Taiwan Medical Stocks Recommendation: Seize Global Pharmaceutical Industry Growth Opportunities

The healthcare industry has become one of the most stable investment sectors worldwide. Driven by multiple factors such as accelerating population aging, breakthroughs in new drug development, and innovation in medical technology, the pharmaceutical biotech industry demonstrates strong growth resilience. Compared to traditional industries affected by economic cycles, the rigid demand for healthcare makes it a safe-haven choice during economic downturns. This article will analyze the investment value of healthcare stocks in depth and outline opportunities for Taiwanese investors in both U.S. and domestic healthcare stocks.

Core Characteristics of the Medical Biotechnology Industry

Market Size and Growth Potential

The U.S. biopharmaceutical market is the largest and most dynamic in the world. According to industry data, the market size is projected to reach $445 billion by 2027, with a CAGR of (CAGR) of 8.5%. This growth rate far exceeds that of traditional manufacturing industries, reflecting the long-term investment value of the pharmaceutical industry.

Unique Stock Price Drivers

Valuation logic for biotech companies differs significantly from traditional firms. Since most biotech companies are in the R&D stage, lacking stable cash flow and profitability, traditional financial metrics (such as P/E ratios) are often inapplicable. The true assets of pharmaceutical companies are their R&D pipelines, with the commercialization prospects of potential products determining company value.

Once a new drug passes clinical trials and gains FDA approval, the stock price often rises rapidly. This “event-driven” characteristic makes healthcare stocks highly expectation-based, with investors chasing future revenue rather than current profits. For example, Taiwanese biotech company TTY Biopharm saw its stock price double in 2022 amid a generally weak market, mainly driven by its drug receiving orphan drug designation in the U.S. At that time, the company’s EPS was still negative at -2.93 NT dollars, yet it attracted investor enthusiasm. By May 2024, after releasing Q1 financials, the stock reached a new high of 388 NT dollars, with investors valuing the company’s promising earnings in the coming years.

Dual Nature of Risks and Volatility

High returns in healthcare stocks come with high risks. Uncertain clinical trial results, competitor movements, regulatory policy changes, patent disputes, and other factors can cause sharp stock price fluctuations. Additionally, government healthcare policies and insurance company interventions significantly increase market complexity. In mature markets like Taiwan’s National Health Insurance, strict regulation of drug prices directly compresses profit margins for pharmaceutical companies, sometimes preventing top new drugs from entering the Taiwanese market.

Scientific Methods for Healthcare Stock Valuation

The Investment Significance of the “Blockbusters” Concept

A key term in the pharmaceutical industry is “blockbusters,” referring to drugs with annual sales exceeding $1 billion. Successful large pharmaceutical companies, although their main profits come from these blockbuster drugs, continue to allocate 50-60% of revenue to R&D to develop the next generation of blockbuster products.

This strategy may seem to reduce short-term profits, but large institutional investors recognize the continuous pipeline of innovative products, which boosts these companies’ valuations and target prices. This explains why TSMC’s P/E ratio can significantly surpass that of UMC—because the market believes TSMC’s ongoing technological investments will lead to long-term growth, whereas UMC’s strategy of maintaining the status quo implies decreasing competitiveness.

A typical approach of major U.S. biotech giants is to maintain relatively stable operating margins while using other funds for R&D or acquiring promising small biotech firms. This “innovation-first” strategy fosters vitality within the U.S. pharmaceutical industry.

( Application of PSR Valuation Method

For R&D-stage biotech companies without profits, traditional P/E valuation is ineffective. In such cases, institutional investors often use PSR (Price-to-Sales Ratio) for assessment. PSR compares market capitalization to revenue, avoiding the interference of profitability fluctuations, making it more suitable for evaluating early-growth healthcare companies.

) The Global Significance of FDA Approval

Whether Taiwanese pharmaceutical companies or domestic U.S. firms, FDA (U.S. Food and Drug Administration) approval is a critical milestone. The FDA has the strictest drug approval standards globally. Any drug approved by the FDA can usually be rapidly approved in other countries. This makes FDA approval the most important milestone for global pharmaceutical companies.

Competitive Advantages of the U.S. Pharmaceutical Industry

Capital Market-Driven Positive Cycle

The U.S. is the largest pharmaceutical market globally. Its market-driven operation confers unique advantages. Unlike some Asian markets where government healthcare controls drug prices, the U.S. allows pharmaceutical companies to set prices independently, with insurance companies negotiating payments. This mechanism encourages continuous innovation investment by drug companies. Although U.S. patients’ healthcare insurance expenditures are high relative to income, they gain access to the most advanced medical technologies worldwide.

Talent and Ecosystem

The U.S. biopharmaceutical sector employs over one million professionals across R&D, manufacturing, sales, and other upstream and downstream fields. Top scientific talent congregates here, and related graduates have broad career prospects, creating a positive feedback loop between industry and education. Meanwhile, the U.S. capital market’s enthusiasm for healthcare investment far exceeds other regions, with ample financing channels further strengthening the ecosystem, making the U.S. the globally recognized best place for pharmaceutical industry development.

In-Depth Analysis of Leading U.S. Healthcare Stocks

The U.S. healthcare market’s competitive landscape is divided into four major sectors: pharmaceuticals, biotechnology, medical devices, and healthcare services, each home to top global companies.

Pharmaceutical Sector: Eli Lilly###LLY###

Eli Lilly, with a market cap of $842.05 billion in 2024, is the largest pharmaceutical company globally, ranking in the top ten worldwide. About 60% of its revenue comes from North America. Its obesity drug line has opened a billion-dollar new market. As obesity is increasingly recognized as a chronic disease, related treatment demand is expected to grow rapidly in the coming years, making LLY a key pharmaceutical target to watch.

( New Drug R&D and Commercialization: Pfizer)PFE###

Pfizer gained attention during the pandemic for its oral COVID-19 drug, which effectively treats mild cases. During U.S. stock market adjustments, Pfizer often demonstrates defensive strength, making it an ideal entry point for long-term investors. The company’s stock price has shown steady growth and offers attractive dividend returns.

( Stable Cash Flow and Dividends: Johnson & Johnson)JNJ###

Johnson & Johnson, similar to Pfizer, has stable stock growth and generous dividend income. Compared to Pfizer, J&J exhibits lower volatility, making it suitable for dollar-cost averaging or long-term holding strategies. Its stable business model and ample cash flow make it a “blue-chip” biotech stock.

( Immunology and Oncology: AbbVie)ABBV###

AbbVie’s main profit engine is Humira, approved by the FDA in 2002, which is a standard treatment for rheumatoid arthritis. The drug maintains growth by continuously expanding its indications. Despite patent expiration risks in 2023, AbbVie holds hundreds of patents, creating a solid protective barrier. The company has also partnered with giants like Pfizer and Amgen to generate new revenue streams through licensing biosimilars and collecting licensing fees. Additionally, AbbVie invests heavily in developing next-generation blockbuster drugs, making its stock a good entry point during downturns.

( Oncology Treatment: Merck)MRK###

Merck, with a century-old pharmaceutical heritage, boasts Keytruda as one of the world’s best-selling cancer treatments. The company’s stock has shown long-term steady growth and offers high dividends, making it a preferred long-term investment target during market adjustments.

( Healthcare Services and Insurance: UnitedHealth)UNH###

UnitedHealth, representing healthcare services, benefits from the aging U.S. population and increasing healthcare demand. The company’s revenue and profit continue to grow, with a long-term rising stock price and attractive dividend yield, representing service-side opportunities in the healthcare industry.

All these companies are leading targets in the U.S. healthcare market, possessing strong competitiveness, excellent innovation capabilities, solid financial foundations, ample cash flow, and substantial investment returns.

Recommendations and Outlook for Taiwanese Healthcare Stocks

( SynCore Pharmaceutical)1720###

SynCore Pharmaceutical is a diversified medical company involved in Western medicine, health supplements, health foods, medical devices, cosmetics, and milk powder. In recent years, the company’s total revenue and net income have shown moderate growth, with assets gradually increasing and a healthy debt structure. Although its innovation motivation is relatively limited, the company’s stable dividend policy has made it popular among Taiwanese dividend investors, making it a good choice for income-focused investors.

( Hoping Biotech)1783###

Hoping Biotech engages in the production and sales of biomedicine, medical devices, skincare products, and precision chemical materials. The company’s business is divided into consumer products (facial cleansers, skincare, medical aesthetic products) and biomedical products (bone repair materials, medical injectables, ophthalmic drugs). Since turning profitable in 2017, its fundamentals have been stable and improving, with a healthy debt-to-asset ratio and consistently low debt levels, making it worth ongoing attention.

Global Pharmaceutical Industry Investment Conclusion

Long-term Investment Logic of Healthcare Stocks

The biotech industry attracts attention due to its large growth potential and ample imagination space. However, Taiwan’s overall capital market remains dominated by electronics. Even outstanding local biotech companies often see their stock price gains fall short of the dozens of times increase typical in the U.S. market.

As global pandemic policies adjust and social consensus evolves, Taiwanese investors’ focus on biotech stocks may increase. Nonetheless, the current market reality shows that the U.S. remains the most attractive market for pharmaceuticals, with numerous excellent biopharmaceutical companies that have scale advantages, innovation leadership, and global competitiveness, making it easier to identify quality investment opportunities.

The Asian pharmaceutical markets, including Taiwan, are still developing and improving. Even if outstanding local drug companies emerge, their stock performance and overall strength are unlikely to match U.S. peers, due to differences in market maturity, R&D capabilities, and investor professionalism.

Investment Recommendations and Directions

Compared to other sectors, investing in healthcare stocks requires investors to have in-depth industry understanding and professional knowledge. Interested investors should continuously monitor developments in the U.S. pharmaceutical industry. Globally, U.S. healthcare companies remain the most attractive investment targets today. Taiwanese investors can consider focusing on Taiwanese healthcare stocks while also allocating part of their portfolio to leading U.S. pharmaceutical stocks, sharing in the growth dividends of the global pharmaceutical industry under manageable risk conditions.