Software makerVeeva Systems (
) got a lot of attention last month when it went public and
bolted out of the gate, its stock more than doubling from a $20
IPO price in a few days.
Now that shares have settled back from early highs and the
excitement that often surrounds an IPO has subsided, investors
can focus on the firm's products, financial performance and
growth prospects. Up nearly 2% Friday, Veeva trades near 38,
where it opened on its first day in the market.
The tech company has a lot going for it, analysts say.
Veeva provides cloud-based software solutions and professional
services for the life sciences industry. Its software is designed
to help drugmakers and other kinds of customers improve their
sales and marketing efforts and also operate more
Veeva's lineup includes Veeva CRM, a customer relationship
management solution that lets pharmaceutical sales reps, account
managers and others manage, track and optimize interactions with
health care providers.
The company also offers Veeva Vault, a cloud-based content
management and collaboration solution that helps customers manage
processes such as clinical trials, quality management,
manufacturing, sales and marketing.
Another product, Veeva Network, is a cloud-based solution
designed to help life sciences firms create and maintain records
of health care professionals and organizations they interact
With cloud-based solutions, customers can operate more cheaply
and efficiently than they would if they had to run software on
in-house hardware systems.
"Veeva's cloud-based applications increase productivity and
compliance of sales and marketing personnel, and have been
successful in replacing legacy on-premise solutions in the life
sciences industry," Deutsche Bank analyst Nandan Amladi noted in
a report initiating coverage on Veeva.
These kinds of solutions are especially important in the life
sciences industry, which has grown increasingly complex and
In a recent interview with IBD, Veeva CEO Peter Gassner said
life sciences companies have a "tremendous amount of business
processes" because of the nature of the industry.
"They are dealing with human life and government regulations,
so this is the perfect industry for cloud (software)," Gassner
said. "They were stuck with these legacy client-server systems
that were not able to keep up as the regulatory and competitive
Veeva has about 170 life sciences customers, including some
leading drugmakers such asMerck (
),Eli Lilly (
),Gilead Sciences (
) and Bayer Healthcare.
About 65% of Veeva's revenue comes from North America. Another
23% comes from Europe and the remaining 12% from
Demand for Veeva's software is reflected in the company's
rapid financial growth. Annual revenue has more than tripled over
the past two years.
Veeva, which was founded in 2007, is also solidly profitable.
It logged net income of nearly $11 million during the first six
months of the current fiscal year.
Analyst Amladi reckons Veeva has about 10% penetration in its
core CRM market and less than 4% penetration in the broader
market for content management and data management products. He
estimates that the total addressable market is around $5 billion
"Veeva's industry cloud model enables deeper specialization
and can achieve greater market share -- more than 50% over time,"
Most of Veeva's competition comes from privately held firms
such as Advanced Health Media Services and StayinFront, while
rival Cegedim Relationship Management is publicly traded in
In his report earlier this month initiating coverage on Veeva,
Canaccord Genuity analyst Richard Davis said that Veeva has
"almost no" venture capital-backed competition.
The combination of cloud technology, in-demand products,
strong financial growth, limited competition and high-profile
clients helps explain why Veeva's stock price rose so rapidly in
its first day of trading, Oct. 16.
The IPO pricing of $20 a share came in above the expected
range of $16 to $18, and Veeva raised $260.9 million from the
sale of 13.045 million shares. Banks involved in the IPO
includedMorgan Stanley (
),Deutsche Bank (DB),Wells Fargo (WFC), Stifel Nicolaus, Pacific
Crest Securities and Canaccord Genuity.
Stock Market Buzz
Veeva shares closed at 37.16 on the first day of trading. They
rumbled higher over the next few days before peaking at 49 on
The IPO "generated the level of anticipation typically
reserved for high-profile names such asTwitter (
),Splunk (SPLK),Tableau (DATA) andWorkday (WDAY)," said Tom
Roderick, analyst at Stifel Nicolaus. "We think this enthusiasm
was and is warranted."
Despite the early volatility, many analysts remain bullish on
"Early cycle disruptive technology stocks almost always work,"
Davis noted. "When you add in quite conservative estimates,
almost no VC-backed segment competition, world-class reference
customers and state-of-the-art cloud technology, we don't see
many things that will shake investors' faith in Veeva."
Veeva is scheduled to report results for its fiscal third
quarter on Dec. 5. Analysts expect earnings of 5 cents a share. A
consensus of four polled by Thomson Reuters sees revenue coming
in at $54 million, up from $36 million a year earlier. For the
full fiscal year, revenue is expected to rise 51% to $196.3