Shares of Merck (MRK) surged 5% in intraday trading on Monday, as investors reacted positively to President Donald Trump's executive order on drug pricing. The pharmaceutical giant's stock reached $79.17, marking its largest percentage increase since March 27, 2024, despite initial concerns about potential negative impacts on the industry.

The executive order, signed by Trump on Monday morning, aims to lower prescription drug prices in the United States by implementing a "most favored nation" pricing model. Contrary to initial fears, the order appears to focus on restructuring how Americans purchase prescription drugs, potentially benefiting pharmaceutical companies by reducing the role of intermediaries such as pharmacy benefit managers.

White House officials indicated that the order would encourage direct-to-consumer sales at "most favored nation" prices, potentially cutting out middlemen and allowing drugmakers to sell directly to patients. This approach could lead to increased profits for pharmaceutical companies like Merck, as they may retain a larger share of drug revenues.

While the full details of the executive order are still emerging, investors seem to be interpreting it as a positive development for the pharmaceutical industry. The broader market also reacted favorably, with other major drug manufacturers such as Pfizer, Eli Lilly, and Gilead Sciences also seeing significant gains. This surge in Merck's stock price comes as a welcome change for investors, as the company's shares had been down 20.42% year-to-date before today's rally.