Quick, a fast age test. How many Americans are 110 years old or older? Are there 17 or 97? Or 188 or 613?

Wrong on all four counts. There are 1,388 such senior citizens: 544 men and 844 women, according to the latest Census Bureau numbers.

Census figures for this and other age groups — which cover various year surveys and probably could use an update — also show a sharply rising and record number of aging Americans at 100 and older (79,682), 85 and older (5,095,938), and 65 and older (36,790,113).

These surging numbers of senior citizens are all part of the living longer trend — a reflection of medical breakthroughs, an awareness of better eating habits, and increased exercise.

Since capitalizing on growing trends is what Wall Street is all about, the question is: How do you make a buck on the ballooning number of Americans in their golden years?

In the minds of most investors, the way to capitalize on this surge, hardly a state secret, is obvious — latch on to the shares of some creative pharmaceutical or biotech company with the research savvy to concoct one of those billion-dollar pills capable of effectively battling or stamping out one of the leading diseases.

What seems obvious, though, is not always so obvious, especially on Wall Street. An editor at a relatively young and promising New York-based monthly newsletter, Emerging Investments, Ari Jahja, makes this point in reference to drug and biotech companies. While they can be very lucrative, they can also be fraught with danger, he observes. For every successful drug that makes it to the market, countless others fall by the wayside, Mr. Jahja notes. Further, he points out, the development costs required for a drug to get clearance from the Food and Drug Administration can range from $500 million to $2 billion.

In effect, he suggests an alternative investment route than the drug or biotech company to cash in on the living longer trend without assuming a great deal of risk — a contract research organization. Contract health care research is booming, what with roughly 24% of the more than $60 billion spent annually for new drug development by the pharmaceutical and biotech industries now being channeled into CROs. And both industries, Mr. Jahja points out, will continue to step up outsourcing over the next few years, as it increases efficiency and lowers development costs while minimizing the need to build infrastructure and expand operations.

The company that is poised to benefit most from this trend, Mr. Jahja says, is Covance, a dominant global CRO headquartered in Princeton, N.J., that commands more than 10% of the market. Covance provides a range of early-stage development services, which includes preclinical, clinical pharmacology, and late-stage development services, among them central lab, clinical development, pre-approval, and cardiac access services. Its sales last year ran $1.25 billion.

Covance, which has no long-term debt and an excellent operating performance, turned in 21% growth in net income last year to $145 million or $2.24 a share on a 12% increase in revenue. It also wrapped up 2006 with a $2.2 billion backlog, up 34% on a year over year basis.

Mr. Jahja expects Covance to earn $2.65 a share this year and $3.15 in 2008, with annual 20% profit growth on tap over the next five years. Key earnings drivers, he says, will include increased toxicology capacity, strong demand for clinical pharmacology, and management’s efforts to expand operating margins.

His outlook for the stock, which closed Friday at $59.70, is pretty positive; he projects about a 25% increase to $75 over the next 12 months.

Notable evidence of Covance’s rising reputation among major CROs, Mr. Jahja observes, has been its ability to attract big pharmas, which have traditionally focused in on in-house R&D. Levels of outsourcing from big pharmas are expected to be high in the coming years because more of them have started closing down their aging toxicology facilities.

In anticipation of this, Covance is building a major new texicology facility in Arizona that will be ready in 2009. This will add to the existing preclinical toxicology facility in Wisconsin and its European facilities in Britain and Germany, which were recently expanded by 30%.

A word of caution: The stock, though trading under 11 times earnings, is by no means undiscovered; it’s up about 23% this year from its 2006 close of $48.55.

dandordan@aol.com