Profits at contract drug development company Covance saw a near 19% increase in the second quarter of 2006 on the back of strong demand for its laboratory testing and commercial services.
Net income came in at $35 million, or 54 cents per share, on revenues up 16% overall to $357 million.
Covance’s late-stage development services – which include central laboratory, Phase II-III testing and commercialisation (peri-approval and market access) services – was the main driver for growth, up 16% to $180 million.
There was some weakness in clinical development related to previously-announced delays to three large studies and a slower-than-expected conversion of backlog to revenue, but strength in central laboratory and commercialisation services made up for this. Two of the delayed trials have now got underway, said the firm.
Around two-thirds of Covance’s revenues come from lab-based businesses, including the handling of patient samples from clinical trials.
In Covance’s early development segment – preclinical toxicology, analytical chemistry, clinical pharmacology and research products – grew 11% to $158 million.
Covance’s backlog – clinical trial services which have been booked but not yet carried out, rose 31% to $1.97 billion, “positioning us well for future growth,” commented Joe Herring, the firm’s chief executive.
“Included in the second quarter's record net orders was the previously announced expanded dedicated capacity contract which secures toxicology space for a client through 2013, adding $150 million to our second quarter backlog,” he said. This $187 million order is the largest in the company’s history and possibly the CRO industry, according to Covance.
Net orders were also well up on the second quarter of 2005, at $555 million versus $356 million, and represent a quarterly record for the company.
On the back of the figures Covance has raised its 2006 earnings per share target to ‘at least $2.19', with mid-teens revenue growth on the back of increased toxicology and Phase I/IIa capacity, larger volumes in central laboratory and increasing demand for commercialisation services.