Credit: Shutterstock photoI t takes some doing for a small fry to make a dent in a market ruled by industry big shots.
But that's what software service providerVeeva Systems ( VEEV ) has done since making its market debut in October 2013, as it's taken share from larger rivals that were using older technology.
Veeva, founded in 2007, specializes in providing cloud-based software to the life sciences industry. Pharmaceutical firms and biotechs use its customer relationship management, or CRM, software to market and sell to doctors and other health care providers more efficiently and effectively, and in compliance with regulations.
Another product, Veeva Vault, provides cloud-based content management for processes such as clinical trials, quality management, manufacturing, sales and marketing. A third cloud-based software offering, Veeva Network, is used for data management.
A Salesforce.com Partner
Veeva's core CRM offering and complementary products, such as CRM Approved Email, useSalesforce.com 's ( CRM ) Salesforce platform. Veeva is Salesforce.com's preferred and recommended Salesforce platform application provider of sales automation solutions for drugmakers in the pharma and biotech industry.
Veeva is the "primary" company offering cloud-based software-as-a-service, or SaaS, in the life science CRM market, says UBS analyst Steven Valiquette.
Veeva's SaaS capabilities have helped it successfully compete with its main rivals in the CRM life science space, which include computer software giantOracle ( ORCL ) and Cegedim, a global technology and services company focused on health care.
"Veeva has been taking a lot of share in the life science CRM market," Valiquette told IBD. "Competitors like Oracle and Cegedim are offering more traditional technology within this marketplace."
He estimates that Veeva has a roughly 45% share of the life science CRM market.
Veeva, an IBD 50 stock, gets about 85% of its revenue from its CRM offerings.
Oracle and Cegedim are losing share to Veeva, Valiquette adds, as pharmaceutical and biotech companies go through a "replacement cycle" and upgrade their technology to newer offerings.
He says Veeva is the "go-to company" in the life science CRM space for these upgrades.
Why go with Veeva's technology?
"Life sciences organizations generally use on-premises systems that were highly customized and specialized in order to work properly and meet the strict regulatory requirements," Valiquette noted in his Feb. 5 initiation report on Veeva, which he rates a buy. And "Veeva's industry-specific software brings the cloud functionality in a form tailored specifically for the life sciences organizations."
Adds Canaccord Genuity analyst Richard Davis: "Veeva runs circles around its competitors."
When salespeople call on a doctor or other health care provider, Veeva's cloud-based software enables them to have the data they need "at their fingertips on a tablet and updated in real time, making them more efficient and intelligent," says Davis.
Vault Helps Lock In Growth
Veeva has been enjoying a nice run, driven by continued growth in its CRM business and increasing momentum from Veeva Vault for content management.
Veeva has logged at least double-digit sales and earnings growth in all but two quarters since its IPO . In the third quarter, earnings rose 50% to 9 cents per share. Sales popped 52% to $83.8 million.
If analysts are on target, Veeva should see double-digit sales and earnings growth when it reports fiscal 2015 fourth-quarter results on March 3 after the stock market close. Analysts polled by Thomson Reuters see EPS growing 29% year over year to 9 cents, a slower rate than in the prior quarter.
Why the slowdown?
Among the causes is increased spending on R&D and sales and marketing, according to Davis.
"Also, so far at least, Veeva has tended to exceed consensus forecasts," he said. "Obviously, no guarantees that they will do that again, but they have done well so far."
But the growth has helped fuel a nice run for Veeva stock . So far this year it's up 13%.
What's the draw for investors?
"More than anything, it's taking a lot of share in the life science CRM market," said Valiquette.
Another plus, he adds, is the fact that Veeva has been showing "very strong" top-line and earnings growth.
Investors like that Veeva makes a profit on a free cash flow basis and that it has operating margins in the mid- to-high 20s, adds Davis.
Valiquette says that he expects to hear a "continuation of market share gains" in Veeva's core life science CRM market in its fourth-quarter report.
He sees Veeva growing its share in that market to 70%-75% between now and 2020.
A merger deal is in the offing for one of Veeva's rivals in the life science CRM market.
IMS Health ( IMS ) is acquiring Cegedim's information solutions and customer relationship management businesses. The deal is expected to close early this year.
"The impact (of the deal) should be minimal, because Cegedim was losing share and IMS management has stated publicly that CRM is not the focal point of the merger," said Valiquette.
Veeva has more than 200 customers, including Bayer,Eli Lilly ( LLY ) andNovartis (NVS).
Analysts expect Veeva's full-year earnings to rise 48% to 34 cents a share.
They see a 21% gain in fiscal 2016 and a 24% increase in 2017.
Veeva Vault is becoming a "greater portion of the company's growth trajectory," says Valiquette.
Customer Count Rising
On the Nov. 25 third-quarter conference call, CEO Peter Gassner said that Veeva has more than 100 Vault customers.
In the last 12 months, he added, the company had seen a threefold increase in the total number of Vaults used by Veeva customers. In the third quarter alone, Veeva signed three Vault deals with annual contract values in the seven figures, he said.
"We are seeing great momentum in Veeva Vault," Gassner said.
Why is there so much customer interest in Vault?
"Today, the industry is stuck on a variety of client service systems that are 10 years to 15 years old," said Gassner. "These systems are slow. It can take minutes to find and retrieve a document (and) usability is poor. They're highly customized."
The industry, he adds, wants cloud solutions to "streamline IT."
"With Vault, they get a suite of cloud applications they can typically implement in just a few months because the applications are functionally complete," he said.
Veeva is part of IBD's Computer Software-Medical industry group. It is the second highest-rated company in the group, with a Composite Rating of 93 out of a possible 99.
Cerner (CERN) ranks No. 1, with a Composite Rating of 97.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
