(Bloomberg) — Salesforce Inc. says it has acquired several major customers of former partner Veeva Systems Inc. into an increasing rivalry to sell software to the pharmaceutical industry.
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More than 40 customers, including a “top three global pharmaceutical leaders,” have signed deals to use Salesforce’s soon-to-launch life sciences product, said Jeff Amann, executive vice president of Salesforce’s industry-specific software lines. Some of those customers are switching from Veeva, he added.
For pharmaceutical-focused customer relationship management software, Veeva is the “well-entrenched incumbent” with more than 80% market share, Dylan Becker, an analyst at William Blair, wrote in a November note. The company, which is estimated to generate $2.72 billion in annual revenue in the year ending in January, also makes tools for drug development tracking and data analytics.
Veeva’s customer relationship management product is historically built on Salesforce’s platform. The two companies had a 2007 non-aggression pact of sorts, which allowed Veeva to flourish without competition from its larger peer. In late 2022, Veeva announced it would terminate the agreement, which would allow the company to build a broader suite of applications.
That spurred Salesforce to develop a competitive offering and try to poach customers. “When Veeva made the decision to go its own way, many of those customers came to us and said ‘we don’t want to leave,’” Salesforce’s Amann said.
Shares of Veeva fell as much as 4.7% on Tuesday. Shares of Salesforce were virtually unchanged.
In recent years, Salesforce, the largest maker of customer management software, has seen revenue growth slow. In an effort to expand, the company recently started offering AI agents and highlighting its data integration product. Life Sciences represents a rare sector where Salesforce’s core product is not yet saturated. The new product played a role in some of the largest deals signed in the most recent quarter, Salesforce said during an earnings conference call.
The San Francisco-based company is currently staffing development teams at “a very aggressive pace” for the life sciences product, which is expected to debut in September, Amann said. The company is “in active discussions” with many of the largest pharmaceutical companies to use the product, he said.
Veeva announced at a conference in December that one of its 20 largest customers had decided to move to Salesforce. Amann said the client was one of the three largest pharmaceutical companies in the world and he expects “many others” to follow.
In an interview, Veeva Executive Vice President Paul Shawah said he expects to retain the “vast majority” of customers. Some of the company’s biggest customers, such as drugmakers GSK Plc and Novo Nordisk A/S, have already agreed to stay, he added. Major customers pledging to stay with Veeva “should ease investor fears about potential disruptions,” Brent Bracelin, an analyst at Piper Sandler, wrote in a note last month.
Veeva is rebuilding its customer management app separate from the Salesforce platform. The Salesforce contract did not allow Veeva to make apps for things like customer service or patient management, CEO Peter Gassner said at an investor event in October. “We don’t have that barrier anymore,” he said.
For customers considering leaving Veeva, Shawah said Salesforce doesn’t have a working offering yet, while Veeva has been optimizing for life sciences for nearly two decades. He added that he expects Salesforce’s offering to be “significantly more expensive.”
“We already have the most advanced CRM and it keeps getting better,” says Shawah.
(Stock movement added in sixth paragraph)
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