us because of their concentrated size and focus.

The fixed rate nature of our contracts could hurt our operating results.

Approximately 90% of our contracts are fixed rate. If we fail to accurately price our contracts or if we experience significant cost overruns, our gross margins on the contracts would be reduced and we could lose money on contracts. In the past, we have had to commit unanticipated resources to complete projects, resulting in lower gross margins on those projects. We might experience similar situations in the future.

If governmental regulation of the drug, medical device and biotechnology industry changes, the need for our services could decrease.

Governmental regulation of the drug, medical device and biotechnology product development process is complicated, extensive, and demanding. A large part of our business involves assisting pharmaceutical and biotechnology and medical device companies through the regulatory approval process. Changes in regulations, that, for example, streamline procedures or relax approval standards, could eliminate or reduce the need for our services. If companies regulated by the United States Food and Drug Administration (the “FDA”) or similar foreign regulatory authorities needed fewer of our services, we would have fewer business opportunities and our revenues would decrease, possibly materially.

In the United States, the FDA and the Congress have attempted to streamline the regulatory process by providing for industry user fees that fund the hiring of additional reviewers and better management of the regulatory review process. In Europe, governmental authorities have approved common standards for clinical testing of new drugs throughout the European Union by adopting standards for Good Clinical Practices (“GCP”) and by making the clinical trial application and approval process more uniform across member states. The FDA has had GCP in place as a regulatory standard and requirement for new drug approval for many years and Japan adopted GCP in 1998.

The United States, Europe and Japan have also collaborated for over 15 years on the International Conference on Harmonisation (“ICH”), the purpose of which is to eliminate duplicative or conflicting regulations in the three regions. The ICH partners have agreed upon a common format (the Common Technical Document) for new drug marketing applications that reduces the need to tailor the format to each region. Such efforts and similar efforts in the future that streamline the regulatory process may reduce the demand for our services.

Parts of our PCMS business advise clients on how to satisfy regulatory standards for manufacturing and clinical processes and on other matters related to the enforcement of government regulations by the FDA and other regulatory bodies. Any reduction in levels of review of manufacturing or clinical processes or levels of regulatory enforcement, generally, would result in fewer business opportunities for our business in this area.

If we fail to comply with existing regulations, our reputation and operating results would be harmed.

Our business is subject to numerous governmental regulations, primarily relating to worldwide pharmaceutical and medical device product development and regulatory approval and the conduct of clinical trials. If we fail to comply with these governmental regulations, it could result in the termination of our ongoing research, development or sales and marketing projects, or the disqualification of data for submission to regulatory authorities. We also could be barred from providing clinical trial services in the future or could be subjected to fines. Any of these consequences would harm our reputation, our prospects for future work and our operating results. In addition, we may have to repeat research or redo trials. If we are required to repeat research or redo trials, we may be contractually required to do so at no further cost to our clients, but at substantial cost to us.

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We may lose business opportunities as a result of health care reform and the expansion of managed-care organizations.

Numerous governments, including the U.S. government, have undertaken efforts to control growing health care costs through legislation, regulation and voluntary agreements with medical care providers and drug companies. In recent years, the U.S. Congress has reviewed several comprehensive health care reform proposals. The proposals are intended to expand health care coverage for the uninsured and reduce the growth of total health care expenditures. The U.S. Congress has also considered and may adopt legislation that could have the effect of putting downward pressure on the prices that pharmaceutical and biotechnology companies can charge for prescription drugs.

If these efforts are successful, drug, medical device and biotechnology companies may react by spending less on research and development. If this were to occur, we would have fewer business opportunities and our revenue could decrease, possibly materially. In addition, new laws or regulations may create a risk of liability, increase our costs or limit our service offerings.

In addition to health care reform proposals, the expansion of managed-care organizations in the health care market and managed-care organizations’ efforts to cut costs by limiting expenditures on pharmaceuticals and medical devices could result in pharmaceutical, biotechnology and medical device companies spending less on research and development. If this were to occur, we would have fewer business opportunities and our revenue could decrease, possibly materially.

We depend on the pharmaceutical and biotechnology industries, either or both of which may suffer in the short- or long-term.

Our revenues depend greatly on the expenditures made by the pharmaceutical and biotechnology industries in research and development. In some instances, companies in these industries are reliant on their ability to raise capital in order to fund their research and development projects. Accordingly, economic factors and industry trends that affect our clients in these industries also affect our business. If companies in these industries were to reduce the number of research and development projects they conduct or outsource, our business could be materially adversely affected.

In addition, we are dependent upon the ability and willingness of pharmaceutical and biotechnology companies to continue to spend on research and development and to outsource the services that we provide. We are therefore subject to risks, uncertainties and trends that affect companies in these industries. We have benefited to date from the tendency of pharmaceutical and biotechnology companies to outsource clinical research projects, but any downturn in these industries or reduction in spending or outsourcing could adversely affect our business. For example, if these companies expanded upon their in-house clinical or development capabilities, they would be less likely to utilize our services.

Because we depend on a small number of industries and clients for all of our business, the loss of business from a significant client could harm our business, revenue and financial condition.

The loss of, or a material reduction in the business of, a significant client could cause a substantial decrease in our revenue and adversely affect our business and financial condition, possibly materially. In Fiscal Years 2008, 2007, and 2006, our five largest clients accounted for approximately 31%, 28%, and 25% of our consolidated service revenue, respectively. We expect that a small number of clients will continue to represent a significant part of our consolidated revenue. Our contracts with these clients generally can be terminated on short notice. We have in the past experienced contract cancellations with significant clients.

If we do not keep pace with rapid technological changes, our products and services may become less competitive or obsolete, especially in our Perceptive business.

The biotechnology, pharmaceutical and medical device industries generally, and clinical research specifically, are subject to increasingly rapid technological changes. Our competitors or others might develop technologies, products or services that are more effective or commercially attractive than our current or future technologies, products or services, or render our technologies, products or services less competitive or obsolete. If our competitors introduce superior technologies, products or services and we cannot make enhancements to our technologies, products and services necessary to remain competitive, our competitive position would be harmed. If we are unable to compete successfully, we may lose clients or be unable to attract new clients, which could lead to a decrease in our revenue.

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If our Perceptive business is unable to maintain continuous, effective, reliable and secure operation of its computer hardware, software and internet applications and related tools and functions, its business will be harmed.

Our Perceptive business involves collecting, managing, manipulating and analyzing large amounts of data, and communicating data via the Internet. In our Perceptive business, we depend on the continuous, effective, reliable and secure operation of computer hardware, software, networks, telecommunication networks, Internet servers and related infrastructure. If the hardware or software malfunctions or access to data by internal research personnel or customers through the Internet is interrupted, our Perceptive business could suffer. In addition, any sustained disruption in Internet access provided by third parties could adversely impact our Perceptive business.

Although the computer and communications hardware used in our Perceptive business is protected through physical and software safeguards, it is still vulnerable to fire, storm, flood, power loss, earthquakes, telecommunications failures, physical or software break-ins, and similar events. And while certain of our operations have appropriate disaster recovery plans in place, we currently do not have redundant facilities everywhere in the world to provide IT capacity in the event of a system failure. In addition, the Perceptive software products are complex and sophisticated, and could contain data, design or software errors that could be difficult to detect and correct. If Perceptive fails to maintain and further develop the necessary computer capacity and data to support the needs of our Perceptive customers, it could result in a loss of or a delay in revenue and market acceptance. Additionally, significant delays in the planned delivery of system enhancements or inadequate performance of the systems once they are completed could damage our reputation and harm our business.

Finally, long-term disruptions in the infrastructure caused by events such as natural disasters, the outbreak of war, the escalation of hostilities, and acts of terrorism (particularly in areas where we have offices) could adversely affect our businesses. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur.

If we cannot retain our highly qualified management and technical personnel, our business would be harmed.

We rely on the expertise of our Chairman and Chief Executive Officer, Josef H. von Rickenbach, and it would be difficult and expensive to find a qualified replacement with the level of specialized knowledge of our products and services and the biopharmaceutical services industry. While we are a party to an employment agreement with Mr. von Rickenbach, it may be terminated by us or Mr. von Rickenbach upon notice to the other party.

In addition, in order to compete effectively, we must attract and retain qualified sales, professional, scientific, and technical operating personnel. Competition for these skilled personnel, particularly those with a medical degree, a Ph.D. or equivalent degrees, is intense. We may not be successful in attracting or retaining key personnel.

If we are unable to attract suitable willing investigators and volunteers for our clinical trials, our clinical development business might suffer.

The clinical research studies we run in our CRS segment rely upon the ready accessibility and willing participation of physician investigators and volunteer subjects. Investigators are typically located at hospitals, clinics or other sites and supervise administration of the study drug to patients during the course of a clinical trial. Volunteer subjects generally include people from the communities in which the studies are conducted. Our clinical research development business could be adversely affected if we were unable to attract suitable and willing investigators or volunteers on a consistent basis.

We may have substantial exposure to payment of personal injury claims and may not have adequate insurance to cover such claims.

Our CRS business primarily involves the testing of experimental drugs and medical devices on consenting human volunteers pursuant to a study protocol. Clinical research involves a risk of liability for personal injury or death to patients who participate in the study or who use a product approved by regulatory authorities after the clinical research has concluded, due to, among other reasons, possible unforeseen adverse side effects or improper administration of the drug or device by physicians. In some cases, these patients are already seriously ill and are at risk of further illness or death.

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In order to mitigate the risk of liability, we seek to include indemnity provisions in our CRS contracts with clients and with investigators. However, we are not able to include indemnity provisions in all of our contracts. In addition, even if we are able to include an indemnity provision in our contracts, the indemnity provisions may not cover our exposure if:

• we had to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnity agreement; or

• a client failed to indemnify us in accordance with the terms of an indemnity agreement because it did not have the financial ability to fulfill its indemnification obligation or for any other reason.

In addition, contractual indemnifications generally do not protect us against liability arising from certain of our own actions, such as negligence or misconduct.

We also carry insurance to cover our risk of liability. However, our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims. In addition, liability coverage is expensive. In the future, we may not be able to maintain or obtain liability insurance on reasonable terms, at a reasonable cost, or in sufficient amounts to protect us against losses due to claims.

In March 2006, we conducted an early-phase clinical trial on behalf of TeGenero AG, a German pharmaceutical company. During the trial, six participants experienced adverse reactions to the TeGenero compound being tested. Through March 31, 2009, we have recorded approximately $1.8 million in legal fees and other incremental costs in connection with the incident. To date, none of the participants in the clinical trial have filed suit against us. We carry insurance to cover risks such as this, but our insurance is subject to deductibles and coverage limits and may not be adequate to cover claims against us. While we believe that TeGenero is responsible to indemnify us with respect to claims related to this matter, TeGenero filed for insolvency in July 2006, which likely will limit any recovery of our legal fees and costs from them. In addition, while TeGenero carried insurance with respect to this type of matter, this insurance also is subject to deductibles and coverage limits.

Our business is subject to international economic, political, and other risks that could negatively affect our results of operations or financial position.

We provide most of our services on a worldwide basis. Our service revenue from non-U.S. operations represented approximately 63.0% and 64.9% of total consolidated service revenue for the nine months ended March 31, 2009 and 2008, respectively. More specifically, our service revenue from operations in Europe, Middle East and Africa represented 49.6% and 53.5% of total consolidated service revenue for the corresponding periods. Our service revenue from operations in the Asia/Pacific region represented 8.4% and 7.1% of total consolidated service revenue for the respective periods. Accordingly, our business is subject to risks associated with doing business internationally, including:

• changes in a specific country’s or region’s political or economic conditions, including Western Europe, in particular;

• potential negative consequences from changes in tax laws affecting our ability to repatriate profits;

• difficulty in staffing and managing widespread operations;

• unfavorable labor regulations applicable to our European or other international operations;

• changes in foreign currency exchange rates; and

• longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions.

Our operating results are impacted by the health of the North American, European and Asian economies. Our business and financial performance may be adversely affected by current and future economic conditions that cause a decline in business and consumer spending, including a reduction in the availability of credit, rising interest rates, financial market volatility and recession

Our revenue and earnings are exposed to exchange rate fluctuations.

We conduct a significant portion of our operations in foreign countries. Because our financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates could have and have had a significant effect on our operating results. For example, as a result of year-over-year foreign currency fluctuation, service revenue for the nine months ended March 31, 2009 was negatively impacted by approximately $48.2 million as compared with the same period in the previous year. Exchange rate fluctuations between local currencies and the U.S. dollar create risk in several ways, including:

• Foreign Currency Translation Risk. The revenue and expenses of our foreign operations are generally denominated in local currencies, primarily the pound sterling and the Euro, and are translated into U.S. dollars for financial reporting purposes. For the nine months ended March 31, 2009 and 2008, approximately 24.5% and 28.1% of consolidated service revenue was denominated in Euros, respectively. Revenue, denominated in pounds sterling, was 14.6% and 13.9% for the same periods. Accordingly, changes in exchange rates between foreign currencies and the U.S. dollar will affect the translation of foreign results into U.S. dollars for purposes of reporting our consolidated results.

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• Foreign Currency Transaction Risk. We may be subjected to foreign currency transaction risk when our foreign subsidiaries enter into contracts or incur liabilities denominated in a currency other than the foreign subsidiaries functional (local) currency. To the extent we are unable to shift the effects of currency fluctuations to the clients, foreign exchange fluctuations as a result of foreign currency exchange losses could have a material adverse effect on our results of operations.

Although we try to limit these risks through exchange rate fluctuation provisions stated in our service contracts, or by hedging transaction risk with foreign currency exchange contracts, we may still experience fluctuations in financial results from our operations outside of the U.S., and may not be able to favorably reduce the currency transaction risk associated with our service contracts.

Our operating results have fluctuated between quarters and years and may continue to fluctuate in the future, which could affect the price of our common stock.

Our quarterly and annual operating results have varied and will continue to vary in the future as a result of a variety of factors. For example, our income from operations totaled $26.4 million for the fiscal quarter ended March 31, 2009, and $7.7 million, $22.0 million, and $26.9 million for three preceding quarters. Factors that cause these variations include:

• the level of new business authorizations in a particular quarter or year;

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

• exchange rate fluctuations between quarters or years;

• restructuring charges;

• seasonality;

• the mix of services offered in a particular quarter or year;

• the timing of the opening of new offices;

• timing, costs and the related financial impact of acquisitions;

• the timing of internal expansion;

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

• the timing and amount of startup costs incurred in connection with the introduction of new products, services or subsidiaries

• the dollar amount of changes in contract scope finalized during a particular period; and

• the amount of any reserves we are required to record.

Many of these factors, such as the timing of cancellations of significant projects and exchange rate fluctuations between quarters or years, are beyond our control.

If our operating results do not match the expectations of securities analysts and investors, the trading price of our common stock will likely decrease.

Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.

As of March 31, 2009, we had approximately $281.4 million principal amount of debt outstanding and remaining borrowing availability of approximately $20.6 million under our revolving line of credit (subject to certain increases as provided in the facility agreement). We may incur additional debt in the future. Our leverage could have significant adverse consequences, including:

• requiring us to dedicate a substantial portion of any cash flow from operations to the payment of interest on, and principal of, our debt, which will reduce the amounts available to fund working capital and capital expenditures, and for other general corporate purposes;

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• increasing our vulnerability to general adverse economic and industry conditions;

• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and

• placing us at a competitive disadvantage compared to our competitors that have less debt.

Under the terms of the credit facility we entered into in June 2008, which we refer to as the 2008 Credit Facility, interest rates are fixed based on market indices at the time of borrowing and, depending upon the interest mechanism selected by us, may float thereafter. Some of our other smaller credit facilities also bear interest at floating rates. As a result, the amount of interest payable by us on our borrowings may increase if market interest rates change.

We may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing or any future debt. In addition, a failure to comply with the covenants under our existing debt instruments could result in an event of default under those instruments. In the event of an acceleration of amounts due under our debt instruments as a result of an event of default, we may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments. The covenants under our existing debt instruments limit our ability to obtain additional debt financing.

In addition, the terms of the 2008 Credit Facility provide that upon the occurrence of a change in control, as defined in the credit facility agreement, all outstanding indebtedness under the facility would become due. This provision may delay or prevent a change in control that stockholders may consider desirable.

Moreover, the United States credit markets are currently experiencing an unprecedented contraction. As a result of the tightening credit markets, we may not be able to obtain additional financing on favorable terms, or at all. If one or more of the financial institutions that supports our $165 million revolving credit facility fails, we may not be able to find a replacement, which would negatively impact our ability to borrow the remaining funds available under the facility.

Moreover, the 2008 Credit Facility will expire in June 2013. While we believe that our credit quality, strength of earnings and bank relationships will provide adequate options for bank participation and will result in the replacement, if necessary, of the 2008 Credit Facility at commercially reasonable terms, the recent and ongoing turmoil in the credit markets could affect our ability to replace the 2008 Credit Facility and/or further increase our funding costs.

Our effective income tax rate may fluctuate from quarter-to-quarter, which may affect our earnings and earnings per share.

Our quarterly effective income tax rate is influenced by our projected profitability in the various taxing jurisdictions in which we operate. Changes in the distribution of profits and losses among taxing jurisdictions may have a significant impact on our effective income tax rate, which in turn could have a material adverse effect on our net income and earnings per share. Factors that affect the effective income tax rate include, but are not limited to:

• the requirement to exclude from our quarterly worldwide effective income tax calculations losses in jurisdictions where no tax benefit can be recognized;

• actual and projected full year pretax income;

• changes in tax laws in various taxing jurisdictions;

• audits by taxing authorities; and

• the establishment of valuation allowances against deferred tax assets if it is determined that it is more likely than not that future tax benefits will not be realized.

Fluctuations in our effective income tax rate could cause fluctuations in our earnings and earnings per share, which can affect our stock price.

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Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.

As of March 31, 2009, our total assets included $322.2 million of goodwill and net intangible assets. We assess the realizability of our net intangible assets and goodwill annually as well as whenever events or changes in circumstances indicate that these assets may be impaired. These events or circumstances generally include operating losses or a significant decline in earnings associated with the acquired business or asset. Our ability to realize the value of the goodwill and indefinite-lived intangible assets will depend on the future cash flows of these businesses. These cash flows in turn depend in part on how well we have integrated these businesses. If we are not able to realize the value of the goodwill and indefinite-lived intangible assets, we may be required to incur material charges relating to the impairment of those assets.

New standards or changes in existing accounting standards issued by the Financial Accounting Standards Board (FASB), SEC or other standard setting bodies may adversely affect our financial statements and could entail significant expenditures. The application of these standards often requires the use of estimates and assumptions which may materially differ from actual results.

Our consolidated financial statements are currently subject to the application of U.S. Generally Accepted Accounting Principles (GAAP), which is periodically revised and/or expanded. Accordingly, we are required to adopt new or revised accounting standards issued by recognized authoritative bodies, including the FASB. It is possible that future changes in standards may change the current accounting treatment and that such changes could have a material adverse effect on our operating results and financial condition. (See Note 9, Recently Issued Accounting Standards, for recent developments in accounting standards.)

The preparation of our consolidated financial statements in compliance with GAAP often requires management to make estimates and assumptions based on available information at that time. These estimates and assumptions may ultimately differ from actual results and the impact could have a material adverse effect on our financial position and results of operations.

Our business has experienced substantial expansion in the past and such expansion and any future expansion could strain our resources if not properly managed.

We have expanded our business substantially in the past. For example, in August 2008, we completed the acquisition of ClinPhone, a leading clinical technology organization, for a purchase price of approximately $192 million, comprised of $172 million for the stock of ClinPhone and $20 million for repayment of ClinPhone’s existing debt. Future rapid expansion could strain our operational, human and financial resources. In order to manage expansion, we must:

• continue to improve operating, administrative, and information systems;

• accurately predict future personnel and resource needs to meet client contract commitments;

• track the progress of ongoing client projects; and

• attract and retain qualified management, sales, professional, scientific and technical operating personnel.

If we do not take these actions and are not able to manage the expanded business, the expanded business may be less successful than anticipated, and we may be required to allocate additional resources to the expanded business, which we would have otherwise allocated to another part of our business.

We may face additional risks in expanding our foreign operations. Specifically, we may find it difficult to:

• assimilate differences in foreign business practices, exchange rates and regulatory requirements;

• operate amid political and economic instability;

• hire and retain qualified personnel; and

• overcome language, tariff and other barriers.

We may make acquisitions in the future, which may lead to disruptions to our ongoing business.

We have made a number of acquisitions, including the recent acquisitions of APEX International Clinical Research Co., Ltd. in November 2007 and ClinPhone plc in August 2008, and we will continue to review new acquisition opportunities. If we are unable to successfully integrate an acquired company, the acquisition could lead to disruptions to our business. The success of an acquisition will depend upon, among other things, our ability to:

• assimilate the operations and services or products of the acquired company;

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• integrate acquired personnel;

• retain and motivate key employees;

• retain customers;

• identify and manage risks facing the acquired company; and

• minimize the diversion of management’s attention from other business concerns.

Acquisitions of foreign companies may also involve additional risks, including assimilating differences in foreign business practices and overcoming language and cultural barriers.

In the event that the operations of an acquired business do not meet our performance expectations, we may have to restructure the acquired business or write-off the value of some or all of the assets of the acquired business.

Our corporate governance structure, including provisions of our articles of organization, by-laws, shareholder rights plan, as well as Massachusetts law, may delay or prevent a change in control or management that stockholders may consider desirable.

Provisions of our articles of organization, by-laws and our shareholder rights plan, as well as provisions of Massachusetts law, may enable our management to resist acquisition of us by a third party, or may discourage a third party from acquiring us. These provisions include the following:

• we have divided our board of directors into three classes that serve staggered three-year terms;

• we are subject to Section 8.06 of the Massachusetts Business Corporation Law, which provides that directors may only be removed by stockholders for cause, vacancies in our board of directors may only be filled by a vote of our board of directors, and the number of directors may be fixed only by our board of directors;

• we are subject to Chapter 110F of the Massachusetts General Laws, which may limit the ability of some interested stockholders to engage in business combinations with us;

• our stockholders are limited in their ability to call or introduce proposals at stockholder meetings; and

• our shareholder rights plan would cause a proposed acquirer of 20% or more of our outstanding shares of common stock to suffer significant dilution.

These provisions could have the effect of delaying, deferring, or preventing a change in control of us or a change in our management that stockholders may consider favorable or beneficial. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions could also limit the price that investors might be willing to pay in the future for shares of our stock.

In addition, our board of directors may issue preferred stock in the future without stockholder approval. If our board of directors issues preferred stock, the rights of the holders of common stock would be subordinate to the rights of the holders of preferred stock. Our board of directors’ ability to issue the preferred stock could make it more difficult for a third party to acquire, or discourage a third party from acquiring, a majority of our stock.

Our stock price has been, and may in the future be volatile, which could lead to losses by investors.

The market price of our common stock has fluctuated widely in the past and may continue to do so in the future. On May 1, 2009, the closing sales price of our common stock on the Nasdaq Global Select Market was $9.56 per share. During the period from May 1, 2006 to May 1, 2009, our common stock closed at split adjusted prices ranging from a high of $35.81 per share to a low of $6.57 per share. Investors in our common stock must be willing to bear the risk of such fluctuations in stock price and the risk that the value of an investment in our stock could decline.

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Our stock price can be affected by quarter-to-quarter variations in a number of factors including, but not limited to:

• operating results;

• earnings estimates by analysts;

• market conditions in our industry;

• prospects of health care reform;

• changes in government regulations;

• general economic conditions, and

• our effective income tax rate.

In addition, the stock market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may adversely affect the market price of our common stock. Although our common stock has traded in the past at a relatively high price-earnings multiple, due in part to analysts’ expectations of earnings growth, the price of the stock could quickly and substantially decline as a result of even a relatively small shortfall in earnings from, or a change in, analysts’ expectations.

ITEM 6. EXHIBITS

See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this quarterly report, which Exhibit Index is incorporated by this reference.

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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.

	PAREXEL International Corporation
Date: May 8, 2009	By:	/s/ Josef H. von Rickenbach
		Josef H. von Rickenbach
		Chairman of the Board and Chief Executive Officer
Date: May 8, 2009	By:	/s/ James F. Winschel, Jr.
		James F. Winschel, Jr.
		Senior Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
31.1	Principal executive officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Principal financial officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Principal executive officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Principal financial officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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