What happened

Shares of Veeva Systems Inc. (NYSE:VEEV), the life science industry's leading cloud service provider, rose 39% during the first half of the year, according to data from S&P Global Market Intelligence. A better-than-expected launch of the company's Vault service keeps giving investors reasons to smile.

So what 

The stock surged furthest this year when the company announced a strong finish to fiscal 2018, which ended in January. Total subscription revenue rose 28% year over year to $554.4 million.

Person drawing an upward sloping chart with his fingers.

Image source: Getty Images.

Looking past the top-line growth reveals an even rosier picture. Veeva needs to share revenue from its customer relationship management (CRM) service with Salesforce.com, but the company fully owns its suite of clinical data management products marketed under the Vault brand. During the three months ended in April, Vault revenue comprised 44% of the top line, up from 37% during the same period last year.

Veeva's a growing company with moving pieces, but it sure looks as if a revenue mix shifting toward Vault is widening profit margins. During the fiscal second quarter, the company reported a 32% operating margin that topped the high end of previously issued guidance.

Now what

Pharmaceutical companies throw off reams of data that needs to remain accessible for a long time, which makes Veeva's services awfully sticky. Without a viable competitor for clinical data management, Vault could become the Microsoft Office of the biopharma industry and we can already see signs of a network effect.

VEEV Revenue (TTM) Chart

VEEV Revenue (TTM) data by YCharts

Over the past two years, revenue growth has outpaced sales, general, and administrative (SG&A) costs, and the marketing team doesn't seem to have any trouble retaining clients. Earlier this year, the company reported a 121% revenue retention rate that shows existing customers are sticking around and adding services. If Veeva shows further signs it can dominate its niche in the second half of the year, this stock could continue its impressive climb.