Growth Stocks: Veeva Systems

Company

Veeva Systems (VEEV.US) is the benchmark enterprise SaaS (Software as a Service) solution in the life sciences industry. Since the company's IPO in late 2013, the shares have delivered a 700% return to date as the business continues to deliver strong revenue and bottom line results. But what are the key factors behind the company's superior performance relative to most cloud access providers that seem to lose more money as they grow? Now we will see.

What does Veeva Systems do?

Veeva System is the default cloud service provider for the global life sciences industry with more than 975 customers, including leading biotech and pharmaceutical companies such as GSK, Bayer, Eli Lilly, Gilead Sciences, and Merck. Looking at it in perspective, Veeva cloud solutions help drug manufacturers accomplish three things:

• Develop and market products more efficiently.
• Market and sell products to doctors and hospitals more efficiently.
• Compliance with all relevant government and industry regulations.

Veeva cloud solutions can be divided into two groups: Veeva Commercial Cloud and Veeva Vault. While there are several specific apps for different corporate functions within each of these two categories, the basic idea is that (1) Veeva Commercial Cloud is a Salesforce-based CRM solution that helps sales reps manage customer information. and sell your products and (2) Veeva Vault enables company employees to digitally store and collaborate on key company assets such as marketing materials, clinical trial documents, and regulatory filings.

Let's take an example that a sales representative of a pharmaceutical company tries to sell a newly developed eye drop for glaucoma. With Veeva CRM, he can manage contact information for all ophthalmologists in the region and make appointments with these healthcare professionals. When you show up at businesses to provide some samples, all you need is an iPad to show them all the relevant information, such as the results of clinical trials. Once you're done with face-to-face meetings, you can follow up by scheduling automatic emails and tracking response rates such as opens and clicks.

It is very possible that the person in charge of the marketing materials related to these glaucoma eye drops, is using the Veeva Vault to collaborate with their colleagues in the industry and is showing an image that inspires hope and that the writing is professional and compliant. regulations. If you are responsible for clinical research, you may use Veeva Vault Clinical to manage all clinical trial data and documentation for contracted research organizations.

Simply put, whatever the role within a pharmaceutical company, Veeva has a cloud solution tailored to that role.

Who started Veeva and what is the philosophy?

Veeva Systems was founded in 2007 by Peter Gassner, who despite having had a very successful career, wanted to avoid having to deal with increased M&A activities at PeopleSoft (where he previously worked) and wanted to get back what has always been to him. liked to do: product innovation. As a result, he joined Salesforce in 2003, going from managing 500 people to managing 4 people. There, Peter served as Senior Vice President of Technology and led the development of the Salesforce platform. Two years later, he would leave Salesforce and start the tech startup.

Gassner knew full well that the cloud would be the next big thing, but he didn't want to start any cloud business that did obvious, horizontal things like accounting and payroll. As a result, he chose the pharmaceutical industry where he thought that pharmaceutical companies would need an industry-specific cloud solution, as local software was very expensive to update and maintain. Subsequently, he co-founded Veeva Systems with Matt Wallach.

Veeva initially raised $ 7 million from investors, but only $ 3 million was used as Gassner, unlike most startup founders, believed that a shortage of capital would help the company spend money wisely. Also, Veeva never had a long-term plan during her first year in business. Instead, he had quarterly plans.

As a product-focused entrepreneur, he believed that Veeva's service was only as good as the amount customers would be willing to pay. If it can't be sold at a profit, it's probably worthless.

Why did Veeva choose the life sciences industry and how are the results so far?

Veeva chose to build a vertical cloud solution for two very simple reasons. First, horizontal solutions lack an industry specific role. In life sciences, companies work in a fairly complex environment where activities such as new drug introductions, quality control, sales, and marketing are subject to iterations, reviews, and approvals. Therefore, a basic horizontal solution will have to be heavily customized to meet these needs, which could be extremely expensive.

Second, life sciences companies deal with regulations that require specific processes and documentation, such as electronic records and electronic signatures required by the FDA. This is the type of regulatory capacity that most horizontal cloud providers do not have, which explains why drug manufacturers need a vertical solution like Veeva to address their regulatory compliance needs.

When you choose an industry that has yet to find a cross-device smart cloud solution that can handle all corporate activities, as local software costs too much to deploy on smartphones and tablets, what you get is rapid revenue growth, profits and free cash flows because competitors are too busy developing generic solutions for all possible industries. That is why Veeva has been a profitable operation since it became a public company.

source: YCharts

By focusing on a single industry, corporate resources such as sales and marketing and R&D can better target a homogeneous group of customers who share similar business challenges. When Veeva can solve the problems of a biotech company, the rest call. This results in economies of scale and therefore improves margins over time.

In 2013, Veeva's subscription service retention rate was 187%. In 2020, that figure was 124%. In perspective, anywhere above 120% is highly enviable in the SaaS world, and it seems Veeva's customers are in no rush to find an alternative. What was the name of that pit again? Opportunity cost.

Technical Analysis

After the rebound in its price due to the improvement of the estimates in its latest results, Veeva Systems broke one of its local resistances at $ 288 per share to attack its most important relative highs, the $ 312 and the previous historical highs above the 325$.

It has currently completed a corrective process to consolidate levels through a Throwback reaching a new ATH at $ 343.83 to $ 312. This move is supported by its EMA50 which could be the necessary springboard to re-score new ATHs.

Darío García
XTB Spain