5 Best Healthcare SaaS Companies to Invest In


Digital Revolution In Healthcare

Healthcare is an activity driven by medical expertise, hospitals, drugs, clinical trials, and insurance companies. But it is also a very “data-heavy” sector, from patient files to medical images, as well as billing, inventory management, logistics, etc…

This creates large opportunities for software companies able to navigate the sector-specific requirements and often complex regulatory restrictions.

This is a growing trend in healthcare like elsewhere is SaaS (Software as a Service). It means providing the software through a cloud-based service, and often selling the service as a subscription. This both reduces upfront costs and allows for synchronized data accessible at all time.

The sector is expected to grow by 19.5% CAGR until 2028, reaching $50B in revenues.

5 Best Healthcare SaaS Companies to Invest In

(The hospital SaaS market is dominated by privately listed companies, so this list also includes SaaS companies active in other segments of healthcare SaaS).

Oracle Corporation (ORCL)

Oracle is one of the largest SaaS companies in the world, through its ERP offering (Enterprise Resource Planning) and other associated software.

The company is very active in the Healthcare sector, especially since its $28B acquisition in 2022 of Cerner, a major provider of EHR (Electronic Health Record – a digital patient files system) and other hospital software for anesthesia, radiology, surgery, etc.

This merging of Cerner and Oracle software provides Oracle with a very complete SaaS offering, potentially integrating together EHR, finances, accounting, image database, and leading ERP Netsuite (with a special version existing for healthcare & life sciences).

This acquisition is likely to create many synergies, as clients of Cerner might be interested in other Oracle products, but in most likelihood this will take a few years to show in the revenues.

In the long run, Oracle’s strong presence in so many SaaS solutions also allows it to provide data analytics at a larger scale, for a whole hospital, an entire healthcare corporation, or even for a whole population of patients. The data can be used to optimize operations, make clinical trials easier and cheaper, or improve healthcare quality.

Oracle also has dedicated software for the life science industry (biotech, pharma, clinical trials), health insurers, and public health organizations.

Despite its massive size, Oracle is still growing, with revenues up 5% in 2022 at $42.4B and operating income of $10.9B. It has returned 19.7B to shareholders in 2022, mostly in the form of share buybacks.

So Oracle is a good stock for investors in SaaS looking for strong exposure to healthcare, a sector the company’s management called “one of Oracle’s most important verticals”.

McKesson Corporation (MCK)

McKesson is a leading supplier to healthcare organizations, especially pharmacies. It resells drugs, medical supplies, software, and full medical practice solutions by medical specialties. It also provides resources for the biopharma sector (biotech + pharmaceutical), including distribution services, and clinical research. The largest part of revenues comes from pharmaceutical sales.

McKesson’s massive scale allows it to be in contact with virtually all of the healthcare supply chain. For example, its AMP” (Access for More Patients) solution speeds up patient access to rare or complex therapies, reaching 96% of pharmacies and prescription volume, 95% of payers (insurances), and 300 life sciences brands.

McKesson notably runs the Health Mart franchise, a chain of independent pharmacies helping them to compete with large pharmacy chains. It also helps pharmacies with drug purchasing, pharmacy management software, patient engagement and even buying or selling a pharmacy.

In its software offering, McKesson offers solutions for POS (Point Of Sales), audit risk mitigation, marketing & sales, group purchasing, reimbursement claims, etc.

Finally, the company also has a Venture Capitalist branch, investing in innovative healthcare solutions, from genetic testing for cancer to drug delivery by drones or rare diseases.

Source: McKesson

Its revenues grew by 11% in Q1 2024 for $74.5B, with earnings per share growing 25%.

While not a pure SaaS company, McKesson is an important software provider to pharmacies and can leverage its trusted drug supply services to cross-sell additional software, equipment, consulting, etc.

IQVIA Holdings Inc. (IQV)

IQVIA provides software, database, and data analytic solutions to the life science industry. It is especially well established in the clinical trial market, with 5 million clinical trial investigators in its network, 2,000+ partner hospitals, and a 100 million patient network for trial recruitment in 100+ countries.

Source: IQVIA

This makes IQVIA a partner, at one point or another, of most drug development and medical progress. All top 15 pharmaceutical companies use IQVIA services.

Source: IQVIA

The reach of IQVIA also gives it the possibility to analyze and sell data about pharmaceutical markets, R&D spending, and overall insights & intelligence on the industry. Its analytic solution, for individual clients or industry-level, uses AI and machine learning to optimize data profiling and analytics.

A growing segment for IQVIA is also the public sector: payers, providers, and government. It can help them analyze and better leverage their available data, helping them to optimize costs, make better decisions, and overall improve healthcare.

In the post-pandemic landscape, IQVIA has suffered from slightly declining/plateauing revenues and earnings after the boom in activities in 2021. The company income is driven by R&D solutions, followed closely by technology and analytic solutions.

IQVIA is an integral part of the R&D ecosystem in life science and pharmaceuticals. With biotech reaching the point of many new concepts and technologies now ready to enter the clinical trial stage, it is expected that the sector will keep growing for the foreseeable future, at least in the long term.

So investors in the company will directly benefit from the emergence of innovative treatments like gene therapies, cell therapies, mRNA, etc. They will also likely benefit from the need for more medical data and advanced analytical methods using AI.

Veeva Systems Inc. (VEEV)

Veeva products with the highest market share are its CRM (Customer Relationship Management) software supporting the industry’s sales & marketing teams, leveraging the Salesforce infrastructure. 83% of approved drugs in the US are launched with Veeva CRM.

Most of the company’s business is conducted in North America (58%), followed by Europe (28%).

Veeva has been expanding into new markets with a large potential of cross-selling with the pharmaceutical companies already clients of the company, including clinical trials, safety monitoring, regulatory (drug submission to the FDA), quality control, and medical communication.

Source: Veeva

Source: Veeva

The absolute dominance of Veeva in the CRM market is the first strong point of the company and the stock, with over 80% of the share of the 450k global pharma sales representatives. The second argument is that with the launch of its full suite of software, the company can be a trusted partner for the entire process of drug development. This starts with the development of the drug, followed by clinical trials, regulatory approval, production quality control, safety monitoring, medical communication, and product launch.

Veeva is likely to stay one of the most dominant software and SaaS providers in the life science industry, making it a good stock for investors looking for a strong business moat. They will however need to pay attention to the stock valuation, with the P/E ratio and other financial metrics often very high, reflecting the market appreciation for the company’s quality.

Computer Programs and Systems, Inc. (CPSI)

CPSI is a leading provider of software and services to smaller community hospitals, below 400 beds, especially in the segment of revenue cycle management (RCM). It also provides EHR (Electronic Health Records).

Source: CPSI

In total, it has above 1,700 hospitals among its clients, of which 900 use only CPSI services and are the most likely to deepen the relationship with the company. 93% of revenue is recurring (subscription). Since 2019, the net patient revenue has grown by 18% CAGR.

CPSI sees a large opportunity in its market, with 80% of hospitals in its segment still using proprietary solutions and in-house software instead of a vendor’s RCM and EHR. With a total of 4,659 hospitals below 400 beds, this represents a $12B opportunity.

Source: CPSI

Part of the company’s growth has come from a series of acquisitions, starting from Heathland in 2016 and Get Real Health in 2017. Revenues have grown 9% CAGR since 2020 and EBITDA has grown by 12% CAGR.

The landscape of healthcare SaaS tends to be dominated by private equity and a few publicly traded giants like Oracle, leaving few choices for investors looking for hospital SaaS.

This makes CPSI a rather unique stock in the sector, thanks to a smaller valuation and a focus on a niche where the target hospitals are too small to move the needle for giant corporations, and for which the software requirements are not a match to the more powerful but also more complex HER and RCM solutions designed for large hospitals.


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