A year after its LabCorp buyout, Covance posts steady sales

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Covance has helped buoy LabCorp ($LH) earnings in the fourth quarter as its leadership team hails a "transformative year."

The New Jersey-headquartered CRO saw net revenue of $691.4 million in the final quarter of 2015--an increase of 4.7% on the $660.1 million it made for the fourth quarter of 2014.

The stronger U.S. dollar, however, negatively impacted year-over-year revenue growth by around 230 basis points. Excluding currency, net revenue increased 7% year-over-year due to increased demand, according to the firm's financial results.

Adjusted operating income was $110.4 million--or 16.0% of net revenue--compared to adjusted operating income of $89.8 million, or 13.6% of net revenue, in the fourth quarter of 2014.

The outlook for the next 12 months is steady, with net revenue growth in Covance drug development expected to grow by 2% to 5%.

The CRO was merged into the Burlington, NC-based LabCorp a year ago this month, but just before the ink was dry, Covance posted 2014 sales which had dipped by 2.7% to $643.7 million--a decline its new parent company blamed on unfavorable currency exchange. But it seems the past 12 months have been much more favorable for the firm.

LabCorp, a leader in diagnostic tests, has spent the past year merging its own testing prowess with Covance's share of the drug development market to create an outfit that can support a candidate therapy from its preclinical inception to well past its market debut.

LabCorp CEO David King

"The year was transformative for LabCorp," chairman and CEO David King said in a statement as it consolidated its first year with Covance. "We concluded the year with strong fourth quarter results including continued organic volume growth in LabCorp Diagnostics, accelerated revenue growth in Covance Drug Development, double-digit adjusted EPS growth, and robust free cash flow."

The whole LabCorp group saw its fourth quarter revenue rise by 48.4% to $2.24 billion year-over-year, and exceeded Wall Street's expectations of $2.22 billion.

Net revenue for the full year was $8.51 billion--an increase of 41.5% over last year's $6 billion. The acquisition of Covance contributed $2.2 billion from the February 19, 2015 closing date, driving 36.7% year-over-year net revenue growth.

- read the results


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