Despite posting overall financial growth in the first quarter, Covance ($CVD) will eliminate its Chandler, AZ, facility and make cuts to its early development cost structure in an effort to improve profits, the CRO announced.
The closure comes as Covance's early development segment saw a 5% drop in net revenues for the first quarter compared to a year ago. Axing its Chandler facility, which handles preclinical and toxicology services, made sense since Covance saw a sharp drop in the volume of its global toxicology services in the quarter. As Outsourcing-Pharma notes, toxicology demand is dwindling; another major CRO, Charles River Laboratories ($CRL), experienced a decline in the same service. By closing the Chandler facility and trimming down on early development services, Covance should see its annual profits improve by at least $20 million, according to the company's financial report. It should also give Covance the chance to focus on Japan, where it is expanding the Kawagoe City lab it shares with Japanese partner, BML.
But while early development suffered fiscally, late-stage development flourished, growing almost 15% in net revenues over the year, reaching $319 million. Covance pinpoints that success to significant growth in its clinical development and central laboratory services.
With corporate V.P. Alison Cornell as the new CFO, Covance will take what it learned last quarter and continue to beef up late-stage services in order to compensate for early-stage development, the report mentioned. But Covance CEO Joe Herring assures shareholders that the CRO remains committed to early-stage work.
"Even as we reduce our footprint, our Early Development services remain an important differentiator for Covance and are a key component of our integrated drug development alliances," he said in the report.