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Cloud Stocks: Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion

Posted on Tuesday, Jun 18th 2019

Pleasanton, California-based Veeva (NYSE: VEEV) recently reported its first quarter results that surpassed all market expectations and sent the stock soaring 15% to a record high. The market is also pleased with the company’s product upgrades and the stock is expected to continue growing in the coming quarters.

Veeva’s Financials

Veeva’s Q1 revenues grew 25% to $244.8 million, significantly ahead of the Street’s forecast of $238.7 million. Adjusted earnings grew 61% to $0.50 per share and beat the market’s forecast of $0.45 per share for the quarter.

By segment, revenues from subscription services grew 27% to $198.1 million. Professional services revenues grew 18% to $46.6 million. Revenue growth was driven by the continued strong performance of Vault and Commercial Cloud offerings.

For the current quarter, Veeva forecast revenues of $259-$260 million with an adjusted EPS of $0.48-$0.49. The market was looking for revenues of $250.4 million with an EPS of $0.47. Veeva expects to end the current year with revenues of $1.045-$1.05 billion and an EPS of $2.01-$2.03. The market was looking for revenues of $1.03 billion with an adjusted EPS of $1.94 for the year.

Veeva’s AI Focus

As part of its AI focus, Veeva recently announced the availability of its AI platform Veeva Andi. Veeva Andi is part of its CRM Suite and is focused on making it easier for companies to adopt, deploy, and scale AI across the CRM platform. Andi will give Veeva customers access to an open and easy-to-use AI application that can provide control to deliver intelligence and insights. It discovers relevant customer insights and suggests the next best action for improved field efficiency and effectiveness. Its machine learning capabilities imply that the solution gets smarter with every action as it learns from data, rep feedback, and customer response.

Besides Veeva Andi, Veeva also added AI capabilities within Veeva CRM and Veeva Vault PromoMats. Veeva CRM Approved Notes leverages AI to help field reps build better customer relationships and remain compliant with every interaction. The field reps will be able to capture free text notes in Veeva CRM and use the power of AI to detect potential compliance risks.

Veeva Vault Auto Claims Linking included in Veeva Vault PromoMats will help improve speed and compliance of content development. It will leverage AI to provide customers with links from claims to related references, thus helping reduce the administrative task of managing claims across countries, channels, and assets.

The improvement in Veeva’s offerings is helping drive Veeva’s improved financial performance. Veeva is convinced that it will be able to deliver more than 20% growth on its subscription business through the end of this calendar year. Revenue growth is translating to higher margins. For the recently reported quarter, Veeva saw a 4% improvement in its gross margins. Analysts expect margin expansion to continue.

I think Veeva would leverage these expanding margins to acquire other companies that can complement its offerings. It had its eye on the Clinical Trials piece and an acquisition that could have worked out in its favor could have been that of New York-based Medidata Solutions.

I have met with Medidata’s CEO Tarek Sherif a few times and have been impressed with how the company was built on a small amount of investment, quite unlike the ventures of today that are flooded with venture capital. You can read my interviews with Tarek here:

Taking a Capital Efficient Company Public and Beyond: Medidata CEO Tarek Sherif

Thought Leaders in Healthcare IT: Tarek Sherif, CEO of Medidata

Tarek explains how Veeva and Medidata operated within the HIT industry, but offered very different products. Whereas Veeva focused on helping to manage part of the commercial process and documents, Medidata focused on data surrounding drug development. Medidata’s products would have complemented Veeva’s Vault offering.

Medidata had raised $20 million prior to its 2009 IPO. In 2009, it had listed by raising $88 million at a valuation of $313 million. For the previous year, it recorded revenues of $635 million with a net income of $52 million. Medidata was recently acquired by the French company Dassault Systèmes for $5.8 billion. Dassault Systèmes is known for its software offerings and 3D design capabilities for the transportation, aerospace, and life sciences industries. The Medidata acquisition will help it expand its position as a provider of an end-to-end approach to research and development in the healthcare industry.

Veeva’s stock is currently trading at $166.46 with a market capitalization of $24.5 billion. It had peaked to a record high of $168.46 earlier this month.  It has grown from the 52-week low of $73.47 that it was trading at nearly a year ago.

This segment is a part in the series : Cloud Stocks


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