Covance Buys Eli Lilly Facility in 10-Year Deal

PharmaManufacturing.com
08/18/2008

Drug-development services company Covance Inc. will buy an early-stage research center from drugmaker Eli Lilly and Co. in a 10-year service deal worth $1.6 billion.

Under the deal, Covance will pay $50 million for Eli Lilly's 450-acre early drug development campus in Greenfield, Ind., while offering employment to about 260 Lilly employees. Covance also will provide Eli Lilly with a broad range of drug-development services over the next 10 years in a deal valued at $1.6 billion.

"Today's announcement represents an innovative approach to the research and development productivity challenges our pharmaceutical clients are facing," Joe Herring, Covance chairman and chief executive, said in a statement.

Drug developers have been outsourcing more of their research and development work to clinical research organizations in an effort to cut and control costs. In turn, clinical research companies, which provide a range of laboratory work and drug testing, have seen demand and profit jump.

The center will be transferred to Covance in October. Covance, in turn, reaffirmed its full-year profit outlook for $3.18 per share, while analysts polled by Thomson Financial expect profit of $3.19 per share.

Shares of Princeton, N.J.-based Covance rose $2.27, or 2.5 percent, to $94.09 in early trading. Shares of Indianapolis-based Eli Lilly fell 35 cents to $47.44.