U.S. biotech stocks rise: A must-read profit map for healthcare stock investors

The healthcare industry is becoming a new favorite among global capital. Unlike the electronics sector, which is troubled by economic fluctuations, the biotech industry has a natural advantage—people will always get sick. With the aging global population, the popularization of telemedicine, and the emergence of new drugs, the U.S. biotech sector is releasing huge investment opportunities.

Why are healthcare stocks worth your attention?

In a downturn, people cut back on consumption, but illness requires treatment at any time. This is the core investment logic of healthcare biotech stocks.

The U.S. biopharmaceutical market is huge, expected to reach $445 billion by 2027, with a compound annual growth rate of 8.5%. But these numbers represent more than just figures; they symbolize endless opportunities for innovative drugs, medical devices, and diagnostic solutions to enter the market.

Three key features of healthcare stocks

Feature 1: Value comes from the future, not the present

Don’t evaluate biotech companies using traditional financial metrics. Many healthcare companies are still in R&D, with no profits or cash flow, but once a drug gets FDA approval, the stock price can double instantly. Take Taiwan’s Yuhan Pharmaceutical as an example: in 2022, amidst a stock market crash, its share price doubled simply because it received orphan drug designation—investors are looking at revenue five years down the line, which is almost unaffected by economic cycles.

Feature 2: Event-driven, prone to black swan events

A clinical trial report, an FDA ruling, or a policy adjustment can cause stock prices to fluctuate by 50%. During the COVID-19 pandemic, vaccine companies’ stocks soared; later, with the Federal Reserve’s QE measures, tech stocks followed suit; when economic storms hit, many companies with record revenues were halved. This high volatility is both a risk and an opportunity.

Feature 3: Policies and regulations are everywhere

From drug approval and pricing to reimbursement policies, government influence is extensive. Taiwan’s National Health Insurance suppresses drug prices annually, discouraging many new drugs from entering the market; in contrast, the U.S. market’s market-based pricing allows insurance companies to pay, giving U.S. biotech stocks greater imagination space.

How to assess the true value of healthcare stocks?

Core question: Does this company have “blockbuster drugs”?

In the industry, a single drug with annual sales exceeding $1 billion is called a “blockbuster.” Successful big pharma companies continuously invest 50%-60% of their revenue into R&D, even if this lowers net profit and EPS, institutional investors will assign higher P/E multiples—because they know a steady stream of innovative products is on the way. That’s why TSMC’s P/E can be much higher than UMC’s.

Key indicator: PSR (Price-to-Sales Ratio)

For biotech companies in R&D, institutions mostly use PSR instead of traditional P/E. Because these companies may never turn a profit, revenue is the real measure of their value.

Most important criterion: FDA approval

The FDA is the strictest regulatory body in the global pharmaceutical industry. Once a drug is approved by the FDA, approval in other countries often follows quickly. That’s why any FDA-related news in U.S. biotech stocks can trigger a stock surge.

Why do U.S. biotech stocks dominate?

Several structural reasons make the U.S. healthcare market the top choice for biotech companies worldwide:

Market size and pricing freedom

The U.S. is the largest pharmaceutical market globally, with a highly developed capital market. New drugs can be priced high and paid for by insurance, providing ample funding for R&D. In contrast, Asian markets face cost-control pressures, often limiting R&D investment.

Talent concentration and a complete ecosystem

Nearly one million professionals work in biomedicine in the U.S., covering R&D, manufacturing, sales, and more. Top scientific talent find the best employment opportunities here, creating a self-reinforcing virtuous cycle. The U.S. capital market is also most willing to invest in this field, resulting in a unique biopharmaceutical ecosystem.

Efficient regulatory system

Although FDA standards are strict, once approved, commercialization is smooth, unlike some regions where approval can be delayed indefinitely.

How to choose U.S. biotech stocks?

The U.S. healthcare market is divided into four main sectors: pharmaceuticals, biotechnology, medical devices, and healthcare services. Each sector has leading companies worth watching.

Pharmaceutical leader: Eli Lilly (LLY)

In 2024, Eli Lilly topped the list as the world’s largest pharmaceutical company with a market cap of $842.05 billion. Its weight-loss drug lineup holds a 60% share in North America, with continued growth expected in the coming years. This is a must-watch biotech stock in the U.S.

Vaccine + oral drug pioneer: Pfizer (PFE)

With its COVID oral medication and vaccines, Pfizer has accumulated huge cash flow. During market corrections, these blue-chip healthcare stocks are the best long-term entry points for investors. Stable dividends make them good “buy-and-hold” stocks.

King of healthcare stocks: Johnson & Johnson (JNJ)

The most stable blue-chip healthcare stock, with an upward long-term trend and generous dividends. Especially suitable for dollar-cost averaging or margin trading to amplify gains.

Specialty drug representative: AbbVie (ABBV)

Its main product Humira is the first-line treatment for rheumatoid arthritis. Even after patent expiry, it remains hard to surpass due to hundreds of patents. The company continues to develop the next “blockbuster” drug, making it a buy-on-dip candidate.

Cancer drug leader: Merck (MRK)

Keytruda is one of the best-selling cancer drugs worldwide. The company’s stock price is steadily rising and it’s also a high-dividend stock, suitable for regular investment.

Integrated healthcare service provider: UnitedHealth (UNH)

Benefiting from the aging U.S. population, revenue and profits continue to grow, with long-term appreciation potential and defensive qualities.

The current situation and limitations of Taiwanese healthcare stocks

There are also many healthcare companies in Taiwan, such as Shengda Chemical (1720), favored by dividend investors for stable payouts, and Kangsheng Tech (1783), with improving fundamentals. But frankly, Taiwan’s capital market still mainly focuses on electronics stocks. Even excellent biotech companies’ stock performance and growth potential are far behind their U.S. counterparts.

This is partly due to differences in capital markets, and partly because Taiwan’s overall investment in pharmaceutical R&D is relatively weak, compounded by the constraints of the national health insurance’s price controls.

Tips for investing in U.S. biotech stocks

Risk awareness

Healthcare stocks are volatile; policy changes, clinical trial results, patent litigations can cause large swings. You need sufficient risk tolerance and patience.

Professional learning

Investing in healthcare stocks isn’t just about chart analysis; you need a basic understanding of the industry—at least knowing FDA approval processes, clinical trial stages, and what constitutes a blockbuster drug.

Diversification

Don’t put all your eggs in one basket. You can allocate to stable blue-chip healthcare stocks (like JNJ, PFE) and also to higher-growth but riskier biotech companies.

Long-term perspective

The biggest advantage of healthcare stocks is that they are less affected by economic cycles. The best holding period is 5-10 years. This isn’t speculation; it’s genuine investing.

Conclusion: Why is the U.S. biotech sector so promising now?

In the global healthcare market, U.S. biotech stocks are undoubtedly the top choice. Their largest scale, fastest innovation, most concentrated talent, and most efficient regulation make the U.S. the global hub of biopharmaceuticals. While Asian healthcare markets are developing rapidly, they still lag in technological depth, capital investment, and international competitiveness.

For investors seeking long-term growth without being tied to economic cycles, U.S. biotech stocks offer a relatively high certainty option. The key is to select the right targets, manage risks well, and stay patient. This is the right approach to profiting from healthcare stocks.