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

                                    FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934
                For the quarterly period ended March 31, 2002
                                       or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934
    For the transition period from ____________________ to ____________________


                         Commission File Number: 1-12213

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

                 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)

       Registrant's telephone number, including area code: (609) 452-4440


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
                                       ---     ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 10, 2002, the Registrant had 62,225,577 shares of Common Stock
outstanding.
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                                                   Covance Inc.
                             Form 10-Q For the Quarterly Period Ended March 31, 2002

                                                      INDEX
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                           <C>
     Part I. Financial Information

     Item 1.  Financial Statements (Unaudited)

       Consolidated Balance Sheets--March 31, 2002 and December 31, 2001.................................     2

       Consolidated Statements of Income--Three Months ended March 31, 2002 and 2001.....................     3

       Consolidated Statements of Cash Flows--Three Months ended March 31, 2002 and 2001.................     4

       Notes to Consolidated Financial Statements.......................................................      5


     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.....      9

     Item 3.  Quantitative and Qualitative Disclosure About Market Risk.................................     18


     Part II. Other Information


     Item 6.  Exhibits and Reports on Form 8-K..........................................................     18


     Signature Page.....................................................................................     19




                                                                                                              1
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<CAPTION>
                                          COVANCE INC. AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS


(Dollars in thousands)                                                              March 31,      December 31,
                                                                                      2002             2001
                                                                                  -------------    -------------
<S>                                                                               <C>              <C>
Assets                                                                             (UNAUDITED)
Current Assets:
    Cash and cash equivalents .................................................   $      34,403    $      35,404
    Accounts receivable .......................................................         158,559          167,840
    Unbilled services .........................................................          43,570           40,895
    Inventory .................................................................          33,738           36,131
    Deferred income taxes .....................................................          13,771           13,445
    Prepaid expenses and other current assets .................................          38,745           30,778
                                                                                  -------------    -------------
       Total Current Assets ...................................................         322,786          324,493
Property and equipment, net ...................................................         224,384          228,092
Goodwill, net .................................................................          54,066           54,038
Other assets ..................................................................           5,060            5,405
                                                                                  -------------    -------------
       Total Assets ...........................................................   $     606,296    $     612,028
                                                                                  =============    =============
Liabilities and Stockholders' Equity
Current Liabilities:
    Accounts payable ..........................................................   $      17,186    $      21,134
    Accrued payroll and benefits ..............................................          39,305           45,902
    Accrued expenses and other current liabilities ............................          39,387           40,296
    Unearned revenue ..........................................................         118,314          116,712
    Income taxes payable ......................................................           6,669            2,739
                                                                                  -------------    -------------
       Total Current Liabilities ..............................................         220,861          226,783
Long-term debt ................................................................              --           15,000
Deferred income taxes .........................................................          11,685           11,613
Other liabilities .............................................................          13,930           13,687
                                                                                  -------------    -------------
       Total Liabilities ......................................................         246,476          267,083
                                                                                  -------------    -------------
Commitments and Contingent Liabilities
Stockholders' Equity:
    Preferred Stock - Par value $1.00 per share; 10,000,000
          shares authorized; no shares issued and outstanding
          at March 31, 2002 and December 31, 2001, respectively ...............              --               --
    Common Stock - Par value $0.01 per share; 140,000,000
          shares authorized; 62,186,312 and 61,882,084 shares
          issued and outstanding, including those held in treasury,
          at March 31, 2002 and December 31, 2001, respectively ...............             622              619
    Paid-in capital ...........................................................         126,898          122,217
    Retained earnings .........................................................         267,104          255,326
    Accumulated other comprehensive income (loss)--
          Cumulative translation adjustment ...................................         (13,762)         (12,310)
    Treasury stock at cost (2,078,873 and 2,073,772 shares at
          March 31, 2002 and December 31, 2001, respectively) .................         (21,042)         (20,907)
                                                                                  -------------    -------------
       Total Stockholders' Equity .............................................         359,820          344,945
                                                                                  -------------    -------------
       Total Liabilities and Stockholders' Equity .............................   $     606,296    $     612,028
                                                                                  =============    =============


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

                                                                                                                2
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                                     COVANCE INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF INCOME
                                              (UNAUDITED)

                                                                       Three Months Ended March 31
                                                                    ----------------------------------
(Dollars in thousands, except per share data)                          2002                   2001
                                                                    ------------          ------------
<S>                                                                 <C>                   <C>
Net revenues ...................................................    $    208,582          $    228,658
Reimbursable out-of-pockets ....................................           9,700                 9,947
                                                                    ------------          ------------
         Total revenues ........................................         218,282               238,605
                                                                    ------------          ------------

Costs and expenses:
    Cost of revenue (including reimbursable expenses) ..........         157,759               176,463
    Selling, general and administrative ........................          31,265                32,297
    Depreciation and amortization ..............................          10,106                13,619
                                                                    ------------          ------------
         Total .................................................         199,130               222,379
                                                                    ------------          ------------
Income from operations .........................................          19,152                16,226
                                                                    ------------          ------------
Other (income) expense, net:
    Interest expense ...........................................             585                 4,532
    Interest income ............................................            (267)                 (317)
    Foreign exchange transaction gain, net .....................            (144)                   (6)
    Gain on sale of business ...................................              --               (39,233)
                                                                    ------------          ------------
         Other (income) expense, net ...........................             174               (35,024)
                                                                    ------------          ------------
Income before taxes ............................................          18,978                51,250
Taxes on income ................................................           7,200                19,425
                                                                    ------------          ------------
Net income .....................................................    $     11,778          $     31,825
                                                                    ============          ============




Basic earnings per share .......................................           $0.20                 $0.55

Weighted average shares outstanding - basic ....................      60,280,237            58,036,599


Diluted earnings per share .....................................           $0.19                 $0.54

Weighted average shares outstanding - diluted ..................      61,705,813            59,096,725


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

                                                                                                     3
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<CAPTION>
                                     COVANCE INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                           FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                              (UNAUDITED)

                                                                          Three Months Ended March 31
                                                                          ----------------------------
(Dollars in thousands)                                                       2002            2001
                                                                          ------------    ------------
<S>                                                                       <C>             <C>
Cash flows from operating activities:
Net income ............................................................   $     11,778    $     31,825
Adjustments to reconcile net income to net cash provided
    by operating activities:
    Gain on sale of business ..........................................             --         (39,233)
    Depreciation and amortization .....................................         10,106          13,619
    Stock issued under employee benefit and stock
      compensation plans ..............................................          2,647           2,295
    Deferred income tax benefit .......................................           (254)         (1,731)
    Other .............................................................            135             872
    Changes in operating assets and liabilities, net of
      business sold:
      Accounts receivable .............................................          9,281          (3,122)
      Unbilled services ...............................................         (2,675)          1,768
      Inventory .......................................................          2,393          (1,325)
      Accounts payable ................................................         (3,948)            164
      Accrued liabilities .............................................         (7,506)        (12,861)
      Unearned revenue ................................................          1,602          10,167
      Income taxes payable ............................................          3,930          18,083
      Other assets and liabilities, net ...............................         (7,692)         (3,879)
                                                                          ------------    ------------
Net cash provided by operating activities .............................         19,797          16,642
                                                                          ------------    ------------
Cash flows from investing activities:
    Proceeds from sale of business ....................................             --         137,500
    Capital expenditures ..............................................         (7,688)        (14,296)
    Other, net ........................................................            (12)              7
                                                                          ------------    ------------
Net cash (used in) provided by investing activities ...................         (7,700)        123,211
                                                                          ------------    ------------
Cash flows from financing activities:
    Net repayments under revolving credit facilities ..................        (15,000)       (104,000)
    Repayments of debt ................................................             --         (18,723)
    Stock issued under employee stock purchase and
      option plans ....................................................          2,037             799
    Purchase of treasury stock ........................................           (135)            (86)
                                                                          ------------    ------------
Net cash used in financing activities .................................        (13,098)       (122,010)
                                                                          ------------    ------------
Net change in cash and cash equivalents ...............................         (1,001)         17,843
Cash and cash equivalents, beginning of period ........................         35,404           7,191
                                                                          ------------    ------------
Cash and cash equivalents, end of period ..............................   $     34,403    $     25,034
                                                                          ============    ============


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

                                                                                                     4
</TABLE>
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                             March 31, 2002 and 2001
               (dollars in thousands, unless otherwise indicated)

1.   Basis of Presentation

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States ("GAAP") for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2002 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2002. The balance sheet at December 31, 2001 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by GAAP for complete financial
statements. You should read these consolidated financial statements together
with the historical consolidated financial statements of Covance Inc. and
subsidiaries ("Covance") for the years ended December 31, 2001, 2000 and 1999
included in our Annual Report on Form 10-K for the year ended December 31, 2001.


2.   Summary of Significant Accounting Policies

     Use of Estimates

     These unaudited consolidated financial statements have been prepared in
conformity with GAAP, which requires 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.

     Reclassifications

     Certain prior period balances have been reclassified to conform with
current year presentation.

     Prepaid Expenses and Other Current Assets

     In connection with the management of multi-site clinical trials, Covance
pays on behalf of its customers fees to investigators, volunteers and other
out-of-pocket costs (such as travel, printing, meetings, couriers, etc.), for
which we are reimbursed at cost, without mark-up or profit. Amounts receivable
from customers in connection with billed and unbilled investigator fees,
volunteer payments and other out-of-pocket pass-through costs are included in
prepaid expenses and other current assets in the accompanying Consolidated
Balance Sheets and totaled $20.5 million and $17.2 million at March 31, 2002 and
December 31, 2001, respectively. See Note 2 "Reimbursable Out-of-Pocket
Expenses".

     Inventory

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

     Goodwill

     Effective January 1, 2002, in accordance with the adoption of Financial
Accounting Standards Board ("FASB") Statement No. 142, Goodwill and Other
Intangible Assets, Covance ceased amortization of goodwill. Had amortization
expense not been recorded for the quarter ended March 31, 2001, the impact on
income from operations, net income and earnings per share would have been an
increase of $0.9 million, $0.7 million, and $0.01 per share, respectively. See
Note 6 "Pro Forma Financial Information".

                                                                               5
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                             March 31, 2002 and 2001
               (dollars in thousands, unless otherwise indicated)

     Comprehensive Income

     Comprehensive income has been calculated in accordance with FASB Statement
No. 130, Reporting Comprehensive Income. Covance has determined total
comprehensive income to be $10.3 million and $32.3 million for the three months
ended March 31, 2002 and 2001, respectively. Covance's total comprehensive
income represents net income plus the change in the cumulative translation
adjustment equity account for the periods presented.

     Earnings Per Share

     Earnings per share has been calculated in accordance with FASB Statement
No. 128, Earnings Per Share. In computing diluted earnings per share for the
three months ended March 31, 2002 and 2001, the denominator was increased by
1,425,576 shares and 1,060,126 shares, respectively, representing the dilutive
effect of stock options outstanding at March 31, 2002 and 2001 with exercise
prices less than the average market price of Covance's common stock during each
respective period.

     Reimbursable Out-of-Pocket Expenses

     As discussed in Note 2 "Prepaid Expenses and Other Current Assets", Covance
pays on behalf of its customers fees to investigators, volunteers and other
out-of-pocket costs for which we are reimbursed at cost, without mark-up or
profit. Effective January 1, 2002, in connection with the required
implementation of Financial Accounting Standards Board Emerging Issues Task
Force Rule No. 01-14 ("EITF 01-14"), Income Statement Characterization of
Reimbursements Received for "Out-of-Pocket" Expenses Incurred, amounts paid to
volunteers and other out-of-pocket costs are now included in cost of revenue,
while the reimbursements received are reported as revenues in the Consolidated
Statements of Income. Covance will continue to exclude from revenue and expense
in the Consolidated Statements of Income fees paid to investigators and the
associated reimbursement since Covance acts as an agent on behalf of the
pharmaceutical company sponsors with regard to investigator payments. See Note 2
"Recently Issued Accounting Standards" for additional information regarding EITF
01-14.

     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 5 "Segment Information".

     Recently Issued Accounting Standards

     In November 2001, the FASB issued EITF 01-14, Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket" Expenses
Incurred. This rule requires that in cases where the contractor acts as a
principal, reimbursements received for out-of-pocket expenses incurred be
characterized as revenue and the associated costs be included as operating
expenses in the income statement. Covance implemented this rule for the quarter
ended March 31, 2002 and as required, has also reclassified comparative
financial information for the quarter ended March 31, 2001. The implementation
of this rule resulted only in the gross up of revenues and expenses and has no
impact upon earnings.

     In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement was effective for
Covance's quarter ended March 31, 2002. These new rules on asset impairment
supersede FASB Statement 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of and portions of APB Opinion 30,
Reporting the Results of Operations. This Standard provides a single accounting
model for long-lived assets to be disposed and significantly changes the
criteria that would have to be met to classify an asset as held-for-sale.
Classification as held-for-sale is an important distinction since such assets
are not depreciated and are stated at the lower of fair value or carrying
amount. This statement also requires expected future operating losses from
discontinued operations to be displayed in the period(s) in which the losses are
incurred, rather than as of the measurement date as presently required. The
adoption of this statement did not have a material impact on Covance's results
of operations, financial position or cash flows.

                                                                               6
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                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                             March 31, 2002 and 2001
               (dollars in thousands, unless otherwise indicated)

     In July 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets. This statement requires that goodwill no longer be amortized
to earnings, but instead be reviewed for impairment. Covance adopted this
statement on January 1, 2002 and accordingly ceased the amortization of
goodwill. The adoption of this statement did not have a material impact on
Covance's financial position or cash flows, and the impact on diluted earnings
per share was $0.01 per share for the quarter ended March 31, 2002.


3.   Supplemental Cash Flow Information

     Cash paid for interest for the three months ended March 31, 2002 and 2001
totaled $0.5 million and $4.6 million, respectively. Cash paid for income taxes
for the three months ended March 31, 2002 and 2001 totaled $3.9 million and $1.4
million, respectively.


4.   Divestitures

     On June 15, 2001, Covance sold its biomanufacturing business
("Biomanufacturing") to Akzo Nobel's pharma business unit, Diosynth, for gross
proceeds of $113.6 million, subject to post-closing adjustments, including
finalization of the closing balance sheet and earnout provision, in accordance
with the Stock Purchase Agreement between Covance and Akzo Nobel, which remains
to be resolved between the parties. Covance recognized a loss of $7.5 million
($4.5 million after tax) from this transaction. Covance used the net proceeds
from the sale of approximately $95 million to reduce borrowings under its senior
revolving credit facility.

     On February 14, 2001, Covance sold its pharmaceutical packaging business
("Packaging") to Fisher Scientific International Inc. for gross proceeds of
$137.5 million. Covance recognized a pre-tax gain of $38.4 million ($24.3
million after tax) from this transaction, of which $39.2 million was recorded
during the three months ended March 31, 2001 in connection with the sale, and
$(0.9) million was recorded during the three months ended June 30, 2001 in
connection with a final working capital adjustment. Covance used the net
proceeds from the sale to repay the $18.5 million balance outstanding on the
mortgage on its North American packaging facility and the remaining net proceeds
of approximately $95 million were used to reduce borrowings under its senior
revolving credit facility.


5.   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 central laboratory, clinical
development, biomanufacturing (through June 15, 2001), commercialization and
other clinical support capabilities (including our packaging operations through
February 14, 2001), 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.

     The information provided below for 2001 is on an "as reported" basis and
has not been restated to exclude the results of Biomanufacturing and Packaging,
which were divested during 2001. Certain of the information below has been
presented on a pro forma basis in Note 6.

                                                                               7
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                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                             March 31, 2002 and 2001
               (dollars in thousands, unless otherwise indicated)

     The accounting policies of the reportable segments are the same as those
described in Note 2. Segment net revenues, operating income and total assets for
the three months ended March 31, 2002 and 2001 are as follows:
<TABLE>
<CAPTION>

                                                      Early            Late-Stage         Other
                                                   Development         Development   Reconciling Items       Total
                                                   -----------         -----------   -----------------       -----

<S>                                                 <C>                <C>            <C>                 <C>
Three months ended March 31, 2002
   Total revenues from external customers...        $   85,384         $ 123,198      $    9,700  (a)     $ 218,282
   Operating income.........................        $   14,180         $  14,028      $   (9,056) (b)     $  19,152
   Total assets.............................        $  287,475         $ 302,838      $   15,983  (c)     $ 606,296

Three months ended March 31, 2001
   Total revenues from external customers...        $   74,045         $ 154,613      $    9,947  (a)     $ 238,605
   Operating income.........................        $   11,336         $  10,660      $   (5,770) (b)     $  16,226
   Total assets.............................        $  229,553         $ 421,990      $   44,726  (c)     $ 696,269
</TABLE>

 ------------
(a)   Represents revenues associated with reimbursable out-of-pocket expenses.
(b)   Represents corporate expenses (primarily information technology,
      marketing, communications, human resources, finance and legal).
(c)   Represents corporate assets.

6.   Pro Forma Financial Information

     The following is a reconciliation between amounts on an "as reported" basis
and amounts on a pro forma basis for the three months ended March 31, 2001. The
pro forma results reflect (1) the exclusion of the results of Packaging and
Biomanufacturing, (2) reduced interest expense from the application of the net
proceeds from the sales of these businesses to outstanding debt, (3) the
exclusion of the net gain recognized on the sale of Packaging during the period,
and (4) the exclusion of goodwill amortization in accordance with the adoption
of FASB Statement No. 142.
<TABLE>
<CAPTION>

                                                                 Pro Forma Adjustments to Remove
                                                   ---------------------------------------------------------
                                         As                        Biomanu-       Net Gain        Goodwill     Pro Forma
                                       Reported     Packaging      facturing       on Sale      Amortization    Results
                                     -----------   -----------    -----------    -----------    ------------  -----------
Three Months Ended March 31, 2001
---------------------------------

<S>                                  <C>           <C>            <C>            <C>            <C>           <C>
Net revenues ..................      $   228,658   $   (11,439)   $   (21,610)   $        --    $        --   $   195,609

Income from operations ........      $    16,226   $    (3,807)   $     1,718    $        --    $       881   $    15,018

Income before taxes ...........      $    51,250   $    (2,580)   $     3,703    $   (39,233)   $       881   $    14,021

Taxes on income ...............      $    19,425   $      (762)   $     1,481    $   (14,908)   $       172   $     5,408

Net income ....................      $    31,825   $    (1,818)   $     2,222    $   (24,325)   $       709   $     8,613

Diluted earnings per share.....      $      0.55   $     (0.03)   $      0.04    $     (0.42)   $      0.01   $      0.15

                                                                                                                        8
</TABLE>
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

     You should read the following discussion together with the unaudited
Covance consolidated financial statements and the accompanying notes included in
this Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.

Overview

     Covance is a leading contract research organization providing a wide range
of product development services on a worldwide basis primarily to the
pharmaceutical, biotechnology and medical device industries. Covance also
provides services such as laboratory testing to the chemical, agrochemical and
food industries. The foregoing services comprise two segments for financial
reporting purposes: early development services, which includes preclinical and
Phase I clinical; and late-stage development services, which includes central
laboratory, clinical development, biomanufacturing (through June 15, 2001),
commercialization and other clinical support services (including our packaging
operations through February 14, 2001). Covance believes it is one of the largest
biopharmaceutical contract research organizations, based on 2001 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.

     On June 15, 2001, Covance sold its biomanufacturing business
("Biomanufacturing") to Akzo Nobel's pharma business unit, Diosynth, for gross
proceeds of $113.6 million, subject to post-closing adjustments, including
finalization of the closing balance sheet and earnout provision, in accordance
with the Stock Purchase Agreement between Covance and Akzo Nobel, which remains
to be resolved between the parties. Covance recognized a loss of $7.5 million
($4.5 million after tax) from this transaction. On February 14, 2001, Covance
sold its pharmaceutical packaging business ("Packaging") to Fisher Scientific
International Inc. for gross proceeds of $137.5 million. Covance recognized a
pre-tax gain of $38.4 million ($24.3 million after tax) from this transaction,
of which $39.2 million was recorded during the three months ended March 31, 2001
in connection with the sale, and $(0.9) million was recorded during the three
months ended June 30, 2001 in connection with a final working capital
adjustment.

     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, but can extend in duration up to five 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, depending upon
the nature of the work contracted. Where the percentage of completion method is
used, Covance generally measures progress toward completion in terms of
units-of-work performed as compared to the total units-of-work contracted. 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. These amounts are deferred and recognized as revenue as services are
performed. Additional payments are made based upon the achievement of
performance-based milestones over the contract duration. In connection with the
management of multi-site clinical trials, Covance pays on behalf of its
customers fees to investigators, volunteers and other out-of-pocket costs (such
as travel, printing, meetings, couriers, etc.), for which we are reimbursed at
cost, without mark-up or profit. Investigator fees are not reflected in total
revenues or expenses since Covance acts in the capacity of an agent on behalf of
the pharmaceutical company sponsor, passing through these costs 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.

     Effective January 1, 2002, in connection with the required implementation
of Financial Accounting Standards Board Emerging Issues Task Force Rule No.
01-14 ("EITF 01-14"), Income Statement Characterization of Reimbursements
Received for "Out-of-Pocket" Expenses Incurred, amounts paid to volunteers and
other out-of-pocket costs are now included in cost of revenue, while the
reimbursements received are reported as reimbursable out-of-pocket revenues in
the Consolidated Statements of Income. Covance will continue to exclude from
revenue and expense in the Consolidated Statements of Income fees paid to
investigators and the associated reimbursement since Covance acts as an agent on
behalf of the pharmaceutical company sponsors with regard to investigator
payments. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - New Accounting Pronouncements" for additional
information regarding EITF 01-14.

                                                                               9
<PAGE>

     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, and excludes depreciation and amortization. Also,
as mentioned above, cost of revenue now includes reimbursable out-of-pocket
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, and excludes
depreciation and amortization.

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 factors such as
(1) delays in initiating or completing significant drug development trials, (2)
termination or reduction in size of drug development trials, (3) acquisitions
and divestitures, and (4) exchange rate fluctuations. Delays and terminations of
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, moderate variations in the commencement, progress or
completion of drug development trials may cause significant variations in
quarterly results.

Results of Operations

     Variances explained below are on an "as reported" basis, but also include
certain pro forma variances (where so noted) - that is, variances between the
three months ended March 31, 2002 and 2001 after giving effect to 1) the
divestiture of Packaging and Biomanufacturing as if these transactions had
occurred on January 1, 2001, and 2) the exclusion of goodwill amortization in
accordance with the adoption of FASB Statement No. 142 (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations - New
Accounting Pronouncements" for additional information regarding Statement No.
142).

Three Months Ended March 31, 2002 Compared with Three Months Ended March 31,
2001. Net revenues decreased 8.8% to $208.6 million for the three months ended
March 31, 2002 from $228.7 million for the corresponding 2001 period, as the
2001 period includes revenues from Covance's biomanufacturing operations for the
entire period and includes revenues from Covance's packaging operations through
February 14, 2001. On a pro forma basis, net revenues increased 6.6% to $208.6
million for the three months ended March 31, 2002 from $195.6 million for the
corresponding 2001 period. Excluding the impact of foreign exchange rate
variances between both periods, on a pro forma basis, net revenues increased
7.5% as compared to the corresponding 2001 period. Net revenues from Covance's
early development segment grew 15.3%, or 16.4% excluding the impact of foreign
exchange rate variances between both periods, driven primarily by growth in our
toxicology service offering. On a pro forma basis, net revenues from Covance's
late-stage development segment increased 1.3%, or 2.0% excluding the impact of
foreign exchange rate variances between both periods. The modest late-stage
development revenue growth was impacted by our strategy to first improve our
operating margins by an increased focus on contract selectivity, particularly in
our Phase II/III services, and the slower conversion of our backlog to revenue,
particularly in our central laboratory business. Our Phase IV and other
late-stage service offerings continue to experience solid revenue growth.

     Cost of revenue, excluding reimbursable out-of-pocket expenses totaling
$9.7 million, decreased 11.1% to $148.1 million or 71.0% of net revenues for the
three months ended March 31, 2002 as compared to $166.5 million (excluding
reimbursable out-of-pocket expenses totaling $9.9 million) or 72.8% of net
revenues for the corresponding 2001 period. Excluding reimbursable out-of-pocket
expenses, gross margins were 29.0% for the three months ended March 31, 2002 and
27.2% for the corresponding 2001 period, as the 2001 period includes Covance's
biomanufacturing operations for the entire period and Covance's packaging
operations through February 14, 2001. Also, the 2001 period included higher
investment spending on internet initiatives and lower margins on bioanalytical
services.

     Overall, selling, general and administrative expenses decreased 3.2% to
$31.3 million for the three months ended March 31, 2002 from $32.3 million for
the corresponding 2001 period. As a percentage of net revenues, selling, general
and administrative expenses increased to 15.0% for the three months ended March
31, 2002 from 14.1% for the corresponding 2001 period, as the 2001 period
includes Covance's biomanufacturing operations for the entire period and
Covance's packaging operations through February 14, 2001. On a pro forma basis,
as a percentage of net revenues, selling, general and administrative expenses
were 14.9% for the 2001 period.

                                                                              10
<PAGE>

     Depreciation and amortization decreased 25.8% to $10.1 million or 4.8% of
net revenues for the three months ended March 31, 2002 as compared to $13.6
million or 6.0% of net revenues for the corresponding 2001 period, due primarily
to the divestiture of our capital intensive biomanufacturing and packaging
businesses in the first half of 2001, and the implementation of FASB Statement
No. 142 in the first quarter of 2002, which has eliminated the amortization of
goodwill. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - New Accounting Pronouncements."

     Income from operations increased 18.0% to $19.2 million for the three
months ended March 31, 2002 from $16.2 million for the corresponding 2001
period. Income from operations from Covance's early development segment
increased $2.8 million or 25.1% to $14.2 million or 16.6% of net revenues for
the three months ended March 31, 2002 from $11.3 million or 15.3% of net
revenues for the corresponding 2001 period, primarily driven by growth in our
toxicology services offering. Income from operations from Covance's late-stage
development segment increased $3.4 million or 31.6% to $14.0 million or 11.4% of
net revenues for the three months ended March 31, 2002 from $10.7 million or
8.8% of net revenues for the corresponding 2001 period.

     On a pro forma basis, income from operations increased 27.5% to $19.2
million for the three months ended March 31, 2002 from $15.0 million for the
corresponding 2001 period. As a percentage of net revenues on a pro forma basis,
income from operations increased to 9.2% for the three months ended March 31,
2002 from 7.7% for the corresponding 2001 period. On a pro forma basis, income
from operations from Covance's late-stage development segment increased $4.7
million or 50.5% to $14.0 million as compared to $9.3 million for the three
months ended March 31, 2001. The increase in late-stage development operating
income on a pro forma basis was due to Covance's continued focus on margin
improvement in our Phase II/III services mentioned above, and margin growth in
Phase IV services.

     Other expense, net for the 2001 period includes a $39.2 million pre-tax
gain on the sale of Packaging in February 2001. Excluding this gain, other
expense, net decreased $4.0 million to $0.2 million for the three months ended
March 31, 2002 from $4.2 million for the corresponding 2001 period, due
primarily to a decrease in interest expense of $3.9 million resulting from a
decrease in the weighted average borrowings under our long-term credit facility
resulting from the divestitures as previously mentioned.

     Covance's effective tax rate for both the three month periods ended March
31, 2002 and 2001 was 37.9%.

     Net income was $11.8 million for the three months ended March 31, 2002
versus $31.8 million for the corresponding 2001 period. On a pro forma basis,
net income increased 36.7% or $3.2 million for the three months ended March 31,
2002 as compared to $8.6 million for the corresponding 2001 period.

Liquidity and Capital Resources

     Covance's expected 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. On June 28, 2001, Covance replaced its credit facility with a new $150
million senior revolving credit facility (the "Credit Facility"). Covance
believes cash from operations and available borrowings under the Credit Facility
will provide sufficient liquidity for the foreseeable future. At March 31, 2002,
there were no outstanding borrowings and $0.9 million of outstanding letters of
credit under the Credit Facility. At December 31, 2001, there was $15.0 million
of outstanding borrowings and $0.9 million of outstanding letters of credit
under the Credit Facility. Interest on all outstanding borrowings under the
Credit Facility is based upon the London Interbank Offered Rate ("LIBOR") plus a
margin and approximated 3.22% per annum for the three month period ended March
31, 2002. Interest on the previous credit facility approximated 7.89% for the
same period in 2001. Costs associated with replacing the previous credit
facility in June 2001, consisting primarily of bank fees totaling $1.7 million,
are being amortized over the three year facility term.

     During the three months ended March 31, 2002, Covance's operations provided
net cash of $19.8 million, an increase of $3.2 million from the corresponding
2001 period. Cash flows from net earnings adjusted for non-cash activity
provided $24.4 million for the three months ended March 31, 2002, up $16.8
million or 219.2% from $7.6 million for the corresponding 2001 period. The
change in net operating assets used $4.6 million in cash during the three months
ended March 31, 2002, primarily due to a reduction in accrued liabilities, while
this net change provided $9.0 million in cash during the three months ended
March 31, 2001, primarily due to an increase in unearned revenue and income
taxes payable. Covance's ratio of current assets to current liabilities was 1.46
at March 31, 2002 and 1.43 at December 31, 2001.

                                                                              11
<PAGE>

     Net days sales outstanding ("DSOs") at March 31, 2002 were 36 days, down
from 41 days at December 31, 2001. DSOs are currently at historic lows, and
accordingly Covance does not expect to experience significant additional
improvement in DSOs during the remainder of 2002. DSOs have historically
followed a seasonal pattern whereby they are generally at their lowest levels at
year end and increase during the first six to nine months of the year, before
returning to their seasonally lower levels at year end. The impact upon
liquidity from a one day change in DSOs is approximately $2 million in cash
flow.

     Investing activities for the three months ended March 31, 2002 used $7.7
million, compared to using $14.3 million for the corresponding 2001 period,
excluding the $137.5 million in proceeds from the sale of Packaging in the first
quarter of 2001. Capital spending for the first three months of 2002 totaled
$7.7 million, and was primarily for the expansion of Covance's toxicology
capacity, outfitting of new facilities, purchase of new equipment, upgrade of
existing equipment and computer equipment and software for newly hired
employees. Capital spending for the corresponding 2001 period was primarily for
the outfitting of new facilities, purchase of new equipment, upgrade of existing
equipment and computer equipment and software for newly hired employees.

     Planned capital expenditures in 2002 include spending associated with the
$27 million expansion of Covance's toxicology capacity in Madison, Wisconsin and
the $13 million expansion and enhancement of our Harrogate, England facility.

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. These risks are 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. 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. See "Risk Factors."

     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 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 in this manner affects the stockholders'
equity account, referred to as the cumulative translation adjustment account.
This account exists only in the foreign subsidiary's U.S. dollar balance sheet
and is necessary to keep the foreign balance sheet 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.

                                                                              12
<PAGE>

Inflation

     While most of Covance's net revenues are earned under contracts, the
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.

New Accounting Pronouncements

     In November 2001, the FASB issued EITF 01-14, Income Statement
Characterization of Reimbursements Received for "Out-of-Pocket" Expenses
Incurred. This rule requires that in cases where the contractor acts as a
principal, reimbursements received for out-of-pocket expenses incurred be
characterized as revenue and the associated costs be included as operating
expenses in the income statement. Covance implemented this rule for the quarter
ended March 31, 2002 and as required, has also reclassified comparative
financial information for the quarter ended March 31, 2001. The implementation
of this rule results only in the gross up of revenues and expense and has no
impact upon earnings.

     In October 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement was effective for
Covance's quarter ended March 31, 2002. These new rules on asset impairment
supersede FASB Statement 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of and portions of APB Opinion 30,
Reporting the Results of Operations. This Standard provides a single accounting
model for long-lived assets to be disposed and significantly changes the
criteria that would have to be met to classify an asset as held-for-sale.
Classification as held-for-sale is an important distinction since such assets
are not depreciated and are stated at the lower of fair value or carrying
amount. This statement also requires expected future operating losses from
discontinued operations to be displayed in the period(s) in which the losses are
incurred, rather than as of the measurement date as presently required. The
adoption of this statement did not have a material impact on Covance's results
of operations, financial position or cash flows.

     In July 2001, the FASB issued Statement No. 142, Goodwill and Other
Intangible Assets. This statement requires that goodwill no longer be amortized
to earnings, but instead be reviewed for impairment. Covance adopted this
statement on January 1, 2002 and accordingly ceased the amortization of
goodwill. The adoption of this statement did not have a material impact on
Covance's financial position or cash flows, and the impact on diluted earnings
per share was $0.01 per share for the quarter ended March 31, 2002.


     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 Quarterly Report on Form 10-Q 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, without limitation,
competitive factors, outsourcing trends in the pharmaceutical industry, the
Company's ability to continue to attract and retain qualified personnel, the
fixed price nature of contracts or the loss of large contracts, the Company's
ability to increase profitability of its clinical development services and to
increase order volume in central laboratory services, and continued growth in
demand for bioanalytical services and Covance's ability to provide these
services on a large scale basis, and other factors described in Covance's
filings with the Securities and Exchange Commission including its Annual Report
on Form 10-K.

                                                                              13
<PAGE>

Risk Factors

     This section discusses various risk factors that are attendant with our
business and the provision of our services. If the events outlined below were to
occur individually or in the aggregate, our business, results of operations and
financial condition could be materially adversely affected.

Changes in government regulation could decrease the need for the services we
provide.

     Governmental agencies throughout the world, but particularly in the United
States, strictly regulate the drug development process. Our business involves
helping pharmaceutical and biotechnology companies navigate the regulatory drug
approval process. Changes in regulation, such as a relaxation in regulatory
requirements or the introduction of simplified drug approval procedures or an
increase in regulatory requirements that we have difficulty satisfying, could
eliminate or substantially reduce the need for our services. Also, if government
efforts to contain drug costs and pharmaceutical and biotechnology company
profits from new drugs, our customers may spend less, or reduce their growth in
spending, on research and development.

Failure to comply with existing regulations could result in a loss of revenue or
earnings.

     Any failure on our part to comply with applicable regulations could result
in the termination of on-going research or sales and marketing projects or the
disqualification of data for submission to regulatory authorities. For example,
if we were to fail to verify that patient participants were fully informed and
have fully consented to a particular clinical trial, the data collected from
that trial could be disqualified. If this were to happen, we could be
contractually required to repeat the trial at no further cost to our customer,
but at substantial cost to us.

We may bear financial losses because most of our contracts are of a fixed price
nature and may be delayed or terminated or reduced in scope for reasons beyond
our control.

     As described in our discussion of contractual arrangements in the
description of our business, most of our contracts provide for services on a
fixed price or fee-for-service with a cap basis and they may be terminated or
reduced in scope either immediately or upon notice. Since our contracts are
predominantly structured as fixed price or fee-for-service with a cap, we bear
the risk of a financial loss if we initially under price our contracts or
otherwise overrun our cost estimates. Such under pricing or significant cost
overruns could have a material adverse effect on our business, results of
operations or financial condition. Cancellations may occur for a variety of
reasons, including:

     o   the failure of products to satisfy safety requirements;

     o   unexpected or undesired results of the products;

     o   insufficient patient enrollment;

     o   insufficient investigator recruitment;

     o   the client's decision to terminate the development of a product or to
         end a particular study; and

     o   our failure to perform properly our duties under the contract.

The loss, reduction in scope or delay of a large contract or the loss or delay
of multiple contracts could materially adversely affect our business, although
our contracts frequently entitle us to receive the costs of winding down the
terminated projects, as well as all fees earned by us up to the time of
termination. Some contracts also entitle us to a termination fee, usually in the
form of a pre-set penalty or a percentage of the revenue expected to be earned
for completion of the project.

We may not be able to successfully develop and market new services.

     An important element of our strategy is the successful development and
marketing of new services that complement or expand our existing business. If we
are unable to (1) develop new services and (2) create demand for those newly
developed services, we will not be able to implement this element of our
strategy, and our future business, results of operations and financial condition
could be adversely affected. For example, we have recently introduced our
bioanalytical service offerings. If

                                                                              14
<PAGE>

demand for these services does not develop as anticipated, our business,
financial condition, or results of operations may be materially adversely
affected. We cannot assure you that we will be able to develop or market this
type of service successfully.

Our quarterly operating results may vary.

     Our operating results may vary significantly from quarter to quarter and
are influenced by such factors as:

     o   the commencement, completion or cancellation of large contracts;

     o   the progress of ongoing contracts;

     o   the timing of and charges associated with completed acquisitions or
         other events;

     o   changes in the mix of our services; and

     o   exchange rate fluctuations.

     We believe that operating results for any particular quarter are not
necessarily a meaningful indication of future results. While fluctuations in our
quarterly operating results could negatively affect the market price of our
common stock, these fluctuations may not be related to our future overall
operating performance.

We depend on the pharmaceutical and biotechnology industries.

     Our revenues depend greatly on the expenditures made by the pharmaceutical
and biotechnology industries in research and development. Accordingly, economic
factors and industry trends that affect our clients in these industries also
affect our business. For example, the practice of many companies in these
industries has been to hire outside organizations such as ourselves to conduct
large clinical research and development projects. This practice has grown
significantly in the last decade, and we have benefited from this trend.
However, if this trend were to change and companies in these industries were to
reduce the number of research and development projects they outsource, our
business could be materially adversely affected.

We operate in a highly competitive industry.

     Competitors in the contract research organization industry range from
small, limited-service providers to full service global contract research
organizations. Our main competition consists of in-house departments of
pharmaceutical companies, full-service contract research organizations, and
universities and teaching hospitals, although to a lesser degree. We compete on
a variety of factors, including:

     o   reputation for on-time quality performance;

     o   expertise and experience in specific areas;

     o   scope of service offerings;

     o   strengths in various geographic markets;

     o   price;

     o   technological expertise and efficient drug development processes;

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

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

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

     o   size.

                                                                              15
<PAGE>

     For instance, our clinical development services have from time to time
experienced periods of increased price competition which had a material adverse
effect on Covance's late-stage development profitability and consolidated net
revenues and net income. Covance took actions in 2000 to mitigate the effects of
this price competition; however, if market conditions were to deteriorate,
additional actions might be required in the future.

     There is competition among the larger contract research organizations for
both clients and potential acquisition candidates. Additionally, small,
limited-service entities considering entering the contract research organization
industry will find few barriers to entry, thus further increasing possible
competition.

     Finally, an increase in investment community interest in our industry could
result in an increased availability of financial resources for contract research
organizations. Such availability of resources could lead to increased
competition. We cannot assure you that competing pressures we face will not have
a material effect on us.

We may expand our business through acquisitions.

     We review many acquisition candidates and, in addition to acquisitions
which we have already made, we are continually evaluating new acquisition
opportunities. Factors which may affect our ability to grow successfully through
acquisitions include:

     o   difficulties and expenses in connection with integrating the acquired
         company and achieving the expected benefits;

     o   diversion of management's attention from current operations;

     o   the possibility that we may be adversely affected by risk factors
         facing the acquired companies;

     o   acquisitions could be dilutive to earnings, or in the event of
         acquisitions made through the issuance of our common stock to the
         shareholders of the acquired company, dilutive to the percentage of
         ownership of our existing stockholders;

     o   potential losses resulting from undiscovered liabilities of acquired
         companies not covered by the indemnification we may obtain from the
         seller;

     o   risks of not being able to overcome differences in foreign business
         practices, language and other cultural barriers in connection with the
         acquisition of foreign companies; and

     o   loss of key employees of the acquired company.

We may be affected by potential health care reform.

     In recent years the United States Congress and state legislatures have
considered various types of health care reform in order to control growing
health care costs. Health care reform may again be addressed by the United
States Congress and state legislatures. We are unable to predict what
legislative proposals will be adopted in the future, if any. Similar reform
movements have occurred in Europe and Asia.

     Implementation of health care reform legislation that contain costs could
limit the profits that can be made from the development of new drugs. This could
adversely affect research and development expenditures by pharmaceutical and
biotechnology companies which could in turn decrease the business opportunities
available to us both in the United States and abroad. In addition, new laws or
regulations may create a risk of liability, increase our costs or limit our
service offerings. We cannot predict the likelihood of any of these events.

Our revenues and earnings are exposed to exchange rate fluctuations.

     We derive a large portion of our net revenues from international
operations. In 2001, we derived approximately 32% of our net revenues from
outside the United States. Our financial statements are denominated in U.S.
dollars. As a result, factors associated with international operations,
including changes in foreign currency exchange rates, could significantly affect
our results of operations and financial condition.

                                                                              16
<PAGE>

The loss of our key personnel could adversely affect our business.

     Our success depends to a significant extent upon the efforts of our senior
management team and other key personnel. We do not maintain insurance on the
life of any of our employees. The loss of the services of such personnel could
adversely affect our business. Because of the nature of our business, our
success is dependent upon our ability to attract and retain technologically
qualified personnel. There is substantial competition for qualified personnel,
and we cannot assure you that we will be successful in recruiting or retaining
qualified personnel to enable us to conduct our business and compete effectively
in our industry.

Our contract research services create a risk of liability.

     In connection with many clinical trials, we contract with physicians, also
referred to as investigators, to conduct the clinical trials to test new drugs
on human volunteers. These tests can create a risk of liability for personal
injury or death to volunteers, resulting from negative reactions to the drugs
administered or from professional malpractice by third party investigators,
particularly to volunteers with life-threatening illnesses. We do not believe we
are legally accountable for the medical care rendered by third-party
investigators and we seek to limit our liability with trial sponsors, third
party investigators and others. However, it is possible that we could be exposed
to liability. For example, we could be held liable for the following:

     o   our errors or omissions that create harm during a trial to study
         volunteers or after a trial to consumers of the drug after regulatory
         approval of the drug;

     o   general risks associated with our Phase I facilities, including
         negative consequences from the administration of drugs to clinical
         trial participants or the professional malpractice of Phase I medical
         care providers;

     o   errors or omissions by our preclinical or central laboratories that
         cause harm to study volunteers or consumers of an approved drug;

     o   errors or omissions by our preclinical laboratories arising from our
         tests conducted for the agrochemical and food industries; and

     o   risks that animals in our breeding facilities may be infected with
         diseases that may be harmful and even lethal to themselves and humans
         despite preventive measures contained in our company policies for the
         quarantine and handling of imported animals.

     We believe that our risks are generally reduced by the following:

     o   contracts with our clients and, where applicable, investigators
         containing provisions entitling us to be indemnified by them;

     o   insurance maintained by our clients, investigators, where applicable,
         and by us; and

     o   various regulatory requirements we must follow in connection with our
         business.

     Contractual indemnifications generally do not protect us against liability
arising from certain of our own actions, such as negligence. We could be
materially and adversely affected if we were required to pay damages or bear the
costs of defending any claim (1) which is not covered by a contractual
indemnification provision, (2) in the event that a party who must indemnify us
does not fulfill its indemnification obligations or (3) which is beyond the
level of our insurance coverage. There can be no assurance that we will be able
to maintain such insurance coverage on terms acceptable to us.

Reliance on air transportation.

     Our central laboratories and, to a lesser extent, our other businesses, are
heavily reliant on air travel for transport of clinical trial kits and other
material and people, and disruption to the air travel system could have a
material adverse effect on our business. While we have developed contingency
plans for a variety of events that could disrupt or limit available air
transportation, there are no assurances that such plans will be effective or
sufficient to avert such a material adverse effect.

                                                                              17
<PAGE>

Actions of animal rights extremists may affect our business.

     Our early development services utilize animals (predominantly rodents) in
preclinical testing of the safety and efficacy of drugs and also breeds and sell
animals for biomedical research. Acts of vandalism and other acts by animal
rights extremists who object to the use of animals in drug development could
have a material adverse effect on our business.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk

     Our $150.0 million credit facility is U.S. Dollar denominated and is not
subject to transaction or translation exposure. Interest on all outstanding
borrowings under this credit facility is based upon LIBOR plus a margin and
approximated 3.22% per annum for the three months ended March 31, 2002. At March
31, 2002 we did not have any outstanding borrowings under our credit facility.

     For the three months ended March 31, 2002, approximately 33% of our net
revenues were from outside the United States. We do not engage in derivative or
hedging activities related to our potential foreign exchange exposures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Foreign Currency" for a more detailed discussion of our foreign
currency risks and exposures.


Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

         Not applicable

(b)      Reports on Form 8-K

         During the three month period ended March 31, 2002, no reports on Form
         8-K were filed.

                                                                              18
<PAGE>

                                   SIGNATURES


Pursuant to the requirements 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.
                                                   COVANCE INC.

Dated: April 26, 2002                         By:  /s/ Christopher A. Kuebler
                                                   ---------------------------
                                                       Christopher A. Kuebler
                                                       Chairman of the Board and
                                                       Chief Executive Officer

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
-----------------------------------
    Christopher A. Kuebler                  Chairman of the Board and                  April 26, 2002
                                            Chief Executive Officer
                                            (Principal Executive Officer)

/s/ William E. Klitgaard
-----------------------------------
    William E. Klitgaard                    Corporate Senior Vice President            April 26, 2002
                                            and Chief Financial Officer
                                            (Principal Financial Officer)

/s/ Michael Giannetto
-----------------------------------
     Michael Giannetto                      Corporate Vice President and Controller    April 26, 2002
                                            (Principal Accounting Officer)




                                                                                                   19
</TABLE>