rewrite this title Investing in Four Healthcare Big Data Stocks – Nanalyze

Artificial intelligence algorithms are only as good as the quality of big data you feed them. Companies that own large proprietary datasets hold tremendous future value that has yet to be unlocked. Since nothing can be valued more than one’s health, companies holding large amounts of quality healthcare data should inevitably benefit from all the advancements being made in artificial intelligence. That’s the basic idea behind the largest contract research organization out there which holds “one of the largest and most comprehensive collections of healthcare information in the world” – IQVIA $IQV.

The Largest CRO in the World

Drug companies invent potential new medicines and often pay a contract research organization (CRO) to handle the hard work – finding patients, running trials, collecting data, satisfying regulators, etc. – so the drug can eventually get approved. IQVIA is the largest CRO in the world by a long shot which explains how they’ve amassed so much data. Now they need to capitalize on it in one of two ways. Either that data helps them attract more clients to their core offering, or they create an offshoot high-margin product offering that consists solely of licensed data. From agentification to (wait for it) partnering with NVIDIA $NVDA, IQVIA claims they’re fully capitalizing on the era of AI. Fine, so we’d expect to either see revenues growing at an above-average pace or margin expansion that hints at lucrative data licensing agreements.

Starting with revenues, IQVIA’s recent quarterly earnings call saw hints of promise with revenue growth reaching the high single digits for the quarter and annual revenue guidance being raised to $17.38 billion or about 7% growth at midpoint.

While the trend is moving in the right direction, that’s hardly the sort of double-digit growth we look for. IQVIA segments revenues into “Commercial Solutions” and “R&D Solutions” which are both showing equal growth and don’t reflect any particular growth driver. Ideally, we’d like to see an isolated segment directly tied to data showing outsized growth reflecting a demand for their mass of proprietary information.

The next place to look for improvements would be margins which are unfortunately weak and trending downwards most recently.

It’s important to understand that the business model of a CRO lends itself to low margins. That’s because many of the costs incurred during the drug development process are “pass-through costs” which distort the actual gross margin. Nonetheless, the profitability profile of this company isn’t very attractive, and we’re not convinced they’ll be able to monetize their data in a way that truly moves the needle. Invest in them because they’re a leading CRO if you believe that niche has promise, but is there perhaps a better way to play the healthcare big data thesis?

It’s been four years since our last piece on IQVIA which noted their five-year legal battle with Veeva Systems $VEEV, which IQVIA has accused of stealing data and launching a rival product. In turn, Veeva alleged that IQVIA was a data bully and has created a monopoly on digital healthcare data. Fast forward to today and that hatchet has been buried.

Veeva’s Data Advantage

Whenever two companies get into a vicious legal battle it tells you at least two things. There’s a big pot of gold at the end of the rainbow they’re both trying to get, and their offerings enjoy a certain amount of overlap. At the core of this spat was control over healthcare/life-sciences data and how freely customers could combine that data with competing software platforms. Just last year, both companies buried the hatchet after an eight-year battle announcing global clinical and commercial partnerships and the complete resolution of all pending legal disputes.

It’s been three years since we covered The Largest Life Sciences SaaS Stock, and revenue growth has continued at reasonable pace alongside a much more attractive profitability profile – 70 to 75 percent gross margins over the past three years.

Low-margin services remain a smaller component of total revenues while subscription services are comprised of two components – “R&D and Quality Solutions” and “Veeva Commercial Solutions.” The former is focused on managing things like clinical trial data, while the latter is geared towards sales and marketing for a commercialized drug.

The appeal of Veeva would be that you get a healthcare SaaS vertical with decent growth and the potential big data upside as a bonus. Ideally, the company can take all the data they have on doctors, professional networks, and hospitals, anonymize it for privacy’s sake, and sell insights to drug developers looking to streamline the marketing process. Anything that simplifies up the arduous process of marketing a new drug should be easy to sell. Sure enough, management claims the newly released Veeva Data Cloud is helping drive growth in the Commercial Solutions segment, but a specific amount wasn’t disclosed. The CEO only said that big data is a “significant long-term opportunity.” Until it’s broken out in Veeva’s financials, investors have no way to track its progress outside of lip service from the C-suite.

There’s also the potential to monetize their proprietary data on the clinical side of their business with their Direct Data API that can be integrated with the likes of Snowflake $SNOW or Databricks for analysis. Again, we’re not told how much revenue the Direct Data API pulls in, so investors are forced to trust the story for now. There’s a lot of potential here, but not much in the way of tangible results. Perhaps a better opportunity for monetization of healthcare data could be found in one of our own life sciences holdings.

Tempus AI Acquires More Data

Our own chips have been placed on Tempus AI $TEM, a firm that sells genetic tests, then licenses the data from those tests. They also use the data internally to improve their operations, creating a nice flywheel effect. It’s a business built directly on big data, and they actually break out their so-called “AI revenues” into a segment known as “data and applications.” While visibility into this segment is nice, we need to see it growing faster than the company’s overall growth rate, which isn’t happening currently. What might change that is their proposed acquisition of cancer testing firm Personalis $PSNL. Should the acquisition go through as planned, Tempus will gain access to Personalis’ Molecular Residual Disease (MRD) technology which scans a patient’s DNA to identify trace amounts of cancer-derived material that may linger after treatment. Since Tempus is currently specializing on the first phase of testing – screening – this acquisition will add some much-needed exposure to the second phase – recurrence.

A UnitedHealthcare Rebound

A less obvious leader in anonymized healthcare data is none other than UnitedHealthcare $UNH – the world’s largest health insurance company. While their core business is still comprised of shuffling money around, they have an interesting subsidiary called Optum Insight that holds the rights to rich data such as health records, medical claims, and patient profiles. They’re currently monetizing it for applications such as clinical research, analytics, and even state health programs in the U.S.

But let’s address the elephant in the room. A year ago we pointed to the Department of Justice investigation as a showstopper, and we’re not closer to a resolution. The investigation has broadened in scope and described in recent commentary as “an ongoing overhang with no clear timeline.” That aside, Optum Insight accounts for nearly 20% of expected earnings this coming year, meaning there’s a whole lot more exposure you’re getting than just data. As we concluded in our past coverage, regulatory risk, volatility, and noise make this a tough stock to hold.

Investing in Four Healthcare Data Stocks

So UnitedHealth isn’t a company we’d consider investing in – for their data exposure or otherwise – until the regulatory overhang gets resolved. That could take a while, so if they can keep their dividend track record going for four more years we’ll start covering them as a Dividend Contender in our Quantigence Dividend Growth Investing universe.

As for IQVIA, we’d only invest if we were extremely bullish on the CRO thesis because that’s ultimately what you’re getting exposure to. The CRO business is rather convoluted with all the pass through costs and seems like a commodity offering where smaller niche players might make for more compelling stories (like AI drug discovery which we’ll cover in our next piece). Their data may be what’s helping drive the recent growth trend but we’d like that to strengthen and offer more convincing proof that AI and proprietary data are leading to a sustained competitive advantage.

Then there’s Veeva which is compelling on its own as a vertical SaaS offering (though we generally prefer horizontal offerings, vertical offerings do have advantages). The growth on tap consistently exceeds our double-digit threshold, and the data offering – though not quantifiable – has value which can strengthen the entire platform.

And finally, there’s Tempus AI which we’ll be revisiting early next year per our usual check-in cadence, though we may comment more on the Personalis acquisition if it goes through sooner than expected (the closing is expected in late 2026 or early 2027).

One can’t help but think that perhaps these four stocks might make for a good little “healthcare big data mini ETF” which reflects four names with large proprietary datasets that collectively might benefit over the next decade. So we’ll leave you with one question to think about. If you had to add one publicly traded company to the four we’ve discussed today as a unique holder of a large population of anonymized connected healthcare data, which company would that be?

Conclusion

Of all the problems AI can solve, making people more healthy seems like a high priority. It also represents the domain with the most complex problems which is why healthcare data seems like such an appealing investment thesis. Plenty of granular data can be found with testing companies like Personalis and Ambry Genetics which is why Tempus AI acquired them. Plenty more testing companies are out there, but our focus is on large populations of anonymized connected medical records which can be fed to artificial intelligence in exchange for powerful insights that helps accelerate cures for diseases – both rare and common.