) took a step further to strengthen its grip on the growing
contract research market in the U.S. The company, in an effort to
fortify its position, has come up with a new offering, managed
market services, for biopharmaceutical and medical device
clients. This service will help the clients to manage contracts
in managed markets effectively.
According to Covance, the managed market services' offering
makes the labor-intensive, time-consuming and costly contract
management process more efficient and convenient. Vice President,
Managed Market Services, Steve Medina has been put in charge of
this new venture. Management believes that under his leadership
the new offering will help clients maximize value with better
controls and management of contract terms and payments. It
will also provide better visibility into contract performance
with managed care organizations, group purchasing organizations,
federal and state programs, and wholesalers. This in turn will
aid clients garner higher market share.
We believe that this effort by Covance will yield strong
results and the new venture will be well accepted by the
biopharmaceutical and medical device companies. According to
statistics, these companies are forced to forego up to 4.4% of
the U.S. revenues ($11 billion a year) due to inadequate
processes and the absence of proper contract management
According to the company, this managed market service will
improve processes and contract management systems. It targets a
substantial need in the marketplace as chargebacks and rebates
used in contracts account for 20% of the U.S. gross sales ($50
billion a year) for biopharmaceutical and medical device
We are impressed with Covance's efforts to boost business
across the nation. The company is taking all the necessary steps
to improve its top line. In the last reported quarter, net
revenue from Early Development declined 2.3% year over year to
$214.6 million. Growth in nutritional chemistry and clinical
pharmacology was offset by pharmaceutical chemistry services and
discovery support services.
Nevertheless, Late-stage Development continues to solely drive
growth on the back of better-than-expected kit volumes in central
laboratories and Clinical development. In April, Covance expanded
its central laboratory facility in Singapore by 50%. With the
expansion process complete, the company will now be able to meet
the demand for drug development in Asia-Pacific going forward.
Covance also has central laboratories in Indianapolis, the
U.S.; Geneva, Switzerland; Shanghai, China; and Tokyo,
Japan. The expansion project reflects the company's focus
and investment in the country. The Singapore project complements
the company's strategy of business expansion in Asia-Pacific,
with special focus on China and India.
Covance retains a Zacks Rank #2 (Buy). Other medical device
stocks worth a look are
Align Technology Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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