OVERVIEW

We are 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. PAREXEL's product and service offerings include:
clinical trials management, data management, biostatistical analysis, medical communications services, clinical pharmacology, patient recruitment, regulatory and product development consulting, health policy and reimbursement, performance improvement, industry, medical imaging services, IVRS, CTMS, web-based portals, systems integration, patient diary applications, and other drug development consulting 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 are managed through three business segments: CRS, PCMS and Perceptive.

• CRS constitutes our core business and includes all phases of clinical research from first-in-man through post-marketing studies including clinical trials management and biostatistics, data management and clinical pharmacology, as well as related medical advisory, patient recruitment, and investigator site services.

• PCMS provides technical expertise and advice in such areas as drug development, regulatory affairs, and biopharmaceutical process and management consulting; PCMS also 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, web-based portals, systems integration, and patient diary applications.

We conduct a significant portion of our operations in foreign countries. Approximately 65.5% and 64.0% of our consolidated service revenue for the fiscal years ended June 30, 2008 and 2007, respectively, were from non-U.S. operations. 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 Fiscal Year 2008, 14.9% of total consolidated service revenue was denominated in pounds sterling and approximately 27.1% of total consolidated service revenue was denominated in Euros. For the Fiscal Year 2007, 16.0% of total consolidated service revenue was denominated in pounds sterling and approximately 28.9% of total consolidated service revenue was denominated in Euros. As a result of the weakening U.S. dollar against the pound sterling and the Euro in Fiscal Year 2008, our revenues and costs increased in Fiscal Year 2008 as compared with the amounts in Fiscal Year 2007, translated using the Fiscal Year 2007 foreign currency exchange rates.

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 on a milestone achievement basis. 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.

ACQUISITIONS

Acquisitions are an important component of our business strategy. We account for acquisitions using the purchase method in accordance with SFAS No. 141, "Business Combinations." Since June 30, 2005, we have completed the following acquisitions:

ClinPhone

Subsequent to the end of Fiscal Year 2008 (in August 2008), we completed the acquisition of ClinPhone, one of the world's leading clinical technology organizations for approximately $192 million, comprised of $172 million for the stock of ClinPhone and $20 million as repayment of ClinPhone's existing debt. We believe that the acquisition of ClinPhone will advance PAREXEL's position as a clinical technology leader. Biopharmaceutical companies have increasingly demanded technology solutions and expertise to support the full range of clinical development activities while improving the speed and efficiency of clinical programs. We believe that the combination of complementary capabilities of PAREXEL and ClinPhone will enable us to provide clients with a more comprehensive suite of clinical information technologies.

APEX

In September 2007, we acquired a majority of the outstanding shares of Taiwan-based APEX International Clinical Research Co., Ltd. ("APEX") and completed the acquisition of all of the outstanding shares of APEX in November 2007 for a total of approximately $55.3 million. The acquisition strengthened our global capabilities, providing clients with a wider range of clinical research service offerings throughout the Asia-Pacific region, including mainland China, Hong Kong, India, Taiwan, Singapore, Indonesia, South Korea, Malaysia, Thailand, the Philippines, New Zealand, and Australia.

BMR/CCT

In November 2006, we acquired substantially all of the assets of Behavioral and Medical Research, LLC ("BMR") and caused the transfer of all of the outstanding stock of California Clinical Trials Medical Group, Inc. ("CCT"). Established in 1981 with headquarters in San Diego, BMR/CCT provided a broad range of specialty Phase I - IV clinical research services through four clinical sites in California. In connection with the transaction, PAREXEL entered into a long-term management agreement with CCT. At the time, the acquisition expanded PAREXEL's global Clinical Pharmacology capacity to over 450 beds. It also brought new expertise to the Company's service offerings in the area of bridging studies, especially Japanese bridging studies, and added depth to our existing expertise in central nervous system clinical trials, neuroscience drug development services and sleep studies.

Synchron

In June 2006, we entered into a joint venture arrangement with Synchron Research Services Private Limited, under which Synchron transferred its clinical trial business operations located in Bangalore, India to a newly-formed entity, PAREXEL International Synchron Private Limited. We acquired a majority equity interest of 75.0% in the newly-formed entity. In addition, the Company paid approximately $2.4 million for a minority interest in Synchron's Phase I business. In Fiscal Year 2008, we increased our investment in this business to 31% for approximately $5.0 million.

Perceptive

In August 2005, we acquired all of the equity interests held by minority stockholders of Perceptive and now own all of the outstanding capital stock of Perceptive. Under the terms of the acquisition, we paid an aggregate of approximately $3.2 million in cash to the minority stockholders (including option holders upon exercise of stock options) for their shares of common stock of Perceptive. Prior to the acquisition, PAREXEL owned 97.8% of the outstanding common stock of Perceptive. Certain executive officers and directors of PAREXEL held shares of Perceptive common stock prior to the merger.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This 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. Actual results may differ from these estimates under different assumptions or conditions.

We regard an accounting estimate underlying our financial statements as a "critical accounting estimate" if the nature of the estimate or assumption is material due to the level of subjectivity and judgment involved or the susceptibility of such matter to change and if the impact of the estimate or assumption on financial condition or operating performance is material. We believe that the following accounting policies are most critical to aid in fully understanding and evaluating our reported financial results:

REVENUE RECOGNITION

Service revenue on fixed-price contracts is recognized as services are performed. We measure progress for fixed-price contracts using the concept of proportional performance based upon a unit-based output method. Changes in the scope of work generally result in a renegotiation of contract pricing terms. Renegotiated amounts are not included in net revenues until earned and realization is assured. Costs are not deferred in anticipation of contracts being awarded, but instead are expensed as incurred. Historically, there have not been any significant variations between contract estimates provided to clients and the actual cost incurred that were not recovered from clients.

The majority of our revenue arrangements include multiple deliverables and are divided into separate units of accounting if the deliverables meet certain criteria, including whether the delivered items have stand alone value and whether there is objective and reliable evidence of fair value of the undelivered items. In addition, we allocate the consideration among separate units of accounting based on their fair values, and consider the applicable revenue recognition criteria separately for each of the separate units of accounting. We determine "fair value" of undelivered items based upon our historic selling prices. Changes to the elements in an arrangement and the ability to establish objective evidence of fair value for those elements could affect the timing of revenue recognition. These conditions are sometimes subjective and actual results could vary from the estimated outcome, requiring future adjustments to revenue.

BILLED ACCOUNTS RECEIVABLE, UNBILLED ACCOUNTS RECEIVABLE AND DEFERRED REVENUE

Billed accounts receivable represent amounts for which invoices have been sent to clients. Unbilled accounts receivable represent amounts recognized as revenue for which invoices have not yet been sent to clients. Deferred revenue represents amounts billed or payments received for which revenue has not yet been earned. We maintain a provision for losses on receivables based on historical collectability and specific identification of potential problem accounts. In the event that we are unable to collect portions of our outstanding billed or unbilled receivables, there may be a material impact to our consolidated results of operations and financial position.

INCOME TAXES

PAREXEL's global provision for corporate income taxes is determined 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. A valuation allowance is established if it is more likely than not that future tax benefits from the deferred tax assets will not be realized. Income tax expense is based on the distribution of profit before tax among the various taxing jurisdictions in which we operate, adjusted as required by the tax laws of each taxing jurisdiction. Changes in the distribution of profits and losses among taxing jurisdictions may have a significant impact on our effective tax rate.

Effective July 1, 2007, we adopted the provisions of Financial Accounting Standards Board 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.

Interim tax provision calculations are prepared during the year based on estimates. Differences between these interim estimates and the final results for the year could materially impact our effective tax rate and our consolidated results of operations and financial position. We are required under Financial Interpretation No. 18, "Accounting for Income Taxes in Interim Periods - an Interpretation of APB Opinion No. 28" to exclude from our quarterly worldwide effective income tax rate calculation losses in jurisdictions where no tax benefit can be recognized. As a result, our effective tax rate may fluctuate significantly on a quarterly basis.

We are subject to ongoing audits by federal, state and foreign tax authorities that may result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is based on judgment. We believe we have adequately provided for any uncertain tax positions in accordance with FIN 48. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period assessments are made or resolved or when statutes of limitation on potential assessments expire.

GOODWILL

Goodwill represents the excess of the cost of an acquired business over the fair value of the related net assets at the date of acquisition. Under SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is subject to annual impairment testing or more frequent testing if an event occurs or circumstances change that would more likely than not reduce the carrying value of the reporting unit below its fair value. The impairment testing involves determining the fair market value of each of the reporting units with which the goodwill was associated and comparing that value with the reporting unit's carrying value. Based on this assessment, there have been no required adjustments to the carrying value of goodwill at any of our reporting units. Any future impairment of goodwill could have a material impact to our financial position or our results of operations.

RESULTS OF OPERATIONS

QUARTERLY OPERATING RESULTS (UNAUDITED)

The following is a summary of unaudited quarterly results of operations for the
years ended June 30, 2008 and 2007:



in thousands, except per share data                      For the year ended June 30, 2008
                                           First       Second        Third       Fourth
                                          Quarter      Quarter      Quarter      Quarter      Total Year
Service revenue                          $ 208,125    $ 238,653    $ 245,336    $ 272,169    $    964,283
Gross profit                                72,063       81,662       84,073       97,086         334,884
Income from operations                      16,528       20,482       22,721       26,935          86,666
Net income                                  13,885       11,531       14,186       25,038          64,640
Diluted earnings per share               $    0.24    $    0.20    $    0.25    $    0.43    $       1.12

in thousands, except per share data                      For the year ended June 30, 2007
                                           First       Second        Third       Fourth
                                          Quarter      Quarter      Quarter      Quarter      Total Year
Service revenue                          $ 165,057    $ 180,474    $ 191,215    $ 205,209    $    741,955
Gross profit                                56,569       60,844       66,927       73,728         258,068
Income from operations                      11,321       13,867       15,475       16,903          57,566
Net income                                   6,977        9,080       10,797       10,435          37,289
Diluted earnings per share               $    0.12    $    0.16    $    0.19    $    0.18    $       0.66

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, 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, PAREXEL has a global infrastructure supporting our business segments and therefore, assets are not identified by reportable segment. Service revenue, direct costs, and gross profit on service revenue for Fiscal Years 2008, 2007, and 2006 were as follows:

                                            Twelve Months Ended
 (in thousands)                                   June 30             Increase
                                             2008         2007       (Decrease)       %
 Service revenue
 Clinical Research Services               $   745,641   $ 548,838   $    196,803     35.9 %
 PAREXEL Consulting and MedCom Services       129,804     120,636          9,168      7.6 %
 Perceptive Informatics, Inc.                  88,838      72,481         16,357     22.6 %

 Total service revenue                    $   964,283   $ 741,955   $    222,328     30.0 %

 Direct costs
 Clinical Research Services               $   493,879   $ 358,555   $    135,324     37.7 %
 PAREXEL Consulting and MedCom Services        85,930      84,475          1,455      1.7 %
 Perceptive Informatics, Inc.                  49,590      40,857          8,733     21.4 %

 Total direct costs                       $   629,399   $ 483,887   $    145,512     30.1 %

 Gross profit
 Clinical Research Services               $   251,762   $ 190,283   $     61,479     32.3 %
 PAREXEL Consulting and MedCom Services        43,874      36,161          7,713     21.3 %
 Perceptive Informatics, Inc.                  39,248      31,624          7,624     24.1 %

 Total gross profit                       $   334,884   $ 258,068   $     76,816     29.8 %


                                            Twelve Months Ended
 (in thousands)                                   June 30             Increase
                                             2007         2006       (Decrease)       %
 Service revenue
 Clinical Research Services               $   548,838   $ 442,512   $    106,326     24.0 %
 PAREXEL Consulting and MedCom Services       120,636     117,129          3,507      3.0 %
 Perceptive Informatics, Inc.                  72,481      55,306         17,175     31.1 %

 Total service revenue                    $   741,955   $ 614,947   $    127,008     20.7 %

 Direct costs
 Clinical Research Services               $   358,555   $ 291,281   $     67,274     23.1 %
 PAREXEL Consulting and MedCom Services        84,475      79,680          4,795      6.0 %
 Perceptive Informatics, Inc.                  40,857      32,521          8,336     25.6 %

 Total direct costs                       $   483,887   $ 403,482   $     80,405     19.9 %

 Gross profit
 Clinical Research Services               $   190,283   $ 151,231   $     39,052     25.8 %
 PAREXEL Consulting and MedCom Services        36,161      37,449         (1,288 )   -3.4 %
 Perceptive Informatics, Inc.                  31,624      22,785          8,839     38.8 %

 Total gross profit                       $   258,068   $ 211,465   $     46,603     22.0 %

FISCAL YEAR ENDED JUNE 30, 2008 COMPARED WITH THE FISCAL YEAR ENDED JUNE 30,
2007

For Fiscal Year 2008, we had net income of $64.6 million. This represents a growth of $27.3 million from net income of $37.3 million for Fiscal Year 2007, due primarily to factors described in the following paragraphs. On a fully diluted basis, earnings per share increased to $1.12 for Fiscal Year 2008 from $0.66 for Fiscal Year 2007.

Revenues

Service revenue increased by $222.3 million, or 30.0%, to $964.3 million for the fiscal year ended June 30, 2008 from $742.0 million for the fiscal year ended June 30, 2007. On a geographic basis, service revenue for Fiscal Year 2008 was distributed as follows: the Americas - $377.9 million (39.2%); Europe, Middle East & Africa - $515.4 million (53.5%); and Asia/Pacific - $71.0 million (7.4%). For Fiscal Year 2007, service revenue was distributed as follows: the Americas - $290.7 million (39.2%); Europe, Middle East & Africa - $411.5 million (55.5%); and Asia/Pacific - $39.8 million (5.4%).

On a segment basis, CRS service revenue increased by $196.8 million, or 35.9%, to $745.6 million in Fiscal Year 2008 from $548.8 million in Fiscal Year 2007. Of the total $196.8 million increase, approximately $45.4 million was attributable to the positive impact of foreign currency fluctuations, $37.5 million was related to the APEX and BMR/CCT acquisitions, and the remaining $113.9 million was driven by strength in all phases of the business due to substantially higher demand for outsourcing services by biopharma companies and the ongoing success of our global strategy. PCMS service revenue increased by $9.2 million, or 7.6%, to $129.8 million in Fiscal Year 2008 from $120.6 million in Fiscal Year 2007. Of the total $9.2 million increase, approximately $4.1 million was related to the positive impact of foreign currency fluctuations and $5.1 million was primarily attributable to growth in PAREXEL Consulting driven by the strong reputation of this operating unit. Perceptive service revenue increased by $16.4 million, or 22.6%, to $88.8 million for Fiscal Year 2008 from $72.5 million for Fiscal Year 2007. Of the total $16.4 million increase, approximately $2.2 million was related to the positive impact of foreign currency fluctuations and $14.2 million was driven by strength in all operating units which can be attributed to strong industry demand and the success of our technology strategy.

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 $145.5 million, or 30.1%, to $629.4 million for Fiscal Year 2008 from $483.9 million for Fiscal Year 2007. As a percentage of total service revenue, direct costs increased to 65.3% from 65.2% for Fiscal Years 2008 and 2007, respectively. On a segment basis, CRS direct costs increased by $135.3 million, or 37.7%, to $493.9 million for Fiscal Year 2008 from $358.6 million for Fiscal Year 2007. Of the total $135.3 million increase, approximately $18.0 million was attributable to foreign currency fluctuations, with the remaining $117.3 million primarily due to increased hiring and training costs to support significant increases in backlog and business activity, as well as APEX-related costs (including costs of integration) and costs associated with a major productivity and efficiency initiative. As a percentage of service revenue, CRS direct costs increased to 66.2% for Fiscal Year 2008 from 65.3% for Fiscal Year 2007. PCMS direct costs remained relatively flat at $85.9 million in Fiscal Year 2008 from $84.5 million in Fiscal Year 2007. Of the total $1.4 million increase, $3.2 million was attributable to foreign currency fluctuations partially offset by $1.8 million in lower costs, primarily resulting from the divestiture of certain inefficient operations, improved productivity and efficiency, and the favorable impact of past restructuring activities. As a percentage of service revenue, PCMS direct costs decreased to 66.2% for Fiscal Year 2008 from 70.0% for Fiscal Year 2007. Perceptive direct costs increased by $8.7 million, or 21.4%, to $49.6 million in Fiscal Year 2008 from $40.9 million in Fiscal Year 2007. The year-over-year increase in Perceptive direct costs was due principally to higher labor costs incurred to support increased business activity levels. As a percentage of service revenue, Perceptive direct costs decreased to 55.8% in Fiscal Year 2008 from 56.4% in Fiscal Year 2007 primarily due to robust revenue growth and ongoing productivity and efficiency improvements.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expense increased by $41.7 million, or 24.6%, to $211.4 million in Fiscal Year 2008 from $169.7 million in Fiscal Year 2007. Of the total $41.7 million increase, $13.2 million was attributable to foreign exchange fluctuations, $5.2 million to incremental expenses from the APEX and BMR/CCT acquisitions, $13.2 million to increased personnel costs in information technology, finance, and selling and promotions, and $10.1 million was related to other sources, mainly facilities. As a percentage of service revenue, SG&A decreased to 21.9% in Fiscal Year 2008 from 22.9% in Fiscal Year 2007.

Depreciation and Amortization

Depreciation and amortization ("D&A") expense increased by $6.8 million, or 22.1%, to $37.7 million in Fiscal Year 2008 from $30.9 million for Fiscal Year . . .