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Covance to get $187M from contract extension

(AP) — Covance Inc., which tests drugs for potential commercial use, said Wednesday that it has extended a contract worth at least $187 million over the next seven years.

The Princeton, N.J.-based company said the contract is the largest in its history and secures toxicology space for an undisclosed client from 2007 to 2013. It will add about $150 million to its second-quarter backlog.

David Windley with Jefferies Research Department cited the new contract in a client note and reaffirmed a "buy" rating and a $64 target price on the stock.

Shares of Covance rose as much as 4.3% to $59.19 in morning trading.

"We continue to be impressed by Covance's ability to attract and secure dedicated agreements for toxicology capacity in a time when little capacity exists." wrote Mr. Windley.

He noted the new contract is "non-cancellable," meaning the client is committed to pay Covance $187 million whether the space is used or not.

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