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COVANCE 2Q 2001 PRO FORMA EARNINGS OF $0.14/SHARE INCREASE 30% OVER PRIOR YEAR
Market Strengthening and Operating Margin Expansion Expected to Support Continued Strong Earnings Growth

Princeton, N.J., July 25, 2001 — Covance Inc. (NYSE: CVD) today reported pro forma earnings for its second quarter ended June 30, 2001 of $0.14/diluted share, excluding a charge of $8.2 million pre-tax ($5.0 million after tax) reflecting the write-off of certain assets and the elimination of redundant positions related to the previously announced reorganization of the Company's internet initiatives. Additionally, pro forma amounts exclude results from the divested packaging and biomanufacturing businesses, non-recurring items, and include a significant reduction in interest expense.

"During the second quarter we raised our 2001 EPS targets to the $0.56 to $0.58 range reflecting the continued strengthening of the market for our services. We also anticipate operating margin expansion in our industry-leading lab-based services, due in part to our recent investments in automation and information technology, and improved profitability in our Phase III clinical trials services. Going forward, we expect to produce revenue growth in the low to mid teens, which combined with margin expansion should result in at least a 30% growth rate in earnings. As a result, we are comfortable with our ability to achieve the current consensus earnings estimate of $0.77 in 2002," said Chris Kuebler, Chairman and CEO.

Consolidated Results
Results for all periods included in this press release are shown on a pro forma basis, excluding packaging, biomanufacturing and special charges.

($ in millions except EPS)	2Q'01	1Q'01	4Q'00	3Q'00	2Q'00	1Q'00
Revenues	$203.9	$195.6	$188.4	$179.7	$184.4	$184.7
Operating Income
Early Development	$11.7	$11.3	$10.0	$11.4	$12.5	$13.1
Late-Stage Development	$10.3	$8.6	$5.3	$2.8	$5.4	$14.1
Corporate Administration	$ (7.0)	$ (5.8)	$ (6.3)	$ (7.1)	$ (7.3)	$ (5.5)
Consolidated Operating Income	$15.0	$14.1	$9.0	$7.1	$10.6	$21.7
Net Income	$ 8.4	$ 7.9	$3.7	$3.2	$6.1	$13.0
Diluted EPS	$0.14	$0.13	$0.06	$0.06	$0.11	$0.23

Net revenues for the second quarter of 2001 increased to $203.9 million, compared to $195.6 million last quarter and $184.4 million in the second quarter of 2000, a year-over-year increase of 10.5% (12.7% excluding the impact of foreign exchange). Year-to-date net revenues increased 8.2% (10.3% excluding the impact of foreign exchange) to $399.5 million compared to $369.1 million for 2000.

Operating income for the second quarter was $15.0 million resulting in an operating margin of 7.3% compared to $14.1 million and 7.2% last quarter and $10.6 million and 5.7% for the second quarter of the prior year. Year-to-date operating income was $29.1 million resulting in an operating margin of 7.3% compared to $32.3 million and 8.7% for the same period in 2000.

Consolidated operating income includes corporate administrative expenses (primarily information technology, communications, human resources, finance and legal) of approximately $7.0 million for the quarter ended June 30, 2001, $5.8 million for the quarter ended March 30, 2001 and $7.3 million for the quarter ended June 30, 2000. These expenses are reported separate from segment operating results in order to provide enhanced visibility on the operating performance of the segments.

Net income for the second quarter was $8.4 million or $0.14/diluted share, compared to $0.13/diluted share last quarter and $0.11/diluted share in the second quarter of 2000, a year-over-year increase of 30%. Year-to-date net income was $16.3 million or $0.27/diluted share compared to $19.1 million or $0.34/diluted share for the same period in 2000.

Segment Results
Early Development Segment

($ in millions)	2Q'01	1Q'01	4Q'00	3Q'00	2Q'00	1Q'00
Revenues	$78.7	$74.0	$72.4	$71.4	$71.2	$72.2
Costs & Expenses	($67.0)	($ 62.7)	($62.4)	($60.0)	($58.7)	($59.1)
Operating Income	$11.7	$ 11.3	$10.0	$11.4	$12.5	$13.1
OM%	14.9 %	15.3 %	13.8 %	16.0%	17.6%	18.2%

The Company's Early Development segment includes preclinical and Phase I clinical trial services. Early Development revenues were $78.7 million for the second quarter of 2001, compared to $74.0 million last quarter and $71.2 million in the second quarter of 2000, a year-over-year increase of 10.6% (13.2% excluding the impact of foreign exchange). Covance toxicology services, which are currently starting toxicology studies at historically high levels, continue to drive solid revenue growth in the segment.

Operating income for the 2001 second quarter was $11.7 million, resulting in an operating margin of 14.9%, compared to $11.3 million and 15.3% last quarter, and $12.5 million and 17.6% in the second quarter of 2000. Year-over year, operating income declined due to the impact of start-up expenses for BioLink™, Covance's new bioanalytical service offering launched in November 2000. BioLink™ expenses were $1.6 million in the second quarter of 2001.

Late-Stage Development Segment (Pro Forma)

($ in millions)	2Q'01	1Q'01	4Q'00	3Q'00	2Q'00	1Q'00
Revenues	$125.1	$121.6	$115.9	$108.3	$113.2	$112.6
Costs & Expenses	($114.8)	($113.0)	($110.6)	($105.5)	($107.8)	($98.5)
Operating Income	$10.3	$8.6	$5.3	$2.8	$5.4	$14.1
OM%	8.2%	7.0%	4.5%	2.6%	4.8%	12.5%

The Late-Stage Development segment includes central laboratory, clinical development, commercialization and other support services. Revenues were $125.1 million for the second quarter of 2001, compared to $121.6 million last quarter, and $113.2 million in the second quarter of 2000, a year-over-year increase of 10.5% (12.4% excluding the impact of foreign exchange).

Operating income for the 2001 second quarter of $10.3 million, resulting in an operating margin of 8.2%, increased sequentially from the first quarter of 2001, primarily due to stronger central laboratory results. Year-over-year, operating income for the second quarter of 2001 grew significantly from the second quarter 2000 primarily due to return to profitability in Phase III clinical services, margin growth in Phase IV services, and stronger central laboratory margins in Europe.

During the quarter, Covance announced the reorganization of its Nexigent subsidiary to integrate Nexigent's current service offerings — site activation, study feasibility, electronic data capture, and web-based central laboratory data access — into Covance's core businesses. This move will result in a reduction in costs associated with Nexigent's infrastructure.

Corporate Information

On June 15, 2001, Covance completed the sale of its biomanufacturing operation. Net proceeds from the sale were used to reduce Covance debt by $95 million and the biomanufacturing subsidiary's debt by $10 million. As of June 30, 2001, Covance debt on the balance sheet is $25 million.

In the second quarter of 2001, the Company recorded a net loss on sale of businesses of approximately $8.4 million, primarily as a result of the biomanufacturing sale. This loss combined with a first quarter $39 million gain from the sale of packaging, resulted in a $31 million net pre-tax gain on sale of businesses for the six months ended June 30, 2001.

In the second quarter of 2001, Covance recorded a one-time restructuring charge of $8.2 million ($5.0 million after tax) of which $1.6 million is cash. The charge reflects the write-off of certain assets and elimination of approximately 30 redundant positions related to the previously announced reorganization of the Company's Nexigent subsidiary. Annual net savings are estimated to be approximately $4 million.

On June 30, 2001, Covance replaced its existing bank revolving credit facility with a new three-year, $150 million bank facility. The company expects cash from operations and this facility to be more than sufficient to meet future capital investment needs.

The Company's backlog was approximately $915 million on June 30, 2001 versus on a pro forma basis $905 million on March 31, 2001 and $895 million on December 31, 2000.

Net Days Sales Outstanding for the Company were 41 days on June 30, 2001 versus on a pro forma basis 38 days on March 31, 2001 and 68 days on June 30, 2000.

The Company's quarterly financial analyst briefing will be webcast on July 26 at 9 am EDT. The CEO commentary and presentation slides are available.

Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with 2000 pro forma revenues of $737 million, operations currently in 17 countries, and approximately 7,100 employees worldwide. Much more informtaion about Covance can be found throughout the site, including our products and services, other recent press releases, and SEC filings.

Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, savings, revenue, earnings growth and other financial results 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 Nexigent reorganization and the realization of savings therefrom, and other factors described in the Company's filings with the Securities and Exchange Commission.


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Financial Exhibits follow

                              COVANCE INC.

                               PROFORMA *

               INCOME STATEMENTS - EXCLUDING SPECIAL ITEMS

             FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
               (Dollars in thousands, except per share data)
                               (UNAUDITED)


                                  Three Months Ended June 30    Six Months Ended June 30
                                        2001(*)      2000(*)        2001(*)      2000(*)

Net revenues                           $203,858     $184,424       $399,467     $369,167 

Costs and expenses:								
  Cost of revenue                      146,515       132,929        287,963      258,567 
  Selling, general and administrative   31,779        30,311         60,990       57,230 
  Depreciation and amortization         10,615        10,586         21,428       21,090 
     Total                             188,909       173,826        370,381      336,887 

Income from operations                  14,949        10,598         29,086       32,280 

Other (income) expense, net:								
  Interest expense, net                    788           458          1,809          500 
  Other expense (income)                   159          (92)            135        (164)
     Other expense, net                    947           366          1,944          336 

Income before taxes                     14,002        10,232         27,142       31,944 

Taxes on income                          5,571         4,098         10,807       12,828 

Net income                              $8,431        $6,134        $16,335      $19,116 

Basic earnings per share                 $0.14         $0.11          $0.28        $0.33 

Weighted average shares outstanding 58,534,186    57,289,753     58,285,392   57,163,477 
     - basic
Diluted earnings per share               $0.14         $0.11          $0.27        $0.33 
								
Weighted average shares outstanding 60,454,375    57,312,310     59,707,635   57,204,265 
     - diluted
								
* Adjusted to exclude results of Packaging and Biomanufacturing in all periods presented,
including reduced interest expense from the application of the net sales proceeds to
outstanding debt, the gain/(loss) on the sale of these business in 2001, and the
restructuring charges recorded in both years. See supplemental schedule for details.




                                        COVANCE INC.
                                      
                                CONSOLIDATED BALANCE SHEETS

                            JUNE 30, 2001 AND DECEMBER 31, 2000				
				
                                   (Dollars in thousands)
				
                                                                     PROFORMA (*)
                                              June 30   December 31   December 31
                                                 2001          2000          2000
                                          (UNAUDITED)                 (UNAUDITED)
ASSETS
Cash & cash equivalents                       $22,216        $7,191       $11,327 
Accounts receivable, net                      146,661       168,006       137,469 
Unbilled services                              41,026        66,135        44,102 
Inventory                                      29,405        30,963        27,522 
Deferred income taxes                          28,700        32,696        28,614 
Prepaid expenses and other current assets      44,829        48,021        46,243 
     Total Current Assets                     312,837       353,012       295,277 

Property and equipment, net                   195,216       331,689       205,033 
Goodwill, net                                  55,770        81,327        57,669 
Other assets                                    5,353         5,063         2,969 
     Total Assets                            $569,176      $771,091      $560,948 

LIABILITIES and STOCKHOLDERS' EQUITY
Accounts payable                              $19,267       $28,312       $22,563 
Accrued payroll and benefits                   38,088        44,167        39,067 
Accrued expenses and other current liabilities 41,706        45,720        46,691 
Unearned revenue                               96,730        96,085        87,475 
Current portion of long-term debt                   -         1,499             -   
Short-term debt                                     -       234,000        39,000 
Income taxes payable                            4,049         1,939       (2,019)
     Total Current Liabilities                199,840       451,722       232,777 

Long-term debt                                 25,000        17,224             -   
Deferred income taxes                          24,335        20,943        24,054 
Other liabilities                              15,476        15,451        15,304 
     Total Liabilities                        264,651       505,340       272,135 

Common stock                                      608           598           598 
Paid-in capital                               104,571        92,572        92,572 
Retained earnings                             236,492       207,426       228,180 
Cumulative translation adjustment            (17,093)      (14,938)      (12,630)
Treasury stock                               (20,053)      (19,907)      (19,907)
     Total Stockholders' Equity               304,525       265,751       288,813 

     Total Liabilities                       $569,176      $771,091      $560,948 
     and Stockholders' Equity

* December 31, 2000 proforma consolidated balance sheet gives effect to the divestitures
of Packaging and Biomanufacturing as if they occurred on December 31, 2000.
 


                                     COVANCE INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                  FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000

                               (Dollars in thousands)
                                     (UNAUDITED)


                                                                Six Months Ended June 30
                                                                             PROFORMA(*)
                                                              2001       2000       2001

Cash flows from operating activities:						
  Net income                                               $29,066     $6,228     $8,312 
  Adjustments to reconcile net income to net cash provided			
       by operating activities:
     Gain on sale of businesses                           (30,803)          -          -   
     Depreciation and amortization                          26,196     26,854     21,428 
     Restructuring charge, net                               8,178     14,317      8,178 
     Stock issued under employee benefit                     6,139        697      6,139
       and stock compensation plans
     Deferred income tax provision                         (1,369)    (6,477)        195 
     Other                                                     993         96        993 
Changes in operating assets and liabilities, net of businesses sold:
  Accounts receivable                                      (4,619)   (33,843)    (9,192)
  Unbilled services                                            615    (4,585)      3,076 
  Inventory                                                (1,816)    (1,101)    (1,883)
  Accounts payable                                         (5,887)      8,421    (3,296)
   Accrued liabilities                                    (16,959)    (5,258)    (7,620)
  Unearned revenue                                           5,645      3,952      9,255 
  Income taxes payable                                       3,644    (4,062)      6,068 
  Other assets and liabilities, net                       (15,273)    (7,931)    (2,010)
Net cash provided by (used in) operating activities          3,750    (2,692)     39,643 

Cash flows from investing activities:				
  Proceeds from sale of businesses                         251,059          -          -   
  Capital expenditures                                    (27,886)    (44,040)  (20,579)
  Contingent purchase price paid in connection with              -       (909)         -
    prior acquisitions
  Other, net                                                   101          56       101 
Net cash provided by (used in) investing activities        223,274    (44,893)  (20,478)

Cash flows from financing activities:
  Net (repayments) borrowings under revolving            (199,000)      35,000    25,000
    credit facilities
  Repayments of long-term debt                            (18,723)       (582)  (39,000)
  Stock issued under employee stock purchase and             5,870       2,269     5,870
    option plans
  Purchase of treasury stock                                 (146)       (329)     (146)
Net cash (used in) provided by financing activities      (211,999)      36,358   (8,276)
Net change in cash and cash equivalents                     15,025    (11,227)    10,889 

Cash and cash equivalents, beginning of period               7,191      25,444    11,327 

Cash and cash equivalents, end of period                   $22,216     $14,217   $22,216 

* Proforma cash flow for the six months ended June 30, 2001 was computed as if the divestitures
of Packaging and Biomanufacturing had occurred in 2000 (i.e., it is intended to reflect the cash
flow of Covance's continuing operations for the first six months of 2001).



                                  COVANCE INC.

                 INCOME STATEMENTS - INCLUDING SPECIAL ITEMS

           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

                 (Dollars in thousands, except per share data)
                              (UNAUDITED)


                                  Three Months Ended June 30     Six Months Ended June 30
                                            2001        2000            2001         2000

Net revenues                            $226,421    $212,118        $455,079     $421,745 

Costs and expenses:
  Cost of revenue                        165,496     152,533         332,012      298,457 
  Selling, general and administrative     33,171      33,875          65,468       64,298 
  Depreciation and amortization           12,577      13,498          26,196       26,854 
  Restructuring charge                     8,178      14,665           8,178       14,665 
     Total                               219,422     214,571         431,854      404,274 

Income (loss) from operations              6,999     (2,453)          23,225       17,471 

Other (income) expense, net:
  Interest expense, net                    2,284       4,120           6,499        7,467 
  Other expense (income)                     159         245             153        (136)
  Loss (gain) on sale of businesses        8,430           -        (30,803)            -   
    Other (income) expense, net           10,873       4,365        (24,151)        7,331 

Income (loss) before taxes               (3,874)     (6,818)          47,376       10,140 

Taxes on income                          (1,115)     (2,685)          18,310        3,912 

Net income (loss)                       $(2,759)    $(4,133)         $29,066       $6,228 

Basic earnings (loss) per share          $(0.05)     $(0.07)           $0.50        $0.11 

Weighted average shares outstanding   58,534,186  57,289,753      58,285,392   57,163,477 
    - basic

Diluted earnings (loss) per share        $(0.05)     $(0.07)           $0.49        $0.11 
								
Weighted average shares outstanding   60,454,375   57,312,310      59,707,635  57,204,265 
    - diluted




                                    COVANCE INC.
                                Supplemental Schedule
                            PRO FORMA INCOME STATEMENTS
                FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                     (Dollars in thousands, except per share data)
                                    (UNAUDITED)

                                                    Pro Forma Adjustments
                                     As     Remove     Remove     Remove Loss         Remove  Pro Forma
                               Reported  Packaging        Bio  (Gain) on Sale  Restructuring    Results

Three Months Ended June 30, 2001

     Net revenues              $226,421        n/a  $(22,563)        $      -      $      -    $203,858

     Income from operations       6,999        n/a      (228)               -         8,178      14,949

     Net income (loss)          (2,759)        n/a        795           5,410         4,985       8,431

     Diluted earnings (loss)    $(0.05)        n/a      $0.01           $0.09         $0.08       $0.14
       per share

Six Months Ended June 30, 2001						

     Net revenues               $455,079   $(11,439)  $(44,173)      $      -       $      -   $399,467

     Income from operations       23,225     (3,806)      1,489             -          8,178     29,086

     Net income (loss)            29,066     (1,817)      3,016       (18,915)         4,985     16,335

     Diluted earnings (loss)       $0.49     $(0.03)      $0.05        $(0.32)         $0.08      $0.27
       per share

													
Three Months Ended June 30, 2000

     Net revenues               $212,118   $(14,989)  $(12,705)            n/a      $      -   $184,424
													
     Income from operations      (2,453)     (3,943)      2,329            n/a        14,665     10,598
													
     Net income (loss)           (4,133)     (1,295)      2,616            n/a         8,946      6,134
													
     Diluted earnings (loss)     $(0.07)     $(0.02)      $0.05            n/a         $0.16      $0.11
       per share

Six Months Ended June 30, 2000

     Net revenues               $421,745   $(28,700)  $(23,878)            n/a      $      -   $369,167

     Income from operations       17,471     (6,429)      6,573            n/a        14,665     32,280

     Net income (loss)             6,228     (2,418)      6,360            n/a         8,946     19,116

     Diluted earnings (loss)       $0.11     $(0.04)      $0.11            n/a         $0.16      $0.33
       per share