COVANCE INC.

NYSE: CVD

September 2014
Safe Harbor
Statements contained in this press release, which are not historical facts, such
as statements about prospective earnings, savings, revenue, operations,
revenue and earnings growth and other financial results are forward-looking
statements pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. All such forward-looking statements including
the statements contained herein regarding anticipated trends in the
Company’s business are based largely on management’s expectations and
are subject to and qualified by risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by such statements.
These risks and uncertainties include, without limitation, competitive factors,
outsourcing trends in the pharmaceutical industry, levels of industry research
and development spending, the Company’s ability to continue to attract and
retain qualified personnel, the fixed price nature of contracts or the loss or
delay of large studies, risks associated with acquisitions and investments, the
Company’s ability to increase order volume, the pace of translation of orders
into revenue in late-stage development services, testing mix and geographic
mix of kit receipts in central laboratories, fluctuations in currency exchange
rates, the realization of savings from the Company’s announced restructuring
actions, the cost and pace of completion of our information technology projects
and the realization of benefits therefrom, and other factors described in the
Company’s filings with the Securities and Exchange Commission including its
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The
Company undertakes no duty to update any forward-looking statement to
conform the statement to actual results or changes in the Company’s
expectations.

2
Covance Profile

Ź Annual Revenue >$2.4 billion

Ź Market Cap ~$5 billion
Ź Only provider of preclinical and clinical services
y Market leader in central laboratory
and preclinical services
y Top five provider of Phase III
clinical trial management services
y Market leader in nutritional chemistry
Ź Operations in >30 countries
Ź Trial activity in >100 countries
Ź >12,500 employees in >60 countries

3
 Markets We Serve: >$150 Billion

>$150
Billion

~$40B: Other (Private R&D, Post R&D,

$ Billions

Covance
revenues can
Food, Environment, Government)
increase through:
1. outsourcing ~$40B: Biopharmaceutical Research Spend
penetration
2. market share gains
3. growth in adjacent
markets

~$75B: Biopharmaceutical Development Spend

$2.4
Billion

4
Only CRO with Full-Range of R&D Services
Pharmaceutical/Biotechnology Research & Development

Discovery Drug Safety Efficacy Approval

(IND) (NDA)

Covance generates more safety and efficacy data

than any other entity involved in drug development
5
Diversified Revenue Base (1H-14 Distribution of Net Revenues)
By Service Offering

Early Development
(toxicology, food/drug chemistry, clinical
pharmacology, research products,
*Central Laboratory discovery services)
32.9% 35.6%

By
y Geography
g p y

Other* USA
17.1% 46.0%
*Phase II-IV Clinical Euro Zone
Development and other 9.2%
31.5%

* 64.4% Late-Stage Development

Switzerland
16.8%
UK
10.9%

* “Other” includes a mix of >20 currencies;

largest is Singapore Dollar

6
Toxicology Volume Trends
2013 demand ~20%
lower than 2007 peak
(price also ~20% lower)

2013 demand
Estimated Toxicology Volume

at 2004 levels
(industry capacity
is near 2006 levels)

Assumption: “high probability compounds”

have grown/will grow at ~2% CAGR
1997 2001 2008 2013 2016

Covance toxicology revenue 15 year CAGR = ~5%

* Includes full testing packages, pulling work forward, dedicated space agreements, etc, due to fear of delayed filings
resulting from constrained capacity (could return if industry capacity is tight for a long period of time)
7 Source: Covance market analysis
Covance Core Strategies

8
1. Operational and Service Excellence

People: Talent attraction and

retention rates at historic highs PEOPLE

Process: Informatics investments;

hundreds of Six Sigma
PROCESS
projects annually; IT automation

Clients: Backlog and

client satisfaction at CLIENTS
historic highs

9
 Informatics and Clinical Trial Transformation

Ź Significant investments in IT infrastructure and talent

y Created a Center of Excellence in Informatics
y Rapidly building an elite team of ~30 data scientists & engineers
y Leveraging recent strategic IT investments (CTMS, ETMF, SAS, PV)

Ź Xcellerate® is the world’s most comprehensive investigator performance database

y Unique data driven by leadership in central lab (touches ~40% of all clinical trials)
y Spans >11,000 protocols, >600 clinical indications, >175,000 investigators,
>15,000,000 patient visits
y Incorporates real-world evidence data
y Utilizes industry-leading forecasting algorithms

Ź A leader and innovator in RBM (Risk Based Monitoring)

Covance is dedicated to improving the quality, lowering the

risk, and reducing the time and cost of drug development

10
Independent Surveys Rank Covance Most
Preferred CRO

Ź “Covance is the clear favorite clinical CRO to work with”

y 62% vs. next CROs at 44%, 37%, 29%, 21% and 9%, N = 104
Baird Equity Research (3/20/14)

Ź Covance received the most mentions as the best-positioned

CRO to win preclinical work (n=100)
William Blair Equity Research (4/25/14)

Ź “Covance received highest score in both preclinical and

clinical quality” N=43
Morgan Stanley Research North America (3/3/13)

Ź Covance Central Laboratory Services named most

preferred lab by investigators, by a wide margin
y 47% vs. 23% and 9% for next two preferred; N= 258
Life Science Strategy Group (7/26/13)
2. Integrated Service Solutions

DISCOVERY DEVELOPMENT COMMERCIALIZATION

RESEARCH PRECLINICAL PHASE I PHASE II PHASE III PHASE IV

INDIVIDUAL SERVICES

MILESTONE-BASED SOLUTIONS

Lead Opt IND/CTA FIH POC Ph II - IV

MULTI-MILESTONE SOLUTIONS

Lead Optimization through FIH

IND / CTA through POC

FIH through Ph IV

FULL DRUG DEVELOPMENT

Lead Optimization through Ph IV

12
3. Drive Strategic Outsourcing

Strategic Service
Integration

Executive
Relationships

Operational
and Service
Excellence

= Accelerators

13
 Net Revenue

2014
Target:
6%-8%
growth*
$ in millions

* Revenue growth target issued on July 29, 2014

14
 Operating Income and OM%
Operating Income

Operating Margin %
$ millions

* 2010, 2011, 2012, 2013 are presented on a “pro forma” basis. See appendix for
reconciliations.

15
 Segment Operating Income Trends
Annual Segment Operating Income and OM%*

Operating Margin
Operating Income
($ millions)

* Corporate overhead not included;

2010-2013 are presented on a “pro forma” basis.
16
Earnings Per Share*

2014
Pro forma
target:
$3.78- $3.92*

* Results are presented on a pro forma basis, please see appendix for GAAP to Pro Forma reconciliations;
Pro forma EPS target issued on May 1, 2014

17
 Net Order Trends

$ in millions 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

Adjusted Net
Book-to-Bill (consolidated) 1.29 1.37 1.23 1.31 1.21 1.23 1.15 1.21

Trailing 8 quarter adjusted net BTB:

• Consolidated: ~1.25:1
• Late-Stage Development Segment: >1.30:1
Backlog

All other backlog CMV backlog

* “CMV” represents the contractual minimum volume commitment under certain strategic and dedicated agreements
19
 Balance Sheet, Cash Flow, and CapEx
BALANCE SHEET
Ź $648 million in cash/short-term investments at 6/30/14

Ź Total debt outstanding at 6/30/14: $290M

FREE CASH FLOW (FREE CASH FLOW IS DEFINED AS CASH FROM OPERATIONS LESS CAPITAL SPENDING)
Ź FY2013 Free Cash Flow was $243 million ($173M normalized)

Ź FY2014 Free Cash Flow target ~$130 million ($200M normalized)

$ in Millions

20 * Excludes $50M purchase of Greenfield campus; when including Cap Ex was $319 in 2008
Capital Deployment Priorities

Invest in the business to generate profitable

organic growth and drive free cash flow

Acquire strategic capabilities

Return excess cash to shareholders

~$685M shares repurchased since 2010

(includes $100M of shares repurchased in 2014)

21
Investment Summary

Ź Covance is well-positioned in dynamic and

growing industry
Ź Unique, integrated drug development portfolio with
emerging informatics capabilities enable biopharma clients
to reduce the time and cost of drug development
Ź Leader in creating true strategic partnerships

Ź Ability to grow revenue through increased outsourcing

penetration, market share gains and growth in adjacent
markets
Ź Revenue growth, lower cost structure, continued process
efficiencies and share repurchases to drive long-term EPS
growth

22
APPENDIX

23
Biotech Funding Trends

Quarterly Biotech Funding

Source: BioWorld, Covance analysis

24
 Backlog and Adjusted Net Orders

$ in millions 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

CMV Backlog $1,877 $1,919 $1,816 $1,734 $1,660 $1,585 $1,480 $1,378
All Other Backlog $4,489 $4,724 $4,792 $4,991 $5,171 $5,337 $5,423 $5,546
Total Backlog $6,366 $6,643 $6,608 $6,725 $6,831 $6,922 $6,903 $6,924

Net Orders $609 $796 $628 $682 $642 $679 $618 $681
CMV revenue
less CMV orders $91 ($26) $88 $94 $90 $90 $92 $92
Adjusted Net Orders $701 $769 $716 $776 $732 $769 $710 $773

Adjusted Net Book-to-Bill 1.29 1.37 1.23 1.31 1.21 1.23 1.15 1.21

• “CMV” represents the contractual minimum volume commitment under certain strategic/dedicated agreements
• Covance believes backlog is not always a predictor of future results

25
Free Cash Flow – 2013 vs. 2014

2013 2014
Actual Expected

Free Cash Flow* $243M $130M

Variance Drivers:
DSO** $42M ($42M)
VAT*** $28M ($28M)

Normalized FCF $173M $200M

* Free cash flow equals cash from operations less capital spending
** 2013 DSO was 6 days under target at 34 days; 2014 expected to return to 40 days (6 day headwind)
*** $28M received in 4Q13; remitted to tax authorities in 1Q14

26
Net Revenue by Geography

$ in millions United United Euro

States Kingdom Switzerland Zone Other*
4ಬ14 $297 $66 $106 $59 $111
Q2’13 $286 $61 $99 $54 $92

Q2’14 46.4% 10.3% 16.6% 9.3% 17.4%

Q2’13 48.3% 10.4% 16.7% 9.1% 15.5%

Q2’14 average rate 1.00 1.68 1.13 1.37 -

Q2’13 average rate 1.00 1.53 1.06 1.30 -
June 30, 2014 1.00 1.71 1.13 1.37 -

* “Other” includes a mix of >20 currencies

27
FX Net Revenue Impact
$ in Millions

28
Days Sales Outstanding
($ in thousands)
Period Accounts Unbilled Total Client Trailing 3 Mos
Ended Receivable Receivables A/R + Unbilled Advances Net GAAP Net Rev
30-Jun-14 $355,272 $162,396 $517,668 $(202,560) $315,108 $639,456
Days 51 23 74 (29) 45
31-Mar-14 $337,381 $159,092 $496,473 $(236,596) $259,877 $620,052
Days 50 23 73 (35) 38
31-Dec-13 $331,815 $141,707 $473,522 $(240,398) $233,124 $623,094
Days 48 21 69 (35) 34
30-Sept-13 $353,940 $147,355 $501,295 $(266,522) $234,773 $606,722
Days 53 22 75 (40) 35
30-June-13 $396,653 $154,345 $550,998 $(241,681) $309,317 $592,298
Days 61 24 85 (37) 48
31-Mar-13 $344,362 $155,754 $500,116 $(241,011) $259,105 $580,199
Days 54 24 78 (38) 41
31-Dec-12 $339,558 $136,878 $476,436 $(255,776) $220,660 $562,180
Days 55 22 77 (41) 36
30-Sep-12 $321,421 $141,020 $462,441 $(234,152) $228,289 $544,818
Days 54 24 77 (39) 38
30-Jun-12 $313,160 $134,163 $447,323 $(237,220) $210,103 $542,782
Days 53 22 75 (40) 35
31-Mar-12 $312,466 $121,315 $433,781 $(261,827) $171,954 $530,841
Days 54 21 74 (45) 29

29
Days Sales Outstanding
($ in thousands)
Period Accounts Unbilled Total Client Trailing 3 Mos
Ended Receivable Receivables A/R + Unbilled Advances Net GAAP Net Rev
30-Jun-14 $355,272 $162,396 $517,668 $(202,560) $315,108 $639,456
Days 51 23 74 (29) 45
31-Mar-14 $337,381 $159,092 $496,473 $(236,596) $259,877 $620,052
Days 50 23 73 (35) 38
31-Dec-13 $331,815 $141,707 $473,522 $(240,398) $233,124 $623,094
Days 48 21 69 (35) 34
30-Sept-13 $353,940 $147,355 $501,295 $(266,522) $234,773 $606,722
Days 53 22 75 (40) 35
30-June-13 $396,653 $154,345 $550,998 $(241,681) $309,317 $592,298
Days 61 24 85 (37) 48
31-Mar-13 $344,362 $155,754 $500,116 $(241,011) $259,105 $580,199
Days 54 24 78 (38) 41
31-Dec-12 $339,558 $136,878 $476,436 $(255,776) $220,660 $562,180
Days 55 22 77 (41) 36
30-Sep-12 $321,421 $141,020 $462,441 $(234,152) $228,289 $544,818
Days 54 24 77 (39) 38
30-Jun-12 $313,160 $134,163 $447,323 $(237,220) $210,103 $542,782
Days 53 22 75 (40) 35
31-Mar-12 $312,466 $121,315 $433,781 $(261,827) $171,954 $530,841
Days 54 21 74 (45) 29

30
Reconciliation of FY13 As Reported to Pro Forma Amounts
($ in millions except EPS) FY13 FY12 Change
Net Revenues $2,402.3 $2,180.6 10.2%
Operating Income $217.3 $115.9 87.6%
GAAP

Operating Margin 9.0% 5.3%

Net Income $179.2 $94.7 89.2%
Earnings per Share $3.15 $1.68 87.2%
Revenue from Facilities Closed in 2012** - $8.8
Net Revenue, continuing ops* $2,402.3 $2,171.9 10.6%
Restructuring Costs and Other Items ($26.8) ($73.1)
Loss from Facilities Closed in 2012** - ($9.3)
Pro forma

Operating Income, excluding items* $244.2 $198.2 23.2%

Operating Margin, excluding items* 10.2% 9.1%
Gain on Sale of Investments $16.4 $1.5
Impairment of Equity Investment - ($7.4)
Favorable Income Tax Developments $3.0 $11.5
Net Income, excluding items* $183.7 $151.9 20.9%
Diluted EPS, excluding items* $3.23 $2.70 19.6%
* See press release for pro forma income statements for reconciliation of 2013/2012 GAAP to pro forma amounts.
** Facilities closed in 2012 include Chandler, Honolulu, and Basel.
Reconciliation of FY2012 As Reported to Pro Forma Amounts

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** Facilities closed in 2012 include Chandler, Honolulu, and Basel

Reconciliation of FY2011 As Reported to Pro Forma Amounts

($ in millions except EPS) FY 2011

Total Revenues $2,236.4
Less: Reimbursable Out-of-Pockets $140.5
Net Revenues $2,095.9
Operating Income $180.6
Net Income $132.2
Earnings Per Share $2.16
2011 Charges ($46.8)
Favorable Income Tax items $2.5
Operating Income, ex items $215.3
Operating Margin %, ex items 10.3%
Net Income, excluding items $165.0
Diluted EPS, excluding items $2.70
Reconciliation of FY2010 As Reported to Pro Forma Amounts

($ in millions except EPS) FY2010

Net Revenues $1,925.6
Operating Income $47.5
Operating Margin % 2.5%
Net Income $68.3
Diluted EPS $1.06
Impairment charge $(119.2)
Restructuring Costs $(18.4)
Operating Income, ex items $185.1
Operating Margin %, ex items 9.6%
Favorable Income Tax Items $17.3
Gain on Sale, net of tax -
Net Income, excluding items $138.6
Diluted EPS, excluding items $2.15
Reconciliation of FY2009 As Reported to Pro Forma Amounts

$ in millions, except EPS

FY2009
Reported Net Income $175.9
Reported Diluted EPS $2.73
Less: Gains of Sales, net of tax $6.3
Less: Favorable tax items $2.1
Pro Forma Net Income $167.5
Pro Forma Diluted EPS $2.60
Reconciliation of FY2008 As Reported to Pro Forma Amounts

$ in millions, except EPS

FY2008 Exclude FY2008

As Reported Gain on Sale Pro Forma
Pre Tax Income $274.3 ($4.1) $270.2

Taxes on Income $79.4 ($1.4) $78.0

Net Income $196.8 ($2.7) $194.1

Diluted EPS $3.08 ($0.05) $3.03

Reconciliation of FY2007 As Reported to Pro Forma Amounts

$ in millions, except EPS

FY2007 Exclude FY2007

As Reported Gain on Sale Pro Forma
Pre Tax Income $246.4 ($6.6) $239.8

Taxes on Income $72.9 ($2.4) $70.5

Net Income $175.9 ($4.1) $171.8

Diluted EPS $2.71 ($0.06) $2.65

Reconciliation of FY2006 As Reported to Pro
Forma Amounts

$ in millions, except EPS

FY2006 Exclude FY2006

As Reported 3Q06 Tax Gain Pro Forma

Pre tax income $200.6 - $200.6

Taxes on income ($57.2) ($2.5) ($59.7)

Equity Earnings $1.6 - $1.6

Net Income $145.0 ($2.5) $142.5

Diluted EPS $2.24 ($0.04) $2.20

Reconciliation of FY2005 As Reported to Pro
Forma Amounts

$ in millions, except EPS

Exclude 4Q
FY2005 As Repatriation FY 2005
Reported Tax Charge Pro Forma

Operating Income $175.1 - $175.1

Net Income $119.6 $4.4 $124.0
Diluted EPS $1.88 $0.07 $1.94