Pharmaceutical stocks have had a record year so far with drugmakers hitting fresh highs in August, as investors have sought to diversify away from AI and positive clinical trial data has boosted the sector. Shares in drugmakers from Johnson & Johnson to Merck have significantly outperformed the market, with the S&P 500 Pharmaceutical index rising 18 per cent in the first eight months of the year, compared with a 13 per cent rise in the wider S&P 500. Biotech and pharma stocks have had an especially fruitful summer, with shares in the US index soaring 27 and 19 per cent respectively since May.

Drugmakers are expected to receive a further boost on Monday, when Bayer, Takeda, CSL and several mid-size biotechs are expected to announce new pricing deals with the White House, according to two people familiar with the matter. Astra Zeneca, Novo Nordisk, Eli Lilly and other large pharmaceutical companies have already struck similar deals in which they agree to lower prices in exchange for relief from tariffs.

The deals have paved the way for pharma's record run of dealmaking this year, with the number of biotechs acquired for at least $1bn reaching 37 by July, eclipsing last year's 35, according to US investment firm Stifel. There have been several megadeals this year, including Abb Vie's $10.9bn deal for Apogee Therapeutics, GSK's $10.6bn purchase of Nuvalent and Eli Lilly spending $7bn on cancer biotech Kelonia Therapeutics.

Meanwhile, successful clinical trials have helped biotech stocks to rise 86 per cent in the past 12 months. Cancer drugmaker Revolution Medicines stunned the market earlier this year when its drug daraxonrasib doubled the survival rate of patients living with advanced pancreatic cancer. Shares in Moderna are up by almost 400 per cent this year after the vaccine maker reported successful clinical trial data.