Master Medical Stock Recommendations: Global Pharmaceutical and Biotechnology Investment Guide

The reason why medical stocks are so attention-grabbing stems from the industry’s inherent unique advantages. As the global population ages, new therapies continuously emerge, and telemedicine develops rapidly, the biotech and pharmaceutical industry demonstrates strong growth momentum. Unlike traditional industries that are easily affected by economic fluctuations, the healthcare market has natural defensive characteristics—regardless of economic conditions, people’s demand for medical services and medications always exists.

Core Characteristics and Investment Logic of Pharma and Biotech Stocks

Value comes from future expectations rather than current profits

Traditional financial indicators for biotech companies are often less than ideal; most are in R&D stages, lacking stable cash flow. However, once a developed drug passes clinical trials and gains FDA approval, the stock price often surges significantly. This characteristic necessitates a long-term perspective when evaluating pharma stocks, focusing on potential rather than short-term financial data.

Taking Taiwan as an example, PharmaDrug doubled its stock price during the 2022 bear market, 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 that year, investors remained optimistic about its future earnings potential. By May 2024, the company’s stock reached a new high of 388 NT dollars, driven by optimistic expectations regarding its clinical trial progress.

Event-driven factors boost stock prices

The prices of biotech stocks are often influenced by major events. During the pandemic, vaccine concept stocks soared; news such as new drug approvals, clinical trial progress, and FDA approvals for expanded indications can serve as catalysts. Investors need to closely monitor industry developments.

Volatility and risk coexist

Results from clinical trials, competitor strategies, policy adjustments, patent disputes, and other factors can cause sharp stock price fluctuations. This requires investors to have sufficient risk awareness and tolerance.

Policy regulation has far-reaching impacts

Biotech and healthcare industries are highly regulated by governments. Many countries have strict policies on drug procurement and advertising. Developed nations’ insurance systems (such as Taiwan’s National Health Insurance) regulate drug prices, adding complexity to the market.

How to Assess the Fair Value of Pharma Stocks

Blockbuster drugs determine future earnings

The concept of “blockbuster drugs” refers to drugs with annual sales exceeding USD 1 billion. Successful pharmaceutical companies are willing to invest 50-60% of annual revenue into R&D, even if it lowers short-term profit margins. Large investment institutions tend to raise target prices based on the company’s continuous innovation drive. This is similar to the valuation logic of TSMC versus UMC—TSMC invests continuously in advanced processes, while UMC adopts a more conservative investment approach.

Many US biotech giants adopt strategies to maintain certain profit margins, using surplus funds for R&D or acquiring promising small biotech firms to continuously launch innovative products.

PSR ratio as an evaluation tool

For unprofitable R&D-stage biotech companies, investors often evaluate using Price-to-Sales Ratio (PSR) rather than traditional P/E ratios.

( FDA approval as a global passport

Whether Taiwanese or US-based companies, FDA approval is a key reference. The FDA has the strictest drug monitoring standards worldwide. Once a drug is approved by the FDA, approval in other countries often follows relatively quickly.

Competitive Advantages of the US Pharmaceutical Market

The US biotech and pharmaceutical market is the largest globally, projected to reach USD 445 billion by 2027, with a CAGR of 8.5%. The US becomes the top choice for pharma stock investments due to several factors:

Capitalist-driven pricing mechanisms: The US has high flexibility in healthcare and drug pricing, with insurance covering most costs. This allows pharmaceutical companies to have higher profit margins for R&D.

Complete industry ecosystem: Nearly one million professionals work in the US biotech and pharma sector, covering R&D, manufacturing, sales, and more. Top talent congregates here, fostering a vibrant innovation environment.

Ample capital support: US capital markets are eager to invest in the healthcare industry, creating a virtuous cycle and establishing a unique biotech ecosystem.

In contrast, the Asian pharmaceutical market is still developing. Taiwan’s National Health Insurance system constrains drug prices, leading many high-quality new drugs to avoid entry. Even with excellent pharma companies, their stock performance and overall strength often cannot match US industry leaders.

Recommended US Pharma Stocks

The US healthcare market is divided into four main sectors: Pharmaceuticals, Biotechnology, Medical Devices, and Healthcare Services. Below are industry leaders in each sector:

) 1. Eli Lilly (LLY)

According to global listed company market cap rankings, Eli Lilly’s market cap in 2024 reaches USD 842.05 billion, ranking 10th worldwide, making it the largest pharmaceutical company globally. Its biggest market is North America, accounting for about 60% of revenue. The obesity drug market is expected to grow steadily in the coming years, making LLY a must-watch healthcare stock recommendation.

2. Pfizer (PFE)

Pfizer holds patents for oral COVID-19 medications that treat mild cases, creating a unique competitive advantage. The company’s stock price has shown steady growth and offers attractive dividends. During major US stock market corrections, it is an excellent entry point for long-term investors.

3. Johnson & Johnson (JNJ)

J&J’s advantage lies in its relatively stable volatility, steady stock price growth, and consistent, substantial dividend returns. Its characteristics make it suitable for dollar-cost averaging or long-term buy-and-hold strategies, earning it a reputation as a preferred biotech stock.

4. AbbVie (ABBV)

AbbVie mainly focuses on immunology, oncology, and virology drugs. Its core profit comes from Humira, approved by the FDA in 2002, which is a top-selling drug for rheumatoid arthritis. The company has repeatedly received FDA approval to expand indications. Although industry concerns exist about patent expiration and biosimilar competition, AbbVie holds hundreds of patents, reducing risks. Since 2018, AbbVie has partnered with giants like Pfizer and Amgen, licensing biosimilar sales after 2023 and collecting royalties. The company continues investing in R&D to find the next blockbuster, presenting investment opportunities during downturns.

5. Merck & Co. (MRK)

Merck has a long history of pharmaceutical development. Its main product, Keytruda, is one of the world’s best-selling cancer treatments. The company’s stock price has steadily risen, offering high dividends, making it a good entry point during market corrections.

6. UnitedHealth Group (UNH)

UnitedHealth, a leader in healthcare services, benefits from the aging US population and increasing healthcare demand. The company’s revenue and profits continue to grow, with long-term stock appreciation and attractive dividend yields.

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

Recommended Taiwanese Healthcare Stocks

1. SynCore Pharmaceutical (1720)

SynCore is a diversified pharmaceutical company involved in Western medicine, health supplements, and medical devices. Its revenue and net profit have grown slowly in recent years, with assets gradually increasing and long-term stable debt ratios. Although its development momentum is modest, its stable dividends make it popular among dividend investors.

2. Hecare Biotech (1783)

Hecare Biotech engages in the production and sales of biopharmaceuticals, medical devices, health supplements, and precision chemical materials. Its business is divided into consumer products (facial cleansers, skincare, aesthetic medicine) and biomedical products (bone repair materials, medical injections, ophthalmic drugs). Since turning profitable in 2017, its fundamentals have stabilized, with healthy asset-liability structures and consistently low debt levels.

Investment Advice for Medical Stocks

The attractiveness of medical stocks lies in their long-term growth potential and defensive nature. However, investing in this field requires professional knowledge of the industry. Compared to other sectors, pharma stocks demand more effort from investors to research clinical trial progress, regulatory policy changes, and competitive landscape evolution.

Investors can choose to buy stocks directly or trade through derivatives. Regardless of the method, it is crucial to establish reasonable risk control mechanisms (including stop-loss points), track industry trends and key news, and regularly review holdings and investment logic.

Taiwan’s overall capital market still mainly focuses on electronics stocks. Even outstanding medical stocks are unlikely to see the multi-hundred-fold gains seen in the US. However, as investor professionalism and market awareness improve, investment opportunities in Taiwanese healthcare stocks are gradually emerging.

From a global perspective, the US remains the best investment market for pharmaceuticals, with numerous excellent biotech companies, scale advantages, innovation momentum, and competitiveness. For investors interested in healthcare stocks, it is recommended to focus on US pharmaceutical development trends, as US biotech stocks are currently the top investment choice.