IQVIA: A Main Digital Healthcare Inventory

Knowledge 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 truly goes to a British knowledge scientist named Clive Humby. After all, it took a advertising and marketing man to level out that uncooked oil should be become a product like fuel or plastic to have actual worth. Equally, knowledge should be refined – structured and analyzed – to be useful. Whereas some have argued that the oil-data analogy is imperfect at greatest – oil is finite, whereas knowledge shouldn’t be, for instance – it’s nonetheless a helpful mind-set about how large knowledge fuels several types of enterprise analytics. To essentially stretch the metaphor, let’s speak about IQVIA (IQV), which might be the world’s largest provider and refinery of healthcare knowledge 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 knowledge 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 biggest 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 line with the large brains at CB Insights. Many of those firms leverage large knowledge and synthetic intelligence to digitize every part from hospital operations to scientific trials.

Large Knowledge = 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 knowledge to trace merchandise in 93 markets, providing advertising and marketing and consulting providers.

 Let’s check out among 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 data spanning gross sales, prescription and promotional knowledge, medical claims, digital medical data, genomics, and social media.” So, we’re speaking a few huge database of each structured and unstructured knowledge that you can feed to algorithms all day lengthy to uncover insights about therapeutic merchandise (ie, pharmaceutical medicine), scientific trial R&D, and rather more.
• IQVIA “touches” one other 100 billion healthcare data yearly.
• Its knowledge platform holds 56 petabytes of proprietary knowledge sourced from roughly 150,000 knowledge suppliers and overlaying over a million knowledge 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 reviews, in addition to operates one thing it calls the IQVIA Institute for Human Knowledge Science.

The corporate breaks down its potential lower 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 knowledge based mostly on sources aside from scientific trials – like the data contained in these 1.2 billion long-term data – that gives assist for or towards the advantages or dangers of a drug. Related well being, at $40 billion, consists of areas corresponding to “income cycle administration, payer analytics, and scientific decision-support providers.”
• Expertise-enabled business operations: That is the $75 billion kitchen sink market that captures every part from knowledge warehousing and software program functions to gross sales and advertising and marketing to affected person engagement and model communication.

Primarily based on 2021 income of $13.9 billion in income, IQVIA owns lower than 5% of the obtainable TAM.  Let’s look a little bit extra intently at the place these revenues come from.

The place Does IQVIA Get Its Revenues?

It will be nice if the corporate breaks down its revenues the identical manner it dissects its market alternatives. Alas, that’s not the case, leaving us to offer you one other checklist of three bullet factors (breaking a Nanalyze file for three-pointed bullet level lists in a single article):

• Expertise & Analytics Options. Final 12 months, this division accounted for about 40% of revenues at $5.5 billion. There’s loads 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 varied market and analytic reviews that it says are utilized by “most giant pharmaceutical firms.” That is additionally the place it generates revenues from real-world knowledge enterprise, which makes use of applied sciences like pure language processing to create structured knowledge from unstructured scientific notes. One notably attention-grabbing 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 nations to verify they get the precise 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 12 months at practically $7.6 billion. It consists of decentralized scientific trials, which upstarts like Science 37 (SNCE) declare they will do higher than legacy firms like IQVIA. Thus far, traders assume otherwise: SNCE inventory has misplaced practically three quarters of its values since merging with a clean verify firm in October 2021.
• Contract Gross sales & Medical Options. At about 5% of 2021 revenues, this division raked in $784 million final 12 months. Income comes from serving to shoppers 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 shoppers in additional than 100 nations. Final 12 months, just one giant shopper accounted for 7% of whole 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. Yet one more bulleted checklist is so as:

• IQVIA posted fairly robust revenues development of twenty-two% between 2021 and 2020, to not point out year-over-year internet revenue shot up practically 250% to $966 million. However was final 12 months the beginning of a pattern or an anomaly? The final couple of years income development was nearer to 4%-7% per 12 months and internet revenue was comparatively flat between 2018 and 2020. In actual fact, Q1-2022 income was extra in step with these years, growing solely 4.7%. Internet revenue, nonetheless, nonetheless jumped 53.3%, which can assist relating to …
• … $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 Road author who churns out awkward-sounding phrases like IQVIA “can deal with its debt as simply as Cristiano Ronaldo may rating a purpose towards an underneath 14s goalkeeper.” Definitely, all of that knowledge doesn’t come cheaply, with the corporate dedicated to spending $657 million on knowledge acquisition in 2022.
• Any firm concerned in healthcare knowledge as deeply as IQVIA is will ultimately 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 all places on the planet. There are a minimum of 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 knowledge and launching a rival product. In flip, Veeva alleges that IQVIA is an information bully and has created a monopoly on digital healthcare knowledge.

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 likely to be tempted to tug the set off now, regardless, given the overall downturn on tech shares: Our easy valuation ratio of lower than 3 says the corporate isn’t overvalued, based mostly on present market cap divided by 2022 annualized revenues ($40 billion/$14.3 billion).

Our cutoff is 40, so IQVIA inventory looks like a discount proper now.

Conclusion

Danger-averse retail traders are justifiably gun shy proper now, particularly relating to tech shares. Then again, meaning there may be worth available. IQVIA inventory appears to occupy a candy spot in healthcare knowledge and analytics which have it poised for explosive development, however its debt burden could also be a drag. We are going to proceed to watch the corporate to see how issues play out.

Tech investing is extraordinarily dangerous. Reduce your threat with our inventory analysis, funding instruments, and portfolios, and discover out which tech shares you must keep away from. Develop into a Nanalyze Premium member and discover out at the moment!