Why I am Long VEEV

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All-
I posted this on the VEEV board, and thought you might be interested too. Here’s my thoughts on why I think Veeva Systems has a great opportunity supporting QA Systems in the consumer goods space. In fact, I think that opportunity may dwarf that of drug development space. For the record, I have over 30 years of R&D and process development experience mostly with Fortune 500 consumer goods companies.

I think that a lot of QA systems actually have their roots with a drug failure. That failure was like the Dr. Seuss book “Because a Little Bug went Kachoo”. In that story, a little bug’s sneeze resulted in mayhem. In the QA story, a failure by a company called G.D. Searle & Co during the registration of an antibiotic caused a regulatory landslide.

Searle’s drug, Flagyl, was an antibiotic that was being tested for long-term use. An external researcher, not associated with Searle, submitted an article to the National Cancer Institute that showed animal studies would reasonably show that Flagyl is a carcinogen. However, in a separate study by Searle that went to the FDA at about the same time reported no such problem. The FDA confirmed the external researcher’s finding with a study of their own.

During July of 1975, the FDA launched the largest raid in their history to that date. I have been told that over 100 FDA investigators descended on Searle in one day. They discovered animals with tumors removed, records that had been falsified, and technicians forced to restate their results fraudulently. Searle’s leadership defended Searle by claiming that they had no idea what their rogue scientists and technicians were up too. That catalyzed the FDA to develop Good Laboratory Practices or GLP in 1987 to combat that fraud in drug development. Soon GLP was also adopted by the EPA for products like disinfectants or other pesticides. Later a variation was adopted for “Good Manufacturing Practices” or GMP. Later still, major quality programs like ISO 9000 adopted aspects of GLP too.

Basic, tenants of GLP and other quality programs are:

1.Org charts identifying clear accountabilities must be up to date for each facility.

2.People must show their technical proficiency for their roles in an organization through training records.

3.Standard Operating Procedures must be developed for common activities.

4.Regular external quality audits for GLP studies, quality labs, and manufacturing processes should be performed by external personnel (e.g. FDA, EPA, or third party auditors such as ISO)

5.Quality documents need to be controlled so they can only be changed by the test method or SOP developer together with the quality manager.

6.Records of measurements must be are stored for a specified period of time.

7.Maintenance records need to be available for varying periods of time.

8.Rejected product and raw materials need to be segregated and kept from production.

  1. Raw materials need to be traceable to their source.

  2. Adverse events from product use must be recorded and reported to the correct regulatory agency.

  3. A list of hazards and mitigation plans need to be recorded.

12.Finished product shipment records must be kept so that product recalls can be implanted if necessary.

There are significant variations between QA programs for automobiles, toothpaste, and laundry bleach, but most QA systems have elements from the list above. In any case, it is a mountain of paperwork to keep track of. It’s ironic that QA mostly flowed from drugs to consumer products, and Veeva Systems is flowing record management from drugs to consumer products. Veeva landed a “large consumer goods producer” last quarter. Doesn’t surprise me in the least. I expect many more to come.

Best,

bulwnkl

Long VEEV and expecting to stay that way for a long, long time.

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Thanks bulwinkl for this very interesting post. I, too, am long Veev.

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Great post thank you bulwnkl.

I’ve been long VEEV. Great management with an obviously fantastic product. However, having saturated their current TAM I had my doubts whether they could successfully continue growing to warrant their P/E. Your post has alleviated some fears and showed how it is an obvious and achievable transition for VEEVA.

So what competitors does VEEV have for providing QA systems for consumer goods?

A quick search brings up:


Company                                Market Cap
Intertek                               9 billion
Bureau Veritas SA                      9 billion
SGS Ltd (ADR)                          19 billion
National Technical Systems, Inc.       Not Listed
VEEVA                                  9 billion

So are you bullish that VEEVA can aggressively compete and steal market share from these other companies because it has already proved how amazing it is in the pharmaceutical market with it’s 100% customer retention record?

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great post and a good history lesson

So what other industries face the same challenges?
Is it so bad in some that it is a broken process?
Sounds like much of this is regulatory and I suspect regulations to continue to grow like Topsy, no matter whether they strangle the economy or not. So what industries are enough like drugs for VEEV to expand into? What is TAM?

I hold some VEEV but it is not a large holding. Because the plans to expand seem too “Black Box” , too secretive to me.
Maybe I need to research and Google “most regulated industries” and back track from there.
I have no way of knowing how good their product is, I will just have to let sales and retention rates speak for that.

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https://www.mercatus.org/publication/mclaughlin-sherouse-lis…

10 most regulated industries
some surprises there for me

companies in those industries probably must engage the services of a small army of regulatory lawyers to help them navigate these rules

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Those items sound very similar to QA processes associated with nuclear power plant design (which has been my profession for 8.5 years now)…and I’m not sure that the nuclear QA programs (descendants of the U.S. Navy programs and Admiral Hyman Rickover, I am pretty sure) might not pre-date those medical-related QA programs. At some point, I may do a bit of research to try to validate the history.

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Hi Bulwnkl

Thanks for the post. Every place I’ve ever worked has some kind of QA department and a BMP meme (Best Management Practice) or some variation of B?P and it is a standard part of the admin’s verbiage :slight_smile:

Anyway, the reason I’m posting is that you say you posted originally on the VEEV board. The only one I’ve seen (and still today) is http://discussion.fool.com/veeva-systems-inc-veev-120963.aspx?mi…

which is inactive.

So, do you have a link to the VEEV board on which you posted?
thanks
ralph

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Bulwnkl,
A lot of lessons in your short write-up. Chief among them is that folks should think twice and think again before they complain about “burdensome government regulations.” The simple fact is that corporations invite these regulations by demonstrating time and time again that they are not above unscrupulous behavior that puts the public health and safety at risk.

I too worked for 30 years in a highly regulated industry where the every end-user of the product this company manufactured put their lives at risk each time they climbed aboard a commercial airliner. And yes, executive management often bemoaned the “bookkeeping, paper trail, training expense, etc., etc. demanded by the regulatory agencies” (more than just the FAA). But, they begrudgingly complied. These regulatory requirements extended to the product long after the sale, in fact, they must be complied with and maintained until the last aircraft of a type designation is taken out of service permanently. No small task with a service life that can reach 75 years.

Where I worked, we had to build all our QA systems, in that there was no commercial off the shelf (COTS) products available to service the very unique requirements of this industry. There simply was not (and is not) enough companies in the game to make COTS a viable product.

I don’t know if Veeva will ever penetrate this industry. Maybe, but with systems already in place, they would compete with the relatively low cost of systems maintenance versus acquisition. Nevertheless, I agree with you that Veeva has a lot of unexplored opportunities.

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A lot of lessons in your short write-up. Chief among them is that folks should think twice and think again before they complain about “burdensome government regulations.” The simple fact is that corporations invite these regulations by demonstrating time and time again that they are not above unscrupulous behavior that puts the public health and safety at risk.

Well said, brittlerock.

Along the same lines, to a certain extent, is that folks should think twice and think again before they complain about candor laugh at safety tags on products, e.g.- a warning on a hair dryer to not take it into the bathtub with you, or a warning on a coffee cup that the coffee is hot. These warnings exist because one or more persons did something very foolish, or was very careless, with a product…suffered injury as a result, and made a claim or filed a lawsuit against the company that manufactured the product. Individuals invite these seemingly silly safety tags by demonstrating time and time again that they are not above foolish and/or careless behavior.

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Individuals invite these seemingly silly safety tags by demonstrating time and time again that they are not above foolish and/or careless behavior.

Or perhaps it can be stated another way?

Individuals invite these seemingly silly safety tags by demonstrating time and time again that they are not above suing manufacturers for their own foolish and/or careless behavior.

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“and think again before they complain about candor laugh at safety tags on products, e.g.- a warning on a hair dryer to not take it into the bathtub with you, or a warning on a coffee cup that the coffee is hot”

Lol, do you think warning labels will actually stop people this dumb from doing exactly this! Never ending bonanza for plaintiff attorneys. These labels are intended for one thing, to be used as a defense in court. But how do you defend against the utterly stupid, who you know will be using your product and you will be profiting from what is, to any profoundly stupid person, and inherently defective device.

Or at least so goes the legal arguments in parts of East St. Louis, the #1 plaintiffs district in all the country.

This is why tort reform becomes so popular. But then you go too far the other way.

Tinker

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To be clear, I am not familiar with all of the list companies you posted, but I am bullish on VEEV for life cycle management of research projects of document controls for drugs, disinfectants, cosmetic products, consumer products, disinfectants, food, animal feed, and renewable fuels. There really has not been another great solution I am aware of that covers QA and R&D needs which is probably why VEEV has made headway here.

Best,

bulwnkl

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Lol, do you think warning labels will actually stop people this dumb from doing exactly this! Never ending bonanza for plaintiff attorneys. These labels are intended for one thing, to be used as a defense in court. But how do you defend against the utterly stupid, who you know will be using your product and you will be profiting from what is, to any profoundly stupid person, and inherently defective device.

I think you may have misinterpreted what I wrote. I did not say that safety tags will stop people from doing what the safety tags warn against, if that is what you are suggesting. What I said (or at least what I meant) was that safety tags exist because many people actually DID do something not very bright with certain products. My point is that many people think that safety tags are stupid or funny because no one in their right mind would do something foolish with a product, when in fact that has happened with a variety of products.

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Hi mauser96,
Thanks for the kind words. To answer your question, who could benefit from VEEV? Anyone who has a modern quality program would benefit. It is very useful for cosmetics, drugs, medical device, food, feed, disinfectants, but could also be useful for any large scale research or quality programs. The steps I outlined are common across many industries. I don’t know how to even estimate the magnitude. It’s far,far larger than the drug area.

Best,

buwlnkl

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Thanks for the great post, bulwnkl, and the extra context offered by all.

It just sounds like VEEV makes it stop hurting in places/processes that are very painful to the customer. I can see lots of TAM in multiple sectors – as has already been noted, any business that must be able to “show their work” is a potential VEEV customer.

just my 2 cents

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Speedy,
While I agree with you to some extent about the presence of what seems to be obvious and unnecessary warnings, I temper that agreement based on a couple of factors.

First, why I agree: I spend a lot of time in China. There is a distinct lack of product warning labels in China. In fact, a lot of health and safety considerations are left up to the consumer in general. Visit the Great Wall and you will find stairs of very uneven runs and rise, hazardous walkways without railings and so forth. Things that simply would not be tolerated at any US monument. Zhangjiajie (Zhang-jia-jay-a) National Forest is a large, breath-takingly scenic park in NW Hunan province, again with a distinct lack of safety features and warnings. China has no history of litigation. For that matter, China has no history of rule by law. When traveling in China I was struck by the modern, world-class infrastructure. It took me a few years to realize that the legal infrastructure like courthouses, big attorney offices, etc, doesn’t really exist. The legal infrastructure that is there, exists primarily to facilitate doing business with the West. The governing philosophy is if you do something stupid, you deserve the outcome. If you do something bad (mostly property crime, violent crime is very low in China), you will be punished, unless you’re in a position of influence. The Chinese people by and large accept this.

But here’s where it gets dicey. The Zhangjiajie tour bus we were on made an unannounced stop at a place of business (this is common practice - captive audience). The 30 - 40 people on the bus were herded into a small theater and everyone was given a foot massage by a group of young people trained to provide the service. This went on for at least half an hour while a man in a lab coat gave a presentation in the front of the room. He was selling “health” products, including the solution our feet were in. My Mandarin was not good enough to understand the specifics, but I caught the gist largely from pictures. He was literally selling snake oil (the primary ingredient of the foot bath). He had other products as well, all of them “scientifically” validated for safety and efficacy. They all bore a seal akin to Underwriter Laboratories or Good Housekeeping or whatever to attest to the fact that the stuff probably would not harm you when used as directed. And several folks on the bus bought this stuff. Just maybe, I prefer the rigor of the FDA when it comes to medicine, but even in America, these concoctions might have flown under the radar as unregulated herbal preparations.

Getting back to the McDonald’s hot coffee episode you mentioned. Stella Liebeck an elderly woman got a cup of coffee at the drive-thru, the lid had not been properly sealed on the cup, it was indeed very hot (180 degrees, able to cause 3rd degree burns in about 7 seconds), the coffee spilled in her lap, badly scalding her legs. She suffered 3rd degree burns on her thighs, requiring emergency medical attention. She wanted to settle for $20K, the actual cost of the medical bills and other related expenses related to the incident. McDonald’s refused and offered her $800. She went to court, the $200K compensatory award plus $2.7M punitive damages was a jury decision which was later reduced via settlement prior to appeal for an undisclosed amount, but known to be less that $600,000.

Think for a moment why is it that you even know about this case? How did this seemingly insignificant incident get such wide spread publicity? The original court award for something that seemed trivial (if you saw photos of her burns, as I have, you might not think it was such a trivial thing) was a great piece of PR for the corporate forces behind “tort reform,” relief from “frivolous litigation,” etc. Were you even aware that the award had been reduced by about 80%? I doubt it.

The PR worked, McDonald’s (as well as a lot of other corporations) got their money’s worth from this incident. What’s my evidence for that statement? The fact that you even cited the case as an example of outrageous settlements forcing corporations to bend to overblown health and safety concerns.

Sometimes, you need to look behind the veneer to see the substrate of the matter.

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Hi brittlerock,

Very interesting post.

Just to clear up a few matters: yes, I was aware of the details behind the McDonald’s hot coffee episode, including that that the award had been significantly reduced. The inclusion of “hot coffee” in my post was a general one, ie- I was not referring to the McDonald’s case. I’m reasonably certain that Ms. Liebeck’s incident, while likely the most widely-known, was not the only incident involving hot coffee. (I am a civil defense attorney and have seen my share of claims and lawsuits over such things).

In addition, I did not cite Ms. Liebeck’s case as “an example of outrageous settlements forcing corporations to bend to overblown health and safety concerns.” As I said, I did not cite Ms. Liebeck’s case (the McDonald’s case). Further, I did not even mention “outrageous settlements”…I think it was another poster who mentioned the plaintiff’s bar and lawsuits, etc.

I hope this clears things up.

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