Pharmaceutical companies are booming in stockmarket thanks to Trump

European laboratory stocks soared on the stockmarket on Wednesday morning. They followed the lead of their US counterparts yesterday, which benefited from the announcement of an agreement between Pfizer and the Trump administration on drug prices. The market is delighted with an agreement that is better than the worst-case scenario.

Yesterday, Pfizer announced that it had agreed to reduce the price of its range of prescription drugs under the Medicaid program in exchange for tariff relief. This agreement is seen as the template for a series of others that could ease the pressure that has been weighing on the industry for months. "While most-favored-nation pricing and tariffs on pharmaceuticals have been a source of concern for the sector for some time, today's announcement is viewed positively," said BMO analyst Evan Seigerman.

Yesterday the Pfizer (+6.8%), Merck & Co (+6.8%) and Eli Lilly (+5%) shares all benefited on Wall Street.

Investors consider this give-and-take system to be the lesser of two evils. It also illustrates Donald Trump's ability to twist the arm of a lobby known for its powerful influence. The US president will obtain more attractive prices for prescription drugs, which are notoriously more expensive in the US than anywhere else.

Progress on marketing authorizations and other agreements in sight

Meanwhile, the FDA is expected to soon grant ultra-fast priority reviews (1 to 2 months instead of 10) to experimental therapies that address a chronic public health need. Five vouchers are planned, which is appreciated by biotech companies and developers that are less established than Big Pharma.

In July, Donald Trump sent letters to 17 major pharmaceutical companies, asking them to reduce their prices to align them with those charged abroad, a policy dubbed "most favored nation pricing" by the president. The laboratories were required to respond with binding commitments by September 29.

In Europe this morning, the healthcare sector is driving indices up, gaining 2.9%. UCB (+4%), ArgenX (+4%), Sanofi (+4.4%), Roche (+5%), Merck KGaA (+5%), with industry subcontractors such as Sartorius Stedim Biotech (+7%) and Siegfried (+3%) also benefiting.

Due to a sector effect, indices rich in healthcare stocks, such as the Swiss SMI (+1.1%) and the Belgian Bel 20 (+1.1%), are significantly outperforming the CAC 40 (-0.1%) and the DAX (-0.4%).