U.S. pharma stocks extend rally as pricing deals and trial data lift sector

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U.S. pharma stocks rally

Highlights

The S&P 500 Pharmaceutical index rose 18 percent in the first eight months of the year, outperforming the S&P 500's 13 percent gain, driven by pricing deals and positive clinical data.
Biotech acquisitions valued at $1bn or more reached 37 by July, already surpassing last year's total, with deals including AbbVie's $10.9bn Apogee Therapeutics purchase, GSK's $10.6bn Nuvalent deal, and Eli Lilly's $7bn Kelonia acquisition.
Biotech stocks surged 86 percent over the past 12 months, led by Revolution Medicines doubling survival rates with daraxonrasib for advanced pancreatic cancer and Moderna's successful cancer therapy trial.

Pricing agreements and clinical gains support valuations

As reported by Financial Times, pharmaceutical shares are outperforming the broader market, with the S&P 500 Pharmaceutical index up 18 per cent in the first eight months of the year, compared with a 13 per cent gain for the wider S&P 500.

The rally is being driven by a mix of policy clarity and drug development progress. The industry has been gaining ground after companies strike deals with the Trump administration to lower prices, while several biotech groups benefit from clinical data that investors view as transformative.

Drugmakers are expected to get another catalyst on Monday, when Bayer, Takeda, CSL and several mid-sized biotechs are expected to announce new pricing agreements with the White House, according to two people familiar with the matter. The White House says details of the agreements should be regarded as speculation before any official announcement, while adding that the administration has made progress on lowering drug prices.

AstraZeneca, Novo Nordisk, Eli Lilly and other large pharmaceutical companies have already agreed similar arrangements, lowering prices in exchange for relief from tariffs. Investors are pushing for these agreements because they provide greater certainty on pricing and reduce the risk of tougher regulation.

Last year, the sector came under pressure after President Donald Trump threatened to force lower U.S. prices and possible tariffs raised the prospect of major disruption to drug manufacturing. Barclays analyst Emily Field says much of 2025 is shaped by uncertainty over those risks, but that backdrop is now improving.

Portfolio manager Rick Bradt of Neuberger says concerns over U.S. price controls have eased significantly over time with the Trump administration. That shift is helping extend a bull run that accelerates after Pfizer reaches a deal with the White House and other large groups follow with U.S.-based manufacturing commitments in return for tariff exemptions.

Dealmaking surge and investor rotation reshape the market

The improved backdrop is also feeding a strong year for acquisitions. According to Stifel, the number of biotechs acquired for at least $1bn reaches 37 by July, already above last year's 35, with major transactions including AbbVie's $10.9bn deal for Apogee Therapeutics, GSK's $10.6bn purchase of Nuvalent, and Eli Lilly's acquisitions of Kelonia Therapeutics for $7bn and Centessa for $7.8bn.

Clinical breakthroughs are adding further momentum. Biotech stocks are up 86 per cent over the past 12 months, making the group the best-performing part of the U.S. stock market over that period. Revolution Medicines jumps after data show its drug daraxonrasib doubles survival rates for patients with advanced pancreatic cancer, and the FDA approves the treatment last week. Moderna is also sharply higher this year after reporting successful clinical trial results for a cancer therapy in development.

Investors are also using pharma and biotech shares as a hedge against volatility in the U.S. technology sector. Bradt says demand to diversify beyond generative AI since 2024, combined with the rising appeal of healthcare, is prompting his team to increase exposure to biotech and pharmaceuticals in recent months.

Field says pharma and biotech are positioned to benefit from AI rather than be displaced by it, and that the sector retains a defensive appeal when technology markets become unsettled. One London-based investor says strong sentiment in the U.S. is making some shares look expensive, potentially creating an opening for undervalued European names such as Sanofi.

In our earlier coverage of pharma and biotech’s 2026 rally, we noted that the sector was outperforming as investors rotated away from AI-heavy technology shares and sought more defensive healthcare exposure. That strength was underpinned by pricing agreements with the White House that improved policy clarity, alongside upbeat clinical results and a surge in $1bn+ M&A deals that further supported sentiment and valuations.

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