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Covance Inc. Reports Operating Results (10-Q)

May 06, 2011 | About:
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10qk

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Covance Inc. (CVD) filed Quarterly Report for the period ended 2011-03-31.

Covance Inc. has a market cap of $3.62 billion; its shares were traded at around $59.89 with a P/E ratio of 27.8 and P/S ratio of 1.8. Covance Inc. had an annual average earning growth of 7.8% over the past 10 years.

Highlight of Business Operations:

Three Months Ended March 31, 2011 Compared with Three Months Ended March 31, 2010. Net revenues totaling $502.0 million for the three months ended March 31, 2011 increased 4.2%, or 2.1% excluding the favorable impact of foreign exchange rate variances between both periods, as compared to $481.9 million for the corresponding 2010 period. Net revenues from Covances early development segment increased 9.3%, or 9.0% excluding the favorable impact of foreign exchange rate variances between both periods. Growth in the early development segment was driven by a number of factors, including the inclusion of results from the sites acquired in October 2010 from sanofi-aventis in the 2011 three month period, revenue growth in our North American toxicology services, excluding Vienna, Virginia and growth in our pharmaceutical chemistry and discovery and translational services. Partially offsetting the growth in these service offerings was a decline in revenue in our Virginia toxicology facility, where services are being wound-down and transitioned to other locations, as well as softness in research products as a result of continuing lower levels of study activity, as we continue to experience lower market demand from our biopharmaceutical clients. Net revenues from Covances late-stage development segment increased 0.4%, but decreased 3.0% excluding the favorable impact of foreign exchange rate variances between both periods. Growth in our Phase II-IV clinical development services, on increased study activity, was largely offset by a reduction in testing volume in our central laboratory services.

Cost of revenue increased 6.3% to $353.5 million or 70.4% of net revenues for the three months ended March 31, 2011 as compared to $332.5 million or 69.0% of net revenues for the corresponding 2010 period. Gross margins decreased by 140 basis points to 29.6% for the three months ended March 31, 2011 from 31.0% for the corresponding 2010 period as losses incurred in connection with the wind-down and transition of our Virginia toxicology services and lower profitability in our central laboratory and European toxicology services, from reduced volumes, more than offset strength in the other early development and late-stage development services from the higher net revenue levels mentioned above.

Overall, selling, general and administrative expenses increased 12.4% to $80.7 million for the three months ended March 31, 2011 from $71.8 million for the corresponding 2010 period. As a percentage of net revenues, selling, general and administrative expenses increased by 120 basis points to 16.1% for the three months ended March 31, 2011 from 14.9% for the corresponding 2010 period. Included in selling, general and administrative expense during the three months e

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