Veeva Demonstrates the Clinical Trials Market is Fast-Growing. An opportunity for ER&D Vendors
Dassault’s Acquisition of Medidata Sends a Strong Message to the ER&D Industry
Early this year, Dassault Systemes finalized the acquisition of Medidata, an ISV specialized in medical trials. With this acquisition, Dassault highlights it now covers the full range of pharma R&D, from the development of new drugs to medical trials. Pharma is now Dassault’s second-largest vertical, after manufacturing.
Dassault’s move sent a strong signal to the ER&D industry, by making its largest-ever acquisition, spending $5.8bn in cash. We think the amount was very significant, as Medidata had only revenues of $636m. However, Medidata was a firm of quality, with revenue growth of ~15% annually and a non-GAAP operating margin above 23%.
Veeva, the Life Science CRM and Clinical Trials ISV
We think that the ER&D sector has no alternative but to enter the pharma R&D sector, eventually. As a result, ERDservices.org is increasing its coverage of the drug development and clinical trials markets. This is where Veeva fits, as a CRM and clinical trials specialist firm.
Veeva is a Wall Street darling with an eye-popping market cap of $21bn. The uniqueness of Veeva is that its SaaS applications run on top of Salesforce’s Clouds. This approach positions Veeva in the high-growth ecosystem of Salesforce (which grows by 20-25% each year). It saves the company R&D expenditures in core CRM technology while benefitting from Salesforce’s fast-expanding functionality. Finally, Veeva has a speculative profile and might be acquired by Salesforce at some point, as part of its verticalization strategy. Last month, Salesforce acquired a vertical partner Vlocity, which serves several sectors including utilities and financial services;
Veeva has two products: a CRM application named Commercial Cloud and a clinical trials software, Vault. CRM has been out for long, and its growth is now slowing down to mid-teen digits, while Vault is a more recent application and is in very high growth.
Veeva Has A Fantastic Financial Performance
Veeva just announced its full-year FY20 results, and they were excellent. Like Salesforce, Veeva is growing fast (+28% in FY20, the year ending January 31, 2020), with most of its growth organic. Subscription revenues were up by 29% to $896m, with Vault subscriptions up 43% and Commercial Cloud up 15% organically. Professional services revenues were up by 24%, including the acquisition of Physicians Wolrd.
Looking ahead, Veeva is targeting $1.4bn in revenues in FY21, up 27%, and (we estimate) up 18% at constant scope (CS). The company expects subscription growth to slow down to +28%, down from +38% in FY20, despite the positive impact of the Crossix acquisition. The slowdown will result from lower subscription growth in Vault, wit the end of the Zinc MAPS migration to Vault PromoMats (Veeva is discontinuing the regulatory content management product from its 2015 Zinc Ahead acquisition) and a demanding comparison basis.
We will continue tracking Veeva to understand the dynamics of the clinical trials industry and what opportunity it offers to ER&D service vendors.