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 (the "Exchange Act"), 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," "appears," "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, 2009, filed on August 28, 2009 (the "2009 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

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. Our 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, ClinPhone RTSM, CTMS, EDC, 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 Early Phase (encompassing the early stages of clinical testing that range from first-in-man through proof-of-concept studies, formerly referred to as "Clinical Pharmacology") to Late Phase (encompassing the later stages of clinical testing, formerly referred to as "Phases II-IV"). Our services include clinical trials management and biostatistics, data management and clinical pharmacology, as well as related medical advisory, patient recruitment, clinical supply and drug logistics, pharmacovigilance, 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, ClinPhone RTSM, CTMS, EDC, web-based portals, systems integration, and patient diary applications.

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 the 2009 10-K.

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. We completed our annual impairment testing in the fourth quarter of Fiscal Year 2009 and determined that there were no required adjustments to the carrying value of goodwill at any of our reporting units. 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. We determined fair value using a discounted cash flow analysis at the reporting unit level. This analysis included significant judgment regarding the assumptions used, such as our weighted average cost of capital, revenue growth rates, profit margins, capital expenditures, and other factors that were all based on current strategic forecasts and other financial metrics. As of September 30, 2009, we do not believe that any of our reporting units are at risk of failing this initial step of goodwill impairment testing.

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 charges, 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, we do not identify assets by reportable segment. Service revenue, direct costs and gross profit on service revenue for the three months ended September 30, 2009 and 2008 were as follows:

                                                 Three Months Ended                     Increase
($ in thousands)                    September 30, 2009        September 30, 2008       (Decrease)           %
Service revenue
Clinical Research Services         $             202,324     $            202,823     $       (499 )       -0.2 %
PAREXEL Consulting and MedCom
Services                                          28,821                   30,111           (1,290 )       -4.3 %
Perceptive Informatics, Inc.                      28,618                   30,112           (1,494 )       -5.0 %

Total service revenue              $             259,763     $            263,046     $     (3,283 )       -1.2 %


Direct costs
Clinical Research Services         $             129,282     $            131,902     $     (2,620 )       -2.0 %
PAREXEL Consulting and MedCom
Services                                          18,431                   20,163           (1,732 )       -8.6 %
Perceptive Informatics, Inc.                      19,116                   19,299             (183 )       -0.9 %

Total direct costs                 $             166,829     $            171,364     $     (4,535 )       -2.6 %


Gross profit
Clinical Research Services         $              73,042     $             70,921     $      2,121          3.0 %
PAREXEL Consulting and MedCom
Services                                          10,390                    9,948              442          4.4 %
Perceptive Informatics, Inc.                       9,502                   10,813           (1,311 )      -12.1 %

Total gross profit                 $              92,934     $             91,682     $      1,252          1.4 %

Three Months Ended September 30, 2009 Compared With Three Months Ended September 30, 2008:

For the three months ended September 30, 2009, we had net income of $12.4 million compared with net income of $13.6 million for the three months ended September 30, 2008. On a fully diluted basis, earnings per share decreased slightly to $0.21 from $0.23 for the respective periods.

Revenues

Service revenue decreased by $3.2 million, or 1.2%, to $259.8 million for the
three months ended September 30, 2009 from $263.0 million for the three months
ended September 30, 2008. On a geographic basis, service revenue was distributed
as follows (in millions):



                                        Three months ended September 30, 2009                   Three months ended September 30, 2008
Region                                 Service Revenue              % of Total                 Service Revenue              % of Total
The Americas                        $               101.6                    39.1 %         $               102.3                    38.9 %
Europe, Middle East & Africa        $               129.6                    49.9 %         $               140.4                    53.4 %
Asia/Pacific                        $                28.6                    11.0 %         $                20.3                     7.7 %

Service revenue in The Americas decreased by $0.7 million, or 0.7%; Europe, Middle East & Africa service revenue decreased by $10.8 million, or 7.7%; and Asia/Pacific service revenue increased by $8.3 million, or 40.8%. Service revenue in Europe, Middle East & Africa was negatively impacted by foreign currency fluctuations of approximately $14.8 million. The negative impact of foreign currency fluctuations in the Americas was approximately $2.3 million, while the impact in Asia/Pacific was minimal.

On a segment basis, CRS service revenue decreased slightly to $202.3 million for the three months ended September 30, 2009 from $202.8 million for the three months ended September 30, 2008. The $0.5 million decrease was attributable to approximately $12.0 million related to the negative impact of foreign currency fluctuations and a $4.7 million decrease in our Early Phase business due, in part, to weakness in the small biopharma market segment; partially offset by a $16.2 million increase in the Late Phase portions of the business as a result of growth in the Americas and Asia/Pacific regions.

PCMS service revenue decreased by $1.3 million, or 4.3%, to $28.8 million for the three months ended September 30, 2009 from $30.1 million for the same period in 2008. The decrease was due primarily to the negative $2.2 million impact of foreign currency fluctuations; partially offset by a net $0.9 million increase in our business, particularly in consulting services.

Perceptive service revenue decreased by $1.5 million, or 5.0%, to $28.6 million for the three months ended September 30, 2009 from $30.1 million for the three months ended September 30, 2008. The decrease was due primarily to the negative $2.0 million impact of foreign currency fluctuations; partially offset by a $0.3 million increase in revenues from ClinPhone (which was acquired in August 2008) and a net $0.2 million increase in our other service lines, including growth in our product support fees and medical imaging. Perceptive revenue for the three months ended September 30, 2008 included $5.7 million related to certain accounting adjustments that were subsequently reversed in the fourth quarter of Fiscal Year 2009.

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 decreased by $4.5 million, or 2.6%, to $166.8 million for the three months ended September 30, 2009 from $171.3 million for the three months ended September 30, 2008. As a percentage of total service revenue, direct costs decreased to 64.2% from 65.2% for the respective periods.

On a segment basis, CRS direct costs decreased by $2.6 million, or 2.0%, to $129.3 million for the three months ended September 30, 2009 from $131.9 million for the three months ended September 30, 2008. This decrease was due primarily to the positive impact of $6.3 million in foreign currency fluctuations and a $1.0 million decrease in our Early Phase business due to a lower volume of business; partially offset by a $4.7 million increase in our Late Phase business to support higher business volume. As a percentage of service revenue, CRS direct costs decreased to 63.9% for the three months ended September 30, 2009 from 65.0% for the three months ended September 30, 2008 due primarily to strong performance in Asia/Pacific, the continued effectiveness of cost controls, and improved productivity and efficiency.

PCMS direct costs decreased by $1.7 million, or 8.6%, to $18.4 million for the three months ended September 30, 2009 from $20.1 million for the three months ended September 30, 2008. This $1.7 million decline was due primarily to $0.6 million in decreases related to lower business activity and $1.1 million related to the impact of positive foreign currency fluctuations. As a percentage of service revenue, PCMS direct costs decreased to 63.9% from 67.0% for the respective periods. This reduction resulted from efforts by PCMS to implement substantial improvements in business processes, mainly related to the strategic marketing portion of the business and the shedding of certain unprofitable service lines.

Perceptive direct costs decreased slightly by $0.2 million, or 1.0%, to $19.1 million for the three months ended September 30, 2009 from $19.3 million for the three months ended September 30, 2008. This decrease was due primarily to a $1.2 million decrease in our legacy IVRS business, a $0.9 million decrease in our medical imaging business and the positive impact of foreign currency fluctuations of approximately $0.8 million; partially offset by a $1.9 million increase in the direct costs of ClinPhone (which was acquired in August 2008) and a $0.8 million increase in our other business lines, primarily in the product support areas. As a percentage of service revenue, Perceptive direct costs increased to 66.8% for the three months ended September 30, 2009 from 64.1% for the three months ended September 30, 2008. This increase was due primarily to lower utilization rates and slower revenue growth.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expense increased by $2.6 million, or 4.6%, to $60.3 million for the three months ended September 30, 2009 from $57.7 million for the three months ended September 30, 2008. This increase was due primarily to a $3.8 million increase in the SG&A of ClinPhone (which was acquired in August 2008), $2.7 million from higher facilities costs, and $1.2 million from an increase in various other expenses including research and development, selling costs, and compensation; partially offset by $5.1 million attributable to foreign exchange fluctuations. As a percentage of service revenue, SG&A increased to 23.2% for the three months ended September 30, 2009 from 21.9% for the three months ended September 30, 2008 resulting from the slowdown in service revenue growth.

Depreciation and Amortization

Depreciation and amortization ("D&A") expense increased by $2.1 million, or 17.9%, to $14.1 million for the three months ended September 30, 2009 from $12.0 million for the three months ended September 30, 2008, primarily due to incremental D&A expense associated with ClinPhone and additional depreciation expense due to increased capital expenditures. As a percentage of service revenue, D&A increased to 5.4% for the three months ended September 30, 2009 from 4.5% for the same period in 2008.

Other Income and Expense

We recorded net other expense of $0.8 million for the three months ended September 30, 2009 compared with net other expense of $0.7 million for the three months ended September 30, 2008.

Taxes

For the three months ended September 30, 2009 and 2008, we had an effective income tax rate of 29.8% and 35.4% respectively. The decrease in the tax rate for the three months ended September 30, 2009, compared with the same period in 2008, was primarily attributable to a $1.0 million reduction in prior year interest accrued on tax reserves.

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 the costs of acquisitions and capital expenditures for information systems enhancements and leasehold improvements. As of September 30, 2009, we had cash and cash equivalents of approximately $96.7 million.

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 58 days at September 30, 2009, 57 days at June 30, 2009, and 66 days at September 30, 2008. Accounts receivable, net of provision for losses on receivables, totaled $492.0 million ($255.7 million in billed accounts receivable and $236.3 million in unbilled accounts receivable) at September 30, 2009 and $481.3 million ($251.2 million in billed accounts receivable and $230.1 million in unbilled accounts receivable) at June 30, 2009 and $457.7 million ($253.7 million in billed accounts receivable and $204.0 million in unbilled accounts receivable) at September 30, 2008. Deferred revenue was $270.9 million at September 30, 2009, $266.5 million at June 30, 2009, and $195.6 million at September 30, 2008. We calculate DSO by adding the end-of-period balances for 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 the three months ended September 30, 2009 totaled $14.4 million and was generated by net income of $12.4 million, non-cash charges for depreciation and amortization expense in the amount of $14.1 million, and $1.5 million related to non-cash charges for stock-based compensation. These sources of cash were offset by $13.6 million related to changes in operating assets and liabilities - composed of a $9.2 million increase in accounts receivable (net of allowance for doubtful accounts and deferred revenue), a $6.9 million increase in prepaid expenses and other current assets, and a $5.2 million increase in other assets; partly offset by a $7.7 million increase in taxes payable and other long-term liabilities.

Net cash used in investing activities for the three months ended September 30, 2009 totaled $15.4 million for capital expenditures, primarily computer software and hardware and leasehold improvements.

Net cash used in financing activities for the three months ended September 30, 2009 totaled $2.0 million, and consisted of $2.8 million of repayment under a line of credit; offset by $0.8 million in proceeds related to the issuance of common stock in conjunction with our stock option plan.

Net cash used in operating activities the three months ended September 30, 2008 totaled $6.3 million and was generated by net income of $13.6 million, non-cash charges for depreciation and amortization expense in the amount of $12.0 million, an increase in deferred income taxes of $8.8 million, $1.6 million related to non-cash charges for stock-based compensation, and $0.5 million of minority interest. These sources of cash were offset by a $20.6 million decrease in other current liabilities (mainly related to the payment of management bonuses), a $13.4 million decrease in accounts payable and other accrued expenses, a $3.9 million decrease in accounts receivable (net of allowance for doubtful accounts and deferred revenue), a $2.6 million decrease in long-term liabilities, and a $2.3 million decrease in other current assets and other assets.

Net cash used in investing activities for the three months ended September 30, 2008 totaled $204.4 million and consisted of $185.3 million for the acquisition of ClinPhone and $19.1 million of capital expenditures, primarily computer software and hardware and leasehold improvements.

Net cash provided by financing activities for the three months ended September 30, 2008 totaled $211.2 million, and consisted of $208.6 million of net borrowings under a line of credit and $2.6 million in proceeds related to the issuance of common stock in conjunction with our stock option plan. The increase in net borrowings was due primarily to the acquisition of ClinPhone.

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 10 to our Condensed Consolidated Financial Statements included in this quarterly report on Form 10-Q for more information on the 2008 Credit Facility.

As of September 30, 2009, we had $271.0 million in principal amount of debt outstanding under the 2008 Credit Facility, consisting of $136.0 million of principal borrowed under the revolving credit facility and $135.0 million of principal under the term loan, and remaining borrowing availability of approximately $29.0 million under the revolving credit facility. Principal in the amount of $150 million under the 2008 Credit Facility has been hedged with an interest rate swap agreement and carries an interest rate of 4.8%. Currently, our debt under the 2008 Credit Facility, including the $150 million of principal hedged with an interest swap agreement, carries an average interest rate of 3.2%.

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 2% and 4%. The line of credit may be revoked or canceled by ABN AMRO Bank, NV at any time at its discretion. We primarily entered into this line of credit to facilitate business transactions with ABN AMRO Bank, NV. At September 30, 2009, we had Euro 12.0 million available under this line of credit.

We also 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 2% and 4%. At September 30, 2009, we had 2.0 million pounds sterling available under this line of credit.

We have an unsecured line of credit with JP Morgan UK in the amount of $4.5 million that bears interest at an annual rate ranging between 2% and 4%. We entered into this line of credit primarily to facilitate business transactions with JP Morgan UK. At September 30, 2009, we had $4.5 million available under this line of credit.

We have a cash pooling arrangement with ABN AMRO Bank. Pooling occurs when debit balances are offset against credit balances and the overall net position is used as a basis by the bank for calculating the overall pool interest amount. Each legal entity owned by PAREXEL and party to this arrangement remains the owner of either a credit (deposit) or debit (overdraft) 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. The gross overdraft balance related to this pooling arrangement was $137.4 million and $117.9 million at September 30, 2009 and June 30, 2009, respectively.

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