Information is the brand new oil. It’s a phrase that common readers will acknowledge, however we will’t take credit score for coining it. The credit score really goes to a British information scientist named Clive Humby. After all, it took a advertising and marketing man to level out that uncooked oil have to be become a product like gasoline or plastic to have actual worth. Equally, information have to be refined – structured and analyzed – to be precious. Whereas some have argued that the oil-data analogy is imperfect at finest – oil is finite, whereas information shouldn’t be, for instance – it’s nonetheless a helpful mind-set about how large information fuels several types of enterprise analytics. To actually stretch the metaphor, let’s speak about IQVIA (IQV), which might be the world’s largest provider and refinery of healthcare information to the pharmaceutical and biotech industries.
A Main Digital Healthcare Inventory
IQVIA is the results of a 2016 merger between Quintiles, a contract analysis group, and IMS Well being, a healthcare information and analytics supplier. We briefly profiled the Durham, North Carolina-based firm final month whereas reviewing a brand new digital well being ETF from notable rising tech investor Lux Capital. IQVIA is now the most important holding in First Belief Nasdaq Lux Digital Well being Options ETF (EKG), sporting a market cap of about $40 billion, with annual income of practically $14 billion in 2021. As we identified in that article, digital well being startups are hoovering up cash, together with a record-breaking $57.2 billion in funding in 2021, up 79% from 2020 totals, in accordance with the massive brains at CB Insights. Many of those firms leverage large information and synthetic intelligence to digitize all the pieces from hospital operations to scientific trials.
Large Information = Large Market
It’s the latter the place IQVIA is the heavyweight champion. Its big-data analytics assist drive scientific trial improvement in assist of 85% of the world’s pharmaceutical firms. That features designing the scientific trials, figuring out websites, and recruiting sufferers. It additionally makes use of that information to trace merchandise in 93 markets, providing advertising and marketing and consulting providers.
Let’s check out a number of the numbers that make IQVIA a pacesetter in its sector:
- The corporate boasts “one of many largest and most complete collections of healthcare info on the planet. It consists of 1.2 billion “complete, longitudinal, non-identified affected person information spanning gross sales, prescription and promotional information, medical claims, digital medical information, genomics, and social media.” So, we’re speaking a couple of huge database of each structured and unstructured information that you possibly can feed to algorithms all day lengthy to uncover insights about therapeutic merchandise (ie, pharmaceutical medicine), scientific trial R&D, and way more.
- IQVIA “touches” one other 100 billion healthcare information yearly.
- Its information platform holds 56 petabytes of proprietary information sourced from roughly 150,000 information suppliers and masking over a million information feeds globally.
That huge sea of information could make an enormous splash when it comes to each well-explored waters and blue ocean markets. (BTW: That’s a brand new Nanalyze file for essentially the most water metaphors in a single sentence.) IQVIA estimates a total addressable market (TAM) in all probability north of $285 billion. This isn’t some random quantity that you simply discover in your typical flashy SPAC investor deck. IQVIA produces its personal market analysis and experiences, in addition to operates one thing it calls the IQVIA Institute for Human Information Science.
The corporate breaks down its potential minimize of the TAM into three core sectors that it serves.
- Outsourced R&D: Biopharmaceutical spending on drug improvement totaled roughly $150 billion in 2021. Greater than half of that cash, $81 billion, funneled into scientific improvement, with about half of that quantity, or $39 billion, outsourced to firms like IQVIA.
- Real-world evidence (RWE) and related well being: The previous is an estimated $20 billion market. RWE is outlined as real-world information primarily based on sources aside from scientific trials – like the information contained in these 1.2 billion long-term information – that gives assist for or in opposition to the advantages or dangers of a drug. Related well being, at $40 billion, consists of areas resembling “income cycle administration, payer analytics, and scientific decision-support providers.”
- Expertise-enabled business operations: That is the $75 billion kitchen sink market that captures all the pieces from information warehousing and software program purposes to gross sales and advertising and marketing to affected person engagement and model communication.
Based mostly on 2021 income of $13.9 billion in income, IQVIA owns lower than 5% of the obtainable TAM. Let’s look just a little extra intently at the place these revenues come from.
The place Does IQVIA Get Its Revenues?
It might be nice if the corporate breaks down its revenues the identical approach it dissects its market alternatives. Alas, that’s not the case, leaving us to offer you one other listing of three bullet factors (breaking a Nanalyze file for three-pointed bullet level lists in a single article):
- Expertise & Analytics Options. Final yr, this division accounted for about 40% of revenues at $5.5 billion. There’s quite a bit bundled in right here, together with software-as-a–service (SaaS) choices, together with customer relationship management (CRM) options. The corporate additionally applies algorithms to supply numerous market and analytic experiences that it says are utilized by “most giant pharmaceutical firms.” That is additionally the place it generates revenues from real-world information enterprise, which makes use of applied sciences like pure language processing to create structured information from unstructured scientific notes. One notably fascinating a part of this enterprise is what the corporate calls “info choices.” These embody a database that tracks greater than 23 million healthcare professionals in additional than 100 international locations to ensure they get the suitable medicinal advertising and marketing messages.
- R&D Options. This beautiful a lot covers the corporate’s scientific analysis division (ie, the Quintiles half of the enterprise), which accounted for practically 55% of revenues final yr at practically $7.6 billion. It consists of decentralized scientific trials, which upstarts like Science 37 (SNCE) declare they’ll do higher than legacy firms like IQVIA. Up to now, traders suppose in a different way: SNCE inventory has misplaced practically three quarters of its values since merging with a clean test firm in October 2021.
- Contract Gross sales & Medical Options. At about 5% of 2021 revenues, this division raked in $784 million final yr. Income comes from serving to purchasers commercialize, promote, and market medicine, amongst different providers.
That is what the above seems to be like damaged down by phase and geography from the newest quarterly report in Q1-2022, launched simply final month:
IQVIA claims to have about 10,000 purchasers in additional than 100 international locations. Final yr, just one giant shopper accounted for 7% of complete revenues, so buyer focus seems comparatively small.
Ought to You Purchase IQVIA Inventory?
There’s a lot to love, however no firm this large doesn’t have its issues. The query for traders is to grasp whether or not any of the blemishes are greater than pores and skin deep. Another bulleted listing is so as:
- IQVIA posted fairly robust revenues development of twenty-two% between 2021 and 2020, to not point out year-over-year web revenue shot up practically 250% to $966 million. However was final yr the beginning of a pattern or an anomaly? The final couple of years income development was nearer to 4%-7% per yr and web revenue was comparatively flat between 2018 and 2020. In actual fact, Q1-2022 income was extra consistent with these years, rising solely 4.7%. Internet revenue, nonetheless, nonetheless jumped 53.3%, which is able to assist in terms of …
- … $12 billion in debt. It’s not essentially a deal killer, so long as the corporate is managing it responsibly. That’s precisely the opinion of a Merely Wall Avenue author who churns out awkward-sounding phrases like IQVIA “can deal with its debt as simply as Cristiano Ronaldo might rating a aim in opposition to an underneath 14s goalkeeper.” Actually, all of that information doesn’t come cheaply, with the corporate dedicated to spending $657 million on information acquisition in 2022.
- Any firm concerned in healthcare information as deeply as IQVIA is will finally discover itself deeply enmeshed in lawsuits, particularly the IMS Well being half of the enterprise that collects info like each pharmacy transaction that takes place just about in every single place on the planet. There are no less than a few ongoing lawsuits within the South Korea department of IMS Well being over affected person and physician privateness points. As well as, IQVIA has been engaged in a five-year authorized battle with competitor Veeva Methods (VEEV), which it has accused of stealing information and launching a rival product. In flip, Veeva alleges that IQVIA is a knowledge bully and has created a monopoly on digital healthcare information.
Nobody factor is essentially a deal killer, however taken collectively, we’d wish to proceed to watch IQVIA to see how the income development story unfolds, in addition to how the corporate handles the continued debt and lawsuit points. Much less risk-averse traders is perhaps tempted to drag the set off now, regardless, given the final downturn on tech shares: Our easy valuation ratio of lower than 3 says the corporate isn’t overvalued, primarily based on present market cap divided by 2022 annualized revenues ($40 billion/$14.3 billion).
Our cutoff is 40, so IQVIA inventory looks like a cut price proper now.
Threat-averse retail traders are justifiably gun shy proper now, particularly in terms of tech shares. Alternatively, which means there’s worth available. IQVIA inventory appears to occupy a candy spot in healthcare information and analytics which have it poised for explosive development, however its debt burden could also be a drag. We’ll proceed to watch the corporate to see how issues play out.
Tech investing is extraordinarily dangerous. Decrease your danger with our inventory analysis, funding instruments, and portfolios, and discover out which tech shares you need to keep away from. Turn out to be a Nanalyze Premium member and discover out in the present day!