| COVANCE LOWERS EARNINGS TARGETS
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Princeton, New Jersey, September 7, 1999 — Covance Inc. (NYSE: CVD) today announced that it expects financial results for its third quarter ended September 30, 1999 to fall below consensus estimates. Management said that as a result of shortfalls in its clinical trials management and central laboratory services, earnings per share for the third quarter are expected to be approximately $0.21 per share, before a one-time restructuring charge.
"Revenue shortfalls in our Phase III clinical business reflect a slowdown in large clinical wins. This situation was compounded by the impact of a major contract cancellation due to molecule performance and a significant reduction in the scope of another large program related to sponsor funding pressures. Revenue growth in our central laboratory business leveled off after exceptionally strong performance in the first half of this year and in 1998 and could not offset weakness in the clinical trials management business," said Chris Kuebler, Chairman and CEO. "We have taken steps to enhance our sales capabilities through a series of organizational and management changes. We have also taken action in our central laboratory business to introduce new product offerings to capture additional share of the clinical testing market."
The Company recently announced an organizational realignment which included the consolidation of its regionally-based Phase III clinical services under one global management structure and the formation of a unified sales force for clinical development, central laboratory, packaging, and other related clinical support services.
In addition to these steps, and partly as a result of the consolidation of the Phase III clinical organization, the Company announced a permanent work force reduction of approximately 150 positions, which is expected to result in annual pre-tax savings of approximately $6.0 million. In connection with this action, Covance will report a restructuring charge of approximately
$4.0-$5.0 million pre-tax in the third quarter.
"While we are confident that industry fundamentals remain solid and that the steps we have taken will strengthen our competitive position going forward, our current expectation is that we will not return to our historical growth rates until the second half of 2000," added Mr. Kuebler.
For the full year 1999, Covance anticipates earnings excluding one-time charges, to be in the $0.91 to $0.93 range. For the full year 2000, management is targeting full-year earnings growth in the low teens.
Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with 1998 revenues of $732 million, operations currently in 17 countries, and approximately 7,700 employees worldwide.
Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, revenue and earnings growth and restructuring charges, are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements including the statements contained herein regarding anticipated trends in the Company's business are based largely on management's expectations and are subject to and qualified by risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, the Company's ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss of large contracts, the success of the Company's reorganization, and other factors described in the Company's filings with the Securities and Exchange Commission.
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