Chart of the Week
This week, the pharmaceutical sector saw a sharp rebound in the stock market, with several U.S. and European names gaining around 10%. Driving the rally was the September 30 announcement of a deal between Pfizer and the U.S. administration. Under the agreement, Pfizer will be exempt from tariffs and allowed to cut U.S. drug prices far less than initially expected, in return for a $70 billion investment commitment in the United States.
The news was warmly welcomed by the market, helping the pharmaceutical sector erase part of its 2025 underperformance. In Europe, the sector continues to trade at a steep discount relative to its 10-year average, leaving room for further catch-up potential.
OUR ANALYSIS
Since the start of 2025, the pharmaceutical sector has been under pressure. Many pharma firms, heavily exposed to the U.S. market – which often accounts for 40% to 50% of their revenue – have been particularly concerned about potential U.S. tariffs. The U.S. administration has also signaled its intent to lower domestic drug prices to match the lowest levels found elsewhere in the world (“MFN Pricing”).
Pfizer’s recent agreement with the U.S. administration has greatly helped to reduce these concerns. Under the deal, price cuts will be limited to the Medicaid program – which serves low-income individuals and already benefits from steep discounts – and to the “direct-to-consumer” channel, a small slice of the overall market. The administration appears ready to grant substantial concessions in exchange for commitments to invest in U.S. operations. As most industry players in the pharmaceutical sector have already announced major investment plans in the United States, totaling nearly $400 billion so far, this development has raised hopes that other groups in the industry could secure similar deals soon.
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Written on October 3 2025. Opinions subject to change.
See also: Banking Sector: Still Moderate Valuations
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