Long-Term Impact Analysis of Novartis and Roche's Drug Pricing Agreement with the White House

According to the latest reports, Swiss pharmaceutical giants Novartis and Roche are nearing a drug pricing agreement with the White House, which is expected to be officially announced around Friday, December 17, 2025 [1]. This agreement aims to ease trade tensions between the U.S. and Switzerland and serves as a key component of the Trump administration’s implementation of the “Most Favored Nation” (MFN) drug pricing model [2].

• Market Capitalization
  : 2,653.2 billion USD
• Current Stock Price
  : $135.59
• Price-to-Earnings Ratio
  : 18.52x
• Net Profit Margin
  : 25.53%
• Operating Profit Margin
  : 31.15%
• ROE
  : 34.12%[0]

Novartis has performed strongly this year, with a year-to-date increase of 39.58% and a one-year gain of 36.82%. The average analyst target price is $126.00, representing a 7.1% downside from the current price, with an overall rating of “Hold” [0].

• Market Capitalization
  : 3,169.4 billion USD
• Current Stock Price
  : $49.74
• Price-to-Earnings Ratio
  : 44.50x
• Net Profit Margin
  : 12.29%
• Operating Profit Margin
  : 28.36%
• ROE
  : 18.94%[0]

Roche has also performed well, with a year-to-date increase of 42.36% and a one-year gain of 38.78%. The average analyst target price is $57.00, representing a 14.6% upside from the current price, with an overall rating of “Hold” [0].

Looking at market index performance, the recent stock market has shown a divergent trend overall. Over the past 30 trading days, the Dow Jones Index rose by 1.85%, while the S&P 500 Index fell slightly by 0.47% and the Nasdaq Index dropped by 2.52% [0]. In this market environment, the uncertainty brought by the drug pricing agreement may have a volatile impact on pharmaceutical stocks.

: The U.S. market accounts for 34.9% of its revenue, making it the largest single market [0]. Drug pricing restrictions will directly affect its pricing power in the U.S., but it may partially offset revenue losses by expanding patient coverage and market share.

: Although the specific U.S. revenue share is not shown in the latest data, as a leading global pharmaceutical company, the U.S. market is equally critical. Its high price-to-earnings ratio (44.50x) reflects market expectations for its innovative drugs, and pricing restrictions may affect the valuation of its high-margin drugs.

According to warnings from the U.S. Chamber of Commerce, the MFN pricing model may affect scientific progress and innovation capabilities [2]. Both companies need to find a balance between price reduction pressure and maintaining R&D investment, which is crucial for long-term competitiveness.

• Novartis
  : Current ratio of 0.88, quick ratio of 0.68, indicating a relatively tight liquidity position [0]
• Roche
  : Current ratio of 1.29, quick ratio of 1.02, with a more robust financial position [0]

Pricing restrictions may affect cash flow, which in turn may impact dividend policies and share repurchase programs—critical factors for long-term shareholder returns.

The valuation logic for the pharmaceutical industry may face reassessment:

• Traditional Model
  : Based on high pricing power during patent protection periods
• New Model
  : Scaled operational efficiency under price regulation

This shift may lead to:

1. PE Compression
   : Overall industry PE valuations may decline
2. DCF Model Adjustments
   : Growth rate and discount rate assumptions need to be recalibrated
3. Relative Value Reassessment
   : Attractiveness compared to other defensive industries may decrease

1. U.S. Domestic Enterprise Advantages
   : May receive policy preferences
2. Pressure on European Pharmaceutical Companies
   : Need to adapt to the new pricing environment
3. Emerging Market Pharmaceutical Companies
   : May gain relative competitive advantages

1. Short-Term Volatility
   : Trading opportunities may arise after the agreement is announced
2. Long-Term Value
   : Companies with strong R&D pipelines and diversified products are more resilient
3. Industry Consolidation
   : Pricing pressure may accelerate industry M&A activities

1. Policy Uncertainty
   : Specific implementation details of the MFN pricing model remain unclear
2. Chain Reactions
   : Other countries may follow with similar pricing policies
3. Innovation Incentives
   : Long-term R&D investment may be affected

The drug pricing agreement between Novartis, Roche, and the White House marks a structural transformation facing the pharmaceutical industry. While it may put pressure on financial performance in the short term, companies with strong innovation capabilities, diversified product portfolios, and robust financial positions are still expected to maintain competitive advantages in the new market environment.

Investors need to closely monitor:

1. Specific terms and implementation timeline of the agreement
2. Companies’ response strategies and business adjustments
3. The process of overall industry valuation reassessment
4. Impact of regulatory policy changes on R&D innovation

This shift may reshape the investment logic of the pharmaceutical industry, evolving from simply relying on patent monopolies and high pricing to a model that focuses more on operational efficiency, market coverage, and continuous innovation.

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[0] Gilin API Data
[1] Bloomberg - “Novartis, Roche Near US Drug Price Deal as White House …” (https://www.bloomberg.com/news/articles/2025-12-17/novartis-roche-near-us-drug-price-deal-in-easing-of-swiss-trade-tensions)
[2] Yahoo Finance - “U.S. Chamber of Commerce Discusses Major Concerns Over New Federal Drug Pricing Proposal” (https://sg.finance.yahoo.com/news/u-chamber-commerce-discusses-major-161300122.html)