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Pharma Tech Outlook | Thursday, May 25, 2023
Veeva Systems, a provider of CRM for the life sciences industry, has demonstrated that an industry cloud player may achieve rapid development and robust earnings, despite being trapped on the Salesforce platform.
As the poster child for the developing industrial cloud trend, Veeva Systems is a formidable competitor in the life sciences CRM market. At the time of its IPO in October 2013, it was already generating substantial profits on yearly revenues of $129.5 million and had grown by 110 percent over the previous year.
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As revenues increased from $210 million in fiscal 2014 to $313 million in fiscal 2015 (year-end January 31), growth rates unavoidably slowed, but the company has maintained a respectable net income in the 12 to 15 percent range.
Even more astonishing is that Veeva went public after raising only $7 million in venture capital (more than half of it from those canny investors at Emergence Capital). Operations funded the remainder of its phenomenal expansion, and the company continues to create substantial cash surpluses to augment the more than $200 million raised from the IPO.
Developing its application natively on the Salesforce platform contributed significantly to its reduced startup costs. This decreased its development expenses and eliminated the requirement for early-stage investments in data centers and servers. This means that it pays Salesforce approximately 15 percent of its income in subscription costs, which is comparable to what other SaaS companies spend on their infrastructure.
Veeva has also suffered the price of being wholly entrenched in the Salesforce platform. Last year, Veeva signed a 10-year deal obligating it to pay Salesforce a minimum of $500 million by September 2025, or between $40 and $50 million annually.
Meeting industry-specific needs
Veeva boasts more than 200 customers in the life sciences business, but the company's top ten clients account for more than half of its income. This skew helps explain Veeva's enormous average annual revenue per customer (AARPU), which Redpoint's Tomasz Tunguz projected to be $780,000 per client based on the company's S-1 filing for its IPO.
Its ability to gain these clients, primarily from major on-premise software companies like Oracle (especially its Siebel products) and IMS Health (who recently purchased significant European player Cegedim), is due to the industry's increased need to adapt to change.
Developing its tech
While over 85 percent of total revenues (and nearly 90 percent of subscription revenues) are generated by the original Veeva CRM built on the Salesforce platform, Veeva is currently expanding its product portfolio on its servers. These products manage documents and data following the special regulatory needs of the life sciences industry:
Veeva Vault maintains and preserves regulated content, including advertising materials, clinical trial documents, etc. Veeva Network utilizes an industry-specific data model for client master data management. Veeva OpenData collaborates with industry partners to deliver a single source of authenticated customer reference data.
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