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Late-stage drug research powers Covance profit beat

(Reuters) - Research services provider Covance Inc reported a better-than-expected 19 percent jump in quarterly adjusted profit as it gained from higher investments in later stages of drug development by pharma companies.

The company forecast 2014 adjusted earnings of $3.65 to $4.00 per share, compared to analysts' expectation of $3.81.

Covance, considered a bellwether for the contract research business, said fourth-quarter revenue jumped 14.5 percent in the later-stage research business.

Revenue in its earlier-stage research business rose a tepid 5 percent after strong growth in the third quarter, constrained by declines in drug discovery support and pharmaceutical chemistry services.

Contract research organizations (CROs) offer drug development outsourcing services, helping pharma companies cut costs by eliminating the need to maintain in-house laboratories.

Demand for late-stage services tends to be stable, but drugmakers often delay or halt earlier-stage development work to reduce spending.

The CRO sector came under pressure during the recent economic downturn after drug companies reduced their research spending squeezed by high costs, reimbursement pressures and patent expirations.

Covance and rivals such as Charles River Laboratories International Inc and Quintiles Transnational Holdings Inc are seeing demand return as pharma companies are more open to investments in a stable economy.

Covance's net income rose to $45.8 million, or 80 cents per share, in the quarter ended December 31, from $33.9 million, or 61 cents per share, a year earlier.

Excluding items, the company earned 87 cents per share.

Total revenue rose 10 percent to $669.8 million.

Analysts had expected earnings of 84 cents per share on revenue of $614.6 million, according to Thomson Reuters I/B/E/S.

Charles River, which mainly offers earlier stage research services, and Quintiles Transnational report quarterly results next week.

(Reporting by Esha Dey in Bangalore; Editing by Sriraj Kalluvila)

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