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 September 30, 2001
                                       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 October 15, 2001, the Registrant had 59,418,167 shares of Common Stock
outstanding.
<PAGE>

                                  Covance Inc.
           Form 10-Q For the Quarterly Period Ended September 30, 2001

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
Part I.  Financial Information


Item 1.  Financial Statements (Unaudited)

  Consolidated Balance Sheets--September 30, 2001 and December 31, 2000................................    2

  Consolidated Statements of Income--Three and Nine months ended September 30, 2001 and 2000...........    3

  Consolidated Statements of Cash Flows--Nine months ended September 30, 2001 and 2000.................    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.....................................   14


Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K..............................................................   15


Signature Page.........................................................................................   16
</TABLE>

                                      - 1 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(Dollars in thousands)                                                September 30,   December 31,
                                                                          2001           2000
                                                                        ---------      ---------
                                                                       (UNAUDITED)
<S>                                                                     <C>            <C>
Assets
Current Assets:
    Cash and cash equivalents .....................................     $  40,231      $   7,191
    Accounts receivable, net ......................................       151,838        168,006
    Unbilled services .............................................        45,602         66,135
    Inventory .....................................................        32,674         30,963
    Deferred income taxes .........................................        28,877         32,696
    Prepaid expenses and other current assets .....................        31,788         48,021
                                                                        ---------      ---------
       Total Current Assets .......................................       331,010        353,012
Property and equipment, net .......................................       200,251        331,689
Goodwill, net .....................................................        54,900         81,327
Other assets ......................................................         5,651          5,063
                                                                        ---------      ---------
       Total Assets ...............................................     $ 591,812      $ 771,091
                                                                        =========      =========
Liabilities and Stockholders' Equity
Current Liabilities:
    Accounts payable ..............................................     $  19,792      $  28,312
    Accrued payroll and benefits ..................................        47,134         44,167
    Accrued expenses and other current liabilities ................        38,509         45,720
    Unearned revenue ..............................................        99,454         96,085
    Short-term debt and current portion of long-term debt .........            --        235,499
    Income taxes payable ..........................................         7,700          1,939
                                                                        ---------      ---------
       Total Current Liabilities ..................................       212,589        451,722
Long-term debt ....................................................        10,000         17,224
Deferred income taxes .............................................        25,458         20,943
Other liabilities .................................................        13,392         15,451
                                                                        ---------      ---------
       Total Liabilities ..........................................       261,439        505,340
                                                                        ---------      ---------
Commitments and Contingent Liabilities

Stockholders' Equity:
    Common Stock - Par value $0.01 per share; 140,000,000 shares
       authorized 61,470,703 and 59,820,253 shares issued and
       outstanding, including those held in treasury, at
       September 30, 2001 and December 31, 2000, respectively .....           615            598
    Paid-in capital ...............................................       115,598         92,572
    Retained earnings .............................................       245,551        207,426
    Accumulated other comprehensive income (loss)--
       Cumulative translation adjustment ..........................       (10,484)       (14,938)
    Treasury Stock at cost (2,073,772 and 2,025,589 shares at
       September 30, 2001 and December 31, 2000, respectively) ....       (20,907)       (19,907)
                                                                        ---------      ---------
       Total Stockholders' Equity .................................       330,373        265,751
                                                                        ---------      ---------
    Total Liabilities and Stockholders' Equity ....................     $ 591,812      $ 771,091
                                                                        =========      =========
</TABLE>

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

                                     - 2 -
<PAGE>

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

<TABLE>
<CAPTION>
                                                       Three Months Ended                   Nine Months Ended
                                                           September 30                        September 30
                                                  ------------------------------      ------------------------------
(Dollars in thousands, except per share data)         2001              2000              2001              2000
                                                  ------------      ------------      ------------      ------------

<S>                                               <C>               <C>               <C>               <C>
Net revenues ................................     $    196,394      $    214,946      $    651,473      $    636,691

Cost and expenses:
    Cost of revenue .........................          141,664           160,149           473,676           458,607
    Selling, general and administrative .....           29,241            33,192            94,709            97,490
    Depreciation and amortization ...........           10,419            13,744            36,615            40,598
    Restructuring charge ....................               --              (876)            8,178            13,789
                                                  ------------      ------------      ------------      ------------
        Total ...............................          181,324           206,209           613,178           610,484
                                                  ------------      ------------      ------------      ------------
Income from operations ......................           15,070             8,737            38,295            26,207
                                                  ------------      ------------      ------------      ------------

Other (income) expense, net:
    Interest expense ........................              710             5,848             7,803            13,957
    Interest income .........................             (376)             (203)             (970)             (845)
    Other (income) expense, net .............             (201)              174               (48)               38
    Gain on sale of businesses ..............               --                --           (30,803)               --
                                                  ------------      ------------      ------------      ------------
        Other expense (income), net .........              133             5,819           (24,018)           13,150
                                                  ------------      ------------      ------------      ------------
Income before taxes .........................           14,937             2,918            62,313            13,057
Taxes on income .............................            5,878             1,135            24,188             5,047
                                                  ------------      ------------      ------------      ------------

Net income ..................................     $      9,059      $      1,783      $     38,125      $      8,010
                                                  ============      ============      ============      ============


Basic earnings per share ....................     $       0.15      $       0.03      $       0.65      $       0.14

Weighted average shares
        outstanding - basic .................       59,381,407        57,582,175        58,650,730        57,303,043


Diluted earnings per share ..................     $       0.15      $       0.03      $       0.63      $       0.14

Weighted average shares
        outstanding - diluted ...............       61,317,564        57,649,229        60,134,970        57,353,347
</TABLE>

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

                                     - 3 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Nine Months Ended September 30
                                                          ------------------------------
(Dollars in thousands)                                         2001           2000
                                                             ---------      ---------
<S>                                                          <C>            <C>
Cash flows from operating activities:
Net income .............................................     $  38,125      $   8,010
Adjustments to reconcile net income to net cash
    provided by operating activities:
    Gain on sale of businesses .........................       (30,803)            --
    Depreciation and amortization ......................        36,615         40,598
    Restructuring charge, net of cash paid .............         7,668          9,325
    Stock issued under employee benefit and stock
      compensation plans ...............................        10,004          3,194
    Deferred income tax provision ......................          (423)        (8,505)
    Other ..............................................         1,173            651
    Changes in operating assets and liabilities, net of
      businesses sold:
      Accounts receivable ..............................        (9,796)       (29,387)
      Unbilled services ................................        (3,961)        (5,349)
      Inventory ........................................        (5,085)        (3,187)
      Accounts payable .................................        (5,362)         1,479
      Accrued liabilities ..............................       (11,011)         3,990
      Unearned revenue .................................         8,369          7,829
      Income taxes payable .............................         7,295         (3,544)
      Other assets and liabilities, net ................        (1,968)        (3,187)
                                                             ---------      ---------
Net cash provided by operating activities ..............        40,840         21,917
                                                             ---------      ---------
Cash flows from investing activities:
    Proceeds from sale of businesses ...................       251,059             --
    Capital expenditures ...............................       (38,770)       (75,004)
    Contingent purchase price paid in connection with
      prior acquisitions ...............................            --           (909)
    Other, net .........................................            75            539
                                                             ---------      ---------
Net cash provided by (used in) investing activities ....       212,364        (75,374)
                                                             ---------      ---------
Cash flows from financing activities:
    Net (repayments) borrowings under revolving credit
      facilities .......................................      (214,000)        45,000
    Repayments of long-term debt .......................       (18,723)          (920)
    Stock issued under employee stock purchase and
      option plans .....................................        12,705          3,097
    Purchase of treasury stock .........................          (146)          (329)
                                                             ---------      ---------
Net cash (used in) provided by financing activities ....      (220,164)        46,848
                                                             ---------      ---------
Net change in cash and cash equivalents ................        33,040         (6,609)
Cash and cash equivalents, beginning of period .........         7,191         25,444
                                                             ---------      ---------
Cash and cash equivalents, end of period ...............     $  40,231      $  18,835
                                                             =========      =========
</TABLE>

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

                                     - 4 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                           September 30, 2001 and 2000
               (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 nine months ended September 30, 2001
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. The balance sheet at December 31, 2000 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, 2000, 1999, and 1998
included in our Annual Report on Form 10-K for the year ended December 31, 2000.

2.  Summary of Significant Accounting Policies

    Use of Estimates

    These unaudited consolidated financial statements have been prepared in
conformity 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.

    Prepaid Expenses and Other Assets

    Covance routinely subcontracts with independent physician investigators in
connection with multi-site clinical trials. Investigator fees are not reflected
in net revenues or expenses 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 $17.3
million and $32.9 million at September 30, 2001 and December 31, 2000,
respectively.

    Inventory

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

    Earnings Per Share

    Earnings per share has been calculated in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 128, Earnings Per Share. In
computing diluted earnings per share for the three months ended September 30,
2001 and 2000, the denominator was increased by 1,936,157 shares and 67,054
shares, respectively, and for the nine months ended September 30, 2001 and 2000,
the denominator was increased by 1,484,240 shares and 50,304 shares,
respectively, representing the dilution of stock options outstanding at
September 30, 2001 and 2000 with exercise prices less than the average market
price of Covance's Common Stock during each respective period.

    Comprehensive Income

    Comprehensive income has been calculated in accordance with FASB Statement
No. 130, Reporting Comprehensive Income. Covance has determined total
comprehensive income (loss) to be $15.7 million and $(3.8 million) for the three
months ended September 30, 2001 and 2000, respectively, and $42.6 million and
$(3.1 million) for the nine months ended September 30, 2001 and 2000,
respectively. Covance's total comprehensive income represents net income plus
the change in the cumulative translation adjustment equity account for the
periods presented.

                                     - 5 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                           September 30, 2001 and 2000
               (dollars in thousands, unless otherwise indicated)


    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 7 for segment disclosure.

    Reclassifications

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

3.  Supplemental Cash Flow Information

    Cash paid for interest for the nine months ended September 30, 2001 and 2000
totaled $8.5 million and $10.7 million, respectively. Cash paid for income taxes
for the nine months ended September 30, 2001 and 2000 totaled $17.1 million and
$18.0 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. 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
credit facility.

5.  Restructuring

    In June 2001, Covance announced plans to reorganize its Nexigent subsidiary,
integrating Nexigent's newly developed clinical trials service offerings into
Covance's core business and reducing Nexigent's infrastructure. Under the plan,
Nexigent's current service offerings - site activation, study feasibility,
electronic data capture, and web-based central laboratory data access - will
continue to be marketed by Covance's core business units, and Nexigent will
narrow its focus, maintaining a small group of technology and business experts
to review new drug development technologies and explore licensing opportunities
and alliances in this area. Covance recorded a pre-tax restructuring charge in
the second quarter of 2001, totaling approximately $8.2 million ($5.0 million
net of tax). The charge consisted of approximately $6.5 million in asset
write-offs in June 2001, and approximately $1.6 million in severance and related
benefits in connection with the elimination of approximately 30 redundant
Nexigent positions. Severance payments began in August 2001 and will continue
through 2002. The remaining $1.0 million accrued restructuring balance is
included in accrued expenses and other current liabilities in the September 30,
2001 Consolidated Balance Sheet.

6.  Long-term Debt

    In the second quarter of 2001, Covance replaced its existing senior
revolving credit facility with a new three year, $150.0 million senior revolving
credit facility. In connection with this financing, Covance paid fees totaling
$1.7 million which will be amortized over the life of the facility.

                                     - 6 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                           September 30, 2001 and 2000
               (dollars in thousands, unless otherwise indicated)


7.  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, 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 accounting policies of the reportable segments are the same as those
described in Note 2. Segment net revenues and operating income for the three and
nine months ended September 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                    Early           Late-Stage               Other
                                                 Development       Development         Reconciling Items        Total
                                                 -----------       -----------         -----------------        -----
<S>                                                <C>               <C>                  <C>                  <C>
(Dollars in thousands)

Three months ended September 30, 2001
   Net revenues from external customers ....       $ 79,705          $116,689                  --              $196,394
   Operating income (loss) .................       $ 12,524          $  8,972             $  (6,426) (d)       $ 15,070
   Total Assets ............................       $246,568          $301,810             $  43,434  (e)       $591,812

Three months ended September 30, 2000
   Net revenues from external customers.....       $ 71,414          $143,532                  --              $214,946
   Operating income (loss)..................       $ 11,417          $  4,477             $  (7,157) (d)       $  8,737 (c)
   Total Assets.............................       $233,546          $476,829             $  43,459  (e)       $753,834

Nine  months ended September 30, 2001
   Net revenues from external customers.....       $232,477          $418,996                  --              $651,473
   Operating income (loss)..................       $ 34,984 (a)      $ 22,531 (a)         $ (19,220) (d)       $ 38,295 (a)
   Total Assets.............................       $246,568          $301,810             $  43,434  (e)       $591,812

Nine  months ended September 30, 2000
   Net revenues from external customers.....       $214,763          $421,928                  --              $636,691
   Operating income (loss)..................       $ 37,033          $  9,199 (b), (c)    $ (20,025) (d)       $ 26,207 (b),(c)
   Total Assets ............................       $233,546          $476,829             $  43,459  (e)       $753,834

-----------------
<FN>
(a) Includes restructuring charge incurred in the second quarter of 2001
    totaling $8,178 ($4,985 after tax).

(b) Includes restructuring charge incurred in the second quarter of 2000
    totaling $14,665 ($8,946 after tax).

(c) Includes third quarter 2000 reversal of restructuring charge totaling $876
    ($534 after tax).

(d) Represents corporate administrative expenses (primarily information
    technology, marketing, communications, human resources, finance and legal).

(e) Represents corporate assets.
</FN>
</TABLE>

                                     - 7 -
<PAGE>

                          COVANCE INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (UNAUDITED)
                           September 30, 2001 and 2000
               (dollars in thousands, unless otherwise indicated)


8.  Pro Forma Financial Information

    The following information is presented on a pro forma basis, and reflects
the (1) exclusion of the gain (loss) on sale of businesses recorded in the first
and second quarters of 2001, (2) exclusion of the results of Packaging and
Biomanufacturing for all periods presented, (3) reduced interest expense from
the application of the net proceeds from the sales of these businesses to
outstanding debt, and (4) exclusion of restructuring charges (reversals) in all
applicable periods.

<TABLE>
<CAPTION>
                                      June 30        Mar 31        Dec 31       Sept 30        June 30        Mar 31
                                       2001           2001          2000          2000          2000           2000
                                       ----           ----          ----          ----          ----           ----

<S>                                  <C>            <C>           <C>           <C>           <C>            <C>
Net revenues                         $203,858       $195,609      $188,372      $179,737      $184,424       $184,743
Income from operations               $ 14,949       $ 14,137      $  8,996      $  7,084      $ 10,598       $ 21,682
Operating Income %                       7.3%           7.2%          4.8%          3.9%          5.7%          11.7%
Other expense, net                   $    947       $    997      $  1,949      $  1,536      $    366       $    (30)
Income before taxes                  $ 14,002       $ 13,140      $  7,047      $  5,548      $ 10,232       $ 21,712
Taxes on income                      $  5,571       $  5,236      $  3,382      $  2,369      $  4,098       $  8,730
Net income                           $  8,431       $  7,904      $  3,665      $  3,179      $  6,134       $ 12,982
Diluted earnings per share           $   0.14       $   0.13      $   0.06      $   0.06      $   0.11       $   0.23
</TABLE>


                                     - 8 -
<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 September 30, 2001.


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 (includes preclinical and Phase I
clinical); and late-stage development services (includes central laboratory,
clinical development, biomanufacturing (through June 15, 2001),
commercialization and other clinical support services). Covance believes it is
one of the largest biopharmaceutical contract research organizations, based on
2000 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. 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. 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.

                                     - 9 -
<PAGE>

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 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,
minor 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 - that is, variances between the three months ended
September 30, 2001 and 2000 and between the nine months ended September 30, 2001
and 2000, after giving effect to 1) the divestiture of Packaging and
Biomanufacturing as if these transactions had occurred on January 1, 2000, 2)
the exclusion of the impact of restructuring charges totaling $8,178 ($4,985 net
of tax) and $14,665 ($8,946 net of tax) recorded in the quarters ended June 30,
2001 and 2000, respectively, and 3) the exclusion of the reversal of
restructuring charge totaling $876 ($534 after tax) recorded in the quarter
ended September 30, 2000.

Three Months Ended September 30, 2001 Compared with Three Months Ended September
30, 2000. Net revenues decreased 8.6% to $196.4 million for the three months
ended September 30, 2001 from $214.9 million for the corresponding 2000 period,
as the 2000 period includes revenues from Covance's biomanufacturing and
packaging operations which were divested in 2001. Pro forma net revenues
increased 9.3% to $196.4 million for the three months ended September 30, 2001
from $179.7 million for the corresponding 2000 period. Excluding the impact of
foreign exchange rate variances between both periods, pro forma net revenues
increased 10.1% as compared to the corresponding 2000 period. Net revenues from
Covance's early development services grew 11.6%, or 12.8% excluding the impact
of foreign exchange variances between both periods. The increase in growth in
early development is primarily a result of continuing strength in our toxicology
business, which accounts for approximately half of all early development
revenues, and strengthening of our Phase I business. Net revenues from Covance's
late-stage development services decreased 18.7%. On a pro forma basis, net
revenues from Covance's late-stage development segment increased 7.9%, or 8.4%
excluding the impact of foreign exchange rate variances between both periods.
Late-stage development revenue growth for the three months ended September 30,
2001 was negatively impacted due to the terrorist attacks on September 11th. The
suspension of air services prevented some sample deliveries to our central labs
in the United States and Europe and delayed site visits by some clinical
monitors.

    Cost of revenue decreased 11.5% to $141.7 million or 72.1% of net revenues
for the three months ended September 30, 2001 from $160.1 million or 74.5% of
net revenues for the corresponding 2000 period. Gross margins increased to 27.9%
for the three months ended September 30, 2001 from 25.5% for the corresponding
2000 period, as the 2000 period includes Covance's biomanufacturing and
packaging operations which were divested in 2001. In addition, the increase in
gross margins is attributable to a number of other factors, including a return
to profitability in Phase III clinical services, margin growth in Phase IV
services, stronger central laboratory margins in Europe and decreased spending
on internet initiatives as compared to the corresponding 2000 period.

    Overall, selling, general and administrative expenses decreased 11.9% to
$29.2 million for the three months ended September 30, 2001 from $33.2 million
for the corresponding 2000 period. As a percentage of net revenues, selling,
general and administrative expenses decreased to 14.9% for the three months
ended September 30, 2001 from 15.4% for the corresponding 2000 period.

    Depreciation and amortization decreased 24.2% to $10.4 million or 5.3% of
net revenues for the three months ended September 30, 2001 from $13.7 million or
6.4% of net revenues for the corresponding 2000 period, primarily due to the
divestiture of our capital intensive biomanufacturing and packaging businesses
in the first half of 2001.

    Income from operations increased to $15.1 million for the three months ended
September 30, 2001 from $8.7 million for the corresponding 2000 period,
inclusive of the $0.9 million restructuring charge reversal in the third quarter
of 2000. Income from operations from Covance's early and late-stage development
segments totaled $12.5 million and $9.0 million, respectively, for the three
months ended September 30, 2001, compared to $11.4 million and $4.5 million,
respectively, for the three months ended September 30, 2000.

    On a pro forma basis, income from operations increased 112.7% to $15.1
million for the three months ended September 30, 2001 from $7.1 million for the
corresponding 2001 period. Also on a pro forma basis, as a percentage of pro
forma net revenues, pro forma income from operations increased to 7.7% for the
three months ended September 30, 2001 from 3.9% for the corresponding 2000
period. On a pro forma basis,

                                     - 10 -
<PAGE>

income from operations from Covance's late-stage development segment totaled
$9.0 million and $2.8 million, for the three months ended September 30, 2001 and
2000, respectively. The significant increase in late-stage development pro forma
operating income was primarily due to return to profitability in Phase III
clinical services, margin growth in Phase IV services, stronger central
laboratory margins in Europe and decreased spending on internet initiatives.

    Other expense, net decreased $5.7 million to $0.1 million for the three
months ended September 30, 2001 from $5.8 million for the corresponding 2000
period, primarily due to a decrease in interest expense of $5.1 million
resulting from a decrease in the weighted average borrowings under our long-term
credit facility resulting from the divestitures previously mentioned, as well as
positive cash flows in 2001.

    Covance's effective tax rate for the three months ended September 30, 2001
increased to 39.4% from 38.9% for the corresponding 2000 period. Since Covance
operates on a global basis, its effective tax rate is subject to variation from
period to period due to the changes in the geographic distribution of its
pre-tax earnings.

    Net income increased to $9.1 million for the three months ended September
30, 2001 from $1.8 million for the corresponding 2000 period, inclusive of the
after tax impact of the restructuring charge reversal recorded in the third
quarter of 2000. On a pro forma basis, net income increased 185.0% to $9.1
million for the three months ended September 30, 2001 from $3.2 million for the
corresponding 2000 period.

Nine Months Ended September 30, 2001 Compared with Nine Months Ended September
30, 2000. Net revenues increased 2.3% to $651.5 million for the nine months
ended September 30, 2001 from $636.7 million for the corresponding 2000 period,
as the 2000 period includes revenues from Covance's biomanufacturing and
packaging operations which were divested in 2001. Pro forma net revenues
increased 8.6% to $595.9 million for the nine months ended September 30, 2001
from $548.9 million for the corresponding 2000 period. Excluding the impact of
foreign exchange rate variances between both periods, pro forma net revenues
increased 10.2% as compared to the corresponding 2000 period. Net revenues from
Covance's early development services grew 8.2%, or 9.2% excluding the impact of
foreign exchange rate variances between both periods. Our toxicology service
offering is the primary contributor to the growth in net revenues. Net revenues
from Covance's late-stage development services decreased 0.7%. Pro forma net
revenues from Covance's late-stage development segment increased 8.8%, or 10.1%
excluding the impact of foreign exchange rate variances between both periods.
Late-stage development revenue growth is primarily attributable to our central
laboratory, and Phase III and IV clinical services.

    Cost of revenue increased 3.3% to $473.7 million or 72.7% of net revenues
for the nine months ended September 30, 2001 from $458.6 million or 72.0% of net
revenues for the corresponding 2000 period. Gross margins declined to 27.3% for
the nine months ended September 30, 2001 from 28.0% for the corresponding 2000
period. The reduction in gross margins is attributable to a number of factors,
including increased investment spending on internet initiatives and
bioanalytical services as compared to the corresponding 2000 period, and lower
volume in our North American central laboratory during 2001 due to increased
program cancellations during 2000.

    Overall, selling, general and administrative expenses decreased 2.9% to
$94.7 million for the nine months ended September 30, 2001 from $97.5 million
for the corresponding 2000 period. As a percentage of net revenues, selling,
general and administrative expenses decreased to 14.5% for the nine months ended
September 30, 2001 from 15.3% for the corresponding 2000 period.

    Depreciation and amortization decreased 9.8% to $36.6 million or 5.6% of net
revenues for the nine months ended September 30, 2001 from $40.6 million or 6.4%
of net revenues for the corresponding 2000 period, due primarily to the
divestiture of our capital intensive biomanufacturing and packaging businesses
in the first half of 2001.

    In the second quarter of 2001, Covance recorded a pre-tax restructuring
charge totaling approximately $8.2 million ($5.0 million net of tax). The charge
consisted of approximately $6.5 million in asset write-offs in June 2001, and
approximately $1.6 million in severance and related benefits in connection with
the elimination of approximately 30 redundant Nexigents positions. Severance
payments began in August 2001 and will continue through 2002. Approximately $1.0
million remains accrued at September 30, 2001.

    Income from operations increased 46.1% to $38.3 million for the nine months
ended September 30, 2001 from $26.2 million for the corresponding 2000 period.
Income from operations from Covance's early and late-stage development segments
totaled $35.0 million and $22.5 million, respectively, for the nine months ended
September 30, 2001, and $37.0 million and $9.2 million, respectively, for the
nine months ended September 30, 2000.

                                     - 11 -
<PAGE>

    Pro forma income from operations increased 12.2% to $44.2 million for the
nine months ended September 30, 2001 from $39.4 million for the corresponding
2000 period. As a percentage of pro forma net revenues, pro forma income from
operations increased to 7.4% for the nine months ended September 30, 2001 from
7.2% for the corresponding 2000 period. Pro forma income from operations from
Covance's early development segment totaled $35.6 million and $37.0 million, for
the nine months ended September 30, 2001 and 2000, respectively. Pro forma
income from operations from Covance's late-stage development segment totaled
$27.8 million and $22.4 million for the nine months ended September 30, 2001 and
2000, respectively. The reduction in early development pro forma operating
income was primarily due to increased investment spending on our bioanalytical
service offering. The increase in late-stage development pro forma operating
income was due to the return to profitability experienced in Phase III, margin
growth in Phase IV and stronger European central laboratory margins experienced
during 2001 which more than offset lower volume in our North American central
laboratory during 2001 (due to program cancellations during 2000) and increased
investment spending on internet initiatives during the first half of 2001.

    Other expense, net includes a $30.8 million net pre-tax gain on the sales of
Packaging and Biomanufacturing in 2001. Excluding this gain, other expense, net
decreased $6.4 million to $6.8 million for the nine months ended September 30,
2001 from $13.2 million for the corresponding 2000 period, primarily due to a
decrease in interest expense of $6.2 million resulting from a decrease in the
weighted average borrowings under our long-term credit facility resulting from
the divestitures as previously mentioned, as well as positive cash flows in
2001.

    Covance's effective tax rate for the nine months ended September 30, 2001
increased to 38.8% from 38.7% for the corresponding 2000 period. Since Covance
operates on a global basis, its effective tax rate is subject to variation from
period to period due to the changes in the geographic distribution of its
pre-tax earnings.

    Net income was $38.1 million for the nine months ended September 30, 2001
versus $8.0 million for the corresponding 2000 period. Pro forma net income
increased 13.9% to $25.4 million for the nine months ended September 30, 2001
from $22.3 million for the corresponding 2000 period.


Liquidity and Capital Resources

    On June 28, 2001, Covance replaced its credit facility with a new $150.0
million senior revolving credit facility which expires in June 2004. 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. Covance
believes cash from operations and available borrowings under its new credit
facility will provide sufficient liquidity for the foreseeable future. At
September 30, 2001 and December 31, 2000, there was $10.0 million and $224.0
million, respectively, of outstanding borrowings and $0.9 million and $0.8
million, respectively, of outstanding letters of credit, under the credit
facilities. Interest on all outstanding borrowings under Covance's long-term
revolving credit facility is based upon the London Interbank Offered Rate
("LIBOR") plus a margin and approximated 7.35% and 7.04% per annum for the nine
month periods ended September 30, 2001 and 2000, respectively. Costs associated
with replacing the credit facility consisting primarily of bank fees totaling
$1.7 million are being amortized over the three year facility term.

    In connection with the sale of Packaging on February 14, 2001, Covance used
approximately $20 million of the net proceeds to pay off the mortgage on its
North American packaging facility, and the remaining $95 million was used to
reduce borrowings under its senior revolving credit facility.

    In connection with the sale of Biomanufacturing on June 15, 2001, Covance
used the net proceeds of approximately $95 million to reduce borrowings under
its senior revolving credit facility. Biomanufacturing had a $10.0 million
short-term revolving credit facility with a bank which was paid off by Akzo
Nobel upon the acquisition of Biomanufacturing.

    During the nine months ended September 30, 2001, Covance's operations
provided net cash of $40.8 million, an increase of $18.9 million from the
corresponding 2000 period. Cash flows from net earnings adjusted for non-cash
activity provided $62.4 million for the nine months ended September 30, 2001, up
$9.1 million or 17.1% from the corresponding 2000 period. The change in net
operating assets used $21.5 million and $31.4 million in cash during the nine
months ended September 30, 2001 and 2000, respectively, primarily due to a
decrease in accrued liabilities and an increase in accounts receivable offset by
an increase in unearned revenue during the nine months ended September 30, 2001,
and an increase in accounts receivable offset by an increase in unearned revenue
during the nine months ended September 30, 2000. Covance's ratio of current
assets to current liabilities was 1.56 at September 30, 2001, and 0.78 at
December 31, 2000 (1.55 on a pro forma basis reflecting borrowings under senior
revolving credit facilities as a long-term liability).

                                     - 12 -
<PAGE>

    Excluding the $251.1 million in proceeds from the sales of Packaging and
Biomanufacturing, investing activities for the nine months ended September 30,
2001 used $38.7 million compared to $75.4 million for the corresponding 2000
period. Capital spending for the first nine months of 2001 totaled $38.8
million, primarily for outfitting of new facilities, purchase of new equipment,
upgrade of existing equipment and computer equipment and software for newly
hired employees, compared to $75.0 million for the corresponding 2000 period.
Investing activities for the nine months ended September 30, 2000 included cash
payments of contingent purchase price totaling approximately $0.9 million in
connection with prior acquisitions.


Competition

    Covance's Clinical Development Services participates in a competitive
industry. Covance believes that this industry has from time to time experienced
periods of increased price competition which had a material adverse effect on
both 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 may be required in the future.


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.

    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 taxing
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.

                                     - 13 -
<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.

    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 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, price
competition in the clinical development services industry, success of the
Nexigent reorganization and the realization of savings therefrom, and risks and
uncertainties set forth in Covance's filings with the Securities and Exchange
Commission including without limitation its Annual Report on Form 10-K.

New Accounting Pronouncements

    In July 2001, the Financial Accounting Standards Board 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. The
amortization of goodwill ceases upon adoption of this statement, which for
Covance will be January 1, 2002. Covance is in the process of evaluating the
disclosure requirements.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

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

                                     - 14 -
<PAGE>

Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibits

      (1)  Exhibit 10.A - Covance Inc. Variable Compensation Plan Effective
           January 1, 2001.

(b)   Reports on Form 8-K

      During the three month period ended September 30, 2001, one report on Form
8-K was filed. The report, dated August 14, 2001, was filed amending a report
dated June 15, 2001 reporting the completion of the sale of Covance's
biomanufacturing business to Akzo Nobel's pharma business unit Diosynth.


                                     - 15 -
<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: November 2, 2001                 By: /s/ Christopher A. Kuebler
                                            ------------------------------------
                                                Christopher A. Kuebler
                                                Chairman of the Board, President
                                                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, President            November 2, 2001
                                  and Chief Executive Officer
                                  (Principal Executive Officer)


/s/ William E. Klitgaard
----------------------------
    William E. Klitgaard          Corporate Senior Vice President             November 2, 2001
                                  and Chief Financial Officer
                                  (Principal Financial Officer)


/s/ Michael Giannetto
----------------------------
    Michael Giannetto             Corporate Vice President and Controller     November 2, 2001
                                  (Principal Accounting Officer)
</TABLE>

                                     - 16 -
<PAGE>

                                  EXHIBIT INDEX

Exhibit       Description
-------       -----------

10.A          Covance Inc. Variable Compensation Plan Effective January 1, 2001.



                                     - 17 -