July 10th, 2025 | 07:25 CEST
Small-cap disrupts billion-dollar market: Johnson & Johnson, Merck KGaA, and NetraMark
When it comes to making people healthy, progress is what matters most. New drugs must be better and safer than old ones. To ensure that these requirements are met, comprehensive testing procedures are carried out by drug regulatory authorities. However, despite ever-expanding knowledge and modern methods, almost 90% of clinical trials still fail. When considering that the development of a drug costs an average of USD 2.6 billion and usually takes more than ten years, it becomes clear what a risk biotech companies and pharmaceutical multinationals are taking. This is precisely where NetraMark's business model comes in, offering the entire industry unparalleled leverage.
time to read: 3 minutes | Author: Nico Popp
ISIN: JOHNSON + JOHNSON DL 1 | US4781601046 , MERCK KGAA O.N. | DE0006599905 , NETRAMARK HOLDINGS INC | CA64119M1059
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Author
Nico Popp
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
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Every year, around USD 250 billion is invested in research and development
Almost all major industry players recognize that research is essential: Johnson & Johnson invests around USD 14 billion in research and development every year, and the Darmstadt-based Merck Group spent around EUR 2.3 billion in 2024. If all research expenditure is added together, the figure is even higher – around USD 247 billion in 2022. The trend is likely to persist after the COVID-19 pandemic ends, with spending expected to increase. What if there were ways to channel these billions more effectively and use them in a more targeted way?**
NetraMark makes clinical trials cheaper and faster
Canadian biotech service provider NetraMark is addressing precisely this issue and offers the industry NetraAI, an analytics platform for optimizing clinical trials. NetraMark's solution identifies patient subgroups that are unlikely to benefit from the investigational drug or are highly prone to placebo effects so that such subjects can be excluded from the trial. In this way, NetraMark aims to reduce the risk of clinical trials and make them more efficient. Imagine if a project could be scrapped in the first few months, rather than progressing to further, cost-intensive phases. What sounds like magic and a bit like trickery is desired by the US Food and Drug Administration and is addressed in guidelines – NetraMark is therefore acting in accordance with current practice.
In May, NetraMark entered into a partnership with the globally recognized contract research organization Worldwide Clinical Trials, which will make NetraAI available to its clients. The associated multiplier effect is expected to lead to further partnerships with biotech companies or research institutions. The chances of this happening are good: according to industry analyses, AI systems could make clinical trials up to 70% cheaper and 80% faster by identifying suitable patients across locations and assisting in the selection of subgroups.
Interest is growing accordingly: Large pharmaceutical companies are investing heavily in AI. One example is the German company Merck. The Darmstadt-based company announced a collaboration with AI start-up Quris in early 2025 to enable toxicity predictions early in the research process. Phase 1 studies determine whether active ingredients are toxic. NetraAI from NetraMark also aims to reduce risks in later phases, precisely where the greatest potential for costly setbacks lies.
Rare diseases as a particular lever for NetraMark
Research into active ingredients for rare diseases is also particularly costly. Among other things, the challenging recruitment of patients drives up costs. These include diseases of the central nervous system, for example. Johnson & Johnson is involved in this area with a nasal spray for depression, and Merck with two active ingredients for multiple sclerosis. NetraMark sees particularly strong growth potential in this area and believes that innovative approaches are in high demand here.
Quick wins instead of lengthy development cycles – HealthTech in demand on the stock market
While the business of large healthcare companies operates in long cycles and depends crucially on the success of research and development, NetraMark benefits from the enormous cost-cutting potential in this area. The fact that AI can make clinical trials 70% cheaper and 80% faster, as estimated by industry experts, is a huge lever. NetraMark is likely to have been on the radar of potential customers or cooperation partners for some time now.
While shares in Johnson & Johnson and Merck KGaA have suffered losses over the past six months, NetraMark's business model is proving popular, with a whopping 30% increase in the past six months. With a valuation of just over EUR 60 million, a significant partnership with a pharmaceutical giant would be enough to fuel speculation about the share price. A takeover of NetraMark is also conceivable. The stock is an exciting bet on innovation in the healthcare sector. Since NetraMark helps companies become more cost-effective and faster, the risk-reward ratio appears promising.
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