Healthcare stocks have capped off their best quarter yet, driven by major clinical trial wins and easing regulatory pressures, according to UBS global head of biotechnology equity research Michael Yee. Speaking to CNBC, Yee pointed out that the sector’s momentum received a fresh boost on Monday when President Donald Trump announced voluntary drug-pricing agreements with nine additional pharmaceutical manufacturers at the White House.
Trump Expands Most-Favored-Nation Pacts to 26 Drugmakers
The newly added agreements bring the total number of participating pharmaceutical companies to 26, which the Trump administration estimates represents 90% of the domestic market. According to a White House fact sheet, the latest group of mostly midsize drugmakers includes Alcon, Astellas Pharma, BeOne Medicines, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceuticals, and UCB. President Trump stated via CBS News that the remaining 10% of the industry will eventually join because they “have no choice,” adding that the combined pricing deals struck over the past year will save Americans more than $600 billion.
Under the terms of the voluntary pacts, the nine manufacturers agreed to offer their medications to state Medicaid programs at “most favored nation” prices on par with what other nations pay. These companies produce treatments targeting conditions such as glaucoma, hemophilia, liver disease, macular degeneration, Parkinson’s disease, skin conditions, and various cancers. USA TODAY reported that the drugmakers negotiated these deals with the administration to avoid future tariffs. However, watchdog groups like Patients for Affordable Drugs have raised concerns. CEO Merith Basey told USA TODAY that patients need permanent, systemic reforms rather than short-term, voluntary agreements whose specific terms remain secret, noting that the deals focus on Medicaid programs where steep discounts already exist.
Biotech Surge and Industry Valuations
Market performance reflects the changing sentiment around regulatory crackdowns. The SPDR S&P Biotech ETF (XBI) has climbed 80% over the last 12 months, significantly outpacing most other equity sectors. Yee told CNBC that the pricing deals have proven less onerous than initially feared, successfully removing a major source of market uncertainty. Furthermore, pharmaceutical companies are sitting on record cash piles, directing more capital into research and development after a multiyear stretch of cheap valuations. UBS characterizes the current market movement as the beginning of a longer re-rating rather than a short-lived bounce, noting that valuations across the sector remain reasonable.
Clinical Catalysts Drive Top Pharma Picks
UBS highlighted several individual drugmakers poised for further growth based on upcoming clinical data. Yee named Merck as a top pick following strong results from a large late-stage trial for its melanoma vaccine, developed in partnership with Moderna, which met its main goals in a study including more than 1,100 patients. Yee also pointed to Merck’s antibody-drug conjugate sacituzumab tirumotecan, which posted a positive lung cancer trial readout and is currently being evaluated across 17 late-stage studies. Revolution Medicines drew attention after the Food and Drug Administration approved its pancreatic cancer drug daraxonrasib on August 26, a therapy that nearly doubled median survival in a late-stage trial compared with chemotherapy. Additionally, UBS maintains a Buy rating on Bristol Myers Squibb, anticipating multiple late-stage trial readouts before the end of the year to help offset revenue lost to patent expirations.
Did you know? The White House drug-pricing website, TrumpRx.gov, lists prices on dozens of brand-name fertility, insulin, and weight-loss medications, directing cash-paying consumers directly to manufacturer websites or coupons rather than processing insurance claims.
Frequently Asked Questions
Which new companies joined the drug-pricing deal?
According to the Trump administration, the nine latest companies are Alcon, Astellas Pharma, BeOne Medicines, BridgeBio, CSL, Kyowa Kirin, Sun Pharma, Teva Pharmaceuticals, and UCB.
What do the participating drugmakers agree to do?
Participating manufacturers agreed to supply state Medicaid programs with brand-name drugs at most-favored-nation prices that match what other countries pay.
How have healthcare stocks performed recently?
Healthcare stocks wrapped up their best quarter yet, and the SPDR S&P Biotech ETF has surged 80% over the past 12 months, according to market data and UBS research.
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