LabCorp 2014 Annual Report Download - page 42

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possible competition. These competitive pressures may affect the attractiveness of Covance Drug Development's services and
could adversely affect its financial results and the financial results of the Company.
Contract research services create a risk of liability.
In contracting to work on drug development trials and studies, Covance Drug Development faces a range of potential liabilities,
including:
• errors or omissions that create harm during a trial to study volunteers or after trial to consumers of drug after regulatory
approval of the drug;
• general risks associated with clinical pharmacology facilities, including negative consequences from the administration
of drugs to clinical trial participants or the professional malpractice of clinical pharmacology medical care providers;
• errors or omissions from tests conducted for the agricultural, food, beverage and dietary supplement industries;
• risks that animals in Covance Drug Development's breeding facilities may be infected with diseases that may be harmful
and even lethal to themselves and humans despite preventive measures contained in Covance business policies, including
those for the quarantine and handling of imported animals; and
• errors and omissions during a trial that may undermine the usefulness of a trial or data from the trial or study or may
delay the entry of a drug to the market.
Covance Drug Development also contracts 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.
While Covance Drug Development endeavors to include in its contracts provisions entitling it to be indemnified or entitling
it to a limitation of liability, these provisions do not uniformly protect Covance Drug Development against liability arising from
certain of its own actions, such as negligence or misconduct. Covance Drug Development could be materially and adversely
affected if it were required to pay damages or bear the costs of defending any claim that is not covered by a contractual
indemnification provision or in the event that a party who must indemnify it does not fulfill its indemnification obligations, or in
the event that the damages and costs exceed Covance Drug Development insurance coverage. There can be no assurance that
Covance Drug Development will be able to maintain sufficient insurance coverage on terms acceptable to it.
Covance Drug Development revenues and earnings are exposed to exchange rate fluctuations.
Covance Drug Development derives a large portion of its net revenues from international operations. Since the Company's
consolidated financial statements are denominated in U.S. dollars, fluctuations in exchange rates from period to period will have
an impact on reported results. In addition, in certain circumstances, Covance Drug Development may incur costs in one currency
related to its services or products for which it is paid in a different currency. As a result, factors associated with international
operations, including changes in foreign currency exchange rates, could significantly affect Covance Drug Development's results
of operations, financial condition and cash flows.
Actions of animal rights extremists may affect business.
Early development services utilize animals in preclinical testing of the safety and efficacy of drugs and also breed and sell
animals for biomedical research. Such activities are required for the development of new medicines and medical devices under
regulatory regimes in the United States, Europe, Japan and other countries. Acts of vandalism and other acts by animal rights
extremists who object to the use of animals in drug development could have an adverse effect on the Covance Drug Development
business.
Animal populations may suffer diseases that can damage Covance Drug Development's inventory, harm its reputation,
result in decreased sales of research products or result in other liability.
It is important that research products be free of diseases, including infectious diseases. The presence of diseases can distort
or compromise the quality of research results, can cause loss of animals in Covance Drug Development's inventory, can result in
harm to humans or outside animal populations if the disease is not contained to animals in inventory, or can result in other losses.
Such results could harm Covance Drug Develpment's reputation or have an adverse effect on financial condition, results of
operations, and cash flows.
Item 1B. UNRESOLVED STAFF COMMENTS
None.