Weekly Update September 8-12
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Veeva is a pretty incredible company in the life sciences industry. Founded by Peter Gassner who is still the CEO and owns over 9% of shares, the company is extremely efficient. What started out as a vertical platform built on Salesforce, has now turned into an important part of life sciences. The flagship product called Veeva Vault is the source of all the other products. The product suite is a little confusing but it can be grouped into two parts – the Development Cloud and the Commercial Cloud.
The Development Cloud primarily deals with the processing of creating a drug or medical device; things like keeping track of the FDA process, sharing data between parties like a clinical research organization and the biotech/pharma, and providing a compliant way for clinical studies to be handled.
Then the Commercial Cloud is more like the original CRM product where life sciences companies can track prescriber data, how well advertising campaigns are doing, and managing events for sales reps.
So the Development Cloud helps life sciences companies create drugs and devices and the Commercial Cloud helps sell them.
The company does about $3 billion in revenue at 50% FCF margins and they are still growing 15%+. The biggest knock against Veeva all along is that they’ve saturated their total addressable market. However, they just keep moving into other areas like development and advertising analytics. Their biggest competition these days is probably IQVIA, which has a plethora of pharma/biotech sales data.
This month, Veeva will be fully transitioned off of its Salesforce foundation as its officially when the contract expires. This has been a very difficult transition to pull off and it seems like the management team is executing well. For 28x TTM EV/FCF, it’s actually not a terrible value considering the high-quality, mission critical nature of these software applications. Adding AI into these workflows should only increase the productivity of Veeva’s customers and lead them to spend even more on new modules. Further out, as computational modeling improves, maybe the drug development process speeds up, requiring more spend on compliance as that becomes the bottleneck. That’s more speculative but the company certainly has tailwinds.