US biotech stocks investment outlook: Global healthcare industry structure analysis and target selection

Long-term Growth Logic of the Healthcare Industry

The global healthcare industry is currently in a rapid expansion phase. With aging populations, continuous emergence of innovative drugs, upgrades in medical equipment, and the rapid development of telemedicine, the imagination space for the biotech sector has significantly expanded. Unlike traditional technology industries, healthcare has a natural anti-cyclical characteristic—people need medical treatment and medication regardless of economic conditions—making this field relatively less affected by economic fluctuations.

The U.S. biopharmaceutical market is the largest in the world, expected to reach $445 billion by 2027, with a CAGR( of 8.5%. Driven by this growth momentum, biotech stocks in the U.S. often experience soaring rallies, attracting increasing investor attention.

Valuation Logic and Characteristics of U.S. Biotech Stocks

) Future Expectations Drive Stock Performance

The valuation of biotech companies differs greatly from traditional industries. These companies are mostly in R&D stages, lack stable cash flow, and their main assets are pipeline drugs under development. However, once a drug passes clinical trials and gains FDA approval, the stock price often experiences a significant surge. Therefore, evaluating U.S. biotech stocks hinges on predicting their future commercialization prospects.

Take PharmaTech as an example: in 2022, amid a sluggish stock market, its stock price doubled, mainly driven by its drug receiving orphan drug designation in the U.S. At that time, the company’s EPS was still negative, yet investor enthusiasm was ignited. By October 2023, the company completed its third phase clinical trial enrollment globally, and by May 2024, upon releasing its Q1 financial report, the stock price reached NT$388. Investors focus on the future commercialization potential of these drugs, as healthcare demand is unaffected by economic cycles.

Event-Driven Price Fluctuations

Biotech stock prices are often driven by major events, including clinical trial data releases, competitor movements, regulatory policy changes, patent disputes, etc. These factors can significantly impact future revenue, causing sharp stock price volatility. Investing in such stocks requires patience and risk tolerance.

Policy and Insurance Dual Impact

The biotech industry is highly regulated by governments, with each country establishing policies to regulate product procurement and advertising. Developed countries’ insurance systems (such as Taiwan’s National Health Insurance) control drug prices, making the healthcare market more complex.

Competitive Landscape of the U.S. Healthcare Industry

The U.S. healthcare market is divided into four main sectors: Pharmaceuticals, Biotechnology, Medical Devices, and Healthcare Services. Each sector hosts multinational corporations, small and medium-sized companies, and innovative startups.

Defining the Value of Blockbuster Drugs

In the pharmaceutical industry, “blockbusters”### refer to drugs with annual sales exceeding $1 billion. Successful pharmaceutical companies are willing to allocate 50-60% of their revenue annually to R&D, even when they have blockbuster drugs. While this reduces profit margins, large investment institutions tend to raise their P/E ratios and target prices for such companies, understanding that innovation will continue to generate new products. This explains why most U.S. pharmaceutical giants maintain moderate operating margins, using the remaining funds for R&D or acquiring promising small firms.

( Global Influence of FDA Certification

Whether a Taiwanese manufacturer or a U.S.-based company, FDA approval is the most critical milestone. The FDA enforces the strictest monitoring standards in the global pharmaceutical industry. Once a drug is approved by the FDA, approval processes in other countries tend to accelerate significantly.

For early-stage biotech companies, investors often use PSR) (Price-to-Sales Ratio)### to evaluate their value, as many R&D-stage drugs have yet to generate profits.

Core Advantages of the U.S. Medical and Biotech Industry

The U.S. is the world’s largest healthcare market. Unlike Taiwan, where low drug prices due to national health insurance discourage new drug entry, the U.S. healthcare system is highly market-oriented, with drug prices determined by market forces and insurance negotiations. This environment fosters a more mature mechanism for rewarding innovative drugs.

Nearly one million professionals work in the U.S. biopharmaceutical sector, covering R&D, manufacturing, sales, and other upstream and downstream segments. Top talent continues to gather in the industry, and employment prospects for related graduates are promising. Additionally, U.S. capital markets have a strong willingness to invest in this sector, forming a healthy industrial ecosystem cycle. This makes the U.S. the globally recognized optimal environment for pharmaceutical industry development.

Recommended U.S. Biotech Stocks

( 1. Eli Lilly (LLY)— Leading Pharmaceutical Company

According to global market cap rankings, Eli Lilly’s market cap in 2024 is $842.05 billion, ranking 10th worldwide, making it the largest pharmaceutical company globally. Its main markets remain in North America, accounting for about 60%. The weight-loss drug market is expected to grow steadily in the coming years, making Lilly a key U.S. biotech stock to watch.

) 2. Pfizer (PFE)— Leader in Vaccines and Oral Medications

Pfizer gained widespread attention with its COVID-19 oral antiviral, which treats mild cases. The company’s stock performance is stable, and during market downturns, it presents a good long-term investment opportunity.

3. Johnson & Johnson (JNJ)— Stable Biotech Giant

J&J’s stock price grows steadily, offering generous dividends, with relatively low volatility. It is very suitable for dollar-cost averaging or long-term buy-and-hold strategies. Its long-term upward trend with limited fluctuations makes it a stable choice among biotech stocks.

4. AbbVie (ABBV)— Immunology Expert

AbbVie mainly develops immunology, oncology, and virology drugs. Its primary profit driver is Humira, approved by the FDA in 2002 for rheumatoid arthritis. Although Humira’s patent is gradually expiring, AbbVie holds over a hundred patents. Since 2018, the company has entered into biosimilar licensing agreements with several major firms, receiving licensing fees while continuing R&D to find the next blockbuster. This makes it a good target for positioning during downturns.

5. Merck (MRK)— Leading Oncology Treatment Company

Merck has a long history, with its flagship product Keytruda being one of the world’s best-selling anti-cancer drugs. The company’s stock has steadily risen, with relatively high dividends, making it a good candidate for market downturn positioning.

6. UnitedHealth (UNH)— Representative of Healthcare Services

UnitedHealth, as a leader in healthcare services, benefits from the aging U.S. population and increasing healthcare demand, with continuous growth in revenue and profit. Its stock price has been trending upward long-term, and dividends are attractive.

All these companies are leading players in the U.S. healthcare market, with strong competitiveness, innovation capacity, solid financial performance and cash flow, as well as substantial investment returns and dividend yields.

Investment Opportunities in Taiwanese Pharmaceutical Stocks

1. SynCore Chemical & Pharmaceutical (1720)— Diversified Pharmaceutical Business

SynCore is a diversified pharmaceutical company involved in Western medicine, health supplements, medical devices, and cosmetics. Its total revenue and net income have shown slow growth in recent years, with assets steadily increasing and long-term stable debt ratios. The company is known for stable dividends, making it popular among Taiwanese dividend investors.

2. Hecare Biotech (1783)— Leading Biomedical Product Provider

Hecare Biotech engages in the production and sales of biomedicine, medical devices, and health products. Its main business is divided into two segments: consumer products (facial cleansers, skincare, medical aesthetics) and biomedical products (bone repair materials, medical injection products, ophthalmic drugs). The company turned profitable in 2017, with stable fundamentals in recent years, healthy asset and debt structure, warranting continued attention.

Practical Considerations for Global Pharmaceutical Investment

Although Taiwan has many high-quality pharmaceutical companies, the overall capital market is still dominated by electronics stocks. Even with excellent biotech firms, it is difficult to see the same multi-fold gains as in the U.S. stock market. As the pandemic normalizes, Taiwanese investors’ focus on biotech stocks may gradually increase, but currently, the U.S. remains the best market for the pharmaceutical industry.

The U.S. biotech industry hosts numerous outstanding companies with larger scale, innovation, and competitiveness, making it easier to identify quality investment targets. The Asian pharmaceutical market is still developing; even with emerging excellent companies, their stock performance and overall strength are not comparable to their U.S. counterparts. This is due to differences in capital markets and also reflects disparities in technological levels and investor professionalism.

Investing in U.S. biotech stocks requires professional understanding of the pharmaceutical industry. For investors interested in this field, it is recommended to closely follow U.S. pharmaceutical development trends. From a global perspective, U.S. biotech stocks remain the top investment choice today.