Veeva System (VEEV) Q3'24 - Migration accelerating
More migration of top 20 pharma expected in the next 6-12 months, eliminating execution risks. At 33x FCF and 12%+ growth, a good entry?
Hi, I am Trung. I deep-dive into market leaders that passed my sleep-well checklist. I follow up on their performance with my Thesis Tracker updates, and when the right price comes, I buy them for the Sleep Well Portfolio, which I am building for my daughters to redeem in 2037. I disclose my reasoning for all BUY and SELL (ideally never). Access all content here.
Hi, sleep well friends,
This post tracks Veeva Systems (VEEV) Q3-24, a top life science drug development SaaS solution.
Previously:
CrowdStrike (CRWD) - Retention rate remains top class - up 71% since bought (Aug 2024)
Fortinet (FTNT) - Core returned to growth, record profitability, up 70% since bought (Mar 2024)
Floor & Decor (FND) - Coping well with slow existing housing sales, up 28% since bought (Oct 2023)
WilScott MM (WSC) - Is the McGrath deal closing? Trimmed to buy Grab.
Dino Polska (DNP.WA) - Reaccelerating store opening, up 9% since bought (Apr 2024)
Sea Limited (SE) - SEA e-commerce leader, up 58% since bought (Jun 2024)
Mercado Libre (MELI) - LATAM e-commerce and banking leader, down 15% since bought (Oct 2024)
GRAB (GRAB) - SEA Super App leader, up 25% since bought (Oct 2024)
MIPS - helmet protection leader, up 61% since bought (May 2023)
Kinsale (KNSL) - E&S insurance leader, up 15% (May 2024)
WiseTech (WTC) - CEO shakes up, logistics SaaS leader, up 80% (Jan 2024)
FTNT + CRWD partnership of endpoint and network security leaders, up 70% and 71% (Mar & Jun 2024)
I compiled all thesis tracking here and linked it to the Sleep Well Portfolio spreadsheet (annual sub only). You can also access all buy-and-sell and deep dives.
As a reminder, I focus on the long-term story/execution of the business, not the quarterly Wall Street beat/miss quarterly records. So, my thesis tracker report primarily checks how my picks build their value propositions, cope with adversity, and maintain/grow moats and market share. It’s crucial to gaining conviction and forming my buy/sell decisions.
Current Sleep Well Portfolio holdings:
For all sleep-well writeups, please visit this link.
Finchat.io, my personal Bloomberg terminal, sponsors this post; join Finchart.io using this link to get 20% off and support sleep-well investments.
Veeva Systems (VEEV) Q3’25 - Migration to Vault accelerating, eliminating execution risks.
When I proposed Veeva Systems in December 2023 [deep dive part 1, part 2], the thesis was straightforward: Veeva is the go-to solution for CRM and R&D cloud platforms in Life Sciences, with 19 out of 20 top pharma as customers and an 80%+ and 30%+ share of the penetrated market, respectively, in terms of seats. Once adopted, it is tough to leave as a journey from initial drug studies to commercialization can last up to 20 years. Better yet, the competition had been relatively inferior.
So when Salesforce and IQVIA introduced competing products, Veeva’s market perception fell to the lowest since its IPO, reaching 25x EV/FCF vs. 40x pre-COVID, the lowest level since its IPO. In hindsight, the market was correct to be pessimistic, given there were real existential risks if they materialized in the short-medium term.
IQVIA, a $40B elephant, was the most significant risk to Veeva’s Commerical (CRM) and Data Cloud (particularly Compass and Crossix). In Q1’24, it announced a partnership with Salesforce to replicate what Veeva does.
IQVIA’s decade-long lawsuit against Veeva for data misuse remains unsettled. The lawsuit restricts Veeva’s customers from integrating IQVIA’s third-party data into Veeva’s multiple applications, including Network Customer Master, Veeva Nitro, Andi, and OpenData. It has impacted Veeva’s ability to negotiate with customers.
Salesforce (CRM), the leader in generic CRM platforms, has created Healthcare to enter life science. But after recruiting Frank Defesche, the former General Manager of Veeva’s Vault, in November 2023, will that change the competition dynamics?
Meanwhile, Veeva is migrating its CRM capabilities to Veeva Vault from Salesforce. Management lauded the long-term gains, but the disruption will increase churn.
Medidata’s Rave and Oracle’s Phase Forward are formidable competitors in specific applications, namely electronic data capture (EDC) and clinical data management. But can they go beyond these functions to disrupt Veeva?
AI - What is Veeva doing to ensure it becomes an opportunity, not a risk?
Loss of exclusivity (LoEs) and the biopharma funding cycle are cyclical risks as R&D and CRM funding cuts worsen, reducing drug development activities. But, could it motivate biopharma to improve efficiency and increase investment in R&D solutions?
Read more about Veeva [deep dive part 1, part 2, CRM+ IQVIA]
I’ll focus on the first four risks and briefly review the most essential things of the Q3’24 results.