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

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004

Commission file number 001-16379

Dendrite International, Inc.
(Exact Name of Registrant as Specified in Its Charter)

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

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

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 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. / /

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). /x/

        The aggregate market value of shares of common stock held by non-affiliates of the registrant as of June 30, 2004 was $712,784,000 based upon the June 30, 2004, closing price of $18.58 per share.

        The number of shares of common stock outstanding as of March 4, 2005 was 42,514,986.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the registrant's Proxy Statement for the 2005 Annual Meeting of Shareholders are incorporated by reference into Part III.

TABLE OF CONTENTS

Note:

Dendrite, First Source Sales Applications, First Source Sales Support, First Source Sample, First Source Compliance, First Source Integrated Marketing, First Source Trial Services, Mobile Intelligence and other Dendrite product and service names mentioned herein are trademarks or registered trademarks of Dendrite in the United States and in several other countries world-wide. All other product and service names referred to in this document are the trademarks of their respective owners.

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PART I

ITEM 1. Business

General

        Dendrite International, Inc. (collectively, with its subsidiaries, the "Company," "Dendrite," "we," and "our") was incorporated in 1987 with a mission to improve sales and marketing productivity for pharmaceutical and other life sciences companies. Through organic growth and strategic acquisitions, Dendrite has consistently broadened its offerings to include a wide range of pharmaceutical and life science sales, marketing, clinical and compliance solutions.

        Dendrite leverages its extensive knowledge of the pharmaceutical industry's complex and unique selling process to deliver valuable solutions that address today's business issues. Today, Dendrite's solutions are used across 50 countries. Dendrite's customers include the world's top 20 pharmaceutical companies. With our flexible solutions and global reach, we are able to offer our customers a common technology, service, and account management approach, which provides the benefit of consistent performance and delivery. Our core competencies include the ability to design, develop and implement industry-specific software solutions, and on-going services, such as help desk, hardware support, and inventory management. Competencies also include the ability to quickly and reliably reach thousands of physicians and other healthcare professionals with promotional and drug safety information as well as drug samples and promotional material through a suite of well-branded delivery programs. The ability to tie software with other highly valuable services together is difficult to replicate and sets us apart from the competition.

        From clinical trial services to drug sample distribution, from field support services and sales automation technology to regulatory compliance, Dendrite helps pharmaceutical and life sciences companies maximize the effectiveness of their sales, marketing and clinical resources.

Dendrite Solutions

        Dendrite provides sophisticated solutions to support all stages of the pharmaceutical product life cycle. These solutions enable pharmaceutical companies to bring products to market more safely and rapidly, to understand the behavior and needs of their customers, and to conduct highly targeted promotional marketing campaigns. Dendrite strives to be the first source for life science companies seeking expert, integrated global solutions to enhance the effectiveness of sales, marketing, and clinical trial programs. Our solutions are grouped into four categories:

I.     Sales Solutions

        To effectively manage relationships with customers, pharmaceutical and life sciences companies must be able to tailor their messages and approach to their individual needs and behavior. Dendrite's Sales Solutions are designed to enable companies to seamlessly manage customer information, segment customers, and gain the strategic insights required to execute coordinated, targeted and effective business initiatives. The full suite of solutions Dendrite offers in this category includes:

1 a.  First Source Sales Applications™

        In order to maximize promotional effectiveness in an environment where time with the doctor is decreasing and competition is increasing, field sales representatives need state-of-the-art tools and information that allows them to achieve their ultimate objective—customer intimacy. First Source Sales Applications is a comprehensive, field-based software suite that helps pharmaceutical and other life sciences companies manage all aspects of sales force activities.

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•

Mobile Intelligence™.  Mobile Intelligence is the next generation successor to WebForce™, Dendrite's flagship Sales Force Effectiveness software. Mobile Intelligence is based on a human-centered design approach, which improves the usability of software by creating an intuitive user interface that maps directly to the daily workflow of sales representatives, yielding more efficient and effective detailing interactions with prescribers. Mobile Intelligence features a Microsoft's Net architecture and Tibco's Enterprise Integration Solutions, which provide an open, extensible and configurable platform that can be integrated across the enterprise.



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Analyzer™.  The next generation successor to ForceAnalyzer™, Analyzer is a flexible, easy-to-use data analysis tool that standardizes the decision support and reporting processes for all levels of a pharmaceutical sales organization.



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Organization Manager®.  The next generation successor to ForceAdministrator, Organization Manager is an interactive territory-management and database-monitoring tool that enables pharmaceutical companies to align sales representatives to the right customer at the right time with the right product.



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Application Integration Server and Xtelligent.  Enables Dendrite customers to integrate Dendrite applications within their own environment, supporting the reuse of existing infrastructure investments and strategies. Utilizing universal integration technologies (XML, Web Services), the Application Integration Server is the integration hub for all of Dendrite's First Source Sales Applications suite.



•

Configuration Tools.  A comprehensive user interface enabling complete management over Dendrite's First Source Sales Applications.



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WebForce™.  A comprehensive suite of sales force effectiveness tools used for managing sales territories that includes data sharing, analysis and interfacing capabilities. WebForce serves as the basis of the Customer Relationship Management ("CRM") environment for small, medium, and large-size national and multinational pharmaceutical companies. With country-specific functionality, the WebForce product suite offers a common architecture with interfaces that can be configured to support software solutions for various pharmaceutical user markets.



•

WebForceMedSurg™.  This suite of products uses the same architecture and functionality as the WebForce suite to satisfy the unique needs of medical device and surgical sales forces. WebForceMedSurg provides sales forces with a robust set of CRM functionalities and capabilities that are accessible from pocket PCs, handheld devices, tablets, laptops or desktops. The WebForceMedSurg suite consists of three core applications (ForceMedSurg™, ForceMobileMedSurg™ and ForceAnalyzerMedSurg™) for sales and marketing units within medical device and surgical companies.



•

WebForceCG™.  This comprehensive product suite is a tool designed to help consumer goods companies effectively manage objective-driven, bi-directional communication among head office, sales management, and remote field sales forces. WebForceCG facilitates effective product promotions, management objectives, event activities, and funds management. Simultaneously, it provides sales forces with a single, centralized location from which to access product information, enter orders, report shelf conditions, evaluate competitors, record and catalogue client and prospect data, and access customer and account databases. The WebForceCG suite consists of three core applications (ForceCG™, ForceMobileCG™ and ForceAnalyzerCG™) for sales and marketing units within traditional consumer goods companies, over-the-counter/consumer health care units and generic pharmaceutical divisions.



•

j-force™.  This software solution suite is specifically developed for the Asian hospital-driven pharmaceutical market. j-force™ offers multiple components, such as: j-forceNET, a sales channel management solution; j-forceMOBILE™, a PDA-based sales solution; and

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j-forceANALYZER™, a business intelligence tool. For head office personnel, Dendrite also features its j-centre™ solution suite. It features: j-centreSITEWATCH®, for monitoring clinical trial progress; j-centreMARKETER® and j-centreOPTIMIZER®, solutions designed for accurate customer segmentation and targeting, resource allocation, and optimization; j-centreSTAGE®, a personalized business intelligence portal; and j-centreSYNERGY™, a solution that enables information exchange between pharmaceutical companies and wholesalers.

1 b. First Source Sales Support^SM

        Successful implementation initiatives in the life sciences industry require not only robust application software, but also a strong technical infrastructure and sophisticated, consistent support services. First Source Sales Support is an integrated suite of services supporting successful CRM and Sales Force Automation ("SFA") activities for pharmaceutical and life sciences companies. Services in this category include:

•

Hardware & Asset Management Services.  Focuses on replacing non-functioning field-based hardware such as laptop computers. Computers are reloaded with mission-critical software and the end-user's personalized data files.



•

Help Desk Services.  Delivers "single-point of contact" solutions support to enhance the productivity and success of mobile professionals, including support for third-party software.



•

Implementation Services.  Provides unique industry insight, expertise and technical capabilities for implementing today's field-based software solutions. Dendrite's experience comes from nearly two decades of delivering customer-adapted CRM and SFA solutions in the Life Sciences market.



•

Regulatory and Operation Training Services.  Provides comprehensive training solutions to the Life Sciences industry that enable "students" to maximize training efficiency, effectiveness, and recall of trained material.



•

Managed Hosting Services.  Provides total outsourcing of all customer system components, including servers, databases, communication networks, and data processes housed within state-of-the art Data Center facilities.

1 c.  First Source Sample™

        A comprehensive solution suite that unites market-leading software tools with consulting and professional services to help pharmaceutical and other life sciences companies meet regulatory compliance requirements. This comprehensive suite supports the pharmaceutical product lifecycle through the following components:

•

Business Process and Sample Program Design.  A consulting service that addresses the needs of pharmaceutical and life sciences companies in the design or redesign of their sample and regulatory programs, providing solutions in the areas of:



•

Business Rule Development



•

Standard Operating Procedure (SOP) Generation



•

Drug Sample Program Design and Process Flow



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Development of Significant Loss Thresholds



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Intelligent Allocations.  A comprehensive solution, combining high value services with web-based ordering technology that enables pharmaceutical personnel to manage and optimize the allotment of product samples.

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•

Distribution and Fulfillment.  Comprehensive services for distribution and fulfillment of pharmaceutical drug samples through Dendrite's distribution facilities. These distribution centers include operations, such as receiving, inventory management, fulfillment, shipping, returns and document retention.



•

Document Scanning and Data Capture.  An optical scanning, imaging, character- recognition, and retrieval system designed for efficient, economical sample accountability to assist our customers with their regulatory compliance requirements.



•

Sample Guardian™.  A comprehensive sample management tool used for accountability, compliance, and maintenance of critical drug sample information. Sample Guardian helps enable pharmaceutical companies comply with government regulations, specifically for the US. but with growing applicability in other countries as well.



•

Sample Reporting™.  A software tool designed to help pharmaceutical head office personnel analyze, report, and trend drug sample information. It helps organize data collected through Dendrite's Sample Guardian solution and present it in a useful format that helps to manage the sample distribution and reconciliation process.



•

Reconciliation Services.  Comprehensive services for pharmaceutical companies designed to enable internal reconciliation of prescription drug samples and evaluation of potential significant loss for field sales representatives. These services are guided by client-specific procedures and by regulatory requirements, such as the Prescription Drug Marketing Act (PDMA) in the US.



•

Auditing and Inventory Services.  Comprehensive services that include annual inventory checks, random audits, and for-cause audits of field sales representatives. Additionally, these services include practitioner office visits, signature verification programs and sales representative closeouts.

1 d. First Source Compliance^SM

        Services that include the provision of unique and specialized guidance given to companies to assist in understanding the policies and regulatory requirements of state and federal government agencies and other regulatory bodies for the pharmaceutical and life science industry.

•

Regulatory Consulting Services.  Compliance auditing and gap analysis, mock inspections, SOP development, program design and implementation, ongoing support and guidance, staff augmentation, and liaising with federal and state agencies.



•

Regulatory and Compliance Training Services.  Comprehensive training and collaborative educational solutions delivered through traditional, web-based or blended training methods. Dendrite develops and delivers training-program content, tailored to specific requirements.



•

Computer Systems Auditing, Validation Services and Information Technology Security.   Focused on ensuring that our clients' software applications and systems meet all business and regulatory requirements. We achieve this through the application of formalized testing methodologies that examine system compliance with key regulatory requirements such as the US's PDMA regulations for 21 CFR Part 11 and Part 203 regulatory testing and validation.

II.    Marketing Services

        Dendrite's suite of Marketing Services supports pharmaceutical and other life science companies in their direct marketing initiatives such as direct mail, peer-to-peer communications, sample fulfillment and campaign analysis, aimed at doctors, healthcare professionals and patients. These services leverage

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Dendrite's data validation and prescriber tracking capabilities to enable the delivery of targeted promotional programs. Services in this suite include:

2. a.  First Source Integrated Marketing™

        A comprehensive, integrated solution suite comprised of targeting, execution and measurement that enables brand managers to impact physician prescribing behavior. This solution suite focuses on executing marketing campaigns to support launching brands, defending brands, enhancing sales coverage and responding to brand-related news. Components of First Source Integrated Marketing include:

•

Single Source Sampling™.  A targeted, cooperative mail and fulfillment program that provides samples to physicians up to six times per year through a syndicated offer approach.



•

Value Script^SM.  A solution that provides pharmaceutical marketers a flexible and efficient alternative to traditional hand-carried sample distribution.



•

Direct Mail.  Dendrite's direct mail services range from personalized mail creation and distribution to custom mail merge and dimensional mail projects.



•

STAT/GRAM®.  A service that enables companies to communicate important medical news such as product launches, labeling changes and product safety recalls.



•

Telecommunications/Call Center.  A service that enables interactive communication with health care professionals via leading-edge call service, broadcasting, and Web technologies. Dendrite customizes programs and offers live operator or interactive voice response systems.



•

Medical Dialogue^SM.  A service that provides telephone-based, interactive discussions between Dendrite's own health care professionals and doctors that our customers may otherwise not be able to reach. The service promotes peer-to-peer discussion and builds product awareness using a disease management approach.



•

CME Marketing.  A service that allows a Continuing Medical Education (CME) provider's message to reach its key target audience through lists maintained by Dendrite.



•

Publication Circulation Management.  Expert services to support paid, controlled, and single-sponsored healthcare publications. Dendrite's extensive database resources make it possible to customize the profiling and targeting of healthcare professionals to meet a client's targeting objectives.

III.  First Source Trial Services^SM

        Dendrite offers a set of solutions designed to benefit the clinical trial process by effectively initiating studies, identifying potential investigators and patients, providing ongoing support and training to investigators, conducting pre- and post-marketing risk assessments, facilitating safety reporting, and providing data analysis of trial and competitive drugs. Services include:

3.a.  Clinical Trial Accelerator Services^SM

        This service allows pharmaceutical and other life sciences companies to expedite the initiation of clinical trials, including protocol feasibility testing, eligible patient population profiling, and investigator identification/qualification. Through a combination of advanced analytics and predictive modeling, the service enables customers to analyze trial protocol criteria needed to target eligible investigators and appropriate patient populations.

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3.b.  Clinical Trial Effectiveness Solutions™

        A sophisticated, 24x7 contact center staffed to ensure complex issues related to a clinical trial and the data capture process as well as adverse event reporting are efficiently managed.

3.c.  Proactive Risk Management

        This intelligence-based service is aimed at delivering actual drug usage data and analysis through observational studies and safety tracking tools that can be used to identify and analyze risk situations before they adversely affect the product life cycle.

IV.    First Source Customer Insight™

        A solution suite that consists of data, technology and services that turn integrated customer information into knowledge and knowledge into strategic action. The integrated components include:

•

ScripMaxAccess™.  Gives pharmaceutical companies direct access to and interaction with Dendrite's LPD (Longitudinal Prescription Data—the industry's largest retail based prescription database hosted by Dendrite) to perform analysis, conduct market research and support strategic planning.



•

ScripMaxIQ™.  A tool designed to provide analysis of LPD at the metropolitan statistical area level.



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ScripMaxMD™.  A tool based on LPD that provides the ability to analyze, target and segment at the individual doctor level.



•

ScripMaxAction™.  Provides an alert and an accompanying "action" message to a SFA application when a particular prescribing activity is detected.



•

Practitioner Validation and Cleansing Services.  This solution keeps customer data clean, up-to-date and verified, by standardizing, matching and merging duplicate information.



•

Pharbase^SM.  This European and Canadian-based healthcare database service provides a source of intelligence to pharmaceutical companies. Dendrite receives daily input from an array of information sources such as professional healthcare organizations, doctors, pharmacists, online data sources and pharmaceutical company representatives to ensure that the data contained in Pharbase is accurate. Powerful marketing programs can be developed with precise targeting characteristics based on elements such as doctor profile data, response to previous promotional approaches, specialty, interests, areas of influence and socio-demographic data contained in Pharbase.



•

Customer Master.  Built specifically for the pharmaceutical industry, it is an end-to-end customer information management solution that enables users to capture, centralize and manage customer-related information, across the enterprise.



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Business Intelligence Data Mart.  A solution that enables pharmaceutical companies to combine disparate information within an analytics data mart to maximize sales and marketing effectiveness. The solution includes reporting and analytical capabilities to provide users with up-to-date information to make the right business decisions.

Customers

        Our major clients consist of multinational pharmaceutical and other life sciences companies including: Abbott; Allergan; AstraZeneca; Bayer; Boehringer-Ingelheim; Bristol-Myers Squibb; Celltech Medeva; Dainippon; Eli Lilly; Forest Laboratories; GlaxoSmithKline; Kissei; Merck, Mitsubishi Tokyo;

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Novartis; Novo Nordisk; Ono Pharmaceuticals; Pfizer; Procter & Gamble; Sankyo; Sanofi-Aventis; Solvay; Takeda Pharma; Teijin; Tokyo Tanabe; Torii; Tsumura; and Wyeth Lederle.

        Approximately 28% of our total revenues in 2004 and 36% our total revenues in 2003 and 2002 came from our largest client, Pfizer.

Competition

        Our solutions compete with others principally on the basis of industry applicability and product flexibility. They also compete on the basis of name recognition, global competence, service standards, cost, breadth of customer base and technical support and service. We believe that our solutions compete favorably with respect to these factors and that we are positioned to maintain strong market leadership through innovative new product and application developments and continued focus on support services.

        While we face a number of significant competitors in each of our specific market areas, we believe that there is no single competitor that currently offers our breadth of solutions in the pharmaceutical and life sciences industries on a worldwide basis. We expect competition to increase as new competitors enter our markets and as existing competitors expand their product lines, consolidate or offer more compelling solutions. We believe that we have distinguished ourselves and are well positioned in the pharmaceutical market due to our combination of deep pharmaceutical business knowledge, recognized technical support, depth of personnel experienced in the pharmaceutical industry and the quality of our proprietary products and product architecture which is uniquely suited to the pharmaceutical industry. In addition, we face competition from current customers and potential customers who may elect to design and install or operate their own systems.

Research and Development

        We continue to take advantage of new technologies in developing new products and services. We work closely with our customers to develop new products designed directly for their business needs. We recorded approximately $9,316,000, $11,633,000, and $10,396,000 of research and development expense for the years ended December 31, 2004, 2003 and 2002, respectively. Our research and development expense plus additions to capitalized software development costs, was approximately $15,202,000, $14,815,000 and $13,074,000 for the years ended December 31, 2004, 2003 and 2002, respectively. We capitalized more costs in the year ended December 31, 2004 than in 2003 due to the development for the release of our next generation CRM solution, expected to be released in 2005.

        Dendrite 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 $9,170,000 and $6,126,000 at December 31, 2004 and 2003, respectively.

Seasonality

        Historically, we have experienced lower spending from our customers in the first and third quarters as compared to other quarters. Due to the recent growth of our international operations, we have been further impacted by lower third quarter spending by our customers outside the United States.

Proprietary Rights

        Dendrite relies on a combination of methods to protect our proprietary rights, including:

•

trade secret, copyright and trademark laws;

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•

non-disclosure and other restrictive covenants with our customers, vendors and strategic partners; and



•

non-disclosure and other restrictive covenants with our executive officers and other key and technical employees and consultants.

        Existing U.S. trade secret and copyright laws provide only limited protection for our proprietary rights, and even less protection may be available under foreign laws.

Employees

        As of December 31, 2004, the Company employed 2,549 employees: 1,366 in the U.S. and Canada; 804 in Europe; 257 in the Pacific Rim; and 122 in Latin America.

Geographical Areas

        See Note 14 of the Notes to Consolidated Financial Statements concerning information relating to the Company's geographic areas.

Executive Officers

        The following table identifies the current executive officers of the Company:

        Each executive officer serves at the discretion of the Board of Directors.

        John E. Bailye has served as Chief Executive Officer and Director since the Company's founding in 1987 and since 1991 in the additional position of Chairman of the Board. Prior to 1987, Mr. Bailye served as Managing Director of Foresearch Pty., Limited ("Foresearch"), a consulting company to the pharmaceutical industry in Australia. Mr. Bailye served in that capacity from the time he acquired Foresearch in 1976 until he sold the company in 1986. Mr. Bailye served as a market researcher for Foresearch prior to 1976. Mr. Bailye holds a Bachelors of Commerce in Finance, Marketing and Business from the University of New South Wales.

        Paul L. Zaffaroni has served as President and Chief Operating Officer of Dendrite since 2001. Prior to joining the Company, Mr. Zaffaroni spent 10 years at Acxiom Corporation, serving in various capacities including Corporate Sales Leader, Division Leader and Senior Vice President. Prior to Acxiom, Mr. Zaffaroni spent 21 years at IBM Corporation. Mr. Zaffaroni holds a Bachelors of Science in Business Administration from Youngstown State University.

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        Kathleen E. Donovan has served as Senior Vice President and Chief Financial Officer since 2003. Ms. Donovan has been with Dendrite since 1997 and has previously served as Vice President and Acting Chief Financial Officer, Vice President and Treasurer, Vice President and Chief Financial Officer of American Operations, Vice President and Corporate Controller, and Vice President of Financial Operations. Prior to joining the Company, Ms. Donovan spent 14 years at Unisys Corporation, most recently as Director of Corporate Financial Planning. Ms. Donovan holds a Bachelors of Science in Finance from Georgetown University.

        Christine A. Pellizzari has served as Senior Vice President, General Counsel and Secretary since 2000. Ms. Pellizzari served as Associate Counsel from 1998 to 2000. Prior to joining the Company, Ms. Pellizzari was an Associate at Wilentz, Goldman & Spitzer, P.A. from 1995 to 1998 and law clerk to the Honorable Reginald Stanton, Superior Court of New Jersey, from 1994 to 1995. Ms. Pellizzari holds a Bachelors of Arts in Legal Studies from the University of Massachusetts at Amherst and a Juris Doctorate from the University of Colorado School of Law.

        Mark H. Cieplik has served as Senior Vice President responsible for the Company's operations and sales efforts for a major customer since 2002 and, additionally, for clinical services since 2003. Mr. Cieplik has been with Dendrite since 1997, previously serving in key senior positions including Senior Vice President, Worldwide Sales. Prior to joining the Company, Mr. Cieplik served as Vice President of Americas of Interleaf, Inc. from 1995 to 1997 and Director of North America Major Accounts for System Software Associates from 1991 to 1995. Mr. Cieplik also served in various capacities with IBM from 1976 until 1991. Mr. Cieplik holds a Bachelors of Science in Marketing from Millikin University.

        Natasha Giordano has served as Senior Vice President responsible for global pharmaceutical company sales and Latin American sales since January 2005. Ms. Giordano has been with Dendrite since 2001 and has previously served as Group President, Global Business Unit for major customers, and Vice President, Global Accounts. Prior to joining Dendrite, Ms. Giordano spent 10 years at Parke-Davis/Warner Lambert in various sales and sales leadership positions, most recently managing Strategic Alliances. Ms. Giordano holds a Bachelors of Science degree from Wagner College in New York.

        Garry D. Johnson has served as Senior Vice President and Chief Technology Officer since 2003. Mr. Johnson has been with Dendrite since 2000 and has served as Vice President of North American Technical Operations. Prior to joining the Company, Mr. Johnson served as Vice President of Information Technology at Boron Lepore and, prior to that, as Director, IT Strategy & Quality, at Allied Signal. Mr. Johnson holds a Bachelors of Arts in Management from Fairfield University.

        Jean-Paul Modde has served as Senior Vice President responsible for European and Asia/Pacific sales and marketing and operations since 2003. Mr. Modde has been with Dendrite since 1988, previously serving in other key management positions including: Senior Vice President, Asia/Pacific and Latin American region; Regional Director, Latin America; and Sales Director, Europe. Mr. Modde holds a Bachelors of Science in Computer Science from Macquarie University, Australia.

        Mark Theilken has served as Senior Vice President responsible for North American sales, marketing services, and BuzzeoPDMA sales and operations since January 2005. Mr. Theilken has been with Dendrite since April 2004 and has previously served as Senior Vice President responsible for interactive marketing, data management and Dendrite's CRM Effectiveness unit. Prior to joining Dendrite, Mr. Theilken served as President and Chief Executive Officer of Fuego, Inc. from March 2000 to January 2004. Prior to Fuego Mr. Theilken spent 5 years at Acxiom Corporation serving as Group Leader, InfoBase Products, and Senior Vice President, marketing information services. Prior to Acxiom, Mr. Theilken spent 22 years at IBM Corporation. Mr. Theilken holds a Bachelors of Science in Mathematics from the University of Illinois.

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Additional Information

        For additional information regarding the Company's business, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Available Information

        We make available free of charge through our website, www.dendrite.com, all materials that we file electronically with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after electronically filing such materials with, or furnishing them to, the SEC.

        You may also read and copy any materials filed by the Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, and you may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website, www.sec.gov, that contains reports, proxy and information statements and other information which the Company files electronically with the SEC.

ITEM 2. Properties

        We lease the following facilities in the U.S.: a 233,000 square foot facility in Bedminster, New Jersey, which serves as our corporate headquarters; a 137,000 square foot facility in Totowa, New Jersey, which serves as a distribution center, warehouse and call center for our interactive marketing business; a 33,000 square foot facility in Bridgewater, New Jersey, which serves as administrative offices; a 37,745 square foot building in Bethlehem, Pennsylvania and a 15,000 square foot warehouse in Somerset, New Jersey, both of which serve as hardware repair and maintenance facilities; a 100,000 square foot facility in Chesapeake, Virginia, which houses a data and call center; a 67,000 square foot facility in Norcross, Georgia, which serves as a data and call center and hardware repair and maintenance facility; a 9,490 square foot office in Durham, North Carolina, which houses certain employees in our data and analytics business; and a 4,200 square foot office in Fort Mitchell, Kentucky, a 2,100 square foot office in Mount Laurel, New Jersey, and a 300 square foot office in San Juan, Puerto Rico each of which house employees of our BuzzeoPDMA Division. The Bedminster facility is subleased from Pharmacia & Upjohn Company, a subsidiary of Pfizer, Inc.

        We also lease, or have leased on our behalf, a total of approximately 270,000 square feet for local management, sales offices and operations in the following countries: Australia, Austria, Belgium, Brazil, Canada, China, Colombia, France, Germany, Greece, Hungary, India, Italy, Japan, Mexico, New Zealand, Poland, Portugal, Russia, South Korea, Spain, The Netherlands, Ukraine and the United Kingdom.

        The Company owns a 145,000 square foot facility in Piscataway, New Jersey, which will serve as a hardware repair and maintenance facility; and a 2,500 square foot facility in Leicestershire, United Kingdom, which is utilized for administrative offices and interactive marketing operations.

ITEM 3. Legal Proceedings

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

ITEM 4. Submission of Matters to a Vote of Security Holders

        Not applicable.

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PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

        The Company's common stock, no par value, is quoted on the Nasdaq National Market System under the symbol "DRTE."

        The following table sets forth for the periods indicated the high and low sale prices for our common stock as reported by the Nasdaq National Market System.

Approximate Number of Equity Security Holders

        As of March 4, 2005, there were approximately 339 holders of record of our common stock.

Dividends

        The Company has never paid cash dividends on its common stock and does not intend to pay cash dividends on common stock in the foreseeable future. If the Company were to consider paying cash dividends, certain of the covenants of the Company's line of credit may limit the amount of any such dividends we may pay. See Note 8 of the Notes to Consolidated Financial Statements and "Liquidity and Capital Resources" in Item 7 for a discussion of our credit agreement.

Issuer Purchases

(1)

Represents shares tendered under the Company's replacement option program under which a designated executive may tender shares of the Company's common stock owned by the executive in order to pay the exercise price of vested options and applicable withholdings. The designated executive receives replacement options in an amount equal to the number of shares tendered. Each replacement option expires on the expiration date of the original exercised option to which it relates and the exercised options must be held for a period of at least one year or the replacement options are forfeited.

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ITEM 6. Selected Financial Data

(a)

Includes the operating results of Synavant Inc. for the period from June 16, 2003 through December 31, 2003.

(b)

2001 restructuring expense relates to the elimination of certain positions and closing of our Stroudsburg facility, including the related exiting costs.

(c)

2002 asset impairment relates to write-down of a facility then held for sale. See Note 5 to the Consolidated Financial Statements.

(d)

2001 asset impairments related to a $6,173 goodwill impairment charge, $3,450 write-off of equity investments and $2,100 impairment of a facility held for sale.

Note:

The data prior to the year ended December 31, 2004 disclosed above has been reclassified to conform to the current year presentation.

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

($ in thousands)

Forward-Looking Statements

        This Form 10-K may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21-E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by such acts. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements, including the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" regarding our strategy, future operations, future expectations or future estimates, future financial position or results and future plans and objectives of management. Those statements in this Form 10-K containing the words "believes," "anticipates," "plans," "expects" and similar expressions constitute forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations, assumptions, estimates and projections about our Company and the pharmaceutical and consumer packaged goods industries. All such forward-looking statements involve significant risks and uncertainties, including those risks identified in this Form 10-K under "Factors That May Affect Future Results," many of which are beyond our control. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate and actual results may differ materially from those indicated by the forward-looking statements included in this Form 10-K, as more fully described under "Factors That May Affect Future Results." In light of the significant uncertainties inherent in the forward-looking statements included in this Form 10-K, you should not consider the inclusion of such information as a representation by us or anyone else that we will achieve such results. Moreover, we assume no obligation to update these forward-looking statements to reflect actual results or changes in assumptions, expectations or projections. In addition, our financial and performance outlook concerning future revenues, margins, earnings, earnings per share and other operating or performance results does not include the impact of any future acquisitions, future acquisition-related expenses or any future restructuring or other charges that may occur from time-to-time due to management decisions and changing business circumstances and conditions.

EXECUTIVE OVERVIEW

        We provide a broad array of solutions worldwide that enable pharmaceutical and other life science companies to strategically optimize their sales and marketing channels and clinical resources. Our plan is to continue to diversify and expand our solutions portfolio, customer base and geographic reach by leveraging our extensive knowledge of the pharmaceutical and life sciences industries and capitalizing upon our deep relationships in these industries. Our strategy continues to rely on both internal growth and acquisitions to meet to our growth objectives.

        In January 2004, we broadened and enhanced our product and service portfolio in the Japanese pharmaceutical industry and extended our leadership position in Japan with our acquisition of Uto Brain Co. Ltd. ("Uto Brain"). In April 2004, we acquired the Medical Data Management group of companies ("MDM"), increasing our ability to provide leading solutions that drive promotional and sales effectiveness in Central and Eastern Europe. In January 2005, we continued to broaden and enhance our service portfolio with our acquisition of BuzzeoPMDA, Inc ("Buzzeo"). Buzzeo's results of operations are not included in the accompanying consolidated financial statements. We believe our recent acquisitions complement our existing business operations by enhancing our solutions portfolio and increasing our access to new customers and markets.

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        We have expanded both our portfolio of solutions and customer base and believe that this combination presents significant opportunity for future growth. We have also committed to investing in key initiatives to help drive future growth. We believe increased investments in marketing and sales resources and programs will help us more effectively sell and market the diversity of solutions we now offer. Our future growth is dependent on our ability to further penetrate the markets in which we operate and increase the adoption rate of our expanded portfolio of solutions.

        We evaluate our performance based upon a number of operating metrics. Chief among these metrics are revenues, operating margins, diluted net income per share, operating cash flow and days sales outstanding. During 2004, we saw the continued execution of our strategy yield growth in revenues, operating margins and diluted net income per share versus the same period of 2003. We also continued to exhibit strong cash generation attributes, improving days sales outstanding from the prior year end and generating strong positive operating cash flow even as we continued to reduce the remaining liabilities associated with our acquisitions. In addition, seasonality has become a factor in certain lines of our business due to our international growth from our 2003 and 2004 acquisitions. Revenues are becoming increasingly stronger in the second and fourth quarters of a year compared to the first and third quarters.

        Due to the growth in our strategic product and service offerings, largely built through our recent acquisitions, we have expanded our revenue categories into Sales Solutions, Marketing Solutions and Shipping. These categories reflect how our service offerings are marketed to and viewed by our customers. They are not reflective of the way we manage our business. Our operating costs are not broken out for these categories on a global basis, as they are not viewed as necessary in the management of our global business. Based upon all of these factors, while these categories are useful in understanding our operating results, we are only one reporting segment for disclosure purposes under Statement of Financial Accounting Standards ("SFAS") 131, "Disclosure About Segments of an Enterprise and Related Information." The following is a summary of our revenue categories:

        Sales Solutions revenue includes product and sales solutions services of the traditional Dendrite business. All of these products and services are used by or provided to the sales force of our customers and sales management.

        Marketing Solutions revenue includes our product and service offerings that are not geared toward the client sales force and primarily consists of offerings acquired in our business combinations over the past few years. The primary components of marketing revenue include interactive marketing, data, consulting and clinical services.

        Shipping revenues are disclosed separately as they are pass-through costs that bear little to no margin, and are required to be included in revenues and costs based upon Emerging Issues Task Force ("EITF") 00-10, "Accounting for Shipping and Handling Fees and Costs." These billable shipping transactions are primarily related to our interactive marketing activities.

        Management's Discussion and Analysis ("MD&A") is intended to help the reader understand the results of our operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with our financial statements and the accompanying notes to consolidated financial statements. Enterprise-wide disclosure information appearing in Note 14 of the Notes to Consolidated Financial Statements are presented in accordance with SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."

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CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES

        A critical accounting policy is one that is both very important to the portrayal of a company's financial position and results of operations and requires management's most difficult, subjective or complex judgments. We believe that our critical accounting policies are revenue recognition, acquisitions and related accruals, impairments, income taxes and capitalized software.

Revenue Recognition

        The area of revenue recognition requires management's to make significant judgments and estimates. AICPA Statement of Position ("SOP") 97-2, "Software Revenue Recognition," governs revenue recognition for arrangements that include software which is more than incidental to the arrangement. Under SOP 97-2, if a sale of software includes services that are essential to the functionality of the software, then the software and essential services are to be accounted for using contract accounting as described in Accounting Research Bulletin 45, "Long-Term Construction-Type Contracts," and SOP 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts." The determination of whether or not services are essential to the functionality of the software can differ from arrangement-to-arrangement and requires the use of significant judgment by management. Factors used in determining whether or not services are essential to the functionality may include: whether or not physical changes are being made to the software's underlying source code; the complexity of software configuration services; the level of effort required to build interfaces; the overall relationship of the service fees to the license fees; the length of time expected to complete the services; and whether or not the services can be obtained by a customer from their internal resources or another third-party vendor. If services are not considered to be essential to the functionality of the software, SOP 97-2 generally allows companies to recognize revenue for software licenses upon delivery of the licenses, prior to configuration or implementation services, provided that the other requirements of the SOP are met. In management's judgment, our configuration and implementation services generally are essential to the functionality of our software. Therefore, we typically recognize revenue using the percentage-of-completion method as detailed in SOP 81-1.

        The percentage-of-completion method of revenue recognition requires us to use significant estimates in measuring the progress-to-completion for each project. For our license fee and implementation service projects, we use the input measure of labor incurred as compared with total expected labor for the entire project. The determination of total project labor requires the use of significant judgment and estimates. We review these estimates on a monthly basis. Actual results could differ from these estimates, which would impact the amount of revenue previously recognized, had better estimates been available at the time.

        Many of our arrangements include multiple deliverables. In the absence of higher-level specific authoritative guidance, we determine the units of accounting for multiple element arrangements in accordance with Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). Specifically, we will consider a delivered item as a separate unit of accounting if it has value to the customer on a stand-alone basis, if there is objective and reliable evidence of the fair value of the undelivered elements, and if the arrangement includes a general right of return relative to the delivered element, delivery or performance of the undelivered element is considered probable and is substantially within our control. The determination of whether or not arrangements meet these criteria requires significant judgment on the part of the management. If our

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arrangements did not meet the separation criteria of EITF 00-21, the timing of revenue recognition could be delayed.

Accounting for Acquisitions and Related Accruals

        The accounting related to business combinations requires us to estimate the fair value and useful life of the assets acquired and the fair value of the liabilities assumed in the combinations. These estimates of fair value are based on our business plan for the entities acquired including planned redundancies, restructuring, use of assets acquired and assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. We typically analyze a number of factors such as valuation or appraisal reports when determined the estimates of fair value. Should actual use of assets or resolution of obligations differ from our estimates, revisions to the estimated fair values, useful lives, or both, would be required.

        During 2003, in connection with the purchase accounting related to the Synavant acquisition, we established certain accruals related to costs that we expect will be incurred in connection with exiting multiple former Synavant facilities and eliminating certain former Synavant positions. These accruals were based on estimates made at the time of acquisition. The liability accrued for expenses to be incurred in exiting certain Synavant facilities includes assumptions related to sublease income which offsets future lease obligations. The underlying subleases are not in place for all facilities and the future placement of subleases, including the timing and terms and conditions of subleases, could be different than our assumptions.

Accounting for Impairments

        We review long-lived assets for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Other than goodwill and indefinite-lived intangibles, if indicators of impairment are present, we evaluate the recoverability of the long-lived assets by estimating future undiscounted cash flows that are directly associated with and expected to arise as a direct result of the use and eventual disposition of the long-lived asset. If this estimate of future undiscounted cash flows demonstrates that recoverability is not probable, an impairment loss would be calculated and recognized based on the excess carrying value of the long-lived asset over the long-lived asset's fair value. The estimate of the fair value and the future undiscounted cash flows of the underlying long-lived assets are based on significant judgments and assumptions.

        We review capitalized software development costs and purchased capitalized software development costs for impairment at each balance sheet date to determine if the unamortized capitalized costs of a computer software product is greater than the net realizable value of that product. In instances where the unamortized capitalized costs are greater than the net realizable value, we record an impairment loss.

        We assess goodwill and indefinite-lived intangibles for the possibility of impairment on an annual basis (as of October 1 of each year), and whenever events or changes in circumstances indicate that the carrying values may not be recoverable. Some factors we consider important which could trigger an impairment review include the following:

•

Significant underperformance relative to historical or projected future operating results;



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Significant changes in our use of acquired assets or the strategy for our overall business; and

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Significant negative industry or economic trends.

        On an annual basis, or when we determine that the carrying value of goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we calculate and compare the fair value of our reporting unit to its carrying value. We currently have only one reporting unit. If the carrying value exceeds the fair value, we calculate the implied fair value of the goodwill for our reporting unit and compare it to the carrying value of the goodwill. If the implied fair value of the goodwill were less than the carrying value of the goodwill, we recognize an impairment loss equal to such difference, (not to exceed the carrying value) in our consolidated statement of operations.

        On an annual basis, or when we determine that the carrying value of an indefinite-lived intangible asset may not be recoverable based upon the existence of one or more of the above indicators of impairment, we calculate and compare the fair value of the indefinite-lived intangible asset to its carrying value. If the carrying value exceeds the fair value, an impairment loss will be recognized in an amount equal to the difference. If we deem the useful life to be no longer indefinite, after testing for impairment in accordance with the applicable rules stated above, we amortize the intangible asset over its remaining estimated useful life, following the pattern in which the expected benefits will be consumed or otherwise used up and we would continue to review for impairment in the future on an annual basis.

Accounting for Income Taxes

        Deferred tax assets and liabilities represent the differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates that are expected to be in effect when the differences reverse. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences, all of which require our significant judgment. We must believe it is more likely than not that the recorded net deferred tax asset will be realized. Realization is dependent on generating sufficient taxable income of a specific nature prior to the expiration of the loss carryforwards, capital loss and foreign tax credit carryforwards. The asset may be reduced if estimates of future taxable income during the carryforward period are reduced. In addition, we maintain reserves for certain tax items, which are included in income taxes payable on the consolidated balance sheet. We periodically review these reserves to determine if adjustments to these balances are necessary.

Accounting for Capitalized Software

        We account for research and development costs in accordance with applicable accounting pronouncements, including SFAS 2, "Accounting for Research and Development Costs," and SFAS 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." SFAS 86 specifies that costs incurred internally in researching and developing a computer software product to be sold should be charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs, which includes directs costs of developing the product, should be capitalized until the product is available for general release to customers. Technological feasibility is considered to be reached when a product and program design has been completed or a working model of the software product has been completed. Our technical operations group reviews each project to determine when technological feasibility of a product is established.

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MERGERS AND ACQUISITIONS

        We regularly evaluate opportunities to acquire products or businesses that represent strategic enhancements to our operations. Such acquisition opportunities, if they arise, may involve the use of cash, equity and/or debt instruments. We have made the following acquisitions over the last three years:

Schwarzeck

        On July 20, 2004, we completed the strategic acquisition of the capital stock of Schwarzeck-Verlag GmbH ("Schwarzeck"). Schwarzeck was a provider of physician databases, direct marketing services and sample fulfillment services to pharmaceutical companies in Germany. This acquisition accelerated our expansion in Europe and increases our interactive marketing solutions and services to the German pharmaceutical industry. In connection with the acquisition, we restructured the combined operations by eliminating certain former Schwarzeck positions. We accrued approximately $300 at July 20, 2004 for liabilities associated with the cost of completing the restructuring plan. Schwarzeck's results of operations have been included in the accompanying consolidated financial statements since the date of acquisition. We have preliminarily allocated the entire purchase price of approximately $800 to purchased database. The assets acquired and liabilities assumed in connection with the Schwarzeck acquisition, and pro forma results of operations are not deemed material to the consolidated financial statements.

MDM

        On April 6, 2004, we completed the strategic acquisition of the capital stock of the Medical Data Management group of companies ("MDM"). Primarily based in Warsaw, Poland, MDM was a provider of physician databases, market research and sales force support services to pharmaceutical companies in Poland, Hungary, Russia and the Ukraine. MDM's results of operations have been included in the accompanying consolidated financial statements since the date of acquisition.

        The aggregate purchase price for MDM was approximately $9,290 and consisted of approximately $5,700 in cash payments, approximately $3,320 in restricted stock and approximately $270 of legal and professional fees. The valuation of certain intangible assets was finalized during the fourth quarter of 2004. The assets acquired and liabilities assumed in connection with the MDM acquisition and pro forma results of operations are not deemed material to the consolidated financial statements.

Uto Brain

        On January 5, 2004, we completed the strategic acquisition of the capital stock of Uto Brain Co., Ltd. ("Uto Brain"). Based in Osaka, Japan, Uto Brain provided more than thirty pharmaceutical companies with data, analytics, publishing and advisory services. The combining of resources of Uto Brain with our existing resources creates a comprehensive information, software and services company dedicated to the Japanese pharmaceutical industry and further enhances our ability to provide solutions to enhance sales, marketing and clinical functions of pharmaceutical companies in the Japanese market. Uto Brain's results of operations have been included in the accompanying consolidated financial statements since the date of acquisition.

        The aggregate purchase price for Uto Brain was approximately $4,900 (498,270 Yen), including approximately $100 of legal and professional fees. As of December 31, 2004, we paid approximately $3,400 of the purchase price with approximately $1,400 still outstanding and included within Other Accrued Expenses on the December 31, 2004 consolidated balance sheet. In accordance with the

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purchase agreement, the outstanding balance is payable as follows: approximately $500 on January 5, 2005; and $900 on March 31, 2005. In addition, we assumed approximately $3,800 in bank debt and an acquired loan, all of which was repaid during the year ended December 31, 2004. The valuation of certain intangible assets was finalized during the fourth quarter of 2004. The assets acquired and liabilities assumed in connection with the Uto Brain acquisition and pro forma results of operations are not deemed material to the consolidated financial statements.

Synavant Inc.

        On June 16, 2003, we completed our acquisition of Synavant. Synavant provided a broad range of knowledge-based services to pharmaceutical and other life science companies around the world. Its global solutions included pharmaceutical CRM applications, interactive marketing, server and database management, dedicated local help-line support, training, telemarketing, sample management and product recall services. Synavant was headquartered in Atlanta, Georgia, and had offices in 21 countries. We believe that combining Synavant's resources with Dendrite's resources created a more comprehensive information, software and services company dedicated to the global life sciences industry, and further enhances our ability to provide market leading solutions to the sales, marketing and clinical functions of pharmaceutical and other life science companies. Synavant's results of operations have been included in the accompanying consolidated financial statements since the date of acquisition.

        The aggregate purchase price for Synavant was approximately $55,130, including consideration paid for the common stock ($3.22 per share) and approximately $3,445 of legal and professional fees incurred in connection with the transaction. We have finalized the valuation of certain intangibles and our restructuring plan to eliminate certain former Synavant positions and exit certain former Synavant facilities due to redundancies and gained efficiencies.

        In connection with the acquisition, we exited certain former Synavant facilities and eliminated certain former Synavant positions. We accrued approximately $22,102 at June 16, 2003, for liabilities associated with the cost of completing the restructuring plan. The components of this accrued liability were approximately $13,042 of severance costs for former Synavant positions being eliminated and approximately $9,060 of costs to exit former Synavant facilities. During the fourth quarter of 2003, we reduced the liabilities related to the restructuring plan by approximately $2,442 based on our revised estimate of the total cost. The components of the reduction to the accrued liability were approximately $2,272 for lower expected severance costs for former Synavant positions being eliminated and approximately $170 for lower costs to exit certain former Synavant facilities. This reduction was recorded by an adjustment within goodwill in the accompanying 2003 consolidated balance sheet. During finalization of the purchase price allocation, we increased our restructuring accrual estimate by approximately $1,800 due to an adjustment of the total costs to exit certain former Synavant facilities and recorded the corresponding adjustment to goodwill in the accompanying consolidated balance sheet.

        The liability accrued for expenses incurred in exiting certain Synavant facilities includes, assumptions related to sublease income which offsets future lease obligations. The underlying subleases are not in place for all facilities and the future placement of subleases, including the timing and terms and conditions of subleases, could be different than the assumptions and impact future results of operations.

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Software Associates International

        On September 19, 2002, we acquired New Jersey based Software Associates International ("SAI"). SAI provided software products and solutions that enabled corporate level sales and marketing analysis for pharmaceutical companies. These solutions are complementary to our suite of business products. SAI's results of operations have been included in the consolidated financial statements since the acquisition date.

        The aggregate purchase price for SAI was approximately $16,739 and consisted of: cash of approximately $15,092; accrued professional fees of approximately $410; and options to purchase Dendrite common stock valued at approximately $1,237. The fair value of the stock options was estimated using the Black-Scholes valuation model.

        We recorded $7,634 of goodwill and $4,694 of acquired intangible assets, of which approximately $732 was assigned to registered trademarks. The remaining $3,962 of acquired intangible assets includes purchased software development costs of approximately $2,441, approximately $328 of non-compete agreements and approximately $1,193 of customer relationship assets.

        In connection with the acquisition of SAI, we developed an exit plan. The exit plan consisted of closing a facility in Mt. Arlington, New Jersey, and relocating the operations to the Company's other facilities in New Jersey. We accrued as part of the acquisition costs the costs to terminate certain leases amounting to $3,252. We closed the facility during the first quarter of 2003.

Pharma Vision

        On August 12, 2002, we acquired Pharma Vision for cash consideration of approximately $700, including approximately $50 of professional service fees. Pharma Vision collected and sold data for customer targeting that pharmaceutical representatives use in Europe and provided support to pharmaceutical customers in Belgium and The Netherlands. Pharma Vision's results of operations have been included in the consolidated financial statements since the date of acquisition. The assets acquired and liabilities assumed in connection with the Pharma Vision acquisition and pro forma results of operations are not deemed material to the consolidated financial statements.

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RESULTS OF OPERATIONS

        The following table sets forth our results of operations expressed as a percentage of total revenues for the periods indicated:

YEARS ENDED DECEMBER 31, 2004 AND 2003

REVENUES

        Total revenues for the year ended December 31, 2004 increased 24% compared with the year ended December 31, 2003. Our international revenues, for which license revenues have been allocated to the geographic location of the customer, were $157,375, or approximately 39% of total revenues, for the year ended December 31, 2004, versus $87,922, or 27% of total revenue for the year ended December 31, 2003, an increase of 79%. Total revenues in the United States were $241,822, or approximately 61% of total revenues, and increased by 4% from the year ended December 31, 2003. The increase in revenues is primarily due to a full twelve-month period of revenues in 2004 from the June 2003 acquisition of Synavant as well as revenues resulting from the 2004 acquisitions of Uto Brain, MDM and Schwarzeck and a favorable impact from foreign currency rates.

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Sales Solutions

        Sales solutions revenues accounted for approximately 72% of total revenues during the year ended December 31, 2004, and increased 9% compared with the year ended December 31, 2003. License fee revenue, which account for approximately 5% of 2004 sales solution revenues, increased 25% over the prior year, largely due to multi-county roll-outs of our software products by large global pharmaceutical customers. In 2004, we saw a trend of clients negotiating larger regional or multi-country deals. Sales solutions services in the United States declined by approximately 4%, but included an increase in our ongoing solutions services which were more than offset by larger decreases in one-time services related to client software rollouts in 2003. International sales solutions service fees increased 48% versus the year ended December 31, 2003, primarily due to our recent acquisitions as well as services relating to multi-country rollouts initiated by several large global pharmaceutical customers.

Marketing Solutions

        Marketing solutions revenues accounted for approximately 24% of total revenues during the year ended December 31, 2004, and increased by approximately 87% compared with the year ended December 31, 2003. Our international marketing solutions business increased by 165% over the prior year, including 200% growth in our international interactive marketing services, 133% growth in our international consulting services, 105% growth in international data fees and the addition of contract sales services from our recent acquisition of MDM. In the United States, marketing solutions fees increased by 36% compared with the year ended December 31, 2003. This increase in the United States was comprised of 76% growth in our Interactive Marketing services, 3% growth in our clinical services, 30% growth in our consulting services and 20% growth in domestic data fees. The growth in our worldwide marketing solutions revenues was primarily driven by our 2003 and 2004 acquisitions.

Shipping

        Shipping fees accounted for approximately 4% of total revenues during the year ended December 31, 2004, and increased by approximately 136% compared with the year ended December 31, 2003. Shipping revenues contribute little to no margin and result from pass-through shipping costs associated with our global interactive marketing business. The interactive marketing business was originated through our acquisition of Synavant in June 2003, and has been further expanded through our 2004 acquisitions.

OPERATING COSTS & EXPENSES

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        OPERATING COSTS (including shipping).    Operating costs increased 27% for the year ended December 31, 2004, compared with the year ended December 31, 2003. The primary driver of the increase was a full year of costs in 2004 from our acquisition of Synavant in June 2003. In addition, we had costs associated with the revenues from our 2004 acquisitions of Uto Brain, MDM and Schwarzeck, the ongoing implementation costs of our offshore initiative and increased pass-through postage costs for the year ended December 31, 2004.

        SELLING, GENERAL AND ADMINISTRATIVE (SG&A).    SG&A expenses increased 22% for the year ended December 31, 2004, compared with the year ended December 31, 2003. This increase reflects the additional costs related to our recent acquisitions, primarily a full year of Synavant costs in 2004, partially offset by a decrease in management incentives. SG&A in 2004 also included increased expenses as a result of our efforts to comply with Sarbanes-Oxley section 404 review, testing and attestation requirements. We invested in sales and marketing initiatives in 2004 while continuing to focus on cost containment measures. As a percentage of revenues, SG&A remained flat at 33% for the years ended December 31, 2004 and 2003.

        RESEARCH AND DEVELOPMENT (R&D).    R&D expenses decreased 20% for the year ended December 31, 2004, compared with the year ended December 31, 2003. As a percentage of revenues, R&D expenses decreased to 2% for the year ended December 31, 2004, from 4% for the year ended December 31, 2003. This decrease was due to the expansion of revenue in marketing solutions areas which is not dependent on R&D spending as well as a higher software capitalization rate. We capitalized more costs in the year ended December 31, 2004 than in 2003 due to the development for the release of our next generation CRM solution, expected to be released in 2005. R&D expenses plus additions to capitalized software development costs, remained relatively flat at approximately $15,202 for the year ending December 31, 2004, compared to $14,815 for the year ended December 31, 2003.

        AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS.    Amortization of acquired intangible assets increased 13% compared with the year ended December 31, 2003. The increase reflects the current year's amortization of intangible assets acquired in connection with our 2004 acquisitions of Uto Brain, MDM and Schwarzeck.

        OTHER OPERATING (INCOME).    We received insurance proceeds in the year ended December 31, 2004 related to the recovery of costs of certain losses.

NON-OPERATING (INCOME) EXPENSE, NET

        INTEREST (INCOME), NET.    Interest income decreased 91% for the year ended December 31, 2004 due to lower average cash balances in 2004, increases in interest expense related to new capital leases and interest expense on acquired debt.

        OTHER EXPENSE (INCOME), NET.    Other expense increased 149% for the year ended December 31, 2004 due to foreign exchange losses on intercompany loans in 2004 while other income in 2003 related to the favorable settlement of certain litigation.

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        PROVISION FOR INCOME TAXES.    Our estimated effective income tax rate decreased to 37.9% for the year ended December 31, 2004 compared to 41.7% in prior year. The reduction in our effective tax rate resulted primarily from the decrease in the number of international subsidiaries generating taxable losses for which previously we could not take a benefit as well as the more favorable distribution of profits among countries with lower tax rates. In addition, during 2003 we recognized a full valuation allowance on a net operating loss carryforward at one of our international subsidiaries in the amount of $608 that increased the effective tax rate by approximately 2%.

        At December 31, 2004 and 2003, there were approximately $25,211 and $13,708, respectively, of undistributed earnings of non-U.S. subsidiaries that are considered to be reinvested indefinitely. If such earnings were remitted to us, the applicable United States federal income and foreign withholding taxes may be wholly or partially offset by foreign tax credits. As a result, the determination of potential U.S. income taxes on these undistributed earnings is not practicable at December 31, 2004 or 2003.

        The American Jobs Creation Act (the "Act") was passed on October 22, 2004. The Act provides for certain tax benefits including, but not limited to, those associated with the reinvestment of foreign earnings in the United States. We are currently evaluating the Act and may or may not benefit from such provisions. For 2005, we could elect under the Act to apply an 85% dividends-received deduction against certain dividends received from controlled foreign corporations, in which we are a U.S. shareholder. Undistributed earnings being considered for potential repatriation could be as much as $25,000. Historically, we have not provided for potential taxes on repatriation of foreign earnings as all of our foreign subsidiaries undistributed earnings have been considered permanently reinvested. When we complete our evaluation of the Act and if we determine to repatriate undistributed earnings, we would provide for additional tax expense or benefit, if any, in that period.

YEARS ENDED DECEMBER 31, 2003 AND 2002

REVENUES

        For comparison purposes 2003 revenue presentation was made to conform to the 2002 revenue presentation, as the 2002 revenue information required to conform to our current revenue presentation was impracticable to obtain.

        Total revenues increased 42% for the year ended December 31, 2003, compared with the year ended December 31, 2002. Approximately 23.5% of the total revenues for the year ended December 31, 2003 were recognized from Synavant. Excluding the revenues recognized from Synavant, revenues increased approximately 9% for the year ended December 31, 2003 over the corresponding prior year period.

        License fee revenues decreased 20% for the year ended December 31, 2003, compared with the year ended December 31, 2002. This decrease is primarily related to sales to new clients, as well as purchases of additional user licenses by existing customers who increased the sizes of their sales forces

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during the third and fourth quarters of 2002. License fees are, by nature, non-recurring items and fluctuate from year-to-year.

        Service revenues increased 46% for the year ended December 31, 2003, compared with the year ended December 31, 2002. Approximately 23.8% of the service revenues for the year ended December 31, 2003 were recognized from Synavant, of which approximately 2.3% was attributable to pass-through postage of the interactive marketing business. Excluding the results of Synavant, service revenues increased 11% for the year ended December 31, 2003 over the corresponding prior year period. This increase was primarily driven by our growth of approximately 20% in our domestic technical services, 17% in our domestic sales solutions services, 10% in our international services, as well as our data and consulting business more than doubling during the year, offset in part by a 27% decrease in low gross margin revenue.

        OPERATING COSTS & EXPENSES    

        OPERATING COSTS (including shipping).    Operating costs increased 46% for the year ended December 31, 2003, compared with the year ended December 31, 2002. The primary drivers of the increase in cost of revenues were the additional costs due to the increase in headcount and associated costs from the Synavant and SAI acquisitions, as well as pass-through postage expenses of approximately $7,361 from the Synavant acquisition. These increases were offset, in part, by decreases in our traditional low gross margin revenue and efficiencies gained from cost reduction actions in the third quarter of 2002.

        SELLING, GENERAL AND ADMINISTRATIVE (SG&A).    SG&A expenses increased 40% for the year ended December 31, 2003, compared with the year ended December 31, 2002. This increase reflects the additional operating costs from the Synavant and SAI acquisitions, partially offset by the impact of our third quarter 2002 cost reduction measures. As a percentage of revenues, SG&A decreased to 33% for the year ended December 31, 2003, compared to 34% for the year ended December 31, 2002.

        RESEARCH AND DEVELOPMENT (R&D).    R&D expenses increased 12% for the year ended December 31, 2003 compared with the year ended December 31, 2002. The increase in R&D expenses related to higher employment costs due to the increase in headcount from the SAI acquisition. As a percentage of revenues, R&D expenses decreased to 4% for the year ended December 31, 2003 from 5% for the year ended December 31, 2002. This decrease was due to the 2003 expansion of revenue in marketing solutions that are not dependent on R&D spending.

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        AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS.    Amortization of acquired intangible assets increased $3,973 compared with the year ended December 31, 2002. The increase reflects a full year of amortization of assets acquired in connection with our SAI acquisition in 2002 and amortization related to the Synavant acquisition in 2003.

        ASSET IMPAIRMENT.    During the year ended December 31, 2002, we reviewed the carrying value of our long-lived assets including the facility held for sale. Based upon a third-party valuation, the carrying value of the facility held for sale was adjusted to $6,900, which approximated its fair value less costs to sell. The resulting $1,832 impairment loss was recorded as a separate line item in the consolidated statement of operations.

        OTHER (INCOME) EXPENSE.    Other (income) expense increased $709, for the year ended December 31, 2003 compared with the year ended December 31, 2002. This increase was primarily attributable to payments made to us in settlement of certain litigation.

        PROVISION FOR INCOME TAXES.    The annual estimated effective income tax rate recorded for the year ended December 31, 2003 was approximately 42%, compared to 40% for the year ended December 31, 2002. In connection with the Synavant integration, we determined which foreign entities would be dissolved and performed a reforecast of projected taxable income by jurisdiction and recognized a full valuation allowance on a net operating loss carry-forward for one of Dendrite's foreign subsidiaries of approximately $608, which increased the effective income tax rate by 2%.

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

($ in thousands)

QUARTERLY RESULTS OF OPERATIONS

        The following table sets forth certain unaudited quarterly consolidated statement of operations data for 2004 and 2003. Our quarterly results have varied considerably in the past and are likely to vary from quarter-to-quarter in the future.

(1)

The quarter ended December 31, 2003 includes net adjustments increasing amortization expense $887 related to changes made in the values and expected lives of certain intangible assets acquired in connection with the Synavant acquisition and the purchase price allocation.

Liquidity and Capital Resources

        At December 31, 2004, working capital was $66,255 compared to $47,176 as of December 31, 2003. Cash and cash equivalents were $64,020 as of December 31, 2004, compared to $30,405 as of December 31, 2003. These increases were primarily attributable to the cash generated by operating

29

activities partially offset by payments made in connection with our 2004 and 2003 acquisitions as well as higher capital expenditures related to various facility moves and consolidations throughout the world.

        We finance our business primarily through cash generated by operations. Net cash provided by operating activities was $55,692 and $17,364 for the year ended December 31, 2004 and 2003, respectively. This increase was primarily related to actions taken in 2003 to significantly reduce the liabilities assumed in connection with the acquisition of Synavant as well as a decrease in payments for accrued purchase accounting restructuring accruals. We also generated operating cash from our growth in net income for the year ended December 31, 2004, compared with the corresponding prior year period. Greater accounts receivable collections for the year ended December 31, 2004 resulted in a decrease in our accounts receivable days sales outstanding to 62 days for the quarter ended December 31, 2004, from 68 days for the quarter ended as of December 31, 2003.

        Cash used in investing activities was $32,080 for the year ended December 31, 2004, and includes payments for the MDM, Uto Brain and Schwarzeck acquisitions as well as increased purchases of property and equipment related to various facility moves. Cash used in investing activities was $61,296 for the year ended December 31, 2003, and was primarily attributable to the payments made in connection with the Synavant acquisition.

        As anticipated, purchases of property and equipment increased for the year ended December 31, 2004 versus the comparable prior year period. The increase is primarily due to the capital costs of the new corporate headquarters and the higher overall capital spending associated with our larger combined company offset by proceeds from the sale leaseback of furniture and equipment. During 2005, we expect capital spending in the range of approximately $22,000 to $26,000 primarily to support the infrastructure expansion as well as capital expenditures for our U.S. consolidated hardware center during 2005. We review our capital expenditure program periodically and adjust it as required to meet current needs. An agreement to sell the facility located in Piscataway, New Jersey, was terminated during the quarter ended June 30, 2004. During the third quarter of 2004, we decided to move our New Jersey hardware services to this facility. Accordingly, the $6,900 carrying value, which approximates the fair market value of the facility, has been reclassified to property and equipment in the consolidated balance sheet as of December 31, 2004.

        Cash provided by financing activities was $8,248 for the year ended December 31, 2004, compared to $5,236 for the year ended December 31, 2003. The increase of $3,012 was primarily attributable to an increase in proceeds from stock option exercises partially offset by the repayments of long-term debt and loans acquired in connection with the Uto Brain acquisition.

        We regularly evaluate opportunities to acquire products or businesses complementary to our operations. Such acquisition opportunities, if they arise, may involve the use of cash, equity or debt instruments. We believe that available funds, anticipated cash flows from operations and the availability of our revolving line of credit will satisfy our current projected working capital and capital expenditure requirements, exclusive of cash required for possible future acquisitions of businesses, products and technologies, during the next twelve to eighteen months. There can be no assurance, however, that our business will continue to generate cash flow at current levels or that anticipated operational improvements will be achieved. Our ability to generate future cash flows depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the pharmaceutical and life sciences industry and to general economic, political, financial, competitive and regulatory factors beyond our control.

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Contractual Obligations and Commitments

        We entered into a line-of-credit agreement (the "Agreement") as of June 16, 2003, in the amount of $30,000 with JPMorgan Chase Bank that expires on July 1, 2005. The Agreement is available to finance working capital needs and possible future acquisitions. Among other covenants, the Agreement requires us to maintain a minimum consolidated net worth, measured quarterly, which is equal to $130,000, plus 50% of net income earned after April 1, 2003, and 75% of the net proceeds of any offering of new equity interests issued subsequent to June 30, 2003. As of December 31, 2004, our consolidated net worth was $227,589. The Agreement contains certain restrictions on our ability to create or assume liens, dispose of assets, consolidate or merge, extend credit, incur other indebtedness or pay cash dividends. On September 24, 2004, we entered into an amendment to the Agreement that changed certain covenants relating to acquisitions, dispositions of our assets, indebtedness of our foreign subsidiaries, real estate and capital expenditures in connection with our move to our new corporate headquarters facility. As of December 31, 2004, we were in compliance with all covenants and did not have any amounts outstanding under the line-of-credit. We currently intend to renew or replace the Agreement concurrent with its expiration.

        Our principal commitments at December 31, 2004 consisted primarily of obligations under operating and capital leases as well as future minimum guarantees to certain vendors. Future minimum payments on these obligations are as follows:

(1)

Operating lease amounts disclosed above include $12,949 of future operating lease costs, excluding estimated future sublease income, accrued for in the purchase accounting restructuring accruals related to the Synavant and SAI acquisitions.

        As of December 31, 2004, letters of credit for approximately $5,721 were outstanding related to deposits on certain facilities.

        We have an agreement with a venture capital fund with a commitment to contribute $1,000 to the fund, callable at the discretion of the general partner in $100 increments. As of December 31, 2004, $500 has been paid, with $500 of the commitment remaining. The agreement has a termination date of December 11, 2010, subject to extension with the consent of a majority in interest of the limited partners. This asset is recorded within Other Assets in the accompanying consolidated balance sheet.

Potential Future Impact on Operating Results of Accounting Change

        In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised 2004) "Share-Based Payment" ("SFAS 123(R)") as a replacement to SFAS 123. This statement supersedes APB 25, "Accounting for Stock Issued to Employees" which allowed companies to use the intrinsic method of valuing share-based payment transactions and amends SFAS No. 95, "Statement of

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Cash Flows." SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on the fair-value method as defined in Statement 123. The effective date is at the beginning of the first interim or annual period beginning after June 15, 2005. SFAS 123(R) provides two alternatives for adoption: (1) a "modified prospective" method in which compensation cost is recognized for all awards granted subsequent to the effective date of this statement as well as for the unvested portion of awards outstanding as of the effective date; or (2) a "modified retrospective" method which follows the approach in the "modified prospective"" method, but also permits entities to restate prior periods to record compensation cost calculated under SFAS No. 123 for the pro forma disclosure. We plan to adopt SFAS 123(R) using the modified prospective method. In addition, SFAS 123 (R) also requires that tax benefits received in excess of compensation cost be reclassified from operating cash flows to financing cash flows in the consolidated statement of cash flows. The adoption of FAS 123(R)'s fair value method is expected to have a significant impact on our consolidated results of operations, though it will have no impact on our overall financial position. However, had we adopted SFAS 123(R) in prior periods, the impact of the standard would have approximated the impact of SFAS 123 as described in the pro forma net income and earnings per share disclosure in Note 1 to our consolidated financial statements.

        We believe that estimating the future impact of expensing stock options provides investors with useful information concerning our potential future operating results. We estimate that the future pre-tax expense relating to the fair value of stock options granted prior to and outstanding as of March 14, 2005, calculated using the Black-Scholes valuation method, is: approximately $11,712 for the year ending December 31, 2005; approximately $2,926 for the year ending December 31, 2006; approximately $651 for the year ending December 31, 2007; and approximately $23 for the year ending December 31, 2008. The decrease from 2005 to 2006 is primarily related to the higher strike prices of options vesting in 2005 as compared to 2006, as well as the absolute number of options vesting in 2005. These estimates have been calculated using the Black-Scholes valuation model, which is the method that we currently use in preparing our financial statement disclosures related to employee stock options.

        The fair values of the options were estimated at the date of grant based on the following assumptions:

        In addition, the expenses calculated above include an annually estimated forfeiture rate of approximately 3.5% annually and do not take into account future stock option grants. The estimated forfeiture rate disclosed above may not reflect actual forfeitures.

        These amounts are preliminary estimates based on our current understanding of this new requirement and are subject to substantial variation based on the final interpretations and applications of these rules. They are intended only to provide order of magnitude and should not be considered or relied upon as final estimates. It is expected that we will grant future equity awards, which may be substantial and which could include awards in fiscal 2005 and subsequent years, and such equity awards would be expected to increase expense under SFAS 123(R).

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FACTORS THAT MAY AFFECT FUTURE RESULTS

        Set forth in this Form 10-K are certain risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-K. You are strongly urged to carefully consider the cautionary language and risks set forth below.

        WE DEPEND ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES

        Historically, a limited number of our customers have contributed a significant percentage of our revenues. We anticipate that our operating results in any given period will continue to depend significantly upon revenues from a small number of customers. The loss of any of these customers (which could include loss through mergers and acquisitions) could have a materially adverse effect on our business, operating results or financial condition. We cannot make any assurances that we will retain our existing customers or attract new customers that would replace the revenue that could be lost if one or more of these customers failed to renew its agreement(s) with us.

OUR BUSINESS IS HEAVILY DEPENDENT ON THE PHARMACEUTICAL INDUSTRY

        Most of our solutions are currently used in connection with the marketing and sale of prescription-only drugs. This market is undergoing a number of significant changes. These changes include:

•

the significant and continuing consolidation of the pharmaceutical industry which may reduce the number of our existing and potential customers;



•

regulatory changes that permit the over-the-counter sale of formerly prescription-only drugs;



•

U.S. and international governmental regulations mandating price controls;



•

increasing Food and Drug Administration activism; and



•

competitive pressure on the pharmaceutical industry resulting from the continuing shift to delivery of healthcare and pharmaceuticals through managed care organizations.

        We cannot assure you that we can respond effectively to any or all of these and other changes in the marketplace. Our failure to do so could have a material adverse effect on our business, operating results or financial condition, as our business depends, in large part, on the business conditions within this marketplace.

OUR CUSTOMERS MAY NOT SUCCESSFULLY IMPLEMENT OUR PRODUCTS

        Our customers often implement our products in stages and our products are often utilized by a large number of our customers' personnel. In the event that our customers have difficulties implementing our products and services or are not satisfied with the implementation or operation our products and services, our business, operating results and financial condition could be materially and adversely affected.

WE FACE RISKS ASSOCIATED WITH OUR ACQUISITIONS

        Our business may be materially and adversely affected as a result of the significant risks associated with our acquisitions, including our recent acquisitions of Synavant, Uto Brain, the MDM group of companies and Schwarzeck. As part of our business strategy, we have acquired, and in the future may

33

acquire, businesses that offer complementary products, services or technologies. These acquisitions are accompanied by substantial risks, including:

•

unexpected problems, liabilities, risks or costs associated with the acquired business;



•

the effect of the acquisitions on our financial and strategic position;



•

our inability to successfully integrate the acquired business;



•

the failure of an acquired business to further our strategies;



•

our inability to achieve expected cost and business synergies;



•

the significant strain on our operating systems;



•

the diversion of our management's attention from other business concerns;



•

the impairment or loss of relationships with customers of the acquired business;



•

the negative impact of the combination of different corporate cultures;



•

the loss of key employees of the acquired company;



•

undetected problems within the acquired organization; and



•

the integration and maintenance of uniform, company-wide standards, procedures and policies.

        Any of these factors could have a material adverse effect on our revenues and earnings. We expect that the consideration paid for future acquisitions, if any, could be in the form of cash, equity, debt or a combination of these. To the extent that we issue shares of stock or other rights to purchase stock in connection with any future acquisition, existing shareholders will experience dilution and potentially decreased earnings per share.

        While to date we have had success integrating acquired entities into our operations, we cannot guarantee that we will successfully integrate these new businesses into our operations or achieve any expected cost synergies.

        We may in the future acquire additional complementary companies, products or technologies. If we do so, we may face the same risks, uncertainties and disruptions discussed above. In addition, our profitability may suffer because of acquisition-related costs or amortization costs of acquired intangible assets.

        BUSINESS AND ECONOMIC PRESSURES ON OUR MAJOR CUSTOMERS MAY CAUSE A DECREASE IN DEMAND FOR OUR NEW PRODUCTS AND SERVICES

        Business and economic pressures on our major customers may result in budget constraints that directly impact their ability to purchase our new products and services offerings. We cannot assure you that any decrease in demand caused by these pressures will not have a material adverse effect on our business, operating results or financial condition.

        OUR LENGTHY SALES AND IMPLEMENTATION CYCLES MAKE IT DIFFICULT TO PREDICT OUR QUARTERLY REVENUES

        The selection of a CRM or SFA solution generally entails an extended decision-making process by our customers because of the strategic implications, substantial costs and significant commitment of resources associated with a customer's license or implementation of the solution. Given the importance

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of the decision, senior levels of management of our customers are often involved in the process and, in some instances, their board of directors may also be involved. As a result, the decision-making process typically takes nine to eighteen months, and in certain cases longer. In addition, other factors, unrelated to our product and services, such as acquisitions, product delays, or other issues, may also significantly impact the timing and amounts of buying decisions. Accordingly, we cannot fully control or predict the timing of our execution of contracts with customers. Prior sales and implementation cycles cannot be relied upon as any indication of future cycles.

        In addition, an implementation process of three to six or more months before the software is rolled out to a customer's sales force is customary. However, if a customer were to delay or extend its implementation process, our quarterly revenues may decline below expected levels and could adversely affect our results of operations.

OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE

        Our total revenue and operating results may vary significantly from quarter-to-quarter. The main factors that could cause these fluctuations are:

•

the discretionary nature of our customers' purchase and budget cycles;



•

potential delays in recognizing revenue from license and other transactions;



•

seasonal variations in operating results, including the increased seasonality associated with our international growth; and



•

variations in the fiscal or quarterly cycles of our customers.

        In addition, we establish our expenditure levels for product development, sales and marketing and some of our other operating expenses based in large part on our expected future revenues and anticipated competitive conditions. In particular, we frequently add staff in advance of new business to permit adequate time for training. If the new business is subsequently delayed, canceled or not awarded, we will have incurred expenses without the associated revenues. We also may increase sales and marketing expenses if competitive pressures become greater than originally anticipated. Since only a small portion of our expenses varies directly with our actual revenues, our operating results and profitability are likely to be adversely and disproportionately affected if our revenues fall below our targeted goals or expectations.

        As a result of these and other factors, revenues for any quarter may be subject to fluctuation. You should not rely on our period-to-period comparisons of our results of operations as indications of future performance. Our future quarterly results may from time to time not meet the expectations of market analysts or investors, which could have a materially adverse effect on the price of our common stock.

        WE MAY BE UNABLE TO SUCCESSFULLY INTRODUCE NEW PRODUCTS OR RESPOND TO TECHNOLOGICAL CHANGE

        The market for CRM and SFA products changes rapidly because of frequent improvements in computer hardware and software technology. Our future success will depend, in part, on our ability to:

•

use available technologies and data sources to develop new products and services and to enhance our current products and services;



•

introduce new solutions that keep pace with developments in our target markets; and

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•

address the changing and increasingly sophisticated needs of our customers.

        We cannot assure you that we will successfully develop and market new products or product enhancements that respond to technological advances in the marketplace, or that we will do so in a timely fashion. We also cannot assure you that our products will adequately and competitively address the needs of the changing marketplace.

        Competition for software products has been characterized by shortening product cycles. We may be materially and adversely affected by this trend if the product cycles for our products prove to be shorter than we anticipate. If that happens, our business, operating results or financial condition could be adversely affected.

        To remain competitive, we also may have to spend more of our resources on product research and development than we have in the past. As a result, our results of operations could be materially and adversely affected.

SOFTWARE ERRORS OR DEFECTS COULD AFFECT OUR REVENUES

        Our software products are technologically complex and may contain previously undetected errors or failures or errors when products are first introduced or when updated versions are released. We cannot assure you that, despite our testing, our new products will be free from significant errors. Software errors could cause delays in the commercial release of products until the errors have been corrected. Software errors may cause us to be in breach of our agreements with customers, which could result in termination of the agreements and monetary damages. Software errors may cause damage to our reputation and cause us to commit significant resources to their correction. Errors that result in termination of agreements, monetary damages, losses or delays could have a material adverse effect on our business, operating results or financial condition.

        INCREASED COMPETITION MAY RESULT IN PRICE REDUCTIONS AND DECREASED DEMAND FOR OUR PRODUCTS AND SERVICES SOLUTIONS

        There are a number of other companies that sell CRM and SFA products and related services that specifically target the pharmaceutical industry, including competitors that are actively selling CRM and SFA software products in more than one country and competitors that also offer CRM and SFA support services. Some of our competitors and potential competitors are part of large corporate groups and have significantly greater financial, sales, marketing, technology and other resources than we have.

        While we believe that the CRM and SFA software products and/or services offered by most of our competitors do not address the variety of pharmaceutical customer needs that our solutions address, increased competition may require us to reduce the prices for our products and services. Increased competition may also result in decreased demand for our products and services.

        We believe our ability to compete depends on many factors, some of which are beyond our control, including:

•

the number and success of new market entrants supplying competing CRM and SFA products or support services;



•

alliances among existing competitors;



•

technological changes or changes in the our customers' use of the Internet;



•

expansion of product lines by, or consolidation among, our existing competitors; and

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•

development and/or operation of in-house CRM or SFA software products or services by our customers and potential customers.

        Any one of these factors can lead to price reductions and/or decreased demand and we cannot assure you that we will be able to continue to compete successfully or that competition will not have a material adverse effect on our business, operating results or financial condition.

        WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THE INTERNET-RELATED PRODUCTS AND SERVICES MARKET NOR CAN WE PROVIDE ASSURANCES THAT THE DEMAND FOR INTERNET-RELATED PRODUCTS AND SERVICES WILL INCREASE

        The success of parts of our business will depend, in part, on our ability to continue developing Internet-related products, modifying and improving our existing products and responding to technological advances and changing commercial uses of the Internet. We cannot assure you that our Internet-related products and services will adequately respond to such technological advances and changing uses. Nor can we assure you that the demand for our Internet-related products and services will increase.

        Commercial use of the Internet raises potential problems with security, privacy, reliability, accessibility, quality of service and government regulation. These issues, if unresolved, may affect the use of our Internet-related products. If these potential problems arise, our business, financial condition or results of operations could be materially and adversely affected.

        OUR INTERNATIONAL OPERATIONS HAVE RISKS THAT OUR DOMESTIC OPERATIONS DO NOT

        We have recently significantly expanded and may in the future further expand our international operations and enter additional international markets. This expansion would require significant management attention and financial resources that could adversely affect operating margins and earnings. We may not be able to maintain or increase international market demand for our products and services. If we do not, our international sales will be limited and our business, financial condition or results of operations could be materially and adversely affected.

        The sale of our products and services in foreign countries accounts for, and is expected in the future to account for, an increasing material part of our revenues. These sales are subject to substantial risks inherent in international business activities, including:

•

adverse changes in the political stability and economic environments in these countries and regions;



•

adverse changes in tax, tariff and trade and other regulations;



•

the absence or significant lack of legal protection for intellectual property rights in certain of these countries; and



•

difficulties in managing an organization spread on a global basis.

        Each of the above risks could have a significant impact on our revenues, profitability and our ability to deliver products on a competitive and timely basis, which could materially and adversely affect our business, financial condition or operating results.

        Since we have operations in a number of countries and our service agreements in such countries are denominated in foreign currencies, we face exposure to adverse movements in foreign currency

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exchange rates. As currency rates change, translation of the income statements of our international entities from local currencies to U.S. dollars affects period-over-period comparability of operating results. Historically, we have not hedged these translation risks because we generally reinvest our cash flows from international operations. However, we continue to evaluate foreign currency translation risk exposure. As we continue to grow our international business, the risks associated with foreign currency translation will also grow.

        CATASTROPHIC EVENTS COULD NEGATIVELY AFFECT OUR INFORMATION TECHNOLOGY INFRASTRUCTURE

        The efficient operation of our business, and ultimately our operating performance, depends on the uninterrupted use of our critical business and information technology systems. Many of these systems require the use of specialized hardware and other equipment that is not readily available in the marketplace. Although we maintain these systems at more than one location, a natural disaster, a fire or other catastrophic event at any of these locations could result in the destruction of these systems. In such an event, the replacement of these systems and restoration of archived data and normal operation of our business could take several days to several weeks, or more. During the intervening period when our critical business and information technology systems are fully or partially inoperable, our ability to conduct normal business operations could be significantly and adversely impacted and as a result our business, operating results and financial condition could be adversely affected.

        OUR SUCCESS DEPENDS ON RETAINING OUR KEY SENIOR MANAGEMENT TEAM AND ON ATTRACTING AND RETAINING QUALIFIED PERSONNEL

        Our future success depends, to a significant extent, upon the contributions of our executive officers and key sales, technical and customer service personnel.

        Our future success also depends on our continuing ability to attract and retain highly qualified technical and managerial personnel. Due to competition for such personnel, we have at times experienced difficulties in recruiting and retaining qualified personnel and we may experience such difficulties in the future. Our ability to expand and increase revenue growth in the future will depend, in part, on our success in recruiting and training such qualified personnel. We may not always be able to expand our personnel in these areas as necessary to support our operations. Any recruiting or retention difficulties could adversely affect our business, operating results or financial condition.

        IF OUR SECURITY MEASURES ARE BREACHED AND AN UNAUTHORIZED PARTY OBTAINS ACCESS TO A CUSTOMER'S DATA, CERTAIN OF OUR SOLUTIONS MAY BE PERCEIVED AS BEING INSECURE AND CUSTOMERS MAY CURTAIL OR STOP USING OUR SERVICE.

        Certain of our solutions involve the storage and transmission of customers' proprietary information, and security breaches could expose us to a risk of loss of this information, litigation and potential liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose existing customers and our ability to obtain new customers.

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        OUR BUSINESS DEPENDS ON PROPRIETARY RIGHTS THAT WE MAY NOT BE ABLE TO PROTECT COMPLETELY

        We rely on a combination of trade secret, copyright and trademark laws, non-disclosure, license and other contractual agreements and technical measures to protect our proprietary rights. We cannot assure you that the steps we take will prevent misappropriation of these rights. Further, protective actions we have taken or will take in the future may not prevent competitors from developing products with features similar to our products. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries. In response to customer requests, we have also on occasion entered into agreements which require us to place our source code in escrow to secure our service and maintenance obligations.

        Further, while we believe that our products and trademarks do not infringe upon the proprietary rights of any third parties, third parties may assert infringement claims against us in the future that may result in costly litigation, diversion of management's attention, the imposition of monetary damages or injunctive relief against us. In addition, any such claims may require us to enter into royalty arrangements. Any of these results could materially and adversely affect our business, operating results or financial condition.

        IF OUR THIRD-PARTY VENDORS ARE UNABLE TO SUCCESSFULLY RESPOND TO TECHNOLOGICAL CHANGE OR IF WE DO NOT MAINTAIN OUR RELATIONSHIPS WITH THIRD-PARTY VENDORS, INTERRUPTIONS IN THE SUPPLY OF OUR PRODUCTS MAY RESULT

        Some of our software is provided by third-party vendors. If our third-party vendors are unable to successfully respond to technological change or if our relationships with certain third-party vendors are terminated, we may experience difficulty in replacing the functionality provided by the third-party software currently offered with our products. Although we believe there are other sources for all of our third-party software, any significant interruption in the supply of these products could adversely impact our sales unless and until we can secure another source. The absence of or any significant delay in the replacement of functionality provided by third-party software in our products could materially and adversely affect our sales.

        THE RESULTS DERIVED FROM CURRENT AND FUTURE STRATEGIC RELATIONSHIPS MAY PROVE TO BE LESS FAVORABLE THAN ANTICIPATED

        We are involved in a number of strategic relationships with third parties and are frequently pursuing others. Should these relationships, or any of them, prove to be more costly than anticipated or fail to meet revenue expectations or other anticipated synergies, we cannot guarantee that such events will not have a material impact upon our business, operating results or financial condition.

        OUR DATA SOLUTIONS ARE DEPENDENT UPON STRATEGIC RELATIONSHIPS WHICH, IF NOT MAINTAINED, COULD UNDERMINE THE CONTINUED VIABILITY OF THESE SOLUTIONS

        Our data and analytics solutions are sourced, in part, from data provided through strategic relationships. Although we believe there are other sources for such data, the termination of any of these relationships could diminish the breadth or depth of our data. This termination or our failure to establish new strategic relationships in the future could negatively impact our business, operating results or financial condition.

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        FEDERAL AND STATE LAWS AND REGULATIONS COULD DEPRESS THE DEMAND FOR SOME OF OUR SOLUTIONS

        While we believe our data and analytics solutions are not in violation of current federal or state laws and regulations pertaining to patient privacy or health information, including the Health Insurance Portability and Accountability Act of 1996 (HIPAA), we cannot guarantee that future laws or regulations or interpretations of existing laws and statutes will not impact negatively upon our ability to market these solutions or cause a decrease in demand for such solutions from customers that see an increased risk in any such new laws or regulations.

        GOVERNMENTAL REGULATION MAY MATERIALLY AND ADVERSELY AFFECT OUR ABILITY TO DISTRIBUTE CONTROLLED SUBSTANCES THROUGH THE MAIL

        Through the interactive marketing business we acquired in the Synavant acquisition, we may distribute controlled substances to doctors' offices through the mail as part of certain interactive marketing programs provided on behalf of pharmaceutical manufacturers. It is important to the business that this practice of distributing prescription-only drugs continues. Future legislation may restrict our ability to provide these types of services. If any such legislation is enacted, it could have a material and adverse effect on our business, operating results and financial condition.

        DIFFICULTIES IN SUBLEASING OR OTHERWISE DISPOSING OF CERTAIN OF OUR FACILITIES MAY NEGATIVELY IMPACT UPON OUR EARNINGS

        We expect to sublease all or a portion of certain facilities, including facilities acquired as part of the Synavant acquisition. An inability to successfully dispose of or sublet, as applicable, any of these facilities or to obtain favorable pricing or sublease terms could negatively impact our earnings.

        UNANTICIPATED CHANGES IN OUR ACCOUNTING POLICIES MAY BE REQUIRED BECAUSE OF MANDATES BY ACCOUNTING STANDARDS SETTING ORGANIZATIONS AND COULD HAVE A MATERIAL IMPACT ON OUR FINANCIAL STATEMENTS

        In reporting our financial results we rely upon the accounting policies and standards then in effect at the time of our report. Future regulations, standards or interpretations may require us to adjust or restate financial results previously reported. A required restatement could have a material impact upon past financial results or current comparison to previous results.

        WE MAY FACE RISKS ASSOCIATED WITH EVENTS WHICH MAY AFFECT THE WORLD ECONOMY

        World events such as terrorist attacks, the current U.S. military action in the Middle East and elsewhere, and hostilities in the Middle East, Asia and other geographical areas, have and may in the future weaken the U.S. and world economies. Any resultant weaknesses in these economies may adversely affect our business, financial condition or results of operations or the businesses of our customers.

        WE FACE RISKS IN CONNECTION WITH IMPLEMENTING THE REQUIREMENTS OF SECTION 404 OF THE SARBANES OXLEY ACT

        We have been engaged in a very lengthy and time consuming process of evaluating our internal control over financial reporting in order to allow management to report on, and our registered independent public accounting firm to attest to, our internal controls, as required by Section 404 of the

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Sarbanes-Oxley Act. This is a continuing process and we cannot be certain as to the timing of completion of our future reviews, evaluation, testing and remediation actions or the impact of the same on our operations or the results of the required testing and required attestation report by us and also by our registered independent public accounting firm. If at any time we are unable to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission or NASDAQ. Any such actions could have a material adverse affect our financial results and the price of our common stock.

        PROVISIONS OF OUR CHARTER DOCUMENTS AND NEW JERSEY LAW MAY DISCOURAGE AN ACQUISITION OF DENDRITE

        Provisions of our Restated Certificate of Incorporation, as amended, our By-laws, as amended, and New Jersey law may make it more difficult for a third-party to acquire us. For example, the Board of Directors may, without the consent of the stockholders, issue preferred stock with rights senior to those of the common stock. In addition, we have a Shareholder Rights Plan which may limit the ability of a third-party to attempt a hostile acquisition of the Company.

OUR COMMON STOCK MAY BE SUBJECT TO PRICE FLUCTUATIONS

        The market price of our common stock may be significantly affected by the following factors:

•

the announcement or the introduction of new products and services by us or our competitors;



•

quarter-to-quarter variations in our operating results or changes in revenue or earnings estimates or failure to meet or exceed revenue or earnings estimates;



•

market conditions in the technology, healthcare and other growth sectors;



•

general consolidation in the healthcare information industry which may result in the market perceiving us or other comparable companies as potential acquisition targets;



•

the gain or loss of significant orders;



•

changes in the domestic and international economic, political and business conditions; and



•

future acquisitions.

        Further, the stock market has experienced on occasion extreme price and volume fluctuations. The market prices of the equity securities of many technology companies have been especially volatile and often have been unrelated to the operating performance of such companies. These broad market fluctuations may have a material adverse effect on the market price of our common stock.

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ITEM 7A.    Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

        Because we have operations in a number of countries and our service agreements in such countries are denominated in a foreign currency, we face exposure to adverse movements in foreign currency exchange rates. As currency rates change, translation of the income statements of our international entities from local currencies to U.S. dollars affects year-over-year comparability of operating results. Historically, we have not hedged translation risks because we generally reinvest our cash flows from international operations. However, we continue to evaluate foreign currency translation risk exposure.

        Management estimates that a 10% change in foreign exchange rates would have impacted 2004 reported operating profit by approximately $1,957. This sensitivity analysis disregards the possibility that rates can move in opposite directions and that losses from one area may be offset by gains from another area. As we continue to grow our international businesses, the risks associated with foreign currency translation will also grow.

Interest Rate Risk

        We earn interest income from our balances of cash and short-term investments. This interest income is subject to market risk related to changes in interest rates, which primarily affects our investment portfolio. We invest in instruments that meet high credit quality standards, as specified in our investment policy. The policy also limits the amount of credit exposure to any one issue, issuer and type of investment.

        Due to the average maturity and conservative nature of our investment portfolio, a sudden change in interest rates would not have a material effect on the value of the portfolio. Management estimates that if the average yield of the Company's investments decreased by 100 basis points, our interest income for the year ended December 31, 2004 would have decreased approximately $424. This estimate assumes that the decrease occurred on the first day of 2004 and reduced the yield of each investment instrument by 100 basis points. The impact on our future interest income will depend largely on the gross amount of our investments and future changes in investment yields.

ITEM 8.    Financial Statements and Supplementary Data

        The Company's 2004 Consolidated Financial Statements, together with the report thereon of Deloitte & Touche LLP, are included in Item 15. The supplementary financial information required by this Item 8 is included in the "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in Item 7.

ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        On May 11, 2004 Ernst & Young LLP ("E&Y") resigned as the independent auditor for the Company.

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        E&Y was initially engaged by the Company as its independent auditor effective April 4, 2002. The reports of E&Y on the Company's financial statements for the years ended December 31, 2003 and 2002 do not contain an adverse opinion or a disclaimer of opinion and are not qualified or modified as to uncertainty, audit scope or accounting principles.

        During the years ended December 31, 2003 and 2002 and through May 11, 2004, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. The Company believes that, during the years ended December 31, 2003 and 2002 and through May 11, 2004, there were no disagreements, as defined in Item 304(a)(1)(iv) of Regulation S-K, with E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of E&Y, would have caused E&Y to make reference to such disagreement in its reports. The quarterly written reports of E&Y to the Audit Committee under SAS 61 and AU Section 722 prior to E&Y's resignation are consistent with this conclusion.

        In connection with its review of the Company's draft Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, E&Y identified a material transaction for which during the quarter the Company had included revenue on the transfer and sale of certain irrevocable licenses in an initial stocking order to a Japanese distributor. Based on its review and analysis, E&Y determined that the revenue related to this particular transaction should be accounted for utilizing the "sell-through" method of accounting, provided the other criteria for revenue recognition under applicable accounting standards were met. After discussion and further review, the Company agreed with this position and did not include this revenue in the quarterly report or its quarterly results. This matter was reviewed with both the Company's Audit Committee and with the Company's Board of Directors in meetings on October 21, 2003 by E&Y. In connection with the Company's preparation of a Current Report on Form 8-K in connection with E&Y's resignation, E&Y informed the Company that, upon further review and analysis of all discussions and information through the date of its resignation, E&Y concluded that in its view in fact there had been a disagreement in connection with the matters described above. The Company has not changed its conclusion that no disagreement occurred.

        The Audit Committee authorized E&Y to respond fully to any and all inquiries of the successor auditor concerning any matters that occurred during E&Y's tenure as the Company's auditor, including any of the matters referred to above.

        E&Y furnished a letter addressed to the Securities and Exchange Commission stating that it agreed with the above statements.

ITEM 9A. Controls and Procedures

        The Company's Chief Executive Officer and Chief Financial Officer, with the assistance of other members of the Company's management, have evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Form 10-K. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective.

        The Company's Chief Executive Officer and Chief Financial Officer have also concluded that there have not been any changes in the Company's internal control over financial reporting during the fiscal quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

        Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal control over financial reporting is a process designed to

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provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2004. Management based this assessment on criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of the Company's internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Management reviewed the results of its assessment with the Audit Committee.

        Based on this assessment, management determined that, as of December 31, 2004, the Company's internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

        Deloitte & Touche LLP, our independent registered public accounting firm, who audited and reported on the consolidated financial statements of the Company included in this report, has issued an attestation report on management's assessment of internal control over financial reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Dendrite International, Inc.
Bedminster, New Jersey

        We have audited management's assessment, included in the accompanying "Management's Report on Internal Control Over Financial Reporting", included in Item 9A, that Dendrite International Inc. and subsidiaries (the "Company") maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the COSO. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the criteria established in Internal Control—Integrated Framework issued by the COSO.

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        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004 and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended December 31, 2004 and the related financial statement schedule as of and for the year ended December 31, 2004 of the Company and our report dated March 16, 2005 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey
March 16, 2005

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ITEM 9B. Other Information