U.S. biotech stock investment guide: Why the healthcare industry is worth paying attention to

The healthcare biotech industry is becoming a focal point for global capital markets. Unlike traditional cyclical industries, human demand for healthcare is a necessity that will not significantly diminish due to economic fluctuations. Coupled with the global aging trend, continuous introduction of innovative drugs, and expansion of telemedicine applications, this industry holds enormous growth potential. Among them, the US biotech sector is the most competitive and innovative market worldwide.

Absolute Advantages of the US Pharmaceutical Market

The US biopharmaceutical market is the largest in the world, projected to reach $445 billion by 2027, with a CAGR( of 8.5%. This not only reflects market size but also signifies that the US has formed a unique biopharmaceutical ecosystem.

The US has nearly one million professionals involved in R&D, manufacturing, sales, and other parts of the complete industry chain, attracting top talent from around the globe. Unlike Taiwan, where national health insurance suppresses drug prices, making it difficult for new drugs to enter, the US market is paid for by insurance companies, allowing pharmaceutical companies more flexibility in pricing for innovative drugs. This market-driven mechanism incentivizes continuous innovation.

At the same time, the US FDA maintains the strictest medical monitoring standards globally. Once a drug is approved by the FDA, approval in other countries usually proceeds rapidly. Therefore, paying attention to biotech developments in US stocks essentially means grasping the global medical innovation trend.

Investment Logic of US Biotech Stocks

Traditional financial metrics are often inadequate for evaluating biotech companies, as many are in the R&D stage and lack stable cash flow. The real assets of such companies are their pipeline drugs, and their book value is often negative. However, once a new drug passes clinical trials and gains FDA approval, the stock price often surges significantly.

Take Taiwan’s PharmaDrug as an example. During the stock market crash in 2022, the company’s stock price doubled, mainly because its drug received orphan drug designation in the US. Despite a negative EPS of -2.93 NT dollars in the first half of 2022, investors enthusiastically pursued it due to optimistic future revenue prospects. By May 2024, when the Q1 financial report was announced, the stock price reached a new high of 388 NT dollars. This illustrates that the value of biotech stocks stems from expectations of future earnings.

When evaluating new drug companies, institutional investors often use PSR) (Price-to-Sales Ratio) instead of traditional P/E ratios, because revenue better reflects the company’s actual commercial progress.

Risks and Characteristics of US Biotech Stocks

Biotech stocks face high uncertainty—clinical trial failures, breakthroughs by competitors, policy changes, patent disputes—all can cause sharp volatility. This sector is also heavily regulated by governments, with strict rules on drug pricing and procurement in various countries, increasing investment complexity.

However, in the long term, successful large pharmaceutical companies will continue to invest 50-60% of their revenue into R&D or acquisitions of promising small firms, seeking the next “blockbuster” drug—defined as a single drug with annual sales exceeding $1 billion. Institutional investors recognize this strategy and often set higher target prices for such companies, expecting a steady stream of innovative products.

Recommended Leading US Biotech Stocks

The US healthcare market encompasses four major sectors: pharmaceuticals, biotechnology, medical devices, and healthcare services. Here are the leaders in each area:

( Eli Lilly (LLY)

According to the 2024 global listed company market cap rankings, Eli Lilly’s market cap reaches $842.05 billion, ranking 10th worldwide, making it the largest pharmaceutical company globally. Its main markets are North America, accounting for about 60%. The obesity drug market is expected to grow continuously in the coming years, making Lilly a must-watch investment in US biotech.

) Pfizer (PFE)

Famous for its COVID-19 vaccine, Pfizer has launched oral COVID treatments for mild cases. The company’s stock price has shown steady growth, and during major US stock market corrections, it has been a good entry point for long-term investors.

( Johnson & Johnson (JNJ)

Similar to Pfizer, J&J has stable stock performance, offers generous dividends, and exhibits relatively mild volatility. It is suitable for dollar-cost averaging or long-term buy-and-hold strategies, earning the title of biotech king with an upward long-term trend and low volatility.

) AbbVie (ABBV)

AbbVie focuses on immunology, oncology, and virology drugs. Its main profit source is Humira, approved by the FDA in 2002, which remains a first-line treatment for rheumatoid arthritis. The company has continuously gained FDA approval to expand indications. Although Humira’s patent expiration poses a risk, AbbVie holds over a hundred patents creating a protective barrier.

The company has agreements with giants like Pfizer and Amgen to license biosimilars after 2023 and collect licensing fees. It also continues R&D to find the next blockbuster drug, making it a worthwhile investment when prices are depressed.

Merck (MRK)

Originating from a family-owned pharmacy in 19th-century Germany, Merck now provides global healthcare solutions. Its flagship product, Keytruda, is one of the best-selling cancer treatments worldwide. The company’s stock price has steadily risen, offering high dividends, and remains a good investment opportunity during US market corrections.

UnitedHealth (UNH)

Benefiting from the aging US population and increasing healthcare demand, UnitedHealth’s revenue and profit continue to grow. Its stock price has long-term upward momentum and offers reasonable dividends, making it a leader in healthcare services.

Additional Value of Taiwanese Healthcare Stocks

Taiwan’s pharmaceutical industry is relatively small and unlikely to generate the multi-fold gains seen in US stocks. However, some stocks are still worth noting:

Sundia ChemPharm (1720) is known for diversified operations, including Western medicine, health supplements, medical devices, and cosmetics. Its revenue and net income have grown slowly in recent years, and stable dividends make it popular among dividend investors.

KangCare Biotech (1783) engages in biopharmaceutical products, medical devices, and precision chemical materials sales. Its business includes consumer products (facial cleansers, skincare, medical aesthetics) and biomedical products (bone repair materials, medical injections, ophthalmic drugs). The company turned profitable in 2017, with stable fundamentals and healthy debt-to-equity ratio.

Why US Biotech Stocks Are More Worthy of Attention

Compared to the still-developing and improving Asian pharmaceutical markets, US biotech stocks have advantages in scale, innovation leadership, and competitiveness. Even if excellent pharmaceutical companies emerge in Taiwan or other Asian countries, their stock performance and overall returns are difficult to match with US counterparts. This disparity stems from differences in capital markets, as well as the level of medical technology and investor professionalism.

Investing in healthcare biotech stocks requires industry expertise. For interested investors, it is recommended to focus on US pharmaceutical development trends. Globally, US biotech stocks remain the top investment choice. As global aging accelerates and drug innovation speeds up, the growth space in this field will further expand.