Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-K 
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
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: 001-36730

SYNEOS HEALTH, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
27-3403111
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
3201 Beechleaf Court, Suite 600
Raleigh, North Carolina
 
27604-1547
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (919) 876-9300

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share
 
The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ý   No  ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or section 15(d) of the Exchange Act.  Yes  ¨   No  ý
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  ý   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ý   No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ¨  
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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): 
Large accelerated filer x
  
Accelerated filer ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)
  
Smaller reporting company  ¨
 
 
Emerging growth company   ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based on the closing sale price of $58.50 on June 30, 2017, was approximately $3,169,493,379. Common stock held by each officer and director and by each person known to the registrant who owned 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 21, 2018, there were approximately 104,584,053 shares of the registrant's common stock outstanding. 
Portions of the registrant’s Proxy Statement for its 2018 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.




SYNEOS HEALTH, INC.
FORM 10-K
For the Fiscal Year Ended December 31, 2017

TABLE OF CONTENTS
 
 
 
 
 
Page
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
 
 
Item 5.
Item 6
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
 
Item 15.
 
 


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PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements reflect, among other things, our current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words “anticipates,” “believes,” "can," "continue," "could," “estimates,” “expects,” “intends,” “may,” "might," “plans,” “projects,” “should,” "would," “targets,” “will” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part I, Item 1A, "Risk Factors" in this Annual Report on Form 10-K. Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.
As used in this report, the terms "Syneos Health, Inc.," "Company," "we," "us," and "our" mean Syneos Health, Inc. and its subsidiaries unless the context indicates otherwise.
Item 1. Business.
Overview
We are a leading global biopharmaceutical services organization providing product development and commercial solutions through our clinical end-to-end contract research organization (“CRO”) and contract commercial organization (“CCO”). We offer both standalone and integrated biopharmaceutical solutions ranging from Early Phase (Phase I) clinical trials to the full commercialization of biopharmaceutical products. Our ability to achieve end-to-end solutions is based on our biopharmaceutical acceleration model ("BAM") where we synchronize our clinical and commercial capabilities – sharing knowledge, data, and insights.
Our customers include large and small to mid-sized companies in the biopharmaceutical, biotechnology, and medical device industries. Our revenue is derived through a broad suite of services designed to enhance our customers’ ability to successfully develop, launch, and market products. Our competitive strengths include our broad continuum of clinical and commercial solutions, with our proprietary Trusted Process® methodology leading to faster, better-informed product development decisions, a focused effort on clinical research site relationships, robust data assets, and clinical trial design fueled by patient-centric commercial insights.
Our organization has been recognized for innovative and best-in-class work. Our Clinical Solutions organization was named the "Top CRO to Work With" among the top global CROs in the 2017 CenterWatch Global Investigative Site Relationship Survey and the 2017 Society for Clinical Research Sites ("SCRS") Eagle Award in the CRO category. In addition, we also participate at the highest level of membership within the SCRS as a Global Impact Partner. Across our Commercial Solutions organization, our consulting business has been recognized by Forbes magazine as one of America’s Best Management Consulting Firms for the past two years, and our communications businesses have won more than 1,000 awards over the last decade. These awards include, among others, the 2017 Medical Marketing & Media Agency of the Year, PM360 Greatest Creators and Trailblazer awards, and SABRE Superior Achievement in Branding, Reputation & Engagement.
Founded more than three decades ago as an academic organization dedicated to central nervous system ("CNS") research, we have translated that expertise into a global organization with deep therapeutic specialties, as well as full data services and regulatory advisory and implementation support capabilities. Over the past decade, we have built our scale and capabilities to become a leading global provider of Phase I to Phase IV clinical development services. We were established as INC Research in 1998, and our corporate

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headquarters is located in Raleigh, North Carolina. As a result of a corporate reorganization in connection with a business combination transaction, INC Research Holdings, Inc., was incorporated in Delaware in August 2010, and we changed our name to Syneos Health, Inc. after our 2017 Merger with inVentiv Health (the "Merger"). The merger of these two companies combined clinical and commercial expertise, scale, data, and insights to facilitate faster delivery of evidence-based medicines to patients worldwide. With approximately 21,000 employees in more than 60 countries across six continents as of December 31, 2017, our combined broad global presence allows us to deliver our services in more than 110 countries, providing our customers with access to diverse markets and patient populations, local regulatory expertise, and local market knowledge. See further discussion in "Note 3 - Business Combinations" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for additional details on the Merger.
Following the Merger, effective August 1, 2017, we realigned our operating segments into two reportable segments: Clinical Solutions and Commercial Solutions to reflect the current structure under which we operate, evaluate our performance, make strategic decisions, and allocate resources.
Our Clinical Solutions segment offers a variety of clinical development services spanning Phase I to Phase IV, including full-service global studies, as well as unbundled service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Our Commercial Solutions segment provides customers with a full range of commercialization services, including outsourced field selling solutions, medication adherence, communications (advertising and public relations), and consulting services. Our strategic, insights-driven approach provides our customers with a single source, integrated end-to end solution that spans the entire product lifecycle, designed to increase the likelihood of a successful product launch and commercial profitability. We offer those services in either a full service or individual, unbundled basis depending on customers' needs.
Our management reviews segment performance and allocates resources based upon segment revenue and segment operating income. Historical segment reporting has been revised to reflect these changes to our segment structure. Prior to the Merger, our Commercial Solutions segment consisted solely of consulting services. For further information about the Company's reportable segments, please see "Note 14 - Segment Information" in our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. For financial information about our revenue and long-lived assets by geographic area, please see "Note 15 - Operations by Geographic Location" in our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Our international operations expose us to risks that differ from those applicable to operating in the United States, including foreign currency translation and transaction risks, risks of changes in tax and labor laws, and other risks described further in Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.
For the year ended December 31, 2017, total net service revenue was $1.85 billion, net loss was $138.5 million, Adjusted Net Income was $196.0 million, and Adjusted EBITDA was $391.9 million. For important disclosures about our non-GAAP measures and a reconciliation of Adjusted Net Income and Adjusted EBITDA to our GAAP net income (loss), see Part II, Item 6, "Selected Financial Data" of this Annual Report on Form 10-K. For further information about our consolidated revenues and earnings, see our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K.
Our Market
The market for our integrated solutions is primarily the biopharmaceutical industry that utilizes outsourced clinical drug development and commercialization services. We believe we are well-positioned to benefit from the following market trends:
Trends in clinical drug development.  Biopharmaceutical companies continue to prioritize the outsourcing of Phase I to Phase IV clinical trials, particularly in complex, high-growth therapeutic areas such as CNS,

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oncology and other complex diseases. Additionally, small and mid-sized biopharmaceutical companies typically have limited infrastructure and therefore are far more likely to outsource their clinical development to CROs. We estimate, based on industry sources (including analysts' reports), and management's knowledge, that the market for CRO services for Phase I to Phase IV clinical development services will grow at an average annual rate of 5% to 7% through 2020, driven by a combination of increased development spending and further outsourcing penetration. In addition, we estimate that total biopharmaceutical spending on drug development in 2017 was approximately $89.0 billion, of which the clinical development market, which is the market for drug development following pre-clinical research, was approximately $77.0 billion. Of the $77.0 billion, we estimate our total addressable market to be $62.0 billion, after excluding $15.0 billion of indirect fees paid to principal investigators and clinical research sites, which are not a part of the CRO market. We estimate that total biopharmaceutical spending on clinical development will grow at a rate of 2% to 4% annually through 2020. In 2017, we estimate biopharmaceutical companies outsourced approximately $31.0 billion of clinical development spending to CROs, representing a 7% increase compared to 2016 and a penetration rate of 49% of our total addressable market. We estimate that this penetration rate will increase to approximately 52% of our total addressable market by 2020.
Within the overall Phase I to Phase IV market segment, the Phase IV/post-approval/Real World Evidence sub-segment represents a large area of spending where outsourcing penetration is lower than traditional clinical development and pharmaceutical industry trends are creating increasing demand.
Trends in commercialization outsourcing.  
We believe that, based on industry sources (including analysts' reports), and management's knowledge, that the market for CCO services will grow at an average annual rate of 7% through 2020, driven by a combination of increased sales and marketing spending and further outsourcing penetration. We estimate that the total addressable market for commercialization services was approximately $154.0 billion in 2017, as determined by our analysis of biopharmaceutical selling, general, and administrative ("SG&A") trends and related sales and marketing budgets over the past 10 years. In 2017, we estimate biopharmaceutical companies outsourced approximately $24.0 billion of this commercialization spending to CCOs, representing a penetration rate of approximately 16% of the total addressable commercial market. We estimate that this penetration rate will increase to approximately 19% of our total addressable market by 2020, while the underlying biopharmaceutical sales and marketing spending will grow at a rate of 1% to 3% annually during this same time period. We project that over time this market may follow a similar outsourcing penetration trajectory as the clinical development market, resulting in the potential for long-term revenue growth. We believe this potential for growth is supported by: (i) significant biopharmaceutical sales and marketing budgets – generally at least 10% greater than research and development ("R&D") budgets at large biopharmaceutical companies; (ii) a continuing shift toward specialty and more complex therapies requiring more complex and integrated sales and marketing execution and experience; (iii) a robust funding environment, which provides capital to fuel growth in development and commercialization spending, particularly with small to mid-sized companies that wish to remain independent, (iv) significant outsourcing penetration opportunities; (v) an evolving industry landscape illustrated by a shift to longer and more strategic relationships; and (vi) significant downward pressure on pharmaceutical pricing.
Increasingly challenging development and commercialization environment. The biopharmaceutical industry is currently facing a number of challenges, including: (i) margin deterioration; (ii) reimbursement and provider access hurdles; (iii) the declining attractiveness of non-core brands resulting in fewer blockbuster and higher profitability drugs reaching the market; (iv) continued pressure from generic brand exposure resulting from expiring patents; and (v) the consolidation of payers, health systems, providers, and pharmacies. These challenges are also making physicians and patients more difficult to engage, making new product launches more difficult. At the same time, the industry is experiencing growing demand for specialty drugs, pressure to achieve improvements in R&D productivity, the transition of the healthcare industry worldwide from a volume-based to a value-based reimbursement structure, and growing political and pricing pressures. Existing approaches to address these challenges include reducing overhead costs, optimizing the deployment of marketing and field assets, and refocusing product portfolios around therapeutic areas with depth of presence and expanded market access capabilities.

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Optimization of biopharmaceutical R&D efficiency.  Market forces and healthcare reform, including the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, the 21st Century Cures Act, and other governmental initiatives, place significant pressure on biopharmaceutical companies to improve cost efficiency. Companies need to demonstrate the relative improvement in quality, safety, and effectiveness of new therapies as compared to existing approved therapies as early as possible in the development process. CROs can help biopharmaceutical companies deploy capital more efficiently as many biopharmaceutical companies do not have adequate in-house development resources. In response to high clinical trial costs, particularly in therapeutic areas such as CNS and oncology, which we believe present the highest mean cost per patient across all clinical trials, biopharmaceutical companies are streamlining operations and shifting development to external providers to lower fixed costs.
Globalization of clinical trials.  Clinical trials have become increasingly global as biopharmaceutical companies seek to accelerate patient recruitment, particularly within protocol-eligible, treatment-naïve patient populations without co-morbidities that could skew clinical outcomes. Biopharmaceutical companies are also increasingly seeking to expand the commercial potential of their products by applying for regulatory approvals in multiple countries, including fast-growing economies that are spending more on healthcare. As part of the biopharmaceutical approval process in newer markets, especially in certain Asian and emerging markets, regulators now often require trials to include specific percentages or numbers of people from local populations, resulting in a combination of multinational and domestic trials.
Management of increasingly complex trials.  The biopharmaceutical industry operates in an increasingly sophisticated and highly-regulated environment and has responded to the demands of novel therapeutics by adapting efficient drug development processes. Complex trial design expertise has emerged as a significant competitive advantage for select CROs that have a track record of successfully navigating country-specific regulatory, trial protocol, and patient enrollment barriers, including sometimes subjective, evolving clinical endpoints. In addition, the therapeutic areas where we have significant experience and expertise, including CNS, oncology, and other complex diseases, often require more complicated testing protocols than other disease indications. Many of these studies have longer durations due to these factors resulting in demand for greater clinical trial proficiency and expertise in these therapeutic areas, particularly in light of new methods of testing, such as the use of biomarkers and gene therapy.
Evolving commercialization outsourcing needs for large vs. small to mid-sized pharma.  Given the increasingly challenging commercialization environment outlined previously, the needs of biopharmaceutical companies are ever-changing. The needs of large versus small to mid-sized customers are developing differently based upon infrastructure and corporate commercialization goals, requiring diverse approaches and capabilities. Large biopharmaceutical companies tend to have more robust internal resources, and are more often seeking to augment these resources with individual services on a brand-by-brand basis. They are also frequently looking for enterprise vendor relationships that achieve broader cost savings based upon volume considerations of their products. Smaller biopharmaceutical companies typically have a limited number of products, and very limited internal resources and expertise for commercialization, requiring the full spectrum of commercialization capabilities, similar to outsourced clinical development patterns. Historically these commercialization considerations may have required small to mid-sized companies to surrender a significant portion of their long-term economic value in licensing arrangements.
Our Competitive Strengths
We believe that our ability to provide integrated clinical drug development and commercial solutions positions us to address market realities where these disciplines must work together to accelerate the delivery of important therapies to market. Our key competitive strengths are:
Global leadership in biopharmaceutical outsourcing with differentiated positioning. We believe our comprehensive suite of clinical and commercial services differentiates us in the marketplace. We offer our services through a highly skilled staff of approximately 21,000 employees located in more than 60 countries as of December 31, 2017, and have conducted work in more than 110 countries. Over 84% of all new molecular entities approved by the U.S. Food and Drug Administration ("FDA") and 70% of the products

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granted marketing authorization by the European Medicines Agency ("EMA") over the last five years have been developed or commercialized with our support. We believe our scale, global reach, and breadth of services, coupled with our deep industry expertise and experience, enable us to offer the solutions our customers require to navigate an increasingly complex and evolving market. In addition, we believe our customers are seeking to consolidate their outsourcing to a smaller set of large global providers in order to address changing industry dynamics.
Innovative operating model - the Trusted Process®. Since 2006, we have conducted clinical trials using our innovative Trusted Process® operating model, which is designed to standardize methodologies, increase the predictability of the delivery of our services, and reduce operational risk. We accomplish standardized delivery through support from a company-wide Project Management Office, which defines, maintains, and improves procedures relating to the Trusted Process® and ensures consistent application globally. Since initiation of the Trusted Process®, we have reduced median clinical study start-up time (defined as the period from finalized protocol to first patient enrolled) on new projects. Based on industry sources for the median study start-up time for the biopharmaceutical industry, we believe we achieve this milestone for our customers at a faster pace than the industry, due in part to this proprietary methodology. In addition to the absolute reduction of cycle times in critical path milestones, we believe we provide greater operating efficiency, more predictable project schedules, and a reduction in overall project timelines. The metrics-driven Trusted Process® methodology is divided into four sub-processes which correlate to the key phases of a clinical project:
PlanActivation® — the design phase, where a project is analyzed and a strategy developed utilizing our therapeutic and clinical experience, forming the basis of a customized project proposal. The strategy continues to be refined based on discussions with the customer through new business award;
QuickStart® — the initiating phase, which serves to align the customer and our project team to a single set of objectives, create shared expectations and develop a joint plan for project implementation;
ProgramAccelerate® — the execution and control phase, which includes the processes of patient recruitment, clinical monitoring and data management. In this phase, we proactively process and review data to ensure quality and project timelines are actively managed, while maintaining strong relationships with investigative sites; and
QualityFinish® — the closing phase, which is triggered by the first enrolled patient completing the clinical trial. This phase focuses on ensuring high quality, actionable data is used to develop the final deliverables which make up the basis of the documentation necessary for filing with regulatory agencies.
While initially developed to better manage clinical trial complexity, the Trusted Process® is being actively deployed across our commercial service portfolio to further drive consistency and quality in our integrated operations.
Functional Service Provider Model. Our Functional Service Provider ("FSP") model provides flexible resourcing solutions in the areas of biostatistics and programming, data management, drug safety and pharmacovigilance, medical writing and clinical monitoring. Our model includes a comprehensive plan designed to ensure both speed and quality for operations, relationship management, communication, quality and risk mitigation, and internal processes and tools. We collaborate extensively across functional teams to ensure customer needs are appropriately identified and supported. Additionally, we provide clinical staffing solutions in the areas of contract staffing and direct placement hire.
Adding value across the biopharmaceutical product lifecycle. Our broad suite of services allows us to deliver customized solutions and provide value to biopharmaceutical companies and other key constituents across the healthcare delivery system. We are uniquely positioned to leverage our broad experience and proprietary data assets across our offerings, providing end-to-end solutions that help biopharmaceutical

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customers optimize execution and reduce costs throughout the product lifecycle using the following capabilities:
Superior clinical trial design: We leverage our expanding clinical and commercial knowledge capital and access claims data from over 100 million patients in the United States to inform and enhance clinical trial design. These insights facilitate shorter and more efficient trials intended to improve the likelihood of regulatory and subsequent commercial success.
Enhanced site selection and patient recruitment: We utilize proprietary data assets, behavioral insights, social media and communications capabilities to enhance the speed and success of site selection and patient recruitment.
Proactive pre-launch reimbursement and formulary management: We bridge the gap between clinical development and commercialization by using our diverse capabilities and ability to communicate clinical benefits to payers and Pharmacy Benefit Managers ("PBMs") to help optimize reimbursement and patient access.
Highly effective commercial product launch capabilities: We help our customers navigate the global complexities of launching a product by orchestrating interconnected work streams to develop and execute an effective product launch strategy.
Proprietary programs to improve medication adherence: We have the ability to reach over 193 million patients through multi-channel medication adherence programs designed to mitigate costs related to non-adherence, which are estimated by the Centers for Disease Control and Prevention to exceed $100 billion to $300 billion annually.
Full commercialization solutions: We enable new companies to develop, launch, and commercially support their brands by accessing our comprehensive outsourced services, and acting as their virtual commercialization infrastructure.
Efficient project ramp-up: We scale clinical or commercial projects rapidly and effectively through our recruiting, training, and deployment capabilities, leveraging over 150 dedicated recruiting personnel and our proprietary database of over 700,000 industry professionals.
Access to robust data assets. We have access to significant data assets through our clinical and commercial operations, our medication adherence services, and a variety of third party providers. These data assets provide insights to our customers to support their product development and commercialization efforts. With more than 50% of all U.S. retail prescriptions ("scripts") and relationships with more than 30 of the top retail pharmacy chains that represent more than 28,750 pharmacies, 193 million patients, and 2.25 billion unique scripts each year, we are able to support all aspects of our end-to-end product development services, including clinical trial protocol design, site selection, patient recruitment, selling solutions program design and management, and pricing and market access consulting, among others. Furthermore, relationships we have in place with third-party partners provide us a breadth of coverage for these insights that reaches Europe and allow us to reach more than 400 million patients throughout North America and the European Union ("EU") and United Kingdom.
We place a high importance on leveraging the insights we derive from our Adheris Health Patient Performance and Outcomes platform to improve our site and investigator interactions. Our market leading commercial capabilities enable our teams to focus their efforts on proactively enhancing planning, driving improved adherence with therapies, and producing more predictable outcomes for our customers. Also, by utilizing our exclusive retail network, we provide patient-level insights that enhance our decision-making and collaboration with our clinical customers who can then leverage these insights to make informed, actionable, and impactful decisions in an increasingly competitive market. 
Deep and long-standing therapeutic expertise and organization. We provide our customers with highly-differentiated, specialized teams that leverage our broad offering of world-class therapeutic expertise in both our Clinical Solutions and Commercial Solutions segments. Our therapeutic expertise is managed by our

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senior leadership and delivered by our senior scientific and medical staff and our clinical research associates ("CRAs") within our various therapeutic areas. Importantly, we believe we are unique in organizing our therapeutic business units down to the CRA level, rather than operating with a broader pool of these resources. We believe this therapeutic alignment improves the effectiveness and efficiency of our customers' clinical trials by ensuring that our clinical staff working at our investigative sites have the therapeutic expertise and experience to manage the trial. Industry analysts have reported that therapeutic expertise is the most influential factor for sponsors of clinical trials in selecting a CRO. We believe that our expertise in managing complex clinical trials differentiates us from our competitors and has played a key role in our growth, our ability to win new clinical trials, and our successful relationship development with clinical research sites. We also believe our specialized therapeutic expertise within our Commercial Solutions segment is unique in our industry and becoming increasingly important to our customers as therapies become more complex and targeted. Our experienced medical and scientific professionals include more than 950 employees with M.D.s, Ph.D.s, or Pharm D.s. These employees apply innovative insights and science to clinical trials as well as to the commercialization of products and support customers across both our Clinical Solutions and Commercial Solutions segments.
Industry-leading principal investigator and clinical research site relationships. We have extensive relationships with principal investigators and clinical research sites. We believe these quality relationships are critical for delivering clinical trial results on time and on budget for our customers. Motivated and engaged investigative sites can facilitate faster patient recruitment, increase retention, maintain safety, ensure compliance with protocols as well as with local and international regulations, and streamline reporting. The ability to recruit and retain principal investigators and patients is an integral part of the clinical trial process. We have dedicated personnel focused on enhancing clinical research site relationships; we work with these sites in collaborative partnerships to improve cycle times and standardize start-up activities to drive efficiency.
Diversified and loyal customer base. We are diversified across our segments, deriving 79% and 21% of our net service revenue during 2017 from our Clinical Solutions and Commercial Solutions segments, respectively. We have a well-diversified, loyal customer base of over 500 customers that includes each of the 50 largest global biopharmaceutical companies (based on annual investment in research and development) as well as high-growth, small and mid-sized biopharmaceutical companies. During 2017, we provided both clinical and commercial services to 64 customers. We have several customers with whom we have achieved "preferred provider" or strategic alliance relationships. We define these customers as relationships from which we generate significant revenue and where we have executed master service agreements in addition to regularly scheduled strategy meetings to discuss the status of our relationship, and for which we serve as a preferred supplier of services. We believe these relationships provide us enhanced opportunities for more business, although they are not a guarantee of future business. Our top five customers accounted for approximately 22% of our net service revenue in 2017.
Our customer base is geographically diverse with well-established relationships in the United States, Europe, and Asia. As of December 31, 2017, our top ten customers had worked with us for an average of 18 years. We believe that the tenure of our customer relationships as well as the depth of penetration of our services reflect our strong reputation and track record. We believe we are uniquely positioned to further penetrate our existing customer base and expand our services across the biopharmaceutical industry, as a significant number of the top 50 biopharmaceutical companies utilize both clinical and commercial services. The flexibility and depth of our services enables us to scale our commercialization solutions to address our customers' needs. We connect and integrate clinical and commercial disciplines, enabling biopharmaceutical companies of all sizes to accelerate the commercialization of assets by bringing market access insights into the clinical trial design, reducing complexity, maximizing speed, and enhancing economic efficiency.
Highly experienced management team with a deep-rooted culture of quality and innovation. We are led by a dedicated and experienced senior management team with significant experience and knowledge focused on the biopharmaceutical industry. Each member of our senior management team has 20 years or more of relevant experience, including experience with biopharmaceutical companies, payers, and health systems. This team has successfully grown our company into a leading biopharmaceutical solutions organization through a combination of organic growth and strategic acquisitions.

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Our Business Strategy
Our goal is to generate profitable revenue growth, achieve differentiation in the marketplace in both of our segments, and increase margins through operational efficiency initiatives. We believe our end-to-end product development model, where clinical insights inform commercialization and commercial insights improve clinical trial design and execution, is unique to the industry. The key elements of our business strategy include:
Increase market share through our unmatched service offerings and scale. We believe we are uniquely positioned to meet our customers’ evolving needs as the only provider of a full suite of services through the clinical development and commercialization continuum. Our size and scale enable us to provide solutions designed to accelerate our customers’ clinical or commercial projects, driving speed and cost efficiencies. Our ability to engage customers in the early phases of clinical trials with respect to commercial insights allows them to make more informed decisions on clinical trial design and strategies, which we believe is a key differentiator from our competitors. Our Real World and Late Phase offering acts as the critical bridge from clinical effectiveness to commercial viability. The capabilities to move from development to commercialization require a comprehensive approach that integrates strategic, creative, and operational expertise. Our Integrated Solutions Group ("ISG") is comprised of dedicated industry veterans and product strategists with regulatory, clinical, commercial, and real world expertise that uniquely positions us to help our customers determine the right mix of clinical and commercial solutions needed throughout the product life cycle. Our unique integration of strategy and operations results in multiple selling points along the operational timeline of product development.
We intend to leverage our differentiated service offerings to increase our share of the growing market for outsourced clinical and commercialization services. We believe the need for a full suite of services is particularly strong with our small to mid-sized customers, given their rapid growth and limited internal resources. We intend to capitalize on this market opportunity with existing and potential customers through a variety of channels, but primarily through the consultative sales approach of our ISG. The ISG is a dedicated group of industry veterans and product strategists with regulatory, clinical, commercial and Real World Evidence expertise. The ISG is uniquely positioned to determine the appropriate mix of clinical and commercial solutions to help customers optimize the development process for their products and maximize the return on their investment.
Leverage our market leadership position in large and attractive markets. Our Clinical Solutions and Commercial Solutions segments are benefiting from specific industry trends that are expected to drive attractive growth. We believe outsourcing late-stage clinical development services to CROs optimizes returns on invested R&D for biopharmaceutical companies. As business models continue to evolve in the healthcare sector, we believe that the rate of commercial outsourcing may follow a similar long-term path to the clinical development market. Global demand for biopharmaceutical products continues to increase, driven by expanding access to care, increasing life expectancy, and the growing prevalence of chronic conditions in both developed and emerging markets. Higher costs and increased complexity are driving our customers to seek efficiency and expertise through outsourcing services. We intend to capitalize on these trends by continuing to provide the services our customers need. Additionally, we believe that our differentiated approach of investing in highly experienced people, making better use of enabling technology, improving the process of clinical development and commercialization, and integrating our significant data and insights across these disciplines will allow our customers to generate superior returns.
Leverage our expertise in delivering complex clinical trials and deepen our therapeutic expertise in fast-growing areas. We intend to continue to develop and leverage our therapeutic and operational expertise in delivering complex clinical trials. Our extensive use of insights gained from fit-for-purpose data sources and our relationships with principal investigators and clinical research sites with longstanding patient relationships are especially critical in delivering complex clinical trials. This is enhanced by the use of our proprietary Trusted Process® methodology that reduces operational risk and variability by standardizing processes, minimizing delays, instilling quality throughout the clinical development process, and leading customers to more confident, better-informed drug development decisions. We believe this collective expertise, data, and insights into complex clinical trials uniquely informs our customers’ decisions about their regulatory and payer approvals, market access, reimbursement and formulary inclusion, and other steps that are critical to optimizing their returns in the commercialization process.

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Drive acceleration of commercial outsourcing. We have continuously expanded and invested in our commercial outsourcing capabilities and we intend to leverage our extensive knowledge, experience and broad offerings to drive expansion of the commercial outsourcing opportunity with new and existing customers. We believe the market for our full suite of services is evolving based upon the different needs of large biopharmaceutical companies compared to small to mid-sized companies, based upon their infrastructure and corporate commercialization goals. Large biopharmaceutical companies are often seeking broader cost savings through enterprise vendor relationships that leverage their volume of products. However, smaller biopharmaceutical companies typically require the full spectrum of commercialization capabilities, given their limited internal resources. Historically, this may have required these smaller companies to surrender a significant portion of their long term economic value in a licensing arrangement to achieve commercialization. However, with sufficient capital given today’s funding environment, we believe these companies may be more receptive to commercialization alternatives that allow them to maintain their independence. Although we are well positioned to capitalize on the needs of both customer types, we believe that the market dynamics for these small to mid-sized customers will be a key catalyst to driving further adoption of commercial outsourcing. Our ISG is purpose-built to leverage this market dynamic, using our strong clinical presence and relationships in the small to mid-sized customer segment. We believe that having the capability to provide our customers with a commercialization plan may increase their overall success with the sales of a drug once FDA approval is received.
Increase cross-selling with existing customers. We believe that we have substantial opportunities to expand the reach of our services that we provide to our existing customers. During 2017, 64 customers, of which 43 were also in our top 100 customers, utilized services from both our Clinical Solutions and Commercial Solutions segments demonstrating our belief that there is both market precedent and significant potential to sell additional services to our existing customer base. Given our past success in expanding the scope of services provided to current customers, we intend to further expand our business with our existing customers by cross-selling additional clinical and commercial services. As part of our cross-selling efforts, we market the potential operational and economic efficiencies that customers can achieve by using more of our services throughout the product lifecycle.
Capitalize on our geographic scale. We intend to leverage our global breadth and scale to drive continued growth and target segments of the biopharmaceutical market in which we are underpenetrated. Additionally, we have developed a global platform with a presence in all of the major biopharmaceutical markets in the world and intend to further expand our business outside of the United States. We are focused on replicating our success in the U.S. market to other major biopharmaceutical markets around the world. We have expanded our capabilities, existing relationships, and local regulatory knowledge, which should continue to position us well for new customer wins in a wide array of markets. We have added geographic reach through both acquisitions and organic growth in areas such as Asia-Pacific, Latin America, and the Middle East and Africa, which we believe is critical to obtaining larger new business awards from large and mid-sized biopharmaceutical companies. Our long-term growth opportunities are enhanced by our strong reputation in emerging markets and our proven track record of performance. We may also selectively identify and acquire complementary businesses to enhance our services, capabilities, and geographic presence.
Continue to enhance our Trusted Process® methodology to deliver superior outcomes. We intend to continue the development and enhancement of our Trusted Process® methodology, which has delivered measurable, beneficial results for our customers and improved drug development decisions. While originally developed through years of experience and refinement in our Clinical Solutions segment, we also intend to adapt and deploy the Trusted Process® across our Commercial Solutions segment. We believe our Trusted Process® will continue to lead to high levels of customer satisfaction.
Continue our proven track record of successfully integrating companies to augment our organic growth. Over the past decade, we have developed a systematic approach for integrating operations. We have successfully integrated ten companies, including both strategic and tuck-in acquisitions. These strategic acquisitions have increased our size, scale, and reach, complementing our organic growth profile as we have become a leading biopharmaceutical solutions organization. Our mergers and acquisitions have enabled us to provide fully integrated clinical and commercial solutions to our customers and expand our global service offerings while also allowing us to achieve significant synergies and cost reductions. In the near term, our

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primary focus will be continuing the successful integration related to the Merger, but we intend to continue evaluating selective tuck-in acquisition opportunities that we believe will enhance our services offerings and geographic presence.
Drive our human capital asset base to grow existing relationships. Our employees are critical to our ability to deliver our innovative operational model by engaging with customers, delivering clinical development services in a complex environment, and supporting and executing our growth strategy. Our recruiting and retention efforts are geared toward maintaining and growing a stable workforce, focused on delivering results for customers. We have a successful track record of integrating talent from prior acquisitions and believe we have a best-in-class pool of highly experienced project management professionals, CRAs, and communications, advertising, and consulting experts. Based on industry reporting, we also believe that our employee retention rates are consistent or better than the industry averages, and we intend to continue fostering an employee-friendly environment that promotes retention.
Our Services
We provide services through two reportable segments: Clinical Solutions and Commercial Solutions. Each reportable segment provides multiple service offerings that – when combined through the sharing of critical insights and data, which we refer to as our Biopharmaceutical Acceleration Model – creates a fully-integrated biopharmaceutical outsourced services provider. Our Clinical Solutions segment offers a variety of clinical development services spanning Phase I to Phase IV, including full-service global studies, unbundled service offerings, and Real World Evidence studies. Our Commercial Solutions segment provides customers with the full range of commercialization solutions, which include outsourced field promotion and medication adherence services, communication solutions (advertising and public relations), and consulting services.
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Clinical Solutions
Our extensive range of clinical solutions supports the entire clinical development process from Phase I to Phase IV and allows us to offer our customers an integrated suite of investigative site support and clinical development services. We offer these services across a wide variety of therapeutic areas with deep clinical expertise with a primary focus on Phase II to Phase IV clinical trials. We believe our therapeutic focus and proprietary project management methodology have set us apart within our industry. We have particular strengths in the complex therapeutic areas such as CNS and Oncology which represent the largest and fastest growing therapeutic areas. We provide total biopharmaceutical program development through our Full

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Service platform, while also providing discrete services for any part of a trial, often known as FSP, primarily through our Strategic Resourcing Group. The combination of service area experts and the depth of clinical capability allows for enhanced protocol design and actionable trial data. Importantly, all of our services in Clinical Solutions operate with the discipline of the Trusted Process®, which we believe improves overall quality, consistency, and delivery timelines. Our comprehensive suite of clinical development services and delivery platforms includes, but is not limited to:
Full Service Clinical Development
Our full service clinical development offering provides comprehensive solutions to address the clinical development needs of our customers, primarily in Phase II-IV. Our solutions can be delivered on a full-service project basis, on a functional or resource basis (see Strategic Resourcing below), or through a combination or hybrid approach depending on the needs of our customers. We are able to customize our services to provide customers support within an individual clinical study, a single function, multiple functions within a single therapeutic area, or across a customer’s entire product portfolio. We can leverage our extensive knowledge capital across both our Clinical Solutions and Commercial Solutions segments to inform clinical development strategy and trial design. Our comprehensive suite of clinical development services includes the following, among others:
Patient Recruitment and Retention.  Our patient recruitment services group helps identify and manage appropriate vendors, focuses on patient recruitment and retention strategies, and acts as a liaison to media outlets and other vendors that we have validated.
Site Start Up. Our site start up team helps maximize the enrollment period of the study by arranging applicable regulatory authority and ethics committee approvals, site contract negotiation, regulatory authority submissions, and the corresponding oversight of those activities.
Project Management.  Our project managers and directors provide customer-focused leadership in managing clinical trials and are accountable for the successful execution of all assigned projects, where success includes on-time, on-budget, and high quality results that lead to satisfied customers. Project managers and directors have the skills, education, experience, and training to support the successful conduct of clinical studies.
Clinical Monitoring.  Our clinical monitors oversee the conduct of a clinical trial by working with and monitoring clinical research sites to ensure the quality of the data. The clinical monitor ensures the trial is conducted according to Good Clinical Practice ("GCP"), International Conference on Harmonisation ("ICH") guidelines, and local regulations, to meet the customers' and regulatory authorities' requirements according to the study protocol. CRAs engage with clinical research sites in site initiation, training, and patient recruitment. We deploy and manage clinical monitoring staff in all regions of the globe. By maintaining a therapeutic focus, we attract CRAs who have a strong desire to dedicate themselves to working within a specific therapeutic area, providing an environment where they can further develop their expertise in their chosen area of interest.
Drug Safety/Pharmacovigilance.  Our drug safety teams are strategically located across the United States, Europe, Latin America, and Asia-Pacific. We provide global drug safety expertise in all phases of clinical research for serious adverse event/adverse event collection, evaluation, classification, reporting, reconciliation, post-marketing safety, and pharmacovigilance.
Medical Affairs.  We have in-house physicians who provide 24/7 medical monitoring, scientific and medical support for project management teams and clinical research sites. These in-house physicians consist of senior clinicians and former clinical researchers with patient care and trial management expertise.
Quality Assurance.  Quality control steps are built into all of our processes. We have an independent quality assurance department that, in addition to conducting independent audits of all ongoing projects and processes as part of our internal quality assurance program, offers contracted quality assurance services to customers, including audits of clinical research sites and of various vendors to

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the clinical research industry, mock regulatory inspections and clinical research site inspection-readiness training, standard operating procedure development, and quality assurance program development/consultation. Our customers also engage us to conduct third-party audits on behalf of their studies.
Regulatory and Medical Writing.  We offer regulatory and medical writing expertise across the entire biopharmaceutical product lifecycle. Our team has hands-on regulatory and medical writing knowledge gained through experience from working in large biopharmaceutical companies, as well as high-growth, small and mid-sized biopharmaceutical companies, CROs, and the FDA. Additionally, each member is trained in FDA regulations, including GCP/standard operating practice compliance guidelines and guidelines established by the ICH.
Clinical Data Management.  Our clinical data management services allow us to confirm that the clinical trial database is ready, accurately populated, and locked in an expeditious manner, with verification and validation procedures throughout every phase of a clinical trial. This processing is done in synchronization with the clinical team, utilizing the information provided from the trial to help ensure efficient processes are employed, regardless of the data collection method used.
Electronic Data Capture.  To compete in today's changing global drug and device development environment, companies must collect and distribute data faster than ever. We have the ability to manage electronic data capture ("EDC") to help our customers take advantage of the efficiencies available through EDC, which include improved access to data, reduced cycle time, increased productivity, and improved relationships with customers, vendors, and other parties. We utilize three leading EDC platforms: Medidata Rave, Oracle Clinical Remote Data Capture, and Oracle Health Sciences InForm products. Our ability to design, build, and deliver high quality databases in all three platforms enables our team to deliver effective EDC solutions.
Biostatistics.  Our biostatistics team has a depth of experience with the FDA and EMA which allows our teams to provide customers with guidance on building a statistical plan to meet regulatory and safety requirements as well as a careful analysis of the resulting study data. In addition, we provide support for independent drug safety monitoring boards and a full range of related services. Our biostatisticians are also heavily involved in our Trusted Process® methodology, so that protocol and project development can be grounded in advanced statistical methodology. As part of a project team, our biostatisticians can provide data oversight throughout a clinical trial and address any data or data handling issues that may arise.
Strategic Resourcing
Our FSP offering helps sponsors review their approach to key functional areas of clinical research, specifically those areas not core to their clinical development business or in areas where they need to augment their own internal resources. We are able to customize our full services offering to provide customers support within an individual clinical study, a single function, multiple functions within a single therapeutic area, or across a customer’s entire product portfolio. Any of our full service clinical solutions outlined above can be delivered on an unbundled or functional basis or on a hybrid approach, based on our customers' specific needs. We believe our FSP service offering provides greater predictability, improved visibility and reporting, and more consistent delivery of services across all protocols. We currently operate FSP hubs in North America, South America, Europe, and Asia.
Early Stage
Our Early Stage offering provides a full range of services for Phase I and Phase IIA clinical trial conduct, bioanalytical analysis assay development, and clinical pharmacology services, including modeling and simulation. We also provide validation and sample analysis services from preclinical development through post-marketing support and purpose-built phase biometrics support from North America and India. We conduct clinical trial studies at our facilities located in Quebec City and Toronto, Canada and Miami, Florida. We have extensive experience in first-in-human, proof-of concept, bioequivalence and bioavailability, biosimilars, and clinical pharmacology study conduct and are a leader in the provision of abuse-liability and

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dependency studies. We have built direct partnerships with leading hospitals for conduct of early development and clinical pharmacology studies that require access to patients. The combination of our facilities and partnerships can provide access in the North American and Asia-Pacific geographies. We have a large base of available subjects, including patient populations with specific medical conditions and healthy volunteers, which provide efficient and rapid patient recruitment. Furthermore, we can also provide early stage and clinical pharmacology studies through our Asia-Pacific Catalyst Model with Phase I - IIA conduct capabilities in Australia, New Zealand, South Korea, Japan, and China.
Our two bioanalytical laboratories located in Quebec, Canada and Princeton, New Jersey have extensive experience in method development, validation, and bioanalytical analysis support for both small molecule therapeutics and biologics using a variety of analytical techniques and instrumentation platforms, as well as the provision of critical reagents handling services for biologics.
Real World and Late Phase Services
Our Real World and Late Phase group conducts “real world” studies to understand how a treatment, service or method of delivering care works when applied in real world, clinical practice environments. We provide both consultative and operational expertise to our customers in real world data generation, from concept through core development, launch and commercialization. By utilizing our successful drug life cycle management, we ensure we partner with our customers to gain better outcomes for patients, physicians, payers, and regulators. These services allow our customers to make timely and cost effective advances in clinical treatment by providing data about actual experience of doctors and patients outside of the regulated environment of clinical development. We also leverage the data and insights from our experience across the commercialization spectrum to inform the design and conduct of these studies. Our services include patient registries, surveillance and observational studies, patient/health outcomes research, and economic studies.
Commercial Solutions
Our Commercial Solutions business provides a broad suite of complementary commercialization services including selling solutions, communications (advertising and public relations) and consulting services.
Selling Solutions Services
Selling solutions services include field-based promotional and market access solutions, field-based clinical solutions, inside sales and contact center, insight and strategy design, patient support services, training, talent sourcing, end-to-end sales operations, and medication adherence. We provide contract field promotion teams with a broad array of capabilities, support services and non-personal engagement solutions including tele-detailing and electronic detailing (e-detailing) to help our customers accelerate the commercialization of their products. Our field promotion teams are supported by recruiting and training capabilities that are complemented by highly-qualified clinical and scientific professionals who serve as advocates and educators to inform markets of new and novel therapies as well as customized patient behavioral models built on extensive data insights and analytics through our extensive and proprietary data-driven platform. Services offered include market research, commercial analytics, managed markets access, biotechnology and specialty managed markets, integrated commercialization, and medication adherence. Our field promotion teams can be supported by our communications and consulting services.
Clinical Field Teams. We are a leading provider of outsourced Clinical Field Team solutions to the biopharmaceutical industry. As Medical Science Liaisons ("MSLs"), Contract US Medical Directors, and/or Clinical Nurse Educators, our Clinical Field Teams deliver education, preparing healthcare professionals, patients, advocacy organizations, and others with the latest evidence-based scientific and practical information about disease states, current treatments, and the use of customers’ products.
Promotional Field Teams and Support. We have the industry-leading, scalable capabilities to recruit, train, target, deploy, and support successful sales teams for our customers to achieve their business goals. As one of the largest providers of outsourced sales teams and sales solutions to the healthcare

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industry, we have well-established flexible processes and infrastructure to efficiently build, scale, deploy, execute, and retain a high-performing field sales team.
Commercial Recruiting Solutions. We are an exclusive recruiting partner who has experience in the commercial life science industry and a talent network of the top MSL, Nurse Educator, Sales, Sales Management, and Market Access performers. Our proprietary database, industry-leading recruiters and branding and talent assessment process are keys to accelerating our customers’ commercial recruiting success.
Operations Support Services. We maintain a comprehensive set of best-in-class operations support services that include field automation hardware/software, data management, targeting and alignments, analytics and reporting, incentive plan design and implementation, quality management, and help desk. These capabilities are used both individually and collectively to ensure that our deployed field teams perform optimally, respond rapidly to changing marketplace dynamics, and continuously improve.  
Medication Adherence. We believe that we have the largest comprehensive network for patient and prescriber access, and provide dynamic patient performance programs that activate patients, improve outcomes, and elevate brand performance. With customized patient behavioral models built on extensive data insights and analytics, we have the ability to communicate with various patient types as they move throughout their individual patient journeys - in the doctor’s office, at the pharmacy, and in their home - through our extensive and proprietary data-driven platform.
Communications Services
Communications services include healthcare advertising, medical communications, digital marketing, communications planning, public relations, and naming/branding services. We offer a broad array of advertising and public relations services to customers looking to commercialize their products domestically and/or internationally. Communications services are deployed throughout a product’s existence, beginning well before commercial launch, encompassing regulatory approval and market introduction, and continuing throughout the life of a product. Our communications services offering is focused on healthcare, and provides advertising, public relations, interactive digital strategies, and branding and identity consulting services, as well as medical communications and education services.
Healthcare Advertising. We believe that we offer the largest independent healthcare communications network in the world. Our advertising teams are immersed in healthcare data and connected to frontline experts who help them delve deep into the real life experience of health, harvesting insights that allow us to create optimal communications strategies for our customers. We help our customers excel at some of the most critical challenges in healthcare, including, but not limited to, brand launch, leveraging mass and personalized media, creating advertising content and campaigns, patient analysis, disease state campaigns, and market perception analysis. Our advertising teams have deep therapeutic expertise, with agencies solely dedicated to oncology, chronic disease care and activation, biologics, and industry innovation.
Public Relations. Our Public Relations teams develop breakthrough creative campaigns grounded in deep customer insight and integrated under a multi-channel strategy. These programs raise awareness and produce meaningful, measurable behavior change among audiences. With a diverse set of healthcare communications specialties under one umbrella, we are able to deliver integrated advice and expert insight from a variety of strategic perspectives. We offer best-in-class capabilities spanning public relations, digital and social media, medical and scientific education, and research and analytics. Our teams create communications that enhance brand perception, drive engagement, activate behavior shifts and deliver on the bottom line.
Medical Communications. Medical Communications helps our customers to frame their product position in a way that clinicians will find relevant, and creates strategies, campaigns and tactics to help these stakeholders at the right time, with the right content. Our Medical Communications team

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provides support through strategic planning, publication planning, content development, and peer-to-peer education.
Consulting Services
Consulting services include commercial strategy development and planning, pricing and market access, medical affairs advisory, and risk and program management. We offer specialized practices in business development, managed markets, and brand management, including strategic product launch planning. Consulting services are focused on addressing the needs of the pharmaceutical and biotechnology industries to support critical decision-making throughout the evolution of a product, from licensing, to product and portfolio strategy development, to drug commercialization. Consulting services professionals have a deep, functional knowledge of our customers’ core business, which produces value-added insights and mission-critical solutions, both creative and standard. Consulting services are centered on maximizing the commercial value of a client’s product pipeline, helping clinical leaders better and more strategically deploy resources and improve efficiency, as well as enhance the effectiveness of marketing and sales activities.
Commercial Strategy Development and Planning. Our strategic consulting group focuses on maximizing the value of scientific knowledge, intellectual property and portfolio content. The key areas of advisory services include strategic drug development, clinical development plans, registration strategies, exit strategies, transitional clarity, good clinical practice compliance strategies, clinical operations optimization, pricing and reimbursement, and due diligence. Strategic consultants include senior personnel from medical and regulatory affairs, clinical research, biostatistics and data management. These individuals provide expertise gained through hands-on experience as former executives from biopharmaceutical companies, CROs, and regulatory agencies.
Pricing and Market Access. Our team offers a full spectrum of market access solutions and services, including market assessment and analysis, comparative effectiveness research, pricing reimbursement, patient assistance services, and legislative and regulatory analysis.
Medical Affairs Advisory. Our team brings more than 20 years of practical experience and expertise in helping our customers realize medical transformation. Our modular medical transformation solution allows customers to assess where they are in their medical transformation by helping them identify their competitive position, prioritize their needs, understand their brand perception, and inform their market engagement strategy.
Quality Management and Regulatory Compliance Advisory. Our quality and compliance team delivers independent quality management services through audit, inspection and implementation services, and assist our customers with developing and executing a clinical regulatory strategy through regulatory consulting, publishing and submission services globally.
Risk and Program Management. Our communications consultants provide advice and subject matter expertise for risk evaluation on medicine affordability, compassionate use, and litigation and access barriers. We provide an evidence-based approach to avoiding policy, patient, and provider pushback on price; using best practices for how life-sciences companies can deploy effective preventative strategies; implementing compliance strategies to prepare for expanded access and compassionate use inquiries; and executing an Institute for Clinical and Economic Review review strategy to demonstrate product value.
Customers
We have a well-diversified, loyal customer base that includes each of the world's largest biopharmaceutical companies, which we define as the top 50 biopharmaceutical companies measured by annual R&D spend. We serve over 500 customers, including each of the 20 largest global biopharmaceutical companies, as well as numerous emerging and specialty biotechnology companies, medical device and diagnostics companies. In addition, we have strong relationships with small and mid-sized biopharmaceutical customers that seek our services for our therapeutic expertise and full-service offering.

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For the year ended December 31, 2017, our net service revenue attributable to large biopharmaceutical companies represented approximately 61% of our total net service revenue and net service revenue attributable to small and mid-sized biopharmaceutical companies represented approximately 39%. Additionally, we serve customers in a variety of locations throughout the world, with approximately 63% of our 2017 net service revenue generated from customers in the United States and Canada; 25% generated from Europe, the Middle East, and Africa; 9% generated from Asia-Pacific; and 3% generated from Latin America. This diversification allows us to grow our business in multiple customer segments and geographies.
For the year ended December 31, 2017, our top five customers accounted for approximately 22% of our net service revenue. No single customer accounted for greater than 10% of our total consolidated net service revenue for the years ended December 31, 2017, 2016 or 2015.
Our top ten customers have worked with us for an average of approximately 18 years as of December 31, 2017. We also have a growing list of "preferred provider" and/or strategic alliance relationships. Further, among the majority of our customers, revenue is diversified by multiple projects and services. For example, during 2017, we provided both clinical and commercial services to 64 customers. We believe that the tenure of our customer relationships as well as the depth of penetration of our services reflects our strong reputation and track record.
New Business Awards and Backlog
In connection with the Merger, we re-evaluated our existing backlog policy for our Clinical Solutions segment. As a result of this evaluation, effective during the third quarter of 2017, we changed our policy for calculating and reporting the amounts of our net new business awards and backlog. Under the new backlog policy for our Clinical Solutions segment, we add new business awards to backlog when we enter into a contract or when we receive a written commitment from the customer selecting us as a service provider, provided that:
the customer has received appropriate internal funding approval and collection of the award value is probable;
the project or projects are not contingent upon completion of another trial or event;
the project or projects are expected to commence within the next six months;
the customer has entered or intends to enter into a comprehensive contract as soon as practicable; and
for awards related to our FSP offering, only a maximum of twelve months of services are included.
In addition, we continually evaluate our backlog to determine if any of the previously awarded work is no longer expected to be performed, regardless of whether we have received formal cancellation notice from the customer. If we determine that any previously awarded work is no longer probable of being performed, we remove the value from our backlog based on risk. We recognize revenue from these awards as services are performed, provided we have entered into a contractual commitment with the customer. The primary changes made to our net new business awards and backlog policy related to reducing the commencement date requirement from twelve months to six months and only recording one year’s worth of an FSP award. These adjustments resulted in a reduction to our backlog of approximately $284.5 million as of September 30, 2017. We have recorded the backlog assumed in the Merger consistently with our new backlog policy.
We do not currently report new business awards or backlog data for our Commercial Solutions segment. Accordingly, all disclosures related to net new service awards and backlog pertain solely to our Clinical Solutions segment.
Our Clinical Solutions backlog consists of anticipated future net service revenue from business awards that have not started but are anticipated to begin in the future, or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these contracts. The average duration of our contracts will fluctuate from period to period in the future based on the contracts

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comprising our backlog at any given time. The majority of our Clinical Solutions segment contracts can be terminated by the customer with a 30-day notice.
As adjusted for the policy changes discussed above, our new business awards, net of award cancellations, for the years ended December 31, 20172016, and 2015 were $1.82 billion, $1.22 billion, and $1.11 billion, respectively. Additionally, as of December 31, 2017 and 2016, our backlog was $3.80 billion and $1.88 billion, respectively, with prior years adjusted to conform to the policy changes discussed above. Included in our Clinical Solutions backlog at December 31, 2017 is $1.51 billion of backlog assumed in the Merger. We expect approximately $1.88 billion of our Clinical Solutions backlog at December 31, 2017 will be recognized as revenue in 2018, with the remainder expected to be recorded as revenue beyond 2018.
We believe that our backlog and net new business awards might not be consistent indicators of future revenue because they have been, and likely will be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and cancellations and changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed by the customer or regulatory authorities. Projects that have been delayed for less than six months generally remain in backlog, but the anticipated timing of the recognition of revenue is uncertain. We generally do not have a contractual right to the full amount of the awards reflected in our backlog. If a customer cancels an award, we might be reimbursed for the costs we have incurred. As we increasingly compete for and enter into large contracts that are more global in nature, we expect that the rate at which our backlog and net new business awards convert into revenue is likely to decrease, and the duration of projects and the period over which related revenue is recognized is likely to increase. No assurance can be given that we will be able to realize the net service revenue that is included in the backlog. See Part I, Item 1A, "Risk Factors - Risks Related to Our Business - Our Clinical Solutions backlog might not be indicative of our future revenues, and we might not realize all the anticipated future revenue reflected in our backlog," and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - New Business Awards and Backlog" of this Annual Report on Form 10-K for more information.
Sales and Marketing
We employ a team of business development sales representatives and support staff that promote, market and sell our services to biopharmaceutical companies. In addition to significant selling experience, many of these individuals have technical and/or scientific backgrounds.
Our business development team works with our senior executives, therapeutic and commercial leaders and project team leaders to maintain key customer relationships and engage in business development activities. For many of our largest customer relationships, we have dedicated strategic account management teams to provide customers with a single point of contact to support delivery, cultural and process integration and to facilitate cross-selling opportunities.
We use integrated and customer-focused business development teams to develop joint sales plans for key accounts. We also place our business development personnel with strong operational experience around the globe to help ensure project demands are fulfilled. Each business development employee is generally responsible for a specific group of customers and for strengthening and expanding an effective relationship with that customer. Each individual is responsible for developing his or her customer base on our behalf, responding to customer requests for information, developing and defending proposals, and making presentations to customers.
As part of each customer proposal, our business development personnel consult with potential biopharmaceutical customers early in the project consideration stage in order to determine their requirements. We involve our therapeutic, operational, technical and/or scientific personnel early in each proposal and, accordingly, these individuals along with our business development representatives invest significant time to determine the optimal means to design and execute the potential customer's program requirements. As an example, recommendations we make to a potential customer with respect to a drug development study or commercial launch strategy design and implementation are an integral part of our bid proposal process and an important aspect of the integrated services we offer. Our preliminary efforts relating to the evaluation of a

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proposed clinical or commercial solution, along with the therapeutic, operational, and technical expertise and advice we provide during this process, enhance the opportunity for accelerated initiation and overall success of the partnership and work.
To drive brand awareness and positioning, our marketing team supports our business development organization through various marketing activities consisting primarily of market and competitive analysis, brand management, market information and collateral development, participation in industry conferences, content-driven thought leadership advertising, e-marketing, publications, and website development and maintenance.
As part of the Syneos Health brand launch, a significant investment has been made to carve out a differentiated positioning based on our unique Biopharmaceutical Acceleration Model where clinical insights inform commercialization and commercial insights inform clinical trial design. From our brand identity that delivers on our ability to “sync” clinical and commercial solutions, to our proprietary tagline, “Shortening the Distance from Lab to Life™,” to curated customer content including commercialization trends impacting real-time outsourcing solutions, all marketing efforts are delivered through multi-channel platforms to reach the right customers at the right time. Over time and with enhanced education and reinforcement, we are confident that brand recognition and our unique value proposition will position us as a preferred strategic outsourcing partner.
Competition
We operate in highly competitive industries. Our competitors include a variety of companies providing services to the biopharmaceutical industry, including large and smaller specialty CROs, large global communications holding companies, smaller specialized communications agencies, and a wide range of consulting companies. Each of our reportable segments faces distinct competitors within the markets they serve.
Clinical Solutions
Our Clinical Solutions segment competes primarily against other full-service CROs and services provided by in-house R&D departments of biopharmaceutical companies, universities and teaching hospitals. Although the CRO industry has experienced increased consolidation over the past three years, the landscape remains fragmented. Our major competitors include ICON plc, IQVIA (formerly Quintiles IMS Holdings, Inc.), Laboratory Corporation of America Holdings (formerly Covance, Inc.), Medpace Holdings, Inc., PAREXEL International Corporation, Pharmaceutical Product Development, LLC, PRA Health Sciences, Inc., and numerous specialty and regional players. We generally compete on the basis of the following factors:
experience within specific therapeutic areas;
the quality of staff and services;
the range of services provided;
the ability to recruit principal investigators and patients into studies expeditiously;
the ability to organize and manage large-scale, global clinical trials;
an international presence with strategically located facilities;
medical database management capabilities;
the ability to deploy and integrate IT systems to improve the efficiency of contract research;
experience with a particular customer;
the ability to form strategic partnerships;
speed to completion;
financial strength and stability;
price; and

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overall value.
Commercial Solutions
Our Commercial Solutions segment's largest competitors in the outsourced sales market are Ashfield (UDG Healthcare PLC), IQVIA, and Publicis Touchpoint Solutions, Inc. Our primary competitors in the communications market are large global communications holding companies such as: Havas SA, Omnicom Group Inc., Publicis Groupe S.A., The Interpublic Group of Companies, Inc., and WPP Group plc. Our consulting services’ competitors include IQVIA, L.E.K. Consulting LLC, McKinsey & Company, Inc., and ZS Associates, Inc. We also compete in our addressable market with the internal operations of biopharmaceutical companies that choose to perform the clinical development and commercialization tasks we provide internally. We generally compete on the basis of the following factors:
experience within the specific therapeutic area;
quality of the staff and services;
creativity of the proposed solution;
perceived "chemistry" with the staff to be deployed;
previous experience with a particular customer;
price; and
overall value.
Notwithstanding these competitive factors, we believe that our deep therapeutic expertise, global reach and operational strengths differentiate us from our competitors across both of our segments.
Government Regulation
The biopharmaceutical industry is subject to a high degree of governmental regulation in both domestic and international markets. Regardless of the country or region in which approval is being sought, before a marketing application for a drug is ready for submission to regulatory authorities, the candidate drug must undergo rigorous testing in clinical trials. The clinical trial process must be conducted in accordance with the Federal Food, Drug and Cosmetic Act in the United States and similar laws and regulations in the relevant foreign jurisdictions. These laws and regulations require the drug to be tested and studied in certain ways prior to submission for approval.
Regulation of Our Clinical Solutions Segment
In the United States, the FDA regulates the conduct of clinical trials of drug products in human subjects, and the form and content of regulatory applications. The FDA also regulates the development, approval, manufacture, safety, labeling, storage, record keeping, and marketing of drug products. The FDA has similar authority and similar requirements with respect to the clinical testing of biological products and medical devices. In the EU and other jurisdictions where our customers intend to apply for marketing authorization, similar laws and regulations apply. Within the EU, these requirements are enforced by the EMA, and requirements vary slightly from one member state to another. In Canada, clinical trials are regulated by the Health Products Food Branch of Health Canada as well as provincial regulations. Similar requirements also apply in other jurisdictions, including Australia, Japan, and other Asian countries, where we operate or where our customers intend to apply for marketing authorization. Sponsors of clinical trials also follow the ICH GCP guidelines. An addendum to the ICH GCP Guidelines was adopted by the ICH committee in November 2016 and will now be implemented through national and regional guidance in ICH member states. The changes aim to encourage sponsors to implement improved oversight and management of clinical trials, utilizing a Quality Risk Management approach while continuing to ensure protection of human subjects participating in trials and clinical trial data integrity.

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Our services are subject to various regulatory requirements designed to ensure the quality and integrity of the clinical trial process. In the United States, we must perform our clinical development services in compliance with applicable laws, rules and regulations, including GCP, which govern, among other things, the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials. Before a human clinical trial may begin, the manufacturer or sponsor of the clinical product candidate must file an investigational new drug application ("IND") with the FDA, which contains, among other things, the results of preclinical tests, manufacturer information, and other analytical data. A separate submission to an existing IND must also be made for each successive clinical trial conducted during product development. Each clinical trial must be conducted pursuant to, and in accordance with, an effective IND. In addition, under GCP, each human clinical trial we conduct is subject to the oversight of an independent institutional review board ("IRB") which is an independent committee that has the regulatory authority to review, approve and monitor a clinical trial. The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the study subjects are being exposed to an unacceptable health risk.
Clinical trials conducted outside the United States are subject to the laws and regulations of the country where the trials are conducted. These laws and regulations might not be similar to the laws and regulations administered by the FDA and other laws and regulations regarding the protection of patient safety and privacy and the control of study pharmaceuticals, medical devices or other study materials. Studies conducted outside the United States can also be subject to regulation by the FDA if the studies are conducted pursuant to an IND or an investigational device exemption for a product candidate that will seek FDA approval or clearance. It is the responsibility of the study sponsor or the parties conducting the studies to ensure that all applicable legal and regulatory requirements are fulfilled.
In order to comply with GCP and other regulations, we must, among other things:
comply with specific requirements governing the selection of qualified principal investigators and clinical research sites;
obtain specific written commitments from principal investigators;
obtain review, approval and supervision of the clinical trials by an IRB or ethics committee;
obtain favorable opinion from regulatory agencies to commence a clinical trial;
verify that appropriate patient informed consents are obtained before the patient participates in a clinical trial;
ensure that adverse drug reactions resulting from the administration of a drug or biologic during a clinical trial are medically evaluated and reported in a timely manner;
monitor the validity and accuracy of data;
monitor drug or biologic accountability at clinical research sites; and
verify that principal investigators and study staff maintain records and reports and permit appropriate governmental authorities access to data for review.
Similar guidelines exist in various states and in other countries. We may be subject to regulatory action if we fail to comply with applicable rules and regulations. Failure to comply with certain regulations can also result in the termination of ongoing research and disqualification of data collected during the clinical trials. For example, violations of GCP could result, depending on the nature of the violation and the type of product involved, in the issuance of a warning letter, suspension or termination of a clinical study, refusal of the FDA to approve clinical trial or marketing applications or withdrawal of such applications, injunction, seizure of investigational products, civil penalties, criminal prosecutions, or debarment from assisting in the submission of new drug applications. See Part I, Item 1A, "Risk Factors—Risks Related to Our Business—If we fail to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations, we could be subject to significant costs or liability and our reputation could be harmed" in this Annual Report on Form 10-K.
We monitor our clinical trials to test for compliance with applicable laws and regulations in the United States and the foreign jurisdictions in which we operate. We have adopted standard operating procedures that are

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designed to satisfy regulatory requirements and serve as a mechanism for controlling and enhancing the quality of our clinical trials. In the United States, our procedures were developed to ensure compliance with GCP and associated guidelines.
In addition to its comprehensive regulation of safety in the workplace, the U.S. Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for healthcare employers whose workers might be exposed to blood-borne pathogens such as HIV and the hepatitis B virus. Furthermore, certain employees might have to receive initial and periodic training to ensure compliance with applicable hazardous materials regulations and health and safety guidelines. We are subject to similar regulations in Canada and Spain.
Regulation of Our Commercial Solutions Segment
Our field personnel are subject to all laws, rules and regulations governing the promotion of pharmaceutical products in the United States and in every other country where such personnel performs work. In particular, these rules and regulations include limitations on the indications for which a product may be promoted and on promotional spending. Violations of these rules may leave us at risk of direct regulatory enforcement action and/or cause us to be in breach of contract with our customers.
Some of our field personnel handle and distribute samples of pharmaceutical products. In the United States, the handling and distribution of prescription drug products are subject to regulation under the Prescription Drug Marketing Act and other applicable federal, state and local laws and regulations and other countries may have similar laws or regulations. These laws and regulations regulate the distribution of drug samples by mandating procedures for storage and record-keeping requirements for drug samples and ban the purchase or sale of drug samples. Further, companies holding or distributing controlled substances are subject to regulation by the U.S. Drug Enforcement Agency.
Our communications solutions offerings are subject to all regulatory risks applicable to similar communications businesses as well as risks that relate specifically to the provision of these services to the biopharmaceutical industry. Such regulatory risks include enforcement by the FDA, Health Canada, the Department of Health in the United Kingdom, EMA and the Federal Trade Commission as well as state agencies and other foreign regulators enforcing laws relating to product advertising, false advertising, and unfair and deceptive trade practices. In addition to enforcement actions initiated by government agencies, there has been an increasing tendency in the United States among biopharmaceutical companies to resort to the courts and industry and self-regulatory bodies to challenge comparative prescription drug advertising on the grounds that the advertising is false and deceptive. There continues to be an expansion of specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements with respect to the advertising for certain products.
Regulation of Patient Information
The confidentiality of patient-specific information and records and the circumstances under which such patient-specific information and records may be released for inclusion in our databases or used in other aspects of our business are heavily regulated. The U.S. Department of Health and Human Services has promulgated rules under the Health Information Technology for Economic and Clinical Health Act in connection with the application of security and privacy provisions under the Health Information Portability and Accountability Act (collectively, "HIPAA"). These regulations govern the use, handling and disclosure of personally identifiable medical information and require the use of standard transactions, privacy and security standards and other administrative simplification provisions by covered entities, which include many healthcare providers, health plans, and healthcare clearinghouses. Although we do not consider that our business activities generally cause us to be subject to HIPAA as a directly covered entity, we endeavor to embrace sound identity protection practices. These regulations also establish procedures for the exercise of an individual's rights and the methods permissible for de-identification of health information. We are also subject to privacy legislation in Canada under the federal Personal Information and Electronic Documents Act, the Act Respecting the Protection of Personal Information in the Private Sector and the Personal Health Information Protection Act, and privacy legislation in the EU under the 95/46/EC Privacy Directive on the protection and free movement of personal data.

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Intellectual Property
We develop and use a number of proprietary methodologies, analytics, systems, technologies and other intellectual property in the conduct of our business. We rely upon a combination of confidentiality policies, nondisclosure agreements and other contractual arrangements to protect our trade secrets, and copyright and trademark laws to protect other intellectual property rights. We have obtained or applied for trademarks and copyright protection in the United States and in a number of foreign countries. Our material trademarks include Trusted Process®, PlanActivation®, QuickStart®, ProgramAccelerate®, QualityFinish®, "Shortening the distance from lab to life™, Syneos Health, Inc., and other corporate emblems. Although the duration of trademark registrations varies from country to country, trademarks generally may be renewed indefinitely so long as they are in use and/or their registrations are properly maintained, and so long as they have not been found to have become generic. Although we believe the ownership of trademarks is an important factor in our business and that our success does depend in part on the ownership thereof, we rely primarily on the innovative skills, technical competence and marketing abilities of our employees. We do not have any material licenses, franchises or concessions.
Employees
The level of competition among employers in the United States and overseas for skilled personnel is high. We believe that our brand recognition and our multinational presence are advantages in attracting qualified candidates. As of December 31, 2017, we had approximately 21,000 employees worldwide, with approximately 58% located in the United States and Canada, 22% in Europe, 16% in Asia-Pacific, 3% in Latin America and 1% in the Middle East and Africa. The majority of our employees are employed on a full-time basis. None of our employees are covered by a collective bargaining agreement and we believe our overall relations with our employees are good. Employees in certain of our non-U.S. locations are represented by workers' councils as required by local laws.
Indemnification and Insurance
In conjunction with our Clinical Solutions services, we employ or contract with research institutions and, in some jurisdictions, principal investigators and pharmacies on behalf of biopharmaceutical companies to serve as research centers and principal investigators in conducting clinical trials to test new drugs on human volunteers. Such testing creates the risk of liability for personal injury or death of volunteers, particularly to volunteers with life-threatening illnesses, resulting from adverse reactions to the drugs administered. It is possible that we could be held liable for claims and expenses arising from any professional malpractice of the principal investigators with whom we contract or engage, or in the event of personal injury to or death of persons participating in clinical trials. In addition, as a result of our operation of Phase I clinical trial facilities, we could be liable for the general risks associated with clinical trials including, but not limited to, adverse events resulting from the administration of drugs to clinical trial participants or the professional malpractice of medical care providers. We also could be held liable for errors or omissions in connection with the services we perform through each of our service groups. For example, we could be held liable for errors, omissions, or breach of contract, if monitoring obligations have been transferred to us and one of our CRA's inaccurately reports from source documents or fails to adequately monitor a human clinical trial resulting in inaccurately recorded results.
We have sought to reduce our risks by implementing the following where practicable:
securing contractual assurances such as indemnification provisions and provisions seeking to limit or exclude liability contained in our contracts with customers, institutions, pharmacies, vendors and principal investigators;
securing contractual and other assurances that adequate insurance will be maintained to the extent applicable by customers, institutions, pharmacies, vendors, principal investigators and us; and

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complying with various regulatory requirements, including monitoring that the oversight of independent review boards and ethics committees are intact where obligations are transferred to us and monitoring the oversight of the procurement by the principal investigator of each participant's informed consent to participate in the study.
Our contractual indemnifications generally do not fully protect us against certain of our own actions, such as negligence. Contractual arrangements are subject to negotiation with customers, and the terms and scope of any indemnification, limitation of liability or exclusion of liability varies from customer to customer and from trial to trial. Additionally, financial performance of these indemnities is not secured. Therefore, we bear the risk that any indemnifying party against which we have claims may not have the financial ability to fulfill its indemnification obligations to us.
While we maintain a global insurance program including professional liability and other types of insurance standard to our industry to cover our liability while conducting our business activities and contracted services, including drug safety issues as well as data processing and other errors and omissions, it is possible that we could become subject to claims not covered by insurance or that exceed our coverage limits. We could be materially and adversely affected if we were required to pay damages or bear the costs of defending any claim that is outside the scope of, or in excess of, a contractual indemnification provision, beyond the level of insurance coverage or not covered by insurance, or in the event that an indemnifying party does not fulfill its indemnification obligations.
Executive Officers
The following table sets forth information concerning our executive officers as of December 31, 2017:
Name
 
Age
 
Position
Alistair Macdonald
 
47
 
Chief Executive Officer and Director
Jason Meggs
 
42
 
Executive Vice President and Interim Chief Financial Officer
Gregory S. Rush
 
50
 
Former Executive Vice President and Chief Financial Officer
Christopher L. Gaenzle
 
51
 
Former Chief Administrative Officer, General Counsel and Secretary
The following is a biographical summary of the experience of our executive officers:
Alistair Macdonald - Chief Executive Officer and Director
Alistair Macdonald has been our Chief Executive Officer ("CEO") and a member of our Company's Board of Directors (the "Board") since October 2016. He joined our Company in May 2002 and has served in various senior leadership roles during that time. Prior to his current role, Mr. Macdonald most recently served as President and Chief Operating Officer from January 2015 to September 2016 and Chief Operating Officer from January 2013 to January 2015. He also served as our President, Clinical Development Services from March 2012 to January 2013, Executive Vice President of our Global Oncology Unit from February 2011 to March 2012, Executive Vice President, Strategic Development from October 2009 to February 2011, and Senior Vice President, Biometrics from May 2002 to September 2009. He received his Master of Science in Environmental Diagnostics from Cranfield University.
Jason Meggs - Executive Vice President and Interim Chief Financial Officer
Jason Meggs was appointed Executive Vice President and Interim Chief Financial Officer ("CFO") on February 21, 2018. Prior to his appointment to this role, he served as Executive Vice President and CFO of the Commercial Solutions segment of the Company beginning in August 2017. He also previously served as Executive Vice President, Oncology Operations at the Company from January 2017 to August 2017 and Senior Vice President, Business Finance with the Company from 2014 to 2016. Prior to joining the Company, Mr. Meggs was Global Vice President, Internal Audit, at Quintiles Transnational Corporation from 2013 to 2014 and held a number of finance roles at Quintiles from 2005 to 2013. He began his career as an auditor with Deloitte & Touche LLP and Arthur Anderson LLP, and is a certified public accountant. He received his

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Bachelor of Science in Business Administration degree with a Major in Accounting from Western Carolina University.
Gregory S. Rush - Former Executive Vice President and Chief Financial Officer
Greg Rush joined our Company in August 2013 as Executive Vice President and Chief Financial Officer ("CFO"). From April 2010 to August 2013, Mr. Rush served as Senior Vice President and Chief Financial Officer of Tekelec, Inc., which was acquired by Oracle Corporation in June 2013, after serving as Interim Chief Financial Officer beginning in March 2010. Mr. Rush joined Tekelec as Vice President and Corporate Controller in May 2005 and served as Vice President, Corporate Controller and Chief Accounting Officer from May 2006 to March 2010. His previous experience also includes roles in various senior financial positions with Siebel Systems, Inc., Quintiles, PricewaterhouseCoopers and Ernst & Young. Mr. Rush received his Bachelor of Science in Business and Master of Accounting degrees from the University of North Carolina at Chapel Hill, graduating with honors, and is a Certified Public Accountant. As disclosed in a Form 8-K filing on February 21, 2018, Mr. Rush stepped down as CFO of the Company and ceased to be an executive officer, he will remain an employee of the Company through April 30, 2018.
Christopher L. Gaenzle - Former Chief Administrative Officer, General Counsel, and Secretary
Chris Gaenzle joined our Company in April 2012 as General Counsel and Secretary. Since August 2013, he has also served as our Chief Administrative Officer. Prior to joining our Company, Mr. Gaenzle served for five years in various senior legal positions at Pfizer Inc., where he was most recently Assistant General Counsel from 2010 to 2012. Prior to Pfizer, Mr. Gaenzle was a partner at Hunton and Williams LLP, where he was a practicing attorney from 1998 to 2007. Mr. Gaenzle has 20 years of private practice and corporate legal experience, the majority of which is in the pharmaceutical, medical and clinical research industries. Mr. Gaenzle received his Bachelor of Arts from Colgate University and his J.D. from Syracuse University. As disclosed in a Form 8-K filing on February 21, 2018, Mr. Gaenzle stepped down as Chief Administrative Officer, General Counsel, and Secretary of the Company and ceased to be an executive officer as of February 19, 2018, he will remain an employee of the Company through April 15, 2018.
Available Information
Our website address is syneoshealth.com. Information on our website is not incorporated by reference herein. Copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and our proxy statements for our annual stockholders meetings, and any amendments to those reports, as well as Section 16 reports filed by our insiders, are available free of charge on our website as soon as reasonably practicable after we file the reports with, or furnish the reports to, the Securities and Exchange Commission (the "SEC"). Our SEC filings are also available for reading and copying at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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Item 1A. Risk Factors.
We operate in a rapidly changing environment that involves a number of risks, some of which are beyond our control. In evaluating our company, you should consider carefully the risks and uncertainties described below together with the other information included in this Annual Report on Form 10-K, including our consolidated financial statements and related notes included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. The occurrence of any of the following risks may materially and adversely affect our business, financial condition, results of operations and future prospects.
Risks Related to Our Business
If we do not generate a large number of new business awards, or if new business awards are delayed, terminated, reduced in scope or fail to go to contract, our business, financial condition, results of operations, or cash flows may be materially adversely affected.
Our business is dependent on our ability to generate new business awards from new and existing customers and maintain existing customer contracts. Our inability to generate new business awards on a timely basis and subsequently enter into contracts for such awards could have a material adverse effect on our business, financial condition, results of operations or cash flows.
There is risk of cancelability in both the clinical and commercial businesses. The time between when a clinical study is awarded and when it goes to contract is typically several months, and prior to a new business award going to contract, our customer can cancel the award without notice. Once an award goes to contract, the majority of our customers can terminate the contract with little notice, in many cases 30 days or less. Our contracts may be delayed or terminated by our customers or reduced in scope for a variety of reasons beyond our control, including but not limited to:
decisions to forego or terminate a particular trial;
budgetary limits or changing priorities;
actions by regulatory authorities;
production problems resulting in shortages of the drug being tested;
failure of products being tested to satisfy safety requirements or efficacy criteria;
unexpected or undesired clinical results for products;
insufficient patient enrollment in a trial;
insufficient principal investigator recruitment;
production problems resulting in shortages of the product being tested;
the customers’ decision to terminate or scale back the development or commercialization of a product or to end a particular project;
shift of business to a competitor or internal resources; or
product withdrawal following market launch.
Our commercial services contracts typically have a significantly shorter wind down period than clinical contracts, particularly within our selling solutions offerings. Furthermore, many of our communications services and consulting services projects are tied to a customer’s annual marketing budget or ad hoc service requests, which can lead to seasonal variability in revenue and less predictability in future revenues. In addition, many of our biopharmaceutical selling solutions service contracts provide our customers with the opportunity to internalize the resources provided under the contract and terminate all or a portion of the services we provide under the contract. Our customers may also decide to shift their business to a competitor. Each of these factors results in less visibility to future revenues and higher volatility in future revenues.
Contract terminations, delays and modifications are a regular part of our business across each of our segments. For example, our full-service offering within our Clinical Solutions business has been, and may continue to be, negatively impacted by project delays, which impact near term revenue disproportionately. In

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addition, project delays, downsizings and cancellations, particularly within our selling solutions and communications offerings, which are part of our Commercial Solutions business, have impacted our results in the past and might impact them in the future. The loss, reduction in scope or delay of a large project or of multiple projects could have a material adverse effect on our business, results of operations and financial condition. In addition, we might not realize the full benefits of our backlog if our customers cancel, delay or reduce their commitments to us.
In the event of termination, our contracts often provide for fees for winding down the project, which include both fees incurred and actual and non-cancellable expenditures and may include a fee to cover a percentage of the remaining professional fees on the project. These fees might not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates and therefore lower operating margins. In addition, cancellation of a contract or project for the reasons noted above may result in the unwillingness or inability of our customer to satisfy its existing obligations to us such as payments of accounts receivable, which may in turn result in a material impact to our results of operations and cash flow. Historically, cancellations and delays have negatively impacted our operating results, and they might again. In addition, we might not realize the full benefits of our backlog if our customers cancel, delay or reduce their commitments to us, which may occur if, among other things, a customer decides to shift its business to a competitor or revoke our status as a preferred provider. Thus, the loss or delay of a large business award or the loss or delay of multiple awards could adversely affect our service revenues and profitability. Additionally, a change in the timing of a new business award could affect the period over which we recognize revenue and reduce our revenue in any one quarter.
Our Clinical Solutions backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog.
Our Clinical Solutions backlog consists of anticipated net service revenue awarded from contract and pre-contract commitments that are supported by written communications. Once work begins on a project, revenue is recognized over the duration of the project, provided the award has gone to contract. Projects may be canceled or delayed by the customer or delayed by regulatory authorities for reasons beyond our control. To the extent projects are delayed, the timing of our revenue could be adversely affected. In addition, if a customer terminates a contract, we typically would be entitled to receive payment for all services performed up to the termination date and subsequent customer-authorized services related to terminating the canceled project. Typically, however, we have no contractual right to the full amount of the future revenue reflected in our Clinical Solutions backlog in the event of a contract termination or subsequent changes in scope that reduce the value of the contract. The duration of the projects included in our Clinical Solutions backlog, and the related revenue recognition, typically range from a few months to several years. Our Clinical Solutions backlog might not be indicative of our future revenues, and we might not realize all the anticipated future revenue reflected in that backlog. A number of factors may affect backlog, including:
the size, complexity and duration of projects or strategic relationships;
the cancellation or delay of projects;
the failure of one or more business awards to go to contract; and
changes in the scope of work during the course of projects.
The rate at which our Clinical Solutions backlog converts to revenue may vary over time. The revenue recognition on larger, more global projects could be slower than on smaller, more regional projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased time frame for obtaining the necessary regulatory approvals.
Our Clinical Solutions backlog at December 31, 2017 was $3.80 billion. Although an increase in Clinical Solutions backlog will generally result in an increase in revenues over time, an increase in backlog at a particular point in time does not necessarily correspond directly to an increase in revenues during any particular period, or at all. The extent to which contracts in Clinical Solutions backlog will result in revenue depends on many factors, including, but not limited to, delivery against project schedules, scope changes, contract terminations and the nature, duration and complexity of the contracts, and can vary significantly over time. Subsequent to the August 2017 Merger with inVentiv, our Clinical Solutions segment represents only a

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portion of our overall business resulting in our reported backlog becoming less meaningful as an indicator of our future total revenues.
We do not currently report new business awards or backlog data for our Commercial Solutions segment.
Failure to adopt the new accounting standard of recognizing revenue from contracts with customers in a timely manner could cause our business, financial condition, results of operations or cash flows to be materially adversely affected.
Effective January 1, 2018, the Company is required to adopt the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers, the new comprehensive accounting standard for recognizing revenue from contracts with customers. If the Company is unable to accurately and efficiently adopt the new standard effective on January 1, 2018, is unable to adopt the new standard for the combined company after the Merger, is unable to get its information systems and processes in place to facilitate compliance, or is unable to effectively communicate the changes in revenue recognition policy to investors, the Company may lose investor confidence, its ability to raise capital, and/or its business, financial condition, results of operations or cash flows may be materially adversely affected. See "Note 1 - Basis of Presentation and Changes in Significant Accounting Policies" to the consolidated financial statements in Part II, Item 8, "Financial Statements and Supplementary Data” in this Annual Report on Form 10-K for further information regarding ASU 2014-09.
Our operating results have historically fluctuated between fiscal quarters and may continue to fluctuate in the future, which may adversely affect the market price of our stock.
Our operating results have fluctuated in previous quarters and years and may continue to vary significantly from quarter to quarter and are influenced by a variety of factors, such as:
timing of contract amendments for changes in scope that could affect the value of a contract and potentially impact the amount of net new business awards and net service revenues from quarter to quarter;
commencement, completion, execution, postponement or termination of large contracts;
contract terms for the recognition of revenue milestones;
progress of ongoing contracts and retention of customers;
timing of and charges associated with completion of acquisitions, integration of acquired businesses, and other events;
changes in the mix of services delivered, both in terms of geography and type of services;
potential customer disputes, penalties or other issues that may impact the revenue we are able to recognize or the collectability of our related accounts receivable; and
exchange rate fluctuations.
Our operating results for any particular quarter are not necessarily a meaningful indicator of future results and fluctuations in our quarterly operating results could negatively affect the market price and liquidity of our stock.
If we underprice our contracts, overrun our cost estimates or fail to receive approval for or experience delays in documentation of change orders, our business, financial condition, results of operations or cash flows may be materially adversely affected.
We price our contracts based on assumptions regarding the scope of work required and cost to complete the work. We bear the financial risk if we initially underprice our contracts or otherwise overrun our cost estimates, which could adversely affect our cash flows and financial performance. In addition, contracts with our customers are subject to change orders, which occur when the scope of work we perform needs to be modified from that originally contemplated in our contract with the customers. This can occur, for example, when there is a change in a key study assumption or parameter or a significant change in timing. We may be unable to successfully negotiate changes in scope or change orders on a timely basis or at all, which could require us to incur cost outlays ahead of the receipt of any additional revenue. In addition, under generally accepted accounting principles in the United States of America ("GAAP") we cannot recognize additional

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revenue anticipated from change orders until appropriate documentation is received by us from the customer authorizing the change. However, if we incur additional expense in anticipation of receipt of that documentation, we must recognize the expense as incurred. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations or cash flows.
Our business depends on the continued effectiveness and availability of our information systems, including the information systems we use to provide services to our customers and to store employee data, and failures of these systems, including cyber-attacks, may materially limit our operations or have an adverse effect on our reputation.
Our information systems are comprised of systems we have purchased or developed, legacy information systems from organizations we have acquired, including inVentiv and, increasingly, web-enabled and other integrated information systems. In using these information systems, we frequently rely on third-party vendors to provide hosting services, where our infrastructure is dependent upon the reliability of their underlying platforms, facilities and communications systems. We also utilize integrated information systems that we provide customers access to or install for our customers in conjunction with our delivery of services.
As the breadth and complexity of our information systems continue to grow, we will increasingly be exposed to the risks inherent in maintaining the stability of our legacy systems due to prior customization, attrition of employees or vendors involved in their development, and obsolescence of the underlying technology as well as risks from the increasing number and scope of external data breaches on multi-national companies. In addition, during 2017 we began a major integration of the legacy inVentiv financial and operational systems to our financial and operating systems. Please refer to the risk factor “Upgrading the information systems that support our operating processes and evolving the technology platform for our services pose risks to our business” below for additional risk related to integrating information technology systems and processes. Because certain customers, clinical trials, and other long-term projects depend upon these legacy systems, we also face an increased level of embedded risk in maintaining the legacy systems and limited options to mitigate such risk. We are also exposed to risks associated with the availability of all our information systems, including:
disruption, impairment or failure of data centers, telecommunications facilities or other key infrastructure platforms, including those maintained by our third-party vendors;
security breaches of, cyber-attacks on and other failures or malfunctions in our internal systems, including our employee data and communications, critical application systems or their associated hardware; and
excessive costs, excessive delays or other deficiencies in systems development and deployment.
The materialization of any of these risks may impede the processing of data, the delivery of databases and services, and the day-to-day management of our business and could result in the corruption, loss or unauthorized disclosure of proprietary, confidential or other data. While we have disaster recovery plans in place, they might not adequately protect us in the event of a system failure. Despite any precautions we take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins and similar events at our various computer facilities or those of our third-party vendors could result in interruptions in the flow of data to us and from us to our customers. Corruption or loss of data may result in the need to repeat a project at no cost to the customer, but at significant cost to us, the termination of a contract or damage to our reputation. Additionally, significant delays in system enhancements or inadequate performance of new or upgraded systems once 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 involving cities in which we have offices, and cyber-attacks such as those recently faced by other multi-national companies could adversely affect our businesses. As our business continues to expand globally, these types of risks may be further increased by instability in the geopolitical climate of certain regions, underdeveloped and less stable utilities and communications infrastructure, and other local and regional factors. Although we carry property and business interruption insurance that we believe is customary for our industry, our coverage might not be adequate to compensate us for all losses that may occur.

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Unauthorized disclosure of sensitive or confidential data, whether through systems failure or employee actions, cyber-attacks, fraud or misappropriation, could damage our reputation and cause us to lose customers. Similarly, we have been and expect that we will continue to be subject to attempts to gain unauthorized access to or through our information systems or those we internally or externally develop for our customers, including a cyber-attack by computer programmers and hackers who may develop and deploy viruses, worms or other malicious software programs, process breakdowns, denial-of-service attacks, malicious social engineering or other malicious activities, or any combination of the foregoing. In addition, we may be susceptible to physical or computer-based attacks by terrorists or hackers due to our role in the biopharmaceutical service industry. These concerns about security are increased when information is transmitted over the Internet. Threats include cyber-attacks such as computer viruses, worms or other destructive or disruptive software, and any of these could result in a degradation or disruption of our services or damage to our properties, equipment and data. They could also compromise data security, including the security of personal data. If such attacks are not detected immediately, their effect could be compounded. To date these attacks have not had a material impact on our operations or financial results. However, successful attacks in the future could result in negative publicity, significant remediation and recovery costs, legal liability and damage to our reputation and could have a material adverse effect on our financial condition, results of operations and cash flows. In addition, our liability insurance might not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches.
Additionally, we rely on service providers for the timely transmission of information across our global data network. If a service provider fails to provide the communications capacity or services we require for similar reasons, the failure could interrupt our services. Because of the centrality of our processing systems to our business, any interruption or degradation could adversely affect the perception of our brands' reliability and harm our business. If a service provider experiences the unauthorized disclosure of sensitive or confidential data they are processing on our behalf, whether through systems failure or employee actions, cyber-attacks, fraud, or misappropriation, it could damage our reputation and cause us to lose customers. Similarly, such disclosure could result in negative publicity, significant remediation and recovery costs, legal liability and damage to our reputation, and could have a material adverse effect on our financial condition, results of operations, and cash flows. In addition, contractual indemnity, the service provider’s liability insurance and our liability insurance might not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks, and other related breaches.
We are subject to regulation in the areas of consumer privacy and data use and security.
Privacy, data use and security continue to receive heightened legislative and regulatory focus in the United States, Europe and elsewhere. For example, in many jurisdictions victims must be notified in the event of a data breach and those jurisdictions that have these laws are continuing to increase the circumstances and the breadth of these notices. Our failure or the failure of our customers to comply with these laws and regulations could result in fines, sanctions, litigation, damages, cost for mitigation activities and damage to our global reputation and our brands.
Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations or cash flows.
If any large customer decreases or terminates its relationship with us, our business, financial condition, results of operations or cash flows could be materially adversely affected. For the year ended December 31, 2017, our top ten customers based on revenue accounted for approximately 37% of our consolidated net service revenue and our top ten Clinical Solutions customers based on backlog accounted for approximately 39% of our total backlog. No single customer accounted for greater than 10% of our total consolidated net service revenue for the years ended December 31, 2017, 2016 or 2015. It is possible that an even greater portion of our revenues will be attributable to a smaller number of customers in the future, including as a result of our entering into strategic provider relationships with customers. Also, consolidation in our potential customer base results in increased competition for important market segments and fewer available customer accounts.
Additionally, conducting multiple clinical trials for different sponsors in a single therapeutic class involving drugs with the same or similar chemical action may adversely affect our business if some or all of the trials are canceled because of new scientific information or regulatory judgments that affect the drugs as a class. Similarly, marketing and selling products for different sponsors with similar drug action subjects us to risk if

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new scientific information or regulatory judgment prejudices the products as a class, leading to compelled or voluntary prescription limitations or withdrawal of some or all of the products from the market.
Our business is subject to international economic, political and other risks that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.
We have operations in many foreign countries, including, but not limited to, countries in the Asia-Pacific region, Europe, Latin America and the Middle East and Africa. As of December 31, 2017, approximately 47% of our workforce was located outside of the United States, and for the fiscal year ended December 31, 2017, approximately 39% of our net service revenue was billed to locations outside the United States. Our international operations are subject to risks and uncertainties inherent in operating in these regions, including:
conducting a single project across multiple countries is complex, and issues in one country, such as a failure to comply with or unanticipated changes to local regulations or restrictions such as restrictions on import or export of clinical trial material or availability of clinical trial data may affect the progress of the trial in the other countries, resulting in delays or potential termination of contracts, which in turn may result in loss of revenue;
the United States or other countries could enact legislation or impose regulations or other restrictions, including unfavorable labor regulations, tax policies, data protection regulations or economic sanctions, which could have an adverse effect on our ability to conduct business in or expatriate profits from the countries in which we operate;
foreign countries are expanding or may expand their banking regulations that govern international currency transactions, particularly cross-border transfers, which may inhibit our ability to transfer funds into or within a jurisdiction, impeding our ability to pay our principal investigators, vendors and employees, thereby impacting our ability to conduct trials in such jurisdictions;
foreign countries are expanding or may expand their regulatory framework with respect to patient informed consent, protection and compensation in clinical trials, or transparency reporting requirements (similar to the Physician Payments Sunshine Act in the United States), which could delay, inhibit or prohibit our ability to conduct projects in such jurisdictions;
the regulatory or judicial authorities of foreign countries might not enforce legal rights and recognize business procedures in a manner in which we are accustomed or would reasonably expect;
changes in political and economic conditions, including the June 2016 vote by the U.K. to exit from the European Union and the results of the U.S. presidential election, may lead to changes in the business environment in which we operate, as well as changes in inflation and foreign currency exchange rates;
potential violations of applicable anti-bribery/anti-corruption laws, including the United States Foreign Corrupt Practices Act ("FCPA") and the UK Bribery Act of 2010, may cause a material adverse effect on our business, financial condition, results of operations, cash flows or reputation;
customers in foreign jurisdictions may have longer payment cycles, and it may be more difficult to collect receivables in those jurisdictions;
natural disasters, pandemics or international conflict, including terrorist acts, could interrupt our services, endanger our personnel or cause project delays or loss of trial materials or results;
political unrest, such as the current situations in the Middle East, could delay or disrupt the ability to conduct clinical trials or other business; and
foreign governments may enact currency exchange controls that may limit the ability to fund our operations or significantly increase the cost of maintaining operations.
These risks and uncertainties could negatively impact our ability to, among other things, perform large, global projects for our customers. Furthermore, our ability to deal with these issues could be affected by applicable U.S. laws. Any such risks could have an adverse impact on our business, financial condition, results of operations, cash flows or reputation.

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Governmental authorities may question our intercompany transfer pricing policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business.
As a U.S. company doing business in international markets through subsidiaries, we are subject to foreign tax and intercompany pricing laws, including those relating to the flow of funds between legal entities in various international jurisdictions. Tax authorities in the United States and in international markets have the right to examine our corporate structure and how we account for intercompany fund transfers. If such authorities challenge our corporate structure, transfer pricing mechanisms or intercompany transfers and the resulting assessments are upheld, our operations may be negatively impacted and our effective tax rate may increase. Tax rates vary from country to country and if a tax authority determines that our profits in one jurisdiction should be increased, we might not be able to realize the full tax benefits in the event we cannot utilize all foreign tax credits that are generated, or we do not realize a compensating offsetting adjustment in another taxing jurisdiction. The effects of either would increase our effective tax rate. Additionally, the Organization for Economic Cooperation and Development has issued certain guidelines regarding base erosion and profit shifting. As these guidelines continue to be formally adopted by separate taxing jurisdictions, we may need to change our approach to intercompany transfer pricing in order to maintain compliance under the new rules. Our effective tax rate may increase or decrease depending on the current location of global operations at the time of the change. Finally, we might not always be in compliance with all applicable customs, exchange control, Value Added Tax and transfer pricing laws despite our efforts to be aware of and to comply with such laws. If these laws change we may need to adjust our operating procedures and our business could be adversely affected.
If we are unable to successfully increase our market share, our ability to grow our business and execute our growth strategies could be materially adversely affected.
A key element of our growth strategy is increasing our market share within the biopharmaceutical services market, the clinical development market and in the geographic markets in which we operate. In addition, we continue to invest in expanding new services such as our late phase offerings, along with solutions for our medical device customers. As we grow our market share within the biopharmaceutical services and clinical development markets and make investments in growing our newer service offerings, we might not have or adequately build the competencies necessary to perform our services satisfactorily or may face increased competition. If we are unable to succeed in increasing our market share or realize the benefits of our investments in our new service offerings, we may be unable to implement this element of our growth strategy, and our ability to grow our business or maintain our operating margins could be adversely affected.
Upgrading the information systems that support our operating processes and evolving the technology platform for our services pose risks to our business.
Continued efficient operation of our business requires that we implement standardized global business processes and evolve our information systems to enable this implementation, especially in the course of integrating inVentiv into our company. We have continued to undertake significant programs to optimize business processes with respect to our services. Our inability to effectively manage the implementation of new information systems or upgrades and adapt to new processes designed into these new or upgraded systems in a timely and cost-effective manner may result in disruption to our business and negatively affect our operations.
We have entered into agreements with certain vendors to provide systems development, integration, and hosting services that develop or license to us the information technology ("IT") platforms and capacity for programs to optimize our business processes. If such vendors or their products fail to perform as required or if there are substantial delays in developing, implementing, and updating our IT platforms, our customer delivery may be impaired, and we may have to make substantial further investments, internally or with third parties, to achieve our objectives. For example, we rely on an external vendor to provide the clinical trial management software used in managing the completion of our customer clinical trials. If that externally provided system is not properly maintained we might not be able to meet the obligations of our contracts or may need to incur significant costs to replace the system or capability. Additionally, our progress may be limited by parties with existing or claimed patents who seek to enjoin us from using preferred technology or seek license payments from us.

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Meeting our objectives is dependent on a number of factors which might not take place as we anticipate, including obtaining adequate technology-enabled services, depending upon our third-party vendors to develop and enhance existing applications to adequately support our business, creating IT-enabled services that our customers will find desirable and implementing our business model with respect to these services. Also, increased IT-related expenditures and our potential inability to anticipate increases in service costs may negatively impact our business, financial condition, results of operations or cash flows.
If we fail to perform our services in accordance with contractual requirements, regulatory standards and ethical considerations, we could be subject to significant costs or liability and our reputation could be harmed.
We contract with biopharmaceutical companies to perform a wide range of services to assist them in bringing new drugs to market and to support the commercial activity of products already in the marketplace. Our services include monitoring clinical trials, data and laboratory analysis, EDC, patient recruitment, product launch consulting, selling solutions, advertising, publications and medical communications, and other related services. Such services are complex and subject to contractual requirements, regulatory standards and ethical considerations. For example, we must adhere to applicable regulatory requirements such as those required by the Food and Drug Administration, European Medicines Agency, and current Good Clinical Practice regulations, which govern, among other things, the design, conduct, performance, monitoring, auditing, recording, analysis, and reporting of clinical trials and the promotion, sales and marketing of biopharmaceutical products. If we fail to perform our services in accordance with these requirements, regulatory agencies may take action against us or our customers. Such actions may include sanctions such as injunctions or failure of such regulatory authorities to grant marketing approval of products, imposition of clinical holds or delays, suspension or withdrawal of approvals, rejection of data collected in our studies, license revocation, product seizures or recalls, operational restrictions, civil or criminal penalties or prosecutions, damages or fines. Additionally, there is a risk that actions by regulatory authorities, if they result in significant inspectional observations or other measures, could harm our reputation and cause customers not to award us future contracts or to cancel existing contracts. Any such action could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.
Such consequences could arise if, among other things, the following occur:
Improper performance of our services.  The performance of our clinical development and other biopharmaceutical services is complex and time-consuming. For example, we may make mistakes in conducting a clinical trial that could negatively impact or obviate the usefulness of the trial or cause the results of the trial to be reported improperly. If the trial results are compromised, we could be subject to significant costs or liability, which could have an adverse impact on our ability to perform our services and our reputation could be harmed. For example:
non-compliance generally could result in the termination of ongoing clinical trials or the disqualification of data for submission to regulatory authorities;
compromise of data from a particular trial, such as failure to verify that adequate informed consent was obtained from subjects or improper monitoring of data, could require us to repeat the trial under the terms of our contract at no further cost to our customer, but at a substantial cost to us; and
breach of a contractual term could result in liability for damages or termination of the contract.
Large clinical trials can cost hundreds of millions of dollars and improper performance of our services could have a material adverse effect on our financial condition, damage our reputation, and result in the termination of current contracts or failure to obtain future contracts from the affected customer or other customers.
Interactive Voice/Web Response Technology malfunction.  We develop, maintain, and use third-party computer-based interactive voice/web response systems to automatically manage the randomization of patients in a given clinical trial to different treatment arms and regulate the supply of investigational drugs, all by means of interactive voice/web response systems. An error in the design, programming, or validation of these systems could lead to inappropriate assignment or dosing of patients which could give rise to patient safety issues, invalidation of the trial, or liability claims against us. Furthermore, negative publicity associated with such a malfunction could have an adverse effect on our business and reputation. Additionally, errors in

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randomization may require us to repeat the trial at no further cost to our customer, but at a substantial cost to us.
Investigation of customers.  From time to time, one or more of our customers are audited or investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials, programs or the marketing and sale of their drugs. In these situations, we have often provided services to our customers with respect to the clinical trials, programs, or activities being audited or investigated, and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our customers or regulatory authorities could claim that we performed our services improperly or that we are responsible for clinical trial or program compliance. If our customers or regulatory authorities make such claims against us and prove them, we could be subject to damages, fines, or penalties. In addition, negative publicity regarding regulatory compliance of our customers' clinical trials, programs, or drugs could have an adverse effect on our business and reputation.
Insufficient customer funding to complete a clinical trial.  As noted above, clinical trials can cost hundreds of millions of dollars. There is a risk that we may initiate a clinical trial for a customer, and then the customer becomes unwilling or unable to fund the completion of the trial. In such a situation, notwithstanding the customer's ability or willingness to pay for or otherwise facilitate the completion of the trial, we may be ethically bound to complete or wind down the trial at our own expense.
In addition to the above U.S. laws and regulations, we must comply with the laws of all countries where we do business, including laws governing clinical trials in the jurisdiction where the trials are performed. Failure to comply with applicable requirements could subject us to regulatory risk, liability, and potential costs associated with redoing the trials, which could damage our reputation and adversely affect our operating results.
Any future litigation against us could be costly and time-consuming to defend.
We may become subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business or pursuant to governmental or regulatory enforcement activity. While we do not believe that the resolution of any currently pending lawsuits against us will, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows, we might be wrong, and future litigation might result in substantial costs and divert management's attention and resources, which might seriously harm our business, financial condition, results of operations, and cash flows. Insurance might not cover such claims, provide sufficient payments to cover all of the costs to resolve one or more such claims, or continue to be available on terms acceptable to us. In particular, any claim could result in potential liability for us if the claim is outside the scope of the indemnification agreement we have with our customers, our customers do not abide by the indemnification agreement as required or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could have a material adverse effect on our financial condition, results of operations, cash flows, or reputation.
The operation of our early stage (Phase I and IIA) clinical facilities and the services we provide there as well as our clinical trial management, including direct interaction with clinical trial patients or volunteers, could create potential liability that may adversely affect our business, financial condition, results of operations, cash flows, and reputation.
We operate facilities where early stage clinical trials are conducted, which ordinarily involve testing an investigational drug on a limited number of individuals to evaluate a product’s safety, determine a safe dosage range and identify side effects. Additionally, our business involves clinical trial management, which is one of our clinical development service offerings, and includes the testing of new drugs on human volunteers. Some of these trials involve the administration of investigational drugs to known substance abusers or volunteers and patients that are already seriously ill and are at risk for further illness or death. Failure to operate any of our early stage facilities in accordance with applicable regulations could result in that facility being shut down, which could disrupt our operations and adversely affect our business, financial condition, results of operations, cash flows, and reputation.
Additionally, we face risks resulting from the administration of drugs to volunteers, including adverse events, and the professional malpractice of medical care providers, including improper administration of a drug or

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device. We also directly employ doctors, nurses, and other trained employees who assist in implementing the testing involved in our clinical trials, such as drawing blood from healthy volunteers. Although we attempt to negotiate indemnification arrangements with our customers or vendors, we might not be able to collect under these arrangements and our exposure could exceed any contractual limits on indemnification. Any professional malpractice or negligence by such doctors, nurses, principal investigators, or other employees could potentially result in liability to us in the event of personal injury to or death of a volunteer in clinical trials. This liability, particularly if it were to exceed the limits of any indemnification agreements and insurance coverage we may have, may adversely affect our business and financial condition, results of operations, cash flows, and reputation.
If our insurance does not cover all of our indemnification obligations and other liabilities associated with our operations, our business, financial condition, results of operations, or cash flows may be materially adversely affected.
We maintain insurance designed to provide coverage for ordinary risks associated with our operations and our ordinary indemnification obligations that we believe to be customary for our industry. The coverage provided by such insurance might not be adequate for all claims we make or may be contested by our insurance carriers. If our insurance is not adequate or available to pay all claims or exposures associated with our operations, or if we are unable to purchase adequate insurance at reasonable rates in the future, our business, financial condition, results of operations or cash flows may be materially adversely affected.
If we are unable to attract suitable principal investigators and recruit and enroll patients for clinical trials, our clinical development business might suffer.
The recruitment of principal investigators and patients for clinical trials is essential to our business. Principal investigators are typically located at hospitals, clinics, or other sites and supervise the administration of the investigational drug to patients during the course of a clinical trial. Patients generally include people from the communities in which the clinical trials are conducted. Several of our competitors have purchased site networks or site management organizations as a strategy for priority access to a specific site, which could put us at a competitive disadvantage. Our clinical development business could be adversely affected if we are unable to attract suitable and willing principal investigators or recruit and enroll patients for clinical trials on a consistent basis. The expanding global nature of clinical trials increases the risk associated with attracting suitable principal investigators and patients, especially if these trials are conducted in regions where our resources or experience may be more limited. For example, if we are unable to engage principal investigators to conduct clinical trials as planned or enroll sufficient patients in clinical trials, we might need to expend additional funds to obtain access to more principal investigators and patients than planned or else be compelled to delay or modify the clinical trial plans, which may result in additional costs to us or cancellation of the trial by our customer. If realized, these risks may also inhibit our ability to attract new business, particularly in certain regions.
Our business could result in liability to us if a drug causes harm to a patient. While we are generally indemnified and insured against such risks, we may still suffer financial losses.
When we market drugs under contract for a biopharmaceutical company, we could suffer liability for harm allegedly caused by those drugs, either as a result of a lawsuit against the biopharmaceutical company to which we are joined, a lawsuit naming us or any of our subsidiaries, or an action launched by a regulatory body. While we are generally indemnified by the biopharmaceutical company for the action of the drugs we market on its behalf and carry insurance to cover harm caused by our negligence in performing services, it is possible that we could nonetheless incur financial losses, regulatory penalties, or both. In particular, any claim could result in potential liability for us if the claim is outside the scope of the indemnification agreement we have with the biopharmaceutical company, the biopharmaceutical company does not abide by the indemnification agreement as required, or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. Such a result could have an adverse impact on our financial condition, results of operations, cash flows, and reputation. Furthermore, negative publicity associated with harm caused by drugs we helped to market could have an adverse effect on our business and reputation.

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Investments in our customers’ businesses or drugs and our related commercial rights strategies could have a negative impact on our financial performance.
We may enter into arrangements with our customers or other drug companies in which we take on some of the risk of the potential success or failure of their businesses or drugs, including making strategic investments in our customers or other drug companies, providing financing to customers or other drug companies, or acquiring an interest in the revenues from customers’ drugs or in entities developing a limited number of drugs. Before entering into any such arrangements, we carefully analyze and select the customers and drugs with which we are willing to structure our risk-based deals. Our financial results could be adversely affected if these investments or the underlying drugs result in losses, do not achieve the level of success that we anticipate, and/or our return or payment from the drug investment or financing is less than our direct and indirect costs with respect to these arrangements. Additionally, there is a risk that we are not awarded projects by other customers who believe we are in competition with them because of these investments, which would negatively impact future awards.
If we lose the services of key personnel or are unable to recruit experienced personnel, our business, financial condition, results of operations, cash flows, or reputation could be materially adversely affected.
Our success substantially depends on the collective performance, contributions, and expertise of our senior management team and other key personnel including qualified management, professional, scientific, and technical operating staff, and business development personnel, particularly as we integrate inVentiv into our company. There is significant competition for qualified personnel, particularly those with higher educational degrees, in the biopharmaceutical and related services industries. In addition, the close proximity of some of our facilities to offices of our major competitors could adversely impact our ability to successfully recruit and retain key personnel. The departure of any key executive, or our inability to continue to identify, attract and retain qualified personnel or replace any departed personnel in a timely fashion, might impact our ability to grow our business and compete effectively in our industry and might negatively affect our business, financial condition, results of operations, cash flows, or reputation.
Foreign currency exchange rate fluctuations may have a material adverse effect on our financial condition, results of operations, and cash flows.
Approximately 17% of our fiscal year 2017 net service revenues were contracted in currencies other than U.S. dollars and 32% of our direct and operating costs are incurred in countries with functional currencies other than the U.S. dollar. Our financial statements are reported in U.S. dollars and changes in foreign currency exchange rates could significantly affect our financial condition, results of operations, or cash flows. Our primary exposure to fluctuations in foreign currency exchange rates is related to the following risks:
Foreign Currency Risk from Differences in Customer Contract Currency and Operating Costs Currency.  The majority of our global contracts are denominated in U.S. dollars or Euros while our operating costs in foreign countries are denominated in various local currencies. Fluctuations in the exchange rates of the currencies we use to contract with our customers and the currencies in which we incur cost to fulfill those contracts can have a significant impact on our results of operations.
Foreign Currency Translation Risk.  The revenue and expenses of our international operations are generally denominated in local currencies and translated into U.S. dollars for financial reporting purposes. Accordingly, exchange rate fluctuations between the value of the U.S. dollar versus local currencies will affect the U.S. dollar value of our foreign currency denominated revenue, costs, and results of operations.
Foreign Currency Transaction Risk.  We earn revenue from our service contracts over a period of several months and, in many cases, over several years, resulting in timing differences between the consummation and cash settlement of a transaction. Accordingly, profitability of the transactions denominated in foreign currencies is subject to effects of fluctuations in foreign currency exchange rates during the period of time between the consummation and cash settlement of a transaction.
We may seek to limit our exposure to these risks through inclusion of foreign currency exchange rate provisions in our service contracts, and/or by hedging certain exposures with foreign exchange derivative instruments. These measures, however, might not offset or mitigate any, or all of the adverse financial effects of unfavorable movements in foreign currency exchange rates.

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Unfavorable economic conditions could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Unfavorable economic conditions and other adverse macroeconomic factors on global and domestic markets might result, among other matters, in tightening in the credit and capital markets, low liquidity, and volatility in fixed income, credit, currency, and equity markets. Such conditions could have a negative effect on our business, financial condition, results of operations, or cash flows. For example, our customers might not be able to raise money to conduct existing clinical trials, or to fund new drug development and related future clinical trials. Resource-sharing customers may also scale back commercial support for their products. In addition, economic or market disruptions could negatively impact our vendors, contractors, or principal investigators which might have a negative effect on our business.
Our effective income tax rate may fluctuate, which may adversely affect our results of operations.
Our 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 an adverse effect on our results of operations. Factors that may affect our effective income tax rate include, but are not limited to:
the requirement to exclude from our quarterly worldwide effective income tax calculations the benefit for losses in jurisdictions where no income tax benefit can be recognized;
actual and projected full year pre-tax income;
the repatriation of foreign earnings to the United States;
uncertain tax positions;
changes in tax laws in various taxing jurisdictions;
audits by taxing authorities;
the establishment of valuation allowances against deferred income tax assets if we determine that it is more likely than not that future income tax benefits will not be realized;
the release of a previously established valuation allowances against deferred income tax assets if we determine that it is more likely than not that future income tax benefits will be realized;
changes in the relative mix and size of clinical studies in various tax jurisdictions; and
the timing and amount of the vesting and exercising of share-based compensation.
These changes may cause fluctuations in our effective income tax rate that could adversely affect our results of operations and cause fluctuations in our earnings and earnings per share.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to: (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) requiring companies to pay a one-time transition tax on certain undistributed earnings of foreign subsidiaries; (iii) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (iv) introducing a new provision designed to tax global intangible low-taxed income ("GILTI"); (v) eliminating the corporate alternative minimum tax ("AMT") and changing how existing AMT credits can be realized; (vi) creating the base erosion anti-abuse tax ("BEAT"), a new minimum tax; (vii) creating a new limitation on deductible interest expense; (viii) introducing limitations on the deductibility of certain executive compensation; and (ix) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
Our effective tax rate may fluctuate as we continue to quantify and implement the various aspects of the Tax Act over the next 12 to 24 months. If any regulations or clarifications about the Tax Act are published that cause us to change how we originally accounted for these new provisions, then our effective tax rate could fluctuate as a result.

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We have only a limited ability to protect our intellectual property rights, and these rights are important to our success.
We develop, use, and protect our proprietary methodologies, analytics, systems, technologies, and other intellectual property. Existing laws of the various countries in which we provide services or solutions offer only limited protection of our intellectual property rights, and the protection in some countries may be very limited. We rely upon a combination of trade secrets, confidentiality policies, nondisclosure agreements, and other contractual arrangements, as well as copyright and trademark laws, to protect our intellectual property rights. These laws are subject to change at any time and certain agreements might not be fully enforceable, which could further restrict our ability to protect our innovations. Our intellectual property rights might not prevent competitors from independently developing services similar to or duplicative of ours or alleging infringement of their intellectual property rights in certain jurisdictions. The steps we take in this regard might not be adequate to prevent or deter infringement or misappropriation of our intellectual property or claims against us for alleged infringement or misappropriation by competitors, former employees, or other third parties. Furthermore, we might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, our intellectual property rights. Enforcing our rights might also require considerable time, money, and oversight, and we might not be successful in enforcing our rights.
Our acquisition strategy may present additional risks.
We have historically grown our business both organically and through acquisitions, most recently and notably of inVentiv. We have and will continue to assess the need and opportunity to offer additional services through acquisitions of other companies. Acquisitions involve numerous risks, including the following:
ability to identify suitable acquisition opportunities or obtain any necessary financing on commercially acceptable terms;
increased risk to our financial position and liquidity through changes to our capital structure and assumption of acquired liabilities, including any indebtedness incurred to finance the acquisitions and related interest expense;
diversion of management’s attention from normal daily operations of the business;
insufficient revenues to offset increased expenses associated with acquisitions;
assumption of liabilities and exposure to unforeseen liabilities of acquired companies, including liabilities for their failure to comply with healthcare, tax, and other regulations;
inability to achieve identified operating and financial synergies anticipated to result from an acquisition;
ability to integrate acquired operations, products, and technologies into our business;
difficulties integrating acquired personnel and distinct cultures into our business; and
the potential loss of key employees, customers, or projects.
We may also spend time and money investigating and negotiating with potential acquisition targets but not complete the merger. Any acquisition could involve other risks, including, among others, the assumption of additional liabilities and expenses, difficulties and expenses in connection with integrating the acquired companies and achieving the expected benefits, issuances of potentially dilutive securities or interest-bearing debt, loss of key employees of the acquired companies, transaction expenses, diversion of management's attention from other business concerns, and, with respect to the acquisition of international companies, the inability to overcome differences in international business practices, language and customs. Our failure to successfully integrate inVentiv and potential future acquisitions could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
If we are unable to successfully integrate acquisitions, our business, financial condition, results of operations, and cash flows could be materially adversely affected.
We have completed a number of acquisitions in the past, most recently and notably inVentiv, and anticipate that a portion of our future growth may come from strategic or tuck-in acquisitions. The success of any acquisition will depend upon, among other things, our ability to execute against identified synergies and

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effectively integrate acquired personnel, operations, products, and technologies into our business, and to retain the key personnel and customers of our acquired businesses. In addition, we may be unable to identify suitable acquisition opportunities or obtain any necessary financing on commercially acceptable terms.
Our relationships with existing or potential customers who are in competition with each other may adversely impact the degree to which other customers or potential customers use our services, which may adversely affect our business, financial condition, results of operations, or cash flows.
The biopharmaceutical industry is highly competitive, with biopharmaceutical companies each seeking to persuade payers, providers, and patients that their drug therapies are better and more cost-effective than competing therapies marketed or being developed by competing firms. In addition to the adverse competitive interests that biopharmaceutical companies have with each other, biopharmaceutical companies also have adverse interests with respect to drug selection and reimbursement with other participants in the healthcare industry, including payers and providers. Biopharmaceutical companies also compete to be first to market with new drug therapies. We regularly provide services to biopharmaceutical companies who compete with each other, and we sometimes provide services to such customers regarding competing drugs in the market and in development. Our existing or future relationships, particularly broader strategic provider and commercial relationships, with our biopharmaceutical customers may therefore deter other biopharmaceutical customers from using our services or may result in our customers seeking to place limits on our ability to serve other biopharmaceutical industry participants. In addition, our further expansion into the broader healthcare market may adversely impact our relationships with biopharmaceutical customers, and such customers may elect not to use our services, reduce the scope of services that we provide to them or seek to place restrictions on our ability to serve customers in the broader healthcare market with interests that are adverse to theirs. Any loss of customers or reductions in the level of revenues from a customer could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.
As of December 31, 2017, our goodwill and net intangible assets were valued at $5.58 billion, which constituted approximately 77% of our total assets.
Our goodwill is principally related to the Merger completed in August 2017. Goodwill is tested for impairment at the reporting unit level, which is one level below the operating segment level. This test requires us to determine if the implied fair value of the reporting unit's goodwill is less than its carrying amount. The impairment analysis requires significant judgments, estimates and assumptions. There is no assurance that the actual future earnings or cash flows of the reporting units will not decline significantly from the projections used in the impairment analysis. Goodwill impairment charges may be recognized in future periods in one or more of the reporting units to the extent changes in factors or circumstances occur, including deterioration in the macroeconomic environment or industry, deterioration in our performance or our future projections, or changes in plans for one or more of our reporting units. As of October 1, 2017 and December 31, 2017, we assigned goodwill to five reporting units. We completed our annual impairment test for potential impairment as of October 1, 2017 for all of our reporting units, determining that there were no impairments.
Intangible assets consist of backlog, customer relationships, and trademarks. We review intangible assets at the end of each reporting period to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of the assets might not be recoverable. If such facts and circumstances exist, we assess the recoverability of identified assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives to their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets and occur in the period in which the impairment determination was made. In connection with the Merger we announced our intentions to relaunch our operations under a new brand name in January 2018. As a result, in the third quarter of 2017 we determined that the useful life of our intangible asset related to the INC Research trademark with carrying value of $35.0 million was no longer indefinite and recorded a $30.0 million impairment charge with the remaining value amortized over the remainder of 2017.

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We face risks arising from the restructuring of our operations, which could adversely affect our financial condition, results of operations, cash flows, or business reputation.
From time to time, we have adopted cost savings initiatives to improve our operating efficiency through various means such as: (i) the reduction of overcapacity, primarily in our costs of services (billable) function; (ii) elimination of non-billable support roles; and (iii) the consolidation or other realignment of our resources. In connection with the Merger, we have established a restructuring plan to eliminate redundant positions and reduce our facility footprint worldwide. We expect to continue the ongoing evaluations of our workforce and facilities infrastructure needs through 2020 in an effort to optimize our resources worldwide. Additionally, in conjunction with the Merger, we assumed certain liabilities related to employee severance and facility closure costs as a result of actions taken by inVentiv prior to the Merger. During the year ended December 31, 2017, we recognized approximately $11.3 million of employee severance and benefit costs, facility closure and lease termination costs of $2.2 million, and other costs of $2.0 million related to the Merger. Additionally, during the year ended December 31, 2017, we recognized approximately $9.4 million of non-Merger related employee severance costs and incurred $1.3 million of non-Merger related facility closure and lease termination costs related to our focus on optimizing our resources worldwide.
Restructuring actions present significant risks that could have a material adverse effect on our operations, financial condition, results of operations, cash flows, or business reputation. Such risks include:
a decrease in employee morale and retention of key employees;
a greater number of employment claims;
actual or perceived disruption of service or reduction in service standards to customers;
the failure to preserve supplier relationships and distribution, sales and other important relationships and to resolve conflicts that may arise;
the failure to achieve targeted cost savings; and
the failure to meet operational targets and customer requirements due to the loss of employees and any work stoppages that might occur.
We operate in many different jurisdictions and we could be adversely affected by violations of the FCPA, UK Bribery Act of 2010, and/or similar worldwide anti-corruption and anti-bribery laws.
The FCPA, UK Bribery Act of 2010, and similar worldwide anti-corruption laws prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate in many parts of the world that have experienced corruption to some degree and, in certain circumstances, anti-corruption laws have appeared to conflict with local customs and practices. Despite our training and compliance programs, we cannot assure that our internal control policies and procedures will protect us from acts in violation of anti-corruption laws committed by persons associated with us, and our continued expansion outside the United States, including in developing countries, could increase such risk in the future. Violations of the FCPA or other non-U.S. anti-corruption laws, or even allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations, cash flows, and reputation. For example, violations of anti-corruption laws can result in restatements of, or irregularities in, our financial statements as well as severe criminal or civil sanctions. In some cases, companies that violate the FCPA might be debarred by the U.S. government and/or lose their U.S. export privileges. In addition, U.S. or other governments might seek to hold us liable for successor liability FCPA violations or violations of other anti-corruption laws committed by companies that we acquire or in which we invest. Changes in anti-corruption laws or enforcement priorities could also result in increased compliance requirements and related costs which could adversely affect our business, financial condition, results of operations, and cash flows.
The failure of third parties to provide us critical support services could adversely affect our business, financial condition, results of operations, cash flows, or reputation.
We depend on third parties for support services vital to our business. Such support services include, but are not limited to, IT services, laboratory services, third-party transportation and travel providers, freight forwarders and customs brokers, drug depots and distribution centers, suppliers or contract manufacturers of

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drugs for patients participating in clinical trials, and providers of licensing agreements, maintenance contracts or other services. In addition, we also rely on third-party CROs and other contract clinical personnel for clinical services either in regions where we have limited resources, or in cases where demand cannot be met by our internal staff. The failure of any of these third parties to adequately provide us critical support services could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.
We might not be able to utilize certain of our net operating loss carryforwards and certain other tax attributes, which could harm our profitability.
As of December 31, 2017, we had approximately $1.0 billion of net operating loss carry forwards (“NOLs”) available to reduce U.S. federal taxable income in future years. Under Section 382 and similar provisions of the Internal Revenue Code (“the Code”), if a corporation undergoes an “ownership change,” that corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited for U.S. federal income tax purposes (or similar provisions of other jurisdictions). These limitations may be subject to certain exceptions, including if there is “net unrealized built-in gain” in the assets of the corporation undergoing the ownership change.
inVentiv had significant NOLs for U.S. federal income tax purposes, which, until they expire, generally can be carried forward to reduce taxable income in future years. In addition, certain of inVentiv’s NOLs and tax attributes are subject to existing limitations under Section 382 and similar provisions of the Code as a result of inVentiv’s prior ownership changes. The application of these provisions with respect to inVentiv’s NOLs and other tax attributes, including the determination of the amount of any “net unrealized built-in gain” in inVentiv’s assets, is complex, involving, among other things, certain factual determinations regarding value and built-in gain amounts. Accordingly, no assurance can be given that the IRS (or other taxing authority in a jurisdiction applying similar law) would not assert our ability to utilize inVentiv’s NOLs and other tax attributes is subject to limitations that are different from the limitations as determined by us, or that a court would not agree with such an assertion.
The benefit of the inVentiv NOLs is uncertain even without regard to the Section 382 rules. Due to the corporate income tax rate change pursuant to the Tax Act, the value of our NOLs was significantly decreased. In addition, a portion of inVentiv’s NOLs arise from certain transaction tax deductions associated with Double Eagle’s acquisition of inVentiv on November 9, 2016. Pursuant to that acquisition, inVentiv generally has a contingent obligation to pay former shareholders of inVentiv Group Holdings the value of U.S. federal, state and local tax benefits arising from those transaction tax deductions as such benefits are realized and, consequently, the ability of the combined company to benefit from inVentiv’s NOLs will be limited to the extent of such contingent obligation.
Further, as of December 31, 2017, we assessed both positive and negative evidence in evaluating whether we could support the recognition of our U.S. net deferred tax asset position or if a valuation allowance would be required. A significant piece of objective negative evidence that we considered was the cumulative loss over the three-year period ended December 31, 2017. This objective evidence limited our ability to consider subjective positive evidence, such as forecasted projections of income. Therefore, the Company recorded a charge to income tax expense in the amount of $52.6 million for the net increase in the valuation allowance.
However, given our anticipated future earnings and the new GILTI and BEAT provisions under the Tax Act, we believe there is a reasonable possibility that within the next 12 to 24 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Consequently, such release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to the tax expense in the period that the release is recorded. However, the exact timing and amount of the valuation allowance release is unknown at this time.
Downgrades of our credit ratings could adversely affect us.
We can be adversely affected by downgrades of our credit ratings because ratings are a factor influencing our ability to access capital and the terms of any new indebtedness, including covenants and interest rates. Our customers and vendors may also consider our credit profile when negotiating contract terms, and if they were to change the terms on which they deal with us, it could have a material adverse effect on our business, results of operations, cash flows, and financial condition.

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Many of our vendors have the right to declare us in default of our agreements if any such vendor, including the lessors under our vehicle fleet leases, determines that a change in our financial condition poses a substantially increased credit risk. Upon default, the lessors can repossess the vehicles and require us to compensate them for any remaining lease payments in excess of the value of the repossessed vehicles. As of December 31, 2017, we had $36.8 million in capital lease obligations, primarily related to vehicles used in our Selling Solutions offering in the United States. Our Selling Solutions offering may be negatively impacted if we lose the use of vehicles for any period of time.
Our 2017 Credit Agreement contains covenants that may restrict our ability to, among other things, borrow money, pay dividends, make capital expenditures, make strategic acquisitions and effect a consolidation, merger, or disposal of all or substantially all of our assets. Refer to "Risks Related to Our Indebtedness - Covenant restrictions under our 2017 Credit Agreement may limit our ability to operate our business" for further details on our covenant restrictions.
Risks Related to Our Industry
The biopharmaceutical services industry is highly competitive and our business could be materially impacted if we do not compete effectively.
The biopharmaceutical services industry is highly competitive. Our business often competes with other biopharmaceutical services companies, internal discovery departments, development departments, sales and marketing departments, information technology departments, and other departments within our customers, some of which could be considered large biopharmaceutical services companies in their own right with greater resources than ours. We also compete with universities, teaching hospitals, governmental agencies and others. If we do not compete successfully, our business will suffer. The industry is highly fragmented, with numerous smaller specialized companies and a handful of companies with global capabilities similar to certain of our own capabilities. Increased competition has led to price and other forms of competition (such as acceptance of less favorable contract terms) that could adversely affect our operating results. There are few barriers to entry for companies considering offering any one or more of the services we offer. Because of their size and focus, these companies might compete effectively against us, which could have a material adverse impact on our business.
In recent years, our industry has experienced increased consolidation and might continue to, which might put us at risk of growing more slowly than our competitors that make acquisitions. This trend is likely to produce more competition from the resulting larger companies, and ones without the cost pressures of being public, for both customers and acquisition candidates. One specific aspect of this consolidation competition involves CROs entering into transactions to attempt to control more access to clinical trial participants, like acquisition of site networks and data. These trends could make it harder for us to compete successfully.
Our future growth and success will depend on our ability to successfully compete with other companies that provide similar services in the same markets, some of which may have financial, marketing, technical, and other advantages. We also expect that competition will continue to increase as a result of consolidation among these various companies. Large technology companies with substantial resources, technical expertise, and greater brand power could also decide to enter or further expand in the markets where our business operates and compete with us. If one or more of our competitors or potential competitors were to merge or partner with another of our competitors, or if a new entrant emerged with substantial resources, the change in the competitive landscape could adversely affect our ability to compete effectively. We compete on the basis of various factors, including breadth and depth of services, reputation, reliability, quality, innovation, security, price, and industry expertise and experience. In addition, our ability to compete successfully may be impacted by the growing availability of health information from social media, government health information systems, and other free or low-cost sources. In addition, consolidation or integration of wholesalers, retail pharmacies, health networks, payers, or other healthcare stakeholders may lead any of them to provide information services directly to customers or indirectly through a designated service provider, resulting in increased competition from firms that may have lower costs to market (e.g., no data supply costs). Any of the above may result in lower demand for our services, which could result in a material adverse impact on our operating results and financial condition.

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Outsourcing trends in the biopharmaceutical industry and changes in aggregate spending and research and development budgets could adversely affect our operating results and growth rate.
Our revenues depend on the level of R&D and commercialization expenditures, size of the drug-development pipelines and outsourcing trends of the biopharmaceutical industry, including the amount of such R&D spend that is outsourced and subject to competitive bidding amongst us and our competitors. Accordingly, economic factors and industry trends that affect biopharmaceutical companies affect our business.
Biopharmaceutical companies continue to seek long-term strategic collaborations with global CROs with favorable pricing terms. Competition for these collaborations is intense and we might not be selected, in which case a competitor may enter into the collaboration and our business with the customer, if any, may be limited. Our success depends in part on our ability to establish and maintain preferred provider relationships with large biopharmaceutical companies. Our failure to develop or maintain these preferred provider relationships could have a material adverse effect on our business and results of operations. Furthermore, in order to obtain preferred provider relationships, we may have to reduce the prices for our services, which could negatively impact our gross margin for these services.
In addition, if the biopharmaceutical industry reduces its outsourcing of clinical trials or commercialization services or such outsourcing fails to grow at projected rates, our business, financial condition, results of operations, and cash flows could be materially and adversely affected. We may also be negatively impacted by consolidation and other factors in the biopharmaceutical industry, which may slow decision making by our customers, result in the delay or cancellation of existing projects, cause reductions in overall R&D expenditures, or lead to increased pricing pressures. Further, in the event that one of our customers combines with a company that is using the services of one of our competitors, the combined company could decide to use the services of that competitor or another provider. All of these events could adversely affect our business, financial condition, cash flows or results of operations.
Actions by government regulators or customers to limit a prescription’s scope or withdraw an approved product from the market could adversely affect our business, results of operations, and financial condition.
Government regulators have the authority, after approving a biopharmaceutical product, to limit its scope of prescription or withdraw it from the market completely based on safety concerns. Similarly, customers may act to voluntarily limit the scope of prescription of biopharmaceutical products or withdraw them from the market. Actions by payors to limit a product on a formulary list can influence customer decisions to withdraw or limit market support for a product. In the past, we have provided services with respect to products that have been limited or withdrawn. If we are providing services to customers for products that are limited or withdrawn, we may be required to narrow the scope of or terminate our services with respect to such products, which would prevent us from earning the full amount of revenues anticipated under the related contracts with negative impacts to our business, results of operations, cash flows, and financial condition.
If we fail to comply with federal, state, and foreign healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, financial condition, results of operations, cash flows, and prospects could be adversely affected.
Even though we do not and will not order healthcare services or bill directly to Medicare, Medicaid, or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse are and will be applicable to our business. We could be subject to healthcare fraud and abuse laws of both the federal government and the states in which we conduct our business. Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.

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We may be affected by healthcare reform and potential additional reforms which may adversely impact the biopharmaceutical industry and reduce the need for our services or negatively impact our profitability.
Numerous government bodies are considering or have adopted healthcare reforms and may undertake, or are in the process of undertaking, efforts to control healthcare costs through legislation, regulation, and agreements with healthcare providers and biopharmaceutical companies, including many of our customers. As governmental administrations change and reforms take place, we are unable to predict what legislative proposals, if any, will be adopted in the future. If regulatory cost-containment efforts limit the profitability of new drugs by, for example, continuing to place downward pressure on pharmaceutical pricing and/or increasing regulatory burdens and operating costs of the biopharmaceutical industry, our customers may reduce their commercialization and R&D spending, which could reduce the business they outsource to us. In addition, if regulatory requirements are relaxed or simplified drug approval procedures are adopted, the demand for our services could decrease.
Government bodies have adopted and may continue to adopt new healthcare legislation or regulations that are more burdensome than existing regulations. For example, product safety concerns and recommendations by the Drug Safety Oversight Board could change the regulatory environment for drug products, and new or heightened regulatory requirements may increase our expenses or limit our ability to offer some of our services. We might have to incur additional costs to comply with these or other new regulations, and failure to comply could harm our financial condition, results or operations, cash flows, and reputation. Additionally, new or heightened regulatory requirements may have a negative impact on the ability of our customers to conduct industry-sponsored clinical trials, which could reduce the need for our post-approval development services.
Current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost to us or could limit our service offerings.
The confidentiality, collection, use, and disclosure of personal data, including clinical trial patient-specific information, are subject to governmental regulation generally in the country in which the personal data was collected or used. For example, U.S. federal regulations under the Health Insurance Portability and Accountability Act of 1996, as amended, ("HIPAA") generally require individuals' written authorization, in addition to any required informed consent, before protected health information ("PHI") may be used for research and such regulations specify standards for de-identification and for limited data sets. We may also be subject to applicable state privacy and security laws and regulations in states in which we operate. We are indirectly affected by the privacy provisions surrounding individual authorizations because many principal investigators with whom we are involved in clinical trials are directly subject to them as a HIPAA "covered entity." In addition, we obtain identifiable health information from third parties that are subject to such regulations. While we do not believe we are a "business associate" under HIPAA, regulatory agencies may disagree. Because of amendments to the HIPAA data security and privacy rules that were promulgated on January 25, 2013, some of which went into effect on March 26, 2013, there are some instances where HIPAA "business associates" of a "covered entity" may be directly liable for breaches of PHI and other HIPAA violations. These amendments may subject "business associates" to HIPAA's enforcement scheme, which, as amended, can yield up to $1.5 million in annual civil penalties for each HIPAA violation.
In the EU and many other data privacy laws outside of the U.S., personal data includes any information that relates to an identified or identifiable natural person, with health, genetic, biometric, and other sensitive personal information carrying additional obligations, including obtaining the explicit consent from the individual for collection, use, or disclosure of the information. In addition, we are subject to EU rules with respect to cross-border transfers of such data out of the EU. The United States, the EU and its member states, and other countries where we have operations, such as Japan, China, South Korea, Malaysia, the Philippines, Russia, and Singapore, continue to issue new privacy and data protection laws, rules, and regulations that relate to personal data and health information. Failure to comply with certain certification/registration and annual re-certification/registration provisions associated with these data protection and privacy laws, rules, and regulations in various jurisdictions, or to resolve any serious privacy or security complaints, could subject us to regulatory sanctions, delays in clinical trials, criminal prosecution, or civil liability. Federal, state, and foreign governments may propose or have adopted additional legislation governing the collection, possession, use, or dissemination of personal data, such as personal health information, and personal financial data as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of

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this type might, among other things, require us to implement new security measures and processes or to pseudonymize or de-identify health or other personal data, each of which may require substantial expenditures or limit our ability to offer some of our services. Additionally, if we violate applicable laws, rules, or regulations relating to the collection, use, privacy, or security of personal data, we could be subject to civil liability or criminal prosecution, be forced to alter our business practices and suffer reputational harm. The European General Data Protection Regulation ("GDPR") goes into effect on May 25, 2018, replacing the existing EU data protection framework. The GDPR contains new provisions specifically directed at the processing of health information, rights of data subjects, higher sanctions, and extra-territoriality measures intended to bring non-EU companies under the regulation.
Our customers face intense competition from lower cost generic products and other competing products, which may lower the amount that they spend on our services and could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
Our customers face increasing competition from competing products and, in particular, from lower cost generic products, which in turn may affect their ability to pursue clinical development and commercialization activities. In the United States, the EU and Japan, political pressure to reduce spending on prescription products has led to legislation and other measures which encourage the use of generic products. In addition, proposals emerge from time to time in the United States and other countries for legislation to further encourage the early and rapid approval of generic products. Loss of patent protection for a product typically is followed promptly by generic substitutes, reducing our customers’ sales of that product and their overall profitability. Availability of generic substitutes for our customers’ products or other competing products may cause them to lose market share and, as a result, may adversely affect their results of operations and cash flow, which in turn may mean that they would not have adequate capital to purchase our services. If competition from generic or other products impacts our customers’ finances such that they decide to curtail our services, our net revenues may decline and this could have a material adverse effect on our business, results of operations, and financial condition.
If we do not keep pace with rapid technological change, our services may become less competitive or obsolete.
The biopharmaceutical industry generally, and drug development and clinical research more specifically, are subject to rapid technological change. Our current competitors or other businesses might develop technologies or services that are more effective or commercially attractive than, or render obsolete, our current or future technologies and services. If our competitors introduce superior technologies or services and if we cannot make enhancements to remain competitive, our competitive position would be harmed. If we are unable to compete successfully, we may lose customers or be unable to attract new customers, which could lead to a decrease in our revenue and have an adverse impact on our financial condition.
In addition, the operation of our business relies on IT infrastructure and systems delivered across multiple platforms. The failure of our systems to perform could severely disrupt our business and adversely affect our results of operations. Our systems are also vulnerable to demise from natural or man-made disasters, terrorist attacks, computer viruses or hackers, power loss, or other technology system failures. These events could adversely affect our business or results of operations.
The biopharmaceutical industry has a history of patent and other intellectual property litigation and we might be involved in costly intellectual property lawsuits.
The biopharmaceutical industry has a history of intellectual property litigation and these lawsuits will likely continue in the future. Accordingly, we may face patent infringement suits or be called upon to provide documentation by companies that have patents for similar business processes or other suits alleging infringement of their intellectual property rights. Legal proceedings relating to intellectual property could be expensive, take significant time, and divert management's attention from other business concerns, regardless of the outcome of the litigation. In the event an infringement lawsuit were brought against us and we did not prevail, we might have to pay substantial damages and we could be required to stop infringing activity or obtain a license to use technology on unfavorable terms.

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Risks Related to Our Indebtedness
Our substantial debt could adversely affect our financial condition and cash flows from operations.
On August 1, 2017, we entered into a credit agreement (the “2017 Credit Agreement”) and used the proceeds to: (i) repay the Company’s and inVentiv’s pre-Merger term loans; (ii) partially redeem inVentiv’s Senior Notes; and (iii) pay certain fees and expenses related to the Merger. As of December 31, 2017, our total principal amount of indebtedness was $2.99 billion, which was comprised of: (i) a $1.0 billion Term Loan A facility; (ii) a $1.55 billion Term Loan B facility; and (iii) $403.0 million of Senior Notes. Our substantial indebtedness could adversely affect our financial condition and cash flows from operations and thus make it more difficult for us to satisfy our obligations with respect to our senior secured facilities. If our cash flow is not sufficient to service our debt and adequately fund our business, we may be required to seek further additional financing or refinancing or dispose of assets. We might not be able to influence any of these alternatives on satisfactory terms or at all. Our substantial indebtedness could also:
increase our vulnerability to adverse general economic, industry, or competitive developments;
require us to dedicate a more substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, investments, acquisitions, capital expenditures, and other general corporate purposes;
limit our ability to make required payments under our existing contractual commitments, including our existing long-term indebtedness;
limit our ability to fund a change of control offer;
require us to sell certain assets;
restrict us from making strategic investments, including acquisitions, or causing us to make non-strategic divestitures;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
place us at a competitive disadvantage compared to our competitors that have less debt;
cause us to incur substantial fees from time to time in connection with debt amendments or refinancings;
increase our exposure to rising interest rates because a substantial portion of our borrowings is at variable interest rates; and
limit our ability to borrow additional funds or to borrow on terms that are satisfactory to us.
Despite our level of indebtedness, we are able to incur more debt and undertake additional obligations. Incurring such debt or undertaking such additional obligations could further exacerbate the risks to our financial condition.
We may be able to incur additional indebtedness in the future. Although covenants under our 2017 Credit Agreement limit our ability to incur certain additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. To the extent we incur additional indebtedness, the risks associated with our leverage described above, including our possible inability to service our debt obligations, would increase.

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Servicing our debt will require a significant amount of cash, and our ability to generate sufficient cash depends on many factors, some of which are beyond our control.
Our ability to make payments on and refinance our debt, make strategic acquisitions, and fund capital expenditures depends on our ability to generate cash flow in the future. To some extent, our ability to generate future cash flow is subject to general economic, financial, competitive, and other factors that are beyond our control. We cannot assure you that:
our business will generate sufficient cash flow from operations;
we will continue to realize the cost savings, revenue growth, and operating improvements that resulted from the execution of our long-term strategic plan; or
future sources of funding will be available to us in amounts sufficient to enable us to fund our liquidity needs.
We also may experience difficulties repatriating cash from foreign subsidiaries and accounts due to law, regulation or contracts which could further constrain our liquidity. If we cannot fund our liquidity needs, we will have to take actions such as reducing or delaying capital expenditures, marketing efforts, strategic acquisitions, investments and alliances, selling assets, restructuring or refinancing our debt, or seeking additional equity capital. We cannot assure you that any of these remedies could, if necessary, be effected on commercially reasonable or favorable terms, or at all, or that they would permit us to meet our scheduled debt service obligations. Any inability to generate sufficient cash flow or refinance our debt on favorable terms could have a material adverse effect on our financial condition. In addition, if we incur additional debt, the risks associated with our substantial leverage, including the risk that we will be unable to service our debt or generate enough cash flow to fund our liquidity needs, could increase.
Covenant restrictions under our 2017 Credit Agreement may limit our ability to operate our business.
Our 2017 Credit Agreement contains covenants that may restrict our ability to, among other things, borrow money, pay dividends, make capital expenditures, make strategic acquisitions and effect a consolidation, merger or disposal of all or substantially all of our assets. Although the covenants in our 2017 Credit Agreement are subject to various exceptions, we cannot assure you that these covenants will not adversely affect our ability to finance future operations, capital needs, or to engage in other activities that may be in our best interest. In addition, in certain circumstances, our long-term debt requires us to maintain a specified financial ratio and satisfy certain financial condition tests, which may require that we take action to reduce our debt or to act in a manner contrary to our business objectives. A breach of any of these covenants could result in a default under our senior secured facilities. If an event of default under our 2017 Credit Agreement occurs, the lenders thereunder could elect to declare all amounts outstanding, together with accrued interest, to be immediately due and payable. In such case, we might not have sufficient funds to repay all the outstanding amounts. In addition, our 2017 Credit Agreement is secured by first priority security interests on substantially all of our real and personal property, including the capital stock of certain of our subsidiaries. If an event of default under our 2017 Credit Agreement occurs, the lenders thereunder could exercise their rights under the related security documents. Any acceleration of amounts due under our 2017 Credit Agreement or the substantial exercise by the lenders of their rights under the security documents would likely have a material adverse effect on us.
Under the terms of the lease agreement for our new corporate headquarters in Morrisville, North Carolina we are required to issue a letter of credit ("LOC") to the landlord based on our debt rating issued by Moody’s Investors Service (or other nationally-recognized debt rating agency). From June 14, 2017 through June 14, 2020, if our debt rating is Ba3 or better, no LOC is required, or if our debt rating is B1 or lower, a LOC equal to 25% of the remaining minimum annual rent and estimated operating expenses (or a LOC of approximately $24.2 million as of December 31, 2017) is required to be issued to the landlord. This LOC would remain in effect until our debt rating increased to Ba3 or higher for a twelve-month period. After June 14, 2020, if our debt rating is Ba2 or better, no LOC is required; if our debt rating is Ba3 or lower, a LOC equal to 25% of the then remaining minimum annual rent and estimated operating expenses is required to be issued to the landlord (estimated at approximately $22.0 million as of December 31, 2017); or if our debt rating is B1 or lower, a LOC equal to 100% of the then remaining minimum annual rent and estimated operating expenses is required to be issued to the landlord (estimated at approximately $87.9 million as of December 31, 2017).

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These letters of credit would remain in effect until our debt rating is back above the required threshold for a twelve-month period.
As of December 31, 2017 (and through the date of this filing), our debt rating was Ba3. As such, no LOC is currently required. Any letters of credit issued in accordance with the aforementioned requirements would be issued under our Revolver, and would reduce our available borrowing capacity by the same amount accordingly.
Interest rate fluctuations may have a material adverse effect on our business, financial condition, results of operations or cash flows.
Because we have substantial variable rate debt, fluctuations in interest rates may affect our business, financial condition, results of operations or cash flows. We currently utilize interest rate swaps to limit our exposure to interest rate fluctuations; however, such instruments may not be effective. At December 31, 2017, we had approximately $2.99 billion of total principal indebtedness comprised of $2.55 billion in term loan debt, $403.0 million in Senior Notes, and $36.8 million of capital leases, of which $2.43 billion was subject to variable interest rates.
Risks Related to Ownership of Our Common Stock
Our stock price is subject to volatility, which could have a material adverse impact on investors and employee retention.
Since our initial public offering in November 2014 (the "IPO"), the price of our stock, as reported by NASDAQ, has ranged from a low of $19.61 on November 7, 2014 to a high of $61.10 on June 19, 2017. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could affect stock price in ways that may be unrelated to our operating performance. The trading price of our stock is subject to significant price fluctuations in response to many factors, including:
market conditions or trends in our industry, including with respect to the regulatory environment, or the economy as a whole;
fluctuations in quarterly operating results, as well as differences between our actual financial and operating results and those expected by investors, especially as we integrate inVentiv into our company;
future performance guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
changes in financial estimates or ratings by any securities analysts who follow our stock, our failure to meet those estimates or the failure of those analysts to initiate or maintain coverage of our stock;
changes in key personnel;
entry into new markets;
announcements by us or our competitors of new service offerings or significant acquisitions, divestitures, strategic partnerships, joint ventures or capital commitments;
actions by competitors;
changes in operating performance and market valuations of other companies in the industry;
investors' perceptions of our prospects and the prospects of the industry;
investors' perceptions of the investment opportunity associated with our stock relative to other investment alternatives;
the public's reaction to press releases or other public announcements by us or third parties, including our filings with the SEC;
announcements related to litigation;

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changes in the credit ratings of our debt;
the sustainability of an active trading market for our stock;
future sales of our stock by our significant shareholders, officers and directors; and
other events or factors, including those resulting from system failures and disruptions, cyber-attacks, earthquakes, hurricanes, war, acts of terrorism, other natural disasters or responses to these events.
These and other factors may cause the market price and demand for shares of our stock to fluctuate substantially, which could result in reduced liquidity and a decline in the price of our stock. When the market price of a stock is volatile, security holders often institute class action litigation against the company that issued the stock. If we become involved in this type of litigation, regardless of the outcome, we could incur substantial legal costs and our management's attention could be diverted from the operation of our business, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We do not expect to pay any cash dividends for the foreseeable future.
We do not anticipate that we will pay any dividends to holders of our stock for the foreseeable future. Any payment of cash dividends will be at the discretion of the Board and will depend on our financial condition, capital requirements, legal requirements, earnings and other factors. Our ability to pay dividends is restricted by the terms of our 2017 Credit Agreement and might be restricted by the terms of any indebtedness that we incur in the future. Consequently, you should not rely on dividends in order to receive a return on your investment. For additional information on our dividend policy, see Part II, Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" in this Annual Report on Form 10-K.
Future sales of our stock in the public market could cause the market price of our stock to decrease significantly.
As of December 31, 2017, we had 104,435,501 outstanding shares of Class A common stock. In addition, we had 3,425,085 shares of outstanding options and restricted stock units that, if exercised or sold, would result in these additional shares becoming available for sale subject, in some cases, to Rule 144 and Rule 701 under the Securities Act. Our private equity sponsors (the “Sponsors”) together own approximately 46% of our outstanding shares and have contractual rights to cause us to register resales of those shares starting in February 2018.
Sales or issuances of substantial amounts of our stock in the public market by us or our shareholders may cause the market price of our stock to decrease significantly. The perception that such sales or issuances could occur could also depress the market price of our stock. Any such sales or issuances could also create public perception of difficulties or problems with our business and might also make it more difficult for us to raise capital through the sale of equity securities in the future at a time and price that we deem appropriate.
Our Sponsors have significant influence over our company, and their interests may be different from or conflict with those of our other shareholders.
Our Sponsors collectively beneficially own approximately 46% of our outstanding common stock. As a consequence, the Sponsors continue to be able to exert a significant degree of influence over our management, affairs, and matters requiring shareholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets, and any other significant transaction. Additionally, each of the Sponsors is party to a stockholders agreement with us (the "Stockholders Agreements"). The Stockholders Agreements, among other things, requires such shareholders to vote in favor of certain nominees to our Board. The interests of the Sponsors might not always coincide with our interests or the interests of our other shareholders. For instance, this concentration of ownership and/or the restrictions imposed by the Stockholders Agreements may have the effect of delaying or preventing a change in control of us otherwise favored by our other shareholders and could depress our stock price.
The Sponsors each make investments in companies and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Each of the Sponsors may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, those

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acquisition opportunities might not be available to us. Our organizational documents contain provisions renouncing any interest or expectancy held by our directors affiliated with the Sponsors in certain corporate opportunities. Accordingly, the interests of the Sponsors may supersede ours, causing the Sponsors or their affiliates to compete against us or to pursue opportunities instead of us, for which we have no recourse. Such actions on the part of the Sponsors and inaction on our part could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The Sponsors control four seats on our Board. Since the Sponsors could invest in entities that directly or indirectly compete with us, when conflicts arise between the interests of the Sponsors and the interests of our shareholders, these directors might not be disinterested.
Provisions of our corporate governance documents and Delaware law could make an acquisition of our company more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.
Provisions of our certificate of incorporation and our amended and restated bylaws contain provisions that delay, defer or discourage transactions involving an actual or potential change in control of us or change in our management that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our stock, thereby depressing the market price of our stock. In addition, these provisions may frustrate or prevent any attempts by our shareholders to replace or remove our current management by making it more difficult for shareholders to replace members of the Board. Because the Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. Among others, these provisions include: (i) our ability to issue preferred stock without shareholder approval; (ii) the requirement that our shareholders may not act without a meeting; (iii) requirements for advance notification of shareholder nominations and proposals contained in our bylaws; (iv) the absence of cumulative voting for our directors; (v) requirements for shareholder approval of certain business combinations; and (vi) the limitations on director nominations contained in our Stockholders Agreement.
Additionally, Section 203 of the Delaware General Corporation Law (the "DGCL") prohibits a publicly held Delaware corporation from engaging in a business combination with an interested shareholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the Merger in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner. The existence of the foregoing provision could also limit the price that investors might be willing to pay in the future for shares of our stock, thereby depressing the market price of our stock.
If securities analysts or industry analysts downgrade our shares, publish negative research or reports, or do not publish reports about our business, stock price, and trading volume could decline.
The trading market for our stock is to some extent influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our shares or our competitors' stock, our share price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we might lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.
We are incurring increased costs and obligations as a result of being a public company.
As a public company, we are required to comply with certain additional corporate governance and financial reporting practices and policies. As a result, due to compliance requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), the Dodd-Frank Act, the listing requirements of the NASDAQ, and other applicable securities rules and regulations, we have and will continue to incur significant legal, accounting and other expenses. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results with the SEC. We are also required to ensure that we have the ability to prepare financial statements and other disclosures that are fully compliant with all SEC reporting requirements on a timely basis. Compliance with these rules and regulations has increased and may continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources.

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We might not be successful in complying with these requirements and the significant amount of resources required to ensure compliance could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our internal controls over financial reporting are required to meet all the standards of Section 404 of Sarbanes-Oxley, and failure to achieve and maintain effective internal controls over financial reporting could have a material adverse effect on our stock price, reputation, business, financial condition, results of operations and cash flows.
Section 404 of Sarbanes-Oxley requires management and our independent registered public accounting firm to assess and attest to the effectiveness of internal control over financial reporting on an annual basis. The rules governing the standards that must be met to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation of our existing controls and could result in incurring significant additional expenditures. We are required to design, implement and test our internal controls over financial reporting in order to comply with this obligation. The effort necessary to meet these requirements is time consuming, costly, and complicated, and we must continually evaluate and refine these processes on an ongoing basis. We might encounter problems or delays in completing the implementation of any required improvements and therefore fail to receive a favorable attestation provided by our independent registered public accounting firm.
As a private company, inVentiv was not subject to the requirements of Section 404 of Sarbanes-Oxley. Now that the Merger has been completed, we must devote significant management time and other resources to ensure that the combined company complies with the requirements of Section 404, and there can be no assurance that it will.
Further, material weaknesses or significant deficiencies in our internal control over financial reporting may exist or otherwise be discovered in the future. If we fail to maintain an effective internal control environment, such failure could limit our ability to report our financial results accurately and timely, resulting in misstatements and/or restatements of our consolidated financial statements, which may cause investors to lose confidence and have a material adverse effect on our stock price, reputation, business, financial condition, results of operations, and cash flows.
We are a holding company and rely on dividends and other payments, advances and transfers of funds from our subsidiaries to meet our obligations and pay any dividends.
We have no direct operations and no significant assets other than ownership of 100% of the capital stock of our subsidiaries. Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments to generate the funds necessary to meet our financial obligations, and to pay any dividends with respect to our stock. Legal and contractual restrictions in our 2017 Credit Agreement and other agreements which may govern future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. The earnings from, or other available assets of, our subsidiaries might not be sufficient to pay dividends, make distributions, or loans to enable us to pay any dividends on our stock or other obligations. Any of the foregoing could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Risks Relating to the Merger
We may be unable to fully realize the competitive and operating synergies that are projected to be achieved through the combination of INC Research’s and inVentiv Health’s offerings.
The success of the Merger will depend on, among other things, our ability to combine the business of INC Research with the business of inVentiv Health and to achieve operating synergies. If we are not able to successfully achieve this objective, the anticipated benefits of the Merger might not be realized fully, or at all, or may take longer to realize than expected. The difficulties of combining the operations of the companies include, among others:
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the combination;

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challenges in attracting, retaining and replacing key personnel;
challenges in creating a new culture for the combined company and maintaining employee morale throughout the post-Merger period of integration and combining the operations of the two companies;
difficulties in managing the expanded operations of a significantly larger and more complex company; and
potential unknown liabilities and unforeseen increased expenses or delays associated with the Merger.
For example, we incurred and will incur substantial expenses in connection with consummation of the Merger and combining the businesses, operations, networks, systems, technologies, policies and procedures of the two companies. Many of the expenses incurred and to be incurred, by their nature, are difficult to estimate accurately at the present time and as result may exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the Merger Date.
It is possible that the integration process or other factors could result in the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies. These transition matters could have an adverse effect on us for an undetermined amount of time after the Merger Date. In addition, events outside of our control, including changes in regulations and laws, as well as economic trends, could adversely affect our ability to realize the expected benefits from the Merger.
We may fail to realize all of the anticipated benefits of the Merger or those benefits may take longer to realize than expected. We may also encounter significant difficulties in integrating the two businesses.
Our ability to realize the anticipated benefits of the Merger will depend, to a large extent, on our ability to integrate the two businesses. The combination of two independent businesses is a complex, costly and time-consuming process. As a result, we are required to devote significant management attention and resources to integrating business practices and operations. The integration process may disrupt the businesses and, if implemented ineffectively, would restrict the realization of the full expected benefits. The failure to meet the challenges involved in integrating the two businesses and to realize the anticipated benefits of the Merger could cause an interruption of, or a loss of momentum in, our activities and could adversely affect our results of operations.
In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention. Further, we may not have identified a significant risk within the inVentiv business that existed at the time of the Merger or that may develop in the future as a result of past practice of inVentiv. These unidentified risks may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the combination;
difficulties in the integration of the companies’ businesses;
difficulties in managing the expanded operations of a significantly larger and more complex company;
difficulties in integrating employees from the two companies;
current and prospective employees may experience uncertainty regarding their future roles with our company, which might adversely affect our ability to retain, recruit and motivate key employees;
lost customers and customer awards as a result of customers deciding not to do business with the combined company;
difficulties in managing supplier relationships of both companies and resolving potential conflicts and consolidation issues that may arise;

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difficulties in systems integration, particularly information technology and finance systems, and conforming standards, controls, procedures and policies, business cultures and compensation structures between the entities;
difficulties in integrating and documenting processes and controls in conformance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which were not applicable to inVentiv prior to the Merger; and
potential unknown liabilities and unforeseen increased expenses and delays associated with the Merger.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact our business, financial condition and results of operations. In addition, even if the operations of the businesses of INC Research and inVentiv Health are integrated successfully, the full benefits of the Merger might not be realized, including the synergies, cost savings or sales or growth opportunities that are expected. These benefits might not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration of the businesses of INC Research and inVentiv Health. All of these factors could negatively impact our earnings per share, decrease or delay the expected accretive effect of the Merger and negatively impact the price of our shares. As a result, there is no assurance that the combination of INC Research and inVentiv Health will result in the realization of the full benefits anticipated.
Our future results will suffer if we do not effectively manage our expanded operations following the completion of the Merger.
Following the completion of the Merger, the size of our business increased significantly beyond the former size of either INC Research’s or inVentiv Health’s businesses on a standalone basis. Our Company has no prior experience integrating a business of the size and scale of inVentiv Health. Our future success depends, in part, upon our ability to manage this expanded business, which poses substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. If we are unsuccessful in managing our integrated operations, or if we do not realize the expected operating efficiencies, cost savings and other benefits currently anticipated from the Merger, our operations and financial condition could be adversely affected and we might not be able to take advantage of business development opportunities.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
As of December 31, 2017, we had 146 facilities located in 47 countries. During the year ended December 31, 2017, we utilized approximately 78% of our available facility space; however, as we continue to expand in new locations, the utilization of our facilities may decline in the short term. Most of our facilities consist solely of office space. We lease all of our facilities, with the exception of office space owned in Madrid, Spain. Our headquarters and principal executive offices are located in Raleigh, North Carolina, where we lease space in two locations totaling approximately 187,700 square feet. The leases for both of our Raleigh locations expire in February 2019.
In January 2017, we entered into a 12-year lease for our new corporate headquarters building in Morrisville, North Carolina, where we intend to relocate all employees from our two existing locations in Raleigh, North Carolina. In June 2017, this lease was amended to add additional office space and extend the term of the lease to 13 years. We expect the construction of the new building to be completed in late 2018 and anticipate completing our relocation efforts prior to the current leases expiring in early 2019. In February 2017, we entered into an 11-year lease agreement for new office space in Farnborough, United Kingdom, which is near our existing Camberley site. In January 2018, we replaced our lease agreement for the Farnborough location with a new 10-year lease agreement. The new agreement provides for additional office space to accommodate our operating plans following the Merger. We also anticipate completing our relocation efforts to the Farnborough location prior to the Camberley lease expiring in 2018.

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In addition, we lease substantial facilities in Columbus, Ohio; Camberley, United Kingdom; Gurgaon, India; Hyderabad, India; Madrid, Spain; Maidenhead, United Kingdom; Mexico City, Mexico; Munich, Germany; New York, New York; Newtown, Pennsylvania; Princeton, New Jersey; Pune, India; Quebec City, Canada; Somerset, New Jersey; Tokyo, Japan; and Toronto, Canada. We also maintain offices in various other Asian-Pacific, European, Latin American and North American locations, including Australia, the Middle East and Africa. None of our leases is individually material to our business model and all either have options to renew or are located in major markets where we believe there are adequate opportunities to continue business operations at terms satisfactory to us.
Item 3. Legal Proceedings.
We are party to legal proceedings incidental to our business. While our management currently believes the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on our consolidated financial statements, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on our financial condition and results of operations.
On December 1, 2017, the first of two virtually identical actions alleging federal securities law claims was filed against us and certain of our officers on behalf of a putative class of our shareholders. The first action, captioned Bermudez v. INC Research, Inc., et al, No. 17-09457 (S.D.N.Y.), names as defendants us, Michael Bell, Alistair MacDonald, Michael Gilbertini and Gregory Rush, and the second action, Vaitkuvienë v. Syneos Health, Inc., et al, No. 18-0029 (E.D.N.C.), names as defendants us, Alistair MacDonald, and Gregory S. Rush. Both complaints allege similar claims under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934 on behalf of a putative class of purchasers of our common stock between May 10, 2017 and November 8, 2017 (Vaitkuvienë action) and November 9, 2017 (Bermudez action). The complaints allege that we published inaccurate or incomplete information regarding, among other things, the financial performance and business outlook for inVentiv’s business prior to the Merger and with respect to the combined company following the merger. On January 30, 2018, two alleged shareholders of ours filed motions both seeking to be appointed lead plaintiff and approving the selection of lead counsel. These motions remain pending. We and the other defendants deny the allegations in these complaints and intend to defend vigorously against these claims.
Item 4. Mine Safety Disclosures.
Not applicable.

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PART II
Item 5. Market for Registrants' Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities.
Market Information for Common Stock
The following table sets forth the high and low sales prices per share of our common stock as reported by the NASDAQ for the periods indicated:
 
 
High
 
Low
Fiscal Year 2017:
 
 
 
 
Fourth Quarter
 
$
59.45

 
$
33.60

Third Quarter
 
$
59.80

 
$
51.00

Second Quarter
 
$
61.10

 
$
40.65

First Quarter
 
$
56.88

 
$
40.85

 
 
High
 
Low
Fiscal Year 2016:
 
 
 
 
Fourth Quarter
 
$
52.75

 
$
41.10

Third Quarter
 
$
47.39

 
$
37.27

Second Quarter
 
$
57.11

 
$
36.70

First Quarter
 
$
48.13

 
$
34.19

Holders of Record
On February 21, 2018, there were approximately 72 shareholders of record of our common stock. This number does not include shareholders for whom shares are held in "nominee" or "street" name.
Dividend Policy
Since becoming a public company, we have not declared or paid cash dividends on our common stock, nor do we intend to pay cash dividends on our common stock in the foreseeable future. However, in the future, subject to the factors described below and our future liquidity and capitalization, we may change this policy and choose to pay dividends.
We are a holding company that does not conduct any business operations of our own. As a result, our ability to pay cash dividends on our common stock is dependent upon cash dividends, distributions, and other transfers from our subsidiaries. Our ability to pay dividends is currently restricted by the terms of our 2017 Credit Agreement, and may be further restricted by any future indebtedness we or our subsidiaries incur. In addition, under Delaware law, the Board may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.
Any future determination to pay dividends will be at the discretion of the Board and will take into account restrictions in our debt instruments, including our 2017 Credit Agreement, general economic business conditions, our financial condition, results of operations and cash flows, our capital requirements, our business prospects, the ability of our operating subsidiaries to pay dividends and make distributions to us, legal restrictions, and such other factors as the Board may deem relevant. For additional information on these restrictive covenants, see Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and "Note 4 - Long-Term Debt Obligations" to our audited consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
Recent Sales of Unregistered Securities
We did not have any sales of unregistered securities during 2017.

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Purchases of Equity Securities by the Issuer
We did not purchase any equity securities during 2017.
Stock Performance Graph
The information included under the heading “Stock Performance Graph” is “furnished” and not “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be “soliciting material” subject to Regulation 14A or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act of 1934, as amended.
In connection with our rebranding under the name Syneos Health, Inc., effective January 8, 2018, our common stock is traded on the NASDAQ under the symbol “SYNH”. From November 7, 2014 through January 7, 2018, our common stock was listed on the NASDAQ under the symbol "INCR". The Stock Price Performance Graph set forth below compares the cumulative total shareholder return on our common stock for the period from November 7, 2014 through December 31, 2017, with the cumulative total return of the Nasdaq Composite Index and the Nasdaq Health Care Index over the same period. The comparison assumes $100 was invested on November 7, 2014 in the common stock of Syneos Health, Inc., in the Nasdaq Composite Index, and in the Nasdaq Health Care Index and assumes reinvestment of dividends, if any.
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12090424&doc=16
The stock price performance shown on the graph above is not necessarily indicative of future price performance. Information used in the graph was obtained from the Nasdaq Stock Market, a source believed to be reliable, but we are not responsible for any errors or omissions in such information.

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Equity Compensation Plans
The information required by Part II, Item 5, "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" in this Annual Report on Form 10-K regarding equity compensation plans is incorporated herein by reference to Part III, Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in this Annual Report on Form 10-K.

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Item 6. Selected Financial Data.
The following tables set forth our selected consolidated financial data for the periods ending on and as of the dates indicated. We derived the consolidated statements of operations data for the years ended December 31, 2017, 2016 and 2015 and the consolidated balance sheet data as of December 31, 2017 and 2016 from our audited consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. We derived the consolidated statements of operations data for the years ended December 31, 2014 and 2013 and the consolidated balance sheet data as of December 31, 2015, 2014, and 2013 from our audited consolidated financial statements not included in this Annual Report on Form 10-K. You should read the consolidated financial data set forth below together with our consolidated financial statements and the related notes thereto included in Part II, Item 8, "Financial Statements and Supplementary Data" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of future results of operations.
 
Year Ended December 31,
 
2017(a)
 
2016
 
2015
 
2014
 
2013
 
(in thousands, except per share amounts)
Statement of Operations Data:
 

 
 

 
 

 
 
 
 

Net service revenue
$
1,852,843

 
$
1,030,337

 
$
914,740

 
$
809,728

 
$
652,418

Reimbursable out-of-pocket expenses
819,221

 
580,259

 
484,499

 
369,071

 
342,672

Total revenue
2,672,064

 
1,610,596

 
1,399,239

 
1,178,799

 
995,090

Costs and operating expenses:
 
 
 
 
 
 
 
 
 
Direct costs (exclusive of depreciation and amortization)
1,232,023

 
626,633

 
542,404

 
515,059

 
432,261

Reimbursable out-of-pocket expenses
819,221

 
580,259

 
484,499

 
369,071

 
342,672

Selling, general, and administrative
282,620

 
172,386

 
156,609

 
145,143

 
117,890

Restructuring and other costs(b)
33,315

 
13,612

 
1,785

 
6,192

 
11,828

Transaction and integration-related expenses(c)
123,815

 
3,143

 
1,637

 
7,902

 
508

Asset impairment charges(d)
30,000

 

 
3,931

 
17,245

 

Depreciation
44,407

 
21,353

 
18,140

 
21,619

 
19,175

Amortization
135,529

 
37,851

 
37,874

 
32,924

 
39,298

(Loss) income from operations
(28,866
)
 
155,359

 
152,360

 
63,644

 
31,458

Other (expense) income, net:
 
 
 
 
 
 
 
 
 
Interest expense, net
(62,543
)
 
(11,800
)
 
(15,448
)
 
(52,787
)
 
(60,489
)
Loss on extinguishment of debt
(622
)
 
(439
)
 
(9,795
)
 
(46,750
)
 

Other (expense) income, net
(19,846
)
 
(9,002
)
 
3,857

 
7,689

 
(1,649
)
(Loss) income before provision for income taxes
(111,877
)
 
134,118

 
130,974

 
(28,204
)
 
(30,680
)
Income tax (expense) benefit
(26,592
)
 
(21,488
)
 
(13,927
)
 
4,734

 
(10,849
)
Net (loss) income
(138,469
)
 
112,630

 
117,047

 
(23,470
)
 
(41,529
)
Class C common stock dividends

 

 

 
(375
)
 
(500
)
Redemption of New Class C common stock

 

 

 
(3,375
)
 

Net (loss) income attributable to common shareholders
$
(138,469
)
 
$
112,630

 
$
117,047

 
$
(27,220
)
 
$
(42,029
)
Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
 
 
Basic
$
(1.85
)
 
$
2.08

 
$
2.02

 
$
(0.51
)
 
$
(0.81
)
Diluted
$
(1.85
)
 
$
2.03

 
$
1.95

 
$
(0.51
)
 
$
(0.81
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
74,913

 
54,031

 
57,888

 
53,301

 
52,009

Diluted
74,913

 
55,610

 
60,146

 
53,301

 
52,009


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As of December 31,
 
2017(a)
 
2016
 
2015
 
2014
 
2013
 
(in thousands)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
321,262

 
$
102,471

 
$
85,011

 
$
126,453

 
$
96,972

Total assets(e)
7,285,867

 
1,288,507

 
1,211,219

 
1,241,365

 
1,227,455

Total debt and capital leases(e)(f)
3,007,724

 
497,724

 
501,839

 
416,257

 
588,823

Total shareholders' equity
3,022,579

 
301,473

 
217,434

 
392,209

 
276,207

Other Financial Data:
 
 
 
 
 
 
 
 
 
Backlog(g)
$
3,796,444

 
$
1,878,267

 
$
1,701,587

 
$
1,532,051

 
$
1,433,024

Net new business awards(g)
1,819,348

 
1,216,871

 
1,114,065

 
942,283

 
851,234

Net Book-to-Bill ratio(h)
1.25x

 
1.19x

 
1.23x

 
1.18x

 
1.32x

 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
2017(a)
 
2016
 
2015
 
2014
 
2013
 
(in thousands)
Statement of Cash Flow Data:
 
 
 

 
 

 
 
 
 

Net cash provided by (used in):
 
 
 

 
 

 
 
 
 

Operating activities
$
198,258

 
$
109,332

 
$
204,740

 
$
131,447

 
$
37,270

Investing activities
(1,722,907
)
 
(31,353
)
 
(21,111
)
 
(27,853
)
 
(17,714
)
Financing activities
1,734,368

 
(53,316
)
 
(211,399
)
 
(67,698
)
 
(6,841
)
Other Financial Data:
 
 
 

 
 

 
 
 
 

Capital expenditures
$
(43,896
)
 
$
(31,353
)
 
$
(21,111
)
 
$
(25,551
)
 
$
(17,714
)
Dividends paid

 

 

 
(375
)
 
(500
)
Redemption of New Class C common stock

 

 

 
(3,375
)
 

Non-GAAP Financial Measures(i):
 
 
 
 
 
 
 
 
 
EBITDA
$
130,602

 
$
205,122

 
$
202,436

 
$
79,126

 
$
88,282

Adjusted Net Service Revenue
1,885,533

 
1,030,337

 
914,740

 
800,728

 
652,418

Adjusted EBITDA
391,899

 
244,506

 
221,360

 
145,276

 
105,521

Adjusted Net Income
195,955

 
139,007

 
120,174

 
44,647

 
16,290

Adjusted Diluted Earnings per share
$
2.57

 
$
2.50

 
$
2.00

 
$
0.83

 
$
0.31

(a)
We completed our Merger with inVentiv on August 1, 2017. Our consolidated financial results include the financial results of inVentiv as of and since the date of the Merger.
(b)
Restructuring and other costs consist primarily of: (i) severance costs associated with merger related workforce reductions; (ii) severance costs associated with a reduction/optimization of our workforce in line with our expectations of future business operations; (iii) transition costs associated with the change in our Chief Executive Officer (2016 and 2017 only), (iv) termination costs in connection with abandonment and closure of redundant facilities and other lease-related charges; and (v) consulting costs incurred for the continued consolidation of legal entities and restructuring of our contract management process to meet the requirements of upcoming accounting regulation changes.
(c)
Transaction and integration-related expenses were $123.8 million for the year ended December 31, 2017 and primarily related legal and professional fees associated with the Merger. Included in transaction and integration-related expenses for 2017 is a benefit of $12.3 million from the reduction in fair value of contingent tax-sharing obligations payable to the former shareholders of inVentiv as a result of the enactment of the Tax Act of 2017. Transaction expenses for the year ended December 31, 2016 were $3.1 million and represented fees associated with secondary stock offerings and the August 2016 stock repurchase, debt refinancing costs and legal fees associated with other corporate transactions. Transaction expenses for the year ended December 31, 2015 were $1.6 million and primarily consisted of fees associated with our secondary stock offerings, debt placement and refinancing and other corporate transactions. Transaction expenses for the year ended December 31, 2014 were $7.9 million and primarily consisted of debt issuance costs and third-party fees associated with our debt refinancings, fees associated with the termination of the Avista Capital Partners, L.P. consulting agreement, and legal fees associated with the MEK Consulting acquisition. Transaction expenses of $0.5 million for the year ended December 31, 2013 related to third-party fees associated with

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debt refinancing and the legal fees associated with our acquisition of MEK Consulting which was completed in March 2014.
(d)
During the year ended December 31, 2017, we recorded an impairment charge of $30.0 million related to the impairment of the Company's INC Research tradename in connection with the Company’s announced rebranding. During the year ended December 31, 2015, we recorded a $3.9 million impairment charge related to goodwill and long-lived assets associated with our Phase I Services reporting unit, a component of our Clinical Solutions segment. During the year ended December 31, 2014, we recorded a $17.2 million impairment charge related to intangible assets and goodwill associated with our Global Consulting reporting unit, a component of the Commercial Solutions segment, and Phase I Services reporting unit, a component of our Clinical Solutions segment.
(e)
Total assets, total debt and capital leases have been reduced by $20.7 million, $2.3 million$3.2 million$3.7 million, and $5.7 million of debt issuance costs associated with the Term Loans as of December 31, 2017, 2016, 2015, 2014, and 2013, respectively.
(f)
Total debt and capital leases include $38.7 million of a premium related to our Senior Notes, net of original issue debt discount for the Term Loan B as of December 31, 2017. Total debt and capital leases include $5.5 million and $4.6 million of unamortized discounts as of December 31, 2014 and 2013, respectively.
(g)
Backlog consists of anticipated future net service revenue from contract and pre-contract commitments that are supported by written communications. Net new business awards represent the value of future net service revenue awarded during the period. In connection with the Merger, we re-evaluated our existing backlog policy for our Clinical Solutions segment. As a result of this evaluation, effective during the third quarter of 2017, we changed our policy for calculating and reporting the amounts of our net new business awards and backlog. Refer to Part II, Item 7, "Management's Discussion and Analysis - New Business Awards and Backlog" in this Annual Report on Form 10-K for a description of our current policy. The majority of our contracts can be terminated by our customers with 30 days notice. These adjustments resulted in a reduction to our backlog of approximately $284.5 million as of September 30, 2017 and prior periods have been retroactively adjusted for comparability purposes. We have recorded the backlog assumed in the Merger consistent with our new backlog policy. We do not currently report new business awards or backlog data for our Commercial Solutions segment.
(h)
Net book-to-bill ratio represents "net new business awards" divided by Clinical Solutions net service revenue. We believe net book-to-bill ratio is commonly used in our industry and represents a useful indicator of our potential future revenue growth rate in that it measures the rate at which we are generating net new business awards compared to our current revenues. We cannot assure you that the net book-to-bill ratio is predictive of future financial performance because it will likely be impacted by a number of factors, including the size and duration of projects, which can be performed over several years, project change orders resulting in increases or decreases in project scope, and cancellations. As a result of the policy changes to backlog and net new business awards discussed above, we have retroactively adjusted net book-to-bill ratio for prior periods for comparability purposes.
(i)
We report our financial results in accordance with U.S. GAAP. To supplement this information, we also use the following non-GAAP financial measures in this report: Adjusted Net Service Revenue, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per share. For a discussion of the non-GAAP financial measures in this Annual Report on Form 10-K, see "Non-GAAP Financial Measures" below. Investors are encouraged to review the following reconciliations of these non-GAAP measures to our closest reported GAAP measures.




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Reconciliation of GAAP Measures to Non-GAAP Measures
 
Year Ended December 31,
 
2017(a)
 
2016
 
2015
 
2014
 
2013
 
(in thousands, except per share amounts)
Net Service Revenue (as reported)
$
1,852,843

 
$
1,030,337

 
$
914,740

 
$
809,728

 
$
652,418

Acquisition-related revenue adjustments(b)
32,690

 

 

 

 

Change order adjustment(c)

 

 

 
(9,000
)
 

Adjusted Net Service Revenue
$
1,885,533

 
$
1,030,337

 
$
914,740

 
$
800,728

 
$
652,418

EBITDA and Adjusted EBITDA:
 

 
 

 
 

 
 
 
 

Net (loss) income
$
(138,469
)
 
$
112,630

 
$
117,047

 
$
(23,470
)
 
$
(41,529
)
Interest expense, net
62,543

 
11,800

 
15,448

 
52,787

 
60,489

Income tax expense (benefit)
26,592

 
21,488

 
13,927

 
(4,734
)
 
10,849

Depreciation
44,407

 
21,353

 
18,140

 
21,619

 
19,175

Amortization
135,529

 
37,851

 
37,874

 
32,924

 
39,298

EBITDA
130,602

 
205,122

 
202,436

 
79,126

 
88,282

Acquisition-related revenue adjustments(b)
32,690

 

 

 

 

Change order adjustment(c)

 

 

 
(9,000
)
 

Restructuring and other costs(d)
33,315

 
13,612

 
1,785

 
6,192

 
11,828

Transaction and integration-related expenses(e)
123,815

 
3,143

 
1,637

 
7,902

 
508

Asset impairment charges(f)
30,000

 

 
3,931

 
17,245

 

Share-based compensation(g)
24,577

 
14,020

 
5,074

 
3,370

 
2,419

Contingent consideration and other expense(h)

 
1,696

 
559

 
918

 
253

Monitoring and advisory fees(i)

 

 

 
462

 
582

R&D tax credit adjustment(j)
(3,568
)
 
(2,528
)
 

 

 

Other expense (income)(k)
19,846

 
9,002

 
(3,857
)
 
(7,689
)
 
1,453

Loss on unconsolidated affiliates(l)

 

 

 

 
196

Loss on extinguishment of debt(m)
622

 
439

 
9,795

 
46,750

 

Adjusted EBITDA
$
391,899

 
$
244,506

 
$
221,360

 
$
145,276

 
$
105,521








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Reconciliation of GAAP Measures to Non-GAAP Measures (continued)
 
Year Ended December 31,
 
2017(a)
 
2016
 
2015
 
2014
 
2013
 
(in thousands, except per share amounts)
Adjusted Net Income:
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(138,469
)
 
$
112,630

 
$
117,047

 
$
(23,470
)
 
$
(41,529
)
Amortization
135,529

 
37,851

 
37,874

 
32,924

 
39,298

Acquisition-related revenue adjustments(b)
32,690

 

 

 

 

Change order adjustment(c)

 

 

 
(9,000
)
 

Restructuring and other costs(d)
33,315

 
13,612

 
1,785

 
6,192

 
11,828

Transaction and integration-related expenses(e)
123,815

 
3,143

 
1,637

 
7,902

 
508

Asset impairment charges(f)
30,000

 

 
3,931

 
17,245

 

Share-based compensation(g)
24,577

 
14,020

 
5,074

 
3,370

 
2,419

Contingent consideration and other expense(h)

 
1,696

 
559

 
918

 
253

Monitoring and advisory fees(i)

 

 

 
462

 
582

R&D tax credit adjustment(j)
(3,568
)
 
(2,528
)
 

 

 

Other expense (income)(k)
19,846

 
9,002

 
(3,857
)
 
(7,689
)
 
1,453

Loss on unconsolidated affiliates(l)

 

 

 

 
196

Loss on extinguishment of debt(m)
622

 
439

 
9,795

 
46,750

 

Bridge financing fee(n)
5,815

 

 

 

 

Adjust income tax to normalized rate(o)
(162,632
)
 
(50,858
)
 
(53,671
)
 
(30,957
)
 
1,282

Impact of Tax Cut and Jobs Act(p)
94,415

 

 

 

 

Adjusted Net Income
$
195,955

 
$
139,007

 
$
120,174

 
$
44,647

 
$
16,290

Adjusted Diluted Earnings Per Share:
 
 
 

 
 

 
 
 
 

Adjusted diluted earnings per share
$
2.57

 
$
2.50

 
$
2.00

 
$
0.83

 
$
0.31

Adjusted Diluted weighted average common shares outstanding(q)
76,168

 
55,610

 
60,146

 
53,858

 
52,033

(a)
We completed our Merger with inVentiv on August 1, 2017. Our consolidated financial results include the financial results of inVentiv as of and since the date of the Merger.
(b)
Represents non-cash adjustments resulting from the revaluation of deferred revenue and the subsequent elimination of revenue in purchase accounting in connection with business combinations. As a result of the Merger, we conformed inVentiv's revenue recognition accounting policies with ours, which resulted in recognition of additional $6.0 million of revenue in the fourth quarter of 2017. Under revenue recognition accounting policies of inVentiv, this revenue has historically been recognized in the first quarter of each fiscal year. We have eliminated this one-time benefit from our non-GAAP financial measures.
(c)
During the second and third quarters of 2014, we experienced higher-than-normal change order activity estimated to be between $6 million and $12 million. Adjusted Net Service Revenue, Adjusted EBITDA, Adjusted Net Income, and Adjusted Diluted Earnings per share for 2014 have been adjusted by $9.0 million to remove the impact of this higher-than-normal change order activity.
(d)
Restructuring and other costs consist of: (i) severance costs associated with merger related workforce reductions; (ii) severance costs associated with a reduction/optimization of our workforce in line with our expectations of future business operations; (iii) transition costs associated with the change in our Chief Executive Officer (2016 and 2017 only); (iv) termination costs in connection with abandonment and closure of redundant facilities and other lease-related charges; and (v) consulting costs incurred for the continued consolidation of legal entities and restructuring of our contract management process to meet the requirements of upcoming accounting regulation changes.
(e)
Represents fees associated with business combinations, stock repurchases and secondary stock offerings, debt placement and refinancings, IPO costs, and other corporate transactions costs.
(f)
Represents impairment of goodwill, intangible assets, and long-lived assets.
(g)
Represents share-based compensation expense related to awards granted under equity incentive plans.

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(h)
Consists of contingent consideration expense incurred as a result of acquisitions and other expenses accounted for as compensation expense under U.S. GAAP.
(i)
Represents monitoring and advisory fees paid to affiliates of Avista Capital Partners, L.P in the periods prior to the initial public offering in November 2014, as well as reimbursements of expenses paid to affiliates of Avista Capital Partners, L.P. and affiliates of Teachers' Private Capital pursuant to the Expense Reimbursement Agreement. These arrangements were terminated upon completion of our initial public offering.
(j)
Represents research and development tax credits in certain international locations for expenses incurred and recorded as a reduction of direct costs.
(k)
Represents other expense (income) comprised primarily of foreign exchange gains and losses.
(l)
Represents losses (gains) associated with unconsolidated affiliates.
(m)
Represents loss on extinguishment of debt associated with our debt modifications and refinancing activities.
(n)
Represents bridge financing fees incurred in connection with the Merger related to an unused financing commitment taken out prior to securing our 2017 Credit Agreement.
(o)
Our effective tax rate has been adjusted to an overall effective rate of 32.6% in 2017, 34% in 2016, 36% in 2015 and 37% in 2014, and 2013. This rate has been adjusted to exclude tax impacts related to valuation allowances recorded against deferred tax assets.
(p)
Represents the direct and indirect net income tax expense recorded in the three months and year ended December 31, 2017 as a result of the enactment of the Tax Act. For further details on the impact of the Tax Act refer to "Note 12 - Income Taxes" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data " in this Annual Report on Form 10-K.
(q)
Diluted weighted average common shares outstanding has been adjusted to give effect to dilutive securities for purposes of calculating adjusted diluted earnings per share by 1,255, 557, and 24 shares for the years ended December 31, 2017, 2014, and 2013, respectively. These shares were excluded from the calculation of GAAP earnings per share as we reported a net loss for the period.
Non-GAAP Financial Measures
We report our financial results in accordance with U.S. GAAP. To supplement this information, we also use the following non-GAAP financial measures in this Annual Report on Form 10-K: Adjusted Net Service Revenue, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per share. Management believes that these non-GAAP measures provide useful supplemental information to management and investors regarding the underlying performance of our business operations. We use these non-GAAP measures to, among other things, evaluate our operating performance on a consistent basis, calculate incentive compensation for our employees and assess compliance with various metrics associated with our Credit Agreement.
Adjusted Net Service Revenue is the consolidated net service revenue adjusted to: (i) include revenue eliminated under purchase accounting; (ii) exclude revenue due to conforming inVentiv revenue recognition policies; and (iii) reduce revenue to adjust for higher-than-normal change order activity during the period.
EBITDA represents earnings before interest, taxes, depreciation, and amortization. Adjusted EBITDA represents EBITDA, further adjusted to include revenue eliminated under purchase accounting and an increase in revenue due to conforming the legacy inVentiv revenue recognition policy and to exclude the impact of higher-than-normal revenue change order activity, and certain expenses and transactions that we believe are not representative of our core operating results, including: management fees that terminated upon our IPO; restructuring and other costs; transaction and integration-related expenses; non-cash share-based compensation expense; contingent consideration and other expenses; asset impairment charges; loss on extinguishment of debt; R&D tax credit adjustments; results of and gains or losses from the sale of unconsolidated affiliates; and other income (expense).
Adjusted Net Income and Adjusted Diluted Earnings per share represent net income (loss) adjusted to include revenue eliminated under purchase accounting and an increase in revenue due to conforming the legacy

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inVentiv revenue recognition policy and to exclude the impact of higher-than-normal revenue change order activity and certain expenses and transactions that we believe are not representative of our core operating results, including: acquisition-related amortization; restructuring and other costs; transaction and integration-related expenses; asset impairment charges: non-cash share-based compensation expense; contingent consideration and other expenses; management fees that terminated upon our IPO; R&D tax credit adjustments: other income (expense); results of and gains or losses from the sale of unconsolidated affiliates; loss on extinguishment of debt: bridge financing fees related to unused financing commitments; adjustments to our tax rate to reflect an expected long-term tax rate that excludes the impact of our valuation allowances and historical NOLs; and adjustments related to the estimated of the enactment of the Tax Act.
We believe that EBITDA is a useful metric for investors as it is a common metric used by investors, analysts and debt holders to measure our ability to service our debt obligations, fund capital expenditures and meet working capital requirements.
Each of the non-GAAP measures are used by management and the Board to evaluate our core operating results as it excludes certain items whose fluctuations from period-to-period do not necessarily correspond to changes in the core operations of the business. Adjusted Net Income (including Adjusted Diluted Earnings per Share) are used by management and the Board to assess our business, as well as by investors and analysts, to measure our performance.
These non-GAAP measures are performance measures only and are not measures of our cash flows or liquidity. Adjusted Net Service Revenue, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per share are non-GAAP financial measures that are not in accordance with, or an alternative for, measures of financial performance prepared in accordance with U.S. GAAP and may be different from similarly titled non-GAAP measures used by other companies. Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. Some of the limitations are:
EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA, Adjusted EBITDA and Adjusted Net Income do not reflect the cash requirements for such replacements; and
EBITDA, Adjusted EBITDA, and Adjusted Net Income do not reflect our actual tax expense or, in the case of EBITDA and Adjusted EBITDA, the cash requirements to pay our taxes.
See the consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for our GAAP results. Additionally, for reconciliations of Adjusted Net Service Revenue, EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted Earnings per share to our closest reported GAAP measures see "Selected Financial Data - Reconciliation of GAAP Measures to Non-GAAP Measures" above.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with Part II, Item 6, "Selected Financial Data" in this Annual Report on Form 10-K and the consolidated financial statements and the related notes included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K. This discussion contains forward-looking statements related to future events and our future financial performance that are based on current expectations and subject to risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those described in Part I, Item 1A, "Risk Factors" and elsewhere in this Annual Report on Form 10-K.
Overview of Our Business and Services
Syneos Health, Inc. (the “Company,” “we,” “us,” and “our”) is a leading global biopharmaceutical services organization comprised of an end-to-end clinical contract research organization (“CRO”) and contract commercial organization (“CCO”). We offer both standalone and integrated biopharmaceutical development and commercialization services ranging from Phase I to Phase IV clinical trial services to services associated with the commercialization of biopharmaceutical products. Our customers include small, mid-sized, and large companies in the pharmaceutical, biotechnology, and medical device industries, and our revenue is derived through a broad suite of services designed to enhance our customers’ ability to successfully develop, launch, and market their products. We consistently and predictably deliver our services in a complex environment and offer a proprietary, operational approach to the delivery of our projects through our Trusted Process® methodology.
On August 1, 2017, we completed a merger (the “Merger”) with Double Eagle Parent, Inc. (“inVentiv”), the parent company of inVentiv Health, Inc. under the terms of the merger agreement, dated May 10, 2017 (the “Merger Agreement”). Upon closing, inVentiv was merged with and into the Company, and the separate corporate existence of inVentiv ceased. In conjunction with the Merger, we entered into the 2017 Credit Agreement to: (i) repay the Company’s and inVentiv’s pre-Merger term loans; (ii) partially redeem inVentiv’s Senior Unsecured Notes; and (iii) pay fees and expenses related to the Merger. See further discussion in "Note 3 - Business Combinations" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for additional details on the Merger.
Following the Merger, we realigned our operating segments to reflect the current structure under which we evaluate our performance, make strategic decisions and allocate resources. As a result of this realignment, effective August 1, 2017, we began managing our business through two reportable segments: Clinical Solutions and Commercial Solutions.
Our Clinical Solutions segment offers a variety of services spanning Phase I to Phase IV of clinical development, including full-service global studies, as well as individual service offerings such as clinical monitoring, investigator recruitment, patient recruitment, data management, and study startup to assist customers with their drug development process. Our Commercial Solutions segment provides the pharmaceutical, biotechnology, and healthcare industries commercialization services, which include outsourced selling solutions, communication solutions (public relations and advertising), and consulting services. Our management reviews segment performance and allocates resources based upon segment revenue and segment operating income. Historical segment reporting has been revised to reflect these changes to our segment structure. Prior to the Merger, our Commercial Solutions segment consisted solely of a consulting offering. See further discussion in "Note 14 - Segment Information" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.
For financial information regarding revenue and long-lived assets by geographic areas, see "Note 15 - Operations by Geographic Location" to our consolidated financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K.

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New Business Awards and Backlog
In connection with the Merger, we re-evaluated our existing backlog policy for our Clinical Solutions segment. As a result of this evaluation, effective during the third quarter of 2017, we changed our policy for calculating and reporting the amounts of our net new business awards and backlog. Under the new backlog policy for our Clinical Solutions segment, we add new business awards to backlog when we enter into a contract or when we receive a written commitment from the customer selecting us as a service provider, provided that:
the customer has received appropriate internal funding approval and collection of the award value is probable;
the project or projects are not contingent upon completion of another trial or event;
the project or projects are expected to commence within the next six months;
the customer has entered or intends to enter into a comprehensive contract as soon as practicable; and
for awards related to our FSP offering, only a maximum of twelve months of services are included.
In addition, we continually evaluate our backlog to determine if any of the previously awarded work is no longer expected to be performed, regardless of whether we have received formal cancellation notice from the customer. If we determine that any previously awarded work is no longer probable of being performed, we remove the value from our backlog based on risk. We recognize revenue from these awards as services are performed, provided we have entered into a contractual commitment with the customer. We recorded the backlog assumed in the Merger consistent with our new backlog policy.
We do not currently report new business awards or backlog data for our Commercial Solutions segment. Accordingly, all disclosures related to net new service awards and backlog pertain solely to our Clinical Solutions segment.
Backlog
Our Clinical Solutions backlog consists of anticipated future net service revenue from business awards that either have not started but are anticipated to begin in the future (as noted above), or that are in process and have not been completed. Our backlog also reflects any cancellation or adjustment activity related to these contracts. The average duration of our contracts will fluctuate from period to period in the future based on the contracts comprising our backlog at any given time. The majority of our Clinical Solutions segment contracts can be terminated by the customer with a 30-day notice.
As of December 31, 2017 and 2016, our Clinical Solutions backlog was $3.80 billion and $1.88 billion, respectively (inVentiv contributed approximately $1.51 billion of our December 31, 2017 Clinical Solutions backlog). We expect approximately $1.88 billion of our Clinical Solutions backlog at December 31, 2017 will be recognized as revenue during 2018, with the remainder expected to be translated into revenue beyond 2018. We adjust the amount of our backlog each quarter for the effects of fluctuations in foreign currency exchange rates. During the year ended December 31, 2017, fluctuations in foreign currency exchange rates resulted in a favorable impact on our December 31, 2017 backlog in the amount of $47.3 million, primarily due to the strengthening of the Euro against the U.S. dollar.
We believe that our backlog and net new business awards might not be consistent indicators of future revenue because they have been, and likely will be, affected by a number of factors, including the variable size and duration of projects, many of which are performed over several years, and cancellations and changes to the scope of work during the course of projects. Additionally, projects may be canceled or delayed by the customer or regulatory authorities. Projects that have been delayed for less than six months generally remain in backlog, but the anticipated timing of the recognition of revenue is uncertain. We generally do not have a contractual right to the full amount of the awards reflected in our backlog. If a customer cancels an award, we might be reimbursed for the costs we have incurred. As we increasingly compete for and enter into large contracts that are more global in nature, we expect that the rate at which our backlog and net new business awards convert into revenue is likely to decrease, and the duration of projects and the period over

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which related revenue is recognized to lengthen. In addition, our adoption of the new revenue recognition accounting standard on January 1, 2018 might affect our backlog. See "Note 1 - Basis of Presentation and Summary of Principal Accounting Policies - Recently Issued Accounting Standards Not Yet Adopted - Revenue from Contracts with Customers." For more information about risks related to our backlog see Part I, Item 1A "Risk Factors—Risks Related to Our Business—Our backlog might not be indicative of our future revenues, and we might not realize all of the anticipated future revenue reflected in our backlog" in this Annual Report on Form 10-K.
Net New Business Awards
Our new business awards, net of award cancellations, for the years ended December 31, 2017, 2016, and 2015 were $1.82 billion, $1.22 billion, and $1.11 billion, respectively, representing a 49.5% increase from 2016 to 2017 and a 9.2% increase from 2015 to 2016. Net new business awards were higher for the year ended December 31, 2017, due to the Merger and an estimated organic increase in net awards of $76.2 million, or 6.3%. New business awards have varied and may continue to vary significantly from quarter to quarter. Fluctuations in our net new business award levels often result from the fact that we may receive a small number of relatively large orders in any given reporting period. Because of these large orders, our backlog and net new business awards in a reporting period may reach levels that are not sustainable in subsequent reporting periods.

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Results of Operations
Year Ended December 31, 2017 Compared to the Years Ended December 31, 2016 and 2015
The following table sets forth amounts from our consolidated financial statements along with the percentage change for years ended December 31, 2017, 2016 and 2015 (dollars in thousands):
 
Years Ended December 31,
 
Change
 
2017
 
2016
 
2015
 
2017 to 2016
 
2016 to 2015
Net service revenue
$
1,852,843

 
$
1,030,337

 
$
914,740

 
$
822,506

 
79.8
 %
 
$
115,597

 
12.6
 %
Reimbursable out-of-pocket expenses
819,221

 
580,259

 
484,499

 
238,962

 
41.2
 %
 
95,760

 
19.8
 %
Total revenue
2,672,064

 
1,610,596

 
1,399,239

 
1,061,468

 
65.9
 %
 
211,357

 
15.1
 %
Costs and operating expenses:
 

 
 

 
 

 
 

 
 

 
 

 
 

Direct costs (exclusive of depreciation and amortization)
1,232,023

 
626,633

 
542,404

 
605,390

 
96.6
 %
 
84,229

 
15.5
 %
Reimbursable out-of-pocket expenses
819,221

 
580,259

 
484,499

 
238,962

 
41.2
 %
 
95,760

 
19.8
 %
Selling, general, and administrative
282,620

 
172,386

 
156,609

 
110,234

 
63.9
 %
 
15,777

 
10.1
 %
Restructuring and other costs
33,315

 
13,612

 
1,785

 
19,703

 
144.7
 %
 
11,827

 
662.6
 %
Transaction and integration-related expenses
123,815

 
3,143

 
1,637

 
120,672

 
n/m

 
1,506

 
92.0
 %
Asset impairment charges
30,000

 

 
3,931

 
30,000

 
n/m

 
(3,931
)