COVANCE TO RESTRUCTURE CLINICAL TRIALS UNIT
Earnings pressure expected to continue in 2Q'00 |
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PRINCETON, N.J., May 31, 2000 — Covance Inc. (NYSE: CVD) announced today that the Company will restructure its Phase III clinical trials unit to align its cost base with current revenue projections. The restructuring will include the closing of two satellite offices, the consolidation of some facilities, and the elimination of approximately 200 positions globally to reduce overhead and excess capacity. In connection with these actions, the Company will report a restructuring charge of approximately $15 million pre-tax in the second quarter. This restructuring initiative is expected to deliver pre-tax savings in 2001 of approximately $16 million, with approximately $8 million in savings anticipated in the second half of 2000.
"While we realized the expected benefits from our 1999 restructuring, these savings have not been sufficient to offset continuing weakness in the market for our Phase III clinical trials services. As a result, we are taking further action to stem the impact of clinical development's earnings shortfall on Covance's overall financial results," said Chris Kuebler, Chairman and CEO.
Management indicated that clinical development's earnings shortfall would impact second quarter earnings more than previously anticipated. Second quarter earnings will also be impacted, as expected, by lower revenues from the Company's biomanufacturing facility. As a result, earnings for the second quarter are currently estimated at $0.09 to $0.10 per share before the restructuring charge.
"We continue to gain market share and recognize solid financial results in our central labs and early development businesses, and we anticipate reaching normal biomanufacturing production levels in the second half of this year. While this should contribute to improved earnings in the second half of 2000, our full-year earnings are expected to fall below previous expectations due to the impact of the weak results in the first half of the year," Mr. Kuebler added. "Despite these short-term financial challenges, we believe in the fundamental strength of the drug development outsourcing market and we continue to invest in strategic initiatives such as eCRO and pharmacogenomics to drive Covance's long-term earnings growth."
Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with 1999 revenues of $829 million, global operations and approximately 7,600 employees worldwide. Information on Covance's products and services, recent press releases, and SEC filings can be obtained through our website at: www.covance.com. |
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