DENDRITE INTERNATIONAL INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

[ X ] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the fiscal year ended December 31, 1996
---------------------

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from _______________________

Commission File Number 0-26138
--------------

Dendrite International, Inc.
----------------------------
(Exact name of registrant as specified in its Charter)

New Jersey 22-2786386
- ------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

___________________________

1200 Mt. Kemble Avenue

Morristown, NJ 07960

201-425-1200

___________________________

(Address, including zip code, and telephone
number (including area code) of registrant's
principal executive office)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Class
--------------------------
Common Stock, no par value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter time period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

[ X ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

[ ]

The aggregate market value of the shares of the Common Stock held by
nonaffiliates of the registrant was approximately $89,554,596 based upon the
average bid and ask price of the Common Stock, which was $9.875 on March 14,
1997. The number of shares of Common Stock outstanding on that date was
11,261,131.

DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT DESCRIPTION 10-K PART
- ------------------------------------------------------------------------------ ----------------

Pages 13 - 32 and the inside back cover of the Registrant's 1996 Annual Report I, II
to Shareholders.

Registrant's Notice of Annual Meeting of Shareholders and Proxy Statement for the III
1997 fiscal year expected to be dated on or about April 18, 1997.

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

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PART I

ITEM 1. BUSINESS.

GENERAL

Dendrite International, Inc. ("Dendrite" or the "Company") succeeded in
1991 to a business co-founded in 1986 by the Company's President and Chief
Executive Officer and others. That business was organized to provide
comprehensive electronic territory management ("ETM") solutions to be used to
manage, coordinate and control the activities of large sales forces in complex
selling environments, primarily in the ethical pharmaceutical industry. Today,
the Company's solutions combine advanced software products with a wide range of
specialized support services including implementation services, technical and
hardware support services and sales force support services. The Company
develops, implements and services advanced ETM systems in the United States,
Canada, Western Europe, Japan, Australia, New Zealand, Hong Kong, and Brazil
through its own sales, support and technical personnel located in twelve offices
worldwide.

PRODUCTS AND SERVICES

The Company's ETM systems utilize proprietary software products coupled
with extensive system support services to provide its customers with the means
for more efficient management of their sales forces, sales and marketing
decision support tools, and operation and maintenance of the customers' sales
databases. As software products become more complex and as the sources and size
of data available increase, there is a parallel need for specialized services
and skills to support these products.

PHARMACEUTICAL INDUSTRY PRODUCTS

The Company currently offers to its pharmaceutical customers one core
software product, Series 6(TM), which can be configured to support four
functional areas: sales representative, account manager (for institutional and
managed care sales forces), area manager and home office sales manager. The
software is designed to be modular, thereby allowing the customer to select a
set of functions most appropriate to its business requirements.

Set forth below is a summary description of the principal functions for the
Series 6 product:

PRINCIPAL FUNCTIONS DESCRIPTION
-------------------------------- ------------------------------
Bids & Contracts/Development & Enables pharmaceutical companies to
Tracking administer and disseminate contract
information relating to managed care
organizations and other institutional
entities

Call Reporting & Sampling/Customer Provides sales representatives with
Records reporting tools and helps enable
pharmaceutical companies control costs
of complying with applicable
governmental regulations associated
with product sample distribution

Diary/Planner/Attendance Report Helps optimize sales representatives'
time management and coordinates sales
force activities among dispersed
sales personnel

Electronic Documents/Mail/ Enables communication between
Admin/Reports/Host Communications geographically dispersed business units
and facilitates coordination of and
communication with widely dispersed
sales personnel

Strategic Selling for Institutional Enables pharmaceutical companies' sales
Sales Teams/Pullthrough teams to plan and coordinate
institutional sales efforts and to
deploy appropriate resources

Sales & Activity Analysis/Target Addresses the individual representative
Analysis and manager requirements for review of
local market potential to construct
and execute optimal sales plans

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The Series 6 product can be configured to enable the customer to choose
appropriate functions to address its specific business requirements. New
functions which integrate fully with the existing configuration can be added
over time, therefore allowing the customer to acquire a system which evolves as
its business requirements change. A typical major pharmaceutical customer will
select a configuration depending on the structure of the customer's sales force,
the geographic region involved and the type of pharmaceutical sales data
available. Each function is offered with specific continuing support services.

The Company also has a significant installed base of Series 3(TM), Series
4(TM) and Series 5(TM) software products.

The Series 3 and Series 4 products are DOS-based products. Customers using
Series 4, and a remaining Series 3 customer, accounted for approximately 37% of
the sales representatives licensed to use the Company's systems at December 31,
1996. These products provide automated information concerning physician
customers, sales call records and distribution of samples, but do not have the
capability to model third-party territory-based prescription and sales data. An
upgrade of a customer's system requires extensive investment in hardware and
software and must be planned well in advance in order to minimize disruption of
sales and marketing activities. Currently many of Dendrite's customers have not
made the transition to the Company's more advanced Microsoft(R) Windows(R) based
Series 5 and Series 6 systems. Therefore, the Company continues to support users
of its older Series systems.

Customers with Series 3 or Series 4 systems may elect to upgrade to Series
6. The primary considerations for customers determining whether to upgrade
include the enhanced ability of Series 6 to address the customers' evolving
business needs, the significant cost of making the transition, and, to a lesser
extent, the desirability of moving to a Windows(TM) graphical user interface.
Although customers determining whether to make the upgrade may also consider
competitors' systems, in the Company's experience, the substantial additional
costs to be incurred in switching to a competitor's system, together with the
Company's existing relationship with a customer, tend to give the Company a
competitive advantage in such situations.

Customers using Series 5 and Series 6 systems accounted for approximately
63% of the sales representatives licensed to use the Company's pharmaceutical
ETM systems at December 31, 1996. These systems offer an enhanced user-friendly
graphical user interface through a Microsoft (R) Windows for Workgroups(TM) or
Windows95(R) environment. Series 5 and Series 6 exploit object oriented
programming technology to enhance the modular properties of these systems.
Series 5 and Series 6 software utilize territory-based (i.e. ZIP-code or other
local area) prescription sales data in providing performance analysis reports.
Series 5 software can be modified to allow presentation of physician-level
prescription sales data. Series 6 includes modules capable of analyzing both
territory-based and prescriber-level prescription sales data to permit priority
targeting of physicians and others who influence the pharmaceutical prescription
process.

Traditionally, the Company priced its pharmaceutical ETM systems solely on
a per-user basis. The Company has in the past offered, as an alternative to one-
time license fees, an arrangement known as a "capitation" agreement, which is a
long-term agreement (currently up to ten years), under which the customer
licenses Dendrite software and upgrades for an increasing preset annual charge.
One customer has executed a capitation agreement to date.

OTHER PRODUCTS

In May 1996, Dendrite acquired SRCI S.A. ("SRCI"), France's
largest provider of custom-designed ETM systems for the over-the-counter
pharmaceutical ("OTC") and consumer packaged goods ("CPG") markets.

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SRCI's core product, NOMAD'S(TM), has been translated into the English language
and the Company has commenced marketing it in the United States and United
Kingdom markets under the name ForceOne(TM). ForceOne contains some of the same
basic functionality as the Series 6 product as well as functionality
specifically created for the OTC and CPG industries. The Company presently
anticipates that the structure of its license and implementation fees for its
OTC and CPG customers will be similar to those for its ethical pharmaceutical
customers.

SERVICES

For the year ended December 31, 1996, service revenues represented 87% of
total Company revenues. The Company seeks to develop long-term strategic
relationships with its customers by providing value-added support in the
operation of installed software systems and assistance to the customer's
management in using the resulting information. To support this objective, the
Company offers a wide variety of specialized services from which customers can
choose, including implementation services, technical and hardware support
services and sales force support services. Most customers enter into agreements
covering technical support, software customization and support services and also
elect to have their databases operated and maintained on a central server
located at a local Dendrite data center facility. Virtually all customers sign
an extended maintenance agreement which covers, among other things, software
defect resolution.

The complexity and size of the sales data and market research databases
being integrated and manipulated by the Company's systems requires highly
specialized information systems skills. The creation of a customer's database
requires loading third party data onto a central server and encoding that data
with proprietary Dendrite data links. This encoding process allows the data to
be integrated into a functional sales-related database used by the Company's
systems. Dendrite performs these services initially for its customers to install
the system, then usually continues to provide the services to manage these tasks
over time. Many companies choose not to employ the information systems staff
needed to manage these large, complex databases and consider the option of
outsourcing these tasks to Dendrite as both economically and operationally
advantageous.

Set forth below is a summary description of the principal services offered
by Dendrite:

PRINCIPAL SERVICES DESCRIPTION
- ------------------ -----------

Implementation Services Project Management--planning the design and
implementation of the Dendrite system

Data Modeling--creation of the customer's specific
version of the Company's data model, which becomes
the Customer Requirements Definition

Customization--customization of software to meet the
Customer Requirements Definition for the software
components of the Dendrite system

Database Design--creation of the customer's
integrated database, including:

--loading and linking third party prescription
sales data, market research and other materials

--identifying geographic and/or functional (e.g.
formulary) segments

--allocating third party data by territory or
other functional segment

Mail Design--definition of e-mail structure to meet
the needs of the customer's organization

Laptop Preparation--loading data onto laptop
computers for training, testing and use

Training--training on use and capabilities of the
Dendrite system

5

Technical and Hardware
Support Services Project Management--designing, structuring and
managing technical support for the Dendrite system

Customization--as required following implementation
to meet customer's needs

Maintenance of Database--continued support of the
customer's database, including:

--loading and linking new releases of third party
data purchased by the customer

--identifying new functional segments for data
analysis

Maintenance of Code--maintenance and updating of
customized code on customer computers

Hardware Support--maintenance of servers and laptops
including recapture of data on defective equipment
and replacement of defective equipment

Sales Force Support
Services Project Management--designing, organizing and
managing support for customer sales forces

Retraining--ongoing training on use and capabilities
of the system

Territory Realignment--assisting the customer in
planning and executing realignments of sales
territories or functional (e.g. formulary-based)
segments to allow more effective resource allocation

Support Services--providing all first line services
up to seven days a week for as many hours as
requested and in the language required

When a customer licenses Dendrite software, the Company typically
establishes a separate service group composed of both customer support and
technical support personnel who are generally dedicated to servicing only one or
two customers. The dedicated service group will usually be located at Dendrite's
facility in the country where a significant portion of the customer's sales
force is located. This allows the service group to provide assistance locally
using a common language with customer personnel. The Company provides services
under contract, typically a multi-year contract. In North America, the service
agreement is between the customer and Dendrite directly. Outside North America,
contracts are entered into between the local customer and the Company through
its local wholly-owned subsidiary or branch. Depending upon the size of the
customer and the scope of services to be performed, a Dendrite dedicated service
group may comprise between five and fifty persons. The relationships with its
pharmaceutical customers, which result from providing services to them, have led
to a growth in the range and scope of services provided to the customers and in
recent years have accounted for much of the increase in the Company's service-
related revenues.

As of December 31, 1996, substantially all of the Company's services
agreements were with its ethical pharmaceutical customers.

SYSTEM CONFIGURATION

Dendrite's ETM pharmaceutical system is configured to allow information
access and communication across geographically dispersed sales and marketing
personnel and regional and home offices. The core of the system configuration is
a central file server which stores the customer database and integrates and
controls all data flow from external points, including the remote databases of
the sales force and their management. Most of the servers used by Dendrite
customers are manufactured by IBM, Digital Equipment Corporation or Sun
Microsystems and run on UNIX(TM) or Windows NT(R) operating systems. Servers
are purchased or leased by Dendrite's customers

6

or leased for them by Dendrite. Some smaller customers lease space on one of
seven Dendrite-owned servers located in various Dendrite offices worldwide.

Remote databases are stored on laptop computers used by sales representatives
in the field and updated periodically over telephone lines via modem. Regional
sales managers using personal computers may access the server via wide area
networks. Dendrite customers are responsible for selecting computer equipment
and for deciding when to upgrade or replace it.

Most laptop computers and all of the desktop personal computers which access
Dendrite's pharmaceutical ETM system support a DOS operating system, with the
Microsoft(R) Windows(TM) for Workgroups interface on the Company's newer
products. Data is managed in Series 4 using an Informix database server and a
flat-file Btrieve structure on the laptops. For laptops in Series 5 and Series 6
with Microsoft(R) Windows(TM) for Workgroups or Windows95, the Company has
currently chosen a PowerBuilder(TM) graphical user interface and a Sybase SQL
Anywhere(TM) relational database management system. Series 5 and Series 6
currently use an Oracle(TM) database server.

Dendrite's pharmaceutical ETM-system permits a pharmaceutical company's sales
representative to send the applicable customer's server information concerning
calls made and to receive information concerning upcoming calls and other sales
efforts to be made later by other sales personnel of that company who share
common or related customers. The server, in most cases located at one of
Dendrite's facilities, contains the customer's own database of sensitive sales
related information, which is maintained and operated for the customer by
Dendrite.

Dendrite's system is designed to provide information to those involved in
sales and sales management and also to a range of other functional areas within
each customer, including its senior management. For example, information
directly related to sales, such as travel and expense reports, may be provided
to the finance and personnel departments. Similarly, representatives in the
field can provide information concerning a physician that can assist managed
care sales personnel. These systems create the linkage which connects a
customer's sales and management functions with other business departments.

Dendrite's OTC and CPG ETM system is generally configured in a manner similar
to Dendrite's pharmaceutical ETM system. However, OTC and CPG sales
representatives may use computer hardware other than laptop and desktop
personal computers to access such ETM system, such as handheld or palmtop
computing devices.

ADDITIONAL INFORMATION

Certain additional information regarding the Company's business is found on
pages 10 - 11 of the Company's 1996 Annual Report to Shareholders. Such pages
are incorporated herein by reference.

MARKETING

CUSTOMERS

The following is a list of some of the Company's current pharmaceutical
customers (who either directly or through subsidiaries may be customers in one
or more countries served by the Company, not necessarily including the United
States):

Boehringer Ingelheim Pharmaceutical, Inc.
Allergan Boehringer Mannheim Corporation
Bayer A.G. Laboratorios Almirall, S.A.

7

Bristol-Myers Squibb Company Pfizer Animal Health
Ciba-Geigy New Zealand, Ltd. Rhone-Poulenc Rorer Inc.
Glaxo Wellcome Sankyo/Parke Davis
Hoechst Marion Roussell
Johnson & Johnson 3M
Eli Lilly and Company
Leo Laboratories Servier S.A.
Merck Sharp & Dohme Novartis S.A.
Parke Davis
Pfizer Inc. Solvay Pharmaceuticals, Inc.
Zeneca Yakuhin, Inc.

Revenues from Pfizer Inc., Eli Lilly and Company and Johnson & Johnson, in the
aggregate, accounted for approximately 54% of the Company's revenues in the year
ended December 31, 1994. Revenues from Pfizer Inc., Eli Lilly and Company and
Rhone-Poulenc Rorer Inc. in the aggregate accounted for 56% and 58% of the
Company's revenues for the years ended December 31, 1995 and December 31, 1996,
respectively. Although the Company has separately licensed software to several
affiliates of these companies and provides services to them under separately
negotiated and executed contracts with local Dendrite subsidiaries and branches,
the loss of all or a significant part of the business of any of these customers
would have a material adverse affect on the Company.

In addition, since the Company acquired SRCI in May 1996, the
Company's consumer business division has entered into customer contracts in
France with the following companies: Kriter Brut de Brut, Lindt, Martini-
Bacardi, Moet & Chandon, Panzani, Segafredo, Urgo, Vania and Varta.

SALES AND MARKETING

The Company actively markets its ETM systems and services to major ethical
pharmaceutical, healthcare, OTC and CPG companies in the United States, Western
Europe and the Pacific Rim using regional and local sales and marketing
personnel operating out of Dendrite's offices. Sales presentations are typically
made to customer personnel in its management information services department and
in either its sales management or sales administration department.

Selection of an ETM system entails an extended decision-making process for the
customer because of the substantial costs and strategic implications associated
with acquiring the system. Senior levels of management are often involved in
this process, given the importance of the decision as well as the risks faced
by the customer should a system fail or not perform as expected. Depending upon
the size of the system and the associated computer hardware and software costs,
senior corporate management or even the board of directors of a client may make
the final decision to license a Dendrite system. Therefore, decisions to acquire
a Dendrite ETM system involve long selling cycles, typically 12 to 18
months for larger customers, although sometimes as long as 24 months, and
usually require lengthy periods of evaluation prior to full installation and
roll-out.

The Company uses a business process analysis to facilitate the marketing
process after obtaining information from a potential customer relating to its
market, its sales organization, its business plan and the identification of
significant costs and problems. Dendrite works with the potential customer to
identify needed product functionality, drawing upon the Company's available
modules and its experience with the applicable vertical market. If solutions are
not immediately available, Dendrite may offer a co-development partnership to
the potential customer in order to design product functionality to meet the
potential customer's needs. In this situation, Dendrite may not retain sole
ownership of the completed software solution.

The response of sales representative users of Dendrite systems is an important
aspect of the Company's on-going relationships with its customers and may
sometimes influence the decisions of those customers to license additional
modules and/or to contract for expanded support services. Dendrite endeavors to
address the concerns of sales personnel during the training portion of its
Implementation Services. In addition, the experience of customer

8

additional modules and/or to contract for expanded support services. Dendrite
endeavors to address the concerns of sales personnel during the training portion
of its Implementation Services. In addition, the experience of customer sales
personnel with a Dendrite ETM system in actual use, together with interactions
with those personnel as part of the ongoing Sales Force Support Services,
provide positive reinforcement as to the ease of use and efficacy of Dendrite
ETM systems.

Independent consultants, including the consulting arms of a number of the
"Big 6" accounting firms and international consulting firms, are occasionally
retained to advise pharmaceutical and healthcare companies on their selection of
an ETM system. Dendrite believes that in a number of these situations
consultants have recommended Dendrite ETM systems to their clients, who
subsequently became customers of the Company. Dendrite does not reimburse
expenses or pay any commissions to such firms in such cases.

The Company believes that an important marketing opportunity is presented
by its relations with existing customers. Dendrite believes that its network of
American, European and Pacific Rim offices gives it the potential for expansion
of license and service revenues from existing customers in countries other than
the ones in which such customers currently have a Dendrite licensed ETM system.
In addition, many of Dendrite's ethical pharmaceutical customers also have OTC
operations which Dendrite believes gives it a competitive advantage when,
marketing its ETM system to such OTC operations.

Finally, the Company has entered into several joint marketing arrangements
whereby the Company and the applicable business partner have agreed to interface
with each other's products and/or services. Examples of these partners and their
respective products include: Proscape Technologies, Inc. (multimedia detailing
software); Presidio Inc. (clinical trial software); Epsilon Data Management,
Inc. (data warehousing and decision support software, analytical and data
scrubbing services and direct marketing programs).

COMPETITION

Globally, the current market for sales and marketing information management
systems is highly competitive. Many companies offer sales force automation and
ETM systems in the ethical pharmaceutical, OTC and CPG industries, although few
focus on the pharmaceutical industry. In addition to itself, the Company
believes that there are approximately ten companies which supply products
automating sales, marketing and customer service functions and specifically
target the pharmaceutical industry. Three of these companies are actively
selling in more than one country. The Company believes that most of its
competitors offer a variety of less customizable software products, which are
typically available more rapidly than Dendrite systems and often at a
substantially lower price. Sales force automation products differ greatly in
terms of functionality, flexibility and the type of hardware platform supported.

The Company estimates that in 1996 its ETM systems were licensed by
approximately 15% of sales representatives from the top 50 pharmaceutical
companies in the United States, Canada, Western Europe and the Pacific Rim.
Dendrite believes that potential competitors must incur significant expense and
product development time and must acquire a skilled technical staff in order to
develop an integrated, customizable solution for the problems presented by
complex multi-national selling environments.

The Company's products and services compete with others principally on the
basis of product flexibility and customization, platform configuration, name
recognition, global competence, service standards, breadth of customer base and
technical support and service. Management believes the Company's systems compete
favorably with respect to these factors, and that the Company is positioned to
maintain its market leadership position through innovative new product and
application developments and continued focus on support services. Some of the
Company's existing competitors, as well as a number of potential market
entrants, have larger technical staffs, larger marketing and sales organizations
and greater financial resources than the Company. Additionally, three of the
Company's competitors in the ethical pharmaceutical industry,

9

own and control, either directly or through affiliated entities, some of the
proprietary data collection systems in some countries (including the United
States) that provide the prescription/sales data sold to the pharmaceutical
companies and which Dendrite's more recent ETM systems and related services are
designed to process. It may be possible for one or more of these competitors to
gain a competitive advantage in the pricing of its ETM systems for customers who
are interested in purchasing the data it or its affiliates collect. The Company
believes that competition will increase as new competitors enter the market to
supply ETM systems to the pharmaceutical industry and as existing competitors
expand their product lines. Dendrite also expects it may encounter additional
competition in the future from firms offering outsourcing of information
technology services and from vendors of software products providing specialized
applications not offered by the Company. The Company also faces potential
competition from its customers and potential customers, which might elect to
design and install or to operate their own sales force management systems.

RESEARCH AND DEVELOPMENT

The Company's Product Development Group is responsible for the
conceptualization, development and implementation of new products
internationally. This group is also responsible for enhancements for existing
products, and the design of technical training and technical procedures
including quality control for core systems and maintenance operations for
existing customer ETM systems. The Company expended $2.8, $3.8 and $8.7 million
on research and development in the years ended December 31, 1994, 1995 and 1996,
respectively. The significant increase in research and development spending in
1996, particularly in the fourth quarter, was attributable to, among other
things, the completion of certain new products by year end, including completing
ForceOne and adapting certain new software for the German market, as well as
integrating the Company's product and service support with the products of its
newest strategic partners. See "Sales and Marketing." Dendrite regularly issues
updated releases for its software modules and maintains a schedule of
anticipated releases.

The Company has capitalized certain costs related to the development of new
software products and the enhancement of existing software products consistent
with Statement of Financial Accounting Standards No. 86, ''Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed''.
Capitalized software development costs net of accumulated amortization were $2.0
and $2.6 million at December 31, 1995 and 1996, respectively.

PROPRIETARY RIGHTS

The Company relies on a combination of trade secret, copyright and trademark
laws; license agreements with customers containing confidentiality and other
contractual protections; confidentiality agreements with vendors and suppliers;
and agreements with each of its executive officers and technical employees
worldwide containing confidentiality and non-disclosure provisions to protect
proprietary intellectual property rights in the Dendrite software systems and
services. Existing United States copyright laws provide only limited protection
and even less protection may be available under foreign laws.

EMPLOYEES

As of December 31, 1996, Dendrite employed 668 employees, 329 in the United
States, 296 in Europe, 35 in the Pacific Rim and 8 in Latin America.

The Company believes that relations with its employees are good. The Company
believes that its future growth and success will depend upon its ability to
attract and retain skilled and motivated personnel.

CERTAIN CONSIDERATIONS

This Form 10-K and other documents of the Company and statements made by
members of management of the Company from time to time may contain forward-
looking statements that may be viewed as predicting future events or outcomes
with respect to the Company and its business. The predictions embodied in

10

these statements will involve risks and uncertainties and, accordingly, the
Company's actual results may differ significantly from the results discussed or
implied in such forward-looking statements. Some important factors (but not the
only factors) that might cause such a difference include the following:

IMPACT ON COMPANY OF CHANGES IN ETHICAL DRUG MARKET

A majority of the Company's ETM systems are currently used in connection
with the marketing and sale of prescription-only drugs (''ethical
pharmaceutical products'' or ''ethical drugs''). The market currently serviced
by the Company is undergoing a number of significant changes, including (i)
consolidations and mergers which may reduce the number of existing and
potential customers of the Company and (ii) the increasing prescription of
generic drugs, in substitution for branded drugs, produced by manufacturers
which have not acquired a Dendrite ETM system. Both of these trends may reduce
the demand for the Company's pharmaceutical ETM products and services. The
trend toward the reclassification of formerly prescription-only drugs to
permit their over-the-counter sale, to the extent it adversely affects
pharmaceutical companies, may also have a negative impact on the Company and
its continued ability to increase revenues and profitability. The increasing
emphasis in the United States on the delivery of healthcare through managed
care organizations such as health maintenance organizations and preferred
provider organizations may also adversely affect the demand for the Company's
products and services, as may the current consolidation of the managed care
industry in the United States and other changes in healthcare delivery systems
occurring in other countries. The Company may also be materially affected by
legislative enactments which alter the structure of, or increase regulations
governing, the healthcare systems in any of the countries where Dendrite
customers and potential customers are located. There can be no assurance that
the Company can respond positively to all of these and other changes in the
marketplace and maintain profitability.

POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY;
LENGTHY SALES AND IMPLEMENTATION CYCLE

The Company's quarterly revenues, expenses and operating results have
varied considerably in the past and are likely to vary from quarter to quarter
in the future. Fluctuations in the Company's revenues depend on a number of
factors, some of which are beyond the Company's control. These factors
include, among others, the timing of contracts, delays in customer acceptance
of the Company's software, the length of sales cycles, customer budget changes
and changes in pricing policy by the Company or its competitors. For
example, the Company incurred a net loss of $3.3 million in the fourth quarter
of 1996, which loss was attributable to, among other things, the delay of
certain new license purchases by an existing customer, the delay of an
existing client's upgrade decision, and the postponement of certain post-
production implementations for an existing client in seven country sites.
The Company establishes its expenditure levels for product development and
other operating expenses based in large part on its expected future revenues.
As a result, should revenues fall below expectations, operating results are
likely to be adversely and disproportionately affected because only a small
portion of the Company's expenses vary with its revenues.

In addition, the Company's quarterly license fees and service revenues may
vary due to seasonal and cyclical factors. The Company typically expects to
realize a greater percentage of its license fees and service revenues for the
year in the second half of the year than it does in the first half. Moreover,
selection of an ETM system often entails an extended decision-making process
for the customer because of the substantial costs and strategic implications
associated with acquiring the system. Senior levels of management are often
involved in this process, given the importance of the decision as well as the
risks faced by the customer should a system fail or not perform as expected.
Depending upon the size of the system and the associated computer hardware and
software costs, senior corporate management or even the board of directors of
a customer may make the final decision to license a Dendrite system.
Therefore, decisions to acquire a Dendrite system involve long selling cycles,
typically 12 to 18 months for larger customers, although sometimes as long as
24 months, and usually require lengthy periods of evaluation prior to full
installation and roll-out.

NEW PRODUCTS AND TECHNOLOGICAL CHANGE

11

The market for ETM systems is characterized by rapid change and
improvements in computer hardware and software technology. The Company's
future success will depend in part on its ability to enhance its current
products, to introduce new products that keep pace with technological and
market developments and to address the increasingly sophisticated needs of its
customers. There can be no assurance that the Company will be successful in
developing and marketing in a timely manner product enhancements or new
products that respond to the technological advances by others, or that its
products will adequately and competitively address the needs of the changing
marketplace. The Company released its first Microsoft /(R)/ Windows /TM/ based
solution, Series 5, in late 1993, its second version, Series 6, in late 1994,
and is preparing subsequent versions to meet anticipated operating system
upgrades. Competition with respect to software products has been characterized
by shortening product cycles, and there can be no assurance that the Company
will not be adversely affected by this trend. If the product cycles for the
Company's systems prove to be shorter than management anticipates, the
Company's operating results could be adversely affected. In addition, in order
to remain competitive, the Company may be required to expend a greater
percentage of its revenues on product innovation and development than
historically has been the case. For example, the significant increase in
research and development spending in 1996, particularly in the fourth quarter
was attributable to, among other things, the completion of certain
new products by year end, including adapting certain new software for the
German market, as well as integrating the Company's product and service
support with the products of its newest strategic partners. In either
case, the Company's gross profit margins and results of operations could be
materially and adversely affected. In addition, products as complex as those
offered by the Company may contain undetected errors or failures when first
introduced or as new versions are released. Such errors have occurred in the
past and there can be no assurance that, despite testing by the Company,
errors will not be found in new products resulting in losses or delays which
could have a material adverse effect on the Company's business, operating
results and financial condition.

The Company currently offers software products designed for markets other
than the ethical pharmaceutical market, including the consumer packaged goods
vertical market. The selling environment in each market has characteristics
that are unique to it. There can be no assurance that the Company will be able
to achieve in other markets the success it has attained in the ethical
pharmaceutical market.

DEPENDENCE ON MAJOR CUSTOMERS

The Company has approximately 26 pharmaceutical customers (considering all
members of an affiliated group to be a single customer). The Company derived
approximately 54%, 56% and 58% of its revenues in the aggregate in the years
ended December 31, 1994, 1995 and 1996, respectively, from the three largest
pharmaceutical customers, two of which had been among the three largest
customers of the Company in terms of revenues in each of those periods. The
Company believes that the costs to its major customers of switching to an ETM
system offered by a competitor, or taking significant system management
functions in-house, would be substantial. There can be no assurance, however,
that such a change will not be undertaken by one or more customers with
respect to a Dendrite system or to all or some of the services offered by the
Company. If such change is made by one or more of the Company's major
customers, the Company's business, operating results and financial condition
could be materially and adversely affected.

RISKS FROM COMPETITION

Globally, the current market for sales and marketing information management
systems is highly competitive. Many companies offer sales force automation and
ETM systems, although few focus on the pharmaceutical industry. In addition to
Dendrite, the Company believes that there are approximately ten companies
which supply products automating sales, marketing and customer service
functions and specifically target the pharmaceutical industry. The Company
believes at least three of these companies are actively selling in more
than one country. In addition, the other vertical markets in which the Company
markets its products possess numerous vendors who market and sell sales force
automation and ETM systems. The Company believes that most of its competitors
offer a variety of less customizable software products, which are typically
available more rapidly than Dendrite systems and often at a substantially
lower price.

12

In addition, competition will increase as new competitors enter the market to
supply ETM systems to the pharmaceutical industry and other vertical markets and
as existing competitors expand their product lines.

The Company expects it may encounter additional competition in the
future from firms offering outsourcing of information technology services, from
purveyors of software products providing specialized applications not offered by
the Company and from the development and/or operation of in-house system by
pharmaceutical companies. Many of the Company's competitors have longer
operating histories and significantly greater financial, technical, sales,
marketing and other resources than those of the Company. Some of the Company's
competitors are part of large corporate groups with significantly greater
resources and broader technology bases than those of the Company. For example,
Sales Technologies, Inc. is owned by Cognizant Corporation. There can be no
assurance that the Company will be able to compete successfully or that
competition will not have a material adverse effect on the Company's business,
operating results or financial condition.

RELIANCE ON COMPETITORS FOR MARKET DATA

Current market data on the sales of ethical pharmaceutical products is
an important element for the operation of Dendrite ETM systems, which the
Company's customers use to guide and organize their sales forces and marketing
efforts. There are currently few sources of such data in the United States,
Europe and the Pacific Rim. Three of the leading purveyors of such market
information in the United States or elsewhere compete with the Company either
directly or through affiliates in the market for ETM systems. Were these
purveyors of market information to require that pharmaceutical companies also
utilize their information management services (or those of their affiliates)
instead of the Company's, the Company's business, operating results and
financial condition would be materially and adversely affected.

INTERNATIONAL OPERATIONS

Currently, the Company's products are marketed in over 16 countries.
The United States, the United Kingdom and France are the Company's main markets.
Approximately 44%, 48% and 52% of the Company's total revenues were generated
outside the United States during the years ended December 31, 1994, 1995 and
1996, respectively. Services provided by Dendrite's foreign branches and
subsidiaries are billed in local currency. License fees for Dendrite products
are billed in U.S. dollars regardless of where they originate. The Company
expects the export segment of its business to grow and to continue to account
for a material part of its revenues. Licensing software in may foreign
countries is subject to risks inherent in international business activities.
Risks include general economic conditions in each such country, the effect of
applicable foreign tax structures, tariff and trade regulations, difficulties in
obtaining local license, the difficulty of managing an organization spread over
various jurisdictions, unexpected changes in regulatory environments, complying
with a variety of foreign laws and regulations and any adverse changes in the
political environments in any such countries. In addition, laws in foreign
countries may not always provide protection for the Company's proprietary rights
in its software products. Providing specialized system support services outside
the United States paid for in local currencies carries the additional risk of
currency fluctuation and may also affect the net income, if any, reported by the
Company. Operating results generated in local currencies are translated into
U.S. dollars at the average currency exchange rate in effect for each financial
reporting period.

DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF GROWTH

The success of the Company depends to a significant extent upon the
contributions of its executive officers, particularly its President and Chief
Executive Officer, John E. Bailye, and key sales, technical and customer service
personnel. The Company maintains a $3 million key man insurance policy on
Mr.Bailye, the proceeds of which are payable to the Company. The Company's
future success also depends on its continuing ability to attract and retain
highly qualified technical and managerial personnel. Competition for such
personnel is intense. The Company has at times experienced difficulty in
recruiting qualified personnel and there can be no assurance that the Company
will not experience such difficulties in the future. Any such difficulties could
adversely affect the Company's business, operating results and financial
condition.

13

All of the Company's executive officers and technical employees and a
significant number of sales employees have entered into non-competition
agreements with the Company. The laws governing such non-competition
agreements vary in different jurisdictions and are evolving. The
enforceability of such agreements in any case will depend upon all of the
facts and circumstances, including the jurisdiction in which enforcement is
sought. In some cases these agreements might be unenforceable, a result that
could have a material adverse effect on the Company.

To manage growth effectively, the Company must continue to strengthen its
operational, financial and management information systems, and expand, train
and manage its work force. There can be no assurance that the Company will be
able to do so on a timely basis. Failure to do so effectively and on a timely
basis could have a material adverse effect upon the Company's business,
operating results and financial condition.

DEPENDENCE ON PROPRIETARY TECHNOLOGY

The Company relies on a combination of trade secret, copyright and
trademark laws, non-disclosure and other contractual agreements, and technical
measures to protect its proprietary rights in its products. There can be no
assurance that the steps taken by the Company will prevent misappropriation of
this technology. Further, there can be no assurance that such protective steps
will preclude competitors from developing products with features similar to
the Company's products. In addition, effective copyright and trade secret
protection may be unavailable or limited in certain foreign countries. The
Company believes that its products and trademarks do not infringe upon the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not assert infringement claims against the Company in the
future or that any such claims will not require the Company to enter into
royalty arrangements or result in costly litigation involving the imposition
of damages or injunctive relief against the Company, any of which could
materially and adversely affect the Company's business, operating results and
financial condition.

CONCENTRATION OF STOCK OWNERSHIP

The Company's present directors, executive officers and principal
stockholders beneficially own a significant portion of the Common Stock. As a
result, such persons are likely to have the practical ability to elect the
Board of Directors and to control voting on all matters requiring the approval
of the Company's stockholders. Accordingly, such persons will be able to
control the management of the Company and its affairs and business. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing a change in control of the Company.

ITEM 2. PROPERTIES.

Dendrite leases a 101,500 square foot headquarters building in Morristown, New
Jersey and a 3,600 square foot warehouse in Morris Plains, New Jersey. The
Company also leases a total of 47,800 square feet in eleven (excluding) Morris
Plains locations in Australia, Belgium, Brazil, France, Germany, Italy, Japan,
New Zealand, Portugal, Spain and the United Kingdom for its full service sales
offices, customer support and data centers. The Company believes that existing
facilities are adequate for its current needs and that adequate space will be
available as needed.

File servers located at Dendrite facilities are maintained in a secured area
and are subject to regular audit and inspection by the customers. Except for the
Dendrite file servers on which customers rent space, most clients requires that
its file server be kept entirely separate from the file servers of all other
customers. All customers require that their databases be kept strictly separate
from the databases of all other customers.

ITEM 3. LEGAL PROCEEDINGS.

The Company is occasionally involved in litigation relating to personnel and
other claims arising in the ordinary course of business. Dendrite is not
currently engaged in any legal proceedings which are expected, individually or
in the aggregate, to have a materially adverse effect on the Company.

14

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

Information regarding the market prices of the Company's common stock and
the market for that stock may be found on page 28 of the Company's 1996 Annual
Report to Shareholders, which page is incorporated herein by reference.

Additional information concerning dividends may be found on page 14 of the
Company's 1996 Annual Report to Shareholders, which page is incorporated herein
by reference.

ITEM 6. SELECTED FINANCIAL DATA.

Selected financial data for the Company is set forth on page 9 of the
Company's 1996 Annual Report to Shareholders, which page is incorporated herein
by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

A discussion of the Company's financial condition, changes in financial
condition and results of operations is found on pages 10 - 14 of the Company's
1996 Annual Report to Shareholders. Such pages are incorporated herein by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements of the Company, together with the
report thereon of the independent public accountants, and the unaudited
"Selected Quarterly Operating Results" are set forth on pages 15 - 28 of the
Company's 1996 Annual Report to Shareholders, which pages are incorporated
herein by reference.

15

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

With the exception of the information incorporated by reference in Parts I and
II of this Form 10-K, the Company's 1996 Annual Report to Shareholders is not to
be deemed filed as part of this report.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information regarding directors and executive officers of the Company will be
set forth in the Registrant's Notice of Annual Meeting of Shareholders and Proxy
Statement, expected to be dated on or about April 18, 1997 (the "Proxy
Statement"), which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information regarding the Company's compensation of its directors and
executive officers will be set forth in the Proxy Statement, which information
is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information regarding security ownership of certain beneficial owners and
management will be set forth in the Proxy Statement, which information is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information regarding transactions with the Company's directors and executive
officers will be set forth in the Proxy Statement, which information is
incorporated herein by reference.

16

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

1. Financial Statements:

PAGE IN ANNUAL
REPORT TO
SHAREHOLDERS
--------------

Report of Independent Public Accountants...................... 27

Consolidated Balance Sheets................................... 15

Consolidated Statements of Operations......................... 16

Consolidated Statements of Redeemable Convertible
Preferred Stock and Stockholder' Equity (Deficit)............. 17

Consolidated Statements of Cash Flows......................... 18

Notes to Consolidated Financial Statements.................... 19 - 26

2. Financial Statement Schedules:

None.

17

3. Exhibits:

3.1 Restated Certificate of Incorporation of the Company, as
amended (incorporated herein by reference to Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q filed with the
Commission June 30, 1996)

3.2 By-laws of the Company, as amended (incorporated herein by
reference to the Exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1995, filed
with the Commission November 13, 1995)

4.1 Specimen of Stock Certificate (incorporated herein by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

4.2 Registration Rights Agreement dated October 2, 1991 between
the several purchasers named therein and the Company
(incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

4.3 Amendment to Registration Rights Agreement dated April 23,
1992 between the Company and the parties named therein as
shareholders of the Company (incorporated herein by
reference to Exhibit 4.3 of Amendment 1 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.1 Master License Agreement with Eli Lilly and Company dated
December 18, 1991 (incorporated herein by reference to
Exhibit 10.1 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.2 Software Maintenance Agreement with Eli Lilly and Company
dated December 18, 1991 (incorporated herein by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.3 Source Material Escrow Agreement with Eli Lilly and Company
dated December 18, 1991 (incorporated herein by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.4 Master Service Agreement with Eli Lilly and Company dated
December 18, 1991 (incorporated herein by reference to
Exhibit 10.4 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.5 Addenda to Master License Agreement with Eli Lilly and
Company dated June 1, 1993, June 17, 1993 and October 25,
1993, respectively (incorporated herein by reference to
Exhibit 10.5 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.6 Master Service Agreement with Eli Lilly and Company Limited
(New Zealand) dated February 15, 1995 (incorporated herein
by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.7 Host Computer Agreement with Eli Lilly and Company Limited
(New Zealand) dated February 15, 1995 (incorporated herein
by reference to Exhibit 10.7 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.8 Master Service Agreement with Eli Lilly Italia, S.p.A. dated
January 17, 1994 (incorporated herein by reference to
Exhibit 10.8 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

18

10.9 Software Maintenance Agreement with Eli Lilly Italia, S.p.A.
dated January 17, 1994 (incorporated herein by reference to
Exhibit 10.9 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.10 Customer Agreement with Lilly Industries Limited dated
September 24, 1990 (incorporated herein by reference to
Exhibit 10.10 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.11 Software Maintenance Agreement with Eli Lilly UK Ltd. dated
July 21, 1992 (incorporated herein by reference to Exhibit
10.11 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.12 Source Material Escrow Agreement with Lilly Industries Ltd.
(incorporated herein by reference to Exhibit 10.12 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.13 Master Service Agreement with Lilly Industries Ltd. dated
June 25, 1992 (incorporated herein by reference to Exhibit
10.13 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.14 Master Software License Agreement with Lilly Deutschland
GmbH and Beiersdorf Lilly GmbH dated July 19, 1994
(incorporated herein by reference to Exhibit 10.14 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.15 Master Software Maintenance Agreement with Lilly Deutschland
GmbH and Beiersdorf-Lilly GmbH dated July 19, 1994
(incorporated herein by reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.16 Master Software Development Agreement with Lilly-Deutschland
GmbH and Beiersdorf-Lilly GmbH dated July 19, 1994
(incorporated herein by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.17 Host Computer Agreement with Lilly Deutschland GmbH and
Beiersdorf-Lilly GmbH dated July 19, 1994 (incorporated
herein by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.18 Master Service Agreement with Lilly Deutschland GmbH and
Beiersdorf-Lilly GmbH dated July 19, 1994 (incorporated
herein by reference to Exhibit 10.18 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.19 Customer Agreement with Johnson & Johnson dated July 16,
1990 (incorporated herein by reference to Exhibit 10.19 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.20 Master Host Computer Agreement with Johnson & Johnson dated
September 22, 1992 (incorporated herein by reference to
Exhibit 10.20 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.21 Master License Agreement with Johnson & Johnson dated
September 22, 1992 (incorporated herein by reference to
Exhibit 10.21 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.22 Master Software Maintenance Agreement with Johnson & Johnson
dated September 22, 1992 (incorporated herein by reference
to Exhibit 10.22 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

19

10.23 Master Service Agreement with Johnson & Johnson
(incorporated herein by reference to Exhibit 10.23 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.24 Master Software Maintenance Agreement with Pfizer Inc. dated
December 29, 1994 (incorporated herein by reference to
Exhibit 10.24 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.25 Master Software License Agreement with Pfizer Inc. dated
December 29, 1994 (incorporated herein by reference to
Exhibit 10.25 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.26 Master Service Agreement with Pfizer Inc. dated December 29,
1994 (incorporated herein by reference to Exhibit 10.26 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.27 Source Material Escrow Agreement with Pfizer Inc. dated
March 10, 1995 (incorporated herein by reference to Exhibit
10.27 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.28 Host Computer Agreement with Pfizer Inc. dated September 26,
1994 (incorporated herein by reference to Exhibit 10.28 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.29 Master License Agreement with Pfizer Inc. dated August 17,
1992 (incorporated herein by reference to Exhibit 10.29 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.30 Master Service Agreement with Pfizer Canada, Inc. dated
April 22, 1994 (incorporated herein by reference to Exhibit
10.30 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.31 Master Service Agreement with Pfizer Chemical, K.K. (Japan)
dated June 15, 1992 (incorporated herein by reference to
Exhibit 10.31 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.32 Master License Agreement with Pfizer Pharmaceuticals, Inc.
(Japan) dated November 17, 1992 (incorporated herein by
reference to Exhibit 10.32 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.33 Services List with Pfizer Ltd. dated August 17, 1994
(incorporated herein by reference to Exhibit 10.33 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.34 Master Capitation Agreement with Rhone-Poulenc Rorer Inc.
dated July 29, 1994 (incorporated herein by reference to
Exhibit 10.34 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.35 Master Customer Support Service Agreement with Rhone-Poulenc
Rorer Inc., dated July 29, 1994 (incorporated herein by
reference to Exhibit 10.35 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.36 January 1992 Stock Plan (incorporated herein by reference to
Exhibit 10.36 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

20

10.37 October 1992 Stock Option Plan for Senior Management
(incorporated herein by reference to Exhibit 10.37 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.38 Indemnification Agreement of Paul A. Margolis dated as of
January 1, 1992 (incorporated herein by reference to Exhibit
10.38 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.39 Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey
(incorporated herein by reference to Exhibit 10.40 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.40 Employment Agreement dated October 2, 1991 with John E.
Bailye, as amended (the "Bailye Employment Agreement")
(incorporated herein by reference to Exhibit 10.41 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.41 Credit Agreement with The Chase Manhattan Bank, N.A. dated
as of May 5, 1995 (incorporated herein by reference to
Exhibit 10.42 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.42 Master Software License Agreement with Pfizer Italiana SpA.
dated December 1994 (incorporated by reference to Exhibit
10.43 to the Company's Registration Statement on Form S-1,
filed with the Commission February 5, 1996)

10.43 Master Software License Agreement with Laboratorios Pfizer
Ltda. dated September 29, 1995 (incorporated herein by
reference to Exhibit 10.44 to the Company's Registration
Statement on Form S-1, filed with the Commission February 5,
1996)

10.44 Master Service Agreement with Pfizer Ltd. dated December 1,
1992, as extended by letters dated August 12, 1994 and April
14, 1995 (incorporated herein by reference to Exhibit 10.45
to the Company's Registration Statement on Form S-1, filed
with the Commission February 5, 1996)

10.45 Master Software Maintenance Agreement with Bristol-Myers
Squibb Company dated December 20, 1995 (incorporated herein
by reference to Exhibit 10.46 to the Company's Registration
Statement on Form S-1, filed with the Commission February 5,
1996)

10.46 Master Software License Agreement with Bristol-Myers Squibb
Company dated December 20, 1995 (incorporated herein by
reference to Exhibit 10.47 to the Company's Registration
Statement on Form S-1, filed with the Commission February 5,
1996)

10.47 Employment Agreement dated July 9, 1990 with John LaHaye
(incorporated herein by reference to Exhibit 10.48 to the
Company's Registration Statement on Form S-1, filed with the
Commission February 5, 1996)

10.48 Employment Agreement dated December 15, 1988 with Bruce
Savage (incorporated herein by reference to Exhibit 10.49 to
the Company's Registration Statement on Form S-1, filed with
the Commission February 5, 1996)

10.49 Employment Agreement dated October 1, 1991 with Teresa F.
Winslow (incorporated herein by reference to Exhibit 10.50
to the Company's Registration Statement on Form S-1, filed
with the Commission February 5, 1996)

21

10.50 Employment Agreement dated June 8, 1988 with Charles
Warczakowski (incorporated herein by reference to Exhibit
10.51 to the Company's Registration Statement on Form S-1,
filed with the Commission February 5, 1996)

10.51 Employment Agreement dated January 22, 1996 with Christopher
J. French

10.52 Dendrite 401(k) Retirement Savings Plan
----- ---------------------------------------

13 The Company's 1996 Annual Report to Stockholders, certain
portions of which have been incorporated herein by reference

21 Subsidiaries of the Registrant

23 Consent of Independent Public Accountants

27 Financial Data Schedule

99.5 Employment Agreement

(b) Reports on Form 8-K.

None.

22

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DENDRITE INTERNATIONAL, INC.

Date: March 31, 1997 By: /s/ John E. Bailye
-------------------------------------
John E. Bailye
Chief Executive Officer and President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

Name Title Date
- ----- ----- ----

/s/ John E. Bailye Chief Executive Officer, __________
- --------------------------------
John E. Bailye President and Director
(Principal Executive Officer)

/s/ Charles C. Warczakowski Vice President, Finance __________
- --------------------------------
Charles C. Warczakowski and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)

/s/ John H. Martinson Director __________
- --------------------------------
John H. Martinson

/s/ Bernard M. Goldsmith Director __________
- --------------------------------
Bernard M. Goldsmith

/s/ Paul A. Margolis Director __________
- --------------------
Paul A. Margolis

23

EXHIBIT INDEX

Exhibit

Exhibit No.
3.1 Restated Certificate of Incorporation of the Company, as
amended (incorporated herein by reference to Exhibit 3.1 to
the Company's Quarterly Report on Form 10-Q filed with the
Commission June 30,1996)

3.2 By-laws of the Company, as amended (incorporated herein by
reference to the Exhibit to the Company's Quarterly Report
on Form 10-Q, for the quarter ended September 30, 1995)

4.1 Specimen of Stock Certificate (incorporated herein by
reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

4.2 Registration Rights Agreement dated October 2, 1991 between
the several purchasers named therein and the Company
(incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

4.3 Amendment to Registration Rights Agreement dated April 23,
1992 between the Company and the parties named therein as
shareholders of the Company (incorporated herein by
reference to Exhibit 4.3 of Amendment 1 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.1 Master License Agreement with Eli Lilly and Company dated
December 18, 1991 (incorporated herein by reference to
Exhibit 10.1 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.2 Software Maintenance Agreement with Eli Lilly and Company
dated December 18, 1991 (incorporated herein by reference to
Exhibit 10.2 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.3 Source Material Escrow Agreement with Eli Lilly and Company
dated December 18, 1991 (incorporated herein by reference to
Exhibit 10.3 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.4 Master Service Agreement with Eli Lilly and Company dated
December 18, 1991 (incorporated herein by reference to
Exhibit 10.4 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.5 Addenda to Master License Agreement with Eli Lilly and
Company dated June 1, 1993, June 17, 1993 and October 25,
1993, respectively (incorporated herein by reference to
Exhibit 10.5 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.6 Master Service Agreement with Eli Lilly and Company Limited
(New Zealand) dated February 15, 1995 (incorporated herein
by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.7 Host Computer Agreement with Eli Lilly and Company Limited
(New Zealand) dated February 15, 1995 (incorporated herein
by reference to Exhibit 10.7 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.8 Master Service Agreement with Eli Lilly Italia, S.p.A. dated
January 17, 1994 (incorporated herein by reference to
Exhibit 10.8 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

10.9
Software Maintenance Agreement with Eli Lilly Italia, S.p.A.
dated January 17, 1994 (incorporated herein by reference to
Exhibit 10.9 to the Company's Registration Statement on Form
S-1, filed with the Commission May 17, 1995)

24

Exhibit No. Exhibit
10.10 Customer Agreement with Lilly Industries Limited dated
September 24, 1990 (incorporated herein by reference to
Exhibit 10.10 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.11 Software Maintenance Agreement with Eli Lilly UK Ltd. dated
July 21, 1992 (incorporated herein by reference to Exhibit
10.11 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.12 Source Material Escrow Agreement with Lilly Industries Ltd.
(incorporated herein by reference to Exhibit 10.12 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.13 Master Service Agreement with Lilly Industries Ltd. dated
June 25, 1992 (incorporated herein by reference to Exhibit
10.13 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.14 Master Software License Agreement with Lilly Deutschland
GmbH and Beiersdorf-Lilly GmbH dated July 19, 1994
(incorporated herein by reference to Exhibit 10.14 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.15 Master Software Maintenance Agreement with Lilly Deutschland
GmbH and Beiersdorf-Lilly GmbH dated July 19, 1994
(incorporated herein b reference to Exhibit 10.15 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.16 Master Software Development Agreement with Lilly-Deutschland
GmbH and Beiersdorf-Lilly GmbH dated July 19, 1994
(incorporated herein by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.17 Host Computer Agreement with Lilly Deutschland GmbH and
Beiersdorf-Lilly GmbH dated July 19, 1994 (incorporated
herein by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.18 Master Service Agreement with Lilly Deutschland GmbH and
Beiersdorf-Lilly GmbH dated July 19, 1994 (incorporated
herein by reference to Exhibit 10.18 to the Company's
Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.19 Customer Agreement with Johnson & Johnson dated July 16,
1990 (incorporated herein by reference to Exhibit 10.19 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.20 Master Host Computer Agreement with Johnson & Johnson dated
September 22, 1992 (incorporated herein by reference to
Exhibit 10.20 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.21 Master License Agreement with Johnson & Johnson dated
September 22, 1992 (incorporated herein by reference to
Exhibit 10.21 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.22 Master Software Maintenance Agreement with Johnson & Johnson
dated September 22, 1992 (incorporated herein by reference
to Exhibit 10.22 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.23 Master Service Agreement with Johnson & Johnson
(incorporated herein by reference to Exhibit 10.23 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

25

Exhibit No. Exhibit
10.24 Master Software Maintenance Agreement with Pfizer Inc. dated
December 29, 1994 (incorporated herein by reference to
Exhibit 10.24 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.25 Master Software License Agreement with Pfizer Inc. dated
December 29, 1994 (incorporated herein by reference to
Exhibit 10.25 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.26 Master Service Agreement with Pfizer Inc. dated December 29,
1994 (incorporated herein by reference to Exhibit 10.26 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.27 Source Material Escrow Agreement with Pfizer Inc. dated
March 10, 1995 (incorporated herein by reference to Exhibit
10.27 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.28 Host Computer Agreement with Pfizer Inc. dated September 26,
1994 (incorporated herein by reference to Exhibit 10.28 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.29 Master License Agreement with Pfizer Inc. dated August 17,
1992 (incorporated herein by reference to Exhibit 10.29 to
the Company's Registration Statement on Form S-1, filed with
the Commission May 17, 1995)

10.30 Master Service Agreement with Pfizer Canada, Inc. dated
April 22, 1994 (incorporated herein by reference to Exhibit
10.30 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.31 Master Service Agreement with Pfizer Chemical, K.K. (Japan)
dated June 15, 1992 (incorporated herein by reference to
Exhibit 10.31 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.32 Master License Agreement with Pfizer Pharmaceuticals, Inc.
(Japan) dated November 17, 1992 (incorporated herein by
reference to Exhibit 10.32 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.33 Services List with Pfizer Ltd. dated August 17, 1994
(incorporated herein by reference to Exhibit 10.33 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.34 Master Capitation Agreement with Rhone-Poulenc Rorer Inc.
dated July 29, 1994 (incorporated herein by reference to
Exhibit 10.34 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.35 Master Customer Support Service Agreement with Rhone-Poulenc
Rorer Inc., dated July 29, 1994 (incorporated herein by
reference to Exhibit 10.35 to the Company's Registration
Statement on Form S-1, filed with the Commission May 17,
1995)

10.36 January 1992 Stock Plan (incorporated herein by reference to
Exhibit 10.36 to the Company's Registration Statement on
Form S-1, filed with the Commission May 17, 1995)

10.37 October 1992 Stock Option Plan for Senior Management
(incorporated herein by reference to Exhibit 10.37 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

26

Exhibit No. Exhibit
10.38 Indemnification Agreement of Paul A. Margolis dated as of
January 1, 1992 (incorporated herein by reference to Exhibit
10.38 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.39 Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey
(incorporated herein by reference to Exhibit 10.40 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.40 Employment Agreement dated October 2, 1991 with John E.
Bailye, as amended (the ''Bailye Employment Agreement'')
(incorporated herein by reference to Exhibit 10.41 to the
Company's Registration Statement on Form S-1, filed with the
Commission May 17, 1995)

10.41 Credit Agreement with The Chase Manhattan Bank, N.A. dated
as of May 5, 1995 (incorporated by reference to Exhibit
10.42 to the Company's Registration Statement on Form S-1,
filed with the Commission May 17, 1995)

10.42 Master Software License Agreement with Pfizer Italiana SpA.
dated December 1994 (incorporated by reference to Exhibit
10.43 to the Company's Registration on Form S-1 filed with
the Commission February 5, 1996)

10.43 Master Software License Agreement with Laboratorios Pfizer
Ltda. dated September 29, 1995 (incorporated by reference to
Exhibit 10.44 to the Company's Registration on Form S-1
filed with the Commission February 5, 1996)

10.44 Master Service Agreement with Pfizer Ltd. dated December 1,
1992, as extended by letters dated August 12, 1994 and April
14, 1995 (incorporated by reference to Exhibit 10.45 to the
Company's Registration on Form S-1 filed with the Commission
February 5, 1996)

10.45 Master Software Maintenance Agreement with Bristol-Myers
Squibb Company dated December 20, 1995 (incorporated by
reference to Exhibit 10.46 to the Company's Registration on
Form S-1 filed with the Commission February 5, 1996)

10.46 Master Software License Agreement with Bristol-Myers Squibb
Company dated December 20, 1995 (incorporated by reference
to Exhibit 10.47 to the Company's Registration on Form S-1
filed with the Commission February 5, 1996)

10.47 Employment Agreement dated July 9, 1990 with John LaHaye
(incorporated herein by reference to Exhibit 10.48 to the
Company's Registration on Form S-1 filed with the Commission
February 5, 1996)

10.48 Employment Agreement dated December 15, 1988 with Bruce
Savage (incorporated by reference to Exhibit 10.49 to the
Company's Registration on Form S-1 filed with the Commission
February 5, 1996)

10.49 Employment Agreement dated October 1, 1991 with Teresa F.
Winslow (incorporated by reference to Exhibit 10.50 to the
Company's Registration on Form S-1 filed with the Commission
February 5, 1996)

10.50 Employment Agreement dated June 8, 1988 with Charles
Warczakowski (incorporated by reference to Exhibit 10.51 to
the Company's Registration on Form S-1 filed with the
Commission February 5, 1996)

27

Exhibit No. Exhibit
10.51 Employment Agreement dated January 22, 1996 with Christopher
J. French

10.52 Dendrite 401(k) Retirement Savings Plan

13 The Company's 1995 Annual Report to Stockholders, certain
portions of which have been incorporated herein by reference

21. Subsidiaries of the Registrant

23 Consent of Independent Public Accountants

27 Financial Data Schedule

99.5 Employment Agreement

28