COLLABORATIVE CLINICAL RESEARCH INC, 424B1, 1996-06-11

COLLABORATIVE CLINICAL RESEARCH INC
424B1, 1996-06-11
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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PROSPECTUS FILED PURSUANT TO RULE 424(b)(1)
REGISTRATION NOS. 333-2140 AND 333-5010
- --------------------------------------------------------------------------------

3,000,000 SHARES

LOGO COLLABORATIVE
CLINICIAL RESEARCH, INC.

COMMON SHARES

All of the 3,000,000 Common Shares offered hereby are being sold by
Collaborative Clinical Research, Inc. ("Collaborative" or the "Company"). Prior
to the Offering, there has been no public market for the Common Shares of the
Company. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The Common Shares have been
approved for listing on the Nasdaq National Market under the symbol "CCLR."

THE COMMON SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS," BEGINNING ON PAGE 6.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
===================================================================================================================
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share......................................... $13.50 $.945 $12.555
- -------------------------------------------------------------------------------------------------------------------
Total............................................. $40,500,000 $2,835,000 $37,665,000
===================================================================================================================
<FN>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company, estimated
at $770,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
450,000 additional Common Shares on the same terms and conditions set forth
above, solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $46,575,000, $3,260,250 and $43,314,750,
respectively. See "Underwriting."

</TABLE>
------------------------

The Common Shares offered by the Underwriters are subject to prior sale,
receipt and acceptance by them and subject to the right of the Underwriters to
reject any order in whole or in part and certain other conditions. It is
expected that delivery of such shares will be made at the offices of the agent
of Vector Securities International, Inc., in New York, New York on or about June
14, 1996.

------------------------

Vector Securities International, Inc. McDonald & Company
Securities, Inc.

June 10, 1996

<PAGE> 2

LOGO

COLLABORATIVE CLINICAL RESEARCH, INC.

(MAP DEPICTING THE UNITED STATES, CANADA AND THE UNITED KINGDOM AND INDICATING
THE NUMBER OF AFFILIATED SITES IN A PARTICULAR JURISDICTION)

------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus, including information under "Risk Factors."

THE COMPANY

Collaborative Clinical Research, Inc. ("Collaborative" or the "Company")
manages a network comprised of over 400 affiliated clinical research sites
("Affiliated Sites") providing access to over 3,000 principal investigators in
the United States, Canada and the United Kingdom. In addition, through its
recent acquisition of an Affiliated Site, GFI Pharmaceutical Services, Inc.
("GFI"), the Company operates three research facilities, conducts Phase I
through Phase IV clinical research and provides clinical reference laboratory
and Institutional Review Board ("IRB") services. Since commencing operations in
1991, the Company has provided site selection and trial management services for
183 clinical trials in a variety of therapeutic areas involving over 10,000
patients and 79 sponsors (primarily pharmaceutical and biotechnology companies
and, in selected cases, contract research organizations
("CROs") -- collectively, "Sponsors"). The Company provides these Sponsors with
an innovative, time-efficient method of site selection and clinical trial
management. The Company leverages its Affiliated Site network in order to
provide rapid access to qualified investigators and patients. The Company
believes that such access is key to enabling Sponsors to reduce the length of
the product development process.

The Company has Affiliated Sites in a number of health care delivery
settings, including academic medical centers, community hospitals, outpatient
treatment centers, for-profit research sites, managed care organizations,
physician practice groups, regional research subnetworks and long-term care
facilities. The Company markets the capabilities of all Affiliated Sites to
Sponsors, thus reducing the inefficiencies associated with single-site marketing
efforts. Affiliated Sites also are exposed to a number of interventional and
non-interventional clinical research opportunities involving various therapeutic
areas, thus increasing their likelihood of success in obtaining revenue from
clinical research.

Demand for the Company's services has been driven by the significant
changes in the health care industry that have occurred in recent years. These
changes have caused pharmaceutical companies to focus on ways in which to reduce
development costs and improve profitability. For example, pharmaceutical
companies are placing increased importance on developing innovative drugs which
may generate greater market value. In addition, these companies are outsourcing
many aspects of the drug development process in order to reduce fixed costs.
Moreover, pharmaceutical companies are seeking ways in which to improve the
efficiency of the clinical research process, thereby enhancing revenue by
extending the period of the products' market exclusivity.

The Company believes that its Affiliated Site network provides a clinical
research model that is responsive to the health care industry's need to increase
the speed with which new products are brought to market. The primary objective
of the Company's Affiliated Site network is to improve the time-efficiency of
the clinical research process. By accelerating the identification and
qualification of research sites and clinical investigators, the Company provides
Sponsors with the opportunity to begin clinical research sooner, thus
potentially reducing the length of the new product development process.

The Company also believes that its Affiliated Site network offers an
attractive opportunity for health care institutions and providers. The growth of
managed care, as well as efforts by the federal and state governments and
insurers to contain increases in reimbursement rates, have imposed significant
cost containment pressures on these institutions and providers. Such pressures
have led institutions and providers to seek alternative sources of revenue. As
clinical research activities have expanded beyond traditional academic settings,
clinical research has become an increasingly attractive alternative revenue
source. However, health care providers often face significant obstacles in
initiating or expanding a clinical research program. Many non-traditional
research sites do not have established research programs, and need to make
investments in administrative staffing and marketing. Furthermore, institutions
and providers that can offer only a single research site confront significant
obstacles

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in marketing their services to Sponsors. In many situations, Sponsors will
require multiple sites for a clinical trial, and it is inefficient for Sponsors
to spend significant amounts of time learning about the capabilities of a single
site. The Company markets the capabilities of its Affiliated Sites to Sponsors
in order to assist individual research sites in realizing the full potential of
clinical research as an additional source of revenue.

The Company intends to expand its Affiliated Site network in the United
States, Canada and the United Kingdom, and to enter other selected European
markets. The Company believes its Affiliated Site network provides a unique
platform for expanding its services beyond clinical research. The Company has
entered into a joint venture with Pharmaceutical Marketing Services, Inc.
("PMSI") to develop and market health-economic data collection and analytical
services. In order to increase the speed, efficiency and accuracy of clinical
data collection within the Affiliated Site network, the Company has also entered
into a letter of intent to form an alliance with Integrated Systems Solutions
Corporation ("ISSC"), a wholly-owned subsidiary of IBM Corporation, to develop
and implement a network-wide, on-site electronic data collection and management
system. Additionally, the Company believes that selective acquisitions of
research organizations will play an important role in the Company's efforts to
become an integrated provider of research services. The Company plans to acquire
controlling interests in research entities that have an established reputation
and on-going business in the performance and management of clinical trials.

The Company was incorporated in Ohio on July 17, 1991. Its principal
executive offices are located at 20600 Chagrin Boulevard, Cleveland, Ohio 44122
and its telephone number is (216) 491-9930.

RISK FACTORS

Prospective investors should consider carefully the matters discussed under
the caption "Risk Factors" prior to making any investment in the Company. Each
of these risks could have adverse consequences to the Company. Among the more
significant risks confronting the Company include those associated with its
early stage of development (such as its limited operating history, lack of
profitable operations, unproven business strategy, need to manage growth and
improve systems and acquisition risks) and those associated with the nature of
its business (such as its dependence on major customers, the possibility of
termination of contracts, fluctuations in its quarterly results and the effect
of the Company's expansion strategy on its core business). In addition, the
success of the initiatives described above and elsewhere in this Prospectus
depend in large part on certain assumptions made by the Company's management
concerning trends in the clinical research market and the health care industry.

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THE OFFERING

<TABLE>
<S> <C>
Common Shares offered.............................. 3,000,000 shares
Common Shares to be outstanding after the
Offering......................................... 5,898,539 shares(1)
Use of proceeds.................................... To repay indebtedness incurred in
connection with the acquisition of GFI
and borrowings under the Company's line
of credit, to provide working capital to
support the expansion of the Company's
business and to fund potential
acquisitions.
Nasdaq National Market symbol...................... CCLR
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
JULY 17,
1991
(INCEPTION) YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
TO ---------------------------------------------- ----------------------------
DECEMBER 31, PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(2) 1995 1996 1996(2)
------------ ------ ------ ------ ------- --------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................... $ 10 $ 549 $1,423 $4,047 $10,453 $16,439 $1,920 $5,303 $5,819
Gross profit..................... 9 270 448 1,139 1,962 4,152 469 1,290 1,437
Operating expenses............... 57 520 804 1,445 2,832 5,008 653 1,192 1,418
Income (loss) from operations.... (48) (250) (356) (306) (870) (856) (184) 98 19
Net income (loss)................ (48) (245) (351) (214) (753) (1,085) (126) 56 (25)
Net income (loss) per share(3)... $(0.23) $(0.25) $(0.10) $ (0.24) $ (0.33) $(0.04) $ 0.02 $(0.01)
Shares used in the
computation(3)................. 1,058 1,407 2,182 3,102 3,250 3,107 3,096 3,244
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................... $ 406 $ 35,152
Working capital (deficit)........................................................................... (3,672) 36,107
Total assets........................................................................................ 13,385 48,131
Accumulated deficit................................................................................. (1,555) (1,555)
Total shareholders' equity.......................................................................... 3,389 43,168
<FN>

- ---------------

(1) Excludes 487,075 Common Shares reserved for issuance upon the exercise of
outstanding options.

(2) Gives effect to the acquisition of GFI as if such transaction had occurred
as of January 1, 1995. See Pro Forma Consolidated Financial Data and Note 8
of Notes to Consolidated Financial Statements.

(3) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of net income (loss) per share.

(4) As adjusted to give effect to the sale of 3,000,000 Common Shares by the
Company hereby (after deducting estimated underwriting discounts and
commissions and the estimated expenses of the Offering) and the receipt and
application of the estimated net proceeds therefrom at the initial public
offering price of $13.50 per share. See "Use of Proceeds" and
"Capitalization."

</TABLE>
------------------------

Except as otherwise noted, all information in this Prospectus, including
financial information, share and per share data: (a) reflects the conversion of
the Series A, Series B, and Series C Preferred Shares (the "Preferred Shares")
into an aggregate of 2,182,353 Common Shares upon completion of the Offering;
(b) assumes the issuance of the number of Common Shares having a value of $2.0
million determined on the basis of the initial public offering price (148,148
Common Shares) in connection with the acquisition of GFI; (c) reflects the
declaration and issuance of additional Preferred Shares pursuant to Preferred
Share dividends through May 31, 1996 and the conversion of such Preferred Shares
into an aggregate of 18,780 Common Shares; (d) reflects the issuance of 136,000
Common Shares issued upon exercise of certain outstanding warrants; and (e)
assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting."

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RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY BY POTENTIAL INVESTORS IN EVALUATING AN
INVESTMENT IN THE COMMON SHARES OFFERED HEREBY.

LIMITED OPERATING HISTORY; LACK OF PROFITABLE OPERATIONS. The Company
commenced operations in 1991 and has a limited operating history upon which
investors may evaluate its performance. The Company has recognized losses in
each year since its inception. As of March 31, 1996, the Company had an
accumulated deficit of $1.6 million. There can be no assurance that the Company
will be profitable during future periods. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."

FLUCTUATIONS IN QUARTERLY RESULTS. The Company is subject to significant
fluctuations in quarterly results caused by many factors, including the
Company's success in obtaining new contracts, the size and duration of the
clinical trials in which the Company and members of its network of Affiliated
Sites participate, the timing of Sponsor decisions to conduct new clinical
trials or cancel or delay on-going trials and other factors. As a result of the
Company's limited operating history, the Company does not have historical
financial data for a significant number of periods on which to base planned
operating expenses. Therefore, the Company's expense levels are based in part on
its expectations as to future revenue and to a certain extent are fixed. There
can be no assurance as to the Company's revenue in any given period, and it may
be unable to adjust expenses in a timely manner to compensate for any unexpected
revenue shortfall. As a result of the Company's relatively small revenue base,
any significant shortfall in revenue recognized during a particular period could
have an immediate adverse effect on its results of operations and financial
condition. There can be no assurance that the Company will be able to accurately
anticipate quarterly results. Volatility in the Company's quarterly results may
adversely affect the market price of the Common Shares. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition."

RISKS ASSOCIATED WITH UNPROVEN BUSINESS STRATEGIES AND EARLY STAGE OF
COMPANY'S DEVELOPMENT. The Company's efforts to establish a network of
Affiliated Sites and market the network as a method of streamlining the process
of selecting investigators and conducting clinical trials represent a
significant departure from the traditional clinical research practices of
Sponsors. The long-term viability of the Company's strategy remains unproven.
There can be no assurance that the Company's strategy will continue to gain
acceptance among Sponsors, research sites or investigators. The Company has
expanded its Affiliate Site network to include 39 Canadian and 12 United Kingdom
sites, but to date has not recognized any revenue from operations outside the
United States. In addition, the Company's efforts to expand into the health care
information services market are at an early stage, and there can be no assurance
as to the Company's ability to expand into this area in a profitable manner. In
that regard, the Company has undertaken a number of strategic initiatives
intended to expand the scope of its services. All of these initiatives are based
upon assumptions made by the Company concerning trends in the clinical research
market and the health care industry. Any of these assumptions could prove to be
incorrect, which could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies in new and rapidly evolving markets, and there can be no assurance
that the Company will be successful in these efforts.

POTENTIAL LOSS OF CONTRACTS. Although the Company's contracts with
Sponsors provide that it is entitled to receive fees earned through the date of
termination, Sponsors generally are free to terminate a clinical trial or the
Company's contract related thereto at any time. The length of a typical clinical
trial contract varies from several months to several years. Sponsors may
terminate clinical trials for several reasons, including unexpected results or
adverse patient reactions to a potential product, inadequate patient enrollment
or investigator recruitment, manufacturing problems resulting in

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shortages of a potential product or decisions by the Sponsor to de-emphasize or
terminate a particular trial or development efforts with respect to a particular
potential product. A Sponsor's decision to terminate a trial in which the
Company participates could have a material adverse effect on the Company's
business, results of operations and financial condition.

DEPENDENCE ON MAJOR CUSTOMERS. The Company's primary customers are
companies in the pharmaceutical industry. The Company's business is
substantially dependent on the research and development expenditures of
companies in this industry. During each of the three years in the period ended
December 31, 1995, and the three months ended March 31, 1996, sales to companies
in the pharmaceutical industry accounted for more than 78% of the Company's
revenue. During 1994, 1995 and the three months ended March 31, 1996, sales to
two units of Merck & Co., Inc. accounted for approximately 23%, 76% and 47%,
respectively, of the Company's revenue. On a pro forma basis, after giving
effect to the GFI acquisition, sales to this customer would have represented 49%
of the Company's revenue during 1995 and 43% during the three months ended March
31, 1996. Other customers in the pharmaceutical industry have from time to time
accounted for more than 10% of the Company's annual revenue, with sales to two
additional pharmaceutical industry customers each accounting for more than 10%
of revenue during 1994 and sales to four pharmaceutical industry customers each
accounting for more than 10% of revenue during 1993. Sales to Merck & Co., Inc.
and one additional customer accounted for more than 10% of revenue for the three
months ended March 31, 1996. The extent to which the Company relies on sales to
one customer varies from period to period, depending upon, among other things,
its ability to generate new business from new and existing customers, the timing
and size of clinical trials and other factors. In light of the Company's small
revenue base, it is more dependent on major customers than many of the larger
participants in the clinical research industry. The Company's operations could
be materially and adversely affected by, among other things, any economic
downturn in the pharmaceutical or biotechnology industries, any decrease in
their research and development expenditures or a change in the regulatory
environment in which these companies operate. See "Business -- Background" and
"--Customers and Marketing."

RISKS ASSOCIATED WITH ACQUISITIONS BY THE COMPANY. Selective acquisitions
are anticipated to play an important role in the Company's efforts to become an
integrated provider of research services. GFI is the Company's first
acquisition. There can be no assurance that the Company will be able to
successfully integrate and profitably manage GFI or that it will be able to
identify, acquire, successfully integrate or profitably manage additional
acquisitions without substantial costs, delays or other problems. In addition,
there can be no assurance that companies acquired in the future will be
profitable at the time of their acquisition or that the GFI acquisition or
possible future acquisitions will achieve and/or maintain revenue and
profitability that justify the investment therein. Acquisitions also may involve
a number of special risks, including adverse short-term effects on the Company's
reported operating results, potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities, diversion of management's
attention, dependence on retention, hiring and training of key personnel, risks
associated with unanticipated problems or legal liabilities and amortization of
goodwill and acquired company intangible assets, some or all of which could have
a material adverse effect on the Company's business, results of operations and
financial condition.

EFFECT OF EXPANSION STRATEGY ON THE COMPANY'S CORE BUSINESS. The Company's
efforts to expand the range of its services expose it to significant risks. As
the Company expands its ability to conduct clinical research through
acquisitions and otherwise, circumstances will arise in which it will compete
for research projects with its Affiliated Sites. There can be no assurance as to
the impact of this competition on the Company's relationship with its current
Affiliated Sites or on its ability to continue to expand the Affiliated Site
network. The Company's inability to continue to expand its network of Affiliated
Sites, or the withdrawal of a significant number of Affiliated Sites or those
with expertise in certain therapeutic areas, could have a material adverse
effect on the Company's business, results of operations and financial condition.
In addition, because of the rapid access to clinical investigators provided by
the Company's Affiliated Site network, CROs have from time to time engaged the

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Company to assist them in the site selection process. During fiscal 1993, 1994,
1995 and the three months ended March 31, 1996, services provided to CROs
represented approximately 7%, 10%, 6% and 7%, respectively, of the Company's
total revenue. There is no assurance that CROs will continue to do business with
the Company.

MANAGEMENT OF GROWTH; NEED FOR IMPROVED SYSTEMS. The Company believes that
the expansion of its business will continue to place a strain on its
operational, human and financial resources. In order to manage such expansion,
the Company must continue to improve its operating, administrative and
information systems and accurately predict its future personnel and resource
needs. In addition, expansion of foreign operations also may involve the
additional risks of assimilating differences in foreign business practices,
hiring and retaining qualified personnel and overcoming language barriers.
Failure by the Company to meet the demands of and to manage expansion of its
business and operations could have a material adverse effect on the Company's
business, results of operations and financial condition.

LIMITED OBLIGATIONS OF AFFILIATED SITES. The Company's network of
Affiliated Sites is essential to its business. The Company enters into
agreements with each Affiliated Site ("Affiliation Agreements"). The obligations
of Affiliated Sites under the Affiliation Agreements are limited. Affiliated
Sites have full discretion as to whether to participate in clinical research
opportunities presented by the Company, are free to pursue research
opportunities presented to them from sources other than the Company and may
withdraw from the network at any time. See "Business -- The Affiliated Site
Network."

DEPENDENCE ON KEY PERSONNEL. As of March 31, 1996, the Company had a total
of 216 employees, of whom eight had executive or managerial responsibilities.
The Company's growth continues to place significant demands on its management
resources. The success of the Company's business is substantially dependent on
the services of its senior management team and the services of Dr. Jeffrey A.
Green in particular. The Company has employment agreements with Dr. Green and
all but one of its executive officers; however, the loss of Dr. Green's services
or the services of other executive officers could have a material adverse effect
on the Company. See "Management."

GOVERNMENT REGULATION; POTENTIAL IMPACT OF HEALTH CARE REFORM. Demand for
the Company's services is largely a function of the regulatory requirements
associated with the approval of a new drug application imposed by the United
States Food and Drug Administration ("FDA"). These requirements are more
stringent and thus more burdensome than those imposed by many other developed
countries. In recent years, efforts have been made to streamline the drug
approval process and coordinate U.S. standards with those of other developed
countries. Changes in the level of regulation, including a relaxation in
regulatory requirements or the introduction of simplified drug approval
procedures could have a material adverse effect on the demand for the Company's
services. Several competing proposals to reform the system of health care
delivery in the United States have been considered by Congress from time to
time. None of the proposals have been adopted. The process by which the
government will pursue additional or modified proposals for national health care
reform and the precise nature of any such proposals is unclear at this time.
Some of the proposals put forth to date incorporate price controls on drugs and
limits on overall medical spending which may adversely affect expenditures by
the pharmaceutical and biotechnology industries for research and development,
which could have a material adverse effect on the Company's business, results of
operations and financial condition. At present, it is impossible to predict the
effect of any new legislation or changes in regulatory environment on the
Company. See "Business -- Regulatory Matters."

The failure of the Company to comply with applicable regulations could
result in the termination of on-going research or the disqualification of data
for submission to regulatory authorities. Further, the issuance of a notice or
finding by the FDA to either the Company or its clients based upon a material
violation by the Company of either Good Clinical Practices or Good Laboratory
Practices

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could have a material adverse effect on the Company's business, results of
operations and financial condition.

COMPETITION. The clinical research industry is highly fragmented and is
comprised of several large, full-service CROs and many small, limited service
providers. The major competitors in the industry include the research
departments of pharmaceutical companies, CROs and other research sites. Many of
the Company's competitors have substantially greater financial and other
resources than the Company, and there can be no assurance of the Company's
ability to continue to compete effectively with these larger competitors. There
can be no assurance that these larger competitors will not develop their own
networks of Affiliated Sites, nor as to the effect of such competing networks on
the Company's operations. The Company may also face competition from other
networks of research sites in the recruitment of potential Affiliated Sites. As
the Company continues to expand the range of its clinical research services, it
will compete more directly with the core services provided by CROs. Many of
these CROs are substantially larger and have more resources than the Company.
There can be no assurance that the Company will be able to compete effectively
with these larger companies in providing clinical research services. See
"Business -- Competition."

POTENTIAL LIABILITY FROM OPERATIONS. Clinical trials involve the testing
of approved and experimental drugs on human beings. This testing carries with it
a significant risk of liability for personal injury or death to participants
resulting from an adverse reaction to, or improper administration of, the
potential product. The Company participates with Sponsors in the selection
process. The Company also contracts on behalf of its customers with physicians
who render, and itself renders, professional services including administering
the drugs being tested to participants in these trials. Consequently, the
Company may be subject to claims in the event of personal injury or death of
persons participating in clinical trials and arising from professional
malpractice of physicians with whom it has contracted and its own employees.
Although the Company is generally indemnified by its clients for such liability,
in order for such indemnification to be valid, the Company and its employees and
agents must act within the bounds of specific procedural requirements governing
the conduct of the clinical trial. Since the value of the Company's
indemnification depends on the financial viability of the indemnifying party,
there can be no assurance that the Company will be able to rely on such
indemnification in each instance of potential liability. In addition, the
acquisition of GFI has significantly increased the Company's involvement in the
clinical research process. Although the Company's employees have been directly
involved from time to time in rendering services to patients in clinical trials,
the Company's role in the clinical trial process prior to the GFI acquisition
primarily consisted of contracting with physicians who rendered professional
services to trial participants. With the GFI acquisition, the Company's
involvement in the patient treatment process is much more significant than in
the past. Accordingly, the Company's risk of liability for malpractice has
increased. If the Company was forced to undertake the defense of, or found
financially responsible for, claims based upon the foregoing or related risks,
there could be a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Potential Liability and
Insurance."

CONTROL BY PRINCIPAL SHAREHOLDERS. Upon completion of the Offering, the
directors and executive officers of the Company and their affiliates
collectively will own approximately 48% of the outstanding Common Shares of the
Company. Exercise of stock options may increase such persons' percentage
ownership of the outstanding Common Shares. As a result, these shareholders will
be able to control the outcome of all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions. Such concentration of ownership may have the effect of delaying or
preventing a change in control of the Company. See "Principal Shareholders" and
"Description of Capital Stock."

MANAGEMENT DISCRETION AS TO USE OF PROCEEDS. The Company has identified
specific uses for only $3.25 million of the net proceeds of the Offering. The
balance of the net proceeds will be used to provide working capital to support
the continuing expansion of the Company's business and to fund potential
acquisitions. The Company has not yet identified the specific corporate purposes
for which

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such proceeds will be used. The Company's management will retain complete
discretion in the application of this portion of the net proceeds. Purchasers of
Common Shares offered hereby will be entrusting their funds to the Company's
management, upon whose judgment they must depend, with limited information
concerning management's intentions as to the specific working capital
requirements and possible acquisitions to which the funds will be applied. There
can be no assurance as to the timing of the application of such proceeds or that
the application thereof will have a positive effect on the Company's future
results of operations or financial condition. See "Use of Proceeds."

ABSENCE OF PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE. Prior to
the Offering, there has been no public market for the Company's Common Shares,
and there can be no assurance that an active trading market will develop or be
sustained in the Common Shares. The initial public offering price of the Common
Shares was determined by negotiations between the Company and the Underwriters
and may have no relationship to the price at which the Common Shares will trade
after completion of the Offering. See "Underwriting." The stock market has from
time to time experienced extreme price and volume fluctuations which have been
unrelated to the operating performance of particular companies. The market price
for the Common Shares may be highly volatile depending on various factors,
including but not limited to the state of the national economy, stock market
conditions, industry research reports, actions by governmental agencies,
litigation involving the Company, announcements by the Company or its
competitors and general conditions in the clinical research industry.

ANTI-TAKEOVER PROVISIONS; CERTAIN PROVISIONS OF OHIO LAW; ARTICLES OF
INCORPORATION AND CODE OF REGULATIONS. Certain provisions of Ohio law and the
Company's Articles of Incorporation and Code of Regulations could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the Company.
The Company's Articles of Incorporation provide for the Board of Directors to be
divided into three classes of directors serving staggered three-year terms. Such
classification of the Board of Directors expands the time required to change the
composition of a majority of directors and may tend to discourage a proxy
contest or other takeover bid for the Company. The Company's Articles of
Incorporation also contain provisions requiring a supermajority vote by the
shareholders to approve certain business combination transactions that have not
received the approval of the Board of Directors. Applicable provisions of Ohio
law also restrict the ability of the Company to engage in certain business
combination transactions with owners of 10% or more of the outstanding Common
Shares. Certain provisions of Ohio law and the Company's Articles of
Incorporation allow the Company to issue preferred shares with rights senior to
those of the Common Shares without any further vote or action by the
shareholders. The issuance of preferred shares could decrease the amount of
earnings and assets available for distribution to the holders of Common Shares
or could adversely affect the rights and powers, including voting rights, of the
holders of the Common Shares. In certain circumstances, such issuance could have
the effect of decreasing the market price of the Common Shares. In addition, the
Company is subject to the anti-takeover provisions of Section 1701.83 of the
Ohio General Corporation Law, which require the prior approval of a majority of
the disinterested shareholders for acquisitions of specified percentages of the
outstanding Common Shares. The application of Section 1701.83 also could have
the effect of delaying or preventing a change in control of the Company. See
"Description of Capital Stock -- Serial Preferred Shares," " -- Business
Combinations" and " -- Certain Provisions of Ohio Law."

DILUTION. The initial public offering price per share will be
substantially higher than the pro forma book value per share of the Common
Shares. Investors purchasing Common Shares in the Offering will experience
immediate and substantial dilution. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, of the
15,000,000 authorized Common Shares, 6,051,380 Common Shares will be issued and
outstanding or reserved for issuance pursuant to the exercise of presently
exercisable stock options. Of these 6,051,380 Common Shares, the 3,000,000
Common Shares purchased in the Offering by persons who are not "affiliates" of
the Company will be freely tradeable without restriction under the Securities
Act of 1933, as amended (the

10
<PAGE> 11

"Securities Act"). The Company believes that 1,019,925 Common Shares may be sold
pursuant to Rule 144 under the Securities Act ("Rule 144") in compliance with
the resale volume limitations of Rule 144 beginning 90 days after the Offering.
The Company believes that 2,031,455 Common Shares are considered "restricted
securities" under the Securities Act and holders may not utilize Rule 144 until
such shares have been held for at least two years or have been registered under
the Securities Act. For a description of Rule 144, see "Shares Eligible for
Future Sale."

The 487,075 Common Shares reserved for issuance upon exercise of
outstanding options will become eligible for resale under Rule 144 two years
subsequent to the date or dates that the holders of such options exercise the
same. Subsequent to the Offering, the Company intends to file registration
statements on Form S-8 with respect to the 487,075 Common Shares reserved for
issuance upon exercise of outstanding options and the 199,667 Common Shares
reserved for issuance pursuant to future option grants. Upon registration, such
shares upon issuance would be freely tradeable by persons who are not
"affiliates" of the Company. In addition, "affiliates" of the Company could sell
such shares pursuant to Rule 144 under the Securities Act in compliance with the
resale volume limitations of Rule 144.

Certain shareholders of the Company who beneficially own, in the aggregate,
2,133,280 Common Shares have the right, subject to certain exceptions, to
require the Company to register their Common Shares for resale under the
Securities Act on up to two occasions on a long-form registration statement at
the Company's expense, an unlimited number of occasions on a long-form
registration statement at the shareholders' expense and an unlimited number of
occasions on a short-form registration statement at the Company's expense. These
shareholders also have a limited right to include their Common Shares in any
registration statement filed by the Company with respect to an offering of its
Common Shares (subject to certain exceptions).

The Company, its current shareholders, the former shareholders of GFI and
certain holders of options, who beneficially own 3,087,864 Common Shares, have
agreed that they will not, directly or indirectly, without the prior written
consent of the Representatives, offer, sell, grant any option to purchase or
otherwise dispose (or announce any offer, sale, grant of any option to purchase
or other disposition) of any Common Shares, or any securities convertible into,
or exchangeable or exercisable for, Common Shares for a period of 180 days after
the date of this Prospectus.

No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Shares prevailing from time to time. Sales of substantial
amounts of Common Shares (including shares issued upon the exercise of the
outstanding stock options), or the perception that such sales could occur, could
adversely affect the prevailing market prices of the Common Shares. See "Shares
Eligible for Future Sale."

11
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,000,000 Common
Shares offered hereby are estimated to be $36.9 million ($42.5 million if the
Underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company.

The Company intends to use approximately $2.0 million of the net proceeds
to repay in full promissory notes issued to the former shareholders of GFI in
connection with the acquisition (the "GFI Notes") and $1.25 million currently
outstanding under the Company's line of credit. The GFI Notes bear interest at
the prime rate plus 1% (9.25% as of May 31, 1996). Borrowings under the
Company's line of credit bear interest at rates up to 1% above the bank's prime
rate. Amounts outstanding under the line of credit currently bear interest at
the bank's prime rate (8.25% as of May 31, 1996). The balance of the net
proceeds will be used to provide working capital to support the continuing
expansion of the Company's business and to fund potential acquisitions. The
Company has not yet identified the specific corporate purposes for which such
proceeds will be used. The Company's management will retain complete discretion
in the application of this portion of the net proceeds. There can be no
assurance as to the timing of the application of such proceeds or that the
application thereof will have a positive effect on the Company's future results
of operation or financial condition. See "Management's Discussion and Analysis
of Results of Operations and Financial Condition." Although selective
acquisitions of companies in the clinical research industry and clinical
research sites are an important component of the Company's strategy, and the
Company is currently in discussion with several such candidates, no material
acquisition has become the subject of any definitive agreements or agreements in
principle. Pending use of the proceeds as described above, the net proceeds will
be invested in short-term, interest-bearing, investment grade securities.

DIVIDEND POLICY

The Company has never declared or paid cash dividends on its Common Shares.
The Company currently intends to retain any earnings for use in its business and
therefore does not anticipate paying any dividends in the foreseeable future.
The Company's bank line of credit for $5,000,000, dated January 19, 1996,
prohibits the payment of cash dividends. See Note 3 of Notes to Consolidated
Financial Statements.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1996; and the adjusted capitalization of the Company at such date giving
effect to (i) the conversion of the Preferred Shares into an aggregate of
2,182,353 Common Shares upon completion of the Offering; (ii) the issuance of
the number of Common Shares having a value of $2.0 million determined on the
basis of the initial public offering price (148,148 Common Shares) in connection
with the acquisition of GFI; (iii) the declaration and issuance of additional
Preferred Shares pursuant to Preferred Share dividends through May 31, 1996 and
the conversion of such Preferred Shares into an aggregate of 18,780 Common
Shares; (iv) the issuance of 136,000 Common Shares, issued upon exercise of
certain outstanding warrants; and (v) the sale of 3,000,000 Common Shares by the
Company hereby and the receipt and application of the estimated net proceeds
therefrom at the initial public offering price of $13.50 per share. See "Use of
Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to bank........................................................... $ 1,000 $ --
Notes and other acquisition payables to officers................................ 4,000 --
------- -----------
5,000 --
------- -----------
Shareholders' equity:
Serial Preferred Shares, without par value; 1,000,000 shares authorized; none
issued...................................................................... -- --
Series A, B, and C Convertible Preferred Shares: par value $0.001 per share;
2,860,000 shares authorized; 2,182,353 shares issued and outstanding,
actual; none issued and outstanding, as adjusted............................ 2 --
Additional paid-in capital.................................................... 4,848 --
Common Shares, without par value; 3,660,000 shares authorized; 15,000,000
shares authorized, as adjusted; 413,258 shares issued and outstanding,
actual; 5,898,539 shares issued and outstanding, as adjusted(1)............. 94 44,723
Accumulated deficit........................................................... (1,555) (1,555)
------- ----------
Total shareholders' equity.................................................. 3,389 43,168
------- ----------
Total capitalization...................................................... $ 8,389 $43,168
======= ==========
<FN>
- ---------------

(1) Excludes 487,075 Common Shares reserved for issuance upon the exercise of
outstanding options at a weighted average exercise price of $2.07 per share.

</TABLE>

13
<PAGE> 14

DILUTION

The pro forma net tangible book value of the Company at March 31, 1996 was
$519,000 or $0.18 per share. Pro forma net tangible book value per share is
equal to the Company's net tangible assets (tangible assets of the Company less
total liabilities) divided by 2,898,539 Common Shares outstanding at March 31,
1996, assuming the issuance of Common Shares in connection with the acquisition
of GFI, the declaration and issuance of Preferred Share dividends, the
conversion of all outstanding Preferred Shares into Common Shares and the
exercise of warrants to purchase Common Shares. After giving effect to the sale
of the 3,000,000 Common Shares by the Company in the Offering and the receipt of
the net proceeds therefrom, the pro forma net tangible book value of the Company
as of March 31, 1996 would have been $37.4 million or $6.34 per share. This
represents an immediate increase in pro forma net tangible book value of $6.16
per share to existing shareholders and an immediate dilution in pro forma net
tangible book value of $7.16 per share to new investors. The following table
sets forth the per share dilution to new investors in the Offering:

<TABLE>
<S> <C> <C>
Initial public offering price per share........................... $13.50
Pro forma net tangible book value per share at March 31,
1996........................................................ $0.18
Increase per share attributable to new investors............. 6.16
------
Pro forma net tangible book value per share after the Offering.... 6.34
------
Dilution per share to new investors............................... $ 7.16
======
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1996,
the differences between existing shareholders and new investors with respect to
the number of Common Shares purchased from the Company, the total consideration
paid and the average price paid per share (at the initial public offering price
of $13.50 per share and before deducting underwriting discounts and commissions
and estimated offering expenses payable by the Company):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... 2,898,539 49% $ 7,826,892 16% $ 2.70
New investors................. 3,000,000 51 40,500,000 84 13.50
--------- ------- ----------- -------
Total.................... 5,898,539 100% $48,326,892 100%
======== ======= ========== =======
</TABLE>

The foregoing computations exclude options to purchase 487,075 Common
Shares at a weighted average exercise price of $2.07 per share. To the extent
that such options are exercised, there will be further dilution to new
investors. See "Management -- Director Compensation," "-- 1996 Outside Directors
Stock Option Plan," "-- 1992 Stock Incentive Plan," "-- 1996 Key Employees and
Consultants Stock Option Plan" and Note 7 of Notes to Consolidated Financial
Statements.

14
<PAGE> 15

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth selected consolidated financial data of the
Company, since its inception. The selected consolidated financial data at
December 31, 1991 and for the period from inception to December 31, 1991, and at
and for each of the four years in the period ended December 31, 1995, are
derived from the financial statements of the Company which have been audited by
Ernst & Young LLP, independent auditors. The selected consolidated financial
data for the three months ended March 31, 1995 and at and for the three months
ended March 31, 1996 has been derived from unaudited consolidated financial
statements, which include all adjustments, consisting solely of normal recurring
adjustments, which management considers necessary to fairly present the
financial information set forth. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1996. The data should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition," the Consolidated Financial Statements and
related Notes thereto and other financial information included elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
JULY 17, 1991 YEAR ENDED DECEMBER 31, MARCH 31,
(INCEPTION) TO ---------------------------------- -----------------
DECEMBER 31, 1991 1992 1993 1994 1995 1995 1996
----------------- ------ ------ ------ ------- ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $ 10 $ 549 $1,423 $4,047 $10,453 $1,920 $5,303
Direct costs................................. 1 279 975 2,908 8,491 1,451 4,013
--- ------ ------ ------ ------- ------ ------
Gross profit................................. 9 270 448 1,139 1,962 469 1,290
Selling, general and administrative
expenses................................... 57 439 686 1,386 2,770 641 1,093
Depreciation and amortization................ -- 81 118 59 62 12 99
--- ------ ------ ------ ------- ------ ------
Income (loss) from operations................ (48) (250) (356) (306) (870) (184) 98
Other income (loss).......................... -- 5 5 92 117 58 (23)
--- ------ ------ ------ ------- ------ ------
Income (loss) before income taxes............ (48) (245) (351) (214) (753) (126) 75
Income tax expense........................... -- -- -- -- -- -- 19
--- ------ ------ ------ ------- ------ ------
Net income (loss)............................ $ (48) $ (245) $ (351) $ (214) $ (753) $ (126) $ 56
====== ====== ====== ====== ======= ====== ======
Net income (loss) per share(1)............... $(0.23) $(0.25) $(0.10) $ (0.24) $(0.04) $ 0.02
====== ====== ====== ======= ====== ======
Shares used in the computation(1)............ 1,058 1,407 2,182 3,102 3,107 3,096
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1991 1992 1993 1994 1995 MARCH 31, 1996
----- ----- ----- ------ ------ --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ -- $ 446 $ 207 $4,105 $3,011 $ 406
Working capital (deficit)..................................... (48) 197 (82) 3,879 2,961 (3,672)
Total assets.................................................. -- 787 651 5,523 7,025 13,385
Long-term liabilities......................................... -- 23 -- -- -- --
Accumulated deficit........................................... (48) (293) (644) (858) (1,611) (1,555)
Total shareholders' equity (deficit).......................... (48) 354 30 4,004 3,323 3,389
<FN>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of net income (loss) per share.

</TABLE>

15
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion and analysis of the results of operations and
financial condition of the Company should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this Prospectus.

GENERAL

The Company provides clinical research services to Sponsors of clinical
research (primarily pharmaceutical and biotechnology companies and, in selected
cases, CROs) through its network of over 400 Affiliated Sites. Revenue is
derived principally from the identification, placement and management of
clinical trial programs and health-economic data evaluations within the
Company's network of Affiliated Sites. During the fourth quarter of 1995, the
Company expanded its services to include regulatory affairs, monitoring and data
management for clinical trials. The Company continues to expand its Affiliated
Site network in the United States and Canada and has begun to enter selected
European markets including the recent addition of 12 Affiliated Sites in the
United Kingdom.

Effective January 31, 1996, the Company acquired GFI. This acquisition has
been accounted for under the purchase method, and GFI's results have been
consolidated with those of the Company for periods subsequent to the date of the
acquisition. The purchase price for the GFI acquisition was $6.0 million, and
included $2.0 million in cash, $2.0 million in notes payable and the number of
Common Shares having a value equal to $2.0 million, determined on the basis of
the initial public offering price (148,148 Common Shares). After allocating the
purchase price to the market value of the net assets acquired, the Company
recorded approximately $5.8 million in goodwill in connection with the
acquisition, which is being amortized using the straight-line method over a
period of 20 years.

The Company's clinical research service contracts generally have terms
ranging from several months to several years. A portion of the contract fee is
generally payable upon execution of the contract, with the balance payable in
installments over the life of the contract. Revenue and related direct costs are
recognized as specific contract terms are fulfilled under the percentage of
completion method utilizing units of delivery. The Company's contracts are
broken down into discrete units of deliverable services for which a fixed fee
for each unit is established. Pass-through costs that are paid directly by the
Company's Sponsors, and for which the Company does not bear the risk of economic
loss, are excluded from revenue. These costs can include investigator meeting
fees, IRB fees and travel costs. The termination of a contract results in no
material adjustments to revenue or direct costs previously recognized, and the
Company is entitled to payment for all work performed through the date of notice
of termination and all costs associated with termination of a study.

16
<PAGE> 17

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain
statement of operations data as a percentage of revenue and the percentage
change in such items as compared to prior periods:

<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
--------------------------------------------- PERCENTAGE CHANGE
THREE MONTHS -----------------------------
ENDED THREE
YEAR ENDED DECEMBER 31, MARCH 31, 1993 1994 MONTHS
------------------------- --------------- TO TO 1995 TO
1993 1994 1995 1995 1996 1994 1995 1996
----- ----- ----- ----- ----- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue......................... 100.0% 100.0% 100.0% 100.0% 100.0% 184.4% 158.3% 176.2%
Direct costs.................... 68.5 71.9 81.2 75.6 75.7 198.3 192.0 176.5
Gross profit.................... 31.5 28.1 18.8 24.4 24.3 154.1 72.3 175.2
Selling, general and
administrative expenses....... 48.2 34.3 26.5 33.4 20.6 101.9 99.8 70.3
Depreciation and amortization... 8.3 1.4 0.6 0.6 1.9 (50.2) 4.9 *
Income (loss) from operations... (25.0) (7.6) (8.3) (9.6) 1.8 14.0 (184.0) 152.9
Other income (expense).......... 0.3 2.3 1.1 3.0 (0.4) * 27.0 (139.3)
Income (loss) before income
taxes......................... (24.7) (5.3) (7.2) (6.6) 1.4 39.0 (251.6) (159.2)
Income tax expense.............. -- -- -- -- (0.3) -- -- *
Net income (loss)............... (24.7) (5.3) (7.2) (6.6) 1.1 39.0 (251.6) 144.4
<FN>
- ---------------
* Not meaningful.

</TABLE>

Three Months Ended March 31, 1996 Compared with Three Months Ended March 31,
1995

Revenue for the three months ended March 31, 1996 increased 176.2% to $5.3
million as compared to $1.9 million in the three months ended March 31, 1995. Of
the $3.4 million increase, $1.0 million was due to the acquisition of GFI and
$2.4 million was due to growth in the number and size of Collaborative's ongoing
and new clinical trials. Approximately $700,000 of the $2.4 million increase was
derived from an ongoing 300 site multi-year clinical research project that began
in December 1994.

Direct costs include compensation and related fringe benefits for
non-administrative employees and other expenses directly related to contracts,
which are generally subcontracted to the Affiliated Sites and other vendors,
such as investigator payments. These costs increased by $2.5 million, or 176.5%,
from $1.5 million to $4.0 million for the three months ended March 31, 1995 and
1996, respectively. Of the $2.5 million increase, $500,000 was due to the
acquisition of GFI and $2.0 million was due to growth in number and size of
Collaborative's ongoing and new clinical trials. Direct costs for
Collaborative's ongoing and new clinical trials increased from 75.6% to 81.0% as
a percentage of revenue for the three months ended March 31, 1995 and 1996,
respectively. This reflects the continuing effects of the Company's decision
during the first half of 1994 to reduce fees for certain services and to absorb
certain administrative contract costs as a means to capture additional market
share. Because the Company's contracts range from several months to several
years, the effects of this pricing decision continued to have an impact on the
results of operations for the three months ended March 31, 1996. During the
second half of 1995, the Company began to implement changes in its pricing
practices intended to increase prices for certain services and include charges
for certain administrative contract costs that had previously been absorbed.
GFI's operations have historically experienced lower direct costs as a
percentage of revenue as GFI has been able to leverage fixed personnel and other
direct costs. During the three months ended March 31, 1996, Collaborative's
higher direct costs as a percentage of revenue were offset by GFI's lower direct
costs. As a result, consolidated direct costs were approximately 76.0% of
revenue for each of the three month periods ended March 31, 1995 and 1996.

Selling, general and administrative expenses include all administrative
personnel costs, business and Affiliated Site development costs, and all other
expenses not directly chargeable to a specific contract. Selling, general and
administrative costs for the three months ended March 31, 1996 increased

17
<PAGE> 18

70.3% to $1.1 million as compared to $641,000 during the three months ended
March 31, 1995. Of the $451,000 increase, $322,000 was due to the acquisition of
GFI, and the remainder was due to the Company's internal growth. Selling,
general and administrative expenses as a percentage of revenue decreased from
33.4% to 20.6% for the three months ended March 31, 1995 and 1996, respectively.
The decrease in selling, general and administrative expenses as a percentage of
revenue reflects improved absorption of fixed costs resulting from the increase
in the Company's revenue.

Depreciation and amortization expense increased from $12,000 in the three
months ended March 31, 1995 to $99,000 during the three months ended March 31,
1996. Of the $87,000 increase, $28,000 resulted from the acquisition of GFI's
assets, $48,000 resulted from the amortization of goodwill due to the GFI
acquisition and $11,000 resulted from the Company's purchase of additional
computer equipment and leasehold improvements during the period.

Other income (expense) decreased $81,000 from $58,000 in the three months
ended March 31, 1995 to ($23,000) in the three months ended March 31, 1996. This
was the result of a $40,000 decrease in interest income caused by a reduction in
cash and cash equivalents required for the GFI acquisition and a $36,000
increase in interest expense due to the issuance of notes payable to the former
shareholders of GFI, and borrowings under the Company's line of credit. The
Company also recorded a $4,500 loss as its share of Health Research Innovations,
L.L.C. ("HRI's") loss for the three months ended March 31, 1996. HRI, formed
through the Company's joint venture with PMSI, contracts with the Company to use
its Affiliated Site network for the collection of outcomes assessment,
health-economic and disease management data. For financial reporting purposes,
the Company records its share of the net income or loss from HRI using the
equity method. See "Business -- Business Strategy."

The Company's effective tax rate for 1996 is estimated to be 25% of pre-tax
income, after giving effect to net operating loss carryforwards ("NOLs") of $1.4
million for federal income tax purposes. This effective tax rate is reflected in
the Company's Consolidated Statement of Operations and in the Pro Forma
Consolidated Statement of Operations for the three months ended March 31, 1996.

Year Ended December 31, 1995 Compared with Year Ended December 31, 1994

Revenue increased by $6.4 million, or 158.3%, from $4.0 million in 1995.
Approximately $5.6 million of the increase resulted from revenue derived from a
300-site multi-year clinical research project which began in December 1994. The
balance of the increase reflects revenue derived from other new projects
obtained through the Company's increased business development efforts.

Direct costs increased by $5.6 million, or 192.0%, from $2.9 million in
1994 to $8.5 million in 1995. Direct costs increased as a percentage of revenue
from 71.9% in 1994 to 81.2% in 1995. The increase in direct costs as a
percentage of revenue reflects the continuing effects of the Company's decision
during the first half of 1994 to reduce fees for certain services and to absorb
certain administrative contract costs as a means of capturing additional market
share. Because the Company's contracts range from several months to several
years, the effects of the pricing decision in 1994 continued to have an impact
on the results of operations for 1995. During the second half of 1995, the
Company began to implement changes in its pricing practices intended to increase
prices for certain services and include charges for certain administrative
contract costs that had previously been absorbed.

Selling, general and administrative expenses increased by $1.4 million, or
99.8%, to $2.8 million in 1995, but decreased as a percentage of revenue from
34.3% in 1994 to 26.5% in 1995. The majority of the increase in these expenses
resulted from additions to personnel and increases in costs associated with
business and Affiliated Site development. In 1995, legal expenses increased by
$250,000 due to costs incurred in defense and settlement of certain employment
litigation. The decrease in selling, general and administrative expenses as a
percentage of revenue reflects improved absorption of fixed costs resulting from
the increase in the Company's revenue.

18
<PAGE> 19

Depreciation and amortization expense increased by 4.9% from $59,000 in
1994 to $62,000 in 1995 as a result of purchases of additional computer
equipment and leasehold improvements during the year.

Other income (expense) increased from $92,000 in 1994 to $117,000 in 1995.
This increase was caused by a higher level of interest income, offset by the
Company's share of losses incurred by HRI for the six months ended December 31,
1995. The Company's share of HRI's loss during 1995 was $105,000.

At December 31, 1995, the Company had cumulative NOLs of $1.4 million for
federal income tax purposes. These NOLs expire in the years 2006 through 2010.
The NOLs are sufficient to absorb GFI's 1995 pre-tax net income such that no
income tax expense is reported in the Pro Forma Consolidated Statement of
Operations for the year ended December 31, 1995.

Year Ended December 31, 1994 Compared with Year Ended December 31, 1993

Revenue increased by $2.6 million, or 184.4%, from $1.4 million in 1993 to
$4.0 million in 1994. This increase resulted primarily from an increase in the
number and size of projects under contract. Of the increase, $320,000, or 22%,
was the result of revenue earned through an alliance with a provider of home
infusion therapy, under the terms of which the Company received fees for
providing access to its network of Affiliated Sites.

Direct costs increased by $1.9 million, or 198.3%, from $975,000 in 1993 to
$2.9 million in 1994. Direct costs increased as a percentage of revenue from
68.5% in 1993 to 71.9% in 1994. The increase resulted from the Company's
decision during the first half of 1994 to reduce fees for certain services and
to absorb some administrative contract costs in order to capture market share.

Selling, general and administrative expenses increased by $700,000, or
101.9%, from $690,000 in 1993 to $1.4 million in 1994, but decreased as a
percentage of revenue from 48.2% in 1993 to 34.3% in 1994. The increase in
selling, general and administrative expenses was the result of increased
personnel, administrative, advertising and Affiliate Site development costs
associated with the continued growth of the Company. The decrease in selling,
general and administrative expenses as a percentage of revenue reflects improved
absorption of fixed costs resulting from the increase in the Company's revenue.

Depreciation and amortization decreased by 50.2%, falling to $59,000 in
1994 from $118,000 in 1993. This decrease resulted from a 75% decrease in
amortization expense caused by start-up costs being fully amortized during the
first quarter of 1994 and was partially offset by a 25% increase in depreciation
expense, due to increased capital expenditures.

Other income (expense) increased from $5,000 in 1993 to $92,000 in 1994.
The increase resulted from increased interest income associated with the funding
received in the Company's July 1994 financing. See "Certain Transactions --
Financing Arrangements."

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<PAGE> 20

QUARTERLY RESULTS

The following table sets forth certain unaudited quarterly statement of
operations data for the quarters indicated below:

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------
MAR-31 JUN-30 SEP-30 DEC-31 MAR-31 JUN-30 SEP-30 DEC-31 MAR-31
1994 1994 1994 1994 1995 1995 1995 1995 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................................ $ 742 $1,105 $ 904 $1,296 $1,920 $2,116 $2,751 $3,666 $5,303
Direct costs................................... 453 839 658 958 1,451 1,758 2,292 2,990 4,013
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross profit................................... 289 266 246 338 469 358 459 676 1,290
Selling, general and administrative expenses... 262 294 369 461 641 681 809 639 1,093
Depreciation and amortization.................. 30 9 9 11 12 15 17 18 99
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from operations.................. (3) (37) (132) (134) (184) (338) (367) 19 98
Other income (expense)......................... -- -- 41 51 58 51 (8) 16 (23)
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes.............. (3) (37) (91) (83) (126) (287) (375) 35 75
Income tax expense............................. -- -- -- -- -- -- -- -- 19
------ ------ ------ ------ ------ ------ ------ ------ ------
Net income (loss).............................. $ (3) $ (37) $ (91) $ (83) $ (126) $ (287) $ (375) $ 35 $ 56
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>

The Company's quarterly results are subject to fluctuations. Quarterly
results can fluctuate as a result of a number of factors, including the
Company's success in attracting new business, the size and duration of the
clinical trials in which the Company and members of its network of Affiliated
Sites participate, the timing of Sponsors' decisions to conduct new clinical
trials or cancellation or delays of on-going trials, acquisitions and other
factors, many of which are beyond the Company's control. See "Risk Factors --
Fluctuations in Quarterly Results."

SUMMARY OF GFI RESULTS

GFI had contract revenue of approximately $6.0 million and net income of
approximately $248,000 during 1995. Although GFI provides clinical trial
management services, a majority of its revenue is derived from the performance
of clinical research. Over the past two years, GFI's revenue has increased from
$4.2 million to $6.0 million, while its gross margin percentage has increased
from 33% to 37%. GFI's margin increase is due to the leveraging of fixed
personnel costs through the performance of more clinical trials, as well as the
performance of higher margin clinical monitoring work during 1995. GFI's
operating expenses have increased as a percentage of revenue from 29% in 1993 to
32% in 1995 due to the expansion of its Phase I facilities and increases in
administrative personnel. GFI's pre-tax net income has remained constant at
approximately 4% of revenue for each of the three years ended December 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company commenced operations in 1991. Since that time, the Company's
principal sources of cash have been cash flow from operations and approximately
$5.0 million in proceeds from three private offerings of equity securities. The
Company's most recent financing was completed in July 1994, and resulted in
proceeds of approximately $4.2 million. See "Certain Transactions -- Financing
Arrangements."

Cash and cash equivalents decreased $751,000 during the three months ended
March 31, 1996. This resulted from $230,000, $391,000, and $129,000 used in
operating, investing and financing activities, respectively. Cash used in
operating activities resulted primarily from cash used to fund working capital
needs. Cash used by investing activities resulted from the approximately $2.0
million used for the purchase of GFI and $252,000 used to purchase property and
equipment, offset by $1.9 million provided by the maturity of short-term
investments. Net uses of cash for financing activities reflect

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<PAGE> 21

borrowings of $1.0 million on the Company's line of credit, offset by $1.1
million used to repay and terminate GFI's line of credit on January 31, 1996 in
connection with the GFI acquisition.

Accounts receivable, net of allowance for doubtful accounts, increased from
$2.9 million at December 31, 1995 to $5.0 million at March 31, 1996, due to
revenue growth and the acquisition of GFI. The number of days outstanding in
accounts receivable (net of unearned revenue) increased from 52 days at December
31, 1995 to 54 days at March 31, 1996. Deferred revenue increased from $559,000
at December 31, 1995 to $1.0 million at March 31, 1996. Fluctuations in deferred
revenue are caused by the timing and amount of advance payments on contracts
received from Sponsors.

Cash and cash equivalents increased $40,000 during the year ended December
31, 1995, as a result of $893,000 provided by investing activities, offset by
$853,000 used in operating activities. Cash provided by investing activities
reflects the proceeds received at maturity of certain U.S. government securities
held as investments. Cash used in operating activities during 1995 primarily
reflects the funding of the operating loss and working capital requirements.

Accounts receivable, net of allowance for doubtful accounts, increased from
$1.2 million at December 31, 1994 to $2.9 million at December 31, 1995, due to
revenue growth. The number of days outstanding in accounts receivable (net of
unearned revenue) increased from 33 days at December 31, 1994 to 52 days at
December 31, 1995. Deferred revenue decreased from $622,000 at December 31, 1994
to $559,000 at December 31, 1995. Fluctuations in deferred revenue are caused by
the timing and amount of advance payments on contracts received from Sponsors.
The Company's contracts with Sponsors generally require an advance payment at
the time a contract is signed.

GFI's primary sources of cash have been cash flows from operations and
borrowings under its line of credit. To the extent that GFI's cash flows from
operations are insufficient to support its cash needs, the Company will use its
available cash resources to provide the funding required.

Total expenditures by the Company for property and equipment were $50,000,
$65,000, $242,000 and $250,000 in 1993, 1994, 1995, and for the three months
ended March 31, 1996, respectively. Computer equipment and leasehold
improvements account for a significant portion of the expenditures. GFI's
property and equipment expenditures were $90,000, $157,000 and $279,000 for each
of the three years ended December 31, 1993, 1994 and 1995, respectively. GFI's
expenditures are generally for computer, medical and laboratory equipment. The
Company's anticipated capital expenditures for the remainder of 1996 are
$800,000 and include the purchase of laboratory equipment for GFI.

The Company's principal cash needs on both a short and long-term basis are
for the funding of its operations and capital expenditure requirements. In
addition, the Company is required under the terms of its joint venture agreement
with PMSI to fund 50% of HRI's operating requirements and capital expenditures.
The Company expects to continue expanding its operations through internal
growth, strategic acquisitions, joint ventures and alliances. The Company
expects such activities will be funded from existing cash and cash equivalents,
cash flow from operations, the net proceeds from the Offering and borrowings
under its line of credit. A portion of the proceeds from the Offering will be
used to repay approximately $2.0 million in indebtedness incurred in connection
with the GFI acquisition (comprised of notes payable to the former shareholders
of GFI) and $1.25 million currently outstanding under the Company's line of
credit. As part of ISSC's planned technology development alliance with the
Company, ISSC will fund the development of the on-site data collection system.

The Company has a line of credit with a commercial bank providing a maximum
credit facility of $5.0 million. Borrowings under the line of credit bear
interest at rates up to 1% above the bank's prime rate. Amounts outstanding
under the line of credit currently bear interest at the bank's prime rate (8.25%
as of May 31, 1996). Amounts outstanding under the line of credit are
collateralized by substantially all of the Company's assets and are payable on
demand. At May 31, 1996, $1.25 million in borrowings were outstanding under the
line of credit. The line of credit is subject to renewal at June 30, 1996.

The Company believes that cash generated from operations, amounts available
under its line of credit and the net proceeds of the Offering will be sufficient
to fund its working capital and capital

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<PAGE> 22

expenditure requirements for the foreseeable future. However, selective
acquisitions of research organizations are anticipated to play an important role
in the Company's efforts to become an integrated provider of research services.
Although the Company does not have any definitive agreements or agreements in
principle with respect to any potential acquisition, it is engaged in
preliminary discussions with several potential acquisition candidates. To the
extent that the Company is successful in its efforts to acquire additional
research organizations, it may require additional capital. There can be no
assurance as to the Company's ability to obtain additional financing.

INFLATION

To date the Company believes the effects of inflation have not had a
material adverse effect on its results of operations or financial condition. The
Company's contracts fix the revenue and costs for each unit of service or work
to be completed, thereby minimizing the impact of inflation on all ongoing
contracts.

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<PAGE> 23

BUSINESS
GENERAL

The Company manages a network comprised of over 400 Affiliated Sites
providing access to over 3,000 principal investigators in the United States,
Canada and the United Kingdom. In addition, through its recent acquisition of
GFI, the Company operates three research facilities, conducts Phase I through
Phase IV clinical research and provides clinical reference laboratory and IRB
services. Since commencing operations in 1991, the Company has provided site
selection and trial management services for 183 clinical trials in a variety of
therapeutic areas involving over 10,000 patients and 79 Sponsors. The Company
provides these Sponsors with an innovative, time-efficient method of site
selection and clinical trial management. The Company leverages its Affiliated
Site network in order to provide rapid access to qualified investigators and
patients. The Company believes that such access is key to enabling Sponsors to
reduce the length of the product development process.

The Company intends to expand its Affiliated Site network in the United
States, Canada and the United Kingdom, and to enter other selected European
markets. The Company believes its Affiliated Site network provides a unique
platform for expanding its services beyond clinical research. The Company has
entered into a joint venture with PMSI to develop and market health-economic
data collection and analytical services. In order to increase the speed,
efficiency and accuracy of clinical data collection within the Affiliated Site
network, the Company has also entered into a letter of intent to form an
alliance with ISSC, a wholly-owned subsidiary of IBM Corporation, to develop and
implement a network-wide, on-site electronic data collection and management
system. Additionally, the Company believes that selective acquisitions of
research organizations will play an important role in the Company's efforts to
become an integrated provider of research services. The Company plans to acquire
controlling interests in research entities that have an established reputation
and on-going business in the performance and management of clinical trials.

BACKGROUND

The pharmaceutical and health care provider industries are undergoing
significant changes, including cost containment efforts that are exerting
pressure on both the price and utilization of drugs and other medical products
and services. These cost containment pressures have led pharmaceutical companies
to place increased importance on developing innovative drugs and bringing them
to market faster. At the same time, these pressures have led hospitals,
physicians and other health care providers to seek alternative sources of
revenue.

Drug Development Industry Trends. Although new drug development has always
been a lengthy and expensive process, in the past, pharmaceutical manufacturers
generally were able to realize an attractive return on investment after a new
drug received marketing approval from the FDA. In recent years, several factors
have combined to make participants in the pharmaceutical industry increasingly
cost conscious. During the 1990s, the number of drugs losing patent protection
has accelerated, which has increased pressure on pharmaceutical companies to
introduce innovative new drugs. Managed care companies are exerting pressure on
the price and utilization of high-cost medicines and changing drug prescription
and distribution patterns through techniques such as therapeutic substitution
and the use of pharmacy benefit managers. This phenomenon has been most apparent
in the context of multiple source drugs, which have been subjected to
significant price erosion and a declining growth rate in the marketplace. As a
result, participants in the pharmaceutical and biotechnology industries have
increasingly focused product development expenditures on innovative drugs to
treat chronic ailments or complex disease states.

The development and approval process for new drugs is becoming increasingly
complex. The size and complexity of the typical new drug application ("NDA")
have grown significantly over the past decade, with the average NDA filing made
during 1988 to 1992 consisting of more than 90,000 pages, as compared to the
approximately 38,000 pages contained in filings made during 1977 to 1980.
Concerns about the safety of previously approved drugs and the continuing growth
in scientific,

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<PAGE> 24

medical and pharmacological knowledge have combined to increase significantly
the amount and sophistication of data required to be included in the NDA. As in
the past, Sponsors can generally anticipate FDA approval if they are able to
document a new drug's safety and short-term efficacy. However, as the number of
FDA-approved drugs within a specific therapeutic category grows, there is
increasing marketplace pressure on Sponsors developing similar therapeutic
entities to demonstrate superior results or incremental benefits. This has led
Sponsors to pursue not only direct pharmacological proof of effectiveness, but
also evidence of long-term benefit, such as the reduction of mortality in a
given disease state. These more complex trials generally take longer to
accomplish, increasing the cost of the drug development process.

While the development of many drugs has been affected by the increasingly
stringent regulatory environment, the pharmaceutical industry's emphasis on the
development of innovative drugs to treat chronic conditions or complex disease
states has also significantly increased costs. Efforts to therapeutically impact
the management of more chronic, complex or virulent diseases, such as
Alzheimer's or AIDS, present significantly greater challenges to researchers
than other more readily treatable ailments. The efficacy of drugs developed to
treat these types of diseases is more difficult to demonstrate, even with large
clinical trials. Thus, industry participants are confronted with the need to
make higher expenditures in the drug development process and with the potential
for longer development time frames in bringing innovative drugs to market.
Enhanced speed and efficiency of the development process can positively affect
the Sponsor's profitability.

In order to reduce development costs and enhance revenue by extending the
period during which the cost of proprietary new products can be recovered,
industry participants have increasingly sought to reduce the fixed costs
associated with drug development programs and enhance the efficiency of the drug
development process. Outsourcing of many aspects of the drug development process
in order to reduce the fixed component of these costs is a direct result of this
effort. Another component, and one which the Company believes will become
increasingly important, is the streamlining of the clinical research process in
order to reduce not only the cost of product development, but also the length of
time required to complete clinical trials and to receive FDA approval.

In recent years, the demand for health care information services has grown
significantly. The desire to contain health care costs has resulted in demand by
many participants in the market for pharmacoeconomic, outcomes assessment and
disease management data. Pharmacoeconomic data are used to assess the cost
effectiveness of various alternatives in treating a specific disease.
Pharmacoeconomic assessments take into account not only the purchase price of a
particular drug, but also the other services necessary for its proper clinical
use. Outcomes and disease management data are intended to enable better
measurement of the health care system's approach to a given disease by assessing
the costs incurred and the overall efficiency with which the disease is managed
in relation to the treatment options available.

Health care information is particularly valuable to the pharmaceutical
industry in setting research and development priorities. Such data can provide
important information concerning the potential market for a new compound, and,
in light of the increasing attention by payors to the cost of new products, may
assume increasing importance in the product development process. In addition,
because managed care presents a very different health care delivery model than
traditional environments, health care information concerning the performance of
new compounds in the managed care environment will become more important in the
future for pharmaceutical companies to gain access to managed care formularies.

Health Care Provider Trends. Health care providers also have seen
significant changes in the market for their services in recent years. The growth
of managed care, as well as efforts by the government and insurers to contain
increases in reimbursement rates, have imposed significant cost containment
pressures on institutions and providers. This has led to a desire on the part of
institutions and providers to seek new sources of revenue. As clinical research
opportunities have expanded beyond academic settings into non-traditional
research sites such as private practice groups, managed care

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<PAGE> 25

organizations and for-profit research corporations, clinical research has become
an increasingly important alternative revenue source to these institutions and
providers. Revenue provided by clinical research usually exceeds the per diem
rate paid by traditional third party payors and may be received more rapidly
than payments from traditional sources. Clinical research also has the potential
to transform a nonpaying, uninsured patient into a revenue-generating patient,
via clinical trial enrollment. In addition, clinical research can serve as an
important marketing tool by providing patients with the most advanced therapies
available.

While clinical research offers considerable benefits to health care
providers, they often face significant obstacles in initiating or expanding a
clinical research program. Many non-traditional sites do not have established
research programs and need to make investments in administrative staffing and
marketing in order to perform clinical research. An institution which can offer
only a single research site confronts difficulty in marketing its services to
Sponsors. In most situations, Sponsors will require multiple sites for a
clinical trial, and it is inefficient for Sponsors to spend significant amounts
of time learning about the capabilities of a single site. The cost of necessary
investments and the difficulty in effectively marketing their services to
Sponsors reduces the ability of many individual research sites to realize the
full potential of clinical research as an additional source of revenue.

BUSINESS STRATEGY

The Company's strategy is to capitalize on opportunities created by the
needs of pharmaceutical companies and health care providers to respond
effectively to cost containment trends. In implementing its strategy, the
Company has identified the following areas of emphasis:

Utilization of the Affiliated Site Network. The Company believes that its
Affiliated Site network provides a clinical research model that is responsive to
pharmaceutical companies' need to increase the speed with which new products are
brought to market. The primary objective of the Company's Affiliated Site
network is to improve the time-efficiency of the clinical research process. By
reducing the time required for research site and investigator selection, the
Company provides Sponsors with the opportunity to begin clinical research sooner
and thereby reduce the length of the new drug approval process. The Affiliated
Site network also increases the attractiveness of clinical research as an
alternative source of revenue to health care providers. The Company markets the
capabilities of all Affiliated Sites, thus reducing the inefficiencies
associated with single-site marketing efforts. Affiliated Sites are provided
with a number of clinical research opportunities involving a wide variety of
therapeutic areas.

Targeted Expansion of the Affiliated Site Network. Expanding the Affiliated
Site network is a central component of the Company's strategy. In targeting
potential additions to the Affiliated Site network, the Company focuses on those
research sites that have areas of therapeutic expertise corresponding with
Sponsors' drug development programs. The Company seeks out both experienced
research sites and health care providers that historically have not participated
in clinical research. Such providers include managed care companies and
companies providing alternate site medical services, such as home and long-term
care. The Company believes that the Affiliated Site network provides a research
model that is adaptable to markets outside the United States. In response to the
growing demand for research site capacity in foreign countries, the Company
intends to expand the number of its Affiliated Sites in Canada and the United
Kingdom and enter other selected European markets.

Development of On-Site, Electronic Data Collection and Management System.
Through a proposed technology development alliance with ISSC, a wholly-owned
subsidiary of IBM, the Company plans to develop a network-wide on-site,
electronic data collection and management system to enable it to improve the
process of collecting clinical research and health care data. Currently, most
clinical research data is gathered through physical monitoring visits to each
individual research site. During these visits, each case report form ("CRF") is
reviewed by the Sponsor or its representative. Monitoring visits may last
several days, and numerous corrections to CRFs are frequently required before
they are acceptable to the Sponsor. Since these visits are made only
periodically, several weeks or even

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<PAGE> 26

months of data must be reviewed during each monitoring visit. This results in a
significant delay between the time of patient-investigator interaction and the
time that data is transferred into the Sponsor's database. Delays in data
transfer not only lengthen the trial, but can also raise significant quality
control issues, since errors may not be detected until long after the
interaction between the patient and the investigator.

Sponsors of clinical research typically work intermittently with different
research sites on each project and need to train different sites each time a new
clinical trial is initiated. The Company typically works with its Affiliated
Sites on a regular basis, and believes that this will enable Affiliated Site
personnel to develop a familiarity with the electronic system over a period of
time. In addition, proprietary systems developed by each Sponsor could result in
research personnel needing to be trained in multiple systems. Space constraints
at research sites also make it difficult for the research site to house multiple
Sponsor systems.

The Company believes that implementation of an effective on-site system
will provide important benefits to Sponsors. For example, because an on-site
data collection system will substantially increase the speed with which data is
provided to Sponsors, it will permit corrections to erroneous information to be
made much more quickly, thus improving quality control. Increasing the accuracy
and timeliness of data collection and correction could enhance the time
efficiency of clinical research and enable Sponsors to bring drugs to market
faster. The Company believes that this approach to on-site data collection could
provide a competitive advantage in the market place.

Expansion of Clinical Research Services. The Company believes that
expanding its range of clinical research services presents significant growth
opportunities, and becoming a fully integrated provider of clinical research
services is one component of its business strategy. The Company has expanded its
range of clinical research services to include the performance of clinical
research, protocol design, clinical reference laboratory services, IRB services
and regulatory affairs services. The Company believes that its ability to
provide protocol design services and conduct Phase I clinical research will
provide it with access to Sponsors at an earlier stage in the clinical trial
process and enable it to increase the number of clinical trials in which it
participates. The Company also believes that earlier access to Sponsors of
clinical research will provide opportunities for the Company to market
regulatory affairs services to Sponsors.

Acquisition Initiative. Selective acquisitions of research organizations
are anticipated to play an important role in the Company's efforts to become an
integrated provider of research services. The Company recently completed its
first acquisition, and intends to seek potential acquisition candidates that,
like GFI, enhance the Company's ability to perform clinical research or provide
additional services. The Company's acquisition strategy is based on acquiring
controlling interests in research entities that have an established reputation
and on-going business in the performance and management of clinical trials.

Development of Health Care Information Services Capabilities. The Company
believes that its network of Affiliated Sites provides it with the ability to
access pharmacoeconomic, outcomes assessment and disease management data in a
cost-effective manner. Each Affiliated Site can access investigators and their
patients to collect this information on a fee for service basis without any need
for additional infrastructure. In order to capitalize on this capability, the
Company has formed HRI, an entity that it owns equally with PMSI. Through HRI,
the Company and PMSI market their health care data collection and analysis
capabilities to the health care industry. HRI will offer custom studies,
designed and owned by the Sponsors who will pay HRI for its data collection and
reporting. HRI also offers protocols and collection tools of its own design, in
order to develop a syndicated database that it anticipates marketing to the
pharmaceutical industry, insurers and the federal government. The Company is
HRI's exclusive subcontractor for the collection of this data and PMSI is its
non-exclusive subcontractor for data analysis and study design.

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<PAGE> 27

Each of the various strategic initiatives undertaken by the Company
summarized above involves significant risks. In particular, the success of each
initiative depends in large part on certain assumptions made by the Company's
management concerning trends in the clinical research market and the
pharmaceutical industry. There can be no assurance that any of these strategic
initiatives will be successful or even that the Company's efforts to pursue
these initiatives will not have a material adverse effect on its results of
operations or financial condition. Moreover, there can be no assurance that the
Company will be successful in its expansion and development initiatives. See
"Risk Factors -- Unproven Business Strategies; Early Developmental Stage,"
"-- Risk of Acquisitions" and "-- Effect of Expansion Strategy on the Company's
Core Business."

THE AFFILIATED SITE NETWORK

Since commencing operations in 1991, the Company has developed a network of
more than 400 Affiliated Sites and today provides Sponsors with rapid access to
over 3,000 principal investigators in a wide variety of therapeutic areas.
Affiliated Sites range from group practices with individual investigators to
integrated health care delivery systems with hundreds of investigators, and
include academic medical centers, community hospitals, outpatient treatment
centers, research centers, managed care organizations and physician practice
groups. Regardless of its size, each member of the network is considered a
single "Affiliated Site." The Company's Affiliated Site network provides
Sponsors with access to over 235 group and private practices, 73 community
hospitals, 47 research centers, 36 academic medical centers and 10 group and
staff model managed care organizations. Additionally, the network's principal
investigator population includes investigators experienced in infectious disease
and HIV/AIDS, orthopedics, cardiology, hematology/oncology and many other
medical specialties. Each Affiliated Site is a party to an Affiliation Agreement
with the Company, under the terms of which each Affiliated Site agrees not to
pursue any opportunities for clinical research initially presented by the
Company directly with the Sponsor of such clinical research program, and also
agrees not to affiliate with another research network during the period of its
affiliation with the Company and for a specified period thereafter. Members of
the Affiliated Site network remain free to solicit and accept clinical research
opportunities presented to them from sources other than the Company. At the
request of Sponsors, the Company will also use research sites outside of its
Affiliated Site network. Sponsors may request that the Company use research
sites outside the Affiliated Site network in the case of large, multi-site
trials or in order to include in the trial investigators of national standing in
a particular therapeutic area or those with whom the Sponsor has worked in the
past.

At each Affiliated Site, the Company identifies a single contact person
("Clinical Liaison") through whom all communications regarding investigational
opportunities are channeled. The Clinical Liaison facilitates the site selection
process by increasing responsiveness to investigational opportunities and
facilitates the timely completion of the IRB approval process for new research
projects. In selecting a Clinical Liaison, the Company seeks to identify an
employee of the Affiliated Site who understands the institution's decision
making processes and is aware of the relative strengths and weaknesses of the
institution's research program. Because the Clinical Liaison must have a working
knowledge of the clinical research process, professionals currently serving in
the Clinical Liaison role include nurses, physicians and pharmacists.

The Company regularly updates its demographic database on each Affiliated
Site including collecting information concerning areas of therapeutic
specialization, research capabilities, prices for various medical services and
demographic information concerning patient disease profiles. Information
generated during this process is kept on-line at the Company's headquarters for
use by the Company's operations and sales and marketing personnel in discussing
clinical research opportunities with potential Sponsors. In addition, this
database is updated each time the Company receives responses from its Affiliated
Sites to a clinical research opportunity.

In seeking additions to its network of Affiliated Sites, the Company
targets research sites with expertise in therapeutic areas corresponding to
Sponsors' drug development programs. The Company

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<PAGE> 28

reviews information concerning compounds undergoing pre-clinical development and
testing and other publicly available information concerning pharmaceutical
research and development activities.

The Company also targets research sites in a wide variety of health care
delivery settings. In 1994, the Company began an initiative to increase the
participation of managed care organizations in the network. Historically,
managed care organizations have not been significant participants in the
clinical research process. The Company believes that this is the result of
several factors, including the widespread absence of research staffs and a
reluctance on the part of these health care providers to enter into business
relationships directly with pharmaceutical manufacturers. The Company believes
that this reluctance reflects managed care organizations' concern that
involvement in research funded by pharmaceutical manufacturers will result in
pressure to include the compound under study in their formularies subsequent to
its approval. However, as managed care continues to grow as a force in the
health care industry, pharmaceutical manufacturers will increasingly need access
to managed care organizations in order to conduct clinical trials. Since the
Company began this initiative, 10 group and staff model managed care
organizations with approximately four million covered lives have joined its
network of Affiliated Sites.

SERVICES

The Company's core business is the provision of site selection and
management services for clinical trial programs. The Company also performs
clinical research and provides clinical reference laboratory and IRB services.
It has performed services in many therapeutic areas. The Company assists
Sponsors in the identification and recruitment of investigators, initiation of
sites, collection and interpretation of data and trial results and report
preparation. Trials for which the Company has provided site selection and trial
management services range in size from single site trials involving fewer than
ten patients to a 300 site trial involving 3,000 patients. As of March 31, 1996,
the Company was managing 126 clinical trials involving approximately 390
research sites (including 158 Affiliated Sites).

Site Selection Services. The Company's site selection services consist of
the identification and recruitment of research sites and investigators to
participate in a clinical trial on behalf of a Sponsor. Certain site selection
services, such as the preparation of a survey abstract to determine the
potential interest of research sites in a particular trial, may be utilized by
Sponsors prior to their determination to initiate a clinical trial. Typically,
Sponsors and CROs recruit investigators and research sites for each new trial
through mass mailings or individual telephone calls and solicit information from
each proposed research site regarding patient volumes and research costs. That
process is repeated with different investigators and research sites for each new
trial and may take several weeks or even months to complete. In contrast, the
Company rapidly identifies interested research sites and investigators by
accessing its network of Affiliated Sites. When the Company is contacted about a
specific study, an informational abstract concerning the study is promptly sent
to each Affiliated Site's Clinical Liaison. Each Affiliated Site has one week in
which to indicate its interest in participating in the trial. The Company
consolidates and prioritizes the Affiliated Site and investigator information
and submits that information to the Sponsor for evaluation. At the Sponsor's
request, the Company will also draw on its database to provide patient volume,
cost or demographic information concerning each interested Affiliated Site. As a
result of the Company's on-going relationship with its Affiliated Sites and
experience in contracting with them on prior projects, it is also able to
present the Sponsor with a budget proposal for the trial at the time that
interested Affiliated Sites are identified.

Clinical Trial Management Services. The Company provides a variety of
clinical trial management services, including pre-study and research site
activation services, patient tracking services, data management services and
project management. These include investigator meetings, coordination of the IRB
approval process and other procedures that must be performed prior to enrollment
of patients in a study, assistance in patient enrollment, on-going data
collection services and adverse events reporting services. Each of the Company's
Affiliated Sites provides it with timely information concerning patient
enrollment, the status of each individual patient and the progression of the
study. This

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<PAGE> 29

information is assimilated by the Company and provided to Sponsors. In a typical
research project, this information is gathered through monitoring visits or
telephone calls to each individual research site. By standardizing this
information, the Company makes the gathering of data more efficient and
cost-effective.

Clinical Research Facilities. The Company performs research directly and
provides certain other clinical research services to its customers. Through its
GFI subsidiary, the Company operates three research sites for conducting Phase
II through Phase IV research (one facility also includes a 100-bed Phase I
clinical research unit), a clinical reference laboratory and owns an independent
IRB. Phase I clinical research is substantially more specialized and limited
than other phases of the research process because hospital or clinic beds must
be available for extended stays in a sequestered environment. The GFI facility
provides the Company with the ability to substantially increase its historical
participation in Phase I research. GFI also provides the Company with the
capability to provide centralized analytical laboratory services, customized
laboratory report design, specimen archival and management on behalf of a study
Sponsor and IRB services in connection with clinical trials. The Company's GFI
subsidiary has conducted 316 clinical trials, 135 of which were Phase I clinical
trials, and has enrolled over 13,500 patients (including 36 clinical trials that
were ongoing at GFI at the time of its acquisition by the Company).

Drug Development and Consulting Services. As part of its continuing effort
to expand the services that it provides, the Company has assembled a group of
prominent, independent physicians and scientists in a wide variety of
therapeutic specialties to assist Sponsors in developing clinical research
programs. These physicians and scientists provide the Company with an
opportunity to place a portion of the studies for which they provide protocol
design services at Affiliated Sites. The Company believes that its ability to
provide Phase I services will enable it to become involved with Sponsors earlier
in the research process and will be of significant assistance in its efforts to
market its protocol development services. The Company also believes that the
earlier access to Sponsors of clinical research provided by GFI's Phase I
capabilities provides opportunities to expand the Company's services. In order
to capitalize on this opportunity, the Company has added personnel with clinical
development capabilities, including data management/statistics and regulatory
affairs. Regulatory affairs services include regulatory strategy design,
document preparation, consultation and liaison with various regulatory agencies,
including the FDA.

CUSTOMERS AND MARKETING

The Company has provided its services to many of the leading pharmaceutical
companies, biotechnology companies and CROs. The Company's business development
strategy focuses on marketing the capabilities of its core Affiliated Site
network combined with efforts to develop and market additional services often
required by Sponsors. The Company believes that its key strength and major
differentiating factor is its ability to provide rapid access to highly
qualified clinical investigators across various therapeutic-disease areas in
multiple health care delivery settings.

The Company's business development staff consists of five people located in
the Philadelphia metropolitan area and New England. All of the Company's
business development staff have scientific or medical backgrounds. The Company
employs a variety of promotional activities including journal advertisements,
direct mail and participation at scientific and medical meetings to promote its
services to the pharmaceutical industry.

During each of the three years in the period ended December 31, 1995 and
the three months ended March 31, 1996, sales to companies in the pharmaceutical
industry accounted for more than 78% of the Company's revenue. During 1994, 1995
and the three months ended March 31, 1996, sales to two units of Merck & Co.,
Inc. accounted for approximately 23%, 76% and 47%, respectively, of the
Company's revenue. On a pro forma basis, after giving effect to the GFI
acquisition, sales to this customer would have represented 49% of the Company's
revenue during 1995 and 43% during the three months ended March 31, 1996. Other
customers in the pharmaceutical industry have from time to time accounted for

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<PAGE> 30

more than 10% of the Company's annual revenue, with sales to two additional
pharmaceutical industry customers each accounting for more than 10% of revenue
during 1994 and sales to four pharmaceutical industry customers each accounting
for more than 10% of revenue during 1993. Sales to Merck & Co., Inc. and one
additional pharmaceutical industry customer accounted for more than 10% of
revenue for the three months ended March 31, 1996. The extent to which the
Company relies on sales to one customer varies from period to period, depending
upon, among other things, its ability to generate new business from new and
existing customers, the timing and size of clinical trials and other factors. As
a result of increasing consolidation in the pharmaceutical industry and the
relatively small number of major participants in the biotechnology industry, it
is not unusual for CROs and others involved in the placement and administration
of clinical trials to derive more than 10% of their revenue from a single
customer. However, in light of the Company's small revenue base, it is more
dependent on major customers than many of the larger participants in the
clinical research industry. The Company's operations could be materially and
adversely affected by, among other things, any economic downturn in the
pharmaceutical or biotechnology industries, any decrease in their research and
development expenditures or a change in the regulatory environment in which
these companies operate.

CONTRACTING AND BACKLOG

The Company's contracts provide a fixed price for each component, or
service, which depends on such things as the number of research sites selected,
patients enrolled and other services required by the Sponsor. Generally, the
Company's contracts range in duration from several months to several years.
Revenue is earned over the life of the contract as various services are
performed under the percentage of completion method utilizing units of delivery.
All costs associated with contract revenue are recognized as incurred. Contracts
require a portion of the fee to be paid at the time the trial is initiated, with
the balance payable over the life of the contract when pre-determined payment
milestones are satisfied. The Company does not bear the risk of cost overruns.

The Company's contracts generally may be terminated by the Sponsor with or
without cause. In the event of termination, the Company is entitled to payment
for all sums owed for work performed through the date of notice of termination
and all costs associated with termination of the study. Clinical trials may be
terminated for several reasons, including unexpected results or adverse patient
reactions to the drug, inadequate patient enrollment or investigator
recruitment, manufacturing problems resulting in shortages of the drug or
decisions by the Sponsor to deemphasize or terminate a particular trial or
development efforts on a particular drug. Depending on the size of the trial in
question, a Sponsor's decision to terminate a trial in which the Company
participates could have a materially adverse effect on the Company's backlog,
future revenue and profitability.

Backlog consists of anticipated revenue from letters of intent and signed
contracts that have not been completed. Once work under a letter of intent or
contract commences, revenue is recognized over the life of the contract. In
certain cases, the Company will work on a project prior to finalizing a letter
of intent or contract. Backlog excludes anticipated revenue for projects for
which the Company has commenced work but for which a definitive letter of intent
or contract has not been executed.

The Company believes that its backlog as of any date is not necessarily a
meaningful predictor of future results. Contracts included in backlog are
subject to termination or delay at any time, as a result of a number of factors.
There can be no assurance that the Company will be able to realize revenue
included in backlog or as to the amount of backlog orders that may be filled
within the current fiscal year. Delayed contracts remain in the Company's
backlog pending determination of whether to continue, modify or cancel the
contract. As of December 31, 1994 and 1995, the Company's backlog was $14.3
million and $21.8 million, respectively. On a pro forma basis, after giving
effect to the acquisition of GFI, the Company's backlog on December 31, 1995
would have been $24.0 million. As of March 31, 1995 and 1996, the Company's
backlog was $14.0 million and $21.8 million, respectively.

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<PAGE> 31

COMPETITION

The clinical research industry is highly fragmented and comprised of
several large, full-service CROs and many small, limited service providers. The
major competitors in the industry include the research departments of
pharmaceutical companies, CROs and other research sites. The Company competes in
this market on the basis of its ability to provide rapid access to high-quality
clinical investigators within its network of Affiliated Sites in a
time-efficient manner and to provide its customers with a high level of service
throughout the trial process. Many of the Company's competitors have
substantially greater financial and other resources than the Company, and there
can be no assurance of the Company's ability to continue to compete effectively
with these larger competitors. The Company believes that its network of
Affiliated Sites provides it with a significant competitive advantage in
obtaining new business from Sponsors of clinical trials. To the extent the
Company's approach to the selection and conduct of clinical trials continues to
gain acceptance in the market, there can be no assurance that these larger
competitors will not develop their own networks of research sites, nor as to the
effect of such competing networks on the Company's operations. The Company may
also face competition from other networks of research sites in the recruitment
of potential Affiliated Sites.

As the Company continues to expand the range of its clinical research
services, it will compete more directly with the core services provided by CROs.
Many of these CROs are substantially larger and have more resources than the
Company. There can be no assurance that the Company will be able to compete
effectively with these larger companies in providing clinical research services.

REGULATORY MATTERS

Government Regulation. The clinical investigation of new pharmaceutical and
biotechnology products is highly regulated. The purpose of these regulations is
to assure that only those products proven to be safe and effective are made
available to the public. The FDA has promulgated regulations and guidelines
pertaining to applications to initiate trials of new compounds, approval and
conduct of studies, report and record retention, informed consent, applications
for approval of new compounds and post-marketing requirements. Under FDA
regulations, companies providing clinical research services that assume the
obligations of a drug Sponsor are required to comply with applicable FDA
regulations and are subject to regulatory action for failure to comply with such
regulations. The historical trend has been toward increased regulation by the
FDA; however, recent initiatives have been undertaken by the FDA to streamline
the agency's internal review processes.

The services provided by the Company are ultimately subject to FDA
regulation and, to the extent that the Company expands its services outside the
United States, appropriate regulatory authorities in other countries. The level
of regulation in other countries is generally less comprehensive than that
present in the United States. Depending on the nature of services that it
provides with respect to a particular research trial, the Company may be
required to comply with FDA regulations governing such activities as selecting
investigators, obtaining documentation from investigators, verifying that
patient informed consent is obtained, monitoring the validity and accuracy of
data, verifying drug accountability and instructing investigators to maintain
records and reports. The Company must also maintain records for each study for
specified periods for inspection by the study Sponsor and the FDA. If FDA audits
indicate that the Company has failed to adequately comply with federal
regulations and guidelines, it could have a material adverse effect on the
Company. In addition, the failure of the Company to comply with applicable
regulations could result in termination of on-going research or the
disqualification of data, either of which could also have a material adverse
effect on the Company's results of operations, financial condition and
reputation.

The Drug Development and Approval Process. All drugs proposed to be
marketed in the United States must undergo an extensive development and approval
process. Pre-clinical testing is the first stage in this process. During the
pre-clinical stage, a new compound is tested in vitro and in animals over a one
to three year period in order to obtain information concerning the basic
biological activity and safety of

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<PAGE> 32

the drug. If the results of pre-clinical studies are satisfactory, the Sponsor
files an Investigational New Drug Application ("IND") with the FDA before
beginning human testing. In order to receive IND status, the Sponsor must
provide the FDA with manufacturing data, preclinical test results, information
concerning the uses of the drug in other countries or in the United States for
other purposes and a plan for conducting clinical trials. The design of each
clinical trial, or its "protocol," is an essential component of the drug
development effort. Each protocol must correctly anticipate the nature of the
data and results that the FDA will require before approving the drug.

In the absence of any comments from the FDA on the IND, a Sponsor may begin
clinical trials on human subjects 30 days after the IND is filed. Clinical
trials often represent the most expensive and time consuming part of the drug
development process. The trial process usually starts on a small scale with
trials intended to assess safety, and then expands to larger trials in order to
test a compound's efficacy. There are four phases of clinical testing, with
multiple trials generally conducted within each phase.

Phase I testing typically consists of specialized studies designed to
acquire safety and dosing information on a new compound. In these studies,
the drug is tested on approximately 20 to 80 individuals and data is
gathered concerning toxicity, absorption, metabolism and other
pharmacological actions. Each individual study lasts from a period of days
to several weeks, and the phase itself typically lasts from six months to
one year.

Phase II testing typically consists of studies in approximately 100 to
200 patients who suffer from the targeted disease or condition. Phase II
trials focus on obtaining information on the drug's effectiveness and
dose-response relationship. Because these trials gather early evidence of a
compound's efficacy, their results are often pivotal to a Sponsor's
decision concerning whether to proceed to larger trials. These trials
typically last one to two years.

Phase III testing typically consists of large, multicenter trials
involving hundreds to thousands of patients. Phase III trials are intended
to collect efficacy and safety information on a large scale. The collection
of such data is most critical in Phase III, because the data developed
during these trials will have a significant influence on the labeling
aspects of the new drug. At least one Phase III trial performed within the
United States is required of any compound before it will be approved by the
FDA. These trials typically last two to three years.

Phase IV studies are frequently required by the FDA as a condition to
granting marketing approval. The FDA will often require Sponsors, after a
drug is approved for marketing, to conduct additional clinical trials to
monitor long-term risks and benefits, alternative dosage levels or evaluate
safety and efficacy in targeted patient populations. These studies are
usually less data intensive than those conducted in other phases of
clinical research, but may involve hundreds to thousands of patients and
can last for several years.

After a new compound has successfully completed the first three phases of
the clinical trial process, an NDA is submitted to the FDA. The NDA is a
comprehensive filing that includes the results of all pre-clinical and clinical
studies, with the majority of its clinical data derived from Phase II and Phase
III trials. In addition, the NDA contains information about the drug's
composition and the Sponsor's plans for producing, packaging and labeling the
product. The FDA's review process for an NDA can take anywhere from a few
months, for drugs related to life threatening conditions, to many years, with
the average review lasting more than two and one-half years. Drugs that
successfully complete this review may be marketed in the United States, subject
to such conditions as the FDA may specify. As a result of increasing public
pressure to allow new drugs to reach the market more quickly, the FDA has
increased its reliance on Phase IV studies. In some instances, the FDA has
granted conditional approval to potentially lifesaving drugs or those for
previously untreatable conditions in order to permit marketing while Phase IV
studies are conducted.

The pre-clinical and clinical testing and approval processes for
biotechnology products are substantially similar to those applicable to drugs,
except that the results of clinical trials are submitted in

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<PAGE> 33

the form of a Product License Application rather than an NDA. In many cases,
medical device products are also subject to extensive pre-clinical and clinical
testing requirements.

POTENTIAL LIABILITY AND INSURANCE

Clinical trials involve the testing of approved and non-approved drugs on
human beings. This testing carries with it a significant risk of liability for
personal injury or death to participants resulting from an adverse reaction to,
or improper administration of, the trial drug. Many of these participants are
seriously ill and are at great risk of further illness or death as a result of
factors other than their participation in the trial. The Company participates
with Sponsors in the site selection process, and contracts on behalf of its
customers with physicians who render professional services, including
administering the drugs being tested, to participants in these trials. Company
personnel also render professional services to participants in trials.
Consequently, the Company may be subject to claims in the event of personal
injury or death of persons participating in clinical trials and arising from
professional malpractice of physicians with whom it has contracted and its own
employees. To date, the Company has not received any claims resulting from
either the testing of new drugs or professional malpractice.

The acquisition of GFI has significantly increased the Company's
involvement in the clinical research process. Although the Company's employees
have been involved from time to time in the treatment of patients in clinical
trials, the Company's role in the clinical trial process prior to the GFI
acquisition consisted primarily of contracting with physicians who rendered
professional services to trial participants. With the GFI acquisition, the
Company's involvement in the patient treatment process is much more significant
than in the past. Accordingly, the Company's risk of liability for malpractice
has increased.

The Company believes that risk of liability associated with clinical trials
is mitigated by various regulatory requirements, including the role of
institutional review boards and the need to obtain informed consent. The FDA
requires each human clinical trial to be reviewed and approved by the IRB at
each research site. An IRB is an independent committee that includes medical and
non-medical personnel and is obligated to protect the interests of patients
enrolled in the trial. After the trial begins, the IRB monitors the protocol and
the measures designed to protect patients, such as the requirement to obtain
informed consent. In addition, regulations governing the conduct of clinical
trials and the protection of human subjects place responsibility for proper
study conduct and subject protection directly on the principal investigator at
each location where a study is performed. Through its acquisition of GFI, the
Company has assumed the duties and liabilities of a principal investigator. All
principal investigators performing studies for GFI are required to carry their
own malpractice insurance.

In order to reduce its exposure to liability, the Company generally obtains
indemnification from its clients and, in some cases, from investigators and
Affiliated Sites contracted by the Company on behalf of its clients. The
Company's agreements with its Affiliated Sites obligate it to pursue contracts
solely with Sponsors that provide indemnification for adverse outcomes which may
occur in an enrolled subject and that allow such indemnification rights to pass
through to the Affiliated Sites and investigators. These indemnity rights do not
protect the Company against certain of its own actions, such as those involving
negligence or misconduct. Furthermore, these indemnities are contractual
arrangements that are subject to negotiation with individual Sponsors, and the
terms and scope of such indemnities vary from Sponsor to Sponsor and from trial
to trial. In order for such indemnification to be valid, the Company and its
employees and agents must act within the bounds of specific procedural
requirements governing the conduct of the clinical trial. Since the value of the
Company's indemnification depends on the financial viability of the indemnifying
party, there can be no assurance that the Company will be able to rely on such
indemnification in each instance of potential liability. The financial position
of the Company could be materially adversely affected if the Company was forced
to undertake the defense of, or found financially responsible for, claims based
upon the foregoing or related risks.

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<PAGE> 34

The Company currently maintains an errors and omissions professional
liability insurance policy in amounts it believes to be sufficient. However,
there can be no assurance that this coverage will be adequate, or that insurance
coverage will continue to be available to the Company.

PATENTS AND TRADEMARKS

The Company has registered a service mark incorporating the Collaborative
Clinical Research logo and is in the process of registering the "DataTRAK"
trademark. Through its GFI subsidiary, the Company has two registered
servicemarks. The Company does not own any patents. The Company believes that
its ability to attract and retain highly-skilled employees and manage the growth
of its business are more important to its performance than any intellectual
property rights that it has developed to date. However, it is possible that
software and other intellectual property developed during the course of the
Company's joint venture with PMSI and its proposed technology development
alliance with ISSC, a wholly-owned subsidiary of IBM, may become important to
its business in the future.

EMPLOYEES

As of March 31, 1996, the Company had 216 full-time employees, of whom
eight had executive or managerial responsibilities. None of the Company's
employees are represented by a union. The Company considers relations with its
employees to be good.

The Company's growth continues to place significant demands on its
management resources. The success of the Company's business is substantially
dependent on the services of its senior management team, and the services of Dr.
Jeffrey A. Green in particular. The Company has employment agreements with Dr.
Green and all but one of its executive officers; however, the loss of Dr.
Green's services or the services of its other executive officers could have a
material adverse effect on the Company. To address these risks, the Company
must, among other things, continue to attract, retain and motivate qualified
personnel. While the Company has not experienced significant problems in
attracting or retaining qualified personnel, there can be no assurance that the
Company will be successful in addressing such risks.

PROPERTIES

The Company presently maintains its executive offices in approximately
6,000 square feet of space in Cleveland, Ohio pursuant to a sublease with an
unaffiliated third party. The sublease expires in November 1998. The Company
leases approximately 2,700 square feet of office space in Mt. Laurel, New
Jersey, which houses both its business development staff and the executive
offices of HRI. The Company also leases approximately 1,500 square feet of
office space in Gaithersburg, Maryland for its regulatory affairs and data
management operations. The Company's GFI subsidiary leases approximately 32,000
square feet of office and medical space in Evansville, Indiana. This facility
houses GFI's executive offices and a 100-bed in-patient Phase I research
facility. GFI also leases approximately 900 square feet of medical space in
Milwaukee, Wisconsin, which is used to conduct clinical trials on an out-patient
basis. With the exception of its GFI subsidiary's facilities, the Company
considers its facilities to be sufficient for its current and anticipated
operations. The Company may have to lease additional space to accommodate the
Company's plans to expand GFI's operations and services.

LEGAL PROCEEDINGS

From time to time, the Company is a party to various lawsuits arising in
the ordinary course of business. The Company does not believe that the outcome
of such litigation will have a material adverse effect on its results of
operations or financial condition.

On December 5, 1995, a former employee of the Company filed a charge
against the Company with the Ohio Civil Rights Commission (the "OCRC") alleging
that the employee's employment was terminated due to age. On March 13, 1996, the
Company filed a statement of position denying the

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allegations in the charge. The OCRC is in the process of investigating this
matter. The Company believes that the charge is without merit and does not
believe that this matter will have a material adverse effect on the Company's
business, results of operations or financial condition.

In January 1996, a charge was filed with the OCRC alleging that the Company
had failed to hire a job applicant on the basis of race. The Company believes
that the charge was without merit, and on April 18, 1996, the OCRC advised the
Company that the applicant's charge had been voluntarily withdrawn. The
applicant has the right to file a private civil action against the Company with
respect to this matter. To date, no such action has been filed.

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<PAGE> 36

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning directors and
executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- ---- ------------------------------------------------------
<S> <C> <C>
Dr. Jeffrey A. Green............. 40 President, Chief Executive Officer and Director
Debra S. Adamson................. 43 Vice President
Terry C. Black................... 38 Vice President of Finance, Chief Financial Officer,
Treasurer and Assistant Secretary
Dr. Richard J. Kasmer............ 38 Vice President of Clinical Operations and Secretary
Dr. Steven E. Linberg............ 45 Vice President for Clinical Program Development
Nathan F. Messinger.............. 41 Vice President of Business Development
Dr. William H. Stigelman, Jr..... 51 Vice President of Affiliated Site Relations
Dr. Mary L. Westrick............. 40 Vice President
Timothy G. Biro (1).............. 42 Director
Seth B. Harris (1)............... 56 Director
Alan Mendelson (2)............... 48 Director
Dr. Robert M. Stote (1).......... 56 Director
James A. Terwoord (2)............ 49 Director
Dr. Alan G. Walton (2)........... 60 Director
<FN>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.

</TABLE>

JEFFREY A. GREEN, PHARM.D., FCP, is the Company's founder and has served as
its President and Chief Executive Officer since March 1992. From 1984 to 1992,
Dr. Green served as an Assistant Professor of Medicine and Radiology at Case
Western Reserve University, Cleveland, Ohio. During his tenure at Case Western
Reserve University, Dr. Green established and directed the Cardiovascular
Clinical Pharmacology Research Program at University Hospitals of Cleveland. In
addition, Dr. Green was an established investigator in clinical cardiology and
PET scanning, and was responsible for directing over 90 individual
investigations during his tenure. Dr. Green has authored over 90 publications
and has been an invited speaker at more than 125 national meetings. He was the
recipient of the McKeen Cattell Distinguished Achievement Award from the
American College of Clinical Pharmacology in 1988.

DEBRA S. ADAMSON, M.S., is a founder of GFI and has served as GFI's
Executive Director, Clinical Services since 1987. Ms. Adamson is responsible for
directing clinical operations, which includes marketing, development of the
Women's Health Care Center and daily research activities. Ms. Adamson is also a
co-founder of the Ohio Valley IRB. Previously, Ms. Adamson served as Senior
Scientist of United States Pharmaceutical Group Clinical Studies at
Bristol-Myers Squibb where she was responsible for overall trial design and
implementation for central nervous system compounds.

TERRY C. BLACK has served as the Company's Vice President of Finance and
Chief Financial Officer since June 1994 and has served as the Treasurer and
Assistant Secretary since January 1996. Prior to joining the Company, Mr. Black
served as Acting Chief Financial Officer and Analyst for Action Auto Rental,
Inc., a Cleveland, Ohio based insurance replacement automobile rental company,
from March 1992 to October 1992 and as its Chief Financial Officer from October
1992 to January 1994. Before joining Action Auto Rental, Mr. Black served in a
variety of financial and accounting positions within

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<PAGE> 37

the insurance replacement rental car industry, including Treasurer and
co-founder of Network Car Rental, Inc. and Treasurer and Controller of Agency
Rent-A-Car. In 1993, Action Auto Rental filed for protection from its creditors
under Chapter 11 of the United States Bankruptcy Code and was subsequently
liquidated.

RICHARD J. KASMER, PHARM.D., J.D., has served as the Company's Vice
President of Clinical Operations and Secretary since 1992. Dr. Kasmer is
responsible for the management of all aspects of interventional and
noninterventional clinical trials. In addition, Dr. Kasmer is actively involved
in operational systems development, trial budgetary issues, contractual
management and the integration of acquisitions or joint ventures into the
Company's operations. Prior to joining the Company, Dr. Kasmer was employed by
the VA Medical Center in Cleveland, Ohio for eight years and is an established
investigator with over 15 years of experience in Phase I through Phase IV trials
and has participated in over 80 individual investigations.

STEVEN E. LINBERG, PH.D., has served as the Company's Vice President for
Clinical Program Development since December 1995. Dr. Linberg is responsible for
the strategic planning of drug and biologics development programs and
applications for the introduction of investigational agents into humans. Dr.
Linberg is also responsible for the filing of marketing applications with the
U.S. Food and Drug Administration and the defense of such applications. In
connection with these responsibilities, Dr. Linberg oversees the Company's
internal divisions of Clinical Research, Regulatory Affairs and Data
Management/Information Systems and Statistics. From 1992 to 1995, Dr. Linberg
was the founder and President of Linberg Research, Inc. In 1992, Dr. Linberg was
the Director of Clinical Research with Univax Biologics, Inc., and from 1986 to
1992, was the Associate Director of Clinical Research for Boehringer Mannheim
Pharmaceuticals.

NATHAN F. MESSINGER has served as the Company's Vice President of Business
Development since August 1993. Mr. Messinger is responsible for strategic and
business development as well as marketing and sales programs. In addition, Mr.
Messinger is responsible for the ongoing development of strategic alliances and
joint ventures within the pharmaceutical, biotechnology and health-economics
industries. From 1992 to 1993, Mr. Messinger served as Director, Business
Development for the Caremark Division of Baxter Healthcare Corporation and has
held senior marketing, strategic planning and general management positions with
companies such as New Brunswick Scientific Company, The Langer Biomechanics
Group and Dynatech Laboratories, Inc.

WILLIAM H. STIGELMAN, JR., M.S., PHARM.D., has served as the Company's Vice
President of Affiliated Site Relations since December 1992. Dr. Stigelman is
responsible for worldwide Affiliated Site development, and the development and
implementation of standard operating procedures and quality control procedures
for the Affiliated Site network. Prior to joining the Company, Dr. Stigelman
served in a variety of positions during his 23-year career in the United States
Air Force. Dr. Stigelman served as director of pharmacy at three Air Force
medical centers and as a director of a clinical research facility. As Chief of
Clinical Investigations at the Air Force Surgeon General's Office, Dr. Stigelman
directed an Air Force wide research program involving more than 1,000 protocols
and annual budgets exceeding $8.0 million.

MARY L. WESTRICK, PH.D., is a founder of GFI and has served as GFI's
Executive Director, Administrative Services since 1987. Dr. Westrick is
responsible for administrative operations, including contract negotiations,
financial functions, analytical laboratory services and quality assurance. Dr.
Westrick is also a co-founder of the Ohio Valley IRB. Previously, Dr. Westrick
held the position of Research Scientist in the Department of Metabolism and
Pharmacokinetics at Bristol-Myers Squibb. In that capacity, she was responsible
for pre-clinical research and trial design and implementation of Phase I studies
and Phase II and Phase III clinical support for central nervous system
compounds.

TIMOTHY G. BIRO has served as a Director of the Company since 1992. Mr.
Biro is a general partner of Brantley Venture Partners II, L.P. ("Brantley") and
Brantley Venture Partners III, L.P. Prior to joining Brantley Venture Partners
in 1991, Mr. Biro was Superintendent of Pharmaceutical Manufacturing at Merck &
Co., Inc. Mr. Biro has a B.S. Degree in Microbiology from Pennsylvania State
University

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<PAGE> 38

and in Pharmacy from Temple University and an MBA from The Wharton School of
Business at the University of Pennsylvania. He is a Director of OXIS
International, Inc., a developer of pharmaceuticals to treat diseases of
oxidative stress, as well as several privately held companies.

SETH B. HARRIS has served as a Director of the Company since 1992. Since
1993, Mr. Harris has been the Chairman of Freider the Source, a distributor of
consumer products. Mr. Harris is the Retired Chairman of the Board and President
of Harris Wholesale, Inc., a wholesale pharmaceutical distribution company. He
is a Director of Bindley Western Industries, Inc., one of the largest
distributors of pharmaceuticals in the United States.

ALAN MENDELSON has served as a Director of the Company since 1994. Mr.
Mendelson is a founding general partner of Axiom Venture Partners ("Axiom"), a
$57.0 million Hartford-based fund which specializes in medical/health care and
communications companies and which was formed in 1994. Prior to founding Axiom,
Mr. Mendelson had a 24-year career at Aetna Life & Casualty in Hartford where,
for the last ten years, he was responsible for building its $135.0 million
venture portfolio. Mr. Mendelson also presently serves on the Board of Virus
Research Institute and is also on the Advisory Boards of Connecticut Seed
Ventures, Battery Ventures and Syncom II, venture funds with almost $200.0
million under management. Mr. Mendelson is a Phi Beta Kappa graduate of Trinity
College (Hartford) and has a law degree from the University of Connecticut.

ROBERT M. STOTE, M.D., has served as a Director of the Company since 1993.
Dr. Stote has served as the Senior Vice President and Chief Science Officer and
a Director of Bentley Pharmaceuticals, Inc., a pharmaceutical company, since
1992. Prior to that time, Dr. Stote was employed for 20 years by SmithKline
Beecham Corporation, serving as Senior Vice President and Medical Director,
Worldwide Medical Affairs, from 1989 to 1992 and Vice President - Clinical
Pharmacology - Worldwide from 1987 to 1989. Dr. Stote was Chief of Nephrology at
Presbyterian Medical Center in Philadelphia from 1972 to 1989 and served as
Clinical Professor of Medicine at the University of Pennsylvania.

JAMES A. TERWOORD has served as a Director of the Company since 1992. Mr.
Terwoord has been the President and Chief Executive Officer of Hudson Business
Forms, Inc., a manufacturer of business forms and distributor of computer
supplies, since 1993. Mr. Terwoord served as Executive Vice President and
Treasurer and as a Director of Action Auto Rental, Inc. from 1984 to 1992. In
1993, Action Auto Rental filed for protection from its creditors under Chapter
11 of the United States Bankruptcy Code and was subsequently liquidated.

ALAN G. WALTON, PH.D., has served as a Director of the Company since 1994.
Since 1987, Dr. Walton has served as a General Partner of Oxford Partners III,
Limited Partnership and Oxford Partners III-A, Limited Partnership, the General
Partners of Oxford Venture Fund III, Limited Partnership and Oxford Venture Fund
III-A Limited Partnership. Since 1992, Dr. Walton has been a General Partner of
OBP Management L.P., the General Partner of Oxford Bioscience Partners, L.P. and
Oxford BioScience (Adjunct), L.P. Dr. Walton has also been a General Partner of
OBP Management (Bermuda) Limited Partnership, the General Partner of Oxford
BioScience Partners (Bermuda), Limited Partnership. Prior to joining Oxford, Dr.
Walton was the President of University Genetics, Co., a publicly traded
biotechnology company and, until 1981, was Professor of Macromolecular Science
and Director of the Laboratory for Biological Macromolecules at Case Western
Reserve University. Dr. Walton is the author of numerous publications and serves
as a Director of Human Genome Sciences, Inc.

TERMS OF DIRECTORS

The number of Directors is currently fixed at seven. The Board of Directors
is divided into three classes. The Directors serve staggered terms of three
years, with the members of one class being elected in any year, as follows: (i)
Messrs. Mendelson and Terwoord have been designated as Class I Directors and
will serve until the 1997 annual meeting; (ii) Dr. Walton and Mr. Harris have
been designated as Class II Directors and will serve until the 1998 annual
meeting; and (iii) Mr. Biro, and Drs. Stote and Green have been designated as
Class III Directors and will serve until the 1999 annual meeting.

38
<PAGE> 39

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has two standing committees: a Compensation
Committee and an Audit Committee. The Compensation Committee has the authority
to administer the Company's stock option plans, including the selection of
optionees and the timing of option grants; and review and monitor key employee
compensation and benefits policies and administer the Company's management
compensation plans.

The Audit Committee recommends the annual appointment of the Company's
auditors, with whom the Audit Committee reviews the scope of audit and non-audit
assignments and related fees, the accounting principles used by the Company in
financial reporting, internal financial auditing procedures and the adequacy of
the Company's internal control procedures.

DIRECTOR COMPENSATION

Under the terms of the Company's 1994 Directors' Share Option Plan (the
"1994 Directors' Plan"), members of the Board of Directors who have been
designated to serve as such by one of the Investors (as defined) receive, in
lieu of director fees, options to purchase Common Shares having a value equal to
$1,000 per each meeting attended by the director ($500 for each meeting attended
by telephone). Options awarded to directors designated by Oxford BioScience
Partners or its various affiliates are to be awarded to an affiliate of Oxford
specified by such director, presently Oxford Bioscience Management Partners. As
of March 31, 1996, options to purchase an aggregate of 10,000 Common Shares have
been awarded to directors of the Company pursuant to the 1994 Directors' Plan.
The exercise prices of options awarded pursuant to the 1994 Directors' Plan
range from $0.80 to $9.60 per share, and vest six months and one day from the
date of grant. In the event of a change in control of the Company, the options
granted under the 1994 Directors' Plan will vest upon the earlier to occur of
(i) such change in control or (ii) six months and one day from the date of
grant. A change in control is defined as (i) a tender offer being made for the
ownership of 25% or more of the outstanding voting securities of the Company,
(ii) the Company being merged or consolidated with another corporation and, as a
result of such merger or consolidation, less than 75% of the outstanding voting
securities of the surviving or resulting corporation being owned in the
aggregate by the former shareholders of the Company, (iii) the Company selling
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary or (iv) a person, within the meaning of Section 3(a)(9)
or of Section 13(d)(3) of the Securities Exchange Act of 1934 acquiring, other
than by reason of inheritance, 25% or more of the outstanding voting securities
of the Company. The Company does not intend to make any additional awards under
the 1994 Directors' Plan subsequent to the Offering.

Directors of the Company have also received awards of options under the
Company's 1992 Stock Incentive Plan. Options to purchase an aggregate of 55,000
Common Shares have been awarded to non-employee directors of the Company under
the terms of that plan, at an exercise price of $0.15 per share. Each director
of the Company who is not a Named Executive Officer (listed in the Summary
Compensation Table) has received options to purchase the following number of
shares under that plan: Mr. Harris, 25,000 shares; Dr. Stote, 25,000 shares; and
Mr. Terwoord, 5,000 shares. Information concerning option awards to directors
who are also Named Executive Officers is set forth in the Fiscal Year-End Option
Value Table appearing elsewhere herein. See "Management -- Executive
Compensation" and "-- 1992 Stock Incentive Plan."

Subsequent to this offering, except for stock options granted under the
Company's 1996 Outside Directors Stock Option Plan, the Company does not intend
to compensate directors for any meetings that they attend, but will reimburse
them for reasonable expenses that are incurred in attending such meetings.

1996 OUTSIDE DIRECTORS STOCK OPTION PLAN

In connection with this offering, the Company adopted the 1996 Outside
Directors Stock Option Plan (the "Outside Directors Plan") providing for the
granting of options to purchase up to 25,000 Common Shares to those directors
who are not employees of the Company ("Eligible Directors"). The

39
<PAGE> 40

Outside Directors Plan provides for the annual granting of options to purchase
an aggregate of 1,500 Common Shares to each Eligible Director and is
administered by the Compensation Committee. The option price for options granted
under the Outside Directors Plan will be equal to the fair market value of a
Common Share on the date of grant. Options granted under the Outside Directors
Plan will be exercisable for a period of ten years from the date of grant but
will not be exercisable during the first year of that period. Thereafter, the
option may be exercised in full at any time or in part from time to time. On
February 29, 1996, options to purchase an aggregate of 9,000 Common Shares were
granted to Eligible Directors at an exercise price of $9.60 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee was comprised of Messrs. Biro and Harris and Dr.
Green. Dr. Green is the President and Chief Executive Officer of the Company.
Dr. Green did not participate in the Committee's decisions concerning his
compensation. During the last three fiscal years, the Company has engaged in
various transactions with the members of its Compensation Committee or entities
with which they are affiliated. The Company believes that these transactions
have been on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties. Subsequent to the Offering, Dr. Green
will be replaced by Dr. Stote on the Compensation Committee.

Mr. Biro is a general partner of Brantley. On March 25, 1992, Brantley
purchased 500,000 Series A Preferred Shares at a purchase price of $600,000. An
aggregate of $30,000 of the purchase price for the Series A Preferred Shares was
paid through the surrender of $30,000 in aggregate principal amount of a
Promissory Note issued by the Company in exchange for a loan from Brantley on
September 9, 1991, together with accrued interest thereon. On January 11, 1993,
Mr. Harris purchased an aggregate of 16,667 Series B Preferred Shares of the
Company at a purchase price of $25,000. On July 25, 1994, Brantley, Mr. Harris
and Dr. Green participated with other investors in the purchase of Series C
Preferred Shares from the Company. In that transaction, Brantley acquired
166,667 Series C Preferred Shares at an aggregate purchase price of $500,000,
Mr. Harris acquired 25,000 Series C Preferred Shares at an aggregate purchase
price of $75,000 and Dr. Green acquired 10,000 Series C Preferred Shares at an
aggregate purchase price of $30,000. Brantley, Mr. Harris and Dr. Green, along
with the Company and its other shareholders, are parties to a Second Amended and
Restated Shareholders' Agreement (the "Shareholders' Agreement"), under which
they have been provided with certain rights by the Company. In addition,
Brantley, Dr. Green and Mr. Harris, along with the Company's other shareholders,
are parties to a Registration Agreement under which the Company has provided
them with certain rights to have their shares registered under the Securities
Act. See "Certain Transactions."

EXECUTIVE COMPENSATION

The table below sets forth information concerning the annual and long-term
compensation for services in all capacities for the Company for the year ended
December 31, 1995, with respect to those persons who were (i) the Chief
Executive Officer and (ii) the only other executive officer whose annual salary
and bonus exceeded $100,000 (the "Named Executive Officers") at December 31,
1995.

40
<PAGE> 41

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL -------------
COMPENSATION(1) SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS/SARS(#)
------------------------------------------ -------- ------- -------------
<S> <C> <C> <C>
Dr. Jeffrey A. Green...................... $120,000 $ -- 25,000(2)
President and Chief Executive Officer
Nathan F. Messinger....................... 100,000 72,397 101,000(3)
Vice President of Business Development
<FN>
- ---------------

(1) No Named Executive Officer received perquisites or other personal benefits
in excess of the lesser of $50,000 or 10% of such individual's salary plus
annual bonus.

(2) Dr. Green's options were granted on July 1, 1995, at an exercise price of
$4.15 per share, 25% of which become exercisable on each of July 1, 1996,
July 1, 1997, July 1, 1998 and July 1, 1999.

(3) Mr. Messinger's options were granted as follows: (i) 20,000 on December 30,
1993, at an exercise price of $0.15 per share, 25% of which are exercisable
on each of August 9, 1994, August 9, 1995, August 9, 1996 and August 9,
1997; (ii) 20,000 on April 1, 1994, at an exercise price of $0.15 per share,
25% of which are exercisable on each of April 1, 1995, April 1, 1996, April
1, 1997 and April 1, 1998; (iii) 50,000 on March 1, 1995, at an exercise
price of $4.15 per share, 25% of which are exercisable on each of March 1,
1996, March 1, 1997, March 1, 1998 and March 1, 1999; (iv) 1,000 on July 1,
1995, at an exercise price of $4.15 per share, which become fully
exercisable on July 1, 1996; and (v) 10,000 on July 1, 1995, at an exercise
price of $4.15 per share, 25% of which become exercisable on each of July 1,
1996, July 1, 1997, July 1, 1998 and July 1, 1999.

</TABLE>

OPTION GRANTS IN 1995

Shown below is information relating to grants of stock options pursuant to
the 1992 Stock Incentive Plan of the Company during the year ended December 31,
1995 to the Named Executive Officers. Such grants are reflected in the Summary
Compensation Table above.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NO. OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(3)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) YEAR(2) ($/SH) DATE 5%($) 10%($)
- ----------------------------- ------------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dr. Jeffrey A. Green......... 25,000(4) 13% $4.15 7/2/05 $168,998 $269,101
Nathan F. Messinger.......... 50,000(5) 26 4.15 3/2/05 337,996 538,202
10,000(6) 5 4.15 7/2/05 67,599 107,640
1,000(7) 1 4.15 7/2/05 6,760 10,764
<FN>
- ---------------

(1) All options reflected in the table above were awarded at an exercise price
equal to the fair market value of the Common Shares on the date of grant, as
determined by the Board of Directors.

(2) Based on an aggregate of 190,000 options granted under the 1992 Stock
Incentive Plan to employees of the Company, including the Named Executive
Officers.

(3) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Shares. There can be no assurance that the amounts
reflected in this table will be achieved. In accordance with rules
promulgated by the Securities and Exchange Commission, Potential Realizable
Value is based upon the exercise price of the options, which is
substantially less than the expected initial public offering price.
Therefore, the Potential Realizable Values may be significantly understated.

</TABLE>

41
<PAGE> 42

(4) These options were granted on July 1, 1995, 25% of which are exercisable on
each of July 1, 1996, July 1, 1997, July 1, 1998 and July 1, 1999.

(5) These options were granted on March 1, 1995, 25% of which are exercisable on
each of March 1, 1996, March 1, 1997, March 1, 1998 and March 1, 1999.

(6) These options were granted on July 1, 1995, 25% of which are exercisable on
each of July 1, 1996, July 1, 1997, July 1, 1998 and July 1, 1999.

(7) These options were granted on July 1, 1995 and are fully exercisable on July
1, 1996.

1992 STOCK INCENTIVE PLAN

Prior to this Offering, the Company awarded stock options to certain
directors, employees and consultants under the terms of its 1992 Stock Incentive
Plan (the "1992 Plan"). Options to purchase an aggregate of 468,075 Common
Shares are outstanding under the 1992 Plan at exercise prices ranging from $0.15
to $7.00 per share. The exercise prices of such options reflect the Board of
Directors' determination of the fair market value of a Common Share on the date
of grant. Options awarded under the plan vest in equal increments over a six
month to five year period commencing on a date specified in each option
agreement. Options awarded to employees of the Company under the plan are
intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). Options awarded
to directors and consultants of the Company under the 1992 Plan are
non-qualified options for federal income tax purposes. In the event of a change
of control of the Company, the options granted under the 1992 Plan will become
immediately exercisable in full. A change in control is defined as (i) a tender
offer being made and consummated for the ownership of 75% or more of the
outstanding voting securities of the Company, (ii) the Company being merged or
consolidated with another corporation and, as a result of such merger or
consolidation, less than 25% of the outstanding voting securities of the
surviving or resulting corporation being owned in the aggregate by the former
shareholders of the Company, (iii) the Company selling substantially all of its
assets to another corporation which is not a wholly owned subsidiary or (iv) a
person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) of the
Exchange Act, acquiring, other than by reason of inheritance, 25% or more of the
outstanding voting securities of the Company. The Company does not intend to
make any additional option awards under the 1992 Plan subsequent to the
Offering.

1996 KEY EMPLOYEES AND CONSULTANTS STOCK OPTION PLAN

In connection with the Offering, the Board of Directors of the Company
adopted the 1996 Key Employees and Consultants Stock Option Plan (the "1996
Plan"). The 1996 Plan is administered by the Compensation Committee of the Board
of Directors, and provides for the issuance of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code to employees of the
Company and other stock options which are non-qualified for federal income tax
purposes to employees and consultants. The 1996 Plan provides for the granting
of options to purchase an aggregate of up to 182,667 Common Shares. Incentive
stock options are exercisable for up to ten years, at an option price of not
less than the market price on the date the option is granted or at a price of
not less than 110% of the market price in the case of an option granted to an
individual who at the time of grant owns more than 10% of the Company's Common
Shares. Nonqualified stock options may be issued at such exercise price and on
such other terms and conditions as the Compensation Committee may determine. The
Compensation Committee has broad discretion to determine that prescribed
conditions (such as the completion of a period of employment with the Company
following the grant of an option to an employee) be satisfied before an option
becomes exercisable. Optionees may also be granted stock appreciation rights
under which they may, in lieu of exercising an option, elect to receive cash or
Common Shares, or a combination thereof, equal to the excess of the market price
of the Common Shares over the option price.

42
<PAGE> 43

FISCAL YEAR-END OPTION VALUE TABLE

The following table shows the number of Common Shares represented by
outstanding stock options held by each of the Named Executive Officers as of
December 31, 1995. None of the Named Executive Officers exercised any stock
options during 1995.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
FISCAL IN-THE-MONEY OPTIONS
YEAR-END(#) AT FISCAL YEAR-END($)(2)(3)
--------------------------- ---------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Dr. Jeffrey A. Green........ -- 25,000 $ -- $ 71,250
Nathan F. Messinger......... 15,000 86,000 102,750 345,100
<FN>
- ---------------

(1) Includes options exercisable within 60 days after December 31, 1995.

(2) Options are in-the-money if the fair market value of the Common Shares
exceeds the exercise price.

(3) Represents the total gain which would be realized if all in-the-money
options beneficially held at December 31, 1995 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and $7.00, the estimated fair
market value per share of the Common Shares at December 31, 1995, as
established by the Board of Directors. Had the fair market value per share
equaled $13.50 per share, the value of the unexercised in-the-money options
beneficially owned at December 31, 1995, exercisable and unexercisable,
respectively, would have been: for Dr. Green: $0 exercisable; $233,750
unexercisable; for Mr. Messinger: $200,250 exercisable; $904,100
unexercisable.

</TABLE>

EMPLOYMENT CONTRACTS

The Company is a party to employment agreements with each of its executive
officers except Dr. Linberg. The Company entered into employment agreements with
Drs. Green, Stigelman, Kasmer and Mr. Black in 1994. Additionally, the Company
proposes to enter into an employment agreement with Dr. Linberg. These
employment agreements are substantially similar except with respect to each
executive's compensation and provide for an initial term of four years. The
agreements will automatically renew for successive one-year periods thereafter
unless certain prior notice requirements are satisfied. Drs. Stigelman, Kasmer,
and Mr. Black's agreements provide for an annual review of each employee's base
salary by the Compensation Committee of the Board of Directors. Dr. Green's
agreement provides that his base salary may be changed after the initial
four-year term as determined by the Compensation Committee and as long as
evidenced by a written memorandum executed by the parties. All agreements
provide that bonuses may be paid to the employee at the discretion of the
Compensation Committee. The agreements also provide each employee with the right
to participate in all benefit plans made available to the Company's executives
and/or employees. The employment agreements provide that the Company may
terminate the employee with or without cause or upon his death or disability.
Additionally, Dr. Green's employment agreement entitles him to terminate his
employment for "good reason." For purposes of Dr. Green's agreement, "good
reason" for such termination will exist if at any time, except in connection
with the termination of the employee's employment in strict compliance with the
terms of the agreement, the Board of Directors fails to elect the employee to
his current positions with the Company or significantly diminishes his
responsibilities, duties, power or authority. If Dr. Green terminates his
employment with the Company for "good reason," he will be entitled to continue
to receive his base salary for two years following the date of such termination.
If the employment of Drs. Green, Stigelman, Kasmer or Mr. Black is terminated in
connection with a sale of the Company, each will be entitled to continue to
receive his base salary for one year following the date of such termination. If
Dr. Green's employment with the Company is terminated without cause, he will be
entitled to continue to receive his base salary for a period of two years
subsequent to the date of termination. If Drs. Stigelman or Kasmer or Mr.
Black's employment is terminated without cause, each will be entitled to
continue to receive his base salary for the lesser of one year or through the
expiration of the original term of the agreement. If Drs. Green, Stigelman,
Kasmer or Mr. Black terminate their employment without "good reason" or are
terminated by the

43
<PAGE> 44

Company for "cause," then they will be entitled to receive their base salary
through the date of termination. If they are terminated for cause prior to
January 1, 1997, the Company will have the right to repurchase 25% of the Common
Shares owned by them or which they have the right to acquire upon the exercise
of options at a price equal to the fair market value of such shares determined
in accordance with the provisions of the Second Amended and Restated
Shareholders' Agreement (the "Shareholders' Agreement") to which all current
shareholders are parties. To the extent that the Company does not exercise such
right within a specified time period, certain other shareholders of the Company
will have the right to acquire such shares on the same terms in accordance with
the terms of such Shareholders' Agreement. For purposes of the agreements,
"cause" is defined to mean a determination by the Board of Directors that the
employee was engaged in (i) fraud, (ii) a breach of the material provisions of
the employment agreement or (iii) a willful failure to perform his duties as
required under the agreement.

Mr. Messinger's agreement was entered into in 1993 and is similar to those
entered into with Drs. Green, Stigelman, Kasmer, and Mr. Black. In the event
that Mr. Messinger is terminated other than for cause, he will be entitled to
continue to receive his salary and benefits for a period equal to the lesser of
one year or through the expiration of the original four year term of the
agreement. In the event that Mr. Messinger's employment is terminated in
connection with the sale of the Company, he will be entitled to receive a
lump-sum payment equal to two months base salary for each full year of service.
Upon termination of Mr. Messinger's employment prior to August 10, 1998, the
Company will have an option to repurchase a specified percentage of the Common
Shares that he owns or has the right to acquire. Initially, all Common Shares
owned by Mr. Messinger or which he had the right to acquire were subject to such
repurchase option. The number of Common Shares subject to repurchase decreases
by 20% per annum. Any repurchase of Common Shares under the terms of the
agreement will be made at a price equal to the fair market value of such shares
determined in accordance with the provisions of the Shareholders' Agreement. To
the extent that the Company does not exercise such right within a specified time
period, certain other shareholders of the Company will have the right to acquire
such shares on the same terms in accordance with the terms of such Shareholders'
Agreement.

The Company also entered into employment agreements with Ms. Adamson and
Dr. Westrick on February 1, 1996. These employment agreements are similar to Dr.
Green's employment agreement except that they: (i) provide for an initial term
of five years; (ii) provide Ms. Adamson and Dr. Westrick with the right to
participate in all of GFI's benefit plans if they are not revised to be
consistent with the Company's benefit plans; (iii) provide the Company with the
right to terminate Ms. Adamson or Dr. Westrick for "sufficient reason" and they
have the right to their base salary for one year following the date of such
termination; (iv) provide that if Ms. Adamson or Dr. Westrick terminate their
employment for "good reason," they will be entitled to receive their base salary
for one year following the date of such termination; and (v) provide that if the
Company terminates Ms. Adamson or Dr. Westrick without "cause" or "sufficient
reason," they are entitled to receive their base salary for two years following
the date of such termination. For purposes of the agreements, "sufficient
reason" for such termination will mean the good faith determination of the Chief
Executive Officer of the Company that Ms. Adamson or Dr. Westrick failed (i) to
adequately perform her duties, (ii) to exercise and employ a level of judgment
and skill in the management of the Company and the supervision of its employees
commensurate with her position and comparable to other executives of similar
companies or (iii) to achieve the business objectives established from time to
time by the Chief Executive Officer and the employee. Additionally, the Company
has agreed to use its best efforts to cause either Ms. Adamson or Dr. Westrick
to be elected to the Company's Board of Directors.

Dr. Linberg's employment agreement will provide for an initial term of four
years and will provide that his base salary will be reviewed by the Compensation
Committee on an annual basis. Dr. Linberg will be entitled to receive a one time
bonus in the amount of $200,000, payable on or before December 31, 1996, and
will also be entitled to receive a bonus payable prior to February 15, 1997 in
an amount equal to two times the 1996 net income earned by the Company on
business developed by Dr. Linberg exclusively through his own efforts. Dr.
Linberg's employment agreement will also provide

44
<PAGE> 45

for the payment of annual bonuses of $28,500 on November 20 of each year during
the term of his agreement, beginning in 1996. This bonus will only be payable if
Dr. Linberg is employed by the Company at the time the bonus becomes payable
with respect to any particular year. If Dr. Linberg's employment with the
Company is terminated for cause prior to January 1, 1999, the Company will have
the right to repurchase specified percentages of the Common Shares owned by him
or which he has the right to acquire. Initially, 50% of such Common Shares will
be subject to this repurchase option. That percentage will decline to 25% on
January 1, 1998, and the Company's repurchase option will terminate on January
1, 1999. Any repurchase of Common Shares under the terms of the agreement will
be made at a price equal to the fair market value of such shares determined in
accordance with the terms of the Shareholders' Agreement. If the Company does
not exercise such right within a specified time period, certain other
shareholders of the Company will have the right to acquire such shares on the
same terms in accordance with the terms of such Shareholders' Agreement. If Dr.
Linberg's employment with the Company is terminated without cause or in
connection with a sale of the Company, he will be entitled to continue to
receive his base salary for one year following the date of termination. In
addition, if Dr. Linberg's responsibilities, duties, powers or authorities are
significantly diminished subsequent to a sale of the Company, he will be
entitled to voluntarily terminate his employment and receive either a lump sum
payment equal to one year's salary or, at his option, a release from the
non-competition provisions of the agreement.

CERTAIN TRANSACTIONS

In connection with its various financing transactions, the Company has
entered into certain agreements with each of its investors. Since these
arrangements were the result of arm's length negotiation among the Company and
its investors prior to their acquisition of an interest in the Company, the
Company believes that they are on terms no less favorable to it than could have
been obtained from unaffiliated third parties. Relationships between the Company
and those investors who are affiliated with members of the Compensation
Committee of the Board of Directors are described under the caption "Management
- -- Compensation Committee Interlocks and Insider Participation."

Financing Arrangements. The Company has engaged in three rounds of venture
capital financing. On March 25, 1992, Brantley purchased 500,000 Series A
Preferred Shares for an aggregate purchase price of $600,000. An aggregate of
$30,000 of the purchase price for the Series A Preferred Shares was paid through
the surrender of $30,000 in aggregate principal amount of a Promissory Note
issued by the Company in exchange for a loan from Brantley on September 9, 1991,
together with accrued interest thereon. On November 12, 1992, Mr. Terwoord
purchased an aggregate of 50,000 Series B Preferred Shares at an aggregate
purchase price of $75,000. On January 11, 1993, Mr. Harris purchased an
aggregate of 16,667 Series B Preferred Shares at a purchase price $25,000. On
July 15, 1994, each of Oxford BioScience Partners, L.P., Oxford BioScience
Partners (Bermuda), L.P., Oxford BioScience Partners (Adjunct), L.P., Axiom,
Brantley, Drs. Green, Kasmer, Stigelman, Stote and Messrs. Harris and Terwoord,
together with one additional investor affiliated with Axiom, purchased an
aggregate of 1,412,367 Series C Preferred Shares at an aggregate purchase price
of $4,237,101.

Shareholders' Agreement. In connection with each of the foregoing
transactions, the Company entered into a shareholders' agreement with its
shareholders. This agreement was modified in connection with subsequent
financings. On July 25, 1994, the Company entered into a Second Amended and
Restated Shareholders' Agreement (the "Shareholders' Agreement"), which governs
certain aspects of the relationship among the Company and its current
shareholders. In the Shareholders' Agreement, each party has agreed to vote all
shares over which that party exercises control to elect as directors of the
Company: (i) one representative designated by each of Brantley, Oxford and Axiom
(collectively, the "Investors") to serve as directors of the Company; (ii) Dr.
Green; (iii) two representatives designated by Dr. Green, one of whom is
required to have experience in the pharmaceutical industry and both of whom are
subject to the approval of the Investors; and (iv) one additional representative
designated jointly by Dr. Green and the Investors. Pursuant to these
arrangements, Brantley designated Mr. Biro to serve as a director, Oxford
designated Dr. Walton, Axiom designated Mr. Mendel-

45
<PAGE> 46

son, Dr. Green designated Mr. Harris and Dr. Stote, and Dr. Green and the
Investors designated Mr. Terwoord. The Shareholders' Agreement also provides for
the establishment of and membership on Board committees, the removal and
replacement of any director designated by a party to the Shareholders'
Agreement, and the termination of each Investor's right to designate a director.
The Shareholders' Agreement also provides the Company with a right of first
refusal in the event of any proposed transfer of shares by a party to the
Shareholders' Agreement. To the extent that such right is not exercised by the
Company, each shareholder has the right to purchase his or its pro rata share of
such shares. Each shareholder is prohibited from transferring any shares to any
competitor of the Company, and each individual shareholder is prohibited, so
long as the Investors continue to own any shares, from transferring shares if
thereafter he or it would own less than two-thirds of the shares owned by him or
it immediately prior to such transfer. In addition, each of the Investors has a
right to participate in any proposed transfer of any shares by any other party
to the Shareholders' Agreement (other than certain transfers to family members
or affiliates of such shareholder). Upon the death, disability or insolvency of
a shareholder, the Company will have the right to repurchase the shares held by
such shareholder at the fair market value thereof, determined in accordance with
the Shareholders' Agreement (other than shares that would be transferred to
certain members of an individual shareholder's family in the event of the
shareholder's death or disability). To the extent that such right is not
exercised by the Company, each shareholder has the right to purchase his or its
pro rata share of such shares. Subject to certain exceptions, if the Company
determines to issue any additional equity securities, the Shareholders'
Agreement provides each shareholder with the right to purchase, on the most
favorable terms to be offered to any third party, an amount of equity securities
sufficient to permit that shareholder to maintain his or its current percentage
ownership of the Company's equity securities on a fully diluted basis. If the
Company determines to raise additional capital through the issuance of
additional debt, the Shareholders' Agreement provides that the Company must
offer to the Investors the right to provide or cause to be provided such
financing.

The Shareholders' Agreement will terminate upon the consummation of the
Offering.

Registration Rights. The Company is a party to a registration rights
agreement with each of its existing shareholders and the former shareholders of
GFI. Under the terms of this agreement, the holders of an aggregate of 2,133,280
Common Shares acquired upon conversion of Series A and Series C Preferred Shares
(the "Registrable Shares") have the right to demand, no more than once every six
months, registration of Common Shares having a market value of at least
$5,000,000 (in the case of a registration on Form S-1) or $1,000,000 (in the
case of a registration on Form S-2 or S-3) their Registrable Shares under the
Securities Act. Such demand right may be exercised by the holders of 40% of the
Registrable Shares. The holders of Registrable Shares may exercise their right
to demand registration of the Registrable Shares on Form S-1 up to two times at
the Company's expense, and may demand registrations on Form S-2 or S-3 an
unlimited number of times at the Company's expense. Although the holders of
Registrable Shares have the right to demand additional registrations on Form
S-1, they will be required to pay their share of the expenses associated with
such registration. The agreement also provides the holders of an aggregate of
764,073 Common Shares (including Common Shares issued in connection with the
acquisition of GFI) (the "Related Shares"), with the limited right to
participate, at their own expense, in a registration statement demanded by the
holders of Registrable Shares. In addition, under certain conditions, the
holders of Registered Shares and Related Shares have the limited right to
include some or all of such shares in any registration statement filed by the
Company with respect to the sale of its Common Shares.

46
<PAGE> 47
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of the Common Shares on a fully diluted basis as of March
31, 1996, and as adjusted to reflect the sale of the 3,000,000 Common Shares
offered hereby (assuming no exercise of the Underwriters' over-allotment
option), by (i) each director, (ii) each Named Executive Officer, (iii) all
directors and executive officers as a group and (iv) each person known by the
Company to be the beneficial owner of more than 5% of the Common Shares on a
fully diluted basis. Unless otherwise indicated in a footnote, each person
possesses sole voting and investment power with respect to the shares indicated
as beneficially owned. Unless otherwise indicated, the address of each
beneficial owner is 20600 Chagrin Boulevard, Suite 1050, Cleveland, Ohio 44122.

<TABLE>
<CAPTION>
PERCENT BENEFICIALLY
NUMBER OF OWNED(1)
SHARES ---------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Dr. Jeffrey A. Green (2)...................................... 392,436 14.2% 6.8%
Timothy G. Biro (3)........................................... 744,219 27.0 12.9
Seth B. Harris................................................ 59,634 2.2 1.0
Alan Mendelson (4)............................................ 655,586 23.8 11.4
Dr. Robert M. Stote........................................... 19,474 * *
James A. Terwoord (5)......................................... 80,467 2.9 1.4
Nathan F. Messinger........................................... 36,000 1.3 *
Dr. Alan G. Walton (6)........................................ 655,585 23.8 11.4
c/o Oxford BioScience Funds
315 Post Road West
Westport, Connecticut 06880
Brantley Venture Partners II, L.P. (7)........................ 744,219 27.0 12.9
20600 Chagrin Boulevard, Suite 1150
Cleveland, Ohio 44122
Axiom Venture Partners Limited Partnership (8)................ 655,586 23.8 11.4
242 Trumbull Street
Hartford, Connecticut 06103
Oxford BioScience Funds (6)................................... 655,585 23.8 11.4
315 Post Road West
Westport, Connecticut 06880
All directors and executive officers as a group (14
persons).................................................... 2,883,386 95.0 47.8
<FN>
- ---------------
* Less than one percent.

(1) Gives effect to the conversion of the Preferred Shares (including additional
Preferred Shares issued as Preferred Share dividends through May 31, 1996)
into an aggregate of 2,201,133 Common Shares. Includes with respect to each
of the following individuals and group the following number of Common Shares
which (i) may be acquired upon exercise of options that become exercisable
within 60 days after the Offering, and (ii) Common Shares to be issued to
the former shareholders of GFI in connection with the acquisition of GFI;
Dr. Green (6,250 shares); Mr. Biro (3,333 shares); Mr. Harris (15,000
shares); Mr. Mendelson (3,000 shares); Dr. Stote (15,000 shares); Mr.
Terwoord (2,500 shares); Mr. Messinger (36,000 shares); Dr. Walton (3,000
shares); all directors and executive officers as a group (285,981 shares).

(2) Includes 150,000 shares held by Dr. Green's wife.

(3) Includes 740,886 shares owned by Brantley. Mr. Biro, a director of the
Company, is a general partner and may be deemed to be a beneficial owner.

(4) Includes 652,586 shares owned by Axiom. Mr. Mendelson, a director of the
Company, is a general partner and may be deemed to be a beneficial owner.

(5) Includes 50,000 shares held by Mr. Terwoord's wife and 27,967 shares held in
trust for Mr. Terwoord.

(6) Includes 408,690 and 130,517 Common Shares owned by Oxford BioScience
Partners, L.P. ("Oxford") and Oxford BioScience Partners (Adjunct), L.P.
("Oxford Adjunct"), respectively, of which OBP Management, L.P. ("OBP") is
the general partner, and 113,378 Common Shares owned by Oxford BioScience
Partners (Bermuda) Limited Partnership ("Oxford Bermuda"), of which OBP
Management (Bermuda) Limited Partnership ("OBP Bermuda") is the general
partner. OBP may be deemed to be the beneficial owner of shares owned by
Oxford Bermuda. Also includes 3,000 Common Shares issuable upon exercise of
options owned by Oxford BioScience Management Partners ("OBM") that are
currently exercisable. Dr. Walton, a Director of the Company, is a general
partner of OBP, OBP Bermuda and OBM.

(7) Includes 3,333 Common Shares issuable upon exercise of options owned by Mr.
Biro that are currently exercisable. Mr. Biro is a general partner of
Brantley.

(8) Includes 3,000 Common Shares issuable upon exercise of options owned by Mr.
Mendelson that are currently exercisable. Mr. Mendelson is a general partner
of Axiom.
</TABLE>
47
<PAGE> 48

DESCRIPTION OF CAPITAL STOCK

The Company's Articles of Incorporation, as amended (the "Articles")
authorized 6,520,000 shares of capital stock, consisting of 3,660,000 Common
Shares, without par value, and 2,860,000 Preferred Shares, $.001 par value. As
of March 31, 1996, 413,258 Common Shares were issued and outstanding and held by
nine holders of record and 2,182,353 Preferred Shares were issued and
outstanding and held by 13 holders of record. In connection with the Offering,
the Company's Articles were amended and restated (the "Amended Articles"). Upon
the automatic conversion of outstanding Preferred Shares, subsequent to the
Offering, the Amended Articles will authorize the issuance of 16,000,000 shares
of capital stock, consisting of 1,000,000 Serial Preferred Shares, without par
value, issuable in series (the "Serial Preferred Shares") and 15,000,000 Common
Shares, without par value. Set forth below is a description of the capital stock
of the Company after giving effect to the amendment and restatement of the
Articles.

COMMON SHARES

The holders of Common Shares are entitled to receive dividends when, if and
as declared from time to time by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." The Common Shares have no preemptive
rights or conversion rights and are not subject to further calls or assessments
by the Company. There are no redemption or sinking fund provisions applicable to
the Common Shares. All currently outstanding Common Shares are, and the Common
Shares being sold by the Company in the Offering will be, duly authorized,
validly issued, fully paid and nonassessable. The holders of Common Shares are
entitled to one vote per share on all matters to be voted upon by the
shareholders. The holders of Common Shares do not have the right to vote
cumulatively in the election of directors. Subsequent to the Offering, the Board
of Directors will consist of seven members divided into three classes of two,
two and three members, respectively. The directors of the class elected at each
Annual Meeting of Shareholders will hold office for a term of three years.
Subject to the rights of the holders of Serial Preferred Shares which may be
issued from time to time and except for the provisions of the Articles relating
to the classification of directors, the denial of preemptive rights and
cumulative voting rights and the approval requirements for certain Business
Combinations described herein, the amendment of which, under certain
circumstances, will require the affirmative vote of the holders of 80% of the
outstanding Common Shares, and at least a majority of the Common Shares held by
persons other than a Related Person (as hereinafter defined), the Articles can
be amended by the affirmative vote of the holders of at least a majority of the
Company's then outstanding shares having voting power thereon.

WARRANTS

In connection with its joint venture with PMSI, the Company entered into a
Warrant Agreement dated as of June 1, 1995 providing for the issuance of
warrants to purchase Common Shares to PMSI. The Warrants entitled PMSI to
purchase an aggregate of 68,000 Common Shares at an exercise price of $5.50 per
share and an aggregate of 68,000 Common Shares at an exercise price of $7.50 per
share. On June 7, 1996, PMSI exercised the Warrants at an aggregate exercise
price of $884,000 for 136,000 Common Shares. The Company has the right to
repurchase all, but not less than all, of the Common Shares acquired upon
exercise of the Warrants in the event that PMSI or its affiliates engage in any
transaction that results in PMSI or any of its affiliates becoming subject to
the control of a person or entity which competes with the Company. Any such
repurchase will be at the fair market value of the Common Shares as of the date
that the Company exercises its repurchase right, as determined through a
procedure set forth in the Warrant Agreement.

SERIAL PREFERRED SHARES

The Amended Articles authorize the directors, without further action by the
shareholders, to issue, from time to time, Serial Preferred Shares in one or
more classes or series which would entitle the holder thereof to one vote per
share, and to fix or alter the designations, powers and preferences,

48
<PAGE> 49

and relative, participating, optional or other rights, if any, and
qualifications, limitations or restrictions thereof, including, without
limitation, dividend rights (and whether dividends are cumulative), conversion
rights, if any, rights and terms of redemption (including sinking fund
provisions, if any), redemption price and liquidation preferences of any
unissued shares or wholly unissued series of Serial Preferred Shares. In
addition, the Board may establish the number of shares constituting any such
class or series and the designation thereof, and increase or decrease the number
of shares of any such class or series subsequent to the issuance of shares of
such class or series, but not below the number of shares of such class or series
then outstanding.

BUSINESS COMBINATIONS

Under the Amended Articles, the affirmative vote of not less than 80% of
the outstanding Common Shares, in addition to the affirmative vote, which may be
required of any series of Serial Preferred Shares that may then be outstanding,
and the affirmative vote of a majority of the Common Shares held or beneficially
owned other than by a Related Person (as hereinafter defined) are generally
required for the approval or authorization of any Business Combination (as
hereinafter defined) of the Company with any Related Person. These provisions of
the Amended Articles do not apply to Business Combinations with Related Persons
which have been approved by a majority of the Disinterested Directors (as
hereinafter defined) of the Company or which satisfy certain provisions of the
Amended Articles relating to the consideration to be paid to the holders of
Common Shares by the Related Person. For purposes of the Amended Articles, the
term "Business Combination" means (i) any merger or consolidation of the Company
with or into a Related Person, (ii) any sale, lease, exchange, transfer or other
disposition, including, without limitation, a mortgage or any other security
device, of all or any substantial part (as hereinafter defined) of the assets of
the Company (including, without limitation, any voting securities of a
subsidiary) or of a subsidiary, to a Related Person, (iii) any merger or
consolidation of a Related Person with or into the Company or a subsidiary of
the Company, (iv) any sale, lease, exchange, transfer or other disposition of
all or any substantial part of the assets of a Related Person to the Company or
a subsidiary of the Company, (v) the reclassification of the shares of stock of
the Company generally possessing voting rights in elections of directors, the
purchase by the Company of such shares, or the issuance by the Company of shares
of any securities convertible thereto or exchangeable therefor which in any such
case has the effect, directly or indirectly, of increasing the proportionate
share of the outstanding shares of any class of equity or convertible securities
of the Company which are directly or indirectly owned by any Related Person or
(vi) any agreement, contract or other arrangement providing for any of the
transactions described in this definition of Business Combination. The term
"Disinterested Director" means a director of the Company who is not the Related
Person or an affiliate or associate of the Related Person and who was a member
of the Board of Directors of the Company prior to the time that the Related
Person became the Related Person, and any successor of a Disinterested Director
who is not the Related Person or an affiliate or associate of the Related Person
and is recommended to succeed a Disinterested Director by a majority of the
Disinterested Directors then in office. The term "Related Person" means any
individual, corporation, partnership or other person or entity which, together
with its "affiliates" and "associates" "beneficially" owns (as those terms are
defined in the Exchange Act and the rules promulgated thereunder), in the
aggregate, 15% or more of the outstanding Common Shares of the Company, and any
affiliate or associate of any such individual, corporation, partnership or other
person or entity; provided that shares held by or over which such entity has
power to vote or otherwise control as a trustee, plan administrator, officer of
the Company or in a similar capacity under an employee benefit plan of the
Company or an employee benefit plan of an affiliate of the Company will not be
deemed to be beneficially owned for purposes of this definition. The term
"substantial part" means more than 10% of the total consolidated assets of the
Company as at the end of its most recent fiscal year ending prior to the time
the determination is made.

49
<PAGE> 50

CERTAIN PROVISIONS OF OHIO LAW

After the Offering, the Company will be subject to certain provisions of
Ohio law which may discourage or render more difficult an unsolicited takeover
of the Company. Among these are provisions that (i) prohibit certain mergers,
sales of assets, issuance or purchases of securities, liquidation or
dissolution, or reclassification of the then outstanding shares of an Ohio
corporation involving certain holders of stock representing 10% or more of the
voting power (other than present shareholders), unless (a) such transactions are
approved by the Board of Directors prior to the 10% shareholder becoming such,
(b) the acquisition of 10% of the voting power is approved by the Board of
Directors prior to the 10% shareholder becoming such, or (c) involve a 10%
shareholder which has been such for at least three years and the transaction is
approved by holders of two-thirds of the voting power of the Company and the
holders of a majority of the voting power not owned by the 10% shareholder or
certain minimum price and form of consideration requirements are met; and (ii)
provide Ohio corporations, or in certain circumstances the shareholders of an
Ohio corporation, a cause of action to recover profits realized under certain
circumstances by persons who dispose of securities of a corporation within 18
months of proposing to acquire such corporation.

In addition, the acquisition of shares entitling the holder to execute
certain levels of voting power of the Company (one-fifth or more, one-third or
more, or a majority) can be made only with the prior authorization of (i) the
holders of at least a majority of the total voting power and (ii) the holders of
at least a majority of the total voting power held by shareholders other than
the proposed acquirer, officers of the Company elected or appointed by the Board
of Directors, and directors of the Company who are also employees and excluding
certain shares that are transferred after the announcement of the proposed
acquisition and prior to the vote with respect to the proposed acquisition. In
light of the fact that, upon completion of the Offering, the directors and
executive officers of the Company and their respective affiliates will continue
to own approximately 48% of the Company's outstanding Common Shares,
acquisitions of the foregoing levels of voting power by third parties may not be
possible unless officers and directors and current shareholders of the Company
vote in favor thereof.

DIRECTOR AND OFFICER INDEMNIFICATION

The Company's Code of Regulations contains provisions indemnifying
directors and officers of the Company to the fullest extent permitted by law and
providing for the advancement of expenses incurred in connection with an action
upon the receipt of an appropriate undertaking to repay said amount if it is
determined that the individual in question is not entitled to indemnification.
The Company has also entered into indemnity agreements pursuant to which it has
agreed, among other things, to indemnify its directors for settlements in
derivative actions.

GENERAL

It is possible that the division of the Board of Directors of the Company
into classes provided for in the Amended Articles, the ability of the Board of
Directors to issue Serial Preferred Shares, the heightened shareholder voting
requirements applicable to certain proposed business combination transactions
and/or the provisions of Ohio law discussed above may discourage other persons
from making a tender offer for or acquisitions of substantial amounts of the
Company's Common Shares. This could have an incidental effect of inhibiting
changes in management and may also prevent temporary fluctuations in the market
price of the Company's Common Shares which often result from actual or rumored
takeover attempts. In addition, the indemnification provisions of the Code of
Regulations and the indemnity agreements may have the effect of reducing the
likelihood of derivative litigation against directors and to deter shareholders
from bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefitted the
Company and the shareholders.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Shares is National City
Bank, Cleveland, Ohio.

50
<PAGE> 51

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, of the 15,000,000 Common Shares
authorized, 6,051,380 Common Shares will be outstanding or reserved for issuance
pursuant to the exercise of exercisable stock options. Of these 6,051,380 Common
Shares, the 3,000,000 Common Shares purchased in the Offering by persons who are
not "affiliates" of the Company will be freely tradeable without restriction
under the Securities Act. The Company believes that 1,019,925 Common Shares may
be sold pursuant to Rule 144 under the Securities Act in compliance with the
resale volume limitations of Rule 144 beginning 90 days after the Offering.
These volume limitations will apply only if and as long as the holders of these
shares are "affiliates" of the Company for purposes of Rule 144. The Company
believes that 2,031,455 Common Shares are considered "restricted securities"
under the Securities Act and holders may not utilize Rule 144 until such shares
have been held for at least two years. The 2,031,455 Common Shares were issued
between July 15, 1994 and the date of this Prospectus.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares for at
least two years, including an "affiliate," as that term is defined below, is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the then outstanding shares or the average
weekly trading volume of the then outstanding shares during the four calendar
weeks preceding each such sale. A person (or persons whose shares are
aggregated) who is not deemed an "affiliate" of the Company, and who has
beneficially owned shares for at least three years, is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
As defined in Rule 144, an "affiliate" of an issuer is a person that directly or
indirectly, through the use of one or more intermediaries, controls, or is
controlled by, or is under the common control with, such issuer. Under
amendments to Rule 144 proposed by the SEC, the two-year and three-year periods
described above may be reduced to one year and two years, respectively.

REGISTRATION RIGHTS

The Company is a party to a registration rights agreement with certain of
its existing shareholders and the former Shareholders of GFI. Under the terms of
this agreement, these shareholders and the former shareholders of GFI have
certain demand registration rights or the right to include their shares in any
registration statement filed by the Company with respect to an offering of
Common Shares under the Securities Act. See "Certain Transactions."

LOCK-UP AGREEMENTS

The Company, its current shareholders, the former shareholders of GFI and
certain holders of options who beneficially own 3,087,864 Common Shares have
agreed that they will not, directly or indirectly, without the prior written
consent of the Representatives, offer, sell, grant any option to purchase or
otherwise dispose of any Common Shares, or any securities convertible into, or
exchangeable or exercisable for, Common Shares for a period of 180 days after
the date of this Prospectus.

51
<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters (the "Underwriters") named below, for whom Vector Securities
International, Inc. and McDonald & Company Securities, Inc. are acting as
representatives (the "Representatives"), have severally agreed to purchase,
subject to the terms and conditions of the Underwriting Agreement, and the
Company has agreed to sell to the Underwriters, the following respective number
of Common Shares.

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
-------------------------------------------------------------------- ----------------
<S> <C>
Vector Securities International, Inc. .............................. 900,000
McDonald & Company Securities, Inc. ................................ 900,000
Bear, Stearns & Co. Inc. ........................................... 75,000
CS First Boston Corporation......................................... 75,000
Donaldson, Lufkin & Jenrette Securities Corporation................. 75,000
A.G. Edwards & Sons, Inc. .......................................... 75,000
Montgomery Securities............................................... 75,000
Morgan Stanley & Co. Incorporated................................... 75,000
PaineWebber Incorporated............................................ 75,000
Salomon Brothers Inc ............................................... 75,000
UBS Securities LLC ................................................. 75,000
Crowell, Weedon & Co. .............................................. 37,500
Cruttendon Roth Incorporated........................................ 37,500
Hanifen, Imhoff Inc. ............................................... 37,500
Jefferies & Company, Inc. .......................................... 37,500
Legg Mason Wood Walker, Incorporated................................ 37,500
David A. Noyes & Co. ............................................... 37,500
Pennsylvania Merchant Group Ltd. ................................... 37,500
Piper Jaffray Inc. ................................................. 37,500
Rauscher Pierce Refsnes, Inc. ...................................... 37,500
Raymond James & Associates, Inc. ................................... 37,500
Roney & Co. ........................................................ 37,500
Starr Securities, Inc. ............................................. 37,500
Sutro & Co. Inc..................................................... 37,500
Van Kasper & Company................................................ 37,500
--------------
Total..................................................... 3,000,000
==============
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all Common Shares offered hereby if any of such
shares are purchased.

The Underwriters propose to offer the shares to the public initially at the
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $0.55 per share. The
Underwriters may allow to selected dealers, and such dealers may reallow a
concession not in excess of $0.10 per share to certain other dealers. After the
initial public offering of the Common Shares, the offering price and other
selling terms may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable at any
time during the 30-day period after the date of this Prospectus, to purchase up
to an additional 450,000 Common Shares at the initial public offering price set
forth on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purposes
of covering over-allotments, if any, in connection with the Offering. To the
extent such option is exercised, each Underwriter will be obligated, subject to
certain conditions, to purchase approximately the

52
<PAGE> 53

same percentage of such additional shares as the number of shares set forth next
to such Underwriter's name in the preceding table bears to the total number of
shares listed in the table.

The Company and the executive officers, directors and certain shareholders
and employees of the Company have agreed not to offer, sell, contract to sell,
grant any option to purchase, or otherwise dispose of any Common Shares for a
period of 180 days after the date of this Prospectus without the written consent
of the Representatives. See "Shares Eligible for Future Sale."

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act or to contribute to
payments that the Underwriters may be required to make in respect thereof.

Prior to the Offering, there has not been any public market for the Common
Shares. Consequently, the initial public offering price for the Common Shares
included in the Offering has been determined by negotiations between the Company
and the Representatives. Among the factors considered in determining such price
were the history of and prospects for the Company's business and the industry in
which it competes, an assessment of the Company's management and the present
state of the Company's development, the past and present revenues and earnings
of the Company, the prospects for growth of the Company's revenues and earnings,
the current state of the economy in the United States and the current level of
economic activity in the industry in which the Company competes and in related
or comparable industries, and currently prevailing conditions in the securities
markets, including current market valuations of publicly traded companies that
are comparable to the Company.

LEGAL MATTERS

The validity of the issuance of the Common Shares offered hereby will be
passed upon for the Company by Calfee, Halter & Griswold, Cleveland, Ohio.
Certain legal matters will be passed upon for the Underwriters by Willkie Farr &
Gallagher, New York, New York.

EXPERTS

The financial statements of Collaborative Clinical Research, Inc. at
December 31, 1995 and 1994, and for each of the three years in the period ended
December 31, 1995, and the balance sheets of GFI Pharmaceutical Services, Inc.
at December 31, 1995 and 1994, and the statements of income and cash flows for
each of the three years in the period ended December 31, 1995, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Shares offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, part of which has been omitted in accordance
with the rules and regulations of the Commission. For further information about
the Company and the Common Shares offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as part thereof.
Although the descriptions in this Prospectus of the contracts or other documents
referred to herein address the material terms thereof, statements contained in
this Prospectus as to the contents of any contract or any other referenced
document are not necessarily complete, and in each instance, reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement.

53
<PAGE> 54

The Registration Statement (with exhibits and schedules thereto) can be
inspected and copied at the public reference facilities maintained by the
Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the Commission's regional offices located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates.

54
<PAGE> 55

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------------
<S> <C>
COLLABORATIVE CLINICAL RESEARCH, INC.
Report of Independent Auditors............................................. F-2
Consolidated Balance Sheets at December 31, 1994 and 1995 and March 31,
1996 (unaudited) and Pro Forma at March 31, 1996 (unaudited)............ F-3
Consolidated Statements of Operations for each of the three years in the
period ended December 31, 1995 and for the three month periods ended
March 31, 1995 and 1996 (unaudited)..................................... F-4
Consolidated Statements of Shareholders' Equity for each of the three years
in the period ended December 31, 1995 and for the three month period
ended March 31, 1996 (unaudited)........................................ F-5
Consolidated Statements of Cash Flows for each of the three years in the
period ended December 31, 1995 and for the three month periods ended
March 31, 1995 and 1996 (unaudited)..................................... F-6
Notes to Consolidated Financial Statements................................. F-7
GFI PHARMACEUTICAL SERVICES, INC.
Report of Independent Auditors............................................. F-16
Balance Sheets at December 31, 1994 and 1995............................... F-17
Statements of Income for each of the three years in the period ended
December 31, 1995 and for the month ended January 31, 1996
(unaudited)............................................................. F-18
Statements of Cash Flows for each of the three years in the period ended
December 31, 1995 and for the month ended January 31, 1996
(unaudited)............................................................. F-19
Notes to Financial Statements.............................................. F-20
PRO FORMA CONSOLIDATED FINANCIAL DATA
Introduction............................................................... F-23
Pro Forma Consolidated Balance Sheet at March 31, 1996..................... F-24
Notes to Pro Forma Consolidated Balance Sheet.............................. F-25
Pro Forma Consolidated Statements of Operations for the year ended December
31, 1995 and for the three months ended March 31, 1996
and Notes thereto....................................................... F-26
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Collaborative Clinical Research, Inc.

We have audited the accompanying balance sheets of Collaborative Clinical
Research, Inc. as of December 31, 1994 and 1995, and the related statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Collaborative Clinical
Research, Inc. at December 31, 1994 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
January 31, 1996, except as to the first paragraph of Note 6 and Note 11 as to
which the date is June 10, 1996

F-2
<PAGE> 57

COLLABORATIVE CLINICAL RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------ MARCH 31, MARCH 31,
1994 1995 1996 1996
---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $1,116,815 $ 1,156,925 $ 406,361 $ 406,361
Short-term investments................................ 2,988,498 1,854,396 -- --
Accounts receivable (less allowance for doubtful
accounts of $65,000 and $89,000 as of December 31,
1994 and 1995 and $165,500 as of March 31, 1996).... 1,201,304 2,936,119 4,964,659 4,964,659
Prepaid expenses...................................... 91,331 715,101 952,722 952,722
---------- ----------- ----------- -----------
Total current assets........................... 5,397,948 6,662,541 6,323,742 6,323,742
Property and equipment:
Equipment............................................. 197,122 403,258 1,210,700 1,210,700
Leasehold improvements................................ -- 35,586 35,586 35,586
---------- ----------- ----------- -----------
197,122 438,844 1,246,286 1,246,286
Less accumulated depreciation......................... 78,530 140,030 191,120 191,120
---------- ----------- ----------- -----------
118,592 298,814 1,055,166 1,055,166
Goodwill, less accumulated amortization of $48,350 as of
March 31, 1996........................................ -- -- 5,753,998 5,753,998
Other assets............................................ 6,165 25,818 218,022 218,022
Investment in HRI....................................... -- 37,937 33,418 33,418
---------- ----------- ----------- -----------
Total assets................................... $5,522,705 $ 7,025,110 $13,384,346 $13,384,346
========== =========== ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank................................. $ -- $ -- $ 1,000,000 $ 1,000,000
Notes and other acquisition payables to officers...... -- -- 4,000,000 4,000,000
Accounts payable...................................... 734,474 2,696,746 3,506,703 3,506,703
Accrued expenses...................................... 162,703 445,859 476,046 476,046
Deferred revenue...................................... 621,616 559,213 1,012,772 1,012,772
---------- ----------- ----------- -----------
Total current liabilities...................... 1,518,793 3,701,818 9,995,521 9,995,521
Shareholders' equity:
Series A, B and C Convertible Preferred Shares:
$.001 par value, authorized 2,860,000 shares; issued
and outstanding 2,062,929 and 2,182,353 shares as of
December 31, 1994 and 1995, 2,182,353 shares as of
March 31, 1996 and 0 shares upon conversion of
Preferred Shares at the closing of the initial
public offering..................................... 2,063 2,182 2,182 --
Additional paid-in capital.......................... 4,848,004 4,847,885 4,847,885 --
Common Shares without par value, authorized 3,660,000
shares; issued and outstanding 400,000 and 402,500
shares as of December 31, 1994 and 1995, 413,258
shares as of March 31, 1996 and 2,614,391 shares
upon conversion of Preferred Shares at the closing
of the initial public offering...................... 11,906 84,011 93,579 4,943,646
Accumulated deficit................................... (858,061) (1,610,786) (1,554,821) (1,554,821)
---------- ----------- ----------- -----------
Total shareholders' equity..................... 4,003,912 3,323,292 3,388,825 3,388,825
---------- ----------- ----------- -----------
Total liabilities and shareholders' equity..... $5,522,705 $ 7,025,110 $13,384,346 $13,384,346
========== =========== ============ ============
</TABLE>

See accompanying notes.

F-3
<PAGE> 58

COLLABORATIVE CLINICAL RESEARCH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................... $ 1,423,177 $ 4,046,884 $10,452,920 $1,919,776 $5,302,216
Direct costs.............. 974,883 2,907,895 8,490,465 1,451,209 4,012,607
----------- ----------- ----------- ---------- ----------
Gross profit.............. 448,294 1,138,989 1,962,455 468,567 1,289,609
Selling, general and
administrative
expenses................ 686,581 1,386,519 2,770,590 641,423 1,092,613
Depreciation and
amortization............ 117,794 58,631 61,500 11,500 99,438
----------- ----------- ----------- ---------- ----------
Income (loss) from
operations.............. (356,081) (306,161) (869,635) (184,356) 97,558
Other income (expense):
Interest income......... 5,129 92,063 222,054 58,294 17,893
Interest expense........ -- -- -- -- (36,267)
Loss from joint
venture.............. -- -- (105,144) -- (4,519)
----------- ----------- ----------- ---------- ----------
Income (loss) before
income taxes............ (350,952) (214,098) (752,725) (126,062) 74,665
Income tax expense........ -- -- -- -- 18,700
----------- ----------- ----------- ---------- ----------
Net income (loss)......... $ (350,952) $ (214,098) $ (752,725) $ (126,062) $ 55,965
========== ========== ========== ========= =========
Net income (loss) per
share................... $ (0.25) $ (0.10) $ (0.24) $ (0.04) $ 0.02
========== ========== ========== ========= =========
Weighted average common
shares outstanding...... 1,406,872 2,182,277 3,102,272 3,106,647 3,096,273
========== ========== ========== ========= =========
</TABLE>

See accompanying notes.

F-4
<PAGE> 59

COLLABORATIVE CLINICAL RESEARCH, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES C
SERIES A SERIES B PREFERRED
PREFERRED SHARES PREFERRED SHARES SHARES
------------------------ ------------------------ ----------
NUMBER NUMBER NUMBER
OF SHARES PAR VALUE OF SHARES PAR VALUE OF SHARES
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993.......................... 500,000 $500 50,000 $ 50 --
Issuance of Series B Preferred Shares.............. 16,667 17
Stock compensation.................................
Net loss...........................................
---------- --- ---------- ----- ----------
BALANCE AT DECEMBER 31, 1993........................ 500,000 500 66,667 67 --
Issuance of Series C Preferred Shares.............. 1,412,367
Series A and Series C Preferred Share dividends.... 30,604 31 53,291
Stock compensation.................................
Net loss...........................................
---------- --- ---------- ----- ----------
BALANCE AT DECEMBER 31, 1994........................ 530,604 531 66,667 67 1,465,658
Exercise of Common Share Options...................
Series A and Series C Preferred Share dividends.... 9,396 9 110,028
Stock compensation.................................
Net loss...........................................
---------- --- ---------- ----- ----------
BALANCE AT DECEMBER 31, 1995........................ 540,000 540 66,667 67 1,575,686
(Unaudited)--
Exercise of Common Share Options...................
Stock compensation.................................
Net income.........................................
---------- --- ---------- ----- ----------
BALANCE AT MARCH 31, 1996 (UNAUDITED)............... 540,000 $540 66,667 $ 67 1,575,686
=========== ==== =========== ===== ===========

COMMON SHARES
ADDITIONAL ------------------------
PAID-IN NUMBER STATED ACCUMULATED
PAR VALUE CAPITAL OF SHARES AMOUNT DEFICIT
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993.......................... $ -- $ 642,815 400,000 $ 3,500 $ (293,011)
Issuance of Series B Preferred Shares.............. 24,983
Stock compensation................................. 1,781
Net loss........................................... (350,952)
---------- ---------- ---------- ---------- -----------
BALANCE AT DECEMBER 31, 1993........................ -- 667,798 400,000 5,281 (643,963)
Issuance of Series C Preferred Shares.............. 1,412 4,180,290
Series A and Series C Preferred Share dividends.... 53 (84)
Stock compensation................................. 6,625
Net loss........................................... (214,098)
---------- ---------- ---------- ---------- -----------
BALANCE AT DECEMBER 31, 1994........................ 1,465 4,848,004 400,000 11,906 (858,061)
Exercise of Common Share Options................... 2,500 375
Series A and Series C Preferred Share dividends.... 110 (119)
Stock compensation................................. 71,730
Net loss........................................... (752,725)
---------- ---------- ---------- ---------- -----------
BALANCE AT DECEMBER 31, 1995........................ 1,575 4,847,885 402,500 84,011 (1,610,786)
(Unaudited)--
Exercise of Common Share Options................... 10,758 1,915
Stock compensation................................. 7,653
Net income......................................... 55,965
---------- ---------- ---------- ---------- -----------
BALANCE AT MARCH 31, 1996 (UNAUDITED)............... $1,575 $4,847,885 413,258 $ 93,579 $(1,554,821)
=========== =========== =========== =========== ============

TOTAL
----------
<S> <C>
BALANCE AT JANUARY 1, 1993.......................... $ 353,854
Issuance of Series B Preferred Shares.............. 25,000
Stock compensation................................. 1,781
Net loss........................................... (350,952)
----------
BALANCE AT DECEMBER 31, 1993........................ 29,683
Issuance of Series C Preferred Shares.............. 4,181,702
Series A and Series C Preferred Share dividends....
Stock compensation................................. 6,625
Net loss........................................... (214,098)
----------
BALANCE AT DECEMBER 31, 1994........................ 4,003,912
Exercise of Common Share Options................... 375
Series A and Series C Preferred Share dividends....
Stock compensation................................. 71,730
Net loss........................................... (752,725)
----------
BALANCE AT DECEMBER 31, 1995........................ 3,323,292
(Unaudited)--
Exercise of Common Share Options................... 1,915
Stock compensation................................. 7,653
Net income......................................... 55,965
----------
BALANCE AT MARCH 31, 1996 (UNAUDITED)............... $3,388,825
===========
</TABLE>

See accompanying notes.

F-5
<PAGE> 60

COLLABORATIVE CLINICAL RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................... $ (350,952) $ (214,098) $ (752,725) $ (126,062) $ 55,965
Adjustments to reconcile net income (loss)
to net cash used in operating
activities:
Equity loss in HRI...................... -- -- 105,144 -- 4,519
Depreciation and amortization........... 117,794 58,631 61,500 11,500 99,438
Provision for doubtful accounts......... 40,000 25,000 24,000 6,000 16,500
Accretion of discount on investments.... -- (60,584) (143,526) (36,418) (3,782)
Stock compensation expense.............. 1,781 6,625 71,730 34,650 7,653
Changes in operating assets and
liabilities:
Accounts receivable................... (184,941) (934,059) (1,758,815) (472,854) (827,866)
Prepaid expenses...................... (32,490) (45,832) (623,770) 31,637 (221,522)
Other assets.......................... -- (5,815) (19,653) (1,090) (192,204)
Accounts payable and accrued
expenses........................... 234,502 502,628 2,245,428 460,858 392,514
Deferred revenue...................... (9,573) 489,069 (62,403) (1,185) 438,321
---------- ---------- ---------- ---------- ----------
Net cash used in operating activities... (183,879) (178,435) (853,090) (92,964) (230,464)
INVESTING ACTIVITIES
Purchases of property and equipment....... (50,159) (65,036) (241,722) (112,140) (251,740)
Purchase of businesses (net of cash
acquired)............................... -- -- -- -- (1,997,044)
Maturities of short-term investments...... -- -- 3,075,700 1,255,000 1,858,178
Purchases of short-term investments....... -- (2,927,914) (1,798,072) (751,423) --
Investment in HRI......................... -- -- (143,081) -- --
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) investing
activities............................ (50,159) (2,992,950) 892,825 391,437 (390,606)
FINANCING ACTIVITIES
Borrowings on line of credit.............. 22,615 100,000 -- -- 1,021,111
Payments on line of credit................ (52,403) (200,710) -- -- (1,152,520)
Proceeds from issuance of shares.......... 25,000 4,181,702 375 -- 1,915
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing
activities............................ (4,788) 4,080,992 375 -- (129,494)
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents............................... (238,826) 909,607 40,110 298,473 (750,564)
Cash and cash equivalents at beginning
of period................................. 446,034 207,208 1,116,815 1,116,815 1,156,925
---------- ---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD................................. $ 207,208 $1,116,815 $1,156,925 $1,415,288 $ 406,361
========== ========== ========== ========== ==========
CASH PAID DURING THE PERIOD FOR
INTEREST.................................. $ -- $ -- $ -- $ -- $ 3,767
========== ========== ========== ========== ==========
</TABLE>

See accompanying notes.

F-6
<PAGE> 61

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND UNAUDITED FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Collaborative Clinical Research, Inc. (the "Company") manages a network of
affiliated clinical research sites. The Company provides sponsors of clinical
research (primarily pharmaceutical and biotechnology companies and, in selected
cases, contract research organizations) with an innovative, time-efficient
method of site selection and clinical trial management.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary GFI Pharmaceutical Services, Inc. ("GFI"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

The results of operations of the business acquired (GFI) have been included
in the consolidated financial statements of the Company from the date of
acquisition (See Note 8).

INTERIM FINANCIAL DATA

Interim financial information as of March 31, 1996 and for the three months
ended March 31, 1995 and 1996 is unaudited. In the opinion of the Company, this
financial information includes all adjustments, consisting solely of normal
recurring adjustments, necessary to fairly present the financial information set
forth. The results for the three months ended March 31, 1996 may not be
indicative of operating results for the full year.

REVENUE RECOGNITION

Revenue and related direct costs of revenue are recognized as specific
contract terms are fulfilled under the percentage-of-completion method (the
units-of-delivery method). Fees for individual contract services are fixed upon
execution of the contract and provide for payment for all work performed.
Pass-through costs that are paid directly by the Company's clients, and for
which the Company does not bear the risk of performance, are excluded from
revenue. The termination of a contract results in no material adjustments to the
revenue or costs previously recognized.

The following sets forth the revenue generated by customers who accounted
for more than 10% of the Company's revenue during each of the periods presented
(in thousands):

F-7
<PAGE> 62

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER ENDED
31, MARCH 31,
-------------------- -----------------
CUSTOMER 1993 1994 1995 1995 1996
----------------------------------------- ---- ---- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
A $252 $522 $ * $ * $ *
B 166 -- -- -- --
C 164 * * * *
D 215 * -- -- *
E -- 950 7,935 1,439 2,516
F -- 654 -- -- --
G -- -- * -- 836
<FN>
* Less than 10% of revenue.

</TABLE>

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Investments in cash
equivalents are carried at cost which approximates market value.

PREPAID EXPENSES

Included in prepaid expenses is $35,500 and $670,600 at December 31, 1994
and 1995, respectively, and $813,900 at March 31, 1996 (unaudited) advanced to
vendors for services to be provided under current contracts.

SHORT-TERM INVESTMENTS

Short-term investments are comprised of U.S. Treasury securities with
maturities of one year or less. These securities are stated at amortized cost,
which approximates fair value. The Company has the positive intent and ability
to hold the securities to maturity.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciable assets consist of
medical, office and computer equipment. Depreciation on equipment is computed
using the straight-line method over estimated useful lives of 5 to 7 years.
Leasehold improvements are amortized using the straight-line method over the
lesser of the assets' estimated useful life or the lease term (4 years).

DEFERRED REVENUE

Deferred revenue represents cash advances received in excess of revenue
earned on on-going contracts. Payment terms vary with each contract but may
include an initial payment at the time the contract is executed, with future
payments dependent upon the completion of certain contract phases or targeted
milestones. In the event of contract cancellation, the Company is entitled to
payment for all work performed through the point of cancellation.

F-8
<PAGE> 63

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. ACCOUNTING POLICIES (CONTINUED)
NET INCOME (LOSS) PER SHARE

Net income (loss) per share is determined by dividing net income (loss)
applicable to Common Shares by the weighted average number of Common Shares and
Common Share equivalents outstanding during the year. Common Share equivalents
consist of Convertible Preferred Shares (all of which will convert, according to
their terms, upon completion of the Company's initial public offering -- see
Notes 6 and 11) and Common Shares which are issuable upon exercise of
outstanding options and warrants to purchase Common Shares.

Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common Share options, Preferred Share dividends and Common Share
warrants granted by the Company during the twelve months preceding the offering
date have been included in the calculation of Common Shares and Common Share
equivalents outstanding as if they were outstanding for all periods presented,
using the treasury stock method (at the initial public offering price of $13.50
per share). 1995 pro forma loss per share, reflecting the acquisition of GFI and
the use of proceeds from the initial public offering to reduce outstanding debt
and related interest expense as if the offering had occurred on January 1, 1995,
was $(0.26).

STOCK BASED COMPENSATION

The Company accounts for stock based compensation in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees.

GOODWILL

The Company has classified as goodwill the cost in excess of fair value of
the net assets acquired in purchase transactions. Goodwill is amortized over a
20-year period using the straight-line method. The carrying value of goodwill is
evaluated if circumstances indicate a possible impairment in value. If
undiscounted cash flows over the remaining amortization period indicate that
goodwill may not be recoverable, the carrying value of goodwill will be reduced
by the estimated shortfall of cash flows on a discounted basis.

INCOME TAXES

The Company follows Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. This accounting standard requires that the
liability method be used in accounting for income taxes. Under this accounting
method, deferred tax assets and liabilities are determined based on the
differences between the financial reporting basis and the tax basis of assets
and liabilities and are measured using the enacted tax rates and laws that apply
in the periods in which the deferred tax asset or liability is expected to be
realized or settled. A valuation allowance is provided for deferred tax assets
for which realization currently is not certain.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that might affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

F-9
<PAGE> 64

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS

In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
This requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying amounts. The Company adopted Statement 121 in the first quarter of 1996
and there was no effect to the financial position or results of operations for
the adoption.

2. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- 1996
1994 1995 (UNAUDITED)
---------- ---------- -----------
<S> <C> <C> <C>
Billed............................. $ 645,697 $2,729,189 $ 4,053,398
Unbilled........................... 620,607 295,930 1,076,761
Allowance for doubtful accounts.... (65,000) (89,000) (165,500)
---------- ---------- -----------
$1,201,304 $2,936,119 $ 4,964,659
========= ========= =========
</TABLE>

3. FINANCING ARRANGEMENTS

The Company has a line of credit agreement with a bank which provides for
borrowings up to $5.0 million that bears interest at rates not to exceed 1%
above the bank's prime rate (no amounts are outstanding at December 31, 1995).
Substantially all of the Company's assets are pledged as collateral on the line
of credit. The line of credit agreement prohibits the Company from paying cash
dividends on its Common Shares. At March 31, 1996, $1,000,000 was outstanding on
this line of credit.

4. INCOME TAXES

At December 31, 1995, the Company had net operating loss carryforwards of
approximately $1.4 million which expire in the years 2006 through 2010. The
significant components of the Company's deferred tax assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...... $ 189,000 $ 238,000 $ 568,000
Allowances and accruals............... 32,000 30,000 70,000
--------- --------- ---------
221,000 268,000 638,000
Valuation allowance................... (221,000) (268,000) (638,000)
--------- --------- ---------
Net deferred tax assets recorded...... $ 0 $ 0 $ 0
======== ======== ========
</TABLE>

F-10
<PAGE> 65

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

4. INCOME TAXES (CONTINUED)
The valuation allowance is primarily provided for the deferred tax assets
associated with the net operating loss carryforwards. During 1994 and 1995, the
valuation allowance increased primarily due to the uncertainty of realizing the
net operating loss carryforwards.

5. OPERATING LEASES

The Company leases certain office equipment and space. Rent expense
relating to these operating leases was approximately $42,000, $46,000 and
$123,000 in 1993, 1994 and 1995, respectively and $29,000 and $110,000 for the
three months ended March 31, 1995 and 1996, respectively (unaudited). Future
minimum lease payments for the Company, including GFI, under noncancelable
operating leases as of December 31, 1995 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
--------------------------------------------------- ----------
<S> <C>
1996........................................ $ 521,900
1997........................................ 508,200
1998........................................ 468,600
1999........................................ 361,200
2000........................................ 328,200
----------
$2,188,100
=========
</TABLE>

6. SHAREHOLDERS' EQUITY

Convertible Preferred Shares

The Series A, B and C Convertible Preferred Shares ("Preferred Shares") are
convertible to Common Shares on a one-for-one basis, have voting rights and have
liquidation preferences over Common Shares. Effective upon the closing of an
initial public offering, all outstanding Preferred Shares will automatically be
converted into Common Shares. The Company is required to convert the Preferred
Shares to Common Shares in equal annual installments over a three-year period
beginning March 25, 1999. The conversion of 2,182,353 Preferred Shares into
Common Shares is reflected in the unaudited pro forma balance sheet at March 31,
1996.

The Series A Preferred Shares have a dividend rate of $0.10 and dividends
are cumulative. Such dividends accrue on or after the second anniversary of the
original issue date. Dividends accrued between the second and third anniversary
of the original issue date were paid in the form of Series A Preferred Shares.
From and after the third anniversary of the original issue date, dividends are
payable in the form of Series C Preferred Shares. Dividends on Series B
Preferred Shares are discretionary or accrue to the extent dividends are
declared on Common Shares. The Series C Preferred Shares have a dividend rate of
$0.24 and dividends are cumulative. Dividends on the Series C Preferred Shares
are payable in Series C Preferred Shares.

Common Share Warrants

At December 31, 1995, the Company had outstanding warrants to purchase an
aggregate of 136,000 Common Shares (68,000 Common Shares at an exercise price of
$5.50 per share and 68,000

F-11
<PAGE> 66

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

6. SHAREHOLDERS' EQUITY (CONTINUED)
Common Shares at an exercise price of $7.50 per share). These warrants were
issued in conjunction with the formation of Health Research Innovations, L.L.C.
("HRI") (see Note 9). The warrants are subject to early expiration in the event
of an initial public offering.

Reserved Shares

At December 31, 1995, the Company had reserved 492,333 Common Shares
(700,000 at March 31, 1996 (unaudited)) for the exercise of Common Share options
and 2,182,353 and 136,000 Common Shares for the conversion of outstanding
Preferred Shares and Common Shares issuable upon the exercise of outstanding
warrants, respectively.

7. SHARE OPTION PLANS

The Company has four share option plans.

The 1994 Directors' Share Option Plan ("Director Plan"), was established by
the Company in July, 1994. The Director Plan provides for the granting of a
maximum of 11,000 options to purchase Common Shares to directors of the Company
for their participation in board of directors' meetings. The option price per
share is equal to the fair market value of a Common Share on the date of grant.
Options fully vest after six months and one day from the date of grant, and all
options granted under the Director Plan expire ten years after the grant date.

The 1992 Stock Incentive Plan ("1992 Plan"), was approved by the Company's
shareholders on September 23, 1992. The 1992 Plan provides for the granting of a
maximum of 481,333 options to purchase Common Shares to key employees and
consultants of the Company and its affiliates. Prior to May 1995, options to
purchase 316,499 Common Shares were granted at exercise prices of less than fair
market value of a Common Share on the date of grant. The Company has recognized
compensation expense related to these Common Share options of $1,781 in 1993,
$6,625 in 1994, $71,730 in 1995, and $7,653 for the three months ended March 31,
1996 (unaudited). Options awarded under the plan vest in equal increments over a
three to five year period commencing on the first anniversary date of the grant.
If all options vest, additional compensation expense of $69,000 will be
recognized through 1998.

Subsequent to April 1995, all options to purchase Common Shares awarded
under the 1992 Plan were granted at exercise prices that represented the fair
market value of a Common Share on the date of grant. All options granted under
the 1992 Plan expire ten years after the grant date.

The 1996 Outside Directors' Stock Option Plan ("1996 Director Plan"), was
established by the Company in February 1996. The 1996 Director Plan provides for
the granting of a maximum of 25,000 options to purchase Common Shares to outside
directors of the Company. The option price per share is equal to the fair market
value of a Common Share on the date of grant. Options fully vest after one year
and one day from the date of grant, and all options granted under the 1996
Director Plan expire ten years after the grant date.

The 1996 Key Employees and Consultants Stock Option Plan ("1996 Plan"), was
established by the Company in February 1996. The 1996 Plan provides for the
granting of a maximum of 182,667 options to purchase Common Shares to key
employees and consultants of the Company and its affiliates. Vesting of options
awarded under the plan is determined by the Company's Compensation Commit-

F-12
<PAGE> 67

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

7. SHARE OPTION PLANS (CONTINUED)
tee, as appointed by the Board of Directors, and all options granted under the
1996 Plan expire ten years after the grant date.

Information regarding the Company's share option plan is summarized below:

<TABLE>
<CAPTION>
1996
1992 DIRECTOR 1996 DIRECTOR
PLAN PLAN PLAN PLAN
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Shares under option:
Outstanding at January 1, 1993.................... 55,000 -- -- --
Granted........................................ 77,500 -- -- --
Exercised...................................... -- -- -- --
Canceled....................................... -- -- -- --
-------- -------
Outstanding at December 31, 1993.................. 132,500 -- -- --
Granted........................................ 176,999 2,666 -- --
Exercised...................................... -- -- -- --
Canceled....................................... (7,500) -- -- --
-------- -------
Outstanding at December 31, 1994.................. 301,999 2,666 -- --
Granted........................................ 190,000 6,000 -- --
Exercised...................................... (2,500) -- -- --
Canceled....................................... (10,666) -- -- --
-------- -------
Outstanding at December 31, 1995.................. 478,833 8,666 -- --
Granted........................................ -- 1,334 -- 9,000
Exercised...................................... (10,758) -- -- --
Canceled....................................... -- -- -- --
-------- -------
Outstanding at March 31, 1996 (unaudited)......... 468,075 10,000 -- 9,000
======== =======
Options available to grant at:
March 31, 1996 (unaudited)........................ -- 1,000 182,667 16,000
======== =======
Average option price per share:
At December 31, 1993.............................. $ 0.15 $ -- $ -- $ --
At December 31, 1994.............................. 0.19 0.80 -- --
At December 31, 1995.............................. 1.85 3.45 -- --
At March 31, 1996 (unaudited)..................... 1.88 3.85 -- 9.60
Options exercisable:
At December 31, 1993.............................. 12,500 -- -- --
At December 31, 1994.............................. 41,250 -- -- --
At December 31, 1995.............................. 118,183 5,666 -- --
At March 31, 1996 (unaudited)..................... 129,800 7,665 -- --
Average price of options exercised:
Year ended December 31, 1993...................... $ -- $ -- $ -- $ --
Year ended December 31, 1994...................... -- -- -- --
Year ended December 31, 1995...................... 0.15 -- -- --
Three months ended March 31, 1996 (unaudited)..... 0.18 -- -- --
</TABLE>

F-13
<PAGE> 68

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

8. ACQUISITION

Effective January 31, 1996, the Company acquired GFI, located in
Evansville, Indiana, which is not included in the audited financial statements
at December 31, 1995. The acquisition was accounted for under the purchase
method. The purchase price was $6.0 million and consisted of $2.0 million each
of cash, Common Shares and notes payable. The notes payable are due in 1996 and
bear interest at prime plus 1%.

Unaudited pro forma data for the year ended December 31, 1995 and three
months ended March 31, 1996, as though the Company had acquired GFI at the
beginning of 1995 are set forth below:

<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
Revenue......................... $16,439,000 $5,819,000
Net loss........................ (1,085,000) (25,000)
</TABLE>

9. INVESTMENT IN HRI

In June 1995, the Company entered into an equally-owned joint venture, HRI,
with Pharmaceutical Marketing Services, Inc. ("PMSI") to collect health care
information. Through HRI, the Company and PMSI will market their health care
data collection and analysis capabilities to the health care industry. The
Company accounts for its investment in HRI using the equity method.

Summarized financial information of HRI as of December 31, 1995 and March
31, 1996 (unaudited) and for the six month period from inception (July 1, 1995)
to December 31, 1995 and for the three months ended March 31, 1996 (unaudited)
is as follows:

DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
(UNAUDITED)
<S> <C> <C>
Current assets......................... $ 88,000 $ 216,000
Noncurrent assets...................... 14,000 12,000
Current liabilities.................... 61,000 196,000
Shareholders' equity................... 41,000 32,000
Revenue................................ 40,000 114,000
Gross profit........................... 33,000 89,000
Net loss............................... (210,000) (9,000)
</TABLE>

F-14
<PAGE> 69

COLLABORATIVE CLINICAL RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

10. QUARTERLY DATA (UNAUDITED)

Selected quarterly data is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
---------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue............................... $ 742 $1,105 $ 904 $1,296 $4,047
Gross profit.......................... 289 266 246 338 1,139
Loss from operations.................. (3 ) (37 ) (132 ) (134 ) (306 )
Net loss.............................. (3 ) (37 ) (91 ) (83 ) (214 )
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenue............................... $1,920 $2,116 $2,751 $3,666 $10,453
Gross profit.......................... 469 358 459 676 1,962
Income (loss) from operations......... (184 ) (338 ) (367 ) 19 (870 )
Net income (loss)..................... (126 ) (287 ) (375 ) 35 (753 )
</TABLE>

11. SUBSEQUENT EVENTS

On June 10, 1996, the Board authorized the sale of up to 3,450,000 Common
Shares to the public. On May 31, 1996, the Board declared and issued 18,780
Preferred Shares for stock dividends accrued since December 31, 1995. All
outstanding Preferred Shares automatically converted into Common Shares
effective upon the closing of the Company's initial public offering.

F-15
<PAGE> 70

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
GFI Pharmaceutical Services, Inc.

We have audited the accompanying balance sheets of GFI Pharmaceutical
Services, Inc. as of December 31, 1994 and 1995, and the related statements of
income and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GFI Pharmaceutical Services,
Inc. at December 31, 1994 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Cleveland, Ohio
January 31, 1996

F-16
<PAGE> 71

GFI PHARMACEUTICAL SERVICES, INC.

BALANCE SHEETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 3,105 $ 1,350
Accounts receivable (less allowance for doubtful accounts
of $40,000 in 1994 and $60,000 in 1995)........................ 850,037 872,023
Prepaid expenses.................................................. 20,827 24,341
---------- ----------
Total current assets...................................... 873,969 897,714
Property and equipment:
Equipment......................................................... 744,519 961,385
Leasehold improvements............................................ 49,302 111,708
---------- ----------
793,821 1,073,093
Less accumulated depreciation and amortization.................... 373,804 522,254
---------- ----------
420,017 550,839
---------- ----------
Total assets.............................................. $1,293,986 $1,448,553
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 271,568 $ 189,437
Notes payable to bank............................................. 219,001 821,409
Accrued expenses.................................................. 151,766 136,710
Deferred revenue.................................................. 300,460 18,556
---------- ----------
Total current liabilities................................. 942,795 1,166,112
Shareholders' equity:
Common Shares, no par value; authorized 1,000 shares,
issued and outstanding, 100 shares............................. 20,000 20,000
Retained earnings................................................. 331,191 262,441
---------- ----------
Total shareholders' equity................................ 351,191 282,441
---------- ----------
Total liabilities and shareholders' equity................ $1,293,986 $1,448,553
========= =========
</TABLE>

See accompanying notes.

F-17
<PAGE> 72

GFI PHARMACEUTICAL SERVICES, INC.

STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MONTH ENDED
---------------------------------------- JANUARY 31,
1993 1994 1995 1996
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue................................... $4,166,040 $5,030,119 $5,986,444 $515,826
Direct costs.............................. 2,777,334 3,335,157 3,796,865 368,992
---------- ---------- ---------- ------------
Gross profit.............................. 1,388,706 1,694,962 2,189,579 146,834
Selling, general and administrative
expenses................................ 1,075,247 1,342,092 1,741,632 187,006
Depreciation and amortization............. 113,946 117,098 148,450 14,799
---------- ---------- ---------- ------------
Operating income (loss)................... 199,513 235,772 299,497 (54,971)
Interest expense.......................... 20,872 9,380 51,847 7,645
---------- ---------- ---------- ------------
Net income (loss)......................... $ 178,641 $ 226,392 $ 247,650 $(62,616)
========= ========= ========= =========
</TABLE>

See accompanying notes.

F-18
<PAGE> 73

GFI PHARMACEUTICAL SERVICES, INC.

STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------- MONTH ENDED
1993 1994 1995 JANUARY 31, 1996
---------- ---------- ---------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................... $ 178,641 $ 226,392 $ 247,650 $ (62,616)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization............... 113,946 117,098 148,450 14,799
Loss on disposal of property
and equipment.............. 8,129 4,328 -- --
Provision for doubtful
accounts................... 20,000 20,000 20,000 --
Changes in operating assets
and liabilities:
Accounts receivable........ (78,306) (417,513) (41,986) (345,151)
Prepaid expenses........... 4,111 (10,609) (3,514) 8,242
Accounts payable and
accrued expenses........ 89,394 (49,393) (97,187) 134,048
Deferred revenue........... 86,116 55,688 (281,904) (3,318)
---------- ---------- ---------- ----------------
Net cash provided by (used
in) operating activities... 422,031 (54,009) (8,491) (253,996)
INVESTING ACTIVITIES
Purchases of property and equipment.. (89,839) (157,251) (279,272) (19,662)
Proceeds from sale of property and
equipment......................... 9,000 600 -- --
---------- ---------- ---------- ----------------
Net cash used in investing
activities................. (80,839) (156,651) (279,272) (19,662)
FINANCING ACTIVITIES
Proceeds from borrowings of notes
payable........................... 2,558,529 1,541,626 4,945,408 310,000
Principal payments on notes
payable........................... (2,742,220) (1,303,073) (4,343,000) --
Dividends paid....................... (32,000) (166,800) (316,400) (36,320)
---------- ---------- ---------- ----------------
Net cash (used in) provided
by financing activities.... (215,691) 71,753 286,008 273,680
---------- ---------- ---------- ----------------
Increase (decrease) in cash and cash
equivalents....................... 125,501 (138,907) (1,755) 22
Cash and cash equivalents at
beginning of year................. 16,511 142,012 3,105 1,350
---------- ---------- ---------- ----------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................. $ 142,012 $ 3,105 $ 1,350 $ 1,372
========= ========= ========= ============
</TABLE>

See accompanying notes.

F-19
<PAGE> 74

GFI PHARMACEUTICAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND UNAUDITED FOR THE MONTH ENDED JANUARY 31, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

GFI Pharmaceutical Services, Inc. (the "Company") owns research facilities
for conducting Phase I through Phase IV clinical research and provides clinical
reference laboratory and Institutional Review Board services.

Effective January 31, 1996, the shareholders of the Company sold all of
their issued and outstanding common shares to Collaborative Clinical Research,
Inc., an Ohio corporation.

REVENUE RECOGNITION

Revenue and related direct costs of revenue are recognized as specific
contract terms are fulfilled under the percentage-of-completion method. Fees for
individual contract services are fixed upon execution of the contract, and are
typically less than one year, provide for payment for all work performed. The
termination of a contract results in no material adjustments to the revenue or
costs previously recognized.

For the years ended December 31, 1993, 1994 and 1995 revenue from major
customers was as follows (dollars in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------------------- ------------------- -------------------
PERCENT PERCENT PERCENT
CUSTOMER AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
- ----------------------- ------ ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
A $1,654 40% $517 10% $ * *%
B * * 528 10 * *
C * * 493 10 663 11
D * * 607 12 797 13
<FN>

* Less than 10% of revenue.

</TABLE>

CASH EQUIVALENTS

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciable assets consist of
medical, office and computer equipment. Depreciation on equipment is computed
using the straight-line method over estimated useful lives of 5 to 10 years.
Leasehold improvements are amortized using the straight-line method over the
lesser of the assets' estimated useful life or the lease term (5 years).

DEFERRED REVENUE

F-20
<PAGE> 75

GFI PHARMACEUTICAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. ACCOUNTING POLICIES (CONTINUED)
targeted milestones. In the event of contract cancellation, the Company is
entitled to payment for all work performed through the point of cancellation.

INCOME TAXES

The Company, with the consent of its shareholders, has elected to be taxed
under sections of the federal income tax laws (S Corporation election), which
provide that, in lieu of corporate income taxes, the shareholders separately
account for their pro rata share of the Company's income, deductions, losses and
credits. Accordingly, the accompanying statements do not include any provision
for federal or state income taxes.

USE OF ESTIMATES

2. FINANCING ARRANGEMENTS

The Company has $2,600,000 available through three lines of credit. Two
lines of credit bear interest at 1/4% above prime (8.75% at December 31, 1995).
At December 31, 1994 and 1995, the Company had an aggregate of $219,001 and
$821,409 outstanding on these two lines of credit, respectively. No amounts were
outstanding on a third line of credit at December 31, 1995 which bears interest
at 3/4% above prime. All three lines of credit are due in May 1996, and are
collateralized by personal guarantees from the Company's shareholders, accounts
receivable and equipment. Interest paid approximated interest expense in 1993,
1994 and 1995.

3. OPERATING LEASES

The Company leases certain equipment and office space under operating lease
commitments. Rent expense relating to these operating leases was approximately
$240,000, $280,000 and $405,000 in 1993, 1994 and 1995, respectively, and
$25,200 for the month ended January 31, 1996 (unaudited).

Future minimum lease payments under noncancelable operating leases as of
December 31, 1995 are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, AMOUNT
--------------------------------------------------- ----------
<S> <C>
1996........................................ $ 380,600
1997........................................ 369,500
1998........................................ 350,300
1999........................................ 346,100
2000........................................ 315,200
----------
$1,761,700
=========
</TABLE>

F-21
<PAGE> 76

GFI PHARMACEUTICAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. PROFIT SHARING PLAN

The Company began a profit sharing plan in 1995 with an Internal Revenue
Code Section 401(k) feature covering substantially all of their employees. Under
the terms of the plan, the Company will match up to 50% of the first 3% of
eligible employee contributions and 25% of the next 3%. Total Company
contributions to the plan were $10,100 in 1995.

In addition, the Company has a discretionary profit sharing plan
("Discretionary Plan") covering substantially all of its employees. The Company
recognized pension expense of $72,000, $80,000 and $40,000 in 1993, 1994 and
1995, respectively, in connection with its Discretionary Plan.

5. RELATED PARTY TRANSACTIONS

The Company is related through common ownership to another Indiana company,
Ohio Valley Institutional Review Board ("Ohio Valley"). Payments to Ohio Valley
were $42,000, $58,700 and $69,900 in 1993, 1994 and 1995, respectively. At
December 31, 1994 and 1995, the Company owed Ohio Valley $0 and $5,439,
respectively. In connection with the sale of all of the Company's issued and
outstanding Common Shares as discussed in Note 1, Ohio Valley was sold to
Collaborative Clinical Research, Inc.

F-22
<PAGE> 77

PRO FORMA CONSOLIDATED FINANCIAL DATA

The following unaudited Pro Forma Consolidated Balance Sheet as of March
31, 1996 and Consolidated Statements of Operations for the year ended December
31, 1995 and for the three months ended March 31, 1996, are based on the
historical financial statements of the Company. The Pro Forma Consolidated
Balance Sheet is adjusted to give effect to the exercise of Common Share
warrants, the issuance of Preferred Share dividends, the conversion of Preferred
Shares into Common Shares, and the sale of Common Shares from this offering and
the use of proceeds from this offering had these transactions occurred on March
31, 1996. The Pro Forma Consolidated Statements of Operations are adjusted to
give effect to the acquisition of GFI, and the related issuance of notes payable
and Common Shares as if these transactions had occurred as of the beginning of
the periods presented. The Pro Forma as Adjusted Consolidated Statements of
Operations is adjusted to give effect to the sale of Common Shares from this
offering and the use of proceeds from this offering had these transactions
occurred as of the beginning of the periods presented. The pro forma operating
results are not necessarily indicative of the operating results that would have
been achieved had the acquisition actually occurred at the beginning of each
period presented, nor do they purport to indicate the results of future
operations.

The Pro Forma Consolidated Financial Statements are based on the
assumptions set forth in the Notes to such statements and should be read in
conjunction with the related consolidated financial statements and Notes thereto
of the Company included elsewhere in this Prospectus.

F-23
<PAGE> 78

PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996

(IN THOUSANDS)

<TABLE>
<CAPTION>
OFFERING
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA
Assets:
Current assets:
Cash and cash equivalents............................ $ 406 $34,746(2,3) $35,152
Accounts receivable, net............................. 4,965 -- 4,965
Prepaid expenses..................................... 953 -- 953
------- ------- -------
Total current assets................................... 6,324 34,746 41,070
Property and equipment, net............................ 1,055 -- 1,055
Goodwill and other assets, net......................... 6,006 -- 6,006
------- ------- -------
Total assets.................................. $ 13,385 $34,746 $48,131
======= ======= =======
Current liabilities:
Notes payable to bank................................ $ 1,000 $(1,000)(3) $ --
Notes and other acquisition payables to officers..... 4,000 (4,000)(3,4) --
Accounts payable..................................... 3,507 -- 3,507
Accrued expenses..................................... 476 (33)(3) 443
Deferred revenue..................................... 1,013 -- 1,013
------- ------- -------
Total current liabilities..................... 9,996 (5,033) 4,963
Shareholders' equity:
Series A, B and C Convertible Preferred Shares....... 2 (2)(1) --
Additional paid-in capital........................... 4,848 (4,848)(1) --
Common Shares, without par value per share........... 94 44,629(1,2,3,4) 44,723
Retained earnings (deficit).......................... (1,555) -- (1,555)
------- ------- -------
Total shareholders' equity.................... 3,389 39,779 43,168
------- ------- -------
Total liabilities and shareholders' equity.... $ 13,385 $34,746 $48,131
======= ======= =======
</TABLE>

See accompanying Notes to Pro Forma Consolidated Balance Sheet.

F-24
<PAGE> 79

NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996

(1) Represents the issuance of 18,780 Preferred Shares on May 31, 1996 and the
issuance of an aggregate of 2,201,133 Common Shares in connection with the
conversion of all convertible Preferred Shares.

(2) Reflects the exercise of Common Share warrants to purchase 68,000 Common
Shares at $5.50 per share and 68,000 Common Shares at $7.50 per share.

(3) Reflects issuance of 3,000,000 Common Shares offered by the Company hereby
at the initial public offering price of $13.50 per share and the use of the
proceeds therefrom as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Gross proceeds from the offering................................. $ 40,500
Underwriting discounts and commissions........................... (2,835)
Estimated expenses of the offering............................... (770)
--------------
Net proceeds..................................................... 36,895
Repayment of notes payable to bank............................... (1,000)
Repayment of notes payable to officers and accrued interest...... (2,033)
--------------
Net increase in cash and cash equivalents........................ $ 33,862
===============
</TABLE>

(4) Reflects the issuance of 148,148 Common Shares to the former shareholders of
GFI to pay $2,000,000 of acquisition payables.

F-25
<PAGE> 80

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THREE MONTHS ENDED MARCH 31, 1996

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL ACQUISITION OFFERING PRO FORMA
---------------- PRO FORMA PRO PRO FORMA AS
CCR GFI(1) ADJUSTMENTS FORMA ADJUSTMENTS ADJUSTED
------- ------ ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $ 5,303 $ 516 $ -- $ 5,819 $ -- $ 5,819
Direct costs......................... 4,013 369 -- 4,382 -- 4,382
------- ------ ---------- --------- ---------- -----------
Gross profit......................... 1,290 147 -- 1,437 -- 1,437
Selling, general and administrative
expenses........................... 1,093 187 -- 1,280 -- 1,280
Depreciation and amortization........ 99 15 24(2) 138 -- 138
------- ------ ----------- --------- ---------- -----------
Operating income (loss).............. 98 (55) (24) 19 -- 19
Interest income...................... 18 -- (14)(3) 4 4
Interest expense..................... (36) (8) (7)(4) (51) 51(5) --
Equity loss HRI...................... (5) -- -- (5) -- (5)
------- ------ ----------- --------- ---------- -----------
Income (loss) before income taxes.... 75 (63) (45) (33) 51 18
Income tax expense (benefit)......... 19 -- (27) (8) 13 5
------- ------ ----------- --------- ---------- -----------
Net income (loss).................... $ 56 $ (63) $ (18) $ (25) $ 38 $ 13
======== ====== ============ ========== =========== ============
Net income (loss) per share.......... $ 0.02 $ (0.01) $ 0.00
======== ========== ===========
Shares used in the computation....... 3,096 3,244 6,310
======== ========== ===========
<FN>
(1) The historical statement of operations data for GFI for the year ended
December 31, 1995 represents the results of operations of GFI from January
1, 1995 to December 31, 1995. The historical statement of operations data
for GFI for the three months ended March 31, 1996, represents the results of
operations of GFI from January 1, 1996 through January 31, 1996, its date of
acquisition. The GFI acquisition has been accounted for as a purchase. See
Note 8 of Notes to the Consolidated Financial Statements of the Company and
the financial statements of GFI appearing elsewhere in this Prospectus.

(2) The adjustment to depreciation and amortization expense reflects the
amortization of goodwill over a 20-year period arising from the excess of
cost over fair value of net assets of GFI, as if it was acquired as of
January 1, 1995.

(3) The adjustment to interest income reflects the reduction that would have
occurred had the consideration in the form of cash and investments for the
acquisition of GFI been paid on January 1, 1995.

</TABLE>

F-26
<PAGE> 81

(4) The adjustment to interest expense consists of: (i) the additional interest
expense that would have been incurred had the consideration in the form of
notes payable for the acquisition of GFI been issued on January 1, 1995; and
(ii) the reduction of interest expense had the retirement of notes payable
of GFI occurred on January 1, 1995.

(5) The adjustment to interest expense reflects the retirement of all
outstanding notes payable of the Company by applying a portion of the
estimated net proceeds of the offering as more fully described under "Use of
Proceeds" as if the offering had occurred on January 1, 1995.

F-27
<PAGE> 82

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 83

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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON IS AUTHORIZED
IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATION NOT CONTAINED HEREIN AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE COMMON SHARES OFFERED HEREBY, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION TO BUY ANY OF THE SECURITIES
OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary........................... 3
Risk Factors................................. 6
Use of Proceeds.............................. 12
Dividend Policy.............................. 12
Capitalization............................... 13
Dilution..................................... 14
Selected Consolidated Financial Data......... 15
Management's Discussion and Analysis of
Results of Operations and Financial
Condition.................................. 16
Business..................................... 23
Management................................... 36
Certain Transactions......................... 45
Principal Shareholders....................... 47
Description of Capital Stock................. 48
Shares Eligible for Future Sale.............. 51
Underwriting................................. 52
Legal Matters................................ 53
Experts...................................... 53
Additional Information....................... 53
Index to Financial Statements................ F-1
</TABLE>

------------------------------------

UNTIL JULY 5, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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3,000,000 SHARES

LOGO

COLLABORATIVE CLINICAL RESEARCH, INC.

COMMON SHARES

---------------------------

PROSPECTUS
---------------------------
Vector Securities International, Inc.

McDonald & Company
Securities, Inc.
JUNE 10, 1996

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