“Accelerated revenue growth in central laboratories was the primary driver of better-than-expected consolidated results in the second quarter,” CEO Joe Herring said.
Covance was recently highlighted in an industry survey of trial investigators as the most favoured among its competitors Quintiles, PPD, Quest and others in the field of central labs. Covance was also favoured among those purchasing lab kits.
Herring said in the conference call on Wednesday that the company could see an uptick in kit revenue because of the early companion diagnostic trials. “We don't know if that's going to play out forever but certainly right now, companion diagnostics means more kits and richer kits for central labs,” he said.
Late-stage development increased 17% for the quarter compared to 2012, while kit volumes in central laboratories drove both year-over-year revenue growth of 22% and operating margin expansion, according to the company.
One of the investment analysts on the conference call asked how Covance was progressing with its partnership deal with Sanofi, and Herring refused to single out any client but said the company has “seven large clinical clients and we’re ramping up all of those.”
Slight Early Development Success
In terms of Covance’s early development division, revenue was flat when compared to last year, though there was a bump in growth in toxicology that could prove promising. The slight bump, however, was offset by declines in discovery support and pharmaceutical chemistry services.
Herring noted that “overall, the visibility in early development still remains much less than anything in late-stage. Having said all that, the orders in early development, again, particularly in toxicology were strong and continued in July.” But he added that “it's a little early to call a recovery in that business.”
Covance raised its expected diluted earnings per share target by about 10 cents and Herring said the company expects “revenue growth in the high-single digit range. We expect sequential increases in earnings per share of approximately two cents in each of the third and fourth quarters."