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Covance Expands in Market Access

Zacks Equity Research

Major drug development services company Covance Inc. (CVD), in a bid to expand its market access offerings, acquired London-based value communication consultancy Medaxial. Financial terms of the deal were not disclosed.

Medaxial offers an integrated approach to market access strategy, health economic modeling and data dissemination services. It also focuses on defining and communicating the value of a biopharmaceutical product or medical device to healthcare payers and stakeholders.

According to Covance, apart from complementing its offerings in the rapidly growing sector of market access and reimbursement, the acquisition will also enable the company to expand its footprint worldwide. Notably, Covance currently has offices in Gaithersburg, MD; Greenfield, IN; San Diego, CA and Sydney, Australia while Medaxial's corporate headquarters is based in London with employees in New York and Antwerp, Belgium.

We also expect this acquisition to revamp Covance’s market access services growth rate which showed a modest decline in the last reported quarter leading to drag in the overall late-stage development performance.

In recent times, Covance is focusing on strategic international expansion which it considers as a major growth driver. In the last reported quarter, revenues from international operations (54% of the total business) once again exceeded that from the U.S. operations (46%).

Apart from the company’s recently established central laboratory facility in Singapore, Covance also has central laboratories in Indianapolis in the U.S.; Geneva in Switzerland; Shanghai in China and Tokyo in Japan. The expansion of the Singapore facility reflects ongoing focus and continued investment in the country. It also underlines the strategy of business expansion in the Asia Pacific region, especially the focus on high-growth countries like China and Japan.

However, the capital spending environment and competitive landscape remain as overhangs.

Zacks Rank

The stock presently carries a Zacks Rank #3 (Hold). Some of the top-ranked medical services stocks worth a look are Omnicare Inc. (OCR), BG Medicine, Inc. (BGMD) and Quintiles Transnational Holdings Inc. (Q), all with a Zacks Rank #2 (Buy).

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