Alright. So thank you, everybody, for coming today. Thank you, everybody. That's on the webcast listening in as well. I think most of you know me, if you don't, I'm Rick Lund, I run Investor Relations here at Veeva.
And please don't hesitate to reach out to me if in the wake of this event, you have questions or need anything, at any point in the future as well. I'm always available. Just a few quick logistics. If everybody, just a quick reminder to silence your cell phones, you haven't found them yet, the bathrooms are just to the right of the elevators, please hold all questions to the end We have a consolidated block of time at the end for Q And A with everyone on the management team. And then, So bear with me for a second while I do the quick disclaimer here.
Alright. During the course of today's presentations, we will make forward looking statements including statements regarding trends, our strategies and the anticipated performance of our business. These forward looking statements will be based on management's current views and expectations and are subject to various risks and uncertainties. Actual results may vary may differ materially. Please refer to the risk factors included in our most recent filing on Form 10 which is available on the company's website at veeva.com under the Investors section and on the SEC's website at sec.gov.
Forward looking statements made during today's presentations are being made as of today. If the presentations are replayed or viewed after today, October 11, 2017, the information presented may not contain current or accurate information. Veeva disclaims any obligation to update or revise any forward looking statements. In the presentations, we will also discuss certain non GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in the appendix of today's presentation, which will be posted on our website.
Okay. Thank you. And with that, I will pass it over to our founder and CEO, Peter Gasser.
Thanks, Rick, and welcome, everyone. Clickers working. Good. So we're going to go through today. You'll hear from me first.
And then Matt will go into some detail about our products. We'll hear from Michael from Gilead, a different type customer that you haven't heard before this time on the R and D side, actually in the non IT area, the business side Henry, our Chief Strategy Officer, will talk about Unified Clinical. Then I'll come back and talk about Vault QualityOne, which is our outside of life sciences. Get a financial update and then you'll have time for your questions. So this is, our vision and value slide.
This is how we manage the company. I explain this time many explain this slide many times every quarter. Start of every board meeting, company call, significant management team meeting, every 2 weeks, I do a leadership meeting with the company. I start with this. This keeps us grounded and it keeps us focused.
So to understand that this is to understand Veeva. We're building the industry cloud for life sciences. That means our customers are people like Pfizer and Novartis, people making medicine, people, our customers, their vision, their mission is to improve and extend human life. Part of that $1,600,000,000,000 industry, we're trying to provide them technology to help them be more efficient and effective That's what we call the industry cloud for life sciences. So we provide cloud applications, data, and the professional services that go along, was that?
That's what we call the industry cloud. For our values, they're how we make decisions along the way. Customer successes. Number 1, that means, our products and our projects have to work for our customers, the company and the people inside the company. And we work hard at that every day.
Employee success is the same, but for our employees, they have to enjoy who they work with, have to have tools to be successful, grow in their career, they have to look back and think, man, Veeva was one of the great places to work, and we call that employee success, And speed, that's a real important one. We want to have that startup quickness, even as we become a large global company that, so we work on those 3 things. So if you want to know where Veeva's going, kind of that's our vision and values, this is our our compass. Some key things you'll hear today, some fundamental things is first that we're a real product company. You know, I've been doing enterprise software for more than 25 years now, starting at IBM and then peoplesoftinsalesforce.com, real product DNA.
Software engineer. And we've assembled those types of people in Veeva, some people who really know software deeply and cloud software deeply. Cloud have been doing for 15 years. So we got a lot of experts that know software, and we have a lot of experts that know about life sciences. And that's kind of unique, because normally, companies that focus on the industry, they are not great technology companies.
But we are. So Veeva is a true outlier in that way. A lot of people, and that's an important point that can be can be missed. We're an outlier. We're a great technology company that started in a very specific vertical.
We have a really powerful asset called our Vowel Vault platform. I'm going to talk about that. That's our application platform, all great application companies like SAP workdaysalesforce.com, etcetera. They have great application platforms. We have one of those and you'll hear about it.
We're headed for long term leadership in these strategic markets, particularly in the commercial area of life sciences, and in the R And D area. You'll hear mostly about that from Matt and myself, and these are long term franchises. That I think we're pretty well set up for. And then we have a good business model that we call the Veeva Way that generates consistent growth and profits, which is kind of unique. So those are probably the key highlights of Veeva.
I'll start with the Veeva way. And If we start there in the gray, it's all about picking the right markets to go into. So the right markets, are we going to go into Pharmaceutical CRM, which is the first one we went into, or EDC, which is one of the electronic data capture, one of the recent ones we went into. We pay a lot of attention on that. We call it internally picking the clear and correct target markets, and that's really a hallmark of what we do in sort of built into our operating model, because if you don't pick the right things to do, it doesn't matter how hard you work.
So we spend a lot of time on that. And we look for something that we can clearly that we think we can become the leader in, the unquestioned leader. Now that might take time. It might take 5 years, 10 years. But we look for a place where we can really be the leader due to some advantage that we think we have.
So we're pretty surgical on this and we have, some discipline around it. We don't just sort of close some deal somewhere and then think, well, that's our next strategic market. It's pretty surgical because we're in a lot of markets, so we have to be clear about that. And then we provide some cloud innovation. We always look to see when we're starting out, if it's going to take us 10 years to be the leader, we better put something fundamentally special in there, and we try to push the envelope on the cloud and really shoot for product excellence.
You'll hear a lot of people talk about product excellence and going extra mile. And then we get some customers, we focus on our early adopters, We get them really successful, and we use that success both to build evangelism, but also to improve the product. The tighter your relationship is with the customer. And the more responsive that you are, the more they give you feedback, the more you improve your product, the more you can then improve it more. So it's a really virtuous cycle there of customer success.
If you do all this thing right, at least the leadership in a product area, which is then you can have strong growth and profitability, you can invest that into organic growth. And in a nutshell, that's what Beev has done. We started out with a core product around the commercial cloud and pharma CRM, established leadership generates good profits, invest that into building Vault. Right now Vault is generating good profits. We're investing that into things we're doing outside of life sciences.
So kind of not that complicated. Lots of hard work, but, it's, conceptually pretty straightforward. And I think it's important that we don't get focused. This is what we do, and we keep doing it. This has led to some good results both in terms of revenue growth and profit.
We're a ten year old company, 8 years of growth and profit operating margins north of 25%. What you're going to hear today, both from me and you're going to see in the demos and from the customer, from Matt, from Tim, from Henry, is kind of the why behind these results. This is the report card. How do we get those good grades? That's what we're gonna do today.
This is, interesting slide. I think you can learn a lot about it. I'm going to talk about 40 minutes on this slide. Just kidding. Kidding.
But I I saw some people's eyes went up, like, oh, man. No. I will it'll be somewhat less than 40 minutes, but I think you can really understand a lot about Veeva from this slide, it shows from our beginning in 2007 to 2017, and we'll concentrate on the bottom part first, which is some strategic decisions, so the green spot there. And on the top, you see products that we have announced as available products that we've announced available. So if we just start with the decision We started the company and we said, Hey, we'll do this industry specific thing, pharmaceutical CRM, build on salesforce.com, and it kind of viewed as risky at the time, just like any startup, not sure if that's actually going to work or if that's a good idea.
It turned out it was a very good idea. And then we face the decision point that first ball is about 2009, should we take this global or not? Because we were doing this in the U. S. That's completely different than trying to accomplish that in Japan or China or France with an entrenched competitor.
Nobody had ever done that before. Nobody had pharmaceutical CRM that was dominant across the world never been done because a very regional market, we decided we would do that in 2009, took us many years to accomplish that, but we're clearly the leader there. But that decision was actually taken in 2009. And then towards the end of 2010, right after we took that globalization decision, we took a decision to build our own application platform, beev evolved, and to go after these content management applications, which we knew would be mainly on the R and D side of life sciences. So we are doing two things there.
We are we're gonna build our own platform, and we're gonna move from the commercial side to the R and D side, all the time, while our hair was on fire, because the the CRM business was just exploding, and it was trying to globalize. But why do we make those decisions? We were thinking about, hey, what's going to be going on in 2020. What's going to be going on 10 years from now? That's what we need to propel our growth.
So that's what we did. Looking back, it was quite aggressive. I'm glad I didn't know that at the time. No, I knew that and we knew trying something aggressive and paid off. So those are very strategic decisions.
Then the next one I call out quite strategic was acquiring Zinc was in the fall of 2015. Zinc was a very good competitor of ours. They focused in the commercial content area of Vault. And they were very well liked in the industry. Really, they were the leader in the industry, started 20 years ago.
And we were battling them with with our promo mats application. And what we thought is, hey, was the best thing for customer success if we acquire Zinc? Otherwise, we were going to split the market share and cause a lot of confusion and have a long battle. So we thought that was best for customers and for Veeva. Because if we could acquire Zinc, we would then put a lot more of our focus into other areas rather than battling with the Zinc, which is a very well loved company.
So we purchased Zinc, which is a great company, got a lot of great employees, and it's really been a positive for the industry. And so we're doing very well there. And then about a year later, we decided 2 big things, basically, at the same time, to go big in clinical, which means developing the application, EDC and E source, and also the CTMS. Those are these big applications in the clinical area of life sciences and also that we should go outside of life sciences with Vault starting with the QualityOne area. So big decisions And then you can see these decisions lead to going into new markets, like EDC as a whole and CTMS.
These are products big new clinical market open data there in 2015. That was all caused by, we decided to go global with the CRM everywhere. So that leads into things like approved email, which is the multichannel version of CRM, events and align, add on products, open data. So this is kind of how things played out. Are there some green balls into the future here?
Absolutely, right? That's what makes it fun. We have some decisions to make in the future, and we, we definitely want to make those as we build a multibillion dollar company, that's what you have to do, you have to make decisions. And think 10 years out. All right.
To understand Veeva, you also have to understand the Vault platform and what it is. It's a super core part of Eva. And this is something that these application platforms This is something I know deeply. I first started working on this in 1995 at PeopleSoft. So I've been doing it more than 20 years.
I started as an engineer in there, went on to be their chief architect and their general manager of that platform area, Then the early 2000 left there went to, build the platform at salesforce.com, was the SVP of technology there, and then And after that, coming to Veeva, we're building our own platform. So I just feel like this is something I know pretty well, and it's not, obviously, not just me, right? We it's all the people that we bring into the company. It's interesting that I still sit right now, I sit right in the middle of the platform engineers. For the, I don't sit around the head of sales or head of marketing.
I sit with the platform engineers. That's kind of my DNA, and I still get involved in it a little bit. The platform to understand it, first of all, it's for us. It's for Veeva. It helps us build that applications quickly and of high quality and very efficient.
That's how we're able to build all those applications you saw, all those big applications. Some companies just struggled just to build one good application. We have 14 Vault applications now, and that's because of the platform. Fundamentally, much of the code we can write once in the platform, so we don't have to write it everywhere else. That means you can write it fast you can focus and have good quality.
When you improve your core platform, you're improving all of your applications. This is a tough thing to build a good cloud platform because you have to use it for developing your own applications, and then you have to upgrade and push out the application So it's a very interesting thing. All great applications companies are going to have one of these. If you show me a company that has acquired lots of different products and or has built them on different platforms, it's not going to be a good application company. It's not going to have scale, It's going to break down over time.
There's just no way to do it. So we have one. Takes a long time to build, but we have one. For our customers, they don't really care how we build the applications. They assume it's going to be great.
They want to use it. But for the customer, it's about the ability to customize their patients. And that's built into the platform to really change what they need to in that application without breaking the upgrade. They need to integrate with it in a consistent way, consistent set of web services, APIs, developer program, documentation, etcetera, and they need to extend it to create their new tabs or new objects to do the things that they need to do. And they get a lot of leverage out of a platform if they have multiple applications from Veeva all in the Vault platform, they start to have common skills on how do I do reporting on this, these applications?
How do I administer security? How do I do an audit? How do I do web services integrations with it? It's the same thing why people like the SAP platform, or they like the work Workday platform. What's so it's really simple, right?
You don't have one of these great platforms. You don't have a great app communication company. What's interesting is many life sciences companies are starting to think of, hey, their 2 more strategic platforms are SAP and Veeva. Veeva. And when they say SAP and Veeva, they really mean Veeva Vault as a platform.
That's what they mean, which is interesting because 5 years ago, we were still explaining to people, what is Vault? You know, most life science companies really didn't even know what it was because we just had one application. So it's quite quite the progress, for Vault. When you look in a little deeper, different cloud platforms, all the application platforms, they all have their different specialties. Their areas that they are great at or they're unique at, And here's some unique things to know about Vault.
First off, it's content and data. So what does that mean? Vault is good at handling content, like a video. Play a video, stop a video highlight a certain section of the video comment on the video. It's good at things like office documents.
Upload an office document, render it into an archive to PDF, mark it up if versions of it. It's good at images. I upload a very complex image. It pull out the metadata of that image, when was it created, what's its DPI, etcetera. It's good at all that type of content, but it's also good at data, the classic data that you need to track in business applications.
What's interesting about that is the first platform that I know of that's ever set out to be great at both. And usually you'll have something like documentum or something like that, that's focused on content, they'll have an SAP that's focused on data. We have people that have back from both sides and that's the people that we use to create vault, so it can do both. I would say the process management is a key area. Sometimes people call this workflow.
I really call it process management. Auth has very complex, tools in there to allow you to to model a very complex process of workflow, which, for example, you would need to go through when you're getting documents ready to submit a clinical trial or when a pharmaceutical company is trying to approve, for example, a video that they will put on TV. When they do that, There's a lot of steps and a lot of fines if you don't get it right. Is it legally correct? Is it medically correct?
Is the compliance With the regulations correct and who signed off on all this stuff, there's a series of steps, you gotta do that accurately and fast. That's process management. Involved has that built right into it. Search everything. The fundamental data store for those of you who more on the technical side is not really a relational database.
It's a tech search engine. More it's more like Google than it is like Oracle. So everything underneath Vault is searchable and super That's picture. When we if you would look at the original document that we wrote when we were starting out Vault, it says, Hey, a large pharmaceutical company should have 15 to 20 Vault applications that Veeva delivers and 15 to 20 that they make on their own. And these are going to come in at different times and be of different maturity.
So we have this multi Vault architecture. So if the regulatory group in pharma gets started first. And they want they're, they're in, they're live, they're very stable. They're not going to be disrupted by the clinical side coming in, in another vault. But we have integration between them.
In this way, we're quite different from SAP, which has everything in one big mass And that makes it difficult to coordinate. We have a sort of a federated model to our applications, which we call the multi Vault Architecture. The security model, and this is some of where the real secret sauce is, is probably the most complete that I've seen in an application platform, and I've seen a lot of them. We have security right down to the field level on a record, right, as we call it, atomic security. And this is, really needed in life sciences.
We're doing some things that really need a lot of level of security. For example, when you're doing clinical trials, and you have a double blind clinical trial and you need to unblind something. You really can't get that wrong, and you have to do it in an administrative way, not in a coding way. And then I'll point out what I call real Java. We need to run to the complexity for applications of Veeva, because we're doing industry specific things, and the very last mile really matters.
Good enough is not good enough when every, application needs to be the leader, So our developers can code when they need to the business logic in real Java, not some scripting language. And also, we'll be exposing that to our customers too. So this is a very powerful platform when it needs to be. This is also we're moving when we started in Vault in 2010, it was not we were not able to use Amazon because it wasn't ready for the rigors of the, you know, the what's called Gxp, what what pharma needs. The regulations that pharma needs.
It was not ready at that time. We deeply evaluated. It was very clear. It wouldn't have passed audits. But now it is.
So we've moved from our, we are moving from our proprietary cloud infrastructure to Amazon. This is for the basic layer of computers, power, electricity, storage, things like that. And by we'll have this CRM involved, all done by the end of this year, and network, which is our last application, will move by, end of Q1 next year. And then we'll be completely into Amazon, and that's kind of significant because we're not we're not doing we're not saying, Hey, Amazon can be an option. We're going all in on Amazon, and I think that'll, provide, a lot of nimbleness.
I love this because this is now something that we don't have to do, and that's something we need to be aware of over the next years. What do we need to do versus what can we have somebody else do? And we always need to move up to higher levels and let people take, advantage Like Amazon, they can do these lower levels for us. I guess you could ask why Amazon, I mean, it was all about quite simply they had the best one. We evaluate it, add the best product.
If it's what we needed, for Veeva, it's all about the product and the product excellence. All right. So that's about sort of Veeva's history, how we started a little bit about our technology. Now we're going to get really into the life sciences specific part of it. Here's a simple way to look at our vision of the industry cloud from a technology perspective.
So SAP is not used by all life sciences companies, but by many, and it's a very strategic part what they call their back office or their ERP. These are things like inventory, financials, shipment data, that type of stuff. Very important. And they know about it, and it helps them run their business. We want to be their strategic partners, both in the drug development area, which is another huge strategic area and their commercial systems.
So I like to say that life sciences really needs 3 strategic technology partners. And Veeva wants to be 2 of them. So it's a pretty, pretty ambitious goal all the way from 2007, two guys in a garage, but we're making good progress, actually. So first, I'll explain our progress on the commercial side. This is what it looked like in in Pharma CRM in 2007 before Veeva.
So it was 10 years ago. There were a lot of systems from a lot of different companies all around the world, there are a lot of point solutions, custom applications, you had Excel, you had paper. It was, I call this, logo soup, know, you just had a mess. And not only that, the IT departments did integrate all these things together, and that's a burden It's brittle. They break.
When you upgrade something, most of this was on premise. It really was a mess. Nobody in life sciences wanted to be on a CRM project because they would fail, and it wouldn't be good for their careers. So in the beginning, we had people hesitant. We were saying, Hey, implement Veeva CRM, and they're like, Oh, man.
No. Get on a CRM project that could tank your career. Now, boy, it's the safest thing. Because we've kind of cleaned it up. We have our commercial cloud.
We've passed forward 10 years. We've really become the standard here. We don't have any failed projects. The product just fits. We have customers sometimes that have deployed globally, to 20,000 or more reps in 18 months, all the way around the world, with nothing even close to a failure.
And the experience is better for the reps, much more modern around the world. It's interesting. You can see this sometimes from the heads of the heads of sales and life sciences companies for a region. They view it as, wow, I can the training cost is not as much as it used to be. Because when I hire an experienced farmer rep, they already know how to use Veeva from some other company.
I bring them into my company. They know how to view Vee use Veeva. It's just become a standard thing. The capabilities are all there, and it's supported by an ecosystem of what we developed of over 500 partners, system integrators, technology partners, and agency partners, creative agencies. So I think that the capabilities are much better.
And probably the cost and complexity of farm CRM, this area, to the life sciences industry is probably it's only half as costly as it was 10 years ago because we've kind of cleaned it up. Now our vision in CRM and in the commercial area is really to be the leader in light. We're the leader for sure. We got to expand to get more of these add on in there, and we have to remain to be liked, which is kind of, which is sometimes harder when you're the leader, but we have a lot of focus on that. And if you're at our our commercial event, our customer summit in May for the commercial side of life sciences, we had about twelve hundred people there.
You would have seen it. There's a real good bond between Veeva and our customers. That's really good. I guess one other thing I'd point out is By being on the standard commercial infrastructure, the industry is more open to innovation than it was before as we move into things like digit with Engage in our approved email, they can adapt these digital capabilities quicker because they're all on a standard based platform. So then for the development area, which is an area, of course, we got into, later, you know, in sort of 2000 the first part is 2012 ish, 2011, 12, we want to do the same thing.
We want to clean up the mess of logo soup, which is much more, actually, I don't have a picture of it, but it's much more extreme in the development area. The development area is very diverse, all the way from regulatory over the clinical data management, diverse. There's a lot of logo soup in our customers. It's really, really a mess. We want to clean it up, and we want to help our customers develop drugs faster.
Why? How may I do this? We can give a consistent way of working for end users and a consistent flow of data all the way across the suite. This is just an industry specific set of applications. Much like SAP cleaned up the back office, you used to get a separate application for accounts on accounts receivable and general ledger, everything like that.
Now you get a sweep. This is what we want to do for the development area. Now this is a multi year journey, for sure, because these are the core parts of a life sciences industry. So it might take 5 years or more for companies to get there. Especially in the large company.
But this is really the foundation for drug development. That's what the development cloud's all about. And here you see our multi vault architecture. A company might start in the rim or regulatory area with Veeva. Where they might start in the clinical operations, or they might start in two areas at once.
Our multi vault architecture allows for independence of implementation and also integration across. That's a key part of the platform. And, you know, it's working. We here's a way to look at our progress. From a CRM, which is the first area we got into, have 19 out of the top 20 pharma companies.
That's the other one that didn't buy. They're calling to see if there's a Veeva left. I got left. That was almost authentic. Alright.
So 19 out of the top 20. That's remarkable. 19 out of the top 20, happy with Veeva, I'm really proud of that. The whole Veeva team is, I'm proud of the Veeva team who did that. 280 customers.
That's a high percentage of the pharmaceutical companies in the world that have, commercial products. For Vault Commercial, which does include our Zinc acquisition, 19 out of the top 20 have significant deployments of either zinc or Vault Promemarats. Now if we hadn't evolved zinc, it's hard to say exactly what that number would have been. It may have been in the 10, 12 ish area, something like that. This is an example of buying zinc.
We have the clear leadership in that area and a path for those customers to migrate from zinc to chromet. In the clinical area, 8 of the top 20 pharmaceutical companies have major deployments of our Vault Etmf. 8 out of the top 20 already. 4 out of the top 20 have major deployments of our bulk quality docs, And 4 out of the top 20 have major deployments of either our registrations product or our submissions product, that have them underway. So that's really remarkable progress and especially fast progress in the development cloud area, but still you can see a long way to go.
Now if we turn to a very specific product area, EDC, electronic data capture This is one of our newer products we announced last year. Let me show you our progress here. So we have our first few early adopters. They are implementing the system right now, and we're working hand in glove with them. They are using our product.
They are saying that product needs this feature, we like this, we don't like that, and it's a lot of collaboration. We're in that, that phase of where we're very active, and it's super exciting to be in. It's our first two early adopters actually have pretty complex studies too. One of them is in oncology and one of them is in ophthalmology, both phase 2 studies. So we're learning a ton here.
But EDC is a it's a deep application. Lots of features and functions that we need to do. We're sort of building them as we go along. It takes time, but we're right in the middle of it. As you look forward, as we build this next generation EDC, here's a way to think about it.
Right now, we can handle early phase trials. This is Phase 1 and some phase 2 trials. They tend to be a little more, a little less complex. And our customers are starting to work us and, hey, Veeva, can you handle this trial? And we'll read their protocol, make sure they're a good early adopter fit.
And if so, we'll start some studies with them. In the fall of the coming year, we'll be ready for the late phase. This is sort of the later phase 2 and the stage stage 3 trials, the bigger trials. And then E source, which is a new application, which will take the paper out of this clinical trial process That will be ready in 2019. So it's sort of a it's a phased approach.
We're really excited about it at our R and D summit last this last week, we had, which is the first time we had our EDC product available, right, the first summit where we had it available. We had a lot of sort of the buyers of this EDC there. They're called clinical data managers. And it was just they're great people, and it was great to see their assignment, it brought a whole new vibe to Veeva. We also announced this last week, too, at our Summit, which is a brand new product area.
It's called safety, called safety. This is an area that's as significant to the industry as, let's say, as the regulatory areas. This means safety means for a pharmaceutical company, they would have a drug. Somebody might report an issue with that drug. They got sick.
If they took that drug, they had an adverse reaction to it, they would report that through a pharmaceutical company, and that safety issue could occur in any country around the world. The pharmaceutical company has a duty then to analyze that, and actually to report it to the right health authority all around the world and also to collect what's called the signal. They need to analyze all these different safety events coming in and try to see if they have a pattern. If they don't do that correctly, it's a big problem. It can be major fines.
It could result in real problems for patients as well, and it's very detrimental to the business. This is also sometimes called pharmacovigilances area. It's a really big important area, and the response is really enthusiastic to our customer when we said we're going to build this. We'll do it in the same way as we've done before. This is an area, a whole new vault.
There's multiple applications to build. The first applications estimated to come out in 2019. So we haven't even started developing it yet. Right? But what we want to do, what we did is announce it to the industry so that they can align with us.
So we can form an interest group, we can see what kind of innovation is needed. And that's the relationship we're starting to have with the industry. We're not really worried about a particular competitor. We just want to be collaborative with the industry and they want us to get this right. This area, by the way, is had not had innovation from the vendors in this area for the last 10 years.
It's really old on premise stuff really It's a backwater. We've got to go and clean that up. So feel really good about this area. And that'll really actually complete the main areas of the development cloud. You see safety over there on my right.
It's This is the last big area, so it completes a picture. And, yeah, just completes a picture. Doesn't mean the work's done. We have about 10 years of hard work to make all these applications, get the customers there. They have to migrate their they can't migrate them all at once.
They have to do it regionally. There's a lot of work to do there, but what I really feel good about is you know, why do anything if you it's so hard work to do stuff. You might as well try to do something great, right? I view that this is trying to do something great. This is this has never been done before by any vendor.
Nobody has tried to attack all these areas much less on a common platform and in the cloud and make really good software for all these applications. We're we're trying that. And I think we have a pretty good path to success. Now if we can do that, this is really a franchise for Veeva for literally the next 30 years, at least. These are these systems are very sticky.
Once you get them in and they're working, you're not changing These are the heart of the drug development and safety process. So these are these are very significant applications in many ways more significant than, in, in terms of complexity, even more significant than the commercial application. So I feel like we're really setting out to do something great. Now, back to some fundamental things, how do we execute about our operating model? First of all, it takes focus.
Something we're great at. We say this all the time in our company focus pays off. And that means, you know, if we're going in the safety area, get a bunch of dedicated people who really know that area, stay with it for multiple years, knock it out of the park, run to the complexity We're dealing with industry specific applications. We want it to be just right to get all the features and functionality just right so that it is an absolute no brainer for the industry. We want product excellence.
And then we go for reference selling. Get our early adopters live, evangelical, they have a great way of bringing customers together. They talk to other customers. It keeps our cost of selling reasonable, which allows us to generate profits, which means we can invest in our future. And above all, persistence, You know, we need to stay with it.
Some of these things are going to take we want to be the leader in every area, but some of these areas, they're going to take 5 or 10 years. We just plan to have, to be clear leadership, and we have that persistence as deep into our operating model. So We are visionary in our approaches, but we're very disciplined in our execution. That's something that's a hallmark of Veeva. And that's why, you know, we're really on a path to becoming a multibillion dollar cloud leader.
This is track record of innovation and product excellence, which is deep in our DNA. This incredible asset of the Vault platform that we've been building for 7 years and it's a very hard thing to build, not everybody can build it. We're shooting for this long term leadership in strategic markets, and you see it in the commercial side and the R and D side of life sciences with the development cloud. These are franchises. And then we have a great business model advantage that generates not only growth, but also profits so that we can grow organically as we go forward.
And that's the Veeva way. So that's, what you'll see from Veeva. Alright. Now I want to call it Matt Wallach, my partner. And Matt's going to go deeper into the industry and our products for the industry.
All right. Hello, everybody. Thanks for being here.
So I'll start with a
little bit of the market opportunity of what we're going after in life sciences. The industry is large. It's still growing. And even though it is big and global, and there's big kind of lumbering companies around things really dynamic, the technology advances that we've seen in the last 5 or 6 years are starting to bear fruit and if you look at the human genome project finished about 15 years ago, takes about 15 years to get drugs to market. So some of these first truly personalized genomic medications are coming out.
CAR T therapy is kind of the hot one now, but there's more coming behind it. So it's been dynamic an exciting place for us to spend our time. There's still a lot of M and A. Luckily, for us, it hasn't been big companies buying each other and getting rid of programs and sales reps and things of that nature. It's more large companies buying smaller ones, keeping all their clinical trials, keeping their products on the market, And so it hasn't been any kind of a negative impact for us, but it keeps us on our toes because there's people moving around the industry all the time.
And the political uncertainty still lingers a bit. It was worse 6 months ago. Nothing's actually changed, and this is mostly in the U. S, of course, But it sort of has come down in terms of when I'm talking to executives at pharma companies, it's not the first thing we talk about anymore, it's further down the list. So the industry is big.
It continues to grow in its forecast to continue growing at this 6% for the next several years. We look at our total addressable market. So we started with commercial cloud. And just as a quick reminder, what $3,000,000,000 includes as all of the sales and marketing applications that are around the reps, and it includes the products that we have today. Products that we could build in the future.
So you remember that definition, and that's about a $3,000,000,000 market that we're targeting. Vault was calculated differently. So Vault is only the products that we have in the bag today or that we have announced. And so this was 4,000,000,000, the last time we showed it to you, the plus is for the safety. Pronounced.
So that's a significant market. It's probably similar in size to the rim market in the regulatory area. And as Peter said, it's one of the most strategic things that you can do. One of the, one of my CIO friends We were talking about this market and our possibility of entering it. He said, oh, yeah, safety.
Like when the safety system goes down, the CEO gets an email right away. And he said no offense, but when the CRM system's down, yeah, we don't tell the CEO right away. So safety is like, that is as serious as this stuff gets, and we have a lot of that on the R and D side. There's a lot of potential for us here in Vault. As you saw, we have 19 of the top 20 using our products in a major way on the commercial side.
We're on a path to doing that on the R and D side, and we're going to capture a big portion of this 4+1000000000 And then Vault QualityOne, about a 1,000,000,000 or more than a $1,000,000,000 in terms of TAM, that's defined by the product that we have today. So QualityOne, and the industries that we're going after. And Peter will give a little bit more detail there, probably a conservative number, but if you add all of those up, that's more than $8,000,000,000 of market and if you compare that to our current run rate around $670,000,000, it still feels to us like there's plenty of room for us to run. So our products today span an entire life sciences company. Peter showed the commercial cloud and development cloud.
This is all of our products in one place. There is no other company that is attempting to build and enhance products that span this broad of a portfolio. So when we talk to a CIO or a CEO of a company, the conversation is different than if we were just trying to sell 1 or 2 things. We have become one of the largest IT spends for many of our customers. I think that that's going to continue.
And it puts us in a position that if we can really deliver upon this promise of an integrated set of best of breed applications, I think we have an important strategic seat at the table for maybe not even years to come, maybe decades to come. And this really is the core of the product strategy at Veeva, unified and best of breed, and I want to spend a moment here. So best of breed is clear. Zinc is a great exam, Zinc was great in the promotional materials management area. They had people that knew it deeply.
Their customers liked them and valued them. The products were good. But if a company wanted to integrate Zinc's product with anything else, they had to write that code themselves, if there was an API. If there was an API, they had, I don't even know how you would do And that's a fine strategy, and there's a lot of companies that go after 1 or 2 applications and try to be the best, and we compete against dozens of these companies. The other hand, the other big strategy for software companies is to have it unified or an integrated suite.
And this is also a perfectly fine strategy, and companies will add things over time, and sometimes they'll get a little lazy, where they know, you know, we've got this integrated suite. If we do one more module, they'll probably buy it. So let's make it good enough. So we're trying to do both of these at the same time. So we're trying to have a unified suite of of things that are best of breed so that we're not resting at all that you may have 5 Vault applications already.
We're not saying, oh, you should buy the 61 because it's on Vault. We're saying you should buy the 61 because if you did an RFP, just for that one thing, that you'll choose it because it is the very best product available. So when we enter a market, the commitment that we make to the industry and to every customer is that if we get into that market, we're going to build those products until they're the very best available. And then we're going to work closely with you in every 120 days, enhance every one of those products. So if we can really accomplish, it's weird how sometimes those ringers just don't turn off.
It's the button on the left. So I'm really not bothered by that. Unified investor breed is if we can accomplish this, we are kind of a forever partner of the industry. Now, we have been doing this for a while, and we've had about 30 releases of EVA CRM. We've had 17 Evolts You can't just take for granted that if you're a cloud company, you're gonna have 3 releases a year.
They're always gonna work. They're always gonna be time, they're going to have in them what you told customers are going to be in them. You can't take that for granted. We have built an innovative cloud software machine. All of our commercial cloud products come out at the same time, so network and open data and crM and approved email.
All these products are on the same release cycle. So there's 10 products that are on the same release cycle. And then there's 14 Vault products that are on the same release cycle. This is really, really hard. We don't take that for granted.
So when we talk about becoming a multi product company. Part of that is the logistics and the operations of, of running That, that, no, it's a little much. Come on. Now you're making fun of me up here. All right.
Alexa has joined. Thank you. You're welcome in the room as well. And so We you can't take for granted that just because someone is a cloud software company, they know how to do this. And so I think there's a lot of operations and processes that that have enabled us to do this.
And when you do it over 10 years, you can build credibility with customers so that when you say That feature is going to be in the next release. Let's say you say it in a sales cycle, and it's a really important feature that they trust that it's going to be that release, and it'll be in time for their deployment. So you don't have to go with someone else. You can wait for Veeva because we're going to come through. And I hear that when I'm with customers that you guys have always come through for us in the past.
If you say that it's going to be in the next version, not only is it going to be there, but it's going to And that is an important part of the story as we try to be a real partner to the industry. Now we don't do everything ourselves. Peter mentioned 500 partners. This is also really significant. We're thinking about, as we're preparing, like, competitive advantage, what are really our sources of competitive advantage?
And obviously product excellence in this unified suite is 1, but the partner ecosystem is another. We have 2000, employees today. Roughly. There's more than two thousand people at these companies and others that are talking about Veeva every day in front of our customers when we're not in the room. And so we've invested a lot here.
Services partners, more than 50 SIs around the world, big ones that you recognize, Accenture Deloitte cognizant and many smaller ones that are strong in certain parts of the life sciences industry or certain geographies. We have to have serious trusted relationships with these companies. We started a technology program, specifically to make sure that integrations with other companies' products are as good as our products themselves. So we take this really seriously, more than 50 companies in this program, and great companies like concur Salesforce Click. In Salesforce, it's not just the CRM.
We have integration with Service Cloud, and we have integration with Marketing Cloud. So, type partnership there. On the data side, there's more than 100 companies that we've partnered with. Some of them provide data and others just work with the data but we make it very easy for them to work with it. It's a one page form.
They get a blanket TPA, and they can use our data on behalf of 1 of one of our joint customers without having to go through any, any hoops. On the agency side, these are marketing agencies that are creating content digital content that gets used in Veeva CRM, Veeva approved email, Veeva Engage, and gets approved through promo There's about 400 different agency partners here around the world. That team has people in India, in China, in Japan, and Latin America, all over the U. S. And Europe.
400 marketing agencies that are trained on Veeva, and the program is set up so that not only do they know what they're doing, but they like us. They know that we care because we care. I mean, it comes through when you do something long enough. CROs, we have dozens of CRO partners. They're customers and partners.
We're kind of on the same side of the table as the CROs because we're serving the pharma companies or the sponsors as they're running clinical trials. And then in the events management area, we have several co partners as well. So altogether, this has really deepened the competitive mode for Veeva. These companies have practices built around Veeva. They have a few to dozens or even hundreds of people trained on Veeva.
And they really expand, the, the voice that we have in the market. And it's working. So we have a lot of customers on the enterprise customers, these are the world's largest pharmaceutical and biotech companies. Of the top 50 companies, 49 are now VIVA customers. That changes a little bit every year as people drop on and off the list.
But it is steadily increased. And there's just one left. We know who it is. We have a bounty on that sales rep, and, and we'll take a pool later to see how long that takes. But, you know, once we get them, then they'll merge with someone and then they'll have to someone else.
These are serious strategic relationships. We are one of the top IT spends. When I'm with CIOs, they talked about SAP, Oracle, Microsoft, and Veeva. And, you know, that's we don't take that for granted. That means that it's important.
That means the stuff that we're doing has to work. And then on the emerging growth side, these guys keep us on our toes, super cool companies. Atara Bio doing car growing yourselves in test tubes to allow you to fight your own cancers, in Tarsia that's got a little, a little one in steel rod that you get inserted and elicits drug evenly for a year. It's like amazing stuff going on. And we get a view into a lot of these companies.
And for many of them, they're Vault customers first for things like eTMF or regulatory. And then we don't go through an RFP. To set up all of their commercial systems. They come to us and say, Hey, we're 18 months from launch. What should we do?
And I've been in a lot of discussions with CEOs of these companies where we bring in our people and their operations people, and we lay out this is the best practice. This is the order in which you should do it. And this is how many months before your launch, you should do these things. So when we say customer success, we really mean it. You hear from us, all the time that that's important.
This slide is the most important slide in the whole deck. This means the world tests. All right. So let me dig into commercial cloud a bit. And so first, let me give some context for what's going on kind of in commercial.
So when we started the company 10 years ago, it was all face to face, interactions between sales reps and physicians. And then when the iPad came out, it really brought on the digitally enabled rep. And it really, accelerated our growth as well, because for about 3 years there, whoever had the iPad, the best iPad product won every deal. And that is when we I mean, it was it was really extreme. So this move from face to face to digital enabled, IT didn't do it.
Actually, the VP of sales would go out and would tell IT, Hey, I want 500 iPads and the v and the IT guy would say, well, but we don't support Apple here. VP sales would say, All right, well, I bought them. So what do I put on them? And they started with custom apps, and then we came very quickly, and we built a CRM product with integrated CLM, so, interactive content on the iPad. And that really brought in this age of the digitally enabled rep.
Over the last few years, we've worked with the industry to get where I would say many companies are today, which is coordinated multi channel. So doing things through more than just one communication channel, but trying to do it in a coordinated way. And then as we look to the future, Some of our products are here, some of our partners are here, but most of the industry is not. How do you get more intelligence from all of the data that's available? So Our partners have data scientists that are working through Veeva.
We have now a small team of data scientists. We're starting to look at our own data. We're not going to talk a lot about that today, but that's something that I would think a year from now or even sooner, we'll give you an update on what we're going to do with data science. Clearly, the world is moving in this direction. I don't think that Alexa is going to drive where the reps are spending their time.
But I think that we can make them more and more intelligent as the time in front of physicians becomes more and more precious, we can make sure that every second counts. And so we do that with the commercial cloud. And as Peter mentioned, we are the clear market leader in CRM. And what we've tried to do, and we have about 2 thirds, a little bit more than 2 thirds of the reps around the world. So a little over 300,000 reps now.
And what we've been trying to do over the last, really, 10 years is to move them from CRM to multi channel CRM. And we've had a lot of success, and that's where you see multiple products per customer has started to grow, be because that was starting to do things through other communication you're calling. And now what we're trying to do is move a lot of those companies that are doing multichannel into the full commercial cloud. So when someone adopts a line, for example, they eliminate the integration and the cost and the time it takes to export the data at Aviva, import into another system, do some work on it, put it export, and then import it back in Aviva. Test it.
Oh, there's a problem. Export it again. Bring it back. We just eliminate that stuff. So we're not making it easier.
To integrate like alignment management or events management with CRM, we're eliminating the friction in the system and the need to integrate different systems. And so it's hugely valuable to our customers. And it's one of the reasons Peter mentioned, we're bringing the costs down for our customers to actually have a better experience and more capabilities. And then the last thread through here is that in order to operate in a digital world, you have to go faster. And if you have to go fast and you have lots of different point systems that are integrated to each other, it really acts as a barrier.
And so we have sped up the innovation around digital. I think the industry still has a long way to go, but we've sped it up by giving them a platform that works. And they can innovate on that platform. And then we have a big role to continue to make things more and more digitally aware, digitally native, and allow them to execute more and more sophisticated digital strategies through our system. So Veeva CRM, to be the leader in light, you can't get a high market share, and then tell everyone how great your market share is.
Like, that is not how it works. And you guys have been around software companies long enough to know that when Silicon Valley Software Companies get a high market share, Generally, they get proud of themselves. They throw big parties. They pat each other on the back, and arrogance creeps him. You can't be the leader in a market for 30 years.
If you're arrogant about it. And so leader in light are important words for us. We have to I mean, we have to be respected. They have to understand what we're trying to do. We have to be consistent in the way that we talk to them and the way that we act, and we need to continue to innovate.
We cannot rest on our laurels and say, well, the product is good enough. We have a high market share. Let's focus elsewhere. We do not do that. And so these, my insight Sunrise UI and real time architecture represent 3 huge areas of technology investment, that some of this, our customers didn't ask us for.
We're trying to stay ahead of, of their needs. And so my insights is a way to do very customized analytics, And not only did we do it in such a way that they can build whatever reports they want right in the workflow of their end users, but we also did it in an open way so that all of our agency partners and RSI partners can create those reports working closely with our customers. So this is going to be, I think, a significant improvement for our customers' ability to get insights into specific business processes. The Sunrise UI is a new user interface. In software, in, you know, in living in a house, you want to get a new coat of paint.
This one is more than just a new coat of paint. This one also is much more responsive, so that we will now have a very functional iPhone application as a result of redoing the UI. In a specific way. The industry is excited about having an iPhone, some parts of the world, where if you walk around a hospital with an iPad out, they think, sales rep. And people are embarrassed.
So they want an iPhone, and we're going to enable that, through a new UI layer. And now, we're going to enable a new UI on lots of different devices, You don't want to have to deal with syncing every device, every time you touch it. So the real time architecture is to just make the data synced all the time. No more sync buttons. So these are big multi, multi month investments.
And the industry didn't ask us to do these things. We're trying to, to really be a deep partner of the industry, and to keep that leader in light moving. All right. Now I'll go through a few of the add on products, just kind of quick status. So approved email, this was the first time that we really invested in something that was not face to face.
And it took off And then companies kind of absorbed it, and then it's taken off again. The thing that is interesting, I think, about it, is they're to be literally dozens of emails sent by our customers just a couple of years ago. Now it's tens of thousands every day. And we used to brag, not brag, we used to report that the open rates of those emails was like 40% on average, sometimes 60% for companies that really did it well. Now that there's many, many more reps sending emails, and many more companies doing this, the open rates are actually just the same.
They it has not come down in effectiveness. So the companies that do this well still enjoy 60% open rates on emails, and they compare that to their colleagues in marketing that are hoping for 1 or 2%. That this has been really great for us and for the industry. Events management. So this is the ability to run an event, and the type of event is, let's say there's a doctor who's a key opinion leader, maybe gets paid a $1000 giving a presentation, and there's 10 doctors in the room, they get paid for listening.
Everything about that event is tracked and has to get reported back to the government every quarter. So there's a lot of overhead around just throwing an event. I've heard customers, I've had, I've heard sales reps say there is so much junk around the event that I don't even want to do it. Like, it takes me longer to create, trade, and do all the administrative stuff than the benefit that I get. So I've met reps that just don't even do it anymore.
We're trying to change that. And so it's perfectly integrated. Actually, I shouldn't even say it's integrated with VIVAS gets part of Ibisiran. And so rather than outsourcing a lot of these logistics, they can include their own employees in it. And the sales reps are better informed.
It's better compliance on the back end. And we're now kind of officially out of the early adopter phase now. So we're now trying to sell events management to all companies, large and small, everywhere around the world. And here's one example. So this is one of the top 25 Global Pharmaceutical Companies.
They had a growing business in South Korea. And events was an important part of what they were doing, but it was really manual. And then enter some new transparency requirements. So South Korea, many others are kind of duplicating what is required in the U. S.
And Europe in terms of transparency. So all their manual processes just sort of broke down, and it was becoming a bottleneck. So we did, events management project We put together a team of our people and their people to do it. And the result is that it's just seamless. They know where all the data is, they know who's coming to the events, they know how to report back to the authorities.
And actually, this customer team, we just heard, I think, 10 days ago, they received the internal recognition for the value that this project created. And then we got some recognition from a third party legal firm as well. So even in way out in South Korea, with one of our new products, we had a successful deployment and what it has led to, this company has since deployed in think it's China, and now they're looking at multiple, other, other countries. So Veeva Align, and this is a core capability every company has to figure out which doctors do I sign to which reps? How many?
How far do I want the reps to drive? What should be the total potential in that territory? Is something that every one of our customers does, and it's the same type of import, export, analyze, import, export, we make it easy. We had very strong growth this year, multiple 100% growth from a small base as we're going through the early adopter phase. And now we feel comfortable.
That we can go out of the early adopter phase, we can sell Vivo line to companies around the world. And here's one example of a company another different company but a similar size. This one was in Europe, where the business wanted to be able to align faster. And IT wanted to be able to do it with less hassle, basically. And it was taking them 12 weeks to do an alignment.
So if you imagine the head of sales has an idea. I want to change the way that we assign these reps to these customers. And then the IT team says, all right, well, in 12 weeks, we can implement that. 12 weeks feels like a long time, if that thing is important. So they, they configured and deployed a line in about a 8 or 9 week project, they started in 5 countries.
And the result was that that 12 week process went to 2 weeks. And if you can take 10 weeks out of that process, you do it more often. So now they're doing alignments much more often because the barrier cost in the time barrier has been not eliminated, but, really significantly shrunk. And the average territory size came down 50% to 80%. So imagine you're a sales rep.
You have 1000 customers in your territory.
Who do you go to? Well, you
make that 200 and they're the right ones, and life is much easier. So improved agility, but also improves targeting and the ability to pull through strategies faster. So this is not just an IT thing. This is enabling business agility out in the field. And then we've engaged arguably the most disruptive of the things that we're doing on the commercial side.
So there's 2 products here: Engage Meeting, which is video calling, right within VIVA CRM, sharing all the same content between a doctor and 1, 2 or 3 reps, basic or sorry, between a rep and just a handful of doctors. So mostly set up for 1 on 1 or kind of 1 on 2 type conversations. Disruptive because reps are used to catching a doctor in between exam rooms. And the doctors sort of thinking about something else, and maybe they'll get 30 seconds, and they're just trying to get their message in there really quick. This is a 5 minute one on one I have your full attention.
So there's a lot of process change and a lot of training that would need to do. Right now, probably only the most scientifically gifted sales reps could handle a 5 or 6 minute. Conversation. But over time, this is where the industry is going, so we're trying to enable them. And then, the other product we've engaged webinar is for virtual events.
So very similar to the event that I was describing before, one doctor, a bunch, one important doctor, a bunch listening, to be able to do this totally virtually. And this has the ability to significantly change the, the cost benefit of running an event. Because it's really expensive to pull people together. If you can do it virtually, you can also replay the thing. You can't replay a face to face event as effectively, although think we're recording this one.
So good that you guys are in the room. But this also requires a lot of business process change. So this one's not going to take off. This is gonna be in early adopter mode, and it's gonna be kind of a slow build, we believe. And then at some point, we're gonna reach, a tipping point, where the doctors who have downloaded the Veeva app to do all of these things and the same app across all of our customers, by the way, when they get used to it, they may start to demand it, because it's just easier for them.
I want to do it at 5:35. I don't want to do it in the middle of my day when I have 3 patients waiting. So this is still an early doctor phase. We'll be here for a little bit. All right.
And then open data. So We talked on the last earnings call about OpenData Network, and then we haven't been growing those businesses as fast as we want, but it doesn't mean that we're not investing in the product and the service. So I'm proud of what the open data team has done in the last couple of years. We're up to 40 two countries where we have a full database of healthcare providers, healthcare organizations. And every year, we get 500,000 or 1,000,000.
I think that's Oh, yeah. I have a 1,000,000. Sorry. We get 500,000 DCRs or data change requests. And the data change request is the sales rep says this doctor doesn't work here anymore, or this doctor changed his or her name, or this doctor has a new address.
That's a data change request. They put it right into Veeva CRM, goes to our data stewards, 225 people around the world, speaking multiple languages. It used to be before Veeva OpenData that when the rep sent that into headquarters, it would take 2 to 3 weeks to come back. So the rep didn't know if they were right. They didn't know if headquarters accepted that change.
And so over time, because they would put something in, wouldn't hear anything for 2 weeks, what did the reps do? They didn't bother, and they write it down in their note instead. And this has been going on for the 20 years I've been in this industry. So we're breaking that. Hours is the average resolution.
So you know in the same day, if headquarters or, in this case, Veeva agrees with your change and why, and 30% of them are resolved in 1 hour. So if you go into a hospital, you say this doctor works here now, by the time you leave, it could be updated. What does that do? It gets the notes into the CRM system, and it makes the data better, and it makes the whole system better. So I think we've accomplished a lot here, and we're selling hard, around the world.
And then with network, we're enabling administrators to better manage that customer data on their own, because we're not the only source. They have lots of upstream and downstream systems that need to be in sync with their master data. And as much as we would have liked to grow this business faster, we have high customer success with the customers that we have. So the product was the right product to build. We've built it in the right way.
It works with Veeva CRM and with OpenData in the right way, and we're still investing for the long term to be the long term market leader here as well. Now if we look across the last few years, we've started to track the average number of commercial cloud products, per CRM customer, and there's a total of 10. So we're moving up towards 10. And if you look in history a little bit, from fiscal 2014 to 2015, that was a little bit of the start of approved email, a little bit of the start of network, And it sort of continued through the early adopter phases from 15 to 16. The big jump from 16 to 17 was mostly approved email.
If email kind of exploded over that time period, dozens dozens of new customers. And then that has continued, but you, we've talked about how open data and network have slowed, and I think that affected the number in the 1st 6 months of this year. But if you look at the total number of customers, it's been 40, 42, 44, mostly, each of these years. So we're not slowing down in terms of the number of customers. And it feels like we're speeding up and as in terms of products per customer.
And so I think when events in the line are kind of fully running, The sales teams are trained and that's fully out of early adoption mode. We expect that this will continue to tick up. All right. Now let me talk for a moment about Align Biopharma. So we mentioned being a partner to the industry
a few
times. So Align BioPharma is a life sciences industry standards group. It was established to make it easier for healthcare providers to work with pharma companies. So right now, it's not easy. The number one place that a farm that a sales excuse me, the number one place that a physician gets information about drugs is Wikipedia and number 2 is Google.
It's not the companies that make those drugs. So we're trying to make that easier. And yesterday, we had the 1st technology standard was, was officially released, approved by the industry, and that will enable single sign on. And this is a quote from a physician that basically said It was too many username and password combinations. I couldn't keep up with it.
If I can actually have a single sign on, it'll help me provide better, better care to my patients. And in this, in this, organization, is now 13 of the 25 largest pharma companies, 6 technology companies, Adobe, Okta, like real serious technology companies Veeva is there, and then major systems integrators as well. So this industry group is already working on the next standard, and we think that this is going to be something that we we got it started. Now we're more of a member. And we want kind of a line biopharma to be able to continue to advance things that are going to help the industry as a whole.
Alright. Now let's shift to Veeva Vault. And I thought I would start with a slide that I use when I go to see a customer. So I call it my Vault Enterprise pitch. But basically, what I'll do is I'll figure out what that customer uses in each of these dozen different areas.
And this is pretty highly simplified, and this is a view of only one company, and it doesn't include all of the integrations that would need to take place to make this stuff actually work. But I use this as a guide, because what it shows is that there's an opportunity to clean up each one of these boxes because none of these products are real cloud, real multi tenant cloud products. There is an opportunity within clinical and within quality, within regulatory to integrate these applications so that you can have content and data on the same thing. One of the things that makes this logo soup is that there's never been one option for the content management stuff and the data management stuff. And then there's also an opportunity across, across clinical regulatory quality, and even commercial to have a single platform, one set of reporting requirements, one audit trail that everyone understands, one set of security measures that you implement.
And so this slide actually tells a lot. And we use it as a guide as we go through, those meetings. And as Peter said, no companies tried this before. Like, this is not we're not copying anybody. All of these different applications on a single platform, it's, you know, it's obvious that it's powerful, right?
You eliminate integration. You allow companies to build processes within or across these different divisions. That they never could do before because they were constrained by the technology. End users report to their administrators and to us, the best software they ever use. They wanna use more of it.
So in each of these areas, it's a significant effort for us to build a best of breed product. And so we organize the product team, the go to market team, the strategy team around each one of these product areas. To make sure that we can look in the customer's eye and say every one of these things is best to breed, or it's on a path to get there, to brand new product. So it is working in terms of customer count. If we look in the commercial area, it's up 39% in year over year.
So this is Q2 to Q2. A little bit of that is aided by companies migrating over from Zinc. But actually the majority of it is not. There is a lot of growth there. And in the next slide, I'll talk about why.
In clinical, where we were already pretty penetrated a year ago, still growing over 30%. And this is primarily eTMF because it was The measure is basically before we had significant CTMS or, EDC customers. Quality and Regulatory is sort of the stars of the show here. 56% 60% growth in a year. And I'm not surprised.
I mean, we have the right products at the right time. And I'll talk about why, why that is. So let me talk first about the, the commercial one. So I talked about the move to digital. So one of the things that needs to change is the way that our our customers create and approve and distribute content.
Especially digital content. They need to do it faster. They need to be able to deploy that content faster and not just into Veeva CRM, but into lots of different multichannel partners, and over the web. And then importantly, once that content is out there, they need to be able to analyze how it is consumed. So if you're creating paper content, you have no idea how it's consumed.
You're not in the room, you're not watching, and there's no way to track it. Here, we can track in real time how things are, are consumed when someone is directing them through it, like in CLM, or when they're directing themselves. Something like a website or an approved email. The companies that then optimize it and change the content and reapprove it, and redistribute it, and re do this whole process are the companies that are going to gain competitive advantage in digital. So we call this the digital supply chain, I think it's a big reason why we've had so much growth in Vault Promomax because it's a better system for managing this digital content and faster and more integrated with Veeva CRM.
Now, I want to focus on the applications on the R and D side, but let me kind of put it in context. So 20 years ago when lots of life sciences companies were implementing their major systems on the R and D side, the landscape is just not that complicated. The company is generally focused on 2 big markets: the U. S. And Europe.
They didn't have a lot of outsourced vendors, and the compliance framework was such that they could create a process and then prove it was compliant later. So in many cases, this meant that operations, like major operations, like, have we registered these products for sale in these countries? Those were done on spreadsheets and like access databases and some client server systems. But it has really changed over the last 20 years. So that very simple picture has become not a little more complex, exponentially more complex.
Far too complex to handle with spreadsheets or access databases or even a lot of client server systems integrated together. There's a required focus on global markets. There's now 100 health authorities around the world that you have to register your products for. So you can't just focus on the U. S.
And Europe. And more and more organizations are, externalizing things like clinical research and, manufacturing to CMOs, you just can't do it in a closed environment. So it's gotten very complex. And life sciences companies, in general, on the R and D side, have not leveraged cloud computing and other technology advances. And so that's the market that we see ourselves in.
It is much, much harder for our customers to do it, to do what they need to do. And that's why I think there is so much demand for Vault, underlying, and then we're, we're attacking that demand. So in the R and D side, we call it the development cloud. The market that we want to own is drug and product development. And so that's clinical data management.
So that's EDC in the future e source, clinical operations, which interestingly, clinical data management, clinical operations, Not only was it different systems, but for many companies, these were different departments, partially because they had different systems. It's a little crazy. So we think that we can actually streamline clinical data operations and clinical management, clinical operations in a way that has not been attempted before by just eliminating all of those technology barriers. Quality management, important stuff for manufacturing. When a plant gets shut down, people get sick, sometimes people die, revenue is significantly hurt, And sometimes it's because the documentation wasn't good enough.
So we take this stuff really seriously, and then you can't sell a product if it's not registered. If you didn't submit the NDA and go through the whole process, you cannot sell it. So this is the lifeblood of a pharmaceutical company, life sciences company, And we can do it at a lower cost. We can do it with much better and faster processes, and we can do it with much happier end users that are eager to use the systems to make themselves more productive. Now I want to talk just for a moment about the R and D summit that was last week.
It was like amazing. It was unbelievable. We had over a thousand people that came together. It was more than a 50% growth than last year. People across clinical quality and regulatory.
There were new teams of people there, people from academic research institutions, clinical data operations, folks, and there was an extremely strong customer feeling. And I, I remember how I described it a year or 2 ago that like people had a great experience with Vault, and then they got into a room with other people like, Oh, it's good for you too. Okay, it's not just us. We're past that where now there was like a little competition like, oh, how many vaults do you have? Oh, you have 3, we have 5 vaults.
And I actually had a meeting with a CIO of a small company and it was a one on one meeting, and I had known him before, and I asked him, you know, what are some of your goals at, at this new company? He said, one of my goals is, is to deploy all of your products. And I said, no, no, no, really. He said, no, I'm serious. I don't want to deal with it.
Your stuff works. It all works together. I'll do it at lower cost, and I'll be a hero to the business. I'm getting it all. So no RFPs coming from that company.
We can be a very efficient partner to them, and we're excited to deliver them. That's a really exciting oncology company. So the enthusiasm around the products was palpable. Like, you really, really could feel it. But there was also excitement about us as a partner.
I think that 10 years of doing what we said we're going to do and really focusing on customer success, is getting out there, and people see that, you know what? It's the kind of company I want to work with. Not only are the products great, but we can trust them. So it really was great from all perspectives I wish you could see it, not enough that we're going to invite you to the next one, but, I do wish that you could see, the excitement there because it's something that, that keeps us going. And then, the evidence that it's working is in is in numbers like this.
So We're on track to add over 100 Vault customers based on the 1st 6 months of this year, and the number of Vaults per customer continues to increase. We're excited about that. It's exactly the strategy. And every time a company buys another vault, yes, it's good for Veeva, but it's great for them. Because there's exponential benefit every time they add another vault.
And then another analysis of that is if you look kind of a cohort If you bought Veeva Vault in 2013, the, the cohort of companies that bought it 4 years ago, they're using 22 times more Vault. In 4 years. If they bought it 3 years ago, they're using 7.5 times more vault, and you can see the other numbers there. And you can also see the average vaults per customer increases the longer that you have it. So these are all going in the right direction.
And if we continue to deliver best of breed products that, best of breed products that are on this unified platform, then this should continue. And now what I'd like to do is call up Steve Harper, who is going to lead us through a demo of the development cloud. Welcome Steve. Steve runs the clinical, product team of Veeva. You ready?
All right. So First, let's start as a clinical research associate. So we'll go into Vault, and we'll go in as a CRA, and we're working for Verteo Biopharma. And you can see on my home page, I have access to multiple vaults. That was a clinical vault and a quality vault.
So I click into vault CTMS, And I look at my studies my study homepage. So here I see at a glance how this site is doing in the trial. For example, I can quickly see the subject enrollment metrics, scrolling, and scrolling down, I can see trends over time and even projected into the future. I can also see the violations and deviations at this site compare them to averages for the rest of the trial, and those are automatically calculated by Vault CTMS. But as a CRA, the meat of my job is monitoring sites.
And my entire monitoring plan is here. I can drill into a specific monitoring visit where I can see all the details, including the participants, planned activities, and various follow-up items. But before I can actually go visit the site, I need to send a confirmation letter, which is automatically generated for me by Vault. And you can see It has pulled up a lot of information that comes directly from the system, including participants and planned activities. Now this document is actually mandated by regulations, So the accuracy is very important.
And it's worth mentioning, this document is already stored in the eTMF in the right place as well. So now it's time to go visit the site. And what I'll do today is I'll check the accuracy of the data that they've collected so far. So first, I need to search for a specific subject in the trial. And then with one click, I'm going to navigate directly into Vault EDC.
So this takes me right into the EDC system directly to that subject, UK-one hundred and two triple 01. And it is here that I can do some source data verification. So now I will double check the site's work to ensure that what they wrote down was the same as what they put into EDC. And in this case, they got all 4 of these right. So now if I switch gears, I'll go into Vault's study startup.
As a study startup specialist, it's my job to track the required documents across all the sites to identify where we're ahead or behind of our goals. So I look at site UK-one hundred and two, looks great, all green there. So I'll focus on-site UK-one hundred and four. And I see that the investigator CV still has not been collected. So I'll notify him or her directly through Vault Site Exchange to let them know that they need to update that document.
Now, I'm in as a site coordinator, so somebody works at site, not for the pharma company. And I'm looking at Vault Site Exchange, and you can see I'm doing trials with 2 different pharma companies, 2 different sponsors, Verteo and Stark Industries, snuck that in there. But luckily, they're both Veeva customers. Drilling into the one for Verteo Pharma, for Teo Biopharma, I can see that I up I need to upload my CV. But rather than scanning it and emailing it or putting it in a FedEx envelope, We're faxing it, which still happens every minute of every day in clinical trials.
I'm just going to click on an email that I got from Verteo, And I'm gonna use a new application called Viva Snap to upload it. So I simply take a picture of the CV, I uploaded into Vault, and it automatically goes directly into the sponsor's Vault Etmf in just the right place. As you can imagine, customers are really excited about this. There's so much time wasted in clinical trials doing things that in normal life are really easy. So now let's go into Vault C TMS quickly to show how quickly that document appears.
You guys need to turn, no, you don't need to turn off your Wi Fi. It's fine. It's there. All right. Alright.
So now what we're gonna do is, we're gonna go into yeah. And so it's already there. So we're going to go into Vault Etmf as a TMF manager. So while many of the documents gathered by the CRA's are are, or they come directly from the sites, as we just saw, there's many other documents involved that are sourced from other places. And so one of those is standard operating procedures or s o SOPs.
So if we search for an SOP, you can see that this document looks like any other document involved, but you can actually see where it came from. And with one click, you can actually dive into the vault quality docs, application to look at the original document. For the source document. So in Vault Etmf, we saw the latest approved version, but now we're in quality docs, and so we have more context about this document. It actually has a new revision being worked on, and that is because the document is under change control.
Now change control is a powerful ability in quality docs. In orchestrates across many changes concurrently. So when the change control is approved, multiple documents can be automatically approved, updated, or even obsoleted, all in a single click. So from here, I can easily go into Vault QMS, whereas a quality manager can manage many of my other duties, things like managing audits or change controls or complaints or deviations. And looking at an audit, we can see just how easy it is to see the details of the audit, the team that's working on it, any outstanding actions, all data, none of that is content.
So none of that is documented. It's just all data. So let last, let's go into Vault submissions as a submissions manager. And in this role, on managing submissions of drug approvals to the regulatory authorities. Here, we're going to look at an NDA in a format called ECTD, which is the international format for transferring regulatory documents to the health authorities.
Within an ECTD, a single, submission, there can be 100 or 1000 of documents. That come from lots of different sources. So I'll search for 1 quickly, I'll look for a CV, just like the one that we just captured through Veeva Snap, And you can see that that CV is being sourced from the eTMF. So from the submissions vault, I can see things that are in eTMF. I don't need to duplicate those documents.
I can just access them directly. All right. So let me take a breath. Steve and I just navigated through 8 Vault applications in 6 minutes. It was Vault CTMS, EDC, study startup, site exchange, ETMF, quality docs, QMS, and Vault submissions.
And we threw in a brand new, mobile app, just for fun. That one will be available in December. Customers are already using it and they love it. We went across the whole, development cloud, quality, clinical, and regulatory. So you saw the ease at which we could do that.
We could navigate across documents and data, processes that span different applications in different parts of the company, We managed clinical data, we managed, audit data. And before all, if we had tried to do this demo for you, we would have worked for months. We would have needed people from 10 different companies to collaborate, and it would have looked terrible. It would have been log in, log out, import, export months, and it would have been terrible. Steve and I started preparing yesterday afternoon for this.
The platform is a breakthrough. It is an absolute breakthrough to be able to Get a document once and to be able to work it through the workflow across every department in the company, reflecting the permissions of each of those people the workflow and what they're allowed to do. And, I mean, it just is amazing. And customers are equally as excited, I think, as I am about it, And I hope that as investors, you get the power of this platform and the company that we've built around it to build really compelling applications that deliver value for our customers each and every day. Alright.
Thank you, Steve.
So with that, I'd like to call
up Michael Louie. Michael Louie from Gilead. Is Michael in the room? Oh, yeah. Fantastic.
Hi, Michael. You're all mic'd up?
Nope. Not yet.
Nope. Not yet? Oh, okay. Can we, do you want, one of these, or do you want a handheld? What do you prefer?
The handheld's easier
Early
employee at Gilead like so early, you're going to be wowed like number 40, right? 65. 65. 65, all right. Yeah.
Actually, let me go a little further. And if you know Gilead, this is one of the truly amazing companies in our industry. And so, thanks so much for being here. I thought to give the audience context first, why don't you talk about your background a little bit, and, your time and your time and your roles at Gilead. So I think to just give people kind of high level context.
I'm actually an organic chemist by training. I have my PhD in organic chemistry, and I was and Gilead's my 4th company And I started there in 1993, so I've been there for almost 25 years. And I was hired by the company to make molecules that, basically would become drugs. So basically it's all about medicinal chemistry and product development. Along the way, I started to manage all their information systems.
Ended up being a a passion of mine. So for the past 21 years, at Gilead, I've been, focusing. I'm still in the pharmaceutical development and main factoring and supply chain division, but I focus on, choosing the information systems that we use for development and now in the by chain as well.
Great. All right. So let's talk about some of your experiences in the industry. So when you started at Gilead, there were like 3 biotech companies and 100 of pharma companies. But you described to me before Gilead, Gilead set out to do something different.
How would you characterize or describe that strategy?
When I started at Gilead, this being the land of biotech, I think many of us knew what biotech was, but I'm an organic chemist. And one of the main differences is in biotechnology, they classically use biology techniques to develop their products. The products tend to be things like blood products or tissues, but in the pharmaceutical world, you use organic chemist and you make chemicals and you turn them into drugs. When Gilead started, I heard a new term, it was called biopharmaceutical. And, What that was was the hybrid between using classic chemistry techniques and biology to develop your products.
But the business model was developed around the start of biotech, type of business. And I remember, when I started at Gilead, people were talking about getting through the development timelines in months. And I had just come from Monsanto And we had 2 years to develop a chemical. And I've always thought of chemical processes taking years to optimize. And when I got to Gilead, and they said, we're going to do this in months.
It was quite a it made my head spin and it was quite a game changer And I think at Gilead, even though we're thirty years old this year, start up speed is still one of our the number one things that we we look for every day. Well, it would
be an understatement to say that the strategy worked. How would you describe how technology enabled Gilead to implement that strategy, or maybe areas that had hindered it.
So when I started at Gilead, actually when I started in the industry 28 years ago, My mentor, I remember my new hire buddy, was a 40 year veteran. And at that time, I was very young. And he said, you can't be too anxious in this business because it takes 17 years to 20 years to develop a drug. So in your career, you might see maybe 3 or 4 drugs get developed. And then it takes about 90 years before you ever see anything get cured.
So you might not see the cure. Your son may not see the cure. Maybe your grandson will. And I have to say after 25 years at Gilead, What I've seen is we've developed the major product lines in HIV. We've changed the treatment of HIV so that it's a manageable chronic disease now.
And we're doing it in, in periods of time of maybe anywhere from 2 to 5 years, 6 years, And recently, we just moved into a a a very impactful cancer area. And I have to say one of the keys to this is really access to your data. And it's very important that your data is organized and is connected together Because if you think about it, all the the research work that you do becomes the engineering that enables the the development of your products. And that initial filing is really the validation of all that technology coming together, all that data being organized, put together in a regulatory filing. And Gilead, we file in 80 different, health authority jurisdictions in the world.
So we may easily have 80 different versions of this data. And you don't get you have different variations as well. So all of that has to be managed in order to be able to move quickly and move accurately. And why quality is important? Every time we say quality, you got to put the word product in front of it.
It's all about product quality. That starts the day you begin placing your drug in into patients. So in the clinical trial, quality starts there. And it it it never ends when you go into commercial, that continues on. And even beyond, in case something bad went to a drug, you have to keep track of all that information.
So it's not unlikely that we need to keep information for 15 to 30 years.
All right, great. It's great context, Michael. So let's dig into more details about Veeva and how you view our products in the company. So first, would you just summarize, Gilead, as you Jeviva in your involvement on some of those projects?
Yes. So I first came into contact with Eva in 2011. And I started to learn about the strategy you guys had in place. Back in 2011, we didn't have the development cloud. But really in 2014 was when I decided to make a decision at Gilead to bring in Veeva and it was quality docs.
At that time, if you look at Gilead, we outsource more than, many companies out there. And It was very difficult for us to keep track of our data. And the regulators have really upped the game where they want us to make sure that there's strong audit trails and you have control over that data. They call it data integrity and data integrity has become a big challenge across our entire industry. Both in the in the safety information that we collect as well as the quality information.
So we have 200 suppliers probably about a 100 of them that are very key and keeping track of that data, bringing it home, having that audit trail became very, very difficult. To the point where it was impacting our business. And we needed to do something very, very quickly. We had just, filed Solvalde, which was trying to get the cure for hepatitis C through and we were running into roadblocks with data integrity. So management talked to me about we need to do something fast.
We need to do something that will be successful. And so I contacted Veeva Because I had seen the demos. And I know that our industry was still kind of afraid of the cloud at the time. This was 2014. And we just jumped in head first.
And we brought we brought in Veeva. We implemented quality docs at 88 days. And it was validated. We went live. We brought in our first external, partner.
So what we did was a little bit different. We set up quality docs and we use it as a collaboration for, highly regulated quality information from our manufacturers bringing that home. Since then, we have onboarded 97 of our contract manufacturing organizations and about 65 of those organizations is really a two way exchange of information. We use the the vault to push out our recipes So some of our our our trade secrets on how do you make the drugs, our procedures, and then we use this system to collect all the quality information. That's related to our drugs.
So quality docs is really where we started. Recently, we've made a decision to replace all of our quality, document management system enterprise wide and we're beginning that process now. Great.
So you've seen a lot of technology implementations over the years. How does how was this Vault project? Different than some of those others?
I have to say the technology, we rolled this up to 97 different CMOs. So you're dealing with 97 different corporate cultures. And in some case, there's geographic differences and all. And I've been rolling out systems to this group of people for a good 15 years. And they they really say this is one of the better tools we've given to them, and this is a very diverse group of folks.
And, it was to the point where internally because we were using this model for external, people are saying we're now giving better tools to our external partners than we have in house. So it's been quite exciting and I have to say it hasn't been exciting in the quality world, software. And, so this has really been something very different and it's been really a pleasure for me to finally get something but complaint from my customer base. So it's been very good.
So we described earlier, Peter and I our product strategy to deliver a unified suite of best of breed applications, so unified and best of breed, all on the Vault platform. Over the years, how do you think about an integrated suite approach versus a best of breed approach?
Before needing Veeva and seeing what you guys have done, I think the an integrated approach was an impossibility. We tried that. I think most of pharma, we bring Invested Group breed and we spend years years trying to integrate them. The funny thing is, is documentum. We have 5 different documented platforms for legal, for quality, for regulatory, for some of the commercial areas.
And although they were all documented, they never get to talk to one another. We have to track versions and linking with Excel spreadsheets, we make a lot of mistakes. But when you look at what you guys have done with with R&D and then now moving into the quality management system, space that opens the door to commercial as well. Our commercial manufacturing is quite an exciting proposal to think about linking all of this information together. We've recently also implemented the eTMF for for for our our clinical area because clinical trial materials is what my group also makes as well.
And we have to supply those materials to the clinical team so that it can begin human testing. Collaborating, getting that information, sharing that with the clinicians is something that we have to do. So we are already seeing that this ability to share information to have it in one place and getting the right version the right time. Is brought a lot of efficiency and a lot of accuracy to the way that we collaborate, which is very important.
So when we were talking earlier, you also talked about kind of the best of breed approach that you have tried to take in the past. And we've talked about that being expensive and difficult to really accomplish. How would you characterize that best of breed approach in the way that you experienced it?
Best to breed applications, I think they get that label because there's a lot of features that that we find are useful features. But what happens when you have best of breed applications and you try to bring them together There's a different user experience, there's a different model, and it becomes very cumbersome and difficult. So even though each area might might seem to be a best of breed, those of us who have to work across these different areas. For example, in my group in pharmaceutical development and manufacturing, if I get a product recall, I have to go through my quality systems to figure out what is in my back office, what locks did I made where? Then I have to go into my regulatory systems and dig up all the product licenses and match the 2.
And guess what? One system where these call a lot, the other ones call batch and I have no way to link the 2 together. So it becomes very difficult and need a lot of Rosetta stones to bring this different information together. And I think the exciting thing about Veeva is that getting applications with good user experience. I have to say, the applications that I've seen, the some of the clinical ones, as well as the, quality management system, quality docs itself, and e eTMF.
The user experience to me are like best free. They're easy to user intuitive, And you have a better chance of bringing a unified data model together and connecting your data. So it is quite remarkable. We haven't seen that before. And I went to the user group meeting last year, And, you know, the conversation used to be, how much did you customize?
And, last year it was, how much did you configure and nobody customized. And that's not a space where we've ever been before. And because of that, we're actually able to share different operating models, different protocols between the industry, because although we all compete, where we don't compete is how we manage our tools. We have 1 set of regulators in the world that come, and we like to be doing similar things. So it's quite an exciting, prospect for us to have this kind of a community.
Yes.
I think we sort of take for granted a little bit that we are harmonizing processes across the So when we started align biopharma, we thought that was a set of processes that we harmonized. On the commercial side, if multiple companies are using Veeva CRM and they have a co promote, then it's easier for them to share data. I know you also had experience on the CRM implementation at Gilead. But from a quality perspective, could you explain what that means?
Yes. I had moved into central IT at that time and my group was responsible for validating the CRM application. What that means is there's health authorities that enforced regulations around making sure that if you're going to leave samples at a physician's office, that you've checked to make sure that that physician had a valid license to receive those samples. And that's very, very critical because, you have all kind of malpractice, types of problems if you don't verify that. And our industry had not really used cloud, at that time.
So those are a lot of skepticism. I think we asked a lot of questions, but many of us had implemented on premise systems that we add these challenges. And we all solve them differently. And I have to say, the 24 to 48 hours that it take to update information would have been very fast, I think, we had much longer times. So my group had to do the validation We had to understand all the workflows, understand the intended use, look at the audit trail, make sure that we can challenge the system and we can break the system.
And then all of this has to be documented and presentable to any health authority that that would come usually from Europe, U. S, Australia, Japan and Germany, those are the big players. So I have to say I had a chance to look very closely at the software, the data model, and the audit trail, and it was Really good to see that functionality work that well.
So when someone who is afraid of the cloud says, Michael, you've implemented and validated multiple cloud systems I'm scared. Like, how do you tell them not
to be scared? Well, I'll tell them that you are where I used to be. And It's one of those things where pharma is often, you know, we might be innovative in the science is but we lag when it comes to technology adoption. And so it's almost as natural cycle. If you let others go first, because at the end of the day, human safety is the name of the game that we play.
And, but I have to say that what Veeva has done you've made a lot of your model, your safety, your security model and your documentation easily available to customers. So one thing that was unique is there's a feature of your product called Viva docs. And that's a basically a Vault set up for customers. And I can go in there and see all the engineering documents, the testing documents, the requirements, documents, the test results and the summary reports, And those are the things that I'm required by law to look at to ensure that you've done your basic testing, and then I have to do my testing. So looking at all of that, talking to your security folks, going out and doing the audit, all of that has given me a lot of confidence in choosing this solution.
And I'm on a steering committee at Gilead to really look at all the different types of solutions that come into R&D and now in the supply chain as well. Well, that's
a great lead in for my next question. So investors ask me a lot, is there too, is there such thing as too many eggs in one basket, even if it's an orange, be the basket? So if you're on that steering committee, you're talking about lots of different systems. We're developing more and more systems. How do you think about is it too many eggs in one basket?
You know, it's a typical challenge that we in the supply chain always deal with, too many in one basket But when you look at Veeva and you look at the way that you set up your technology and you look at the type of functionality, you brought a lot of features. And I really say that from a technology perspective, the tools that we use Our industry has always looked for some way of bringing that harmonization, together. It just gives us a lot more benefit than the risks that come with maybe going with one vendor. And this is really the management of our data. That data is still something that belongs to us we bring it home, we store it, we consume it differently, even though it's in your cloud, is our use of it has the ability to help us So we feel pretty comfortable, pretty confident in, looking at the different offerings that you guys
have, right? Going to ask one more question and then I'll open it up for the audience if you want to prepare a question. You mentioned the R and D summit last year, but I saw you there last week too.
Yes.
I was sort of talking it up earlier saying that it was amazing. From the customer's perspective, someone who's deployed systems, someone who's going to deploy more systems. I'm sure companies want to or people wanted to find you and get your opinion, because you've spoken at that event in the past. How would you characterize that event? As like a software vendor or a technology vendor's user conference?
So this is my 3rd year attending the Veeva event, and I've been going to these things probably for the past 20 years. I used to go to about maybe 10 a year, 10 different companies. Now I probably go to about maybe 3 a year. And I have to say that the level of excitement and collaboration between the other pharmaceutical and biotech appears It's been quite different. I've not seen it at this level where we're excited about a product.
We belief that we could use it with just configuration. The functionality is is incredible. The user experience is really what is probably wowing us the most and the potential of what you guys are doing. And I have to say if the user community meeting is part of that the end and I've attended that for the past 2 years. I think we've had it for the past 2 years.
And that's where you get to sit in a room with really some of the other user groups and really kind of talk about what your experiences are. And I have to say that the similarity because you are helping us drive good practices. And Veeva has seemed to have picked out some of the better practices and built them into the product, to the point where many of us can benefit. So it's exciting and it's different. And I have to say it's quite different than a lot of the other conferences that I go to.
Does anyone have a question for my call, in the back? Doctor. Sherry?
Thanks, Bhavan Suri here. Just a quick question. You've obviously implemented eTMF and you've got sort of the clinical operation side of it. But then the EDC part where you're doing the actual trials, maybe another vendor, just how does your organization think back to Matt's question of sort of all the orange eggs? One basket.
How do you think about sort of the interaction? And is there sort of a best of breed in the EDC space? And I guess the same question applied to manufacturing. Is there an overlap somewhere where VIVA's quality management processes start interacting with the supply chain ERP and how do you guys think about where VIVA fits in vis a vis what the ERP might offer? So both on the EDC side, you go to clinical operations, in R And Ds, the trial stuff and then on the ERP side?
Thank you. Sure.
I'll be honest. I'm not real close the EDC side, but I will answer that question, really from the CMO side, the contract manufacturing organization because that is part of what I do. And When I say that we've deployed Veeva Vault as a exchange platform for 97 of our partners, These are different contract manufacturing organizations and test labs that actually they manufacture our drugs, they test them, they help release all that data needs to come home. Now, the inventory, the actual inventory of these products sit in a back office system, an ERP system. So I've been talking to Veeva about, their QMS system really was the first application to introduce lot.
And lot is really the key to the back office system. So I think this is really an exciting time to look at that data model to see how you can connect because we could really speed up our supply chain and bring a lot of quality if we can bring Because if you look at the QMS system, the quality information is about those lots. From the time you start manufacturing all the way to release, That information today in pharma is in another system. So you go to ERP, you go to this system, you gotta look them look them up. And if the lot numbers don't match and they sometimes don't because they're put in by humans, then you could have all kinds of problems.
So this is really quite an exciting time to see if I talked to Peter about this last week. If Veeva will look in that direction, because that's something we're thinking about at Gilead as well.
Is there, there was another question, Grace? Yes. There's a mic just behind you.
Thanks. I think you mentioned that you use eTMF. And I think the Veeva team has talked about having tight integration between the CTMS and ETMF are it can be very important for customers or a big value add for customers. How do you think about that? Is that something that's it's a high value add for you as you look at your clinic operations?
Yes, I would say that is a high value. The way we look at CTMS is that's really the the the demand chain or the supply chain that comes out of the clinical world. That tells you what materials you need, where you need them, And then the eTMF is where you execute and you need to place your information there. Today, those are spreadsheets apart. And many spreadsheets apart.
So having that, closer together will be really amazing And then if you add the QMS piece, then you can have the quality information related to the materials to supply that trial. It could rapidly shorten the operation. Bring more accuracy. So we're pretty excited about that. Okay.
Last question.
As you look at your deployment, the Veeva products, Approximately, what do you think your ROI has been on the products? And the second part of the question is when you've had challenges with the companies around product because there's no such thing as a perfect piece of software. How has Veeva been with responding to your needs and improving the products?
So I I would say that the support and response has been been quite good. Veeva has, have some people work closely with us. I actually set up a desk for one of their people to come in. He comes in once a week and and really is like the key account manager, and he attends a lot of our meetings to put a lot of time into understanding our problems. We've had good engagement with, Veeva has brought in their architects to listen to us, some of their their process folks as well.
So I would say that we've been getting, good attention from Veeva.
All right. So let me, let me just ask one last question. So over your career, you've worked with a lot of technology companies. Yes. Where does Veeva rank?
How do you think of us? And we talked earlier today about our desire to be seen like a platform like SAP. What do you think? Do you think that we can get there?
You know, when I look at all the vendors I've worked with and I've worked with all of them at Gilead, you guys are really, really at the top.
At the top.
At the top.
Yeah. We didn't practice that. No.
I just finished ERP a few years ago and done this is my this will be my 4th quality document management system, that I put in, I worked with the clinical system the drug safety system, our first or second CRM system, you put 2 of those in. And legal hold all of those systems I work with all those vendors and and I tell you, well, I think one of the differences that you guys are listening to your customers and you're taking that understanding and building it into your product, but you're not just listening to one customer. You're getting you're validating what you're hearing across the industry. Helps us too.
Great. And Michael, thank you so much for being here today. We deeply appreciate your partnership and your time. Thank you.
Okay. So it's time to take a quick break We'll do maybe 10 minutes. There's coffee and refreshments at the table outside. If you wouldn't mind just aim to be back in the seats at about 3:10 or so. Thank you.
A little more in-depth about, what we're doing in clinical. Thanks.
Thank you. Can y'all hear me? So I'm glad that all the questions for Mike or about clinical, so I'm hoping that I'll answer, some of them and maybe create, another. My name is Henry Levy, and I'm Veeva's Chief Strategy Officer. I joined Veeva a year ago last week.
It's been an exciting year. Let me explain a little bit about myself because I'm going to spend a little time talking about the industry and what has happened over the last 20 years. I'm a bioengineer by trade, and then I spent 21 years at Accenture focused completely on the life sciences R And D space. I left, Accenture as the Global Managing Director for the Life Sciences R&D practice. And during those 21 years, I did probably 30 to 40 system implementations of just about every EDC solution, every CTMS solution, most of the pharmacovigilant solutions, and a couple of the regulatory solutions.
I then focused on process improvement and IT strategy, and then I set up Accenture's pharmacovigilance, data management, and biostatistic operations, mostly in India and in China, which led me to my next position, which was Chief Commercial Officer at PPD, CRO. Where I did 2 main things. 1 is define a new model for CROs to support the biotech industry, which needs a lot more touch. You would think that a big pharmaceutical company would want to, really control its CROs more than a biotech, but Biotech has one drug, and usually they depend on that success. And because of that, they need a lot of touch.
And then on the Big Pharmacyte, I define new partnership strategies, you know, how does a big top 25 pharmaceutical company establish a very differentiated strategy with the CRO. And I joined Veeva quite to my surprise, actually. I never thought I would end up in software, but I've known Matt for a while, and he convinced me to talk to a few of Veeva's clients. And when I did that, it became very clear that Vivo was trying to do something that I was hoping for. That's something that I've been trying to tell our clients that we needed to do, for 25 years.
And for the first time, I saw the potential for success. Veeva has a platform that I think can accomplish the thing that I've been trying to to tell our clients we should do for a while. So it's been exciting. It's been an interesting year, and I'm excited to be in front of you. I'm going to spend about 10 minutes telling you a little bit about the market.
As we prepared for today, we wanted to see what has happened over the last 10 or 15 years in the industry and in clinical specifically, To tell you, you asked the ROI. Well, we need to understand what is it that we're trying to do. And to be honest, I think we were surprised by what we found. We knew that there was a lot of space, but the amount of space that we found is a little bit surprising. Then we actually asked our clients what they wanted, and I'll tell you a little bit about that.
And then I'll try to focus on how are we attacking the clinical space? And how do we think that we will transform it in a way that hasn't been done before. So with that, I'll start with pride. You've heard, Matt mentioned CAR T, what Novartis and Kite is trying to do, and it's exciting. You heard Michael just highlighting how Gilead has been able to go from, you know, HIV being something that, you know, people can live with, and now they're focusing completely on cure.
But if you look as an innovation engine, our industry is amazing. Just in the last, about 16 years, We have doubled the amount of products that are in the R and D pipeline, doubled from about 5000 to over 10,700. That is amazing. That is, all innovative products that hopefully will help one of us or one of our loved ones over the next 10 or 15 years. That means that there's a lot of work to be done.
There's a lot of clinical trials to be done. There's a lot of patients to be identified And if you look at the amount of approvals, 2011 through 2015 were good years. We actually beat the average, and we were hoping that that average was going to continue. 2016 and what we've seen of 2017 seems to have brought us back. Which means that our overall success rate has gone down.
There are more products. The approvals are similar to what it's been over the last 20 years, which means that our success rates have been down. So I think everybody probably has worked or seen tough work on how much does it cost to bring, the capitalized cost of bringing a single drug to market. And what this highlights is that Over the last 10 to 15 years, we have had an inefficient engine to bring those massive amounts of products. Peter has said this to a lot of, a lot of people.
We are developing products that you could equate to a new rocket that takes us to Mars. But we're bringing that rocket to the launching pad with a horse and buggy. And I would add to that that the horse is probably asthmatic and that the buggy has a broken, like, spoke. It is truly amazing that we have such amazing innovation when it comes to bringing a new product? How do we treat the human body?
But the ability to actually bring that product and execute what is really just a very, very clear and specified process, we have not been able to do that. So If we look at the approval times, these are the approval times for bringing a drug, from the initial execution of phase 1 studies all the way through to submission. And what you see is that in about 1992, there was new regulation called PDUFA. You've heard about it. And that pretty much was a pretty significant change in the way that you could get things approved.
And that had a big impact in 96% 98%, where the time went down pretty significantly. But if you look at that, if you look at the last 20 years, we have gotten worse. If you look at this year or the year before, we are at the same place that we were in 1992. Literally, we have moved forward 20 years and done backwards 20 years. Now you could say that all technology, and the answer is no.
What most people will say is that clinical trials have gotten more complex. And that is true. If you look at the overall complexity of clinical trials, we have some, some interesting dynamics. 1 is bringing a drug to approval is no longer the goal. The goal is bringing a drug to reimbursement.
And as soon as you do that, you have to bring more things, more data about health and outcomes research, about pharmacoeconomics, and these things take a lot more effort. So we're seeing the number of pieces of data that need to be captured, going up, the number of, procedures that you have to execute go up. And because of that, there is an incremental complexity. So you can explain why maybe the time to approval has gone up. But you would think over the last 20 years, over the last 15 years, the internet cloud technologies, mobile technologies.
There's been a massive improvement in the way that we can execute clinical trials. So you would think that the individual metrics, the things that we do 1000 times or maybe even 10,000 or 15000 times in every single clinical trial should be better. But If we go to a study that Tufts has recently published and we look at these very specific metrics, these are metrics that should be impacted by the technologies that are out there and that have been out there for very, very long time. We're getting worse. So bringing a site from 0 to being able to bring in a patient.
That process has gotten 4 weeks worse in the last 15 years. Let me repeat that. The process, which really is the main bottleneck for A patient to be brought on to a clinical trial has gone from 25 weeks to 29 weeks. In the same time that you can now, you know, call an Uber in 3 minutes or, you know, probably buy, a book on Amazon in 1, in probably 1 hour, our shoes in Zappos today and receiving tomorrow. Starting up a site has increased.
We have slowed. We have deteriorated from 25 weeks to 29 weeks. And then when we look at EDC, EDC has been out there for about 20, 23 years. Over the last, probably 17 or 18 years, we've seen an evolution to the point that the majority of trials are being run-in EDC. And the main objective of EDC is getting to data faster and being able to clean that data faster and being able to get access to that data so you can analyze it faster.
Yet in the last 15 years, the time from the minute that a patient enters the room of the doctor, to the minute that the data's entered into the system has gotten worse. We're talking about 1.2 days slower. That is during a time in which EDC has been out there in the market. How could that be? And in addition, the time at the end, when I've had all the data together, and I can clean it, and I can just start to report it, that process has gotten 3 days slower.
How could that be? How could it be that the trials can be complex, but these specific metrics that are expected to to get better because these are the transactional activities that we do on a day to day basis have gotten worse. So what I would tell you is these technologies that have come in and that make sense have not delivered the ROI they were meant to have. So Many of you know Matt, and he told me this is the crappiest looking slide he's ever seen. And I thought about changing it, but I actually thought it actually represents the way our clients feel.
About the technology that are out there. When I this is supposed to represent how the technologies that exist today have evolved. Over the last 15 years, a technology might have been really, really good from a best of breed perspective, maybe in EDC, or maybe in CTMS. And their customer said, Hey, if you had the other one, the other part of the technology, you would be strongly, you could bring them together. So yes, okay.
Well, we'll, we'll buy that one, and we'll build that one. And we'll try to stitch them all together, and we'll sell it to you as a platform. But the data, the processes completely disconnected, starting from different places, there is no actual platform. And the experience is completely different. I might be working in CTMS and feel one thing, and then I go into EDC, and I feel a completely different thing.
And then more importantly, the data doesn't actually come together and the ability to see the data and to have true visibility is not there. I would ask you to ask some of our customers. If you ask them, can you give me a list of all the clinical trials that you're running in every country in the world, depending on the company that you talk to, it might take 1 week or 1 month to answer the question. Not 1 hour or 2 hours, but 1 week or 1 month. And that's because of the fragmented nature of what they call a platform.
So, if I go back to my consulting roots, I did probably 20 different IT strategies during that period of time. And, I'll have to say that I'm a little bit embarrassed in the sense that it was always the same. It was always the Sophie's Choice decision of do I go with the best of breed or do I go with one integrated platform? And the reason I say Sophie's choice, which I don't think lightly, is that you were gonna be unhappy regardless of the decision that you made. If you went with a best of breed solution, you pretty much voted on the fact that I'm going to buy the best thing out there, and I'm going to be happy with the individual areas but I'm going to pay for the integration.
And there were 2 main things that happened. One is that even the best of breed was not that great. The best of breed was still making their customers unhappy. And in addition, because of the commitment to integrate those technologies, the cost of maintaining those technologies handcuffed you. All of a sudden, many of our clients were in a situation where their, non discretionary budgets were creeping and creeping and creeping because they just had money to maintain the stuff that they were integrating.
If they went all the way to the other side and said, Well, I'm just going to go with this one company. They have the majority of the and they've already integrated, yes, I'll sacrifice a little bit in a couple of technologies that are not best of breed. They encountered, again, 2 bad things. The technologies that were not good might have been terrible. It might have been things that made people incredibly unhappy.
I I am not exaggerating when when I say that many nurses, many CRA that work on clinical trials, talk about the fact that they hate coming into work because at home, they have access to technology, and then they get to their work And they have to deal with things that they don't understand why it is so bad to have to experience those types of technologies. And in addition, Even though they were told that it was an integrated platform, they find out that really it isn't. And they end up having to pay for the integration, either themselves, or funding the integration for those platforms to do themselves. And then it gets even more fun because About probably year 2003, 2004, there's a new push, which is less outsource. You know, let's leverage our CROs.
The CROs are good at this stuff. They have to be. They provide services in this space. While really, CROs are in the same position. They might be in an even worse position because if a CRO has 200 customers, it has 250 different ways that they have to do work because every single customer wants to do things differently.
So they said, well, I have my systems, I'm going to give some of my trials to our CROs, and then the, what we call, the Rubik's cube started to be created. You pretty much had some companies say, Hey, CRO, you use my system. And then some of them said, you know, CRO, I want to use your systems. And just recently, there's been an example where one CRO is being told that they have to give access to their systems to their competitors. So in order for company A to run trials with X CRO, that CRO will use somebody else's a different CRO systems.
It has gotten so convoluted, so painful that the ability to integrate is stopping us from progression. It is stopping us from being better, and it is stopping us from being truly excellent, as excellent as we have to be. So we asked our clients, over the last year. What are the technologies that you're using to support critical systems? I mentioned site startup at the beginning of my conversation, and we were amazed.
85% of respondents say that they use spreadsheets to start their sites. We are, I believe, in 2017. This is a process that is executed there are 40,000 sites that submitted to the FDA this year. So if you multiply that, there's probably 80 to 100 thousand times that this happens a year just in FDA related trials, yet it's a spreadsheet that we're using to execute a repeatable process. And then when we ask today, in 2017, what is your biggest challenge when it comes to running clinical?
70% of sponsors and 72% of CROs are the opposite. 72% of sponsors and 70% of CROs say their biggest challenge is integration, is trying to integrate their clinical technologies. And when we ask them, what do you want? What do you what would be your wish 99% of them say it's about unification. It's about getting clinical technologies to work together.
So how do we answer the question? I think you knew that already. I think we've said that a few times, but at the end of the day, for us, the Volt Clinical suite is the answer. And why is it the answer? It's because it's one unified solution.
Every one of those solutions have been built on one platform. Let me just repeat and try to explain it a little bit more specifically. If I have 11572, that is a document that a investigator, a physician who wants to participate in the clinical trial, They have to fill it out and submit it. If I want to manage that document and it goes into Vault, it's created once. And never again, do I need to create it?
I just use it again and again and again. Today, that 1572 is being copied, scanned, printed again, scanned again, and then print it again to be packaged and then sent to the authorities. That process is not unified. And in our world, a document can be maintained forever and be used across all of our applications. And you don't have to do that just with documents, but you can do that with data.
In addition, you saw Matt and Steve you went through 8 different or 9 different applications in 6 minutes, and I would, I would guess, that as fast as Nas has not read, you had no clue that you were in 8 different applications. That is incredibly powerful. The fact that every application feels the same that you don't have to come in and out, log in, log out, but that you can move seamlessly is incredibly powerful. And then lastly, because that data never has to be repeated, there's a single source of truth. It means that your status for a clinical trial is only in one place, And that report that I told you that might take a week or a month for a pharmaceutical company to develop should be able to be done in seconds.
You should be able to press a button get to a dashboard and know how many trials are being run-in every country that you're running clinical trials. So let me give you a bit of an example. An interim monitoring visit is when a pharmaceutical company rep, a CRA comes, prepares to, and comes to the, investigator and wants to check how the trial is going. In a, I'll say, a normal phase 3, study, this happens 20,000 times, somewhere around there. It could be happened more if it's longer, or there's more sites, but it could happen 20,000 times in one trial.
And that process, today, happens in 9 different systems that are not talking to each other, some things in paper, some things through email, some things all over the place, You have, as I said before, printing and scanning and scanning and printing and sending and receiving and cataloging and indexing 29 different steps for something that is happening 20,000 times. I mean, it is mind numbingly crazy. How many steps it takes and the fact that it has to be done 20,000 times in one clinical trial. In our world, the CRA logs in once And then they have 8 additional steps that they can execute to make that process better. And if you look at those 8 processes or 8 steps, I believe 3 are generating automated reports, auto populated files that you just have to generate because the data is already there.
So you're talking about a simplification that brings 29 steps down to 9 It takes an environment where data and documents are in different places and duplicated to a place where all your information is unified, if you think about compliance, if you think about the FDA coming to audit you, and they're trying to find where you made a mistake, where you didn't follow a process. And you have to do 29 different steps in which the same document might be printed and scanned multiple times a piece of data entered 3 times, you're pretty much increasing the amount of potential failure. So the compliance risk is incredibly high in that environment. And in our environment, that compliance risk significantly is reduced. Clearly, there's a cost benefit.
There is a reduction in the effort and a significant amount of efficiency. But to me, and most importantly, That CRA, the main job of that CRA is to build a relationship with that physician and make sure that that physician knows how to recruit patients. And that they're doing it in a safe way. So if you think about it, if you can get rid of all the administrative burden of a CRA, That person can actually focus on ensuring that patients are being treated in the appropriate way and in a safe way and that they're talking to the physician, they're talking about the value of the drug, how to identify those patients and incredibly accelerate the amount of enrollment that you're going to drive. So up to now, I focus very much on, I'll say, tactical steps.
You know, like, 29 steps, you know, that can go down to 9. Those are just things you do. I haven't talked about the potential for transformation. I would and here are three examples. I would love your opinion about these, but also I don't think we've dug deep into what unification can actually do, 3 of them to highlight.
If you think about, and I wish Michael Louis was still here because if, if you ask them, how do I implement the change to one process? So if a process that I have to do has 4 systems. And I'm an IT guy. In essence, I have to create a roadmap that probably takes 3 or 4 years. Because I'm going to implement the first one in year 1, the second one in year 2, the third one in year 3, and the 4th one in year 4.
And if you think about it, How can that process ever be that impressive, except maybe when you finish after 4 years? Well, if every technology is unified, If it all feels the same and it's seamless, you could actually foresee a way in which Michael Louie, instead of implementing 4 systems, to improve one process could just implement one process. And let the systems just happen configure them so that it executes the process exactly how it wants he wants it to be, and just lets the technology be an enabler. We have the potential to make technology not be a barrier to progress, but an actual enabler of progress. Then on the right hand side, and, Matt talked about this.
There are probably 10 out of the 30 or 40 roles that play a role in clinical trials. That have been born because of the technology. There are document administrators, site administrators, data administrators, These roles only exist because our technologies force us to have those. If you think about what unification can do, It can simplify roles. It can simplify organizations.
It can reduce costs. It can drive massive efficiencies. And then lastly, you probably have heard of risk based monitoring. What is risk based monitoring? It is applying analytics data to figure out if I cannot do certain things.
And right now, it's been only applied to monitoring, which is a big part, but it's not the only part of clinical trials. And the reason it's only been applied there is because there's never been an environment where you could do it all the way from the beginning. You could do risk based protocol design. You could do risk based data management. You could do risk based data cleaning.
All of those things would be possible in a unified environment, which means that it's not about risk based monitoring, really risk based everything. It's risk based clinical trials, which to me is truly exciting. And then if you think about this Rubik's cube that I mentioned If you think about that, highly confusing and painful situation where you have CROs using my system and your system and the others, If you have one platform that is consistent, that is one major component of potentially solving that Rubik's SKU. The second one is standardization. So if any of you have talked to CROs, they know that every single sponsor works in a different way.
So we have just recently brought together 5 of the top 10 CROs, To work in a parallel way to the way a line biopharma is defined, it's called the line clinical CRO, and they have agreed to work together to define technical standards about how CROs work with sponsors. And the combination of a platform the Veeva Clinical suite and standardization could really, really have a massive impact in making outsourcing what it's supposed to be. It should be about getting better results, not just moving worked out. If we can do that, we can incredibly impact what today is a pain is difficult to outsource from a technology perspective. So I hope you see the passion.
I am very passionate about this space, and that's just clinical. I mean, imagine how excited I would be and how annoying I would be in talking to you. If I could add regulatory, quality, and I didn't even put safety here. If I add those 3 and I think about the potential, I mean, today, if if you've worked with your, pharmaceutical sponsors, regulatory and clinical don't even talk to each other, because regulatory are the document people clinical as the data people, regulatory operations and clinical operations do the same thing. If you could have a technology that supports that, the transformation is truly amazing.
So just to summarize, over the last 15 years, we've seen degradation in the time to bring a drug to approval, which could be attributed to complexity. But you can attribute that complexity to the fact that the individual metrics of what EDC should have solved what CTMS and all the others should have solved have gotten worse. And you can point the finger at the fact that you cannot integrate those technologies. And by doing so, you're reintroducing inefficiencies. And that if we have a common plan in VIVA clinical and the development cloud, that you can drive costs down, that you can speed execution, that you can do seamless outsourcing and really take advantage of your CRO partners.
And more, more excitingly for me, I think we can transform clinical to the next generation model. I will pass it back to Peter to talk about QualityOne.
Alright. So that's sort of how Veeva gets better. We're kind of a melting pot. In our own way for the technology industry and the life sciences industry. Somebody like Henry comes with 20 years of passion, and it started even before that Henry's father was a physician, you know, back in the time where a lot of things you can cure now Henry's father just had to watch people die.
Watch him waste away. So Henry's Henry's passion comes from watching his father and what he had to deal with. So that's how Veeva gets better. If we bring these people from different areas, Henry comes from a consulting and really from a product of his father being a physician. He brings that into Veeva.
We have outstanding technologists who come from all different places, and we have experienced people like Henry. Or just yesterday, I was interviewing one of the, well, it's probably between 50 and 100 new college, basically new college grads that we bring in to Veeva and all across the the parts of the company from con consulting to development, etcetera. This is a person coming into consulting or James Emily, she's been working for about a year and a half. Biology, I think psychology major, she's actually a clinical research coordinator. So basically project managing clinical trials inside Children's Hospital of Philadelphia.
So she brings a different melting perspective of, oh my god. I'm just out of college. I'm working at this thing and Why is it so hard? What am I doing with all this paper and spreadsheet? But she also brings a perspective of use.
She's probably twenty three years old. And that's what Veeva really is. That's how we're getting better by bringing people in and sort of pollinating. So it's really happy to see that. So now we're leaving the world of life sciences, and now we're talking about QualityOne, which is our first Vault application, our suite of products outside of life sciences.
So it looks similar. We got a slide with some orange on it, a little bit of gray. So applications built on the Vault platform, 2 of the applications here in the quality area. So it's Vault QMS and Vault quality docs, We call that Vault QualityOne, when we sell that suite of applications outside of life sciences. It implements processes.
Henry was talking about processes inside of life sciences, okay, monitoring, visit report, submitting an NDA, etcetera, There are, there are generic quality processes that have to be done across any industry that's trying to measure quality. Things like complaint management. I got a complaint, is it a valid complaint, triage the complaint. Change control. I got I gotta change my manufacturing plant, but there's 7 things that need to happen.
They all need to be improved, but they then that change needs to happen as a set of things. That's called change control. There's audits and etcetera. So quality 1 implements these processes, And we're targeting, the process manufacturing industries, largely. You can see that down at the bottom, things like We're targeting chemical companies, consumer packaged goods, food and beverage, oil and gas.
And we're also targeting what we call regulated services. Highly regulated services. They don't they're not really making a product, but they're operating as operating a service. I'm doing a service that's involved in a nuclear power plant. I gotta be trained.
I gotta know what I'm doing. Mistakes can't be tolerated. So that's that's what we're making and who we're targeting, and it's a very broad market, as you can see. Quality is complex. And so it's a good fit for the Vault platform.
Remember, we talked about Vault Platform has good security. It also has good process management. So quality is a real application. You can't just manage this type of stuff in a spreadsheet or a, you know, a SharePoint file. I'll just just one process of equality and debt.
You gotta intake. You gotta identify the issue. Somebody said something was wrong. Okay. Let me let me gather that all in.
You gotta confirm if that issue is legitimate or not. Somebody needs to be at some triage. You gotta figure out if there's an action you need to take, a follow-up as it closed out, and then you have to generally have corrective and preventative actions. How did I correct this thing? How can I prevent it in the future?
Who signed off on that? Where we add on this preventative measure. So it's a very complex sort of process, and you wanna use it to identify trends is what you want to do, because the cost of poor quality can be pretty extreme, you know, For companies of any decent size where they have something to lose, they have a high market capital, quality is a board level type of thing in these process manufacturers. They will they will discuss it because it's a serious downside. When they don't sort of create themselves overnight, the serious ones.
They're not an issue of one person making one mistake. It's a set of things that build up over time. And if not addressed, when they do come to light, they can be big issues. So we, many of us may remember the manufacturing problems in Tylenol. That was a quality issue, right?
That shut down plants that had major impact. It wasn't a mistake by one person at one time. It was quality issues building up and lack of continuous improvement. We saw, experience with Volkswagen and the diesel engines. And the fact that they were not operating the pollution controls correctly.
That's a series of checks and balances and quality that allowed to build up across many, many people over many, many years, resulting in when it came to life, basically a catastrophic failure to the business. And you see it in other areas. We saw what happened at experience with the the, exposure of people's records. It wasn't There wasn't one mistake made by one person. That was a lack of continuous improvement of quality throughout the process.
Throughout multiple years. So they're pretty serious stuff. QualityOne is a set of software that helps you get continually better in quality can have a systematic way because if you have an issue, you can lose your reputation, you got a lot of costs. It's a big issue. That's why it's important.
And this is a very fragmented market. This is a total logo soup here. I mean, it's a lot of small companies, A lot of spreadsheets, a lot of custom applications, most of it on premise. If you talk to a very, very big company, they've implemented different multiple different quality related products, sometimes at every different manufacturing site. So it's very fragmented.
It doesn't have a clear leader. So these are the kind of These are the kind of, markets, Veeva likes. It's a big opportunity overall. So if you look at we're just talking about process manufacturers here, we're just talking about the US. So we're narrowing that scope.
There are 600 process that are over 500,000,000 in revenue and another 1000 that are between 501,100,000,001 100,000,000. So it's a lot. It's a big It's a big world out there. A lot of things being manufactured. So that makes it a good market because it's big.
It doesn't have a clear leader. And also it's It's expansion opportunities. It's adjacent to a lot of things. Process Manufacturing. It's kind of adjacent to discrete manufacturing.
It's not our target area yet, discrete manufacturing, but we would know what we would have to do to start to address that. Discrete manufacturing is you're making an automobile, you're making a medical device, things like that. There's a lot of adjacent applications to the quality application too. Certain areas of supply chain and demand planning, etcetera, very adjacent to quality. And you heard Michael, Louis talk about that Product Lifecycle Management?
Oh, I absolutely very related to, to, to quality marketing, certain types of product marketing types of things, very related to quality. So product Michael made an interesting comment. He said when you talk about quality, you should always say product quality because it is about the quality of the product. That means quality is adjacent to many, many product related things in the in the company. What also happens here when we go after this quality and process related manufacturers, we start to uncover platform capabilities, platform opportunities where a customer has a a need for something where they have such a specific thing to do, they can't find a good application to buy, they need a platform to implement it, they see Vault.
They get familiar with it. Hey, we can implement that on Vault. So that's why it's a great market opportunity for us. And we can really leverage what we've already made for life sciences, which is our QMS and our quality docs product. So a good market model, it's, you know, pretty simple.
It's very, very straightforward. We have a dedicated sales team for outside of life sciences. It's organized by geography. It's not organized by industry. We don't have a set of people only selling into chemicals.
That's not the way we're organized. A dedicated strategy team and services team. This goes back to our focus pays off. So we have a set of people in Veeva that think Wow. QualityOne is it.
That's all that's all it is, and they're they're going after it. There's a small development team because this area will need specific features and and capabilities. Not a lot, but it needs an extra layer or not extra but it needs some things that we don't need inside of life sciences. We're starting in North America first, and next year, we're going to start Europe. Our process is really straightforward.
We get our early adopters. We find people that are a good fit. We get them live, evangelical, We use them to improve the product. We end up with a very happy customer and a better better product. And then we we rinse and repeat rinse and repeat.
It's not a complicated Why do we do it this way? It's because what what we end up with is the path to greatness. Very happy customers, so then we can do our reference selling. A great product because we're listening. And I think you heard that from Michael, right?
We have this intimate relationship. It's actually built into our processes for product development. This relationship with customers. Everybody inside Veeva would know, well, what is an early adopter? Why do you have an early adopter.
What do you do with that early adopter? How do you interact with that? How does it affect the product development lifecycle? And that's really our path to long term leadership. So now that's all the theory.
Let me talk about some specific examples, some some customer use cases. I'm not going to give specific customer names. That's confidential. I'll just describe the type of customer and what they're doing. So first one, small one.
150 people, highly regulated service of genetic testing. So if This is important in quality. If you get this wrong, it's a problem, not only the patient, but it'll definitely shut the company down. They'll be out of business. If they don't if they get audited and find out that they don't have quality controls, that's it, wrap it up.
So very important. This company is new in their fast growing 100 and 150 people, they are replacing a manual process, and they're going to roll out the basic quality 1 suite to all all their employees. 150 employees now, who knows how many they have in the future. When they looked at us, it was obvious. They felt like, oh, gosh, this is what I want.
No way does a nimble me like this when I installed some legacy. How did they find out about this? One of the people in this company used to work inside life sciences and said, hey, Veeva, maybe Veeva's got some. And just went to our website. And this was before we were even really marketing quality 1 too much.
They found us their happy customer now, happy in life. Next one's a little bit bigger, about 500 employees. This is a different type of company that make industrial products. They're mainly a contract manufacturer. They make very specialized industrial products.
They make parts that are put into everything from medical devices to big, huge construction machines, all kinds of stuff. They started with, quality 1 in a pilot for a fifty person team, making a certain type of product, and they're using it for document control. They're replacing actually some packaged software that they put in on-site roughly 15 years ago that was nobody really liked. And critically, it couldn't be exposed to their external partners. So this was a problem.
They were looking for a solution They actually just found us from a web lead. They just did a Google search, found us, came here, and we have a qualification process for early adopters, they seem like a great fit. So, they're implementing right now. And we think we can you know, expand in this company as well after this pilot, if we do a good job. This is a different type of company, cosmetics company, a bigger company, 1300 employees, although mostly in the sales and marketing area, this is a fast growing company, really have some products that are taking off.
Basically, their business mushroomed just grew up like this, and they had not put in quality processes yet. And so their business is mushroom rooming, and they can't keep up with their quality process, lots of faxing of things to their contract manufacturers, etcetera. So they picked Veeva because, a, they needed to pick something they knew, you know, manual's not gonna, not gonna work as in their growth. And they wanted a chance to be great, right? When they looked out there, you know, there was nothing that had any hope of being greatness, and they also had the contract manufacturing issue if they needed something on cloud So they're live and happy.
You know, and we're very happy for them as well. We don't want to ask bad cosmetics out there. This one is pretty interesting. Different type of company, global, top 5 CPG company. This has it's it's this company has been around for for a long time, well over 50 years, 100,000 employees all around the globe.
And quality, this is a very serious issue for them if they would have quality issues in a consumer package good. You know, that's like a tie on all type of situation. So it's definitely a board level thing. They knew of us. They knew of our reputation.
I think they did their research and they knew what, what, we were doing in life sciences. Had some people in life sciences that now worked at this big consumer packaged good company, started talking with us. Now they, we have 2 things going on with them. First, we have a pilot for QualityOne in 4 manufacturing sites. It touches roughly about a thousand people.
And then they're also building a custom application that touches about 700 people for their regulatory filing and safety of their consumer packaged goods So it's a total of about, 1700 people. These are early deployments, right? And they're not live yet, and they're in that, in that cooking process. But what what can this lead to? And, yeah, these are both of these implementations are replacing multiple, multiple custom solutions.
If you look at this company overall, just in their quality area, out of all their sites, manufacturing sites, which are over 100, they probably have about 400 applications that that do what QualityOne does. So it's that much of a, that's much of a mess. So where can we lead up to over multiple years we have success with these early projects and more at this company, we can lead to a company where they have one quality one system for all their manufacturing sites. They're replacing these 400 siloed systems with 1 unified quality 1, and they might have 4 or 5 big custom applications, very unique to CPG that they implement on Veeva Vault, and this customer very well could be a it could be a 8 figure, you know, per year subscription to a customer to us if we're successful. So that's that's the kind of stuff we're doing in, outside of life sciences with QualityOne is very similar to what we're doing inside of life sciences.
It's based on customer success, incremental progress, cloud innovation, and our business model, our VivoA business model. If I look ahead for QualityOne, what can you expect? 1st of all, we are definitely in it to win it. That's part of our model. I don't like to lose, I never have.
And we got a dedicated team and we're in it to win it. I think we are set up to win it because it's a market that's right for Veeva. There's basically no cloud vendor. It's it's disparate. The industry is under change that this manufacturing industry with all the contract manufacturers is very ripe for what we want to do.
And it's a super good fit for our Vault platform, all the security, all the reporting, all the process management. So what we need is consistent execution, getting more early adopters, getting them live, getting them happy, We need to expand within our enterprise customers. And then this year, we'll this coming year, we'll start building out our Europe team. We're starting to build that team now. It'll start executing next year.
So people, they often ask me, Hey, what's next? For Vault outside of life sciences. What's beyond QualityOne? Well, I'm sure there's going to be something out there. There's all kinds of adjacent things, but I'm really not concerned with that right now.
QualityOne is a very big market. We're very early days in it. If we are successful in QualityOne, and let's say we get 200 customers in the process manufacturing industry. And they think this Veeva stuff is the greatest stuff, and this Vault platform is the greatest stuff. All things are rosy.
All things are good, and there's many different things we can do. If we can't do that, none of those things are good. None of those things are rosy. So that's why we're focusing on QualityOne and we're really going to make it work. Alright.
That's for QualityOne. Now we're going to have Tim come up and talk about our financials.
Thank you, Peter. Hello, and again, thank you for joining us today. I'm going to go over, I'm going to cover 3 areas today. 1, I'll walk through a few slides on our continued strong execution and our resulting financial performance second, I'll spend a brief moment to touch on the high level financial impact associated with our adoption of ASC 606, which I'm sure you're all familiar with. And I'll conclude by discussing our progress against our 2020 objectives and how to think about our long term operating model.
So you saw this slide in Peter's deck, and you've seen us present this a number of times. But I think what it signifies is while many SaaS companies that you know are still in the early stages to prove out the scale of their business model. And a lot of them are still burning cash. You can see that we, as a company here at Veeva, have always had a focus on growing the company in a very profitable way. Q2 of this year marked the 32nd consecutive quarter of strong growth and profitability And over the past 18 months, as you saw today from Mad and Henry and Peter, we've continued to deliver new products that are addressing large strategic markets, which we expect to materially contribute to revenue beyond the $1,000,000,000 target in the years after 2020.
And finally, as you can see here, our profitability is meaningful. With the last 2.5 years, showing operating margin results in 30%. So this combination of growth and profitability is due to a differentiated business model that we've talked about before. So it's different about our business model. 1st, we have, as Peter talked about, and you heard in the conversation with Matt and Michael, We have deep industry expertise, and we have tailored solutions, and we're viewed as a strategic partner and achieve real customer intimacy.
So these create insights that allow for more focused R and D spending that'll more likely address some of our customers' key challenges which lead to higher levels of customer success and strong retention and ultimately to higher customer lifetime value. In addition, as Peter talked about, both within life sciences and outside life sciences, we have a disciplined go to market approach. Which over time will lower our customer acquisition costs and drive much more efficient sales and marketing. You've already seen that working in our financial model today. So this go to market approach, and Peter talked about earlier, is a key tenet of the Veeva way.
These positive aspects of our all operating model also drive healthy cash flow from operation. You can see here, even with the all cash acquisition of Zinc 2 years ago, over the course of the last 3 years, we've nearly doubled our cash position and expect to end the current year at well over $700,000,000 in cash. Our operating cash flow margin, if you take out or exclude the impact of the recent stock comp accounting continues to be in the 20 plus percent range, enabling us with clear future optionality and a very strong balance sheet. As we look at our most recent quarter, Q2 of fiscal 'eighteen, we delivered exceptional performance both on the top and bottom line. In each metric, you see here, we produced material year over year growth primarily driven by Vault's momentum and the continued global commercial cloud deployments.
Total revenue exceeded our guidance at 27 percent growth year over year and subscription revenue. And as we've talked about, this is really the key metric to assessing our business momentum grew at 28%. This drove strong operating model performance with gross margin at 72% which is already at the bottom end of our original 2020 operating model that we introduced 2 years ago, and higher than expected operating margin, which grew year over year by 40%. Let me pivot and spend a little time here on 606. So to be clear, we're on track to adopting this standard starting with Q1 of our next fiscal year, so fiscal 2019, we have decided to use the full retrospective method of adoption So we'll be making updates to our prior period results in fiscal 20172018 as necessary to reflect our financials as if we always were under 606.
So for us, there are 2 primary impacts to the P and L that I wanted to note. 1, in revenue accounting, for multi year contracts with ramping fees, and I have a slide that I'll cover a little bit in more detail there. And these are primarily Vault contracts, and you've heard us talk about these contracts as enterprise license agreements or the acronym ELAs. The second impact is moving from expensing commissions in the current period which we do today to capitalizing and amortizing commissions. So we'll also have some updates from a new disclosure perspective, primarily in three areas, as you can see here.
1, unbilled receivables, 2nd, revenue recognized from beginning deferred revenue. So there's a roll forward in the new disclosure in terms of from the starting deferred revenue, how much produced revenue in that particular given period and backlog. Now one note on backlog, So given the fact that the vast majority of our arrangements with our customers are 1 year or less, our backlog relative to our revenue will look less than most SaaS companies who have a majority of their contracts are long term in nature, so multi year in nature. We'll talk more about that as we go through the adoption process, but I just wanted to make sure I noted that. Now perhaps most importantly, We're not making any customer facing operational changes in the adoption of this standard.
For instance, we're not changing the way we contract or bill with our customers. Due to the adoption of 606. Now, as I said, I wanted to further explain this multi year contract So we prepared this slide for you. So in the scenario we have here, we signed a non cancelable 3 year arrangement with the customer. Where the fees are ramping assume we delivered an enterprise license agreement day 1, so they could access everything.
But as we work with our customers, they're going to adopt it over time across regions and divisions. So the growth of their commitment and use of the product is really mimic in the way that we But because it's noncancelable and because we're not delivering anything different in years 1, 2, and 3, the new standard will make us look at this as a 3 year contract. Where we need to straight line amortize the revenue. So where the revenue will still be 12,000,000, we will take it Now as we apply the full retrospective method to these types of arrangements that we have today, we'll see revenue move across periods which results today in a favorable update to our revenue in fiscal 'seventeen. This was of course our last closed annual period, by roughly $6,000,000 to $7,000,000.
In addition, under the new standard, as we move to capitalizing and amortizing commissions, And we've analyzed this, and we think a 3 year amortization period is right for Veeva, you can also see that we get a benefit in fiscal 'seventeen of a decrease in operating expenses by roughly $6,000,000 to $7,000,000. Now to be clear, there is, as you know, if you've read the standard. There's a lot of considerations in the standard that are both relevant to companies like Veeva and not, But we believe others outside of the 2 that I've covered here today are not material to our results. So let me finish by covering a little bit of our progress against the targets we set out 2 years ago for 2020. So as discussed earlier in the year, we're ahead of our original 2020 revenue run rate target of $1,000,000,000, And this is driven primarily by our strong momentum involved, which is here you've heard us talk about.
In addition to continued solid growth in commercial cloud, and in part due to the new product introductions over the last 18 months. When we look at our current guidance for fiscal 'eighteen and our path to 2020, we're planning on 20 plus percent organic subscription revenue growth. This is a new disclosure or sharing today as we wanted to provide greater insight into what we believe is the most important metric to our business momentum. We're confident that 20 plus percent organic subscription revenue growth through 2020 based upon that strong demand for our products, and the growing and expanded use of these products within our customer base as they use them more across divisions and regions. Now drilling down a little bit further and you remember this when we introduced this revenue target, our scorecard, if you will, our recipe, We're making great progress against these 3 key areas since we rolled this out.
1st, the contribution of non CRM revenue which I think you all know is almost entirely led by Vault continues to progress towards that 50 plus percent. You can see the ahead of the overall 2020 target is due to that rapid growth of Vault. And as we covered throughout the day, we believe we're in the early innings of this opportunity. The expanded use of our products and the new adoption of some of our newer products in our current customer base has also seen strong growth in our eight figure customers as we close in on the 20, we targeted 2 years ago with the growth of 4 this year And notably, we also grew our 7 figure customers from 71 this time last year to 85 today. And lastly, we continue to expand our customer count.
And in the last 2 years alone, we've continued to add more than 100 per year. Now we certainly see, and we will see some revenue contribution from the newer products we've introduced over the last 18 months, as we march towards that $1,000,000,000 revenue run rate. But what I wanted to make sure was clear and reiterate was how we think about new products, and our approach to their market entry. In each of these markets, like clinical or what Peter just talked about in terms of outside life sciences, and our initiative there, we start with the goal of building the best products. We then look to partner with early adopters and really invest in their success, and our learning.
Once we've established strong early adopter success or customer success from our early adopters, We move into the reference selling mode where we can see material revenue growth for these particular products or markets. And as discussed, this is typically a multi year process. So when you think about the newer products that we've added, while they will generate and contribute to some revenue up to the 2020 mark of the $1,000,000,000 revenue run rate, they're really the seeds we're planting for material revenue growth beyond 2020. Now we've also seen strong operating margin performance throughout the year, So gross margin from last year has grown nearly 200 basis points, as we've seen the mix of revenue change towards more subscription versus professional services, but probably more importantly, the contribution of Vault in the subscription revenue mix is much stronger as well. So given this performance, today, we've updated our 2020 model for gross margin to 74% to 75%, from what you saw last time when you saw this slide of 72 to 73.
And this is really reflective of the mix that I just talked about, primarily in the Vault area, And as you guys know, and as we've discussed in the past, Vault has a higher gross margin profile than our core CRM product. Over the next three years, as you heard from Henry and Peter and Matt today, we'll continue to invest significantly in both innovation well as go to market efforts. But the net result is an operating margin target that we still believe in the 2020 timeframe can be between 30% 32%. Today, we've essentially narrowed the margin that we talked about when we first introduced this slide from 28% to 32% to what you see today, which is 30% to 32%, while we're still investing more in growth initiatives than at any point in the company's history. It's also worth noting that we believe our current and targeted operating margin is best in class, when you think about a growing software company like Veeva.
So with that, let me turn it back to Peter for some closing remarks before Q and I clicked ahead, so You
clicked ahead. That's okay. Forgive us. Alright. So to round up, you've you've heard us talk talk with you a bit and you've seen some product demos you heard from a customer.
What are what are the key takeaways? A, we're a technology company. That's in our core. That's what our people do. We make great software products.
We apply them to the life sciences industry. We have a history of it. We know how to get to product excellence, and we've sort of proven it over the last 10 years, and I expect it to continue for the next 10. We have this incredible asset in the Vault platform that not very many companies have All companies would claim they would have them, not not many companies do because you need a certain set of ingredients of people and capital of time to create it. We have that.
We started coding it 7 years ago. That's our Vault platform. We also have this long term leadership in these strategic markets, both in the commercial area of life sciences and in the R and D. We have these franchises that can continue for 20 or 30 years if we, concentrate on our customer success. And I know we're deeply committed to that.
So that makes Vivo a very sustainable business. I think Veeva is a company that knows how to take care of its home state. We're not going to lose our home state. We know what got us here, and we're very focused on that. And then we have a business model that's repeatable, the Veeva Way, make great products, get early adopters live and happy, reference selling, use your early adopters to improve the product, grow high, high margin from our existing products, use it to create more products.
That's a summary of what you've seen today, and now we're going to bring the management team and take questions after we set up here a bit.
Are you
going to be at the right moment?
It was like it was like high chairs. I haven't sat in one of these since I was sort of three years old.
You got them so easily.
That in the relationship. I know that you said there were former life sciences employees, but when you're going into an entirely new area?
How does that
how do you develop that?
So the question in terms of the CPG company, how did that come about? And also probably I can just explain a little bit more generally how it does come out. The real story of the CPG company was slightly complex with multiple touch points So there was an interaction with a autonomous division of this company that was small and very autonomous and fast growing in kind of a nutraceutical area, and they just needed a basic quality system and quick. They found out about Veeva, and they started getting interested in Veeva, and they brought that up to their corporate, is that Is that okay? What do you think about Veeva?
Do we need? How about this quality in the cloud? So that got some exposure in the corporate. And then we also got exposures through an employee that moved from life sciences to PNG, knew some of our employees said, hey, I've I've gone into this new manufacturing area of the CPG company. We have just completely terrible systems in there.
Do you have anything, what could you do And that's just what started the fire going. Now from there, it's the normal process of, Hey, let's have a demo. Let's really be clear on what we're doing here. We're talking about manufacturing of our consumer package. You guys, this is super complex and very important.
It was a sort of a dating process. And then this is a fast moving CPG company. It's something we weren't quite used to. Pharmaceutical tends to be more measured. Once they sort of looked at us a little bit, then they moved very fast and they came out for a full on-site 3 day audit of us with 4 people, very serious audit we passed that and became an approved global supplier.
So that was a big step for us. That was the gateway to say, okay, now we can now we can do the piloting in this group. When we started doing the piloting, then we start developing relationships with our professional services team we have a good sized professional services team on these two projects. It may be in the area of you know, it's certainly more than five people on these two projects. So then they started liking our people and it kind of snowballs from there.
We have a account manager on this, basically that's very similar to our account manager inside of life sciences that a person that's seasoned in, in, you know, how to bring Veeva together with our customer. And I don't think that's is similar to what we're gonna see in in other areas. We're working with a large chemical company It happened in a similar way. It was not a employee that moved from pharmaceutical, but it was a process that was very similar. And they thought they're actually in this chemical company.
This is with the agrochemical division of this very large chemical company. They view what they're doing is quite similar to pharmaceutical. And so they look often to see what are pharmaceutical companies doing. Because an agrochemical definitely has to be registered in a country. You can't just make a new chemical and put it out there on the land, right?
That's not okay for good reason. So they look and see what is pharmaceutical industry using that, hey, they got this Veeva and they contacted us And, so that's how things grow, I think.
Hi, thanks. Carl, curious to the Deutsche Bank. Question for Tim. Around the revenue mix assumptions for, 2020, I guess I have 2 related questions. One is it feels from your commentary and your numbers that the non CRM mix that you've pegged at 50% plus feels like it's biased up.
So, first is, is that correct? And then secondly, how sensitive is the 30 to 30 2% operating margin target to revenue mix. So in other words, if that non CRM mix turns out to be 55.60 does that change your 2020 operating margin and let's say cash flow profile?
Yes. So again, as we look down the $1,000,000,000 revenue target Carl 2 years ago, and we introduced it. I think the one thing that has changed over that 2 year period is the momentum in Vault. Relative to what we originally thought. So I do think that, I would agree with you.
I think it is biased up in terms of the commentary you heard As it relates to the operating model impact, I think you'd see it in gross margin and whether or not that would trickle all the way down to operating margin, would depend upon the mix of investment opportunities we see in that time period. So it's possible I wouldn't call that multiple points of potential change. So I don't think it's materially from a multiple or from a change perspective, but I do think you'd see some gross margin uptick if the mix changes in that way. And Carl, I think it's important to note is when we've talked about it a lot, and you can see, as we think about Vault and the new products we've introduced, That really is our primary engine of growth to get to that multibillion dollar company. So longer term, I think that mix continues to grow towards the Vault side.
Two quick questions. First, Peter, just given how important reference selling has been to Veeva's success so far, How do you plan on getting that type of reference selling with QualityOne given that the customers are in many different industries that you're targeting And then, Tim, just since you did discuss the giant cash file that you have on the balance sheet, how are you thinking about options to deploy that capital beyond normal operations? Thank you.
The reference selling, how are we going to do that? It's in a similar way to life sciences we've talked about a large CPG company, 1 of the top 5. These top 10 CPG companies, they are aware of what each other doing. Let's say you might leave, be an employee working at Unilever, you might leave Unilever, you might go to Nestle. Or you might go to, Procter And Gamble or one other company like that.
So I think there'll be natural pollinization and we'll also reinvent, I think the way we do reference selling, and we'll do that in a outside of life sciences way. I think that's we're committed to. And there's very early signs that it's working. I mean, even the very early project we're doing with that chemical company, we now actually have another agrochemical company interested in what we're doing because the word-of-mouth pollinates. And, I would say it's in our DNA.
You know, we know that's how we we know that's how we work. Cash file.
Sure. So I think 2 things, Rishi, as we've talked about before, we are a very strategic partner with some very large and important companies. So part of the cash balance is always attributable to having a very strong balance sheet where they know we're in it for the long term, because they are making long term decisions. I think as we grow that cash balance, it gives us some optionality from an M and A perspective. Nothing to talk about in that particular area there.
I think our strategy around M and A has has remained unchanged. If we see something that's interesting and you've seen us do it a few times in our history, we're not scared to go ahead and pull the trigger. So I think that creates the optionality of M and A is the way that I would answer it.
Thank you, Sandy Draper at SunTrust. A question on the, as you commented on the pharma guys sell or buy slowly, often, when you think about the way customers are buying and buying an initial product, do they typically want to deploy that across all regions to go worldwide and then start looking at products? Do they like to come in with a couple of products and deploy several products in a region? I guess, is there a pattern there? And then the follow-up is, what is the mitigating factor on growth there?
I mean, if someone likes the first product and they want to really blow it out, is it their decision process, or is there anything on your side that says, well, you got to slow down. We need to take longer to deploy the products. Thanks.
All right. So on the first question, I think there probably is a pattern. So we think of large companies, I think they wanna do something in an enterprise way before they go and do something else. So for example, if they do an eTMF pilot for one set of studies, That's not enough to prove that they can do a global regulatory system. So I think the short answer is yes.
They'll they'll run one project to completion in terms of going global before they start something similar. Now that was certainly the case up until 18 months ago. With large companies. What we've seen more recently is companies starting more than 1 at the same time because they've had success with us somewhere else. Or because companies just like them have had success.
I think with smaller companies, it's not necessarily the case. We have a lot of examples of companies kind of going all in, getting 2, 3, 4 volts at once. We see it with CTMS customers. We sell CTMS and eTMF together a lot. And even into companies, a lot.
It's several times so far. But even with companies that didn't have other Veeva products. And then Your second question
was also on the
on the constraints.
On the commercial side, it's off, with CRM and the commercial cloud, that can be regional. That can be, Hey, we have an idea of doing something globally, but our European team has a need. Let's get that done. And that would be kind of a separate choice there may be a global standard agreed on, but in terms of deployment schedule and priorities, that's going to be decided regionally by the regional businesses
And then in terms of what would hold them back from going faster, it's certainly not Veeva or the product. It is their ability to to consume. And so if there's something that if a company says we want to replace, you know, 20 systems with 4 volts, the bigger the company, the longer it takes. And these are serious enterprise systems with 100 or 1000 of users, And you gotta change them while the car is moving, right? You can't stop your trials.
You can't stop your submissions. You can't stop training people and standard operating procedures, you can't shut the factories down. So companies will not tend to do all of them at once, but we have we are seeing companies doing more than one at scale, with different teams, but we make sure that they share because if you're setting up a single platform, for multiple departments, they don't necessarily know how to do that because they've never had it before. So we need to teach the industry how to approach projects where there's multiple vaults, whether they're doing it together or whether they're just going to end up in the same place.
Hey, gentlemen. It's Tom Roderick with Stifel. So I get that 2019 is a little ways away, but you seem pretty enthusiastic about, talking about the new safety product. Can you just go into a little bit more depth about what specific challenges you're helping your customer solve with this? At its basic level, it sounds a little bit like the challenges that we see with quality, but I'm sure they're quite different.
So can you talk maybe use cases or what your customers are asking you to do with this product? And then second part of that is how much of the platform do you think you can, you leverage with what exists today to the challenges your customers are asking you to solve? Thanks.
So I think that Peter highlighted the fact that the safety space has been stagnant for probably 10 to 15 years. And the players are not the big ones. They're relatively small and there has been zero innovation. So I think that, pharmacovigilance is exploding. If you think about pharmacovigilance, it is not just the clinical trial space, but actually post market.
Once you put a drug out there, you have to track every single adverse event. And for companies like Pfizer and Novartis, those numbers are going up by 20% or 30% every year. And the cost is becoming prohibitive. So there's a need for automation. There's a need for a reduction in the cost of processing a case.
And then as Peter highlighted, on the second side, the potential for identifying signals, the potential for knowing that because adverse events are happening in 7 different parts of all over the world, that they actually connect with each other and that you actually have to target patient safety, If you don't identify those and there's a couple of examples out there, it can completely destroy your company. So one is efficiency and case processing through automation, And then the second one is elevating the potential for signal detection to reduce patient safety issues. And then
I would say from a technology point of view, I I did talk to with multiple people about the safety area at our recent customer summit. And the way to think about it is when they implement a safety system now, It's almost like they get a base toolkit from a couple of these vendors, and they have to put all the specific stuff in there. And the rollouts take years. I remember 3 years ago, 4 years ago, I was working with a top 10 pharma company doing a lot of projects, close relationship with their CIO. And this CIO, their main thing they were worried about was their safety implementation going on.
That was by far their main thing. It was a 4 year project, main thing turns out It had to cancel it 3 years in. It was the same old story that I had seen on CRM years ago, because you get this tool kit And it doesn't have built into it. How do I triage an adverse event in Japan and submit it to the Japanese regulatory authority? It's just a toolkit.
I gotta figure out with my project people how to do that thing code that in their test. So that's one big, big issue. And then there's tons of integration. Safety has maybe more integrations into it than almost any other system. It has to integrate with the regulatory system, with the clinical system, with the quality system, because basically Well, here's how this thing works.
You've got you've got a lot. I made a lot of I made a batch of medicine. That's in a lot. I have a product name. It might be, you know, Lipitor Chantix.
But there's a thing in here that's in the middle. It's sort of the medicinal product that you have to get registered, which means there's a product. How did you make it? Which suppliers did you use? What factory did you do it in?
What standard operating procedure? So that's what you really have to control. When you have it, have it adverse event, it's not on libatore, right? It's on libatore made in a certain way at a cert certain factory under certain specifications. That means there's a ton of integrations with the quality system and the regulatory system because also that's what you have to register for sale.
Don't register Liberator. You register Lipitor made in a certain way, certain suppliers, certain procedures, certain machines. When you change any of those, you gotta register it. That's why safety is just complex. A lot of these integrations basically have to hand code all of them.
So now what happens when any of those other systems gets upgraded? Okay. Boom. I gotta redo my safety integrations. And it's a mess.
So one of the things, Vault, it's a very good fit for this because it's a lot of APIs. We're good at that. A lot of business process management. We're good for that. We'll have to build some special types of analytics in the signal detection.
That's not something we've done before. We're looking forward to it. We can use some advanced technologies. And you gotta remember, this stuff we're going to replace is fifteen years old, outdated stuff. So retuced about.
Everybody who's really interested in safety in the pharma industry, broadly speaking, consultants, technology partners, they all got whilst sending their resumes to Veeva, right, because they want to do something good and we're going to put the capital into it and leverage our platform. So, yeah, don't get me started. I love this area.
What's some of the new initiatives you announced your EDC movement outside of life sciences. Can you talk a little bit about how those decisions were made in terms of management bandwidth organizational structure hiring. And as you think about the optionality around moving outside life sciences and some of the platform opportunities that will emerge in, from Vault as you move into CPG And Manufacturing and these other fields, how you think about those questions as well, like when the right time, when the organization is right and what are the right components
Yes. So customer success are number one value. So when we're looking at new initiatives, we always want to consider our existing customers were doing that new initiative just really hurt our existing customers, either that we would have to pull too many people over or we would not be able to invest in that area. So we have to take to consider that first, which then you get to do I have do I have can I assemble a team for this new area? And that always has to be a mix of people I move over and a mix of new people.
And do I have that? How have I groomed those people that know the Veeva Way? Can I spare them? Are they ready for that growth? So for example, the EDC area is being led by the person who used to lead our CRM team because he had groomed his successor over many years and he's ready.
The person leading the QualityOne area used to run all of our professional services globally, but he was ready for it and he had groomed his successor and he moved go over. If we don't do this, and of course, they've recruited some people from inside Veeva, but mostly from out. But in this case, these 2 leaders grew up inside of Veeva. Now they're getting better by leading other areas. So I look at that.
Do I have people to put on it And then, very critical thing was what was the status of the Vault platform? I want to push it to the red line, but not over. I have the Vault platform. Can it handle these requirements from QualityOne? Can it handle also these requirements from EDC At the same time, it's keeping our existing customers happy, or am I going to push the development team over the breaking point?
Because you can't can't just add more people to the platform team. If it was that simple, everybody would do it. So that's what I consider. And it's Honestly, it's more of an art than a science, but it's something I've been doing for, I mean, 20 plus years. And you get a feel for it over time.
So that's what I considered. It's as simple as that.
A couple of questions. Tim, when we think about your the 20% CAGR out to 2020, how should we think about the shape of that when factoring in some of these early investments and the potential ramp that might take and then also factoring in ASC 606. And then second question for maybe Peter or Matt. You had talked about the potential of that CPG customer turning into an eight figure customer, Can you maybe kind of think back to your life science customers that had maybe a similar size, kind of what that ramp look like? And is it fair to fair for us to assume a similar type of a trajectory?
Yes. So Ken, your first question was in relation to the 20 plus percent organic subscription revenue growth. And sort of what the shape looks like. I think as we look out at the, the products that we have in the market and the momentum in those markets, I don't know if there's, I don't know if there's a materiality in the shape in terms of slope of the line. I think we look at the visibility that we have and the ability to be over that number over the course of the next 3 years, the way that I would think about it, Ken?
So I don't think there's I don't think there's a material shape. If you look at where we're from our run rate out of this year, from a subscription revenue growth perspective, we're in the low 20s from the implied Q4 guidance that we gave in our last call. So I would say the shape is fairly flat. That was a long winded answer for just a simple word, flat.
It's not flat. It's growing.
Growing 20 plus percent, but the shape of the growth. Thank you, Matt. Well stated.
It's growing flatly.
Slightly growing. Then I'll take that one in terms of getting to an 8 figure customer. I You know, it's, I don't remember exactly how long it took us to go to an eight figure customer, our first eight figure customer, because remember when we're starting in 2007, just two guys, right? I remember when we've got our first five figure order. And I thought, woah.
You know, I remember showing the check to the board, like, look at this thing. So where it took a while to we had to go international, and it took a while. I think we've we'll probably get there a little faster with this one because we, we just have a better scale. We don't have to prove our viability anymore. Right?
In that early days, we were approving our viability as a company. Look at the festival, not dramatically, dramatically faster. We don't. We still have to prove ourselves. We have to prove ourselves in the quality area, but maybe we don't have to prove our company.
We have to prove our products.
Did you look at the the revenue opportunities in both safety and quality 1. Can you kind of contrast how those could be over time versus what you're seeing in your current product base?
Yeah. So, safety we think is kind of similarly sized to an area like regulatory. Regulatory has 4 applications. If you look at the value of those and what we think companies will pay, we think that it's in the same ballpark as safety. And we listed 5 different applications within safety.
That's not defined. That's 5 major process areas. We don't know exactly how we'll package that. So we think of it as one of the big application areas within life sciences, not as big as EDC, but as big as the other, major vault areas. And then QualityOne, think has the potential to be the single largest thing that we go after.
Right now within life sciences, EDC is the largest market. We call that about $1,000,000,000 plus. But QualityOne certainly has the ability to be quite a bit larger than that as we go into other industry other industry segments and other geographies.
If you look at a large customer in in in QualityOne kind of, you know, in a, in a say the CPG 1, if it were fully rolled out, would it be similar to what you're selling quality wise for for pharma? Or, you know, how do you guys think about that?
Yeah. I I would say I would Roughly similar. Now, of course, the largest consumer packaged goods company is going to be bigger than the largest, pharmaceutical companies. But still, the revenue may be to us, may be similar because, the quality processes in life sciences are some of the most complex, because your, I mean, the issues are a big, big problem when you have quality issues there. So I would say it's probably similar.
Thank you, Brent Bracelin with KeyBanc Capital Markets. First question for Tim here. As you think about commercial cloud, you have 19 of the top 20. If I look at that attach rate, it inched up slightly, not a lot year over year as you think about just attach. So maybe walk us through how we should think about the growth levers there.
And as that business matures, it's a sizable, most sizable part of the business, is this still a double digit kind of grower or should we kind of rethink that growth rate around commercial cloud?
Yes. So I think as you look at the growth drivers in commercial cloud, I think are, there are a few of them. 1 is the continued deployment of users within some of those companies. So 19 out of 'twenty, Brent doesn't mean that they're fully deployed globally across all their geographies and divisions, We probably only have a few of those. So a lot more of the top 20 still have other geographies or other divisions we can we could they could use our product, maybe the best way to say it, Brent.
So I think that's primary growth driver number 1. Growed driver number 2, and I think it was the impetus thus showing that adoption slide across the commercial cloud is we're at 2.85 as of Q2 of this year against 10. So there's a lot of opportunity with these add on products, both in multi channel CRM, and some of the data products and networks. I think that's growth driver number 2. Over the long run, although we don't talk necessarily about it, I do think There's other things that we can do within commercial cloud.
So I would say that's more of a long run growth driver number 3 is potentially new products we can bring to market seen a lot of our product introductions recently more on the development side and moving outside of life sciences, but there's probably some interesting things that we still have the opportunity to do within commercial cloud. So think about those. Now the thing that I would say is the talk tracker or the, or the headline is we're ahead of our $1,000,000,000 target. This is a very healthy growing business. And we're set up.
We have the pieces in place to be a multibillion dollar company, and primarily that's being driven by the growth in Vault, the opportunity we have with the platform, a best in class solve more business issues and really grow our TAM and our opportunity in front of us. That's if commercial cloud continues to be 10, 11, 12%. Even if it slides below that a little bit over the next 5 years, that's not going to be the story. It's the 2nd act of Vault that's really going to drive the impetus of us being a multibillion dollar company, which is what we talked a lot about today across all the presentations.
Very helpful. And then one for, Peter here, as we think about that quality one opportunity, you gave us 4 customer examples today. You talked about kind of 200 customers as being kind of a success point in the future. I guess the question is really trying to understand How fast are you going to go here?
And I
think we're all asking the same question, but it's, as we think about, fast forwarding 1 year, provide us a little color. I mean, how much investments going into this on the go to market side? I mean, how much are you holding back the reins just to get it right? I'm trying to balance that and understand how to measure your success in quality in the next year, how you're thinking about that and how fast you're going to go?
Yes, I think that's something where we want to provide metrics as we go along. I think you saw us do that with Vault right? At first, you know, it's kind of a limited set of metrics because it's it's really, you know, we, we don't want to be under a or soap in the small area, right, we want to be free to innovate and do things how we do, because customer success is number 1. So in this, this area, we're really trying to get it right for customers. All of our decisions would be based on that.
So we don't, we don't really want to have specific metrics out there that would say, okay, now we might disappoint somebody, etcetera, etcetera. We got to focus on the customer success. You'll see us give more metrics later, but right now, And we'll give updates along the way what we're not going to give specific targets. Now I have internal targets, but they're all around they're all around success, right? That's what they are.
These, I review it every week, right? And I view our key metrics of what are our leads coming in, etcetera, etcetera, but mainly what I'm looking at is our our projects and what are we learning and how fast are we going with the product? And what does customer really want. Do we really know that? We're getting set up to have our first QualityOne customer meeting.
Next, next May, actually. And we'll do that, not in Philadelphia, because that's, that's not the place you do that for those types of manufacturers will do that in Ohio, right, where those types of manufacturers are. So those are the things I'm focused on, but I don't have them focused on It's not really a specific metric of revenue or customer. So metrics have come more. What you'll see is progress from we'll say, Hey, this is what we're doing, this is what we're doing.
And then at some point, we'll get more mature and we'll set out goals, which would probably be around subscription revenue growth. I would guess, over the years. Okay?
Hey, guys. Brad Sills here from BofA Merrill. Obviously, you've got, you've built the platform now. Maturity is there on the platform. A lot of your success for vaults within life sciences is dependent on maturity of the applications from here.
But how do you feel about your sales force? What are the things you need to do, if anything, to, bridge the multi department sale now going from, you know, commercial into clinical and regulatory, etcetera?
Yeah. I think we We always have to refine our field model. One of the things is our relationships are getting more and more strategic. So you saw us even having more and more eight figure customers. And, you know, some of those are not in the low eight figures anymore, right?
So we have to, how do we manage that account management, our customer success manager model. So we have to really, focus on that, the communication. We're in so many different areas we have to continually evolve that. And then it's and then it's figuring out when to have specialized sales forces. So we introduced a specialized sales force for, for example, this year for, or we did that start of last year for medical device because it was time, so specialized sales force.
We introduced this year a specialized sales force for the CRO area. So we got to do that. We might need a specialized type of Salesforce for the very small end of the biotechs, right, because we need. So that's That's more of what we're doing. Continue fine tuning, which we do every every year.
And, we do that. We get that set. We already have that for next year. Our sales year starts February 1. So we said all those things definitely, generally in the September timeframe.
Sometimes it trickles over in a little bit of October. We're all set for what we want to do next year. So we just look at year to year, but nothing dramatic. There's no big changes.
Hey, guys. Good afternoon. Stan Slotsky from Morgan Stanley.
So first one for Tim.
Tim, as we we look at our models and we look at the commercial cloud, It slowed from about 20% growth to in Q1 to 15% in Q2. And then if we look to think about the rest of the year, kind of implies a 12% to 13% growth rate in order to hit the 15% subscription target. As the upsell of additional add ons comes online, things like engage and align in events, maybe not engaged, but as these things start to really pick up steam, can we see perhaps an acceleration on the commercial cloud side in Next year? Or is it more of a kind of going back to the questions around the trajectory as we go through 2020? Is it going to be just kind of like a slow decelerating almost like an asymptotic kind of, deceleration on that side of the business?
And then one for either Matt or Peter around, hiring. As far as going outside of life sciences, How are you approaching? And what are you seeing out there as far as hiring talent around Salesforce? And even if there's something specific around, developers on the R and D side that you need to pick up? And what are you seeing in the market for talent?
Thank you.
Yes, it's Stan. On the commercial cloud side in terms of growth, I think what we're setting up for, especially as we think about one of the answers to the earlier questions of what are the growth drivers there. I think, as you heard us talk about in across all of our products, is more sustainable longer term growth. I don't beyond the 2020 mark, we really haven't talked about, nor talked about publicly where we see the growth of commercial cloud, the opportunity is still there for long term sustainable growth. As I said, whether that's 10%, 11%, 12% or maybe even slide below that in that time period, The real story is our ability to hit that multibillion dollar company, which with the contribution from commercial cloud, but really Vault driving a lot of the the opportunity over the coming years and even beyond that.
So that's the way that I would think about the growth of commercial cloud.
And on the hiring, it's for development. It's generally a good job of developers all the way from experience to new hires in the development area, we wouldn't target a specific skill in the quality area. We would target that more in our strategy team. People that really know of the industry. So we bring in often with quality experience.
And then the sales area, actually not targeting people with experience in that area. Because we don't find, on the average, the best selling cultures, the best best athletes in those companies. So we're bringing those in from just a variety of different places. A few transfers from inside of life sciences in vivo, but mostly direct hires from the side.
We probably have time for one more, TJ.
D. J. Heinz from Canaccord. Just curious if you guys could talk about kind of competitive responses to your EDC effort how price sensitive are buyers in that market? And I guess what competitors could do to kind of fend off your efforts?
Sure. I think that as with any environment, price sensitivity is something we have to deal with, but we to be competitive. And we haven't seen anything that, I think, surprises from a pricing perspective. We don't think that we can be that we can be beat when it comes to the platform story. And what we're seeing is companies are having to, make somewhat difficult decisions on how to respond to that.
So we're seeing companies just try to complete the story that we already can tell because we have platform. Beyond that, I don't think we've seen anything other than very aggressive messaging, some dirty tricks in different companies and and nothing else.
Yes, nothing obviously. Nothing unexpected. We causing waves in the ADC area, right? We're, we're the 1st new entrant in any serious way. And Henry, I mean, I think it's really since Medidata started, right, which was how long ago?
18 years ago. Yeah. So when you think about first new entrant in 18 years, and we're not going into it in the halfway, right? We're going in it in all the way. So this is kind of a seismic shift in that EDC area.
And I think there are people trying to figure out how to deal with that.
All right. I think we're going to wrap up there, but that's obviously not the end of the conversation. Feel free to engage with us in the future. Hit me up if you have questions or me anything. And today, please join us on the 3rd floor in the Park Grill restaurant, for refreshments.
And thank you for everyone that joined us on the webcast. And thank you for spending the afternoon with us.