Covance and Lilly Enter Into a Strategic R&D Collaboration

COVANCE AND LILLY ENTER INTO A STRATEGIC R&D COLLABORATION

• Covance to Acquire Lilly’s Greenfield, Indiana Campus for $50 Million
• Covance and Lilly Execute 10-Year, $1.6 Billion Services ContractPrinceton, New Jersey, August 6, 2008 – Covance Inc. (NYSE:CVD), a leading provider of drug development services, announced today that it signed a definitive agreement with Eli Lilly and Company (NYSE: LLY) to help transform Lilly’s R&D model.  Under the agreement, Covance will acquire Lilly’s 450-acre early drug development campus in Greenfield, Indiana for $50 million and will offer employment to about 260 Lilly employees.  In addition, Covance will provide Lilly with a broad-range of drug development services over the next ten years for a contract value of $1.6 billion.  Under the agreement, Covance will assume ownership of the site and operations on or about October 1, 2008.
   
  “Today’s announcement represents an innovative approach to the R&D productivity challenges our pharmaceutical clients are facing,” said Joe Herring, Covance Chairman and CEO. “We are very excited to welcome world-class Lilly scientific talent to Covance, and to take possession of valuable state-of-the-art assets, including more than 600,000 square feet of laboratory space, and acquire new service lines that will help us accelerate our long-term, strategic growth plans. Covance will invest in this facility and maximize its capacity utilization by conducting substantial work with Lilly and bring in new work from other pharmaceutical and biotechnology clients. We expect the Greenfield site to be a key contributor to the future growth and success of Covance.”  
   
  “This strategic agreement is a result of a long-term trust-based relationship between our two companies.  Covance has proven they can help accelerate drug development timelines and improve efficiencies with Lilly, which will enable us to further focus on our core competencies in delivering better patient outcomes over the longer-term,” said John Lechleiter, Eli Lilly CEO. “This industry-pioneering alliance will provide Lilly access to Covance’s broad and efficient drug development platforms. In addition, this collaboration will help us make our fixed cost infrastructure more flexible and continue to grow our portfolio of best-in-class and first-in-class pharmaceutical products.”
   
  Under this agreement Lilly will transfer responsibility to Covance for its non-GLP toxicology, in vivo pharmacology, quality control laboratory, and imaging services.  In addition, the contract includes a committed level of clinical pharmacology, central laboratory, GLP toxicology studies, and clinical Phase II-IV services.
   
  Covance has been in Indiana for more than 20 years with a global central laboratory facility in Indianapolis and a Phase I clinic in Evansville. The company has more than 1,000 employees based in Indiana.
   
  Covance continues to expect to deliver mid-teens revenue growth and 20% annual growth in EPS to $3.18 per diluted share in full-year 2008 (excluding the gain on sale from centralized ECG services from both periods), despite the expectation of a couple of pennies of dilution in the third quarter of 2008 from this transaction and the previously announced joint venture in China. Covance expects to provide its 2009 earnings target, including more financial details related to the agreement announced today, in December 2008.
   
  Covance will host an investor teleconference and webcast today at 10:30 am ET to discuss its strategic collaboration with Lilly.   The live investor call will be available via webcast at www.covance.com <http://www.covance.com/> and by listen-only telephone: 866-215-8862.  An archived call will be available by the end of the day via webcast at www.covance.com <http://www.covance.com/>  and via telephone at 719-457-0820 (pass code: 6037442).
   
  About Covance
  Covance, with headquarters in Princeton, New Jersey, is one of the world’s largest and most comprehensive drug development services companies with annual revenues greater than $1.5 billion, global operations in more than 20 countries, and more than 9,000 employees worldwide. Information on Covance’s products and services, recent press releases, and SEC filings can be obtained through its website at www.covance.com <http://www.covance.com/> .
   
  About Lilly
  
  Lilly, a leading innovation-driven corporation, is developing a growing portfolio of first-in-class and best-in-class pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Indiana, Lilly provides answers – through medicines and information – for some of the world’s most urgent medical needs.  Additional information about Lilly is available at www.lilly.com <http://www.lilly.com/>
  
  Statements contained in this press release, which are not historical facts, such as statements about prospective earnings, savings, revenue, operations, revenue and earnings growth and other financial results are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements including the statements contained herein regarding anticipated trends in the Company’s business are based largely on management’s expectations and are subject to and qualified by risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. These risks and uncertainties include, without limitation, competitive factors, outsourcing trends in the pharmaceutical industry, levels of industry research and development spending, the Company’s ability to continue to attract and retain qualified personnel, the fixed price nature of contracts or the loss of large contracts, risks associated with acquisitions and investments, the consummation of the acquisition of the Greenfield campus, the consummation of the joint venture with Wuxi PharmaTech, the Company’s ability to increase order volume, the pace of translation of orders into revenue in late-stage development services, and other factors described in the Company’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The Company undertakes no duty to update any forward looking statement to conform the statement to actual results or changes in the Company’s expectations.
  
   
  

Fast Facts:
 

COVANCE AND ELI LILLY –
STRATEGIC PARTNERSHIP TO ACCELERATE DRUG DEVELOPMENT

Who are the players?

• Eli Lilly (NYSE: LLY), one of the world’s largest ($18.6 billion revenues) pharmaceutical companies
• Covance Inc. (NYSE: CVD), headquartered in Princeton, NJ, is the world’s largest publicly traded contract research organization (CRO).  Covance, which has annual revenues of over $1.5 billion and approximately 9,000 employees in more than 50 countries, conducts research to help pharmaceutical companies develop new prescription drugs.  Covance has helped to advance a quarter of all new medicines in the market today.
  
  
  What is the strategic partnership?
  Under the agreement, Covance will help Eli Lilly transform its R&D model. Covance will acquire Lilly’s early drug development campus in Greenfield, Indiana for $50 million, and we will hire approximately 260 Lilly employees.  In addition, Lilly awarded Covance a 10-year contract, worth a minimum of $1.6 billion, for a broad-range of drug development services. This is the largest and most comprehensive agreement ever announced in the CRO industry by a wide margin.
  
  What’s driving this strategic alliance?
  As a wave of patent expirations threaten more than $60 billion of pharmaceutical sales over the next few years, pharmaceutical companies are reassessing their R&D business models. CROs, like Covance, have substantial size, reach, and scale in drug development and can help pharmaceutical companies create more flexible cost structures and speed time to market.  
   
  What is the drug development outsourcing trend?
  As evidenced by today’s announcement, large pharmaceutical companies are increasingly outsourcing drug development to large, global CROs.  It is estimated that the pharmaceutical and biotechnology industries spend approximately $70 billion on drug development (the “D” of “R&D”) each year with approximately 27%, or $18 billion projects outsourced to companies like Covance. Industry experts believe that the CRO industry could easily double over the next five years.
  
  What’s special about Covance?
  Covance is the largest public CRO and is the only CRO with market-leading assets in both early and late-stage drug development services.  Covance provided its shareholders a return of more than 300 percent in the past five years. Covance has delivered consistent earnings, with seven consecutive years of EPS growth of at least 20%.
   
  Information on Covance's products and services, recent press releases, and SEC filings can be obtained at www.covance.com