The contract research organisation (CRO) recorded an operating income of $55.5m (€40.3m), an 18 per cent jump from $47m in the same quarter last year.
Sales totalled $404.1m in the quarter ended 30 June 2007, compared with $357.1m in the second quarter of 2006, a 13 per cent increase.
Meanwhile, the firm spent a total of $348.7m in costs and expenses during the period, 12.5 per cent more than in the same quarter last year.
New Jersey-based Covance pinpointed its Early Development unit's strong growth as one of the main drivers for the quarter's performance.
"Early Development net revenue growth was again very strong at 22.7 per cent and operating margins increased both year-on-year and sequentially to 25.6%, as demand for our toxicology and chemistry services remains buoyant," said Joe Herring, Covance chairman and CEO.
"The eight clinical pharmacology sites we purchased a year ago delivered another quarter of outstanding sequential growth in revenue and profit and were solidly accretive to our earnings."
The segment, which includes preclinical toxicology, analytical chemistry, clinical pharmacology services, and research products, generated $191.1m in revenues, compared to $155.7 in the same quarter of 2006, while operating income totalled $49m, a 25.2 per cent increase from the $39.1m recorded in the second quarter last year.
The Late-Stage Development business performance was not as strong but still on the up, with a 5.9 per cent increase in sales, to $190m for the period, while operating income for the segment was $31.9m, 11.8 per cent more than the $28.5 posted in the comparable quarter last year.
The company said these results were led by "exceptional year-over-year revenue growth" in clinical development. In addition, Covance said, a substantial increase in central laboratory kit volumes led to a 10.5 per cent growth in its revenues. The Late-Stage Development unit includes central laboratory, Phase II- III clinical development, commercialisation services, and cardiac safety services.
"Given its continued strong orders, we expect central laboratory revenues to continue to increase throughout the year," said Herring.
"Continued strong order performance furthers our confidence in achieving our full-year targets of low- to mid-teens revenue growth," he added.
This confidence in the early-stage business potential has not been stained by the hurdles the company has been facing recently. Covance is currently building a new early-stage lab testing facility in Chandler, Arizona which has caused controversy since the building plans were announced.
Opponents of the CRO filed a lawsuit earlier this month alleging that Chandler city officials violated the Arizona Open Meeting Act and city ordinances in allowing Covance to build in the Chandler Airpark. The lawsuit asked the court to void the building permit and the zoning for the facility. The city of Chandler said it will fight the lawsuit.
According to local paper The Arizona Republic, City Attorney Michael House said this week that the Physicians group and the seven individuals who filed the lawsuit "have no legal standing to challenge a drug development company's building permit and site plans in Chandler".
Covance broke ground on the 300,000-square-foot site last month. It seems that this latest setback is unlikely to jeopardise the smooth continuation of the site construction. The company, however, remains tight-lipped about the issue.
