You could forgive drug and biotech executives for having a bad case of target fixation.
After all, they do work in a field that is filled with time-consuming and expensive headaches.
Consider that the Biotechnology Innovation Organization (BIO), the world’s largest biotech trade organization, looked at 7,400 drug programs by 1,103 companies. They were investigating drug-approval rates.
The news was not good -just 9.6% of drugs scientists discover ever get approved for sale. That’s a one-in-ten shot.
With such daunting data, it’s no wonder that, even in a field already worth $1.2 trillion in global sales, industry leaders are on the lookout for ways to lower the cost of discovery and shorten time to market.
And with that goal in mind, I’ve uncovered a high-octane, large-cap firm that has become an essential ingredient in the drug sector’s success.
The Search for the Next Big “Blockbuster”
Now then, drug and biotech firms generally want to find as many so-called “blockbusters” as they can, and there’s a good reason for that.
You see, a “blockbuster” drug is defined as one with sales of at least $1 billion annually. EvaluatePharma expects 10 will be launched this year alone. The research firm forecasts that combined sales for this particular group will hit $18.2 billion by 2024.
It’s no doubt that numbers like that can certainly grab headlines, but there is a downside to all that press as well. To be candid, it’s one of the reasons why so many people don’t understand the complexity behind drug prices.
The fact that many people don’t realize is that prescription drug prices aren’t just based on the winners. They include the billions sunk into the 90.4% of drugs that, according to the BIO, are never released.
Consider that a few years ago, the Tufts Center for the Study of Drug Development found that it cost $1 billion to get a new drug to market.
Tufts has since updated that study to reveal that the field is only getting tougher. It now forecasts that, these days, the average drug takes 12 years to go from discovery to commercial launch.
When you factor in the impact of failed trials, Tufts further found that the average cost of getting a new drug to the public is a staggering $2.5 billion.
In other words, this is a sector that is badly in need of technology that can greatly flatten the R&D curve.
And that’s just what we have with Veeva Systems Inc. (VEEV). It offers a suite of cloud-based services for the life sciences industry.
Delivering its products as software as a service (SaaS), Veeva offers tools to help clients manage the entire clinical suite. It covers everything from collecting and verifying data to making sure clients are ready for any government inspections.
With drug safety, Veeva helps by using artificial intelligence to automate case intakes. The system can manage safety content and mitigate risks of something going wrong in a drug trial.
With R&D, Veeva also helps firms document and track all aspects of the process, from early stage research through clinical trials, all the way to FDA approval.
All the key documents are stored and shared in the Veeva Vault, which is designed to mimic the exact steps of the paperwork that the FDA will want to see during clinical phases.
Then there’s Veeva Commercial Cloud. This is where clients can store all of their internal operational data, as well as their external interactions with the medical community.
No wonder Veeva’s client list now totals some 600 firms and reads like a Who’s Who of the field. We’re talking leaders like AstraZeneca PLC (AZN), Biogen Inc. (BIIB), GlaxoSmithKline plc (GSK), Eli Lilly and Co. (LLY), and Shire plc (SHPG).
The Veeva Advantage
As you might imagine, Veeva’s website is chock full of customer success stories.
Let’s use Merck as an example. The global giant found that a switch to Veeva’s customer-relationship management (CRM) system more than doubled their rates of productivity and collaboration.
Merck learned that only 23% of the firm’s sales reps bothered with the old, in-house CRM. With Veeva’s more robust platform in place, fully 82% of sales reps jumped on board.
That kind of success has helped Veeva grow like crazy. Founded in 2007, the firm’s sales base had reached $400 million less than nine full years later. By next year, I’m expecting sales to approach $1.3 billion.
And from where I sit, I can see yearly sales hitting $3 billion by mid-decade.
That’s because Veeva is just now pushing into the even bigger industrial market, which is twice the size of its core life sciences sector.
There’s no doubt that a big part of Veeva’s success starts at the top with founder and CEO Peter Gassner. He’s a bona fide software and cloud star.
Armed with a degree in computer science, he began his career back in 1984 with International Business Machines Corp. (IBM). He then served as a vice president and general manager at the financial software firm PeopleSoft, now a part of Oracle Corp. (ORCL).
After that, he became a senior vice president at CRM leader salesforce.com inc. (CRM). Gassner was in charge of building the Salesforce platform, a role that helped the company go public in 2004.
Today, he oversees a firm that is one of the more successful cloud-based units in the world today. And he has the stock return to prove it.
Over the past five years, the S&P 500 is up roughly 53.2%. By contrast, VEEV is up 421% over the same period, beating the broad market by 691%.
In its fiscal second quarter, which ended on July 31, Veeva said per-share profits rose 56% from the year-ago quarter. As a sign that this is a profit powerhouse, earnings rose more than twice as much as sales.
Over the past three years, it has grown per-share profits by an average of 48%. That means they are doubling roughly every 18 months.
If we cut that back to a conservative 24%, we could still see the stock double in value in as little as three years.
With the software sector out of favor, I believe now is a good time to start building a position in this winner. By lowering your entry cost, you build in extra profits.
And with its amazing track record, Veeva is one of those stocks you can count on to really help you build your wealth.
Cheers and good investing,
Michael A. Robinson