Pharma Stocks Keep Climbing as Trump Adds More Firms to Pricing Deal

Healthcare stocks have wrapped up their best quarter yet, according to UBS. The sector's rally still has room to run, says Michael Yee, global head of biotechnology equity research at UBS. He attributes the advance to a series of major clinical wins and new pricing deals that have calmed fears of a broader industry crackdown.

President Trump announced nine more pharmaceutical firms joining his drug-pricing deal on Monday. The companies involved are mostly midsize drugmakers, including Alcon, Astellas Pharma, and Teva Pharmaceuticals. They pledged $19.6 billion toward U.S. manufacturing and agreed to offer their drugs at discounted prices to every state Medicaid program.

The White House said 17 companies had already joined the pricing framework over the past year. President Trump stated that with today's announcement, 'we now have 26 companies representing 90% of the domestic pharmaceutical market, and the other 10% are also coming in. They have no choice.'

Yee highlighted Merck as one of his top picks, citing the company's melanoma vaccine developed with Moderna, which met its main trial goals in a large trial. He also mentioned Revolution Medicines' pancreatic cancer drug daraxonrasib, approved by the FDA on August 26, and Bristol Myers Squibb, which UBS carries a Buy rating on.

The current pharmaceutical market rally has outpaced most other equity sectors, with the SPDR S&P Biotech ETF (XBI) climbing 80% in the last 12 months. Yee believes this move looks like the start of a longer re-rating rather than a short-lived bounce.