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    Veeva Systems Pursues New Growth Initiatives Both Inside And Outside Of Life Sciences

    This article was originally published on Forbes. Click here to view the original article.

    Investors this year have bid up shares of Veeva Systems (VEEV), a provider of cloud-based software for the life sciences industry, as the company continues to broaden its product portfolio and expand into new verticals. Veeva shares in the middle of June hit a new all-time high at $168.46. So far in 2019, the stock has advanced 86%.

    The company’s Vault content management products, expected to grow 40% in fiscal 2020 (ending January), have become an important part of the business, representing nearly half of total revenue. Vault was the main reason why Veeva’s subscription revenue in fiscal Q1 (ended April) rose 27%, the highest growth rate in seven quarters.

    Veeva got its start with its Commercial Cloud business, which is made up of the core customer relationship management (CRM) offering and add-on modules. This unit has transitioned into a slower-growth phase because the CRM solution has already achieved a market share of about 80% across all global pharma rep seats. Since share gains from here on will be more difficult to come by, it makes sense that Commercial Cloud this fiscal year is only expected to grow 11%.

    While the total addressable market (TAM) for Commercial Cloud is estimated at $3 billion, Vault’s TAM in the regulated content management space is worth more than $4 billion. Veeva has an advantage with Vault in that it goes up against a lot of legacy technology that can’t compete in terms of features and performance, meaning there are ample opportunities to gain market share, especially as more organizations go through complete digital transformations.

    Vault CDMS, Veeva’s clinical data management solution, operates in a TAM of $1 billion. The product is more of a standalone offering, often purchased ahead of a new clinical trial. Veeva in FQ1 closed its first top 20 pharma enterprise deal for Vault CDMS. After completing a nine-month trial, the Veeva customer signed the multi-year deal that will be worth eight figures annually once fully rolled out. With that big win as a reference customer, Veeva is looking to sign some additional large Vault CDMS deals.

    In the content-centric segment of the business, the Vault eTMF solution handles document management related to drug clinical trials. The most mature product among Veeva’s solutions for R&D, Vault eTMF had a record year in FY’19, adding two top 20 pharma customers in the final quarter. Veeva eTMF ended last year with 200+ customers, including 11 of the top 20 pharma companies.

    Last May, Veeva announced Nitro, a modern cloud commercial data warehouse for the life sciences industry. A replacement for legacy technology or custom-built data warehouses in need of an upgrade, Nitro is easy to implement and configure. It’s not bogged down by the inflexibility and slowness of the custom data warehouses, and is analytics-ready for customers to deploy the business intelligence and AI tools of their choice.

    The life sciences industry is increasingly inundated with data. With Nitro, Veeva customers can corral all of that data and then properly analyze it for actionable insights. Sales forecasting and sales force productivity analysis are just two important use cases for Nitro.

    At the end of FY’19, Nitro had six early adopter customers. Veeva management thinks it will take at least two years before Nitro produces meaningful revenue for the company. But Nitro will become the biggest growth driver in Commercial Cloud once it’s out of the early adopter phase.

    Vault Training, one of Veeva’s newer products, simplifies role-based training and helps quality control teams remain audit-ready and compliant. Employees in quality control and manufacturing have high compliance requirements, and it takes time to make sure the right people are properly trained. Vault Training makes the whole training process much easier. The product is not a learning management solution (LMS) itself because it’s too specialized, but coexists with outside LMS offerings.

    Veeva Andi, the company’s first purpose-built AI application, is designed to provide important customer insights and make recommendations about the next best action pharma reps should take to improve sales effectiveness. Veeva’s new CRM Approved Notes product uses AI technology to reduce compliance risk when field reps are meeting with doctors. Veeva will make CRM Approved Notes part of the core CRM subscription.

    Since Vault was not built purely for life sciences, it has ample potential in content management in other regulated industries. Veeva’s QualityOne solution debuted two and a half years ago after the company received inbound interest from a number of manufacturers.

    For now, Veeva is offering QualityOne to companies in three large verticals outside of life sciences: consumer packaged goods, chemicals and cosmetics. Since Veeva is still in the early stages with this product, the company is focused on improving QualityOne and making sure it finds the right early adopters to become core reference customers for the next sales phase.

    At recent prices, Veeva’s enterprise value is 22 times the FY’20 consensus revenue estimate of $1.04 billion. While the company this year is expected to expand the top line by 20.6%, that’s not a blistering growth rate normally associated with such a pricey valuation. But Veeva bulls are willing to pay up for the stock because they see the potential for revenue growth to reaccelerate due to new products and the expanded TAM from the company’s push into additional verticals.