Covance Reports 2Q07 Earnings of $0.64 Per Share.

-Net Revenue Growth Accelerates to 13.7%; Backlog Grows 25.9% to $2.5 Billion-

PRINCETON, N.J., July 25 /PRNewswire-FirstCall/ -- Covance Inc. today reported earnings for its second quarter ended June 30, 2007 of $0.64/diluted share, representing 18.9% year-over-year EPS growth.

"Covance delivered another strong financial performance, including an increase in net revenue growth to 13.7% and an expansion in operating margins to 14.6%. Continued robust net orders of $481 million helped drive our backlog up 25.9% year-on-year to $2.5 billion which positions us for accelerated growth," said Joe Herring, Chairman and Chief Executive Officer. "Early Development net revenue growth was again very strong at 22.7% and operating margins increased both year-on-year and sequentially to 25.6%, as demand for our toxicology and chemistry services remains buoyant. The eight clinical pharmacology sites we purchased a year ago delivered another quarter of outstanding sequential growth in revenue and profit and were solidly accretive to our earnings. In Late-Stage Development, revenue grew 5.9% year- on-year and 6.1% from last quarter, and operating margins expanded both year- on-year and sequentially. Late-Stage Development results were led by exceptional year-over-year revenue growth in clinical development. In addition, a substantial increase in central laboratory kit volumes led to a 10.5% sequential growth in its revenues. Given its continued strong orders, as evidenced by a net book-to-bill of 1.5:1 in the second quarter, we expect central laboratory revenues to continue to increase throughout the year.

"Our relentless focus on operational and service excellence continues to deliver substantial benefits. Six Sigma, which is being utilized across more than two-thirds of the company, delivered approximately $5 million in incremental profitability in the first half of 2007. More importantly, Six Sigma reduces process variation, which improves project delivery, increases client satisfaction, and helps drive repeat business. By this time next year, we expect all of Covance's service offerings globally to have deployed Six Sigma. In addition, we continue to make strategic infrastructure investments in facilities, information technology, and talent to support our ability to capitalize on the extremely favorable, long-term outsourcing trend in drug development.

"Continued strong order performance furthers our confidence in achieving our full-year targets of low- to mid-teens revenue growth and diluted earnings per share of at least $2.63, reflecting acceleration in EPS growth in the second half of the year."

 
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