The following discussion of the financial condition and results of operations of Life Sciences Research, Inc ("LSR") and Subsidiaries (collectively, "the Company") should be read together with the financial statements and related notes, which are included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. The Company's actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in more detail in its 2008 Annual Report on Form 10-K. The Company undertakes no obligation to update any information in its forward-looking statements.

OVERVIEW OF THE COMPANY'S BUSINESS

The Company provides pre-clinical and non-clinical biological safety evaluation research services to most of the world's leading pharmaceutical and biotechnology companies, as well as many agrochemical and industrial chemical companies. The purpose of this safety evaluation is to identify risks to humans, animals or the environment resulting from the use or manufacture of a wide range of chemicals, which are essential components of the Company's clients' products. The Company's services are designed to meet the regulatory requirements of governments around the world.

The Company's aim is to develop its business within these markets, principally in the pharmaceutical sector, and through organic growth. In doing so, the Company expects to benefit from strong drug pipelines in the pharmaceutical industry and a growing trend towards greater outsourcing as clients focus more internal resources on research and increasingly look to variabilize their development costs.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis of the Company's financial condition and operating results is based on the Company's financial statements. The preparation of this Quarterly Report requires the Company to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the Company's financial statements, and the reported amount of revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions. See "Notes to Unaudited Condensed Financial Statements" in Part I of this Quarterly Report for a presentation of the Company's significant accounting policies. No changes have been made to the Company's critical accounting policies and estimates disclosed in its 2008 Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Three months ended March 31, 2009 compared with three months ended March 31, 2008.

The Company is continuing to experience what it expects is a near term softness in demand driven by a number of factors, including reorganizations and reprioritizations within pharmaceutical industry customers, and contraction in spending by biotechnology customers who are facing a challenging financing environment. This impacted orders in the first quarter of 2009 with the result that orders for the quarter ended March 31, 2009 were $40.8 million, a 27% decrease on orders for the quarter ended March 31, 2008 at constant exchange rates. This reduction in orders, following on from a reduction in orders in the fourth quarter of 2008 and a significant weakening of the British Pound against the US dollar reduced revenues in the first quarter of 2009.

Net revenues for the three months ended March 31, 2009 were $48.0 million, a decrease of 24.0% on net revenues of $63.2 million for the three months ended March 31, 2008. The underlying decrease, after adjusting for the impact of the movement in exchange rates was 2.6%; with the UK showing a 0.4% decrease and the US a 10.4% decrease.

Cost of sales for the three months ended March 31, 2009 were $34.3 million (71.4% of revenue), a decrease of 20.9% on cost of sales of $43.4 million (68.6% of revenue) for the three months ended March 31, 2008. The underlying increase, after adjusting for the impact of the movement in exchange rates was 0.8% with the UK showing a 1.3% increase and the US a 1.0% decrease. The increase in cost of sales as a % of revenues was due to a 170 basis points increase in labor costs as a % of revenue and a 110 basis points increase in overhead costs as a % of revenue. In part this was due to a reduction in capacity utilization consequent upon the decline in revenue. The increase in overhead costs as a % of revenue also reflected higher utility costs.

Selling, general and administrative expenses ("SG&A") decreased by 22.9% to $7.9 million for the three months ended March 31, 2009 from $10.2 million in the corresponding period in 2008. The underlying decrease, after adjusting for the impact of the movement in exchange rates was 6.2%. That decrease in costs was primarily due to a reduction in incentive accruals and stock option expenses.

Net interest expense decreased by 8.6% to $2.6 million for the three months ended March 31, 2009 from $2.8 million for the three months ended March 31, 2008. This decrease of $0.2 million was due to a $0.2 million net interest saving associated with the March 2006 Financing and a $0.2 million decrease in capital lease interest expense, offset by a $0.2 million decrease in interest income.

Other expense of $87 thousand for the three months ended March 31, 2009 comprised $135 thousand from the non-cash foreign exchange re-measurement expense on the March 2006 Financing denominated in US dollars (the functional currency of the financing Subsidiary that holds the loan is UK sterling), offset by other exchange gains of $48 thousand. In the three months ended March 31, 2008 other expense of $50 thousand comprised non-cash foreign exchange re-measurement loss on the March 2006 Financing denominated in US dollars (the functional currency of the financing Subsidiary that holds the loan is UK sterling) and other exchange losses of $10 thousand.

Income tax benefit for the three months ended March 31, 2009 was $0.4 million. This reflects a tax benefit arising in the US, which the Company expects to utilize during the course of 2009. The income tax expense for the three months ended March 31, 2008 was $0.1 million. Net operating losses are $87.7 million at March 31, 2009, with net operating losses in the US of $16.1 million and net operating losses in the UK of $71.6 million.

Net income for the three months ended March 31, 2009 was $3.7 million compared with net income of $6.7 million for the three months ended March 31, 2008. The decrease in net income of $3.0 million is due to a $3.8 million decrease in operating income, offset by a decrease in the net interest expense of $0.2 million and an increase in the income tax benefit of $0.6 million.

Net income per outstanding common share for the three months ended March 31, 2009 was 27 cents, compared to 53 cents income in the three months ended March 31, 2008, on the weighted average common shares outstanding of 13,346,915 and 12,633,031 respectively. Net income per fully diluted share for the three months ended March 31, 2009 was 25 cents, compared to 44 cents in the three months ended March 31 2008, on the weighted average fully diluted common shares outstanding of 14,461,580 and 15,405,691 respectively.

LIQUIDITY & CAPITAL RESOURCES

Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2009 were $38.0 million and were held in
accounts denominated in the following currencies:

                  Currency                       March 31, 2009
                  (Amounts in USD Equivalents)   $           000

                  Dollar                                  24,044
                  Sterling                                12,052
                  Euro                                     1,815
                  Yen                                        107
                                                          38,018

The Company retains sufficient working capital in the appropriate currencies to meet its local short term requirements. These local currency balances are normally funded by the collection of similar currency accounts receivables. Excess cash is converted into US Dollars and held on deposit to act as an economic hedge against the Company's US Dollar denominated debt.

The Company has approximately $78 million of outstanding debt. $57 million of this debt relates to the March 2006 Financing, and is repayable on March 1, 2011. In addition, the Company has a long term lease of $21 million arising on the sale and leaseback deal (Alconbury) which is classed as long-term debt.

The Company's expected primary cash needs on both a short-term and a long-term basis are for capital expenditures, expansion of services, possible future acquisitions, geographic expansion, working capital and other general corporate purposes, including possible share repurchases.

As of March 31, 2009, the Company had a working capital surplus of $16.9 million, and the Company believes that projected cash flow from operations will satisfy its contemplated cash requirements for at least the next 12 months.

Net days sales outstanding ("DSO") at March 31, 2009 were 27 days, a decrease from the 30 days at December 31, 2008 (23 days at March 31, 2008). DSO is calculated as a sum of accounts receivable, unbilled receivables and fees in advance over total net revenue. The impact on liquidity from a one-day change in DSO is approximately $483,000.

During the three months ended March 31, 2009, the Company's operating activities generated net cash of $4.4 million. The change in net operating assets and liabilities used $1.9 million, mainly caused by the decrease in accounts payable, accrued expenses and other liabilities, which used $2.7 million, offset by the decrease in DSO which generated $1.7 million.

Investing activities for the three months ended March 31, 2009 used $2.1 million, as a result of capital expenditures.

Financing activities for the three months ended March 31, 2009 used $0.6 million, due to capital repayments of the March 2006 Financing.

The effect of exchange rate movements on cash for the three months ended March 31, 2009 was a decrease of $0.2 million.

The Company's cash balances increased by $1.5 million during the three months ended March 31, 2009.

OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2009, the Company did not engage in any off-balance sheet arrangements as defined in Item 303 (a) (4) of Regulation S-K under the Securities Act of 1933, as amended, that have, or are likely to have, a material current or future effect on its consolidated financial position or results of operations.

Recently Issued Accounting Standards
Effective January 1, 2009, the Company adopted SFAS No. 141(R), "Business Combinations - a replacement of FASB Statement No. 141" ("SFAS 141R"). Under SFAS 141R, an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of provision for taxes. In addition, acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life. For the Company, SFAS 141R is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of January 1, 2009, with the exception of the accounting for valuation allowances on deferred taxes and acquired contingencies under SFAS 109. With the adoption of SFAS 141R, any tax related adjustments associated with acquisitions that closed prior to January 1, 2009 will be recorded through income tax expense, whereas the previous accounting treatment would require any adjustment to be recognized through the purchase price. The adoption of SFAS 141R did not have any impact on the Company's consolidated financial statement as of and for the three months ended March 31, 2009.

Effective January 1, 2009, the Company adopted FASB Staff Position 157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2"). FSP 157-2 delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until the beginning of the first quarter of fiscal 2009. These include goodwill and other non-amortizable intangible assets. The adoption of SFAS 157 to non-financial assets and liabilities did not have a significant impact on the Company's consolidated financial statements.

Effective January 1, 2009, the Company adopted FASB Staff Position No. 142-3, "Determination of the Useful Life of Intangible Assets " ("FSP 142-3"). FSP 142-3 amends FASB Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R and other U.S. GAAP. The adoption did not have a material impact on the Company's consolidated results of operations or financial condition.

In December 2008, the FASB issued FASB Staff Position 132(R)-1 ("FSP 132R-1"), which provides guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP 132R-1 requires disclosure of investment allocation methodologies and information that enables users of financial statements to assess the inputs and valuation techniques used to develop fair value measurements of plan assets in order to provide users with an understanding of significant concentrations of risk in plan assets. FSP 132R-1 is effective for years ending after December 15, 2009. FSP 132R-1 requires additional disclosure only and therefore, will not impact the Company's consolidated results of operations or financial position.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.