Here is a recent IPO that might be of interest. I think Saul shies away from recent IPOs, but this has an excellent business, no sock-puppet.com are they.
I found this in the IBD “New America” column.
The CEO came from Salesforce.com and decided he could do something similar for the pharma industry. They were anchored in old, if not archaic computer systems and apps that slowed them down in a fast paced world. Veeva decided it could rapidly develop industry-specific applications and functionality that is miles ahead of legacy offerings. Their first goal - replace pharma’s legacy systems with his cloud-based one. And it is working as planned…
Big Customer number 1:
When health care behemoth Johnson & Johnson (JNJ) decided last year to use Veeva Systems’ (VEEV) software for gathering data from clinical trials needed to get a new drug approved, Veeva’s rivals took notice.
For good reason. Thanks to J&J, it wasn’t long before Veeva’s content management application turned the heads of its potential customers as well.
Then More:
“They (J&J) said we’re going to standardize this globally, and within 12 months we had 6 customers (among the 20 biggest drugmakers) do the exact same thing,” Veeva Chief Financial Officer Timothy Cabral told a Stifel technology conference in June
Veeva’s first product was a customer relationship management offering for pharma sales reps. Then it started targeting the research and development side of the business with its clinical trial content management application. Now, after a rapid six-month development period, it’s launching a new application to track quality control processes for drug manufacturing.
6 Months is very fast, does anyone remember how long healthcare.gov took? And it failed miserably at first.
Veeva’s drug and biotech customers “are in a race against time – in two directions,” Gassner told Investor’s Business Daily. On one hand, they need to expedite regulatory approval to bring their cures to market and keep people from suffering or dying. Then there are the business-driven reasons for fully capitalizing on a market opportunity before patents expire.
It seems this system can easily pay for itself, it is being widely adopted and has massage potential. It does not have to be limited to one industry either.
That race has become even more critical over time. The cost of developing a new drug has soared to $2.6 billion, up from about $1 billion in 2000 in inflation-adjusted dollars, according to the Pharmaceutical Research and Manufacturers of America. Because the stakes are so high, more large drug developers have decided in rapid succession to junk their prior technology investments and embrace Veeva as a critical ally in their race against the clock.
GlaxoSmithKline (GSK) is ramping up adoption of Veeva’s customer relationship management product among all its 20,000-plus drug sales team members. Most customer relationship deployments aren’t yet global in scale, but most big drug and biotech companies are now Veeva customers.
That is a big vote of confidence. As a software guy, I know it takes a lot for a company to redevelop or modernize a system, and the teams they have may not even be cloud savvy. So much easier to buy a proven system. That is why SalesForce.com is growing so well - and this company is coming off a small base. Who knows CRM may buy them in a couple years.
The company has about 16% of what is roughly a $2 billion market providing customer relationship solutions to 450,000 global sales reps. Those reps are tasked with teaching 20 million doctors how and when to prescribe their drugs effectively. If all its customers embrace Veeva across their sales geographies, the company’s market share could approach 70%.
Ok, don’t go crazy, but at 16% maybe they double to 32% pretty fast.
One relatively new customer relationship feature from Veeva is called Approved Email, which allows drug sales reps to send marketing and educational materials to doctors by email. That had been rare because of regulatory concerns until Veeva provided templates that let the communication happen in a compliant way.
Wait a minute, David Gardner’s multiple possible futures coming up…
A pharmaceutical giant might have 10,000 people, both inside and outside the company, collaborating on clinical trials for 20 different drug candidates at a time. Sharing, commenting on, updating and record-keeping of all the actions involved in a trial and drug application used to involve couriers, multiple file-sharing systems and document repositories.
Those were hard for some participants to access. Now, Vault makes it possible to have a central hub in the cloud where everyone can connect in a way that streamlines regulatory compliance.
Vault launched in 2013, generating $9 million in subscription revenue in 2014. This year, Vault should generate $52 million in subscription revenue, doubling to $104 million in 2017, according to William Blair analysts Bhavan Suri and Alper Tuken.
“They’re winning because of better usability,” Suri told IBD. He noted that Vault revenues are growing so fast that the Veeva may continue to see revenue growth accelerate a little.
Overall revenue rose 33% from a year ago to $119.8 million in the first quarter, Veeva announced in May. About 80% of revenue now comes from ongoing subscriptions. Adjusted earnings rose 23% to $21.2 million. On a per-share basis, earnings rose to 15 cents a share from 12 cents.
“We are more confident than ever that we are on track to achieve our stated revenue run rate target of $1 billion in 2020, selling just our current solutions within life sciences alone,” Gassner told analysts on Veeva’s first-quarter earnings call, according to a Seeking Alpha transcript.
Transcript here: http://seekingalpha.com/article/3978159-veeva-systems-veev-c…
The key to Veeva’s success is that it has brought together enterprise software expertise with industry-specific expertise. That expertise and their applications don’t just permit regulatory compliance with the FDA but with regulatory bodies around the world. About 45% of Veeva revenue comes from outside the U.S. Now the company is just beginning to expand its industry expertise beyond life sciences.
“We have a tremendous platform involved and we can build applications on it rapidly as we’ve done with QMS (Veeva’s drug manufacturing quality management application), and many of those applications are applicable outside of life sciences,” Gassner said.
Gassner announced on the latest earnings call that Veeva has a small team now dedicated to selling Vault to other industries.
Analyst see potential:
Because Veeva’s strong suit is ease of use in a heavily regulated industry, a lot of investors think it may have a future providing cloud-based applications to the financial services industry, including the brokerage business, Needham & Co. analyst Scott Berg told IBD.
But Berg sees more near-term potential in industries “the FDA actually works with,” namely food manufacturing, which is vulnerable to costly and reputation-damaging recalls. He mentioned Hormel Foods (HRL) and Cargill as two possibilities.
Suri sees Johnson & Johnson, because of its existing relationship with Veeva, as a candidate to adopt its Vault platform for managing quality in other regulated industries. Baby food manufacturers such as Nestle also would be a natural market for Vault to penetrate, Suri said
A little tech talk…
IBD’S TAKE: Shares of Veeva Systems surged on its May 27 earnings news, breaking above a long basing pattern, though they remain below levels hit just after the 2013 IPO. Shares are still close enough to a buy point to merit consideration.
Shares broke out well past 30 in late May, built a base and then surged again to eclipse the 35 mark in early July. In Friday trading, shares ticked up 0.8% to 37.99.
http://stockcharts.com/freecharts/gallery.html?veev
Excellent Growth rankings, all green. It is a bit extended from its breakout, so don’t jump in whole hog if you intent to buy. Space it out a bit, maybe Hillary and The Donald will scare the market for us.
ChecklistRating
Composite Rating 99 Pass
EPS Rating …97 Pass
RS Rating …Pass
Group RS Rating A- Pass
SMR Rating …A Pass
Acc/Dis Rating A- Pass
And it is #1 in its group. It has 3 quarters of increasing fund ownership, but 0 quarters of accelerating EPS. Overall though it checks out very well.
I think this is a free yahoo link to the entire article…
finance.yahoo.com/m/5125fa0b-e903-3dc7-be29-fb8845532358/ss_…
A zack’s article
http://finance.yahoo.com/news/veeva-systems-veev-launches-mu…
The regular Yahoo page shows a chart of h ow they have been crushing earnings. Analyst too scared to be wrong on the high side. Yahoo says only 11 analysts are following it. For instance, GILD has 22 and CRM has 31.
http://finance.yahoo.com/quote/VEEV?p=VEEV
http://finviz.com/quote.ashx?t=VEEV
I feel like this is one of those companies like SHOP that you want to be in a little bit, even if it does not match the typical 1YPEG (which I have not checked). The “regular” PE, and PEG are high.
I feel very good about this and will likely take a started position.
FYI, the IBD “New America” column is where I found LGIH, DY, and CBM. Not bad credentials.
Let me know what you guys think.
Pete