Biotech and Medical Investment Map: Why Are U.S. Pharmaceutical Stocks Worth Focusing On?

The Golden Age of Biotech and Medical Industry

The global aging population wave is sweeping in, telemedicine is becoming increasingly common, and the frequency of new drug approvals is rising. The biotech and medical industry has become a hot track that major capital is vying to pursue. Unlike traditional industries that need to cope with economic fluctuations, the biotech and medical sector has inherent defensiveness—people will get sick after eating grains, and medical needs are essentially rigid, making this field more resilient to economic downturn risks compared to other industries.

The US biopharmaceutical market is the most dynamic in the world, expected to reach $445 billion by 2027, with a CAGR of 8.5%. This large and continuously expanding market is nurturing numerous investment opportunities and potential high-flyers.

The Uniqueness of Biotech and Medical Stocks: Why Traditional Financial Metrics Fail?

Many investors feel unfamiliar with biotech and medical stocks, mainly because their valuation logic differs greatly from traditional industries.

Future expectations determine stock prices highly

Most biotech companies are in the R&D stage, lacking stable cash flow and profitability. Their core assets are candidate drugs in development pipelines, which are difficult to quantify on financial statements. However, once a drug successfully passes clinical trials and gains FDA approval, the stock price often experiences dramatic surges. Take Taiwan’s PharmaEngine as an example: in 2022, amid a sluggish stock market, its share price doubled, mainly driven by its drug receiving orphan drug designation in the US. Although its EPS in the first half of that year was still negative 2.93 NT dollars, investors focused on its future revenue potential, which is substantial and unaffected by economic cycles. By May 2024, after releasing Q1 financials, the stock price had climbed to 388 NT dollars.

Event-driven volatility

News events, clinical trial results, regulatory decisions, competitor movements—these are key variables affecting biotech stock prices. During the COVID-19 pandemic in 2020, many vaccine developers’ stocks soared; later, the Federal Reserve’s aggressive easing policies boosted tech stocks, but when the economic outlook shifted and rate hike cycles began, many unprofitable biotech companies plummeted. This requires investors to have sufficient patience and risk tolerance.

Policy and insurance complexities

Biotech and medical industries are highly regulated by governments, with corresponding healthcare policies and regulatory frameworks. Developed countries generally have insurance systems (like Taiwan’s National Health Insurance) that strictly regulate medical service and drug prices, adding complexity and uncertainty to the market.

How to Assess the Investment Value of Biotech and Medical Stocks?

P/S ratio becomes a core indicator

In the pharmaceutical industry, “blockbusters” refer to drugs with annual sales exceeding $1 billion. Successful large pharmaceutical companies typically reinvest 50-60% of revenue into R&D, even if this lowers short-term profits and EPS. However, institutional investors tend to raise the P/E target for such companies because they understand that continuous innovation will support long-term growth—this is the logic behind TSMC’s high P/E compared to United Microelectronics.

Since many candidate drugs in development are not yet profitable, institutional investors often use P/S ratio (Price-to-Sales Ratio) to evaluate emerging biotech companies rather than traditional P/E ratios.

FDA approval determines global market prospects

Whether a Taiwanese pharmaceutical company or a US-based enterprise, the most critical milestone is FDA approval. The FDA has the strictest drug monitoring standards worldwide. Once a drug passes FDA review, its approval in other countries is usually much faster.

Why Does the US Dominate the Global Biotech and Medical Landscape?

Innovation ecosystem driven by capitalism

The US healthcare market is the largest, with a completely different drug pricing mechanism. Unlike Taiwan, where universal health insurance keeps drug prices low (discouraging some new drug companies from importing the latest drugs), the US market allows pharmaceutical companies to set higher prices paid by insurers, ensuring ample profits for R&D investment.

A virtuous cycle of talent and capital

The US biotech and pharmaceutical industry employs nearly one million people across R&D, manufacturing, sales, and other upstream and downstream fields. Graduates from related universities have promising employment prospects, attracting top talent worldwide. Meanwhile, the US capital markets are eager to invest in such long-cycle, high-risk projects, forming a unique and comprehensive biopharmaceutical ecosystem. As a result, the US is widely recognized as the most favorable country for pharmaceutical industry development.

Key US Biotech and Medical Leaders

The US healthcare market is divided into four core sectors: pharmaceuticals, biotechnology, medical devices, and healthcare services. Here are representative companies from each sector:

Eli Lilly (LLY)—The Biggest Winner in the Weight Loss Boom

According to CompaniesMarketCap data, Eli Lilly’s market cap in 2024 is $842.05 billion, ranking 10th globally, making it the largest pharmaceutical company by market value. Its drug market is mainly concentrated in North America (about 60%), with weight-loss drugs expected to maintain high growth in the coming years, making it a must-watch investment target.

Pfizer (PFE)—A Steady Turnaround Post-Pandemic

Pfizer gained fame for its COVID oral medication, which effectively treats mild cases. The company’s stock price has been steadily rising, and during US stock market corrections, it’s an ideal long-term investment entry point.

Johnson & Johnson (JNJ)—The Steady King of Biotech Stocks

Similar to Pfizer, J&J offers stable dividend income with relatively low volatility, suitable for dollar-cost averaging or long-term stock holding strategies. With a long-term upward trend and low fluctuations, it can also be considered for leveraged trading to amplify returns.

AbbVie (ABBV)—Deep Patent Moat

AbbVie mainly develops drugs in immunology, oncology, and virology. Its revenue pillar is Humira, launched in 2002, a first-line treatment for rheumatoid arthritis. The company has continuously received FDA approvals to expand indications. Although there are concerns about generic competition after patent expiry, AbbVie holds hundreds of patents and reached licensing agreements with giants like Pfizer and Amgen in 2018, earning royalties after biosimilar drugs enter the market. The company continues investing in new drugs, making it a preferred low-price entry point.

Merck (MRK)—A Global Leader in Cancer Treatment

Merck originated from a small pharmacy in Germany in the 19th century and has become a global healthcare solutions provider. Its key product, Keytruda, is one of the world’s best-selling cancer treatments. Its stock price has steadily risen, offering high dividends and being an excellent entry point during market corrections.

UnitedHealth (UNH)—Direct Beneficiary of Population Aging

UnitedHealth benefits directly from the aging US population and expanding healthcare needs, with continuous growth in revenue and profit. Its stock price has been trending upward long-term, and its dividend yield is attractive, making it a resilient healthcare investment option.

All these companies are leading players in the US healthcare market, with strong competitiveness, innovation, solid financial performance, ample cash flow, and substantial investment returns.

Opportunities and Limitations of Taiwanese Biotech and Medical Stocks

SynCore Chemical (1720)—A Stable Dividend Stock Choice

SynCore Chemical is a diversified pharmaceutical company involved in Western medicine, health supplements, medical devices, and cosmetics. Its revenue and net profit have grown slowly in recent years, with assets steadily increasing and a healthy long-term debt ratio. Due to stable dividends, it is favored by Taiwan’s dividend stock investors.

Hoping Biotech (1783)—Development Potential in Multi-Channel Layout

Hoping Biotech engages in biomedicine, medical devices, and skincare products, divided into consumer lines (cleansers, skincare, medical aesthetics) and medical product lines (bone repair materials, injectables, ophthalmic drugs). It turned profitable in 2017, with stable fundamentals in recent years, healthy asset-liability structure, and consistently low debt levels, warranting ongoing observation.

Differences Between the Taiwanese and US Biotech and Medical Markets

Although Taiwan also has excellent biotech companies, their investment returns are relatively limited compared to the US market. Taiwan’s capital market is still dominated by electronics stocks, and even outstanding biotech firms rarely see the multi-tenfold gains typical in the US.

The Asian pharmaceutical market is still developing and maturing; the stock performance and overall returns of top companies are not on par with US peers. This stems from differences in market scale and depth, as well as gaps in technological innovation and investor professionalism.

From a global perspective, the US remains the top investment destination for biotech and medical industries. It has nurtured the largest and most innovative pharmaceutical groups and offers the most robust market mechanisms and capital supply. In contrast, despite large healthcare needs, Asia still has significant room for growth in capital support, technological accumulation, and investment maturity.

For investors aspiring to enter biotech and medical investments, professional industry knowledge and an international perspective are crucial. It is recommended to closely follow the latest developments in US biotech and medical sectors and select core competitive and growth-potential biotech and medical stocks worldwide to seize this long-term upward industry wave.