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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                        COMMISSION FILE NUMBER: 1-12213

                                  COVANCE INC.
             (Exact name of Registrant as specified in its Charter)

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<S>                                                <C>
                     DELAWARE                                   22-3265977
             (State of Incorporation)              (I.R.S. Employer Identification No.)

    210 CARNEGIE CENTER, PRINCETON, NEW JERSEY                    08540
     (Address of Principal Executive Offices)                   (Zip Code)
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       Registrant's telephone number, including area code: (609) 452-4440

Securities registered pursuant to Section 12(b) of the Act:

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<CAPTION>
                                     Name of Each Exchange
      Title of Each Class             on Which Registered
--------------------------------  ---------------------------
<S>                               <C>
  Common Stock, $.01 Par Value      New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   YES _X_    NO ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  ____

As of February 10, 2000, the aggregate market value of the voting stock held by
non-affiliates of the Registrant was $881,647,657 (based on the closing price of
the Company's Common Stock on the New York Stock Exchange on February 10, 2000
of $15.50).

As of February 10, 2000, the Registrant had 57,156,349 shares of Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

The Company's definitive Proxy Statement is incorporated by reference into Items
10, 11, 12 and 13 of Part III of this Form 10-K.
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                                     PART I

ITEM 1. BUSINESS

GENERAL

    Covance Inc. is a leading contract research organization providing a wide
range of product development services on a worldwide basis to the
pharmaceutical, biotechnology and medical device industries. We also provide
health economics and outcomes services for managed care organizations, hospitals
and other health care providers and laboratory testing services to the chemical,
agrochemical and food industries. The services Covance provides constitute two
segments for financial reporting purposes: early development services which
includes preclinical and Phase I clinical service capabilities, and late-stage
development services which includes clinical development, clinical support,
biomanufacturing and commercialization services. We believe Covance is one of
the largest biopharmaceutical contract research organizations, based on annual
net revenues, and one of a few that are capable of providing comprehensive
global product development services.

    On May 13, 1996, the Board of Directors of Corning Incorporated approved a
plan to distribute, in a tax free distribution to all Corning stockholders of
record on December 31, 1996, all of the Company's outstanding Common Stock, and
that of Quest Diagnostics Inc. The Distributions were effected as of the close
of December 31, 1996 and Covance, as well as Quest, became an independent,
publicly-traded company on such date.

    Most of the service offerings that constitute Covance's business were
initially acquired by our former parent, Corning and later by Covance, as part
of a strategy to create a global and full service product development company.
Covance has continued to acquire certain capabilities by strategic acquisition
as well as through in-house development. Our more recent acquisitions include
our November 1998 acquisitions of GDXI, Inc., a company located in Reno, Nevada
(now known as Covance Central Diagnostics Inc.), which provides centralized
electrocardiogram analysis for clinical trials and Berkeley Antibody
Company, Inc. (now a subsidiary of Covance Research Products Inc.), a company
located in Richmond, California, which provides contract services in custom
antibody production, applied immunology, and custom animal research to support
the medical device industry and preclinical evaluations.

    We maintain offices in 17 countries. Most recently we opened offices in
Canada, Argentina, and Poland in 1997, and China in 1998.

CONTRACT RESEARCH ORGANIZATION INDUSTRY OVERVIEW

    The contract research organization industry provides independent product
development services to the pharmaceutical, biotechnology and medical device
industries. In general, contract research organizations derive substantially all
of their revenue from the research, development and marketing expenditures of
these industries. Full service contract research organizations design and manage
preclinical and clinical and periapproval studies and trials, and provide health
economics and outcome services. Contract research organizations may also provide
other services including pharmaceutical packaging, central laboratory,
biomanufacturing and other services required to develop and market new
pharmaceutical and biotechnology products.

TRENDS AFFECTING THE CONTRACT RESEARCH ORGANIZATION INDUSTRY

    We believe that the outsourcing of drug development activities by
pharmaceutical and biotechnology companies has been increasing and will continue
to increase as a result of the factors described below.

    COST CONTAINMENT PRESSURES.  Market forces and governmental initiatives have
placed downward pressure on pharmaceutical and biotechnology companies' drug
prices. We believe that the pharmaceutical industry is responding to these
pressures by converting some of the fixed costs of maintaining research and
development personnel and facilities to variable costs, which can be increased
or decreased as needed, by outsourcing drug development activities to contract
research organizations. Pharmaceutical companies may find that they do not have
sufficient internal development resources when a large number of prospective
drugs emerge from the research process and need to undergo development. These
resource shortages increase demand for the services of contract research
organizations. We also believe that many of these companies are attempting to
shorten the new drug development cycle time by using contract research
organizations, which may have greater expertise in a therapeutic area and/or
offer greater

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efficiency at a lower cost. Please also see "Competition" in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

    MARKETPLACE GLOBALIZATION.  Pharmaceutical and biotechnology companies are
increasingly attempting to expand the market for new drugs by applying for
regulatory approvals in multiple countries simultaneously rather than
sequentially as they have in the past. We believe that contract research
organizations with a global presence, such as Covance, will continue to benefit
from these trends.

    REVENUE ENHANCEMENT THROUGH FASTER DRUG DEVELOPMENT.  We believe that
contract research organizations, by providing specialized development services,
are often able to perform the needed services with a higher level of expertise
or specialization, and more quickly than a pharmaceutical or biotechnology
company could perform such services internally.

    PHARMACEUTICAL COMPANY CONSOLIDATION.  Business combinations such as mergers
and acquisitions by pharmaceutical companies present an opportunity for contract
research organizations, as companies resulting from business combinations often
seek to reduce costs. Once combined, many pharmaceutical companies aggressively
manage costs by reducing jobs, decentralizing the research and development
process and outsourcing to contract research organizations in an effort to
reduce the fixed costs of internal drug development.

    INCREASINGLY STRINGENT REGULATION.  Regulatory requirements throughout the
world have become more stringent and there is a trend toward global
standardization of these requirements. This has led to an increase in the need
for broader, global regulatory expertise. We believe that the pharmaceutical and
biotechnology industries are outsourcing to global contract research
organizations to take advantage of their capabilities and geographic presence.

    THERAPEUTIC FOCUS.  We believe that the economics of the marketplace require
increased research and development expenditures as pharmaceutical and
biotechnology companies become focused on innovative new products. These include
drugs for an aging population and drugs for the treatment of chronic disorders
and life threatening conditions. The development of therapies for chronic
disorders, such as Alzheimer's disease or arthritis, requires complex clinical
trials to demonstrate the therapies' effectiveness and to determine whether the
drugs cause any long-term side effects. We believe that contract research
organizations with the requisite therapeutic experience and the ability to
manage complex trials will present an attractive development alternative for
biopharmaceutical companies.

    INCREASING COMPETITIVE PRESSURES IN THE PHARMACEUTICAL INDUSTRY.  A report
issued in late 1998 by the accounting firm PricewaterhouseCoopers stated that if
recent trends continue, the research and development costs of the top 20
pharmaceutical companies will more than double by the year 2005. If the growth
in research and development budgets keeps pace with revenue growth, which
PricewaterhouseCoopers believes is more likely, they conclude that research and
development costs per drug will have to be reduced to provide their shareholders
with the investment returns they have experienced through much of the 1990's. We
believe that to meet these pressures, large pharmaceutical companies will have
to develop drugs more quickly and less expensively and that should lead to an
increasing reliance on the services of contract research organizations.

    BIOTECHNOLOGY INDUSTRY GROWTH.  The United States biotechnology industry has
grown rapidly over the last twelve years and is introducing new therapies which
require regulatory approval. Many biotechnology companies do not have the
necessary capital, equipment or personnel experience to conduct preclinical
studies and clinical trials. Accordingly, many biotechnology companies have
chosen to outsource to contract research organizations rather than expend
significant time and resources to develop an internal preclinical or clinical
development or biomanufacturing capability.

THE NEW DRUG DEVELOPMENT PROCESS--OVERVIEW

    Before a new drug may be marketed to the public, it must undergo extensive
testing and regulatory review to determine that the drug has the required
quality and is both safe and effective for its intended purpose. The drug
development process and typical corresponding time periods for these processes
in the United States are described below. Similar extensive testing and
regulatory reviews are required in most countries throughout the world.

    PRECLINICAL RESEARCH--6 MONTHS TO 3 YEARS.  IN VITRO, or test tube, and IN
VIVO, or animal, studies are conducted to establish the basic pharmacokinetic
effect and safety of a drug including the toxicity of the drug over a wide range
of

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doses. Pharmacokinetics is the study of how a drug is metabolized or absorbed
and digested in the body. Initially, acute, or short term, toxicology studies
are conducted to ascertain any noxious characteristics of the drug. In the
United States, if results warrant continuing development of the drug, the
manufacturer, also known as the sponsor, will file an Investigational New Drug
application, whereupon the United States Food and Drug Administration ("FDA")
may grant permission to begin human trials. Human trials are also known as
"clinical trials". Preclinical studies may continue after the start of clinical
trials to determine the longer term effects of a drug.

    CLINICAL RESEARCH--3.5 TO 6 YEARS.

    - PHASE I--6 MONTHS TO 1 YEAR.  This phase involves the initial basic safety
      and pharmacokinetic testing in approximately 20 to 100 human subjects,
      usually healthy volunteers in a closely monitored setting. These studies
      determine the side effect profile of the drug, how the drug works, how it
      is affected by other drugs, where it goes in the body, how long it remains
      active and how it is broken down and eliminated from the body.

    - PHASE II--1 TO 2 YEARS.  This phase involves basic efficacy, or
      effectiveness, and dose-range testing in approximately 100 to 400
      carefully selected patients suffering from the disease or condition under
      study. These studies help determine the best effective dose, confirm that
      the drug works as expected and provide additional safety data. The trials
      are typically well controlled and usually involve a placebo. A placebo is
      an identical dosage form such as a tablet or solution which lacks the
      active substance under investigation.

    - PHASE III--2 TO 3 YEARS.  This phase involves efficacy and safety studies
      in broader populations of hundreds or thousands of patients at many
      investigational sites. Investigational sites are the places that enroll
      the patients participating in the trial, where the drug is provided and
      where progress is monitored. Investigators are physicians treating the
      patients enrolled in the study. These services may involve
      placebo-controlled trials, in which the new drug is compared with a
      placebo; controlled trials, in which the new drug is compared with one or
      more drugs with established safety and efficacy profiles in the same
      therapeutic category; or uncontrolled trials, where there is no comparison
      to a placebo or another drug. Generally, Phase III studies are intended to
      provide additional information on drug safety and efficacy, an evaluation
      of the risk-benefit relationship for the drug, and information for the
      adequate labeling of the product.

    NEW DRUG APPLICATION PREPARATION AND SUBMISSION.  Upon completion of Phase
III trials, the sponsor or contract research organization assembles the
tabulated and statistically analyzed data from all phases of development into a
single large document, called the New Drug Application in the United States. New
Drug Applications are, on average, approximately 100,000 pages.

    REGULATORY REVIEW AND APPROVAL.  At this stage, the regulatory agency will
scrutinize data from all phases of development to confirm that the sponsor has
complied with regulations and that the drug has the required quality and is safe
and effective for the specific use, or indication, under study. Product labeling
is also approved at this stage, which serves as a guideline to the sponsor about
how its product can be promoted in the marketplace.

    TREATMENT INVESTIGATIONAL NEW DRUG--MAY SPAN LATE PHASE II, PHASE III AND
FDA REVIEW.  When results from Phase II or Phase III show special promise in the
treatment of a serious condition for which existing therapeutic options are
limited or are of minimal value in the United States, the FDA may allow the
manufacturer to make the new drug available to a larger number of patients
through the regulated mechanism of a Treatment Investigational New Drug
application. Although less scientifically rigorous than a controlled clinical
trial, a Treatment Investigational New Drug Application may enroll and collect
data from thousands of patients, which data provides short and long term safety
information useful in defining the product's profile.

    POST-MARKETING SURVEILLANCE AND PHASE IV STUDIES--PERIAPPROVAL.  United
States Federal regulations require the sponsor to collect and periodically
report to the FDA additional safety data on the drug for as long as the sponsor
markets the drug. In some cases, it may be necessary to undertake an evaluation
of specific aspects of safety. These are known as Phase IV studies and are
sometimes referred to as post-marketing surveillance. If the drug is marketed
outside the United States, these reports must include data from all countries in
which the drug is sold. Additional studies may be undertaken after initial
approval to find new uses for the drug or to test new dosage formulations. All
of these studies are types of periapproval studies, or studies performed around
or after a regulatory authority's approval to let the sponsors sell the drug
commercially.

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BUSINESS STRATEGY

    We believe we are one of the largest pharmaceutical and biotechnology
contract research organizations, based on annual net revenues, and one of a few
that are capable of providing comprehensive global product development services.
Our strategy is to provide high quality, cost effective, integrated,
comprehensive and innovative services to assist our pharmaceutical and
biotechnology clients to develop, produce, obtain approval for and enhance the
commercial success of their new therapeutic products worldwide. As this strategy
unfolds, we will increasingly focus attention on customers who are biased
towards development approaches that are flexible and innovative. We believe
these customers would be more likely to use more than one of our services or
retain us for a project that may involve more than one of our services.

    HIGH QUALITY, COST EFFECTIVE, INTEGRATED, COMPREHENSIVE AND INNOVATIVE
SERVICES. We believe that contract research organizations capable of offering a
full range of biopharmaceutical drug development and manufacturing services are
better able to compete for three reasons: (1) a full range of services provides
a client with the choice of using just one provider to secure all of the
client's development needs; (2) an organization which can integrate these
services can provide economies of scale and accelerate the development of the
client's product through more comprehensive planning of the development process;
and (3) early stage development provides the contract research organization with
access to the client sooner in the development cycle and may promote the
client's use of later stage development services.

    We strive to continually improve our existing services. We have implemented
a total quality management system throughout our operations which assists us in
our goal of producing error-free services on time and within the client's
budget. Relatedly, we have piloted a customer satisfaction and loyalty
initiative in connection with our Clinical Development Services that we intend
to expand to our other service offerings. Furthermore, some of our United States
and European subsidiaries have received ISO 9000 and 9001 certifications based
on quality standards established by the International Standards Organization.
The ISO 9000 standards define the international requirements for creating a
quality assurance system that is intended to result in the provision of
consistent service. We have also initiated a program designed to maximize
customer satisfaction and loyalty.

    We also focus on providing our clients new, value-added services, including
those that involve integrated services relying on multi-disciplinary teams drawn
from our various operations. For instance, we are duplicating in the United
States a strategic product development program developed in Europe that has
successfully reduced the estimated time from preclinical testing to the first
human studies using both preclinical and clinical expertise.

    Our new service offerings arise as a result of both "home-grown" activities
and through strategic acquisitions and alliances. As examples of home-grown
activities, we have invested in the creation of a multi-use biomanufacturing
facility which became operational in 1997 and have created a clinical trial
management system utilizing an interactive voice response system. We have also
recently developed a Strategic Consulting Group which helps pharmaceutical
companies assess a compound's potential and identify the best therapeutic
indications and market position for a new drug candidate. As to recent
acquisitions, we acquired our U.S. pharmaceutical packaging capabilities in
1995, European pharmaceutical packaging capabilities in 1996 and health and
economics and outcomes capabilities in 1996. In addition, in 1998 we added
centralized electrocardiogram analysis capabilities through the acquisition of
GDXI, Inc. and we enhanced our custom animal research and antibody production
capabilities through the acquisition of Berkeley Antibody Company, Inc.

    We expect to continue developing services internally and making strategic
acquisitions that are complementary to our existing services and that will
expand our ability to serve our clients. Complimentary businesses are those that
will enhance our existing services either qualitatively or geographically, or
add new services which can be integrated with our existing services.

    STREAMLINING THE DRUG DEVELOPMENT PROCESS.  In 1999, as an outgrowth of its
Clinical Trials Research and Development Group, Covance initiated eCRO Services,
a group devoted to reducing the time and cost of clinical trials through the use
of improved processes, better information, and technology based services such as
internet-based applications. eCRO Services will also increase Covance's use of
electronic data capture tools to facilitate real-time information gathering and
data access during clinical trials. These tools, some of which Covance already
uses, are intended to provide a method for more rapid data entry and query
resolution during clinical trials, allowing Covance to reduce the cost of the
data gathering process. We presently use electronic data capture to retrieve
data directly from investigator sites.

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    In 1997, we created the Covance Clinical Research Alliance to identify and
form alliances with leading investigators and institutions throughout North
America and Europe to accelerate the start of studies, to increase patient and
data access and to improve the timeliness and quality of data. Over 60 member
organizations, encompassing over two hundred active investigators in North
America, are currently part of the Covance Investigator Alliance. Our management
intends to continue to expand the number of Covance Investigator Alliance sites
in North America, Europe and Asia.

    In continually examining ways to improve the drug developmental process, our
information technology strategy is to capitalize on our proprietary computer
systems by customizing them where appropriate for client specific requirements
and incorporating new systems and technologies to meet changing demands in a
timely and cost effective manner such as with eCRO Services. An example of an
information technology development is our Trial Tracker(SM) Information Access
System. This system provides clients with 24-hour access to study data, such as
study patient enrollment progress, patient visit information, case report form
status, serious adverse event experiences and other useful clinical trial
information. Our drug supply management system based on interactive voice
response system technology allows clients to more efficiently manage the
distribution of their experimental compounds to investigational sites. In
addition, we are pursuing the development and implementation of internet-based
systems that may reduce the time and cost of clinical development. With respect
to technical resources, we have over 400 information systems professionals
working in 14 regional and 22 satellite information system centers. Virtually
all of our employees, both domestic and international, as well as our file
server and desktop computer systems, are connected by a wide area network that
provides global access to the expertise, technologies and data contained in the
regional information system centers. These systems help us provide integrated
services and connect us to our clients.

    GEOGRAPHIC EXPANSION.  We intend to continue our strategy of establishing
new or enhancing existing operations in significant pharmaceutical and
biotechnology markets. We expect this will occur as a result of internal growth
and through strategic acquisitions. For example, in 1997, we opened new offices
in Montreal, Canada, Buenos Aires, Argentina and Warsaw, Poland, and in 1998 we
opened our Beijing, China office.

    We believe that it is becoming increasingly important to provide our full
range of drug research and development services in all major and many developing
pharmaceutical and biotechnology markets, especially given industry trends to
conduct clinical trials in multiple countries simultaneously. Through our
offices, regional monitoring sites, laboratories and manufacturing sites in over
38 locations in 17 different countries and field work in many other countries,
we believe we are a leader among contract research organizations in our ability
to deliver services globally. Currently, approximately 34% of our employees are
based outside of the United States.

    Besides conducting studies in the Asia Pacific region, we are also focusing
on increasing the number of clinical trials we conduct there. By working with
various science and technology boards and local ministries, we are training
local health professionals on western drug development regulations and
procedures. For instance, we are continuing our collaboration with the Singapore
National Science and Technology Board concerning the Singapore government's
initiative to form the Asia Pacific Economic Cooperation Coordinating Center for
Good Clinical Practice. Good Clinical Practice embodies the industry standards
for the conduct of clinical research and development studies. We are currently
teaching Good Clinical Practices to key physicians and investigators in select
Chinese hospitals and clinical pharmacology centers. This training is expected
to be expanded in future years to include Good Laboratory Practices and Good
Manufacturing Practices.

SERVICES

    We provide a wide range of product development services on a worldwide basis
to the pharmaceutical, biotechnology and medical device industries. We also
provide health economics and outcomes services for managed care organizations,
hospitals and other health care providers and laboratory testing services to the
chemical, agricultural chemical and food industries. The services we provide
constitute two segments for financial reporting purposes: early development,
which includes preclinical and Phase I clinical service capabilities, and
late-stage development, which includes clinical development, clinical support,
biomanufacturing and commercialization services.

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EARLY DEVELOPMENT

PRECLINICAL AND PHASE I CLINICAL SERVICES

    We have four major laboratories, located in Madison, Wisconsin and Vienna,
Virginia in the United States and Harrogate, United Kingdom and Munster, Germany
in Europe. We also have an administrative and sales office in Tokyo, Japan. The
preclinical services offered are wide-ranging, and include:

    - IN VIVO toxicology studies which are studies of the toxic effects of drugs
      in animals;

    - genetic toxicology studies which include studies of the toxic effects of
      drugs on chromosomes, as well as on genetically modified mice; and

    - chemistry services that analyze the components of compounds.

    Our preclinical area has also been a source of innovation by introducing new
technologies for client access to data, electronic animal identification,
multimedia study reports and animal and test tube measures of induced cell
proliferation, or reproduction. Our preclinical group also works closely with
the Phase I and II operations of the Early Development and Clinical Development
Services groups to minimize product development time and to provide clients with
early data on the safety and efficacy of new molecules. This data allows clients
to make an early decision about whether to continue, modify or cease their
development programs.

    As part of our preclinical services, we have duplicated in the United States
the Strategic Product Development ("SPD") program developed in Europe. This
program has successfully reduced the time from preclinical testing to the first
human studies. SPD involves an integrated process and team drawn from our
preclinical and Phase I and II areas. In an SPD program, the compound is
researched from initial preclinical evaluation through its first dosing in
humans, including the filing and attainment of an Investigational New Drug
application. The process includes all aspects of preclinical services including
formulation and dose delivery testing, product metabolism, chemistry, toxicology
and safety testing.

    We also provide purpose-bred animals for biomedical research. These research
animals are required by pharmaceutical and biotechnology companies, university
research centers and contract research organizations as part of their
preclinical animal safety and efficacy testing. Through a variety of processes,
technology and specifically constructed facilities, we are able to provide both
purpose-bred and specific pathogen free animals that meet our clients' rigorous
quality control requirements. A pathogen is a microbe or organism that causes
disease. Although our preclinical research facilities maintain procedures in
accordance with applicable government regulations and our own policies for the
quarantine and handling of imported animals, including primates, there is a risk
that these animals may be infected with diseases that may be harmful and even
lethal to themselves and humans.

    We are also a provider of custom polyclonal and monoclonal antibody services
and we own and operate a state-of-the-art antibody serum production facility
that complies with both Good Manufacturing Practices and Good Laboratory
Practices. Monoclonal antibodies recognize only one type of virus or bacteria,
while polyclonal antibodies are a group of antibodies each of which recognize
different parts of a virus or bacteria. In November 1998, we augmented this
capability with the acquisition of Berkeley Antibody Company, Inc., which
produces custom antibodies as well as offers animal research services to the
medical device industry. Berkeley Antibody Company, Inc. also provides
preclinical evaluations and services in the area of applied immunology, which is
research relating to the immune process.

    We offer immunotoxicology services in which we assess the impact of drugs or
chemicals on the structure and function of the immune system. In 1999, we opened
a new immunotoxicology and cell culture laboratory featuring online data capture
capabilities and Good Laboratory Practices compliant instrumentation monitoring
systems.

    We also provide laboratory testing services to the chemical, agricultural
chemical and food industries. We offer a complete range of services to
agricultural chemical manufacturers to determine the potential risk to humans,
animals and the environment from plant protection products such as pesticides.
We also offer a broad range of services to the food industries, including
nutritional analysis and nutritional content fact labels. In 1998 we began
offering testing services to the growing nutriceutical industry. Generally,
nutriceuticals are natural products such as vitamin supplements or botanical
products used for pharmaceutical purposes.

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LATE-STAGE DEVELOPMENT

CLINICAL DEVELOPMENT SERVICES

    We offer a comprehensive range of clinical trial services, including Phase
II through III clinical studies. We have extensive experience in a number of
therapeutic areas, including the following:

    - diseases of the cardiovascular and central nervous system;

    - diseases of the endocrine and respiratory systems;

    - oncology; and

    - infectious diseases including AIDS.

    We have extensive experience in managing small, medium and large trials in
the United States and in many parts of the world. These trials may be conducted
separately or simultaneously as part of a multinational development plan. We can
manage every aspect of clinical trials. Examples of the services that we provide
to clients include:

    - clinical development plans and protocol design;

    - site, investigator and patient enrollment;

    - clinical and data management and processing;

    - regulatory consulting and filings;

    - information systems and drug development strategy;

    - European study submissions;

    - New Drug Applications;

    - product license applications;

    - European submission dossiers;

    - preparation and submission of Investigational New Drug applications;

    - monitoring and safety evaluation management and reporting;

    - statistical analyses and report writing, medical writing; and

    - Good Clinical Practice, Good Laboratory Practice and Good Manufacturing
      Practice audits.

    Clinical trials are managed by a dedicated project team, which, in each
case, is led by a project director or manager who supervises all aspects of the
clinical trial.

    We provide, either on an individual or integrated basis depending on client
needs, as part of conducting clinical trials the following core services:

    STUDY DESIGN.  In the critical area of study design, we prepare study
protocols and case report forms. The study protocol (1) defines the medical
issues to be examined in evaluating the safety and efficacy of the drug under
study, (2) specifies the number of patients required to produce statistically
valid results, (3) specifies the clinical tests to be performed in the study,
(4) specifies the time period over which the study will be conducted,
(5) specifies the frequency and dosage of drug administration and (6) sets forth
the exact inclusion and exclusion criteria for enrolling patients in the study.

    The success of the study depends on the ability of the protocol to
accurately reflect requirements of regulatory authorities and to fit coherently
with the other aspects of the development process including the ultimate
marketing strategy for the drug. Marketing strategy considerations include
outcomes and pharmacoeconomic concerns and reimbursement planning, topics
discussed in greater detail in the description of "HEALTH ECONOMICS AND OUTCOMES
SERVICES". When study protocols are being finalized, we develop case report
forms to record the desired study information and ensure that valid data are
acquired in a form that is most efficient for the investigator. Individuals
representing all of the disciplines involved in the drug development process,
including epidemiology, data management, statistics and regulatory affairs, must
work closely with the clinical trial management project team to assure that

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the right data are acquired, and in the form which is most efficient for
subsequent data entry, management analyses and reporting.

    INVESTIGATOR RECRUITMENT.  During a clinical trial, physicians, also
referred to as investigators, supervise the administration of the drugs to
patients at hospitals, clinics or other locations, also referred to as
investigational sites. The success of a clinical trial depends, in large part,
on the performance of these investigators. We solicit the participation of
investigators, who contract directly with either us or our clients-the sponsors.
We maintain, and continually expand and refine, our investigator databases. Our
databases contain information regarding our experience with these investigators,
including factors relevant to rapid study initiation.

    STUDY MONITORING.  We provide study monitoring services by visiting
investigational sites. These services include investigator recruitment and
education, patient enrollment assistance and data collection. These visits also
ensure that data is gathered according to Good Clinical Practice, the
requirements of the client, and other applicable regulations. We focus, at an
early stage, on quickly completing the critical steps of screening and selecting
investigators, processing pre-study regulatory paperwork, obtaining
institutional review board approvals and scheduling investigational site
initiation visits.

    CLINICAL DATA MANAGEMENT AND BIOSTATISTICAL ANALYSIS.  Our data management
and biostatistical analysis services assist clients in managing and analyzing
the information produced in clinical trials. These services are managed by
professionals with pharmaceutical and biotechnology industry experience in the
design and construction of local and multinational clinical trial databases.
These services are offered either as discrete products or as part of an
integrated drug development program. During the design of development plans and
protocols, we offer consulting services related to the determination of sample
size for patient enrollment, and the development of data analysis plans. During
the conduct of a clinical trial, we assist in the rapid acquisition of accurate
study data. Following completion of the clinical trial, we assist in preparing
reports and regulatory submissions. Our biostatisticians may also participate
with clients in meetings with the FDA to present and discuss biostatistical
analyses prepared by us. We have expertise in electronically capturing and using
diverse study data from different locations.

    MEDICAL WRITING AND REGULATORY SERVICES.  We provide medical report writing
and regulatory services to our clients. We write integrated clinical/statistical
reports, manuscripts, risk/benefit assessment reports, package inserts, quality
assurance and environmental risk assessments. These services are fully
integrated with our other clinical services and are designed to reduce overall
drug development time.

CLINICAL SUPPORT SERVICES

    CENTRAL LABORATORY SERVICES.  We believe that the ability to provide high
quality and sophisticated central laboratory services is an integral aspect of a
full service contract research organization. We have two laboratories, one
located in the United States and the other in Switzerland, that provide central
laboratory services dedicated to biotechnology and pharmaceutical studies. These
facilities provide clients with data in studies that can be conducted
separately, or multinationally and simultaneously. The data we provide from
these central laboratories is combinable because we use consistent laboratory
methods, the same reagent manufacturers and the identical equipment calibration
and clinical trial reference ranges. Clinical trial reference ranges are the
laboratory values that would be considered normal in a typical population.
Combinable data eliminates the need for statistical correlation among different
laboratories. We also employ a proprietary clinical trials management system,
which we believe is unique, that enables us to enter a sponsor's protocol
requirements directly into our database. This system, based on protocol
requirements, coordinates many aspects of clinical trials including:

    - constructing the drug kits that will go to the investigational sites and
      the requisition forms for additional drug kits;

    - facilitating proper laboratory specimen collection from the
      investigational sites;

    - sequencing of study participants visits and investigator ordering of
      additional tests, ensuring that all demographic data is complete and
      accurate; and

    - producing the client reports that are customized to their specifications.

8
<PAGE>
    The laboratory data can be easily audited because all laboratory data can be
traced to source documents. In addition, the laboratories are capable of
delivering customized data electronically within 24 hours of test completion and
provide safety test results within 48 hours of test completion from most
locations.

    As the need for central laboratory services expands geographically, we have
expanded the reach of our central laboratories services through contractual
arrangements, one with a leading South African laboratory and the other with a
leading Australian laboratory. Each of these relationships allows us to combine
the testing capabilities of the laboratory with our own proprietary systems. In
June 1998, we completed a significant expansion of our United States laboratory
to further accommodate expanding operations and expected future demand.

    CENTRALIZED ELECTROCARDIOGRAM SERVICES.  In November 1998, we expanded our
ability to collect and centralize clinical trial data with the purchase of
GDXI, Inc. (now known as Covance Central Diagnostics Inc.) which undertakes the
capture and interpretation of electrocardiograms. An electrocardiogram is a
recording of electrical signals from the heart. Electocardiogram analysis, one
of the most frequently used tools in clinical trials, is included in more than
one-half of clinical trials as part of the study protocol. Covance Central
Diagnostics Inc. distributes a proprietary hand-held electrocardiogram device to
clinical trial sites. The device can be used anywhere in the world and collects
the data, performs a real-time quality check, and transmits the information by
telephone to a full-time central operations center. In 1999, Covance introduced
ambulatory cardiac monitoring capabilities, often referred to as Holter
monitoring. Holter monitoring involves the ambulatory monitoring of cardiac
activity and permits long-term monitoring-often 24 to 48 hours as opposed to the
ten seconds of data typically provided by stationary ECGs, and therefore may
reveal certain conditions which may not be discovered by a stationary ECG.

    PHARMACOGENOMIC TESTING SERVICES.  In 1999, Covance entered into a
collaborative agreement with Variagenics, Inc. to offer an array of technologies
for the rapid discovery and detection of genetic variation to optimize drug
treatments and to develop safer and more effective pharmaceutical products. We
will offer Variagenics' pharmacogenomic testing technologies in conjunction with
our central laboratory services. These technologies focus on the rapid
identification of normal variance in human gene sequences and testing for these
variances in clinical trial populations. We anticipate that the use of genetic
variation during drug development will facilitate the adjustment of treatment
regimens and improve disease definition.

    CLINICAL DEVELOPMENT TECHNOLOGIES.  To expedite the drug development process
and to help reduce costs, we created a proprietary interactive clinical trial
management system utilizing an interactive voice response system. This system
uses touch-tone telephone technology for data entry purposes and assists our
clients in managing clinical trials on a real time basis and in reducing product
waste with just-in-time inventory processing. This system is multi-lingual and
is available world-wide through toll-free numbers seven days per week, 24 hours
per day. The most frequently used functions include patient screening, patient
enrollment, patient randomization, drug assignments, drug inventory management,
unblinding, discontinuations and patient diaries. Clients can realize
substantial cost savings through this information technology, by reducing and
better managing clinical supply requirements and controlling waste. In addition,
real time data access expedites the clinical trial process by offering clients
precise and accurate information for quick analysis. We offer this system both
in conjunction with clinical trials we conduct and as a stand alone service.

    PHARMACEUTICAL PACKAGING SERVICES.  We offer full service contract drug
packaging in the United States and Europe. These services include drug package
development and design, overencapsulation and blinding of products, coldformed
and thermoformed blister units, multi-blister packaging, multi-dose bottle
filling, clinical labeling, wallet packaging, storage and site distribution of
clinical supplies and return services for unused supplies. We believe that by
integrating packaging services with our other clinical and clinical support
services we can accelerate the drug development process for our clients through
operational efficiencies that arise from the upfront coordination of clinical
trial design.

BIOMANUFACTURING SERVICES

    We own 78% of the voting capital stock of Covance Biotechnology
Services Inc. Covance Biotechnology is a company formed in 1995 to manufacture
recombinant proteins for biotechnology and pharmaceutical clients for
preclinical and clinical trials as well as for commercial sales. Recombinant
proteins are biologically based compounds that result from the combination of
the human genes that make the protein and the DNA of non-human cells that can be
grown rapidly, such as bacteria, yeast, or animal cells. Through this
recombination, proteins capable of treating a disease can be rapidly grown.
Covance Biotechnology's services include the development of processes suitable
for

                                                                               9
<PAGE>
manufacturing these proteins according to Good Manufacturing Practices
regulations. Covance Biotechnology also provides full analytical testing,
quality control, quality assurance and regulatory affairs support. Covance
Biotechnology is able to produce multiple compounds for multiple clients
simultaneously and on a scale, we believe, greater than most other contract
biomanufacturers. Covance Biotechnology provides an alternative for clients who
might otherwise have to design, finance and construct their own facility to
manufacture a biopharmaceutical compound for clinical trials or commercial sale.
By retaining Covance Biotechnology, a client can avoid the expense, time delay
and risk of making additional significant investments for a product whose
safety, efficacy and commercial success are uncertain. This allows clients to
lower the financial risk of drug development.

    The remaining 22% of Covance Biotechnology's capital stock is owned by
minority stockholders. Our ownership in Covance Biotechnology could be reduced
to approximately 68% if all of the stock options granted to Covance
Biotechnology executives were exercised in full.

    Our company, Covance Biotechnology and its minority stockholders have
entered into a capital contribution and stockholder agreement. This agreement
limits the minority stockholders' right to transfer their common stock, grants
us a right of first refusal on shares of minority stockholders' common stock,
and grants us the right to purchase the common stock held by the minority
stockholders in amounts of one-third each within 60 days of December 31, 1998,
1999 and 2000. If we do not exercise our purchase right, the minority
stockholders have the right to require Covance Biotechnology to use its best
efforts to arrange for the sale of those shares on terms specified in the
agreement. Our company and the minority stockholders elected not to exercise our
respective rights in 1999. We have elected not to exercise our rights in 2000.
In October 1997, our company and the minority stockholders entered into an
additional agreement obligating us and the minority stockholders to make, upon
request by Covance Biotechnology, (1) additional capital contributions to
Covance Biotechnology of an aggregate amount of $12.0 million in proportion to
our respective ownership interests and (2) at our option after these capital
contributions have been made, additional capital contributions of up to an
aggregate amount of $18.0 million also in proportion to our respective ownership
interests. In March 1999, our company and the minority stockholders agreed to
increase this funding mechanism for Covance Biotechnology from the original
$30.0 million to a total of $60.0 million upon the same terms. Through
December 31, 1999, aggregate capital contributions of $48.0 million have been
made to Covance Biotechnology pursuant to this agreement. Our share of the
capital contributions has totaled approximately $37.4 million and we have loaned
to the minority stockholders approximately $10.6 million in the aggregate to
fund their required capital contributions. These loans are secured by the
Covance Biotechnology stock owned by the minority stockholders and are the only
assets available to us to satisfy the loans in the event the minority
stockholders do not repay the loans.

COMMERCIALIZATION SERVICES

    PERIAPPROVAL SERVICES.  Periapproval trials are studies conducted "around
approval", generally after a drug has successfully undergone clinical efficacy
and safety testing and the New Drug Application has been submitted to the FDA.
We offer a range of periapproval services, including:

    - Treatment Investigational New Drug applications ("TINDs");

    - Phase IIIb clinical studies, which involve studies conducted after New
      Drug Application submission, but before regulatory approval is obtained;

    - Phase IV clinical studies which are studies conducted after initial
      approval of the drug; and

    - other types of periapproval studies such as post-marketing surveillance
      studies and prescription to over-the-counter switch studies.

    A TIND is an application, the associated procedure of which allows broader
populations of patients to receive treatment with an investigational new drug
for a serious or immediate life-threatening disease, for which no comparable or
satisfactory therapy is available. Examples of these diseases include AIDS and
cancer. This treatment is provided during the clinical trial phase of
development but does not typically use controlled clinical trials. We are
experienced with TINDs and have developed specialized systems for prompt
initiation and effective operation of TIND programs. These systems include
computerized patient screening, optical scanning of Case Report Forms and drug
management systems. We also provide project specific information to physicians,
patients and patient advocacy groups, and data processing, management, analyses
and reporting systems relating to TINDs. Our expanded access program, which is
conducted pursuant to a TIND, is a mechanism that allows innovative new
therapies for life-threatening diseases to be given to expanded populations
before FDA approval.

10
<PAGE>
    Post-marketing surveillance studies are evaluations of the use of products
in actual medical practice using a broad range of patients. These studies use
practicing physicians to evaluate primarily the safety profile of the product
under actual medical practice conditions. Post-marketing surveillance studies
are large, typically involving over 1,000 physicians and thousands of patients,
and usually focus on evaluating a small number of key clinical outcomes, such as
a particular side effect.

    In prescription to over-the-counter switch studies, we gather the necessary
safety data and other information including patients' ability to self diagnose,
and their interpretation and comprehension of label instructions, to obtain
regulatory permission for the sale of a drug without the need of a prescription.
These studies are also large, well-controlled programs.

    We also field and process telephone calls and inquiries relating to adverse
experiences with a drug while we perform the safety services in the context of
periapproval studies. In 1999 we have increased our focus on offering these
services on a stand alone basis.

    HEALTH ECONOMICS AND OUTCOMES SERVICES.  We offer a wide range of health
economics services, including outcomes and pharmacoeconomic studies,
reimbursement planning and reimbursement advocacy programs. Pharmaceutical,
biotechnology and medical device manufacturers purchase these services from us
to help optimize their return on research and development investments. These
services provide our clients with information as to the economic impact of drugs
for the purpose of enhancing the economic performance of the providers' medical
practices.

    Outcomes and pharmacoeconomic services include performing studies to
determine the cost effectiveness of a particular disease treatment compared with
alternative treatments. Quality of life studies analyze the effects of drug
treatment on a patient's daily life. Outcomes studies may be conducted before
the marketing of a drug, often in conjunction with clinical trials, or after the
marketing of a drug has begun. These studies enable clients to demonstrate the
value of their product to regulators, insurers and care providers. To help
inform client's drug development decisions and marketing strategies, we believe
the ability to perform outcomes and pharmacoeconomic studies will become
increasingly important because of the competitive pressures affecting the
pharmaceutical industry and the rising need to more rigorously demonstrate the
value of new drugs, both in their own right and as compared to other drugs and
treatment regimes.

    We also offer our customers strategic reimbursement and market planning
services. We analyze who will pay for a medical product, such as private
insurance companies or federal programs like Medicare, and what economic
barriers or opportunities exist for the product, exploring issues such as claims
coding, coverage policy and payment amounts. We often offer our reimbursement
planning activities in conjunction with marketing planning services that
evaluate existing and potential market size, pricing, distribution and economic
impact.

    In addition, we provide full service reimbursement case management programs
on behalf of manufacturers. These programs generally consist of toll-free
telephone hotlines offering one or more of the following services:
(1) contacting insurers to investigate specific coverage and benefit matters,
resolving denied claims and educating insurers; (2) assisting manufacturers in
designing and effectively running their indigent patient programs, under which
costly new products are made available to patients who cannot afford them
because of inadequate insurance coverage or other cost reasons; (3) designing
and administering transition programs for manufacturers, which includes
obtaining third-party payment for a product for patients who had previously
received it free as part of a clinical trial; and (4) conducting reimbursement
training seminars for clients and their customers.

    In 1998, we added an additional service offering known as the Payer Alliance
Group-TM-, which utilizes field-based representatives to intervene with major
third party payers to secure favorable coverage and reimbursement policies.

CUSTOMERS AND MARKETING

    We provide product development services on a global basis to, among others,
the pharmaceutical and biotechnology industries. In 1999, we served
approximately 300 biopharmaceutical companies, including nearly all of the
world's 50 largest pharmaceutical companies and most of the largest
biotechnology companies.

    No single customer accounts for more than ten percent of our aggregate net
revenues. However, our late-stage development segment has two customers which
each account for more than five but less than ten percent of the aggregate net
revenues of that segment. The loss of either of these customers could have a
material adverse effect on the business and results of operations of that
segment.

                                                                              11
<PAGE>
    For net revenues from external customers and assets attributable to each of
our business segments, please review Note 12 of the Notes to Consolidated
Financial Statements.

    For net revenues from external customers and long-lived assets attributable
to operations in the United States, United Kingdom and other countries for each
of the last three fiscal years, please review Note 13 of the Notes to
Consolidated Financial Statements.

    Our global sales activities are conducted by more than 70 sales personnel
based in our operations in the United States, Canada, Europe, Australia, Japan
and Singapore. Most of our business development personnel have technical or
scientific backgrounds. In 1999, we reorganized our sales force by creating a
global organization covering both Clinical Development Services and Clinical
Support Services. Early Development, Biomanufacturing and Commercialization
maintain their own sales organizations.

    Our sales force consists primarily of account executives, account managers
and, with respect to Clinical Development Services and Clinical Support
Services, client opportunity leaders. Account executives and account managers
are each responsible for optimizing business opportunities for specific clients
and fostering long-term relationships. Client opportunity leaders are focused on
providing timely responses to client requests for information and developing
comprehensive proposals for clinical trials.

CONTRACTUAL ARRANGEMENTS

    Most of our contracts with our clients are either fixed price, or
fee-for-service with a cap. To a lesser extent, some of our contracts are
fee-for-service without a cap. In cases where the contracts are fixed price, we
generally bear the cost of overruns, but we benefit if the costs are lower than
we anticipated. In cases where our contracts are fee-for-service with a cap, the
contracts contain an overall budget for the trial based on time and cost
estimates. If our costs are lower than anticipated, the customer keeps the
savings, but if our costs are higher than estimated, we are responsible for the
overrun unless the increased cost is a result of a change requested by the
customer, such as an increase in the number of patients to be enrolled or the
type or amount of data to be collected. Contracts may range from a few months to
several years depending on the nature of the work performed. In some cases for
multi-year contracts, a portion of the contract fee is paid at the time the
study or trial is started with the balance of the contract fee payable in
installments over the study or trial duration. Sometimes the installments are
tied to meeting performance milestones. For example, in clinical and
periapproval trials, installment payments may be related to investigator
recruitment, patient enrollment or delivery of a database.

    Most of our contracts may be terminated by the customer either immediately
or upon notice. Contracts may be terminated for a variety of reasons, including
the failure of a product to satisfy safety requirements, unexpected or undesired
results of the product, the customer's decision to forego or terminate a
particular study, insufficient enrollment or investigator recruitment, or our
failure to properly discharge our obligations.

BACKLOG

    Some of our studies and projects are performed over an extended period of
time, which may be as long as several years. We maintain an order backlog to
track anticipated net revenues for work that has yet to be earned. However, we
do not maintain an order backlog for other services that are performed within a
short period of time or where it is not otherwise practical or feasible to
maintain an order backlog.

    Backlog usually includes work to be performed under letters of intent and
contracts. Once work under a letter of intent or contract begins, net revenues
are recognized over the life of the contract. In some cases, however, we will
work on a project before executing a letter of intent and backlog may include
the net revenues expected from that project. Some of our studies and projects
are performed over an extended period of time, which may be as long as several
years.

    We cannot assure you that we will be able to realize all or any net revenues
included in backlog. Although backlog can provide meaningful information to our
management with respect to a particular study where study-specific information
is known, such as study duration, performance clauses and other study-specific
contract terms, we believe that our aggregate backlog as of any date is not
necessarily a meaningful indicator of our future results for a variety of
reasons, including the following. First, studies vary in duration. For instance,
some studies that are included in 1999 backlog may be completed in 2000, while
others may be completed in later years. Second, the scope of studies may change,
which may either increase or decrease their value. Third, studies included in
backlog may be subject to bonus

12
<PAGE>
or penalty payments. Fourth, trials under verbal approvals, letters of intent or
contracts included in backlog may be terminated or delayed at any time by the
client or regulatory authorities. Terminations or delays can result from a
number of reasons. Delayed contracts remain in our backlog until a determination
of whether to continue, modify or cancel the study has been made.

    For years prior to 1999, backlog associated with large dollar value projects
in our central laboratory (i.e., those projects with values exceeding
$1.0 million) excluded the portion of the project valued in excess of
$1.0 million. Because our experience has indicated that backlog is more
meaningful if calculated without such exclusions, beginning in 1999, backlog is
now computed using the full value of those large central laboratory projects.
Based upon the foregoing, our aggregate backlog at December 31, 1999, 1998 and
1997 was approximately $957 million, $852 million and $678 million,
respectively. The amounts at December 31, 1998 and December 31, 1997 have been
revised for the definitional change described above. Had we not changed our
method of computing backlog in 1999, we would have reported, using consistent
methodology, total backlog of $859 million at December 31, 1999 as compared to
$780 million and $625 million, reported under that same methodology at
December 31, 1998 and 1997, respectively.

COMPETITION

    The contract research organization industry has many participants ranging
from hundreds of small, limited-service providers to a few full service contract
research organizations with global capabilities. We primarily compete against
in-house departments of pharmaceutical companies, full-service and limited
service contract research organizations and, to a lesser extent, universities
and teaching hospitals. We believe, based on net revenues, that the four largest
contract research organizations besides us include Quintiles Transnational
Corp., Parexel International Corporation, Pharmaceutical Product
Development, Inc. and Phoenix International Life Sciences Inc.

    There is competition among the larger contract research organizations for
both customers and acquisition candidates. Companies may also choose to limit
the contract research organizations with whom they are willing to work. In
addition, there are few barriers to entry for small, limited-service providers
considering entry into the contract research organization industry. Contract
research organizations compete on the basis of several factors, including the
following:

    - reputation for on-time quality performance;

    - expertise and experience in specific therapeutic areas;

    - scope of service offerings;

    - strengths in various geographic markets;

    - price;

    - technological expertise and efficient drug development processes;

    - the ability to acquire, process, analyze and report data in a time-saving
      and accurate manner;

    - the ability to manage large-scale clinical trials both domestically and
      internationally;

    - expertise and experience in health economics and outcomes services; and

    - size.

    We believe that we compete favorably in most of these areas.

GOVERNMENT REGULATION

    Our laboratory, manufacturing and packaging services are subject to various
regulatory requirements designed to ensure the quality and integrity of the
testing, manufacturing and packaging processes. The industry standards for
conducting preclinical laboratory testing are embodied in the Good Laboratory
Practice (GLP) and Good Manufacturing Practice (GMP) regulations and for central
laboratory operations in the Clinical Laboratory Improvement Amendments of 1988.
Our central laboratory in Switzerland has also been certified by the College of
American Pathologists. GMP sets forth the requirements for manufacturing
facilities. The standards of GLP and GMP are required by the FDA, by the
Department of Health in the United Kingdom and by similar regulatory authorities
in other parts of the world. GLP and GMP stipulate requirements for facilities,
equipment and professional staff. The

                                                                              13
<PAGE>
regulations require standardized procedures for conducting studies including
procedures for recording and reporting data and for retaining appropriate
records. To help satisfy its compliance obligations, Covance has established
quality assurance controls at its laboratory and manufacturing facilities which
monitor ongoing compliance with GLP and GMP regulations and the Clinical
Laboratory Improvement Amendments, as applicable, by auditing test data and
conducting inspections of testing and manufacturing procedures.

    The industry standards for the conduct of clinical research and development
studies are embodied in the regulations for Good Clinical Practice (GCP). The
FDA and other regulatory authorities require that test results submitted to such
authorities be based on studies conducted in accordance with GCP. These
regulations require, but are not limited to, the following:

    - complying with specific requirements governing the selection of qualified
      investigators;

    - obtaining specific written commitments from the investigators;

    - verifying that appropriate patient informed consent is obtained;

    - ensuring adverse drug reactions are medically evaluated and reported;

    - monitoring the validity and accuracy of data;

    - verifying drug or device accountability;

    - instructing investigators and studies staff to maintain records and
      reports; and

    - permitting appropriate governmental authorities access to data for their
      review.

    We must also maintain reports for each study for specified periods for
auditing by the study sponsor and by the FDA. As with GLP and GMP, noncompliance
with GCP can result in the disqualification of data collection during the
clinical trial.

    Covance's standard operating procedures are written in accordance with
regulations and guidelines appropriate to the region and the nation where they
will be used. All clinical research is carried out in accordance with the
International Conference on Harmonization-Good Clinical Practice Guidelines, and
the requirements of the applicable country. Although the U.S. is a signatory to
these guidelines, the FDA has not adopted all of the guidelines as statutory
regulations, but has currently adopted them only as guidelines. From an
international perspective, when applicable, we have implemented common standard
operating procedures across regions to assure consistency whenever it is
feasible and appropriate to do so.

    Our animal import and breeding facilities are also subject to a variety of
federal and state laws and regulations, including The Animal Welfare Act and the
rules and regulations promulgated thereunder by the United States Department of
Agriculture ("USDA"). These regulations establish the standards for the humane
treatment, care and handling of animals by dealers and research facilities. Our
breeding and animal import facilities maintain detailed standard operating
procedures and the documentation necessary to comply with applicable regulations
for the humane treatment of the animals in its custody. Besides being licensed
by the USDA as both a dealer and research facility, this business is also
accredited by the American Association for the Accreditation of Laboratory
Animal Care and has registered assurance with the United States National
Institutes of Health Office of Protection for Research Risks.

    The use of controlled substances in testing for drugs with a potential for
abuse is regulated by the U.S. Drug Enforcement Administration. All Covance
laboratories and packaging sites using controlled substances for testing or
packaging purposes are licensed by the U.S. Drug Enforcement Administration.

    Our United States laboratories are subject to licensing and regulation under
federal, state and local laws relating to hazard communication and employee
right-to-know regulations, the handling and disposal of medical specimens and
hazardous waste and radioactive materials, as well as to the safety and health
of laboratory employees. All of our laboratories are subject to applicable
federal and state laws and regulations relating to the storage and disposal of
all laboratory specimens including the regulations of the Environmental
Protection Agency, the Nuclear Regulatory Commission, the Department of
Transportation, the National Fire Protection Agency and the Resource
Conservation and Recovery Act. Although we believe that Covance is currently in
compliance in all material respects with such federal, state and local laws,
failure to comply could subject Covance to denial of the right to conduct
business, fines, criminal penalties and other enforcement actions.

14
<PAGE>
    In addition to its comprehensive regulation of safety in the workplace, the
Occupational Safety and Health Administration has established extensive
requirements relating to workplace safety for health care employers, whose
workers may be exposed to blood-borne pathogens such as HIV and the hepatitis B
virus. These regulations, among other things, require work practice controls,
protective clothing and equipment, training, medical follow-up, vaccinations and
other measures designed to minimize exposure to chemicals, and transmission of
blood-borne and airborne pathogens. Furthermore, relevant Covance employees
receive initial and periodic training focusing on compliance with applicable
hazardous materials regulations and health and safety guidelines.

    The regulations of the U.S. Department of Transportation, the U.S. Public
Health Service and the U.S. Postal Service apply to the surface and air
transportation of laboratory specimens. Covance's laboratories also comply with
the International Air Transport Association regulations, which govern
international shipments of laboratory specimens. Furthermore, when the materials
are sent to a foreign country, the transportation of such materials becomes
subject to the laws, rules and regulations of such foreign country.

INTELLECTUAL PROPERTY

    We have developed certain computer software and technically derived
procedures that provide separate services and are intended to maximize the
quality and effectiveness of our services. Although our intellectual property
rights are important to our results of operations, we believe that such factors
as the technical expertise, knowledge, ability and experience of our
professionals are more important, and that, overall, these technological
capabilities provide significant benefits to our clients.

EMPLOYEES

    At December 31, 1999, we had approximately 7,100 full-time employees,
approximately 34% of whom are employed outside of the United States.
Approximately 50 of our employees hold M.D. degrees, 193 hold Ph.D. degrees, 15
hold Pharm.D. degrees, 23 hold D.V.M. degrees and 582 hold masters or other
postgraduate degrees. We believe that Covance's relations with its employees are
good.

ITEM 2. PROPERTIES

    Covance both owns and leases its facilities. Covance's principal executive
offices are located in Princeton, New Jersey. Covance leases substantial
facilities for its clinical development services in Princeton, New Jersey,
Walnut Creek, California, and Maidenhead, United Kingdom. Covance leases
facilities for periapproval services in Radnor, Pennsylvania. Covance owns
substantial facilities in Madison, Wisconsin, Harrogate, United Kingdom and
Muenster, Germany and leases facilities in Vienna, Virginia for its preclinical
services. Covance also owns several of the buildings in Vienna, Virginia.
Covance leases substantial facilities in Indianapolis, Indiana and Geneva,
Switzerland for its central laboratory services. Covance owns substantial
facilities in Allentown, Pennsylvania and in Allschwil, Switzerland for
pharmaceutical packaging services, as well as a facility in Horsham, United
Kingdom for pharmaceutical packaging, clinical and periapproval services.
Covance leases facilities in Washington, D.C. for health economics and outcomes
research activities. Covance also owns or leases other facilities in the United
States, Canada, Europe, Asia and Latin America. Covance believes that its
facilities are adequate for its operations and that suitable additional space
will be available when needed.

    Covance Biotechnology's 109,000 square-foot biomanufacturing facility,
located in Research Triangle Park, North Carolina, is financed through several
tax retention operating leases provided by a commercial lending institution. The
lease expires in December 2006. The annual minimum lease payments are
approximately $5.7 million. At the expiration of the lease term, Covance
Biotechnology is liable for the unamortized balance of the cost of the facility,
currently estimated to be approximately $51.0 million. Covance Biotechnology may
also choose to purchase the facility at specific dates over the 10 year period.
Using current estimates, the purchase price would have been approximately
$53.0 million at the end of 1997 (the first year of the lease), decreasing on an
amortizing basis to approximately $37.0 million at the end of 2006 (the tenth
year of the lease). Covance Biotechnology also leases an additional facility
with 30,000 square feet in Research Triangle Park, North Carolina.

                                                                              15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

    Covance is party to lawsuits and administrative proceedings incidental to
the normal course of its business. Covance does not believe that any liabilities
related to such lawsuits or proceedings will have a material effect on its
financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    Covance's Common Stock is traded on the New York Stock Exchange (symbol:
CVD). The following table shows the high and low sales prices on the New York
Stock Exchange for each of the most recent eight fiscal quarters.

<TABLE>
<CAPTION>
    Quarter                              High                Low
    -------                            --------            --------
    <S>                                <C>                 <C>        <C>
    First Quarter 1998...............  $24.875             $17.688
    Second Quarter 1998..............  $24.750             $20.125
    Third Quarter 1998...............  $28.875             $21.625
    Fourth Quarter 1998..............  $29.563             $23.375
    First Quarter 1999...............  $32.875             $23.250
    Second Quarter 1999..............  $29.125             $19.438
    Third Quarter 1999...............  $24.875             $ 8.188
    Fourth Quarter 1999..............  $11.563             $ 8.875
</TABLE>

    As of February 10, 2000, there were 8,071 holders of record of Covance's
Common Stock.

    Covance has not paid any dividends during 1999 or 1998. Covance does not
currently intend to pay dividends in the foreseeable future, but rather, intends
to reinvest earnings in its business. Covance is also restricted (subject to
certain exceptions) from paying dividends on its Common Stock by certain
covenants contained in a credit agreement to which Covance is a party.

16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

    The following table presents selected historical consolidated financial data
of Covance as of and for each of the years ended December 31, 1999, 1998, 1997,
1996 and 1995. This data has been derived from the audited consolidated
financial statements of Covance.

    You should read this selected historical consolidated financial data in
conjunction with Covance's audited consolidated financial statements and
accompanying notes included elsewhere in this Annual Report. Historical
consolidated financial data may not be indicative of Covance's future
performance. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                      -----------------------------------------------------------------------
                                                         1999           1998           1997           1996           1995
                                                      -----------    -----------    -----------    -----------    -----------
                                                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                   <C>            <C>            <C>            <C>            <C>
INCOME STATEMENT DATA:

Net revenues......................................     $828,980       $731,574       $590,651       $494,828       $409,174
Costs and expenses:
  Cost of revenue.................................      553,283        484,128        389,785        324,345        270,726
  Selling, general and administrative.............      128,003        117,844         92,329         80,014         64,201
  Depreciation and amortization...................       48,147         37,723         30,877         25,204         22,070
  Special charges(a)..............................       12,968(a)          --             --         27,404(a)       4,616(a)
                                                       --------       --------       --------       --------       --------
    Total.........................................      742,401        639,695        512,991        456,967        361,613
                                                       --------       --------       --------       --------       --------
Income from operations............................       86,579(b)      91,879         77,660         37,861(c)      47,561(d)
                                                       --------       --------       --------       --------       --------
Other expense, net:
  Interest expense, net...........................       10,062          7,361          8,314          6,791          5,269
  Other expense (income)..........................           57            373            167          1,116           (784)
                                                       --------       --------       --------       --------       --------
    Other expense, net............................       10,119          7,734          8,481          7,907          4,485
                                                       --------       --------       --------       --------       --------
Income before taxes and equity investee results...       76,460(b)      84,145         69,179         29,954(c)      43,076(d)
Taxes on income...................................       30,642         35,099         29,367         17,377         18,445
Equity investee loss (gain).......................           --            438             58           (139)           405
                                                       --------       --------       --------       --------       --------
Net income........................................     $ 45,818(b)    $ 48,608       $ 39,754       $ 12,716(c)    $ 24,226(d)
                                                       ========       ========       ========       ========       ========

Basic earnings per share..........................     $   0.78(b)    $   0.84       $   0.69       $   0.22(c)         N/A(e)
Diluted earnings per share........................     $   0.78(b)    $   0.83       $   0.69            N/A(e)         N/A(e)

BALANCE SHEET DATA:

Working capital...................................     $102,247       $ 81,488       $ 59,488       $ 65,946       $ 18,472
Total assets......................................     $700,314       $593,415       $484,014       $451,047       $322,510
Long-term debt....................................     $208,724       $149,909       $132,423       $163,000       $ 89,836
Stockholders' equity..............................     $262,652       $225,015       $157,057       $110,704       $ 82,517

OTHER FINANCIAL DATA:

Gross margin......................................         33.3%          33.8%          34.0%          34.5%          33.8%
Operating margin..................................         12.0%(f)       12.6%          13.1%          13.2%(g)       12.8%(h)
Net margin........................................          6.5%(f)        6.6%           6.7%           6.6%(g)        6.6%(h)

Current ratio.....................................         1.51           1.42           1.35           1.43           1.15
Debt to capital...................................         0.44           0.40           0.46           0.60           0.52
Book value per share..............................         4.61           3.88           2.74           1.94            N/A
Net days sales outstanding........................           52             55             48             50             47
</TABLE>

----------------------------------

(a) Special charges in 1999 consist of merger-related costs totaling $5,249 and
    a restructuring charge totaling $7,719; in 1996 they consist of a spin-off
    related charge totaling $27,404; in 1995 they consist of a restructuring
    charge totaling $4,616.

(b) Excluding the impact of the second quarter merger-related costs totaling
    $5,249 ($3,150 net of tax) and the third quarter restructuring charge
    totaling $7,719 ($4,631 net of tax), income from operations, income before
    taxes and equity investee results and net income for the year ended
    December 31, 1999 were $99,547, $89,428 and $53,599, respectively, and basic
    and diluted earnings per share ("EPS") were both $0.91.

(c) Excluding the impact of the fourth quarter 1996 one-time spin-off related
    charge totaling $27,404 ($19,725 net of tax), income from operations, income
    before taxes and equity investee results and net income for the year ended
    December 31, 1996 were $65,265, $57,358 and $32,441, respectively, and basic
    EPS was $0.57.

(d) Excluding the impact of the second quarter 1995 restructuring charge
    totaling $4,616 ($2,770 net of tax), income from operations, income before
    taxes and equity investee results and net income for the year ended
    December 31, 1995 were $52,177, $47,692 and $26,996, respectively.

(e) Since Covance Common Stock began "regular way" trading on the NYSE on
    January 14, 1997, computation is not possible.

(f) Operating margin and net margin exclude the impact of the second quarter
    merger-related costs and the third quarter restructuring charge. Including
    the impact of these charges, operating margin and net margin were 10.4% and
    5.5%, respectively.

(g) Operating margin and net margin exclude the impact of the fourth quarter
    1996 one-time spin-off related charge. Including the impact of this charge,
    operating margin and net margin were 7.7% and 2.6%, respectively.

(h) Operating margin and net margin exclude the impact of the second quarter
    1995 restructuring charge. Including this charge, operating margin and net
    margin were 11.6% and 5.9%, respectively.

                                                                              17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS

OVERVIEW

    Covance is a leading contract research organization providing a wide range
of product development services on a worldwide basis to the pharmaceutical,
biotechnology and medical device industries. Covance also provides services such
as health economics and outcomes for managed care organizations, hospitals and
other health care providers and laboratory testing to the chemical, agrochemical
and food industries. The foregoing services comprise two segments for financial
reporting purposes: early development services (includes preclinical and Phase I
clinical); and late-stage development services (includes clinical development,
clinical support, biomanufacturing and commercialization). Covance believes it
is one of the largest biopharmaceutical contract research organizations, based
on 1999 annual net revenues, and one of a few that is capable of providing
comprehensive global product development services. Covance offers its clients
high quality services designed to reduce product development time. This enables
Covance's customers to introduce their products into the marketplace faster and
as a result, maximize the period of market exclusivity and monetary return on
their research and development investments. Additionally, Covance's
comprehensive services and broad experience provide its customers with a
variable cost alternative to fixed cost internal development capabilities.

    Historically, a majority of Covance's net revenues have been earned under
contracts. These contracts generally range in duration from a few months to two
years. Revenue from these contracts is generally recognized under either the
percentage of completion method of accounting or as services are rendered or
products are delivered. The contracts may contain provisions for renegotiation
for cost overruns arising from changes in the scope of work. Renegotiated
amounts are included in net revenues when earned and realization is assured. In
some cases, for multi-year contracts a portion of the contract fee is paid at
the time the trial is initiated. Additional payments are made based upon the
achievement of performance-based milestones over the contract duration. Covance
routinely subcontracts with independent physician investigators in connection
with either single or multi-site clinical trials. Investigator fees are not
reflected in net revenues or expenses since these investigator fees are paid by
the customers to Covance on a "pass-through basis" (i.e. without risk or reward
to Covance). Most contracts are terminable either immediately or upon notice by
the client. These contracts typically require payment to Covance of expenses to
wind down a study, payment to Covance of fees earned to date, and, in some
cases, a termination fee or a payment to Covance of some portion of the fees or
profit that could have been earned by Covance under the contract if it had not
been terminated early.

    Covance segregates its recurring operating expenses among three categories:
cost of revenue; selling, general and administrative expenses; and depreciation
and amortization. Cost of revenue consists of appropriate amounts necessary to
complete the revenue and earnings process, and includes direct labor and related
benefit charges, other direct costs and an allocation of facility charges and
information technology costs. Cost of revenue, as a percentage of net revenues,
tends and is expected to fluctuate from one period to another, as a result of
changes in labor utilization and the mix of service offerings involving hundreds
of studies conducted during any period of time. Selling, general and
administrative expenses consist primarily of administrative payroll and related
benefit charges, advertising and promotional expenses, administrative travel and
an allocation of facility charges and information technology costs.

RESULTS OF OPERATIONS

    YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31,
1998.  Net revenues increased 13.3% to $829.0 million for 1999 from
$731.6 million for 1998. Excluding the impact of acquisitions and foreign
exchange rate variances between both periods, net revenues increased 12.3% in
1999. Net revenues from Covance's late-stage development segment grew 12.2% in
1999 as compared to 31.9% in 1998, excluding the impact of acquisitions and
foreign exchange rate variances between both periods. The slowdown in growth in
the late-stage development segment was the result of a slowdown in large
clinical orders, the impact of a major contract cancellation due to molecule
performance, and a significant reduction in scope of another large program due
to sponsor funding pressures. The slowdown was compounded by a moderation of
growth in central laboratory services. Net revenues from Covance's more mature
early development segment grew 14.1% in 1999, or 11.5%, excluding the impact of
acquisitions and foreign exchange rate variances between both periods.

    Cost of revenue increased 14.3% to $553.3 million for 1999 from
$484.1 million for 1998 primarily as a result of the 13.3% increase in net
revenues. Cost of revenue, as a percentage of net revenues, increased to 66.7%
for 1999 from 66.2% for 1998.

18
<PAGE>
    Overall, selling, general and administrative expense increased 8.6% to
$128.0 million for 1999 from $117.8 million for 1998. As a percentage of net
revenues, selling, general and administrative expense decreased to 15.4% for
1999 from 16.1% for 1998. The decrease in selling, general and administrative
expense as a percentage of net revenues is a result of a reduction in certain
variable administrative expenses, including recruitment, relocation and variable
compensation.

    Depreciation and amortization increased 27.6% to $48.1 million or 5.8% of
net revenues for 1999 from $37.7 million or 5.2% of net revenues for 1998 due to
increased depreciation expense associated with capital spending and the goodwill
amortization associated with the November 1998 acquisitions of Berkeley Antibody
Company, Inc. and GDXI, Inc. and the contingent purchase price payments made in
1999 for two acquisitions completed in 1996.

    In order to improve its global competitiveness, better optimize capacity
utilization and enhance quality and service worldwide, Covance has consolidated
its regionally based Phase II and III clinical services under one global
management structure and formed a unified sales force for its clinical
development, central laboratory, packaging and other related clinical support
services. Primarily in connection with these actions, in the third quarter of
1999, Covance recorded a pre-tax restructuring charge of $7.7 million
($4.6 million net of tax) consisting primarily of $6.5 million in severance and
related benefits arising from the elimination of approximately 165 managerial
and staff positions. Severance payments began in September 1999 and will
continue into 2000. As of December 31, 1999, a total of 138 employees have been
terminated and a total of $3.6 million in costs have been paid.

    In connection with the June 1999 termination of a proposed merger, Covance
incurred one-time, out-of-pocket transaction and integration related costs
(primarily professional fees for investment bankers, attorneys, accountants and
consultants) of $5.2 million ($3.1 million, net of tax).

    Inclusive of the $5.2 million merger-related charge and the $7.7 million
restructuring charge, income from operations decreased 5.8% to $86.6 million for
the year ended December 31, 1999 from $91.9 million for the corresponding 1998
period. Excluding the impact of the merger-related charge and the restructuring
charge, income from operations increased 8.3% to $99.5 million, or 12.0% of net
revenues, from $91.9 million or 12.6% of net revenues for the corresponding 1998
period. The reduction in operating income as a percentage of net revenues is
attributable to the increase in cost of revenue as a percentage of net revenues,
the increase in depreciation and amortization, and higher Year 2000 project
expenses in 1999 versus 1998. Excluding the impact of the merger-related charge
and the restructuring charge, income from operations from Covance's early
development segment increased $8.6 million or 25.1% to $42.8 million or 15.7% of
net revenues for the year ended December 31, 1999 from $34.2 million or 14.3% of
net revenues for the corresponding 1998 period. Excluding the impact of the
merger-related charge and the restructuring charge, income from operations from
Covance's late-stage development segment decreased $0.9 million or 1.6% to
$56.7 million or 10.2% of net revenues for the year ended December 31, 1999 from
$57.6 million or 11.7% of net revenues for the corresponding 1998 period. The
reduction in the growth of late-stage development operating income was due to
the softness in clinical development and central laboratory services discussed
above.

    Other expense increased $2.4 million to $10.1 million for 1999 from
$7.7 million for 1998, due to an increase in net interest expense of
$2.7 million partially offset by a reduction in net foreign exchange transaction
losses of $0.3 million, in 1999 as compared to 1998.

    Covance's effective tax rate decreased to 40.1% for 1999 from 41.7% for
1998. Since Covance operates on a global basis, its effective tax rate is
subject to variation from year to year as the geographic distribution of its
pre-tax earnings changes.

    Inclusive of the after tax impact of both the $5.2 million merger-related
charge and the $7.7 million restructuring charge, net income decreased 5.7% to
$45.8 million for the year ended December 31, 1999 from $48.6 million for the
corresponding 1998 period. Excluding the after tax impact of the merger-related
charge and the restructuring charge, net income increased 10.3% or $5.0 million
to $53.6 million.

    YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31,
1997.  Net revenues increased 23.9% to $731.6 million for 1998 from
$590.7 million for 1997. Net revenues from Covance's late-stage development
segment grew 31.9%, benefiting from the continued trend in outsourcing of
clinical development activities. Net revenues from Covance's early development
segment grew 10.1%.

                                                                              19
<PAGE>
    Cost of revenue increased 24.2% to $484.1 million for 1998 from
$389.8 million for 1997 as a result of the increase in net revenues. Cost of
revenue, as a percentage of net revenues, increased to 66.2% for 1998 from 66.0%
for 1997.

    Overall, selling, general and administrative expense increased 27.6% to
$117.8 million for 1998 from $92.3 million for 1997. As a percentage of net
revenues, selling, general and administrative expense increased to 16.1% for
1998 from 15.6% for 1997. The increase in selling, general and administrative
expense of 27.6% was attributable to a number of factors, including higher sales
and marketing expenses and higher recruitment expenses during 1998 as compared
to 1997.

    Depreciation and amortization increased 22.2% to $37.7 million or 5.2% of
net revenues for 1998 from $30.9 million or 5.2% of net revenues for 1997.
Depreciation and amortization from Covance's late-stage development and early
development segments totaled $22.4 million and $15.3 million, respectively.

    Income from operations increased $14.2 million or 18.3% to $91.9 million for
1998 from $77.7 million for 1997. Income from operations as a percentage of net
revenues decreased from 13.1% for 1997 to 12.6% for 1998, primarily as a result
of the increase in cost of revenue and selling, general and administrative
expense, as discussed above. Income from operations from Covance's late-stage
development and early development segments for the year ended December 31, 1998
totaled $57.6 million and $34.2 million, respectively, as compared to
$45.2 million and $32.4 million, respectively, for the year ended December 31,
1997.

    Other expense decreased $0.8 million to $7.7 million for 1998 from
$8.5 million for 1997, due to a reduction in net interest expense of
$1.0 million, partially offset by an increase in net foreign exchange
transaction losses of $0.2 million, in 1998 as compared to 1997.

    Covance's effective tax rate decreased to 41.7% for 1998 from 42.5% for
1997. Since Covance operates on a global basis, its effective tax rate is
subject to variation from year to year as the geographic distribution of its
pre-tax earnings changes.

    Net income increased $8.9 million or 22.3% to $48.6 million for 1998 from
$39.8 million for 1997.

QUARTERLY RESULTS

    Covance's quarterly operating results are subject to variation, and are
expected to continue to be subject to variation, as a result of a variety of
factors including, without limitation, (1) delays in initiating or completing
significant drug development trials, (2) termination of drug development trials,
(3) acquisitions, and (4) exchange rate fluctuations. Delays and terminations of
studies or trials are often the result of actions taken by Covance's customers
or regulatory authorities and are not typically controllable by Covance. Since a
large amount of Covance's operating costs are relatively fixed while revenue is
subject to fluctuation, minor variations in the commencement, progress or
completion of drug development trials may cause significant variations in
quarterly operating results.

    The following table presents unaudited quarterly operating results of
Covance for each of the eight most recent fiscal quarters during the period
ended December 31, 1999. In the opinion of Covance, this information has been
prepared on the same basis as the audited consolidated financial statements
included elsewhere in this Annual Report and reflects all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of results of operations for those periods. This quarterly
financial data should be read in conjunction with the audited consolidated
financial statements included elsewhere in this Annual Report. Operating results
for any quarter are not necessarily indicative of the results that may be
reported in any future period.

20
<PAGE>

<TABLE>
<CAPTION>
                                                                             QUARTER ENDED
                                      -------------------------------------------------------------------------------------------
                                      DEC. 31,   SEPT. 30,     JUNE 30,     MAR. 31,   DEC. 31,   SEPT. 30,   JUNE 30,   MAR. 31,
                                        1999       1999          1999         1999       1998       1998        1998       1998
                                      --------   ---------     --------     --------   --------   ---------   --------   --------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>        <C>           <C>          <C>        <C>        <C>         <C>        <C>

Net revenues........................  $204,368   $198,920      $215,060     $210,632   $198,789   $182,187    $182,089   $168,509
Operating expenses..................   180,313    183,517(a)    192,105(b)   186,466    175,801    157,912     157,787    148,195
                                      --------   --------      --------     --------   --------   --------    --------   --------
Income from operations..............    24,055     15,403(a)     22,955(b)    24,166     22,988     24,275      24,302     20,314
Other expense, net..................     2,973      2,660         2,580        1,906      2,241      1,803       1,882      1,808
                                      --------   --------      --------     --------   --------   --------    --------   --------
Income before taxes and equity
  investee results..................    21,082     12,743(a)     20,375(b)    22,260     20,747     22,472      22,420     18,506
Taxes on income.....................     8,326      5,036         8,168        9,112      8,522      9,329       9,388      7,860
Equity investee loss................        --         --            --           --         --         80         164        194
                                      --------   --------      --------     --------   --------   --------    --------   --------
Net income..........................  $ 12,756   $  7,707(a)   $ 12,207(b)  $ 13,148   $ 12,225   $ 13,063    $ 12,868   $ 10,452
                                      ========   ========      ========     ========   ========   ========    ========   ========
Basic earnings per share............  $   0.22   $   0.13(a)   $   0.21(b)  $   0.22   $   0.21   $   0.22    $   0.22   $   0.18
Diluted earnings per share..........  $   0.22   $   0.13(a)   $   0.21(b)  $   0.22   $   0.21   $   0.22    $   0.22   $   0.18
</TABLE>

------------------------------

(a) Excluding the impact of the third quarter restructuring charge totaling
    $7,719 ($4,631 net of tax), operating expenses, income from operations,
    income before taxes and equity investee results and net income totaled
    $175,798, $23,122, $20,462, and $12,338, respectively, and basic and diluted
    EPS were both $0.21.

(b) Excluding the impact of the second quarter merger-related costs totaling
    $5,249 ($3,150 net of tax), operating expenses, income from operations,
    income before taxes and equity investee results and net income totaled
    $186,856, $28,204, $25,624, and $15,357, respectively, and basic and diluted
    EPS were both $0.26.

LIQUIDITY AND CAPITAL RESOURCES

    Covance has a centralized domestic cash management function whereby cash
received from operations is generally swept daily to a centrally managed
concentration account. Cash disbursements for operations are funded as needed
from the concentration account. From time to time excess cash balances are
maintained at Covance, generally for specific cash requirements.

    Covance's primary cash needs on both a short and long-term basis are for
capital expenditures, expansion of services, possible future acquisitions,
geographic expansion, working capital and other general corporate purposes.
Management believes that through a combination of borrowings under the Credit
Facility (as defined below), cash generated from operations and capital that
Covance believes could be made available to it from other credit sources if
required, Covance will have sufficient financial flexibility and ready access to
cash on both a short-term and a long-term basis to fund, as required, capital
expenditures, potential future acquisitions and other longer-term growth
opportunities.

    At December 31, 1999, there was $190.0 million of outstanding borrowings and
$11.3 million in outstanding letters of credit, resulting in a remaining
availability of $48.7 million under Covance's five-year $250 million senior
revolving credit facility (the "Credit Facility"). Covance has several different
interest rate options available to it under the Credit Facility. Interest on all
outstanding borrowings under the Credit Facility during 1999 was computed based
upon the London Interbank Offered Rate plus a margin and approximated 5.5% per
annum. The Credit Facility expires in November 2001 and contains various
covenants which, among other things, may restrict Covance from engaging in
certain financing activities and prohibits Covance from paying cash dividends on
the Covance Common Stock during a default or an event of default, as defined in
the Credit Facility, or if after giving effect to the payment of such dividends
Covance would not be in compliance with the financial covenants of the Credit
Facility. At December 31, 1999, Covance was in compliance with the terms of the
Credit Facility.

    In December 1999, Covance financed its newly constructed North American
packaging facility through a five year, $20 million mortgage which bears
interest at a rate of 7.72% per annum.

    Covance Biotechnology Services Inc. ("Covance Biotechnology") has a
$10.0 million short-term revolving credit facility with a bank, of which
$10.0 million of borrowings were outstanding as of December 31, 1999. This
short-term revolving credit facility carries interest at a rate substantially
equivalent to the rate in effect on Covance's borrowings under the Credit
Facility and is guaranteed by Covance. In December 1999, Covance Biotechnology
repaid $3.0 million in short-term debt with the North Carolina Biotechnology
Center.

    In October 1997, a foreign subsidiary of Covance borrowed 13.5 million Swiss
Francs from a bank. This loan bears interest at a fixed rate of 2.9% per annum
and matures in October 2000. These funds were used to repay certain

                                                                              21
<PAGE>
cross-currency intercompany obligations and to fund capital expenditures. In
connection with this loan, Covance provided a letter of credit in favor of the
lender which may be drawn upon in event of default.

    During the year ended December 31, 1999, Covance's operations provided net
cash of $79.0 million, an increase of $14.9 million from the corresponding 1998
amount. Cash flows from net earnings adjusted for non-cash activity provided
$100.2 million during 1999, up $2.1 million or 2.2% from the corresponding 1998
amount of $98.1 million. The change in net operating assets used $21.2 million
in cash during 1999, primarily due to an increase in unbilled services and
unearned revenue and a decrease in accrued liabilities, while this net change
used $34.0 million in cash during 1998, primarily due to an increase in accounts
receivable. Covance's ratio of current assets to current liabilities was 1.51 at
December 31, 1999 and 1.42 at December 31, 1998.

    Investing activities for the year ended December 31, 1999 used
$127.0 million compared to $100.4 million for the corresponding 1998 period.
Capital spending for 1999 totaled $111.2 million, primarily for outfitting of
new facilities, purchase of new equipment, upgrade of existing equipment and
computer equipment and software for newly hired employees, as well as the
purchase of Covance's new North American packaging facility, compared to
$74.9 million for the corresponding 1998 period. Investing activities for the
year ended December 31, 1999 included cash payments of contingent purchase price
totaling approximately $16.8 million in connection with two of Covance's 1996
acquisitions. Investing activities during 1998 included $25.5 million in cash
payments to purchase GDXI, Inc. and Berkeley Antibody Company, Inc.

    As discussed in Note 9 to the audited consolidated financial statements
included elsewhere in this Annual Report, Covance has entered, and may from time
to time in the future, enter into build-to-suit operating lease arrangements.
These transactions may allow Covance to purchase the underlying facility and/or
equipment or cancel the lease arrangement on various dates over the lease term.
In the event of cancellation, Covance may be obligated under residual value
guarantee provisions of the leases. Covance has one lease arrangement whereby it
has a contingent residual value guarantee payment in the event that Covance
terminates the lease and the sale of the underlying facility and equipment
results in sales proceeds by the lessor in an amount less than the lessor's
unamortized investment in the lease arrangement. Under these circumstances,
Covance's maximum payment would have approximated $35 million at the end of 1997
(the first year of the lease) and decreases to approximately $25 million at the
end of 2006 (the tenth year of the lease), assuming Covance terminates the lease
and the sales proceeds received by the lessor were zero.

COMPETITION

    Covance's Clinical Development Services participates in a competitive
industry. Covance believes that this industry is experiencing an increase in
price competition which is having, and if such trend continues, could continue
to have a material adverse effect on net revenues and net income from Covance's
Clinical Development Services operations.

FOREIGN CURRENCY

    Since Covance operates on a global basis, it is exposed to various foreign
currency risks. Two specific risks arise from the nature of the contracts
Covance executes with its customers since from time to time contracts are
denominated in a currency different than the particular Covance subsidiary's
local currency. This contract currency denomination issue is generally
applicable only to a portion of the contracts executed by Covance's foreign
subsidiaries providing clinical services. The first risk occurs as revenue
recognized for services rendered is denominated in a currency different from the
currency in which the subsidiary's expenses are incurred. As a result, the
subsidiary's net revenues and resultant earnings can be affected by fluctuations
in exchange rates. Some contracts provide that currency fluctuations from the
rates in effect at the time the contract is executed are the responsibility of
the customer. Other contracts provide that currency fluctuations from the rates
in effect at the time the contract is executed up to a specified threshold
(generally plus or minus a few percentage points) are absorbed by Covance while
fluctuations in excess of the threshold are the customer's responsibility. Most
contracts do not specifically address responsibility for currency fluctuations.
Historically, fluctuations in exchange rates from those in effect at the time
contracts were executed have not had a material effect upon Covance's
consolidated financial results.

    The second risk results from the passage of time between the invoicing of
customers under these contracts and the ultimate collection of customer payments
against such invoices. Because the contract is denominated in a currency other
than the subsidiary's local currency, Covance recognizes a receivable at the
time of invoicing for the local

22
<PAGE>
currency equivalent of the foreign currency invoice amount. Changes in exchange
rates from the time the invoice is prepared and payment from the customer is
received will result in Covance receiving either more or less in local currency
than the local currency equivalent of the invoice amount at the time the invoice
was prepared and the receivable established. This difference is recognized by
Covance as a foreign currency transaction gain or loss, as applicable, and is
reported in other expense (income) in Covance's Consolidated Statements of
Income.

    Finally, Covance's consolidated financial statements are denominated in U.S.
dollars. Accordingly, changes in exchange rates between the applicable foreign
currency and the U.S. dollar will affect the translation of each foreign
subsidiary's financial results into U.S. dollars for purposes of reporting
Covance's consolidated financial results. The process by which each foreign
subsidiary's financial results are translated into U.S. dollars is as follows:
income statement accounts are translated at average exchange rates for the
period; balance sheet asset and liability accounts are translated at end of
period exchange rates; and equity accounts are translated at historical exchange
rates. Translation of the balance sheet asset and liability accounts at current
rates and equity accounts at historical rates results in the creation of the
cumulative translation adjustment stockholders' equity account. This account
exists only in the foreign subsidiaries' U.S. dollar balance sheets and is
necessary to keep the foreign subsidiaries' balance sheets stated in U.S.
dollars in balance. To date such cumulative translation adjustments have not
been material to Covance's consolidated financial position.

TAXES

    Since Covance conducts operations on a global basis, Covance's effective tax
rate has and will continue to depend upon the geographic distribution of its
pre-tax earnings among locations with varying tax rates. Covance's profits are
further impacted by changes in the tax rates of the various jurisdictions. In
particular, as the geographic mix of Covance's pre-tax earnings among various
tax jurisdictions changes, Covance's effective tax rate may vary from period to
period. See Note 5 to the audited consolidated financial statements included
elsewhere in this Annual Report.

INFLATION

    While most of Covance's net revenues are earned under contracts, long-term
contracts (those in excess of one year) generally include an inflation or cost
of living adjustment for the portion of the services to be performed beyond one
year from the contract date. As a result, Covance believes that the effects of
inflation generally do not have a material adverse effect on its operations or
financial condition.

YEAR 2000 ISSUES

    Commencing in 1997, Covance planned and implemented a Year 2000 assessment
and remediation plan. The plan approached the Year 2000 problem from an
internal, supplier and customer perspective. As a result of this plan, Covance's
information systems have been successfully transitioned into the Year 2000 and
Covance's operations have not been adversely affected by Year 2000 computer
issues.

    Beginning in early 1998, Covance began to incur costs and make expenditures
related to the Year 2000 project. Covance expects to continue to incur costs and
make expenditures relating to the Year 2000 project into the year 2000. These
costs and expenditures can be broadly classified into two categories:

    (1) amounts that will be expensed as incurred. These amounts consist of
       internal payroll relating to employees newly hired or redeployed to work
       on the Year 2000 project, external consultants and the net book value of
       non-Year 2000 compliant equipment to be replaced; and

    (2) amounts that will be capitalized and depreciated over the useful lives
       of the associated assets. These amounts consist of the purchase price of
       new hardware, software and other equipment acquired to replace existing
       hardware, software and other equipment that is not Year 2000 compliant.

    Covance currently estimates that the costs of internal payroll, external
consultants and the net book value of equipment to be replaced, amounts that
have and will be expensed as incurred, will total between $8.5 million and
$9.0 million over the three year period ending December 31, 2000. Of these
amounts, a total of $7.9 million has been incurred and expensed during the two
year period ended December 31, 1999 ($5.6 million in 1999 and $2.3 million in
1998).

                                                                              23
<PAGE>
    Covance currently estimates that the cost of new hardware, software and
other equipment to be acquired in replacement of existing non-Year 2000
compliant hardware, software and other equipment will total between
$6.7 million and $7.1 million. Of these amounts, capitalizable expenditures
totaling $6.2 million have been made during the two year period ended
December 31, 1999 ($4.5 million in 1999 and $1.7 million in 1998).

    The primary source of funds for all costs yet to be incurred and
expenditures to be made is expected to be provided by Covance's operating cash
flows.

    FORWARD LOOKING STATEMENTS. STATEMENTS IN THIS MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, AS WELL AS IN CERTAIN
OTHER PARTS OF THIS ANNUAL REPORT ON FORM 10-K THAT LOOK FORWARD IN TIME, ARE
FORWARD LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD LOOKING STATEMENTS
INCLUDE STATEMENTS CONCERNING PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE
EVENTS OR PERFORMANCE, EXPECTATIONS, PREDICTIONS, AND ASSUMPTIONS AND OTHER
STATEMENTS WHICH ARE OTHER THAN STATEMENTS OF HISTORICAL FACTS. ALL SUCH FORWARD
LOOKING STATEMENTS ARE BASED ON THE CURRENT EXPECTATIONS OF MANAGEMENT AND ARE
SUBJECT TO, AND ARE QUALIFIED BY, RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THOSE
STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO,
COVANCE'S ABILITY TO ESTIMATE COSTS OF YEAR 2000 REMEDIATION, PRICE COMPETITION
IN THE CLINICAL DEVELOPMENT SERVICES INDUSTRY, AND RISKS AND UNCERTAINTIES SET
FORTH IN COVANCE'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION INCLUDING
WITHOUT LIMITATION THIS ANNUAL REPORT ON FORM 10-K.

NEW ACCOUNTING PRONOUNCEMENTS

    None.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    See Management's Discussion and Analysis of Financial Condition and Results
of Operations

24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                PAGE
                                                                ----
<S>                                                           <C>
Report of PricewaterhouseCoopers LLP--Independent
  Accountants...............................................      26

Consolidated Balance Sheets--December 31, 1999 and 1998.....      27

Consolidated Statements of Income--Years ended December 31,
  1999, 1998 and 1997.......................................      28

Consolidated Statements of Cash Flows--Years ended December
  31, 1999, 1998 and 1997...................................      29

Consolidated Statements of Stockholders' Equity--Years ended
  December 31, 1999, 1998 and 1997..........................      30

Notes to Consolidated Financial Statements..................      31
</TABLE>

                                                                              25
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Covance Inc.

    In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of cash flows and of stockholders' equity
appearing on pages 27 through 42 present fairly, in all material respects, the
financial position of Covance Inc. and its subsidiaries at December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of Covance's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Florham Park, NJ
January 21, 2000

26
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                1999       1998
(DOLLARS IN THOUSANDS)                                        --------   --------
<S>                                                           <C>        <C>
ASSETS
Current Assets:
  Cash and cash equivalents.................................  $ 25,444   $ 19,263
  Accounts receivable, net..................................   139,680    139,145
  Unbilled services.........................................    52,647     41,589
  Inventory.................................................    26,474     26,726
  Deferred income taxes.....................................    17,292      9,671
  Prepaid expenses and other assets.........................    40,587     38,095
                                                              --------   --------
    Total Current Assets....................................   302,124    274,489
Property and equipment, net.................................   296,943    237,587
Goodwill, net...............................................    84,575     71,999
Other assets................................................    16,672      9,340
                                                              --------   --------
    Total Assets............................................  $700,314   $593,415
                                                              ========   ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................  $ 25,715   $ 33,381
  Accrued payroll and benefits..............................    34,138     41,505
  Accrued expenses and other liabilities....................    40,318     39,117
  Unearned revenue..........................................    75,531     60,226
  Short-term debt...........................................    19,787     13,000
  Income taxes payable......................................     4,388      5,772
                                                              --------   --------
    Total Current Liabilities...............................   199,877    193,001
Long-term debt..............................................   208,724    149,909
Deferred income taxes.......................................    14,982     12,416
Other liabilities...........................................    14,079     13,074
                                                              --------   --------
    Total Liabilities.......................................   437,662    368,400
                                                              --------   --------
Commitments and Contingent Liabilities
Stockholders' Equity:
  Common stock--Par value $0.01 per share; 140,000,000
    shares authorized; 59,024,976 and 58,417,536 shares
    issued and outstanding, including those held in
    treasury, at December 31, 1999 and 1998, respectively...       590        584
Paid-in capital.............................................    95,954     75,853
Retained earnings...........................................   192,190    146,372
Accumulated other comprehensive income--
    Cumulative translation adjustment.......................    (6,504)     2,206
Treasury stock at cost (1,995,000 shares)...................   (19,578)        --
                                                              --------   --------
    Total Stockholders' Equity..............................   262,652    225,015
                                                              --------   --------
    Total Liabilities and Stockholders' Equity..............  $700,314   $593,415
                                                              ========   ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                                                              27
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                 1999          1998          1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                 -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
Net revenues................................................  $   828,980   $   731,574   $   590,651
Cost and expenses:
  Cost of revenue...........................................      553,283       484,128       389,785
  Selling, general and administrative.......................      128,003       117,844        92,329
  Depreciation and amortization.............................       48,147        37,723        30,877
  Special charges:
    Restructuring charge....................................        7,719            --            --
    Merger-related costs....................................        5,249            --            --
                                                              -----------   -----------   -----------
    Total...................................................      742,401       639,695       512,991
                                                              -----------   -----------   -----------
Income from operations......................................       86,579        91,879        77,660
                                                              -----------   -----------   -----------
Other expense, net:
  Interest expense, net.....................................       10,062         7,361         8,314
  Other expense.............................................           57           373           167
                                                              -----------   -----------   -----------
    Other expense, net......................................       10,119         7,734         8,481
                                                              -----------   -----------   -----------
Income before taxes and equity investee results.............       76,460        84,145        69,179
Taxes on income.............................................       30,642        35,099        29,367
Equity investee loss........................................           --           438            58
                                                              -----------   -----------   -----------
Net income..................................................  $    45,818   $    48,608   $    39,754
                                                              ===========   ===========   ===========
Basic earnings per share....................................        $0.78         $0.84         $0.69
Weighted average shares outstanding--basic..................   58,477,199    58,050,114    57,254,042

Diluted earnings per share..................................        $0.78         $0.83         $0.69
Weighted average shares outstanding--diluted................   58,680,794    58,774,334    57,463,587
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

28
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                1999        1998        1997
(DOLLARS IN THOUSANDS)                                        ---------   ---------   --------
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
Net income..................................................  $  45,818   $  48,608   $ 39,754
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................     48,147      37,723     30,877
  Restructuring reserve, net of cash paid...................      4,147          --         --
  Stock issued under employee benefit and stock compensation
    plans...................................................      6,859       6,929      5,523
  Deferred income tax provision.............................     (5,055)      4,420      7,856
  Other.....................................................        320         429        673
  Changes in operating assets and liabilities:
    Accounts receivable.....................................       (535)    (31,877)   (11,089)
    Unbilled services.......................................    (11,058)       (609)    (1,667)
    Inventory...............................................        252      (8,342)    (1,678)
    Accounts payable........................................     (7,666)      8,087     (2,308)
    Accrued liabilities.....................................    (10,313)      7,441      6,297
    Unearned revenue........................................     15,305      (2,247)     4,305
    Income taxes payable....................................     (1,384)      1,574        748
    Other assets and liabilities, net.......................     (5,808)     (7,997)    (2,662)
                                                              ---------   ---------   --------
Net cash provided by operating activities...................     79,029      64,139     76,629
                                                              ---------   ---------   --------
Cash flows from investing activities:
  Capital expenditures......................................   (111,153)    (74,945)   (56,538)
  Contingent purchase price paid in connection with prior
    acquisitions............................................    (16,830)         --         --
  Acquisition of businesses, net of cash acquired...........         --     (25,546)        --
  Other, net................................................        975         129        196
                                                              ---------   ---------   --------
Net cash used in investing activities.......................   (127,008)   (100,362)   (56,342)
                                                              ---------   ---------   --------
Cash flows from financing activities:
  Net borrowings (repayments) under revolving credit
    facility................................................     50,000      20,000    (40,000)
  Proceeds from long-term borrowings........................     20,000          --      9,423
  Proceeds from short-term borrowings.......................         --          --     10,000
  Repayments of short-term borrowings.......................     (3,000)         --         --
  Purchase of treasury stock................................    (19,578)         --         --
  Stock issued under employee stock purchase and option
    plans...................................................      6,738       7,459      2,901
                                                              ---------   ---------   --------
Net cash provided by (used in) financing activities.........     54,160      27,459    (17,676)
                                                              ---------   ---------   --------
Net change in cash and cash equivalents.....................      6,181      (8,764)     2,611
Cash and cash equivalents, beginning of year................     19,263      28,027     25,416
                                                              ---------   ---------   --------
Cash and cash equivalents, end of year......................  $  25,444   $  19,263   $ 28,027
                                                              =========   =========   ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                                                              29
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                              ACCUMULATED
                                                                 OTHER                                      TOTAL
                             COMMON    PAID-IN    RETAINED   COMPREHENSIVE   COMPREHENSIVE   TREASURY   STOCKHOLDERS'
                             STOCK     CAPITAL    EARNINGS      INCOME          INCOME        STOCK        EQUITY
(DOLLARS IN THOUSANDS)      --------   --------   --------   -------------   -------------   --------   -------------
<S>                         <C>        <C>        <C>        <C>             <C>             <C>        <C>
Balance, December 31,
  1996....................    $571     $48,970    $ 58,010      $ 3,153                            --     $110,704
  Comprehensive income:
  Net income..............      --          --      39,754           --         $39,754            --       39,754
  Currency translation
    adjustment............      --          --          --       (2,713)         (2,713)           --       (2,713)
                                                                                -------
    Total comprehensive
      income..............      --          --          --           --         $37,041            --           --
                                                                                =======
Capital contribution......      --         888          --           --                            --          888
Shares issued under
  various employee benefit
  and stock compensation
  plans...................       6       8,245          --           --                            --        8,251
Stock option exercises....      --         173          --           --                            --          173
                              ----     -------    --------      -------                                   --------
Balance, December 31,
  1997....................     577      58,276      97,764          440                            --      157,057
  Comprehensive income:
  Net income..............      --          --      48,608           --         $48,608            --       48,608
  Currency translation
    adjustment............      --          --          --        1,766           1,766            --        1,766
                                                                                -------
    Total comprehensive
      income..............      --          --          --           --         $50,374            --           --
                                                                                =======
Capital contribution......      --       3,196          --           --                            --        3,196
Shares issued under
  various employee benefit
  and stock compensation
  plans...................       5      10,511          --           --                            --       10,516
Stock option exercises....       2       3,870          --           --                            --        3,872
                              ----     -------    --------      -------                                   --------
Balance, December 31,
  1998....................     584      75,853     146,372        2,206                            --      225,015
  Comprehensive income:
  Net income..............      --          --      45,818           --         $45,818            --       45,818
  Currency translation
    adjustment............      --          --          --       (8,710)         (8,710)           --       (8,710)
                                                                                -------
    Total comprehensive
      income..............      --          --          --           --         $37,108            --           --
                                                                                =======
Capital contribution......      --       6,511          --           --                            --        6,511
Shares issued under
  various employee benefit
  and stock compensation
  plans...................       5      11,378          --           --                            --       11,383
Stock option exercises....       1       2,212          --           --                            --        2,213
Treasury stock, at cost...      --          --          --           --                      $(19,578)     (19,578)
                              ----     -------    --------      -------                      --------     --------
Balance, December 31,
  1999....................    $590     $95,954    $192,190      $(6,504)                     $(19,578)    $262,652
                              ====     =======    ========      =======                      ========     ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

30
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

1. ORGANIZATION

    Covance Inc. and its subsidiaries ("Covance") is a leading contract research
organization providing a wide range of product development services on a
worldwide basis to the pharmaceutical, biotechnology and medical device
industries. Covance also provides services such as health economics and outcomes
for managed care organizations, hospitals and other health care providers and
laboratory testing to the chemical, agrochemical and food industries. Covance's
operations constitute two segments for financial reporting purposes. The first
segment, early development services, includes preclinical and Phase I clinical
service offerings. The second segment, late-stage development services, includes
clinical development, clinical support, biomanufacturing and commercialization.
At the present time, operations are principally focused in the United States and
Europe.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of all entities
controlled by Covance, including Covance Biotechnology Services Inc. ("Covance
Biotechnology"), a majority owned business. All significant intercompany
accounts and transactions are eliminated. The equity method of accounting is
used for investments in affiliates in which Covance owns between 20 and
50 percent.

    USE OF ESTIMATES

    These consolidated financial statements have been prepared in conformity
with generally accepted accounting principles. Generally accepted accounting
principles require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.

    FOREIGN CURRENCIES

    For subsidiaries outside of the United States that operate in a local
currency environment, income and expense items are translated to United States
dollars at average rates of exchange prevailing during the year, assets and
liabilities are translated at year-end exchange rates and equity accounts are
translated at historical exchange rates. Translation adjustments are accumulated
in a separate component of stockholders' equity in the Consolidated Balance
Sheets and are included in the determination of comprehensive income in the
Consolidated Statements of Stockholders' Equity. Transaction gains and losses
are included in the determination of net income in the Consolidated Statements
of Income. Transaction losses totaled $0.1 million, $0.4 million and
$0.2 million for the years ended December 31, 1999, 1998 and 1997, respectively.

    CASH AND CASH EQUIVALENTS

    Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less at date of purchase and consist
principally of amounts temporarily invested in money market funds.

    FINANCIAL INSTRUMENTS

    The fair value of cash and cash equivalents, accounts receivable, accounts
payable, accrued expenses and long and short-term debt are not materially
different than their carrying amounts as reported at December 31, 1999 and 1998.

    Accounts receivable and unbilled services represent amounts due from Covance
customers who are concentrated primarily in the pharmaceutical and biotechnology
industries. Covance monitors the creditworthiness of its customers to which it
grants credit terms in the ordinary course of business. Although Covance
customers are concentrated primarily within these two industries, management
considers the likelihood of material credit risk exposure as remote.

                                                                              31
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

In addition, in some cases Covance requires advance payment for a portion of the
contract price from its customers upon the signing of a contract for services.
Historically, bad debts have been minimal.

    INVENTORY

    Inventories, which consist principally of supplies and animals, are valued
at the lower of cost (first-in, first-out method) or market.

    PROPERTY AND EQUIPMENT

    Property and equipment are recorded at cost. Depreciation and amortization
are provided on the straight-line method at rates adequate to allocate the cost
of the applicable assets over their estimated useful lives, which range in term
from three to thirty years.

    GOODWILL

    Goodwill (investment costs in excess of the fair value of net tangible
assets acquired) is capitalized and amortized on a straight-line basis over the
period expected to be benefited, which is generally twenty years or less, except
for acquisitions prior to 1996 which are being amortized over forty years.

    IMPAIRMENT OF LONG-LIVED ASSETS

    Assessments of the recoverability of long-lived assets are conducted when
events or changes in circumstances occur that indicate that the carrying value
of the asset may not be recoverable. The assessment of possible impairment is
based upon the ability to recover the asset from the expected future
undiscounted cash flows of related operations.

    REVENUE RECOGNITION

    Historically, a majority of Covance's net revenues have been earned under
contracts which generally range in duration from a few months to two years.
Revenue from these contracts is generally recognized under either the percentage
of completion method of accounting or as services are rendered or products are
delivered. Contracts may contain provisions for renegotiation in the event of
cost overruns due to changes in the level of work scope. Renegotiated amounts
are included in revenue when earned and realization is assured. Provisions for
losses to be incurred on contracts are recognized in full in the period in which
it is determined that a loss will result from performance of the contractual
arrangement. Most service contracts may be terminated for a variety of reasons
by Covance's customers either immediately or upon notice. The contracts often
require payments to Covance to recover costs incurred, including costs to wind
down the study, and payment of fees earned to date, and in some cases to provide
Covance with a portion of the fees or profits that would have been earned under
the contract had the contract not been terminated early.

    Unbilled services are recorded for revenue recognized to date that is
currently unbillable to the customer pursuant to contractual terms. In general,
amounts become billable upon the achievement of milestones or in accordance with
predetermined payment schedules. Unbilled services are billable to customers
within one year from the respective balance sheet date. Unearned revenue is
recorded for cash received from customers for which revenue has not been
recognized at the balance sheet date.

    Covance routinely subcontracts with independent physician investigators in
connection with multi-site clinical trials. Investigator fees are not reflected
in revenue or expense since such fees are granted by customers on a
"pass-through basis" without risk or reward to Covance. Amounts receivable from
customers in connection with billed and unbilled investigator fees and
out-of-pocket pass-through costs are included in prepaid expenses and other
current assets in the accompanying Consolidated Balance Sheets and totaled
$27.3 million at both December 31, 1999 and 1998.

32
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    COSTS AND EXPENSES

    Cost of revenue generally includes appropriate amounts necessary to complete
the revenue earning process and encompasses direct labor and related benefit
charges, other direct costs and allocable expenses (including facility charges,
indirect labor and information technology costs). Selling, general and
administrative expenses primarily consist of administrative payroll and related
benefit charges, advertising and promotional expenses, administrative travel and
allocable expenses (facility charges and information technology costs).
Advertising expense is recognized as incurred.

    TAXES ON INCOME

    Covance uses the asset and liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of differences between the carrying amounts of
assets and liabilities and their respective tax bases using enacted tax rates in
effect for the year in which the temporary differences are expected to reverse.
The effect on deferred taxes of a change in enacted tax rates is recognized in
income in the period when the change is effective. See Note 5.

    COMPREHENSIVE INCOME

    Comprehensive income has been calculated in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 130, REPORTING COMPREHENSIVE
INCOME. Covance's total comprehensive income represents net income plus the
change in the cumulative translation adjustment equity account for the periods
presented.

    SEGMENT REPORTING

    Covance reports information about its operating segments and related
disclosures about products, services, geographic areas and major customers in
accordance with FASB Statement No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. See Note 12 for segment disclosure.

    SUPPLEMENTAL CASH FLOW INFORMATION

    Cash paid for interest for the years ended December 31, 1999, 1998 and 1997
totaled $13.2 million, $9.1 million and $9.1 million, respectively. Cash paid
for income taxes for the years ended December 31, 1999, 1998 and 1997 totaled
$30.9 million, $25.5 million and $27.9 million, respectively.

    EARNINGS PER SHARE

    Earnings per share is computed in accordance with FASB Statement No. 128,
EARNINGS PER SHARE. Basic EPS is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding during
the period. The computation of diluted EPS is similar to the computation of
basic EPS, except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the dilutive
potential common shares had been issued.

    In computing diluted earnings per share for the years ended December 31,
1999, 1998 and 1997, the denominator was increased by 203,595 shares, 724,220
shares and 209,545 shares, respectively, representing the dilution of stock
options outstanding at December 31, 1999, 1998 and 1997, with exercise prices
less than the average market price of Covance's Common Stock during each
respective period. Excluded from the computation of diluted earnings per share
at December 31, 1999 were options to purchase 3,676,178 shares of common stock
at prices ranging from $19.57 to $29.13 per share because the exercise prices of
such options were greater than the average market price of Covance's Common
Stock during 1999. Excluded from the computation of diluted earnings per share
at December 31, 1998 were options to purchase 185,650 shares of common stock at
prices ranging from $24.56 to $29.13 per share because the exercise prices of
such options were greater than the average market price of Covance's Common
Stock during 1998. Excluded from the computation of diluted earnings per share
at December 31, 1997 were options to

                                                                              33
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

purchase 1,474,585 shares of common stock at prices ranging from $19.00 to
$20.56 per share because the exercise prices of such options were greater than
the average market price of Covance's Common Stock during 1997.

3. PROPERTY AND EQUIPMENT

    Property and equipment at December 31, 1999 and 1998 consist of the
following:

<TABLE>
<CAPTION>
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
Property and equipment at cost:
  Land......................................................  $   6,859   $   6,859
  Buildings and improvements................................    158,671     137,682
  Equipment.................................................    244,924     212,681
  Furniture, fixtures & leasehold improvements..............     85,921      62,888
  Construction-in-progress..................................     31,839      14,952
                                                              ---------   ---------
                                                                528,214     435,062
Less: Accumulated depreciation and amortization.............   (231,271)   (197,475)
                                                              ---------   ---------
Property and equipment, net.................................  $ 296,943   $ 237,587
                                                              =========   =========
</TABLE>

    Depreciation and amortization expense aggregated $43.5 million,
$35.2 million and $28.0 million for 1999, 1998 and 1997, respectively.

4. ACQUISITIONS AND GOODWILL

    In November 1998, Covance acquired the stock of GDXI, Inc. (now known as
Covance Central Diagnostics Inc.) and all of the assets and certain liabilities
of Berkeley Antibody Company, Inc. (now known as Covance Antibody
Services Inc.) for cash payments totaling approximately $26 million in separate
transactions accounted for as purchase business combinations. The goodwill
resulting from these transactions aggregated $23.4 million.

    In October 1996, Covance acquired the stock of CRS Pacamed AG (now known as
Covance Pharmaceutical Packaging Services AG) for a cash payment of
approximately $14.4 million in a transaction accounted for as a purchase
business combination. In 1999, Covance paid an additional $1.0 million in
contingent purchase price associated with this acquisition. The total goodwill
resulting from this transaction aggregated $11.3 million.

    In March 1996, Covance acquired all of the assets and substantially all of
the liabilities of Health Technology Associates, Inc. (now known as Covance
Health Economics and Outcomes Services Inc.) for an initial cash payment of
approximately $14.9 million in a transaction accounted for as a purchase
business combination. In 1999, Covance paid an additional $15.8 million in
contingent purchase price associated with this acquisition. The total goodwill
resulting from this acquisition aggregated $29.5 million.

    Results of operations for these entities have been included in the
accompanying consolidated financial statements beginning on the respective dates
of acquisition. Pro forma information for these entities has not been presented,
due to their insignificance to Covance taken as a whole.

    Goodwill associated with these and prior acquisitions aggregated
$84.6 million and $72.0 million, net of accumulated amortization of
$14.2 million and $10.0 million at December 31, 1999 and 1998, respectively.
Amortization expense aggregated $4.2 million, $2.5 million and $2.3 million for
1999, 1998 and 1997, respectively.

34
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

5. TAXES ON INCOME

    The components of income before taxes and the related provision (benefit)
for taxes on income for 1999, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                               1999       1998       1997
                                                             --------   --------   --------
<S>                                                          <C>        <C>        <C>
Income before taxes and equity investee results:
  Domestic.................................................  $57,644    $63,401    $48,927
  International............................................   18,816     20,744     20,252
                                                             -------    -------    -------
    Total..................................................  $76,460    $84,145    $69,179
                                                             =======    =======    =======
Federal income taxes:
  Current provision........................................  $19,924    $23,179    $14,968
  Deferred provision (benefit).............................    1,065       (324)     2,700
International income taxes:
  Current provision........................................    6,489      3,648      3,987
  Deferred provision (benefit).............................   (1,165)     2,472      2,387
State and other income taxes:
  Current provision........................................    4,100      6,714      5,840
  Deferred provision (benefit).............................      229       (590)      (515)
                                                             -------    -------    -------
    Net income tax provision...............................  $30,642    $35,099    $29,367
                                                             =======    =======    =======
</TABLE>

    The differences between the provision for income taxes and income taxes
computed using the Federal statutory income tax rate for 1999, 1998 and 1997 are
as follows:

<TABLE>
<CAPTION>
                                                                1999        1998        1997
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
Taxes at statutory rate.....................................    35.0%       35.0%       35.0%
State and local taxes, net of Federal benefit...............     3.7         4.7         5.1
Goodwill amortization.......................................     0.9         1.0         1.1
Impact of international operations..........................    (1.7)       (1.3)       (1.0)
Other, net..................................................     2.2         2.3         2.3
                                                                ----        ----        ----
  Total.....................................................    40.1%       41.7%       42.5%
                                                                ====        ====        ====
</TABLE>

    The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1999 and
1998 are as follows:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Current deferred tax assets:
  Liabilities not currently deductible......................  $  5,088   $  5,926
  Net operating losses......................................    11,602      5,084
  Other.....................................................       602        727
                                                              --------   --------
  Gross current deferred tax assets.........................    17,292     11,737
  Less: Valuation allowance.................................        --     (2,066)
                                                              --------   --------
  Net current deferred tax assets...........................  $ 17,292   $  9,671
                                                              ========   ========
Noncurrent deferred tax assets:
  Liabilities not currently deductible......................  $  7,159   $  6,436
  Less: Valuation allowance.................................    (1,212)    (1,579)
                                                              --------   --------
  Net noncurrent deferred tax assets........................     5,947      4,857
Noncurrent deferred tax liabilities:
  Property and equipment....................................   (20,929)   (17,273)
                                                              --------   --------
  Net noncurrent deferred tax liabilities...................  $(14,982)  $(12,416)
                                                              ========   ========
</TABLE>

                                                                              35
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    Covance currently provides income taxes on the earnings of foreign
subsidiaries to the extent those earnings are taxable or are expected to be
remitted. Taxes have not been provided on $59.1 million of accumulated foreign
unremitted earnings because those earnings are expected to remain invested
indefinitely. It is not practical to estimate the amount of additional tax that
might be payable if such accumulated earnings were remitted. Additionally, if
such accumulated earnings were remitted, certain countries impose withholding
taxes that, subject to certain limitations, are available for use as a tax
credit against any Federal income tax liability arising from such remittance.

    At December 31, 1999, Covance has net operating loss carryforwards of
approximately $29.0 million which expire in years 2009 through 2012 and are
available to offset future Federal taxable income.

6. SHORT AND LONG-TERM DEBT

    Covance has a $250 million senior revolving credit facility (the "Credit
Facility") with a syndicate of banks, as to which there was $190.0 million and
$140.0 million of outstanding borrowings and $11.3 million and $11.3 million in
outstanding letters of credit at December 31, 1999 and 1998, respectively. Under
the Credit Facility, borrowings can be made in a number of different currencies
until November 2001 at which time all outstanding loans must be paid in full. In
addition, Covance has several different interest rate options under the Credit
Facility. Interest on all outstanding borrowings during 1999, 1998 and 1997 was
computed based upon the London Interbank Offered Rate plus an applicable margin
and approximated 5.5%, 5.8% and 6.0% per annum, respectively. Covance has the
option to prepay the loans outstanding under the Credit Facility in whole or in
part at any time, subject to payment of breakage costs, in certain
circumstances. The Credit Facility contains certain covenants and requires the
maintenance of key ratios, as defined in the Credit Facility. At December 31,
1999, Covance was in compliance with the terms of the Credit Facility.

    In December 1999, Covance financed its newly constructed North American
packaging facility through a five year $20.0 million mortgage which bears
interest at a rate of 7.72% per annum.

    In December 1999, Covance Biotechnology repaid $3.0 million in short-term
debt with the North Carolina Biotechnology Center which matured in
December 1999. In addition, Covance Biotechnology has a $10.0 million short-term
revolving credit facility with a bank, of which $10.0 million of borrowings were
outstanding as of both December 31, 1999 and 1998. This short-term revolving
credit facility carries interest at a rate substantially equivalent to the rate
in effect on Covance's borrowings under the Credit Facility and is guaranteed by
Covance.

    In October 1997, a foreign subsidiary of Covance borrowed 13.5 million Swiss
Francs from a bank. This loan bears interest at a fixed rate of 2.9% per annum
and matures in October 2000. These funds were used to repay certain
cross-currency intercompany obligations and to fund capital expenditures.

7. EMPLOYEE BENEFIT PLANS

    Covance has several defined contribution plans covering substantially all of
its full-time employees. Contributions to these plans aggregated $11.4 million,
$9.4 million and $8.1 million for 1999, 1998 and 1997, respectively.

8. STOCKHOLDERS' EQUITY

    PREFERRED STOCK

    Covance is authorized to issue up to 10.0 million shares of Series Preferred
Stock, par value $1.00 per share (the "Covance Series Preferred Stock"). The
Covance Board of Directors has the authority to issue such shares from time to
time, without stockholder approval, and to determine the designations,
preferences, rights, including voting rights, and restrictions of such shares,
subject to the Delaware General Corporate Laws. Pursuant to this authority, the
Covance Board of Directors has designated 1.0 million shares of the Covance
Series Preferred Stock as Covance Series A Preferred Stock. No other class of
Covance Series Preferred Stock has been designated by the Board. As of
December 31, 1999 no Covance Series Preferred Stock has been issued or is
outstanding.

36
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    DIVIDENDS--COMMON STOCK

    Covance's Board of Directors may declare dividends on the shares of Covance
Common Stock out of legally available funds (subject to any preferential rights
of any outstanding Covance Series Preferred Stock). However, Covance has no
present intention to declare dividends for the foreseeable future, but instead
intends to retain earnings to provide funds for the operation and expansion of
its business. In addition, the Credit Facility prohibits Covance from paying
cash dividends on the Covance Common Stock during a default or event of default,
as defined in the Credit Facility, or when after giving effect to the payment of
such dividends Covance would not be in compliance with the financial covenants
of the Credit Facility.

    TREASURY STOCK

    During September 1999, the Board of Directors authorized the repurchase of
up to 5% or approximately 3.0 million shares of Covance's outstanding common
stock, subject to market conditions and other factors. As of December 31, 1999,
Covance repurchased a total of 1,995,000 shares at a total cost of approximately
$19.6 million.

    STOCK COMPENSATION PLANS

    The Employee Equity Participation Program ("EEPP") consists of two plans:
(a) a stock option plan (the "Covance Stock Option Plan"); and (b) an incentive
stock plan (the "Covance Incentive Stock Plan"). The Covance Stock Option Plan
of the EEPP, which is administered by the Covance Compensation and Organization
Committee of the Board of Directors, provides for the grant to eligible
employees of either non-qualified or incentive stock options, or both, to
purchase shares of Covance Common Stock at no less than fair market value on the
date of grant. Options granted are not exercisable for at least twelve months
and expire no more than ten years from date of grant. The Covance Incentive
Stock Plan of the EEPP authorizes the Covance Compensation and Organization
Committee to award eligible employees shares, or the right to receive shares, of
Covance Common Stock. The shares awarded may be subject to certain restrictions
prohibiting sale or other disposition and may be subject to forfeiture, in
certain circumstances. A maximum of 6.0 million shares may be optioned or
granted to eligible employees under the EEPP. During 1999, 1998 and 1997,
Covance recorded compensation expense of $0.1 million, $1.7 million and
$1.1 million, respectively, in connection with stock issued to certain members
of Covance's executive management under the Covance Incentive Stock Plan.

    Covance also has an employee stock purchase plan (the "ESPP") pursuant to
which Covance may make available for sale to employees shares of its common
stock at a price equal to 85% of the lower of the market value on the first or
last day of each calendar quarter. The ESPP, which is administered by the
Covance Compensation and Organization Committee, is intended to give Covance
employees the opportunity to purchase shares of Covance Common Stock through
payroll deductions. A maximum of 1.0 million shares may be purchased by Covance
employees under the ESPP. During 1999, 1998 and 1997, a total of 277,876 shares,
204,573 shares and 190,928 shares of common stock, respectively, were issued
under the ESPP.

    Covance has adopted the disclosure-only provisions of FASB Statement
No. 123 ("SFAS 123"), ACCOUNTING FOR STOCK-BASED COMPENSATION, and accordingly,
applies Accounting Principles Board Opinion No. 25 and related interpretations
in accounting for its plans. Had Covance elected to recognize compensation
expense in accordance with the provisions of SFAS 123 for the stock option
awards and for the stock purchased by Covance employees under the ESPP, its net
income in 1999, 1998 and 1997 would have been $35.6 million, $39.5 million and
$35.9 million, respectively, its basic and diluted earnings per share would both
have been $0.61 in 1999; its basic and diluted earnings per share would have
been $0.68 and $0.67, respectively, in 1998; and its basic and diluted earnings
per share would both have been $0.63 in 1997. The fair value of the Covance
stock options used to compute the net income and earnings per share disclosures
required under SFAS 123 is the estimated present value at grant date using the
Black-Scholes option-pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively: expected volatility of 49.0%,
49.0% and 33.3%; risk free interest rate of 5.45%, 5.47% and 6.50%; and an
expected holding period of seven years, seven years and seven years.

                                                                              37
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    The following table sets forth Covance's stock option activity during 1999,
1998 and 1997:

<TABLE>
<CAPTION>
                                                                  NUMBER       WEIGHTED
                                                                OF SHARES      AVERAGE
                                                              (IN THOUSANDS)    PRICE
                                                              --------------   --------
<S>                                                           <C>              <C>
Options outstanding, December 31, 1996......................     1,062.5        $16.11
  Granted...................................................     1,763.1        $19.49
  Exercised.................................................       (11.8)       $14.62
  Forfeited.................................................       (66.6)       $18.63
                                                                 -------
Options outstanding, December 31, 1997......................     2,747.2        $18.01
  Granted...................................................     1,867.3        $21.33
  Exercised.................................................      (241.9)       $16.70
  Forfeited.................................................      (397.1)       $19.62
                                                                 -------
Options outstanding, December 31, 1998......................     3,975.5        $19.42
  Granted...................................................     1,328.6        $26.19
  Exercised.................................................      (113.4)       $18.73
  Forfeited.................................................      (440.4)       $21.96
                                                                 -------
Options outstanding, December 31, 1999......................     4,750.3        $21.17
                                                                 =======
</TABLE>

    The weighted average fair value of the stock options granted during 1999,
calculated using the Black-Scholes option-pricing model with the assumptions as
set forth above, is $15.78 per share.

    The following table sets forth the status of all options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
                                 STOCK OPTIONS OUTSTANDING              STOCK OPTIONS EXERCISABLE
                        --------------------------------------------   ---------------------------
                                             WEIGHTED
                            NUMBER           AVERAGE        WEIGHTED       NUMBER        WEIGHTED
    OPTION PRICE          OF SHARES         REMAINING       AVERAGE      OF SHARES       AVERAGE
        RANGE           (IN THOUSANDS)   CONTRACTUAL LIFE    PRICE     (IN THOUSANDS)     PRICE
---------------------   --------------   ----------------   --------   --------------   ----------
<C>                     <C>              <S>                <C>        <C>              <C>
    $ 9.69-$13.98             139         6.4 years          $ 8.78           61          $ 7.50
    $14.88-$16.49             588         5.3 years          $15.86          496          $15.85
    $17.25-$25.06           2,819         7.6 years          $20.24        1,997          $19.88
    $25.81-$29.13           1,204         9.1 years          $27.32           84          $26.65
</TABLE>

9. COMMITMENTS AND CONTINGENT LIABILITIES

    Minimum annual rental commitments under noncancellable operating leases,
primarily office and laboratory facilities in effect at December 31, 1999 are as
follows:

<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
<S>                                                           <C>

2000........................................................  $31,427

2001........................................................  $29,665

2002........................................................  $20,137

2003........................................................  $18,303

2004........................................................  $15,465

2005 and beyond.............................................  $70,756
</TABLE>

    Operating lease rental expense aggregated $31.9 million, $27.0 million and
$26.0 million for 1999, 1998 and 1997, respectively.

38
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    Covance has entered, and may from time to time in the future, enter into
build-to-suit operating lease arrangements. These transactions may allow Covance
to purchase the underlying facility and / or equipment or cancel the lease
arrangement on various dates over the lease term. In the event of cancellation,
Covance may be obligated under residual value guarantee provisions of the
leases. Covance has one lease arrangement whereby it has a contingent residual
value guarantee payment in the event that Covance terminates the lease and the
sale of the underlying facility and equipment results in sales proceeds by the
lessor in an amount less than the lessor's unamortized investment in the lease
arrangement. Under these circumstances, Covance's maximum payment would have
approximated $35 million at the end of 1997 (the first year of the lease) and
decreases to approximately $25 million at the end of 2006 (the tenth year of the
lease), assuming Covance terminates the lease and the sales proceeds received by
the lessor were zero.

10. MERGER COSTS

    Covance entered into an Agreement and Plan of Merger as of April 28, 1999
(the "Proposed Merger") with Parexel International Corporation ("Parexel"). On
June 25, 1999, Covance and Parexel mutually agreed to terminate the Proposed
Merger. In connection with the termination, Covance and Parexel entered into a
termination agreement whereby, among other things, each party agreed to release
the other from any claims relating to the Proposed Merger and each party agreed
to bear its own expenses incurred in connection with the Proposed Merger. During
the year ended December 31, 1999, Covance incurred one-time, out-of-pocket
transaction and integration related costs (primarily professional fees for
investment banking, attorneys, accountants and consultants) of $5.2 million
($3.1 million, net of tax) in connection with the Proposed Merger.

11. RESTRUCTURING

    In order to improve its global competitiveness, better optimize capacity
utilization and enhance quality and service worldwide, during 1999 Covance
consolidated its regionally based Phase II and III clinical services under one
global management structure and formed a unified sales force for its clinical
development, central laboratory, packaging and other related clinical support
services. Primarily in connection with these actions, Covance recorded a pre-tax
restructuring charge of $7.7 million ($4.6 million net of tax) consisting
primarily of $6.5 million in severance and related benefits arising from the
elimination of approximately 165 managerial and staff positions. Severance
payments began in September 1999 and will continue into 2000. As of
December 31, 1999, a total of 138 employees have been terminated and a total of
$3.6 million in costs have been paid. The remaining $4.1 million is included in
accrued expenses and other liabilities in the Consolidated Balance Sheet.

12. SEGMENT INFORMATION

    Covance has two reportable segments: early development and late-stage
development. Early development services, which includes Covance's preclinical
and Phase I clinical service capabilities, involve evaluating a new compound for
safety and early effectiveness as well as evaluating the absorption,
distribution, metabolism and excretion of the compound in the human body. It is
at this stage that a pharmaceutical company, based on available data, will
generally decide whether to continue further development of a drug. Late-stage
development services, which include Covance's clinical development, clinical
support, biomanufacturing and commercialization capabilities, are geared toward
demonstrating the clinical effectiveness of a compound in treating certain
diseases or conditions, obtaining regulatory approval and maximizing the drug's
commercial potential.

                                                                              39
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

    The accounting policies of the reportable segments are the same as those
described in Note 2.

<TABLE>
<CAPTION>
                                                      EARLY        LATE-STAGE
                                                   DEVELOPMENT     DEVELOPMENT      TOTAL
                                                   -----------     -----------     --------
<S>                                                <C>             <C>             <C>
Net revenues from external customers:
  1999...........................................    $273,315       $555,665       $828,980
  1998...........................................    $239,483       $492,091       $731,574
  1997...........................................    $217,558       $373,093       $590,651

Depreciation and amortization:
  1999...........................................    $ 16,326       $ 31,821       $ 48,147
  1998...........................................    $ 15,362       $ 22,361       $ 37,723
  1997...........................................    $ 14,644       $ 16,233       $ 30,877

Operating income:
  1999...........................................    $ 42,826(a)    $ 56,721(a)    $ 99,547(a)
  1998...........................................    $ 34,245       $ 57,634       $ 91,879
  1997...........................................    $ 32,487       $ 45,173       $ 77,660

Segment assets:
  1999...........................................    $239,187       $461,127       $700,314
  1998...........................................    $219,326       $374,089       $593,415
  1997...........................................    $199,432       $284,582       $484,014

Capital expenditures:
  1999...........................................    $ 25,981       $ 85,172       $111,153
  1998...........................................    $ 23,392       $ 51,553       $ 74,945
  1997...........................................    $ 16,375       $ 40,163       $ 56,538
</TABLE>

------------------------

(a) Excludes special charges recorded during the year ended December 31, 1999,
    as follows: (1) Third quarter restructuring charge totaling $7,719 ($4,631
    after tax); and (2) Second quarter 1999 merger-related charge totaling
    $5,249 ($3,150 after tax).

13. GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
                                                 UNITED     UNITED
                                                 STATES    KINGDOM     OTHER      TOTAL
                                                --------   --------   --------   --------
<S>                                             <C>        <C>        <C>        <C>
Net revenues from external customers(1)
  1999........................................  $572,326   $131,904   $124,750   $828,980
  1998........................................  $500,463   $118,820   $112,291   $731,574
  1997........................................  $402,642   $102,704   $ 85,305   $590,651
Long-lived assets(2)
  1999........................................  $190,830   $ 77,747   $ 28,366   $296,943
  1998........................................  $132,671   $ 75,009   $ 29,907   $237,587
  1997........................................  $101,170   $ 70,059   $ 21,900   $193,129
</TABLE>

------------------------

(1) Net revenues are attributable to geographic locations based on the physical
    location where the services are performed.

(2) Long-lived assets represents the net book value of property, plant and
    equipment.

40
<PAGE>
                         COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        DECEMBER 31, 1999, 1998 AND 1997
               (DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)

14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

    The following is a summary of unaudited quarterly financial information for
1999 and 1998:

<TABLE>
<CAPTION>
                                           FIRST      SECOND       THIRD        FOURTH
YEAR ENDED DECEMBER 31, 1999              QUARTER    QUARTER      QUARTER      QUARTER
----------------------------              --------   --------     --------     --------
<S>                                       <C>        <C>          <C>          <C>
Net revenues............................  $210,632   $215,060     $198,920     $204,368
Income from operations..................  $ 24,166   $ 22,955(a)  $ 15,403(b)  $ 24,055
Net income..............................  $ 13,148   $ 12,207(a)  $  7,707(b)  $ 12,756
Basic and diluted earnings per share....  $   0.22   $   0.21(a)  $   0.13(b)  $   0.22
</TABLE>

<TABLE>
<CAPTION>
                                           FIRST      SECOND       THIRD        FOURTH
YEAR ENDED DECEMBER 31, 1998              QUARTER    QUARTER      QUARTER      QUARTER
----------------------------              --------   --------     --------     --------
<S>                                       <C>        <C>          <C>          <C>
Net revenues............................  $168,509   $182,089     $182,187     $198,789
Income from operations..................  $ 20,314   $ 24,302     $ 24,275     $ 22,988
Net income..............................  $ 10,452   $ 12,868     $ 13,063     $ 12,225
Basic and diluted earnings per share....  $   0.18   $   0.22     $   0.22     $   0.21
</TABLE>

------------------------

(a) Excluding the impact of the second quarter merger-related costs totaling
    $5,249 ($3,150 net of tax), income from operations and net income totaled
    $28,204, and $15,357, respectively, and basic and diluted EPS were both
    $0.26.

(b) Excluding the impact of the third quarter restructuring charge totaling
    $7,719 ($4,631 net of tax), income from operations and net income totaled
    $23,122, and $12,338, respectively, and basic and diluted EPS were both
    $0.21.

                                                                              41
<PAGE>
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    (a) Identification of Directors.

    Incorporated by reference to the Company's definitive Proxy Statement in
connection with its annual Meeting of Shareholders to be held on April 25, 2000,
which Proxy Statement has been filed pursuant to Regulation 14A under the
Securities and Exchange Act of 1934, as amended.

    (b) Identification of Officers.

    Christopher A. Kuebler, 46, has been Covance's President and Chief Executive
Officer since November 1994. From March 1993 through November 1994, he was the
Corporate Vice President, European Operations for Abbott Laboratories Inc.
("ALI"), a diversified health care company. From January 1991 until March 1993,
Mr. Kuebler was the Vice President, Sales and Marketing for ALI's Pharmaceutical
Division. Mr. Kuebler has been a member of the Covance Board since
November 1994, and was elected Chairman in November 1996. Mr. Kuebler also
serves in various executive officer and director capacities of Covance's
subsidiaries.

    Charles C. Harwood, Jr., 46, has been Covance's Corporate Senior Vice
President and Chief Financial Officer since July 1996. From November 1994 to
July 1996, Mr. Harwood was Covance's Vice President and Chief Financial Officer.
From May 1993 to November 1994, Mr. Harwood was Executive Director, Finance of
Covance. From January 1993 to May 1993, Mr. Harwood was Chief Financial Officer
and Vice President of Finance with Integrated Telecom Technologies, Inc. Prior
to January 1993, Mr. Harwood worked for seven years in the field of commercial
real estate development and six years with the Hewlett-Packard Company in its
Medical Products Division. Mr. Harwood also serves as a director of several of
Covance's subsidiaries.

    Joseph L. Herring, 44, has been Covance's Corporate Senior Vice President
and President-Early Development Services since September 1999. From
September 1996 to September 1999, Mr. Herring was Corporate Vice President and
General Manager of Covance Laboratories North America. Prior to joining Covance,
Mr. Herring was Vice President of Caremark International, a provider of home
care and physician practice management services.

    Alan Horgan, 43, has been Covance's Corporate Senior Vice President and
President-Clinical Development Services since September 1999. From
November 1997 to September 1999, Mr. Horgan was Corporate Vice President and
General Manager of Covance Clinical Development Services Europe. From May 1996
to September 1997, Mr. Horgan was Managing Director of Nutraceuticals, Ltd., and
from September 1996 to March 1997 was Interim CEO of Lotus Healthcare, a
pharmaceutical company based in Beijing PRC. From 1994 to 1996, Mr. Horgan was
Managing Director UK Operations of Fisons, a multinational pharmaceutical
company.

    Jeffrey S. Hurwitz, 39, has been Covance's Corporate Senior Vice President,
General Counsel and Secretary since July 1996. From November 1994 to July 1996,
Mr. Hurwitz was Covance's Vice President, General Counsel and Secretary. From
October 1993 to November 1994, Mr. Hurwitz was Covance's General Counsel and
Secretary. From May 1992 to October 1993, Mr. Hurwitz was an Assistant Counsel
and Assistant Secretary for Corning Life Sciences Inc., an affiliate of the
Company prior to December 31, 1996. From August 1991 to May 1992, Mr. Hurwitz
was an Assistant Counsel for Corning, an affiliate of the Company prior to
December 31, 1996. From February 1991 to June 1991, Mr. Hurwitz was an Associate
with the law firm of Luskin & Stern. Prior to February 1991, Mr. Hurwitz was an
Associate with the law firm of Shearman & Sterling. Mr. Hurwitz also serves as a
director of several of Covance's subsidiaries.

    Howard Moody, 49, joined Covance in February 2000, as Corporate Senior Vice
President-Chief Information Officer. Prior to joining Covance, Mr. Moody was
Vice President, Information Systems, Core Business for Quest Diagnostics Inc., a
position to which Mr. Moody was appointed after Smithkline Beecham Clinical
Laboratories was acquired by Quest in 1999. Mr. Moody held that position with
Smithkline Beecham Clinical Laboratories from 1995 to 1999. From 1989 to 1995
Mr. Moody held various positions of increasing responsibility with Smithkline
Beecham.

                                                                              43
<PAGE>
    F. John Mills, M.D., Ph.D., 48, has been Covance's Corporate Senior Vice
President and President-Clinical Support Services since September 1999. From
March 1999 to September 1999, Dr. Mills was Corporate Vice President and Global
General Manager of Covance Central Laboratory Services Inc. From September 1997
to March 1999, Dr. Mills was Corporate Vice President and General Manager of
Covance Central Laboratory Services Inc. From January 1997 to September 1997,
Dr. Mills was Corporate Vice President and General Manager of Covance CAPS
Europe. From 1992 to January 1997, Dr. Mills was Corporate Vice President and
General Manager of CAPS Europe for Covance.

    Paul H. Sartori, Ph.D., 53, has been Covance's Corporate Senior Vice
President-Human Resources since January 1999. From January 1997 through
December 1998, Dr. Sartori was Executive Vice President of External Affairs and
Human Resources for Novartis Corporation, a global life sciences company. From
January 1995 through December 1996, Dr. Sartori was Senior Vice President-Human
Resources & Communications for the pharmaceuticals division of Ciba-Giegy
Corporation and from December 1988 to December 1994 he was Senior Vice
President-Human Resources of that division.

    Stephen J. Sullivan, 53, joined Covance in June 1999 and has been Covance's
Corporate Senior Vice President and President-Clinical Development Services and
Support Services since September 1999. From 1996 to 1999, Mr. Sullivan was
Chairman of the Board, President and Chief Executive Officer of
Xenometrix, Inc., a Boulder, Colorado-based biotechnology company. Prior to
that, Mr. Sullivan was Vice President, Worldwide Marketing for the Diagnostics
Division, and Vice President and General Manager of the Diagnostic Assay Sector
of Abbot Laboratories. Mr. Sullivan continues to serve as Chairman of the Board
of Xenometrix, Inc.

    Michael Giannetto, 37, has been Covance's Controller since July 1996 and a
Corporate Vice President since February 1998. From November 1996 to
February 1998, Mr. Giannetto was a Vice President of Covance. From March 1995 to
July 1996, Mr. Giannetto was the Business Controller for Covance. From
December 1992 to March 1995, Mr. Giannetto was the Manager of Financial
Reporting and Technical Accounting for Corning Life Sciences Inc., an affiliate
of the Company prior to December 31, 1996. Prior to December 1992,
Mr. Giannetto was a Senior Audit Manager for Deloitte & Touche.

ITEM 11. EXECUTIVE COMPENSATION

    Incorporated by reference to the Company's definitive Proxy Statement in
connection with its 2000 Annual Meeting of Shareholders to be held on April 25,
2000, which Proxy Statement has been filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.

ITEM 12. SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
  COVANCE

    Incorporated by reference to the Company's definitive Proxy Statement in
connection with its 2000 Annual Meeting of Shareholders to be held on April 25,
2000, which Proxy Statement has been filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Incorporated by reference to the Company's definitive Proxy Statement in
connection with its 2000 Annual Meeting of Shareholders to be held on April 25,
2000, which Proxy Statement has been filed pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended.

44
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) DOCUMENTS FILED AS PART OF THIS REPORT.

    1.  FINANCIAL STATEMENTS. The financial statements filed as part of this
       report are listed on the Index to Consolidated Financial Statements on
       page 25.

    2.  FINANCIAL STATEMENT SCHEDULES. Schedules are omitted because they are
       not applicable or the required information is shown in the consolidated
       financial statements or notes thereto.

    3.  EXHIBITS. The exhibits required by Item 601 of Regulation S-K filed as
       part of, or incorporated by reference in, this report are listed in
       (c) below and in the accompanying Exhibit Index.

(B) REPORTS ON FORM 8-K.

    None.

(C) ITEM 601 EXHIBITS.

<TABLE>
<C>    <S>
 2.1   Transaction Agreement among Corning Incorporated, Corning
       Life Science Inc., Corning Clinical Laboratories Inc.
       (Delaware), Covance Inc. and Corning Clinical Laboratories
       Inc. (Michigan), dated November 22, 1996. INCORPORATED BY
       REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
       FISCAL YEAR ENDED DECEMBER 31, 1996.

 3.1   Certificate of Incorporation. INCORPORATED BY REFERENCE TO
       REGISTRANT'S FILING ON AMENDMENT NO. 2 ON FORM 10, FILED
       WITH THE SEC ON NOVEMBER 19, 1996.

 3.2   By-Laws. INCORPORATED BY REFERENCE TO REGISTRANT'S FILING ON
       AMENDMENT NO. 2 ON FORM 10, FILED WITH THE SEC ON NOVEMBER
       19, 1996.

 4.1   Form of Common Stock Certificate. INCORPORATED BY REFERENCE
       TO REGISTRANT'S FILING ON AMENDMENT NO. 3 ON FORM 10, FILED
       WITH THE SEC ON NOVEMBER 25, 1996.

 4.2   Rights Agreement between Covance Inc. and Harris Trust and
       Savings Bank, dated December 31, 1996. INCORPORATED BY
       REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
       FISCAL YEAR ENDED DECEMBER 31, 1997.

10.1   Tax Sharing Agreement among Corning Incorporated, Corning
       Clinical Laboratories Inc. and Covance Inc., dated December
       31, 1996. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
       REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
       1996.

10.2   Spin-Off Tax Indemnification Agreement between Corning
       Incorporated and Covance Inc., dated December 31, 1996.
       INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
       FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

10.3   Spin-Off Tax Indemnification Agreement between Covance Inc.
       and Corning Clinical Laboratories Inc., December 31, 1996.
       INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
       FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

10.4   Spin-Off Tax Indemnification Agreement between Corning
       Clinical Laboratories Inc. and Covance Inc., dated December
       31, 1996. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
       REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
       1996.

10.5   Credit Agreement among Covance Inc., NationsBank, N.A.,
       Wachovia Bank of Georgia, N.A. and Lenders named therein,
       dated November 26,1996. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1996.

10.6   Employee Stock Ownership Plan. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1996.

10.7   Stock Purchase Savings Plan, as amended. INCORPORATED BY
       REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
       FISCAL YEAR ENDED DECEMBER 31, 1996.
</TABLE>

                                                                              45
<PAGE>
<TABLE>
<C>    <S>
10.8   Employee Stock Purchase Plan. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1996.

10.9   Employee Equity Participation Plan. INCORPORATED BY
       REFERENCE TO REGISTRANT'S FILING ON AMENDMENT NO. 3 ON FORM
       10, FILED WITH THE SEC ON NOVEMBER 25, 1996.

10.10  Amended and Restated Supplemental Executive Retirement Plan.
       INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
       FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.

10.11  Restricted Share Plan. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1996.

10.12  Non-Employee Directors' Amended and Restated Restricted
       Stock Plan. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
       REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
       1998.

10.13  Directors' Deferred Compensation Plan, as amended.
       INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
       FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.

10.14  Employment Agreement between Christopher Kuebler and Covance
       Inc. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT
       ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

10.15  Corporate Senior Vice President Employment Letters and
       Schedule. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
       REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
       1996.

10.16  Variable Compensation Plan. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1998.

10.17  Conversion Equity Plan. INCORPORATED BY REFERENCE TO
       REGISTRANT'S FILING ON A REGISTRATION STATEMENT ON FORM S-8,
       REGISTRATION NO. 333-29467, FILED WITH THE SEC ON JUNE 18,
       1997.

10.18  Non-Employee Directors' Stock Option Plan. INCORPORATED BY
       REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
       FISCAL YEAR ENDED DECEMBER 31, 1998.

10.19  Deferred Stock Unit Plan for Non-Employee Members of the
       Board of Directors. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1998.

10.20  Amendment No. 1 to Employment Agreement between Christopher
       Kuebler and Covance Inc. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1998.

10.21  Amendment No. 1 to Corporate Senior Vice President
       Employment Letters between Covance Inc. and each of Messrs.
       Harwood and Hurwitz. INCORPORATED BY REFERENCE TO
       REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
       ENDED DECEMBER 31, 1998.

10.22  Severance Agreement and Release between Covance Inc. and
       James D. Utterback dated as of September 1, 1999.
       INCORPORATED BY REFERENCE TO REGISTRANT'S QUARTERLY REPORT
       ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999.

10.23  Employment Agreement between Christopher A. Kuebler and
       Covance Inc. dated as of May 13, 1999. INCORPORATED BY
       REFERENCE TO REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR
       THE PERIOD ENDED SEPTEMBER 30, 1999.

10.24  2000 Employee Equity Participation Plan. FILED HEREWITH.

21     Subsidiaries. FILED HEREWITH.

23     Consent of PricewaterhouseCoopers LLP. FILED HEREWITH.

27     Financial Data Schedule (EDGAR FILING ONLY).
</TABLE>

(D) FINANCIAL STATEMENT SCHEDULES.

    None.

46
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S>                                                    <C>  <C>
                                                       COVANCE INC.

Dated: March 2, 2000                                   By:  /s/ Christopher A. Kuebler
                                                            ---------------------------------------------------
                                                            Christopher A. Kuebler
                                                            Chairman of the Board, President
                                                            and Chief Executive Officer
</TABLE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                         TITLE                           DATE
                      ---------                                         -----                           ----
<S>                                                    <C>                                       <C>
/s/ Christopher A. Kuebler                             Chairman of the Board,
-------------------------------------------            President and Chief Executive Officer     March 2, 2000
Christopher A. Kuebler                                 (Principal Executive Officer)

/s/ Charles C. Harwood, Jr.                            Corporate Senior Vice President and
-------------------------------------------            Chief Financial Officer                   March 2, 2000
Charles C. Harwood, Jr.                                (Principal Financial Officer)

/s/ Michael Giannetto                                  Corporate Vice President and Controller
-------------------------------------------            (Principal Accounting Officer)            March 2, 2000
Michael Giannetto

/s/ Robert M. Baylis                                   Director
-------------------------------------------                                                      March 2, 2000
Robert M. Baylis

/s/ Van C. Campbell                                    Director
-------------------------------------------                                                      March 2, 2000
Van C. Campbell

/s/ Irwin Lerner                                       Director
-------------------------------------------                                                      March 2, 2000
Irwin Lerner

/s/ J. Randall MacDonald                               Director
-------------------------------------------                                                      March 2, 2000
J. Randall MacDonald

/s/ Nigel W. Morris                                    Director
-------------------------------------------                                                      March 2, 2000
Nigel W. Morris

/s/ Kathleen G. Murray                                 Director
-------------------------------------------                                                      March 2, 2000
Kathleen G. Murray

/s/ William C. Ughetta                                 Director
-------------------------------------------                                                      March 2, 2000
William C. Ughetta
</TABLE>

                                                                              47
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------   ------------------------------------------------------------
<C>                     <S>
         2.1            Transaction Agreement among Corning Incorporated, Corning
                        Life Science Inc., Corning Clinical Laboratories Inc.
                        (Delaware), Covance Inc. and Corning Clinical Laboratories
                        Inc. (Michigan), dated November 22, 1996. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
                        FISCAL YEAR ENDED DECEMBER 31, 1996.

         3.1            Certificate of Incorporation. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S FILING ON AMENDMENT NO. 2 ON FORM 10, FILED
                        WITH THE SEC ON NOVEMBER 19, 1996.

         3.2            By-Laws. INCORPORATED BY REFERENCE TO REGISTRANT'S FILING ON
                        AMENDMENT NO. 2 ON FORM 10, FILED WITH THE SEC ON NOVEMBER
                        19, 1996.

         4.1            Form of Common Stock Certificate. INCORPORATED BY REFERENCE
                        TO REGISTRANT'S FILING ON AMENDMENT NO. 3 ON FORM 10, FILED
                        WITH THE SEC ON NOVEMBER 25, 1996.

         4.2            Rights Agreement between Covance Inc. and Harris Trust and
                        Savings Bank, dated December 31, 1996. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
                        FISCAL YEAR ENDED DECEMBER 31, 1997.

        10.1            Tax Sharing Agreement among Corning Incorporated, Corning
                        Clinical Laboratories Inc. and Covance Inc., dated December
                        31, 1996. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
                        REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
                        1996.

        10.2            Spin-Off Tax Indemnification Agreement between Corning
                        Incorporated and Covance Inc., dated December 31, 1996.
                        INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
                        FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

        10.3            Spin-Off Tax Indemnification Agreement between Covance Inc.
                        and Corning Clinical Laboratories Inc., December 31, 1996.
                        INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
                        FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

        10.4            Spin-Off Tax Indemnification Agreement between Corning
                        Clinical Laboratories Inc. and Covance Inc., dated December
                        31, 1996. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
                        REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
                        1996.

        10.5            Credit Agreement among Covance Inc., NationsBank, N.A.,
                        Wachovia Bank of Georgia, N.A. and Lenders named therein,
                        dated November 26, 1996. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1996.

        10.6            Employee Stock Ownership Plan. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1996.

        10.7            Stock Purchase Savings Plan, as amended. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
                        FISCAL YEAR ENDED DECEMBER 31, 1996.

        10.8            Employee Stock Purchase Plan. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1996.

        10.9            Employee Equity Participation Plan. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S FILING ON AMENDMENT NO. 3 ON FORM
                        10, FILED WITH THE SEC ON NOVEMBER 25, 1996.

        10.10           Amended and Restated Supplemental Executive Retirement Plan.
                        INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
                        FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998.

        10.11           Restricted Share Plan. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1996.

        10.12           Non-Employee Directors' Amended and Restated Restricted
                        Stock Plan. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
                        REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
                        1998.
</TABLE>

48
<PAGE>

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                   DESCRIPTION
---------------------   ------------------------------------------------------------
<C>                     <S>
        10.13           Directors' Deferred Compensation Plan, as amended.
                        INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT ON
                        FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997.

        10.14           Employment Agreement between Christopher Kuebler and Covance
                        Inc. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL REPORT
                        ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.

        10.15           Corporate Senior Vice President Employment Letters and
                        Schedule. INCORPORATED BY REFERENCE TO REGISTRANT'S ANNUAL
                        REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
                        1996.

        10.16           Variable Compensation Plan. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1998.

        10.17           Conversion Equity Plan. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S FILING ON A REGISTRATION STATEMENT ON FORM S-8,
                        REGISTRATION NO. 333-29467, FILED WITH THE SEC ON JUNE 18,
                        1997.

        10.18           Non-Employee Directors' Stock Option Plan. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE
                        FISCAL YEAR ENDED DECEMBER 31, 1998.

        10.19           Deferred Stock Unit Plan for Non-Employee Members of the
                        Board of Directors. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1998.

        10.20           Amendment No. 1 to Employment Agreement between Christopher
                        Kuebler and Covance Inc. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1998.

        10.21           Amendment No. 1 to Corporate Senior Vice President
                        Employment Letters between Covance Inc. and each of Messrs.
                        Harwood and Hurwitz. INCORPORATED BY REFERENCE TO
                        REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
                        ENDED DECEMBER 31, 1998.

        10.22           Severance Agreement and Release between Covance Inc. and
                        James D. Utterback dated as of September 1, 1999.
                        INCORPORATED BY REFERENCE TO REGISTRANT'S QUARTERLY REPORT
                        ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1999.

        10.23           Employment Agreement between Christopher A. Kuebler and
                        Covance Inc. dated as of May 13, 1999. INCORPORATED BY
                        REFERENCE TO REGISTRANT'S QUARTERLY REPORT ON FORM 10-Q FOR
                        THE PERIOD ENDED SEPTEMBER 30, 1999.

        10.24           2000 Employee Equity Participation Plan. FILED HEREWITH.

        21              Subsidiaries. FILED HEREWITH.

        23              Consent of PricewaterhouseCoopers LLP. FILED HEREWITH.

        27              Financial Data Schedule. (EDGAR FILING ONLY).
</TABLE>

                                                                              49