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COVANCE REPORTS RECORD RESULTS; RAISES 2003 EARNINGS GUIDANCE
Fourth Quarter Revenue Grows 14.6% and EPS Grows 58.8%
Company raises 2003 Earnings Guidance by $0.07 to $1.20

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Princeton, New Jersey, January 23, 2003 — Covance Inc. (NYSE: CVD) today reported earnings for its fourth quarter ended December 31, 2002 of $0.27/diluted share, versus consensus expectations of $0.26, and full year pro forma 2002 earnings of $0.93/diluted share, excluding a one-time favorable income tax gain of $0.11.

"Covance delivered higher than expected results reflecting the strength of our diversified business model. Late-Stage Development earnings were robust this quarter primarily driven by strength in our central lab and Phase II/III clinical services. Early Development continues to experience strong demand and deliver solid results," said Chris Kuebler, Chairman and CEO. "Year-over-year revenue growth accelerated to 14.6% for the quarter and 10.3% for the full year 2002. In addition, we ended the year with no debt and $75.9 million in the bank. In light of our continually improving performance, we are raising our 2003 full year diluted EPS guidance to $1.20/share. We continue to expect solid double-digit revenue growth and to see 2003 operating margins increase over this year's level of 10.7%."

"In 2002 we experienced significant benefit across the organization from our focus on operational excellence," said Joe Herring, President and COO. "Productivity, as measured by revenue per employee, increased by 13.1%, and we also continued to improve our employee retention rate. While we made great strides in 2002, there are even more opportunities for process improvement in 2003, including data management, proposal management, and resource planning. On the automation front, we are pleased to see the continued rapid adoption of Early Development's StudyTracker® and Central Laboratory's LabLink, our web-based reporting tools that allow us to report drug development data in near real-time. In addition, our proprietary Digitography™ system has had a very positive impact on our centralized ECG services."

Consolidated Results

($ in millions except EPS)	4Q02	4Q01*	Change	FY 2002*	FY 2001*	Change
Net Revenues	$234.3	$204.4	14.6%	$883.1	$800.3	10.3%
Reimbursable Out-of-Pockets	$11.4	$10.2		$41.6	$40.1
Total Revenues	$245.7	$214.6		$924.7	$840.4
Costs and Expenses	$206.1	$187.2	10.1%	$788.4	$736.2	7.1%
Reimbursable Out-of-Pockets	$11.4	$10.2		$41.6	$40.2
Total Costs and Expenses	$217.5	$197.4		$830.0	$776.4
Operating Income	$28.2	$17.2	63.3%	$94.7	$64.0	47.8%
Operating Margin %	12.0%	8.4%		10.7%	8.0%
Net Income	$17.0	$10.5	62.2%	$57.3	$38.0	50.6%
Diluted EPS	$0.27	$0.17	58.8%	$0.93	$0.63	47.6%

* 2002 net income and diluted EPS amounts have been reduced to exclude the $6.5 million ($0.11/diluted share) favorable income tax reserve reversal reported during the third quarter. All 2001 amounts in this release have been adjusted to exclude the 2001 divestitures of our packaging and biomanufacturing businesses, restructuring charge, and the amortization of goodwill in accordance with SFAS 142.

Net revenues for the fourth quarter of 2002 increased 14.6% to $234.3 million compared to $204.4 million in the fourth quarter of 2001 and up 6.0% sequentially from $221.0 million reported last quarter. Full year 2002 net revenues increased 10.3% to $883.1 million compared to $800.3 million for 2001.

Costs and expenses for the fourth quarter of 2002 increased 10.1% to $206.1 million, compared to $187.2 million in the fourth quarter of 2001. Full year 2002 costs and expenses increased 7.1% to $788.4 million compared to $736.2 million in the prior year.

Consolidated operating income for the fourth quarter of 2002 increased 63.3% to $28.2 million, compared to $17.2 million in the fourth quarter of 2001. Operating margin for the fourth quarter of 2002 was 12.0% compared to 8.4% for the fourth quarter of last year and 11.3% last quarter. Full year 2002 operating income was up 47.8% to $94.7 million from $64.0 million for the prior year and operating margin for 2002 increased to 10.7% from 8.0% in 2001.

Net income for the fourth quarter of 2002 increased 62.2% to $17.0 million or $0.27/diluted share compared to $10.5 million or $0.17/diluted share for the fourth quarter of last year and $15.4 million or $0.25/diluted share last quarter. Full year net income grew 50.6% to $57.3 million or $0.93/diluted share compared to $38.0 million or $0.63/diluted share in 2001.

Operating Segment Results
Early Development

($in millions)	4Q02	4Q01	Change	FY 2002	FY 2001	Change
Net Revenues	$97.0	$78.7	23.3%	$367.5	$311.1	18.1%
Operating Income	$17.4	$13.1	32.8%	$66.7	$49.1	35.9%
Margin %	18.0%	16.7%		18.1%	15.8%

The Company's Early Development segment includes preclinical toxicology, analytical chemistry and Phase I clinical trial services. Early Development net revenues for the fourth quarter of 2002 grew 23.3% to $97.0 million compared to $78.7 million in the fourth quarter of 2001. The very strong fourth quarter 2002 net revenues benefited from $2.8 million in billings to a customer for investigator fees under a unique fixed price contract which GAAP requires to be included in expense and net revenues. For the full year, 2002 net revenues increased 18.1% to $367.5 million compared to $311.1 million for the prior year. All elements of Early Development services contributed to the quarterly and annual revenue growth.

Operating income for the fourth quarter of 2002 increased 32.8% to $17.4 million compared to $13.1 million for the fourth quarter of last year. Operating margins for the fourth quarter of 2002 were 18.0% versus 16.7% in the prior year and 19.4% last quarter. Operating margin continued to be very strong in the high teens, despite some margin dilution from the inclusion of the unique pass-through investigator fees in net revenues and expense. Full year 2002 operating margins were 18.1% compared to 15.8% for the prior year. We expect full year 2003 margins to improve from the reported 2002 level.

Late-Stage Development

($in millions)	4Q02	4Q01	Change	FY 2002	FY 2001	Change
Net Revenues	$137.4	$125.7	9.2%	$515.5	$489.1	5.4%
Operating Income	$24.2	$11.4	112.3%	$73.0	$41.5	76.0%
Margin %	17.6%	9.1%		14.2%	8.5%

The Late-Stage Development segment includes central laboratory, Phase II-III clinical development, commercialization services (comprised of Phase IV studies and health economic and outcomes services), and other strategic clinical support services. Late-Stage Development net revenues for the fourth quarter of 2002 increased 9.2% to $137.4 million compared to $125.7 million in the fourth quarter of 2001 and $127.2 million last quarter. Revenue growth in the quarter was driven primarily by improved performance in central laboratory and Phase II/III services.

Operating income for the fourth quarter of 2002 increased 112.3% to $24.2 million compared to $11.4 million in the fourth quarter of the prior year and $18.2 million last quarter. Operating margins increased significantly year-over-year and sequentially. For the fourth quarter of 2002, operating margin was a very strong 17.6%, up from 9.1% for the fourth quarter last year and 14.3% last quarter. Margin improvement in the quarter was driven primarily by an increase in central laboratory volumes and more favorable contract terms in Phase II/III services. Full year 2002 operating margins were 14.2% compared to 8.5% in the prior year. Full year 2002 margin improvement reflects strong performance across all Late-Stage Development areas and effective cost management.

Corporate Information

The Company's backlog was $1,122 million at December 31, 2002 compared to $1,083 million at September 30, 2002, and $1,013 million at December 31, 2001.

The Company reported cash and cash equivalents of $75.9 million at December 31, 2002 and continues to have no debt outstanding. The Company's capital expenditures for 2002 totaled $66.8 million and 2002 free cash flow was $61.1 million.

Net Days Sales Outstanding (DSO) were 41 days at December 31, 2002 versus 42 days at September 30, 2002 and 41 days at December 31, 2001. Current DSOs continue to track at the low end of historical experience.

Covance, with headquarters in Princeton, New Jersey, is one of the world's largest and most comprehensive drug development services companies with 2002 net revenues of $883 million, global operations in 17 countries, and approximately 6,900 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, operations, revenue and 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, levels of industry research and development spending, the Company's ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss of large contracts, risks associated with acquisitions and investments, the Company's ability to increase profitability of its clinical development services and to increase order volume in central laboratory and commercialization services, and continued growth in demand for bioanalytical services and Covance's ability to provide these services on a large scale basis, and other factors described in the Company's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. All information in this release is as of January 23, 2003. The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the Company's expectations.


	SEC Filings

	Annual Reports

	Quarterly Reports

	Press Releases


Financial Exhibits follow

                                COVANCE INC.

                    PROFORMA UNAUDITED INCOME STATEMENTS

        FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2002 AND 2001

                (Dollars in thousands, except per share data)


                               Three Months Ended December 31      Year Ended December 31
                                            2002      2001(a)        2002(b)      2001(c)

Net revenues                         $   234,318  $   204,404    $   883,074  $   800,265
Reimbursable out-of-pockets               11,376       10,210         41,623       40,167 
    Total revenues                   $   245,694  $   214,614    $   924,697  $   840,432 

Costs and expenses:
  Cost of revenue                        159,541      144,443        612,465      574,070 
  Reimbursed out-of-pocket expenses       11,376       10,210         41,623       40,167 
  Selling, general and administrative     34,827       32,502        133,508      122,733 
  Depreciation and amortization           11,794       10,216         42,434       39,400 
    Total                                217,538      197,371        830,030      776,370 

Income from operations                    28,156       17,243         94,667       64,062 

Other (income) expense, net:
  Interest expense, net                       86           15            831        2,158 
  Foreign exchange transaction loss, net   1,476          311          3,395          245 
    Other expense, net                     1,562          326          4,226        2,403 

Income before taxes                       26,594       16,917         90,441       61,659 

Taxes on income                            9,574        6,427         33,158       23,632 

Net income                           $    17,020  $    10,490     $   57,283  $    38,027 

Basic earnings per share             $      0.28  $      0.18     $     0.95  $      0.65

Weighted average shares outstanding   60,256,552   59,660,187     60,285,330   58,903,095 
 - basic
Diluted earnings per share           $      0.27  $      0.17     $     0.93  $      0.63 

Weighted average shares outstanding   62,105,947   61,243,038     61,641,367   60,430,060 
 - diluted

(a) Three months ended December 31, 2001 adjusted to exclude goodwill amortization in
accordance with SFAS No. 142.

(b) 2002 adjusted to exclude the reversal of a $6.5 million income tax reserve during the
third quarter of 2002 relating primarily to the favorable settlement of a longstanding
multi-year foreign income tax audit.

(c) Year ended December 31, 2001 adjusted to exclude results of divested businesses
(including reduced interest expense from the application of the net sales proceeds to
outstanding debt and gain on sale).  2001 also has been adjusted to exclude a restructuring
charge recorded during the second quarter of 2001 and goodwill amortization in accordance with
SFAS No. 142.
				
See supplemental schedule for details.



                                        COVANCE INC.

                                CONSOLIDATED BALANCE SHEETS

                                DECEMBER 31, 2002 and 2001

                                   (Dollars in thousands)

                                                                    
                                             December 31  December 31
                                                    2002         2001
ASSETS						
Cash & cash equivalents                       $   75,913    $  35,404
Accounts receivable, net                         159,368      167,840
Unbilled services                                 39,073       40,895
Inventory                                         40,472       36,131 
Deferred income taxes                              1,839       13,445 
Prepaid expenses and other current assets         28,721       30,778 
   Total Current Assets                          345,386      324,493 

Property and equipment, net                      258,407      228,092 
Goodwill, net                                     56,805       54,038 
Other assets                                      16,405        5,405 
   Total Assets                              $   677,003  $   612,028 

LIABILITIES and STOCKHOLDERS' EQUITY
Accounts payable                             $    24,123  $    21,134 
Accrued payroll and benefits                      57,803       45,902
Accrued expenses and other current liabilities    40,828       40,296 
Unearned revenue                                  91,681      116,712
Income taxes payable                                   -        2,739 
   Total Current Liabilities                     214,435      226,783 

Long-term debt                                         -       15,000 
Deferred income taxes                             16,432       11,613 
Other liabilities                                 14,469       13,687 
   Total Liabilities                             245,336      267,083 

Common stock                                         637          619 
Paid-in capital                                  147,745      122,217 
Retained earnings                                319,109      255,326 
Cumulative translation adjustment                  1,714      (12,310)
Treasury stock                                   (37,538)     (20,907)
   Total Stockholders' Equity                    431,667      344,945 
   Total Liabilities and Stockholders' Equity $  677,003   $  612,028 




                                     COVANCE INC.

                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                   FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

                               (Dollars in thousands)

                                    
                                                                    Years Ended December 31
                                                                                       PROFORMA(*)
                                                                  2002         2001           2001
                                                                                       (UNAUDITED)
Cash flows from operating activities:						
  Net income                                                  $  63,783   $  47,900      $  27,146
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Depreciation and amortization                                42,434      47,719         42,951
    Stock issued under employee benefit and                      11,672      12,509         12,509
      stock compensation plans
    Deferred income tax benefit                                  16,656       1,164          2,728 
    Gain on sale of businesses                                        -     (30,803)             -
    Restructuring charge, net of cash paid                            -       7,287          7,287 
    Other                                                         2,036       1,399          1,399 
Changes in operating assets and liabilities, net of businesses
acquired sold:
  Accounts receivable                                             9,054     (25,798)       (30,371)
  Unbilled services                                               1,822         746          3,207
  Inventory                                                      (4,341)     (8,542)        (8,609)
  Accounts payable                                                2,867      (4,020)        (1,429)
  Accrued liabilities                                            11,689      (9,555)          (216)
  Unearned revenue                                              (25,175)     25,627         29,237
  Income taxes payable                                           (2,739)      2,334          4,758
  Other assets and liabilities, net                              (1,923)     (1,184)        12,079
Net cash provided by operating activities                       127,835      66,783        102,676

Cash flows from investing activities:
  Capital expenditures                                          (66,784)    (78,136)       (70,829)
  Acquisition of business, net of cash acquired                  (2,796)          -              -
  Proceeds from sale of businesses                                    -     251,059              -
  Other, net                                                         11          73             73
Net cash (used in) provided by investing activities             (69,569)    172,996        (70,756)

Cash flows from financing activities:
  Net repayments under revolving credit facilities              (15,000)   (209,000)       (24,000)
  Repayments of long-term debt                                        -     (18,723)             -
  Stock issued under employee stock purchase and option plans    13,874      16,303         16,303 
  Purchase of treasury stock                                    (16,631)       (146)          (146)
Net cash used in financing activities                           (17,757)   (211,566)        (7,843)
Net change in cash and cash equivalents                          40,509      28,213         24,077

Cash and cash equivalents, beginning of period                   35,404       7,191         11,327 

Cash and cash equivalents, end of period                      $  75,913   $  35,404      $  35,404


* Proforma cash flow for the year ended December 31, 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 2001).


   
   

                                COVANCE INC.

                           Supplemental Schedule

                        PRO FORMA INCOME STATEMENTS
                    FOR THE YEAR ENDED DECEMBER 31, 2002
            AND THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2001

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


                                                       Pro Forma
                                              As       to Remove     Pro Forma
                                        Reported  Tax Adjustment       Results

Year Ended December 31, 2002

  Net revenues                         $ 883,074      $      -       $ 883,074

  Income from operations                  94,667             -          94,667

  Income before taxes                     90,441             -          90,441

  Taxes on income                         26,658         6,500          33,158

  Net income                              63,783        (6,500)         57,283

  Diluted earnings per share           $    1.03      $  (0.11)      $    0.93


                                                 Pro Forma to Remove
                                              As        Goodwill     Pro Forma
                                        Reported    Amortization       Results

Three Months Ended December 31, 2001

  Net revenues                         $ 204,404      $      -       $ 204,404

  Income from operations                  16,355           888          17,243

  Income before taxes                     16,029           888          16,917

  Taxes on income                          6,254           173           6,427

  Net income                               9,775           715          10,490

  Diluted earnings per share           $     .16      $   0.01       $    0.17

                                                            Pro Forma Adjustments to Remove
                                            As                              Net Gain                     Goodwill   Pro Forma
                                      Reported   Packaging          Bio     on Sales  Restructuring  Amortization     Results

Year Ended December 31, 2001

  Net revenues                       $ 855,877   $ (11,439)   $ (44,173)   $       -     $       -     $        -   $ 800,265

  Income from operations                54,650      (3,806)       1,489            -         8,178          3,551      64,062

  Income before taxes                   78,342      (2,579)       4,970      (30,803)        8,178          3,551      61,659

  Taxes on income                       30,442        (762)       1,954      (11,888)        3,193            693      23,632

  Net income                            47,900      (1,817)       3,016      (18,915)        4,985          2,858      38,027

  Diluted earnings per share         $    0.79   $   (0.03)    $   0.05    $   (0.31)    $    0.08     $     0.05    $   0.63



                                    COVANCE INC.

                      INCOME STATEMENTS - INCLUDING SPECIAL ITEMS

             FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2002 AND 2001

                 (Dollars in thousands, except per share data)


                                    Three Months Ended December 31         Year Ended December 31
                                                2002          2001             2002          2001
                                                   (UNAUDITED)
Net revenues                             $   234,318   $   204,404      $   883,074   $   855,877
Reimbursable out-of-pockets                   11,376        10,210           41,623        40,167
    Total revenues                       $   245,694   $   214,614      $   924,697   $   896,044

Costs and expenses:
  Cost of revenue                            159,541       144,443          612,465       618,119
  Reimbursed out-of-pocket expenses           11,376        10,210           41,623        40,167
  Selling, general and administrative         34,827        32,502          133,508       127,211
  Depreciation and amortization               11,794        11,104           42,434        47,719
  Restructuring charge                             -             -                -         8,178
    Total                                    217,538       198,259          830,030       841,394

Income from operations                        28,156        16,355           94,667        54,650

Other (income) expense, net:
  Interest expense, net                           86            15              831         6,848
  Foreign exchange transaction loss, net       1,476           311            3,395           263
  Gain on sale of businesses, net                  -             -                -       (30,803)
    Other (income) expense, net                1,562           326            4,226       (23,692)

Income before taxes                           26,594        16,029           90,441        78,342

Taxes on income                                9,574         6,254           26,658        30,442

Net income                                $   17,020    $    9,775       $   63,783   $    47,900

Basic earnings per share                  $     0.28    $     0.16       $     1.06   $      0.81

Weighted average shares outstanding       60,256,552    59,660,187       60,285,330    58,903,095
 - basic
Diluted earnings per share                $     0.27    $     0.16       $     1.03   $      0.79

Weighted average shares outstanding       62,105,947    61,243,038       61,641,367    60,430,060
 - diluted