Covance CFO says early stage business is mostly back on track

By Zachary Brennan

- Last updated on GMT

Covance CFO says early stage business is mostly back on track

Related tags Pharma companies Pharmacology

Sounding upbeat on Covance’s recent gains in its early stage clinical business, CFO Alison Cornell expressed a conservative amount of optimism that growth will continue.

Speaking at the 35th​ annual Goldman Sachs Global Health Care Conference, Cornell noted that Covance has seen a general uptick in early stage volume over the past several quarters.

We’re not calling for a full rebound​,” Cornell said cautiously. “But stepping back, following the financial crisis and patent expirees, which shifted funding to late stage – now that most companies have navigated that space, they’re recognizing they need to spend some amount of money in early stage​.”

She also said there’s been a shift where pharma companies previously focused on testing high volumes of compounds, “but now they’re focused on successful compounds​,” and they’re using more thoughtful assessments of compounds up front, which means the success rates for compounds coming out of the testing “is a lot higher. We think this is the new normal for demand of early development​.”

Covance continues to see growth in its nutritional chemistry and clinical pharmacology businesses, Cornell added, noting the company may look to make an acquisition in the nutritional chemistry industry for a company that’s outside the US.

But Covance’s discovery business seems to be in more difficult territory as it’s “been in and out of profitability for some time,” Cornell said, noting the company’s recent sale of its genomics site in Seattle​. “Discovery is a fragmented market​,” Cornell added, noting that many pharma and biotech companies want to keep their discovery in house because it’s one of the most scientific areas.

As far as M&A, Cornell noted that the company looks at potential candidates “almost every day of the week​,” though they’re looking “for more tuck-in capabilities​” as “we don’t see any kind of big bang type of acquisition occurring​,” she said. Nutritional chemistry outside the US and health economics companies in the Phase II-IV space are prospective acquisition targets, she added.

Late Stage

And echoing what Covance CEO Joe Herring said last week​ about the percentage of the outsourcing industry rising, Cornell said it “could go all the way up to 80%​” as the pharma cost structure continues to vary.

As far as driving the company’s central labs growth, Cornell said more studies are going global and in emerging markets, which plays to Covance’s advantage.

From a strategic partnerships perspective, she noted there are still a handful of pharma companies, such as AstraZeneca, who seem reluctant to outsource too much of their work. So in that sense, Cornell said she sees “more strategic partnerships moving to mid-size pharma companies, who are recognizing they can’t do it alone​.”

And as these partnerships expand, work continues to gravitate to the top 5 CROs due to complexity of trials and global footprint, she added. 

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