Biotech Concept Stock Investment Map: Opportunities Comparison Between U.S. Pharmaceutical Companies and Taiwanese Medical Stocks

In recent years, with the global aging population trend intensifying, new drugs continuously emerge, telemedicine applications become increasingly widespread, and biotech concept stocks have become a focus of attention in the capital markets. The greatest appeal of this industry lies in the fact that it is not as susceptible to economic cycles as the electronics industry—people need medical care and medication regardless of economic conditions, which determines the healthcare industry’s inherent defensive nature. Globally, the United States is undoubtedly the most mature and dynamic market in this field.

Why are biotech concept stocks worth paying attention to?

The valuation logic of pharmaceutical companies is fundamentally different from traditional industries

Traditional valuation methods often fail here. Most biotech companies are in the R&D stage, lacking stable cash flow, and often report negative net profits. However, once a new drug passes clinical trials and gains FDA approval, the stock price often experiences explosive growth. Taking Taiwan’s PharmaDrug as an example, despite a negative EPS of -2.93 NT dollars in 2022, the company’s stock price doubled, because investors are optimistic about its future revenue prospects after orphan drug approval. By May 2024, the stock even hit a record high of 388 NT dollars.

Policy catalysts and event-driven factors

In 2020, when the pandemic broke out, many vaccine development companies’ stock prices soared. Although some companies later proved to be overhyped, this case clearly illustrates the driving force of news events on biotech concept stocks—clinical trial progress, expansion of drug indications, patent approvals can all become stock price catalysts.

Strong anti-cyclicality attribute

Unlike other industries, the demand for medical services is rigid regardless of economic conditions. This makes high-quality pharmaceutical stocks more resilient during market adjustments.

Risks and challenges of biotech concept stocks

Investing in these stocks requires a thorough understanding of their risks:

Failures in clinical trials, breakthroughs by competitors, regulatory policy adjustments, patent disputes, and other uncertainties can cause sharp stock price fluctuations. Additionally, different countries’ government and insurance systems regulate drug prices to varying degrees, directly impacting companies’ profit margins. Taiwan’s National Health Insurance system benefits the public but keeps drug prices artificially low, leading many overseas pharmaceutical companies to be reluctant to launch new drugs in Taiwan, which is a significant reason for the relatively small size of Taiwan’s pharmaceutical market.

How to evaluate the value of biotech concept stocks?

Go beyond traditional financial indicators

For R&D-focused biotech companies, P/E ratios and other conventional valuation methods have limited relevance. The industry more often uses PSR (Price-to-Sales Ratio) to assess the value of new drug companies, as revenue is a better reflection of actual commercial potential than net profit.

Blockbuster drugs are key

In the pharmaceutical industry, there is a term called “(blockbusters),” referring to drugs with annual sales exceeding $1 billion USD. Large pharmaceutical companies typically allocate 50-60% of revenue to R&D for new drugs, even if this temporarily depresses EPS. Major investment institutions tend to raise target prices for these companies because they recognize that continuously innovative drug manufacturers have long-term growth potential. This also explains why TSMC’s P/E ratio can be much higher than UMC’s: the former continuously invests in advanced processes, while the latter has announced to give up such investments and relies on old profits. US biotech giants also adopt similar strategies, investing heavily in R&D or acquiring promising small biotech firms to ensure a steady stream of innovative products.

FDA approval is the global passport

The FDA has the strictest monitoring standards in the pharmaceutical industry worldwide. Once a drug is approved by the FDA, approval processes in other countries are usually significantly accelerated. Therefore, FDA approval has become the most closely watched milestone event for global investors.

The competitive landscape of the US pharmaceutical market

The US biopharmaceutical market is the largest and most vibrant globally, projected to reach $445 billion USD by 2027, with a CAGR of 8.5%. The market is divided into four main sectors: pharmaceuticals, biotechnology, medical devices, and healthcare services.

Why is the US the cradle of global biotech concept stocks?

The US has nearly one million professionals engaged in biomedicine, covering R&D, manufacturing, sales, and other parts of the entire industry chain. Top scientific talent concentrates in this field, and the capital market provides the most robust financing support, forming a unique ecological cycle. Unlike Taiwan, where low drug prices due to national health insurance reduce incentives for new drug entry, the US market allows pharmaceutical companies to set market-based prices and transfer risks through insurance companies. This model stimulates innovation. As a result, the US has nurtured the world’s best biopharmaceutical companies.

Recommended US biotech concept stocks

Leading pharmaceutical company: Eli Lilly (LLY)

According to CompaniesMarketCap data, Lilly’s market cap in 2024 reached $842.05 billion USD, ranking 10th globally and becoming the largest pharmaceutical company by market value. About 60% of its business is in North America. Its weight-loss drug line is expected to maintain strong growth in the coming years, making it a biotech concept stock not to be overlooked.

Vaccines and antiviral field: Pfizer (PFE)

Pfizer is known for its COVID oral medication that treats mild cases. The company’s stock price remains steadily rising, often serving as an ideal entry point for long-term investors during US stock market pullbacks.

Stable choice: Johnson & Johnson (JNJ)

J&J, similar to Pfizer, features steady stock growth and generous dividends. Its volatility is relatively low, suitable for dollar-cost averaging or long-term holding strategies, making it a top performer among biotech stocks. Given its upward long-term trend and moderate fluctuations, leveraging financing to amplify returns is also an option.

Immunology and oncology: AbbVie (ABBV)

AbbVie mainly develops immunology, oncology, and virology drugs. Its core product Humira was approved by the FDA in 2002 and is the first-line treatment for rheumatoid arthritis, continuously gaining approval for more indications. Although there are concerns about generic competition after patent expiry, AbbVie holds over a hundred patents and, in 2018, reached agreements with major firms like Pfizer and Amgen to license biosimilar sales after 2023 and collect royalties. The company continues investing in R&D to find the next blockbuster drug, making it a good target during dips.

Oncology leader: Merck & Co. (MRK)

Merck’s origins trace back over a century to a German pharmacy, now evolved into a global healthcare solutions provider. Its flagship product Keytruda is used for cancer treatment and is one of the best-selling drugs worldwide. The stock price has steadily risen, and its dividend yield is attractive, making it another good entry point during market corrections.

Healthcare insurance and services: UnitedHealth (UNH)

UnitedHealth benefits from the aging US population and increasing healthcare demand, with continuous growth in revenue and profit. Its stock price shows a long-term upward trend, and dividends are solid, making it a representative stock in the healthcare services sector.

All these companies are leaders in the US healthcare market, with strong competitiveness, continuous innovation, solid financial performance, abundant cash flow, and attractive investment returns.

Opportunities in Taiwan biotech concept stocks

SynCore Pharmaceuticals (1720)

SynCore 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 healthy debt levels. Although its fundamentals are moderate, stable dividends have earned it a good reputation among Taiwanese stock savers.

Hoping Biotechnology (1783)

Hoping Biotechnology engages in biomedicine, medical devices, skincare, and fine chemical sales. Its business is divided into two main areas: consumer products (facial cleansers, skincare, medical aesthetics) and biomedical products (bone repair materials, medical injections, ophthalmic drugs). It turned profitable in 2017, with stable fundamentals in recent years, healthy debt-to-equity ratio, and low long-term debt levels, making it worth watching.

Differences between the Taiwanese and US pharmaceutical markets

Although Taiwan has quality pharmaceutical companies, overall, the US remains the best investment destination for the pharmaceutical industry. The reasons are complex and multifaceted: firstly, the maturity and recognition of capital markets differ; secondly, the technological and innovative capabilities of pharmaceuticals vary; thirdly, investor professional awareness is deeper. Even if excellent biotech companies emerge in Asia, their stock performance and overall competitiveness often lag behind US biotech stocks.

The Taiwanese market still mainly focuses on electronics stocks. Even high-growth potential biotech companies find it difficult to replicate the multi-tenfold gains seen in US stocks. As pandemic policies adjust, investor attention to biotech concept stocks has increased, but from a global perspective, the scale, innovation capacity, and market liquidity of the US pharmaceutical industry still far surpass others.

Summary: Why pay attention to biotech concept stocks now?

Biotech concept stocks have high growth potential but also come with higher risks, requiring investors to have sufficient professional knowledge and risk tolerance. Compared to other investment fields, investing in healthcare stocks demands a higher understanding of the industry. However, once you grasp the core logic—focusing on FDA approvals, blockbuster drugs, and R&D investment as three key indicators—you can significantly improve your decision-making quality.

US stocks in the pharmaceutical sector are currently the top choice for biotech concept stock investments. If you are interested in this field, it is recommended to focus on the latest developments in the US pharmaceutical industry, systematically study the product lines and clinical trial results of leading companies mentioned above, so as to seize real investment opportunities amid the wave of biotech stocks.