What Makes Veeva Systems (VEEV) the Picks and Shovels of Drug Development?

What Makes Veeva Systems (VEEV) the Picks and Shovels of Drug Development?

Mon, August 3, 2026 at 2:58 PM GMT+3 4 min read

• VEEV +1.10%

Fundsmith, an investment management firm based in London, has released its second-quarter 2026 investor letter for its "Fundsmith Equity Fund." A copy of the letter can be downloaded here. The Fund returned -2.9% in the first half of 2026, underperforming the MSCI World Index by 14.1 percentage points, driven by challenges from a momentum-driven market dominated by passive index funds and AI-related exuberance. The letter discusses the rise of passive investing, noting that index funds now resemble active funds, concentrating heavily in a few sectors and stocks. Due to increased market volatility and a 51% portfolio turnover in the first half of the year, the firm plans to adopt a more active approach, incorporating momentum while maintaining its core mantra: buy good companies, don't overpay, and do little. In addition, please check the Firm's top five holdings to know its best picks in 2026.

In its Q2 2026 investor letter, Fundsmith Equity Fund highlighted Veeva Systems Inc. (NYSE:VEEV), noting its inclusion in the portfolio. Veeva Systems Inc. (NYSE:VEEV) is a technology company that provides a cloud-based software platform for the life sciences industry. On July 31, 2026, Veeva Systems Inc. (NYSE:VEEV) closed at $203.78 per share, reflecting a market capitalization of $33.10 billion. Veeva Systems Inc. (NYSE:VEEV) posted a one-month return of 6.13%, while its shares lost 28.57% over the past 52 weeks.

Fundsmith Equity Fund stated the following regarding Veeva Systems Inc. (NYSE:VEEV) in its Q2 2026 investor update:

"Veeva Systems Inc. (NYSE:VEEV) – Veeva provides specialised cloud-based software designed specifically for the pharmaceutical and life sciences industries. Its software tracks the entire lifecycle of a drug from clinical trials through manufacturing and final sales. For example, during a clinical trial for a new drug, Veeva's Vault eTMF (Electronic Trial Master File) is used to maintain the thousands of critical documents (trial protocols, investigator qualifications, ethics committee approvals). eTMF is the digital vault that organises these documents so the FDA or EMA can audit them at a moment's notice to ensure the trial is safe and compliant. Veeva's Vault QMS (Quality Management System) is used on the manufacturing floor. If a batch of medication is manufactured at the wrong temperature, Vault QMS is the software used to log the deviation, launch an investigation, and track the CAPA (Corrective and Preventive Action) to ensure it doesn't happen again.

Its competitive 'moat' is built on extremely high switching costs: once a drug company integrates Veeva to manage strict clinical trials and regulatory compliance, it is risky and expensive to replace it. Pharmaceutical companies rarely switch from Veeva because replacing the software risks halting clinical trials or drug manufacturing, which would cost vastly more than any savings a cheaper vendor could offer. Additionally, moving to a new system requires a massive, expensive effort to pass strict regulatory approvals and transfer sensitive data without breaking legally required audit trails. Veeva holds roughly 80% of the market share in pharmaceutical customer relationship software, meaning almost the entire industry relies on its platform. Growth is fuelled by upselling new software modules to existing clients and by using AI agents to manage the administrative work of drug trials, which is currently very labour intensive. ROIC: headline is ~15%, but that is due to a very large cash balance. Excluding cash it is well in excess of 100%; FCF yield: 5.7%."

Veeva Systems Inc. (NYSE:VEEV) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 62 hedge fund portfolios held Veeva Systems Inc. (NYSE:VEEV) at the end of the first quarter, compared to 75 in the previous quarter. While we acknowledge the potential of Veeva Systems Inc. (NYSE:VEEV) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on thebest short-term AI stock.

In another article, we covered Veeva Systems Inc. (NYSE:VEEV) and shared Vulcan Value Partners' views on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.