Is the biotech stock boom here? How the US pharmaceutical giants become the top investment choice

In an era of accelerating global aging populations and continuous emergence of new drugs, the healthcare biotech industry has become a focal point in the capital markets. Unlike traditional electronics sectors affected by economic fluctuations, medical demand has a rigid characteristic—human metabolism always requires medical services—making biotech stocks relatively counter-cyclical. However, not all pharmaceutical stocks are worth attention. The US market, with its完善的 capital mechanisms and regulatory systems, has become the top choice for global biotech investors.

Why Have Medical Biotech Stocks Become a New Gold Mine?

Market Size Continues to Expand

The global biopharmaceutical market is projected to reach $445 billion by 2027, with a CAGR of 8.5%. Behind this figure lies a continuous stream of investment opportunities. Unlike Taiwan, where the National Health Insurance system suppresses drug prices, leading to delays in the development of new quality drugs, the US pharmaceutical market adopts a “capitalist pricing model”—high drug prices borne by insurance companies—fully unlocking the commercial value of new drugs.

Stock Price Gains Driven by Future Imagination

Biotech companies are often in R&D stages, making traditional financial metrics difficult to evaluate their true value. A key turning point is FDA approval—once a new drug passes FDA approval, it not only signifies a pathway to commercialization but often triggers dramatic stock price surges. Take Taiwan biotech star drug Huaya Pharma as an example: in 2022, due to orphan drug certification, its stock price doubled; by May 2024, it reached a new high of NT$388. Despite still posting negative EPS, investors are betting on substantial future earnings potential.

Frequent News Catalysts

During the COVID-19 pandemic in 2020, vaccine development companies’ stock prices soared; clinical trial progress, patent disputes, regulatory policy changes, and other events can all trigger stock price volatility. This event-driven nature creates opportunities for short-term traders but also entails high volatility risks.

Why Are Pharmaceutical Stocks Difficult to Value?

In the pharmaceutical industry, there is an important concept—“blockbusters,” referring to drugs with annual sales exceeding $1 billion. Successful drug companies still invest 50-60% of their revenue annually into R&D for new drugs, sacrificing short-term EPS to ensure long-term competitiveness. Because of this, large investment institutions tend to assign higher P/E multiples to such companies, knowing that continuous innovation is the key to sustained growth.

A common feature of top US biotech giants is—maintaining moderate operating margins, with the rest of the funds fully invested in developing or acquiring promising new drug companies. Under this business model, traditional P/E valuation systems become ineffective, and capital institutions often turn to PSR (Price-to-Sales Ratio) to evaluate the value of new drug companies.

Structural Advantages of the US Pharmaceutical Market

Capital Flows and Talent Concentration

The US healthcare workforce approaches one million, covering R&D, manufacturing, sales, and other segments. Graduates in related fields have excellent employment prospects, leading to a continuous influx of top talent. The US capital market’s enthusiasm for the pharmaceutical industry is unprecedented, creating a virtuous cycle that ultimately builds a unique biopharmaceutical ecosystem.

Strictest FDA Regulatory Standards Globally

The FDA has the world’s most rigorous drug monitoring standards. Once a drug passes FDA approval, the review process in other countries accelerates significantly. This grants US-approved drugs global priority and pricing power.

Pricing Autonomy

Compared to Taiwan’s National Health Insurance system’s continuous price suppression, the US insurance system operates differently—insurance companies mainly bear costs rather than directly intervene in pricing—giving pharmaceutical companies ample commercial space.

Notable US Pharmaceutical Leaders to Watch

The US healthcare market is divided into four major sectors: Pharmaceuticals, Biotechnology, Medical Devices, and Healthcare Services.

Eli Lilly (LLY.US)

In 2024, Lilly’s market cap reached $842.05 billion, ranking as the 10th largest publicly listed company globally and the largest pharmaceutical company by market value. Its weight-loss drugs account for 60% of the North American market. The weight-loss drug market is expected to continue expanding in the coming years, making LLY a biotech stock to follow closely.

Pfizer (PFE.US)

The commercialization of the COVID-19 vaccine brought Pfizer into the public eye, and its oral treatments for mild symptoms also generate steady revenue. The stock has shown steady growth, and during major market corrections, it is an ideal entry point for long-term investors.

Johnson & Johnson (JNJ.US)

J&J exhibits much lower volatility than peers, offers generous dividends, and is suitable for dollar-cost averaging or long-term buy-and-hold strategies—earning it the title of “King of Biotech Stocks.” Its long-term upward trend and moderate fluctuations also make it suitable for margin trading to amplify profits.

AbbVie (ABBV.US)

Its main drug Humira is a first-line treatment for rheumatoid arthritis. Despite patent expirations, the company holds hundreds of patents creating a moat. AbbVie has licensing agreements with giants like Pfizer and Amgen, collecting royalties while maintaining stable income. The company continues investing in R&D to develop the next blockbuster drug; buying during dips is worthwhile.

Merck (MRK.US)

Keytruda, its flagship product, is one of the world’s best-selling anti-cancer drugs. The stock price steadily climbs, and its dividend level is relatively high, making it suitable for phased purchases during market downturns.

UnitedHealth (UNH.US)

Benefiting from aging populations and rising healthcare demand in the US, its revenue and profits continue to grow. The stock price has been rising long-term, with stable dividends, making it a top representative in healthcare services.

All these leading companies share three key features: strong market competitiveness and innovation momentum, solid financial performance and cash flow, and generous investment returns and dividend income.

Current Market Status of Taiwanese Biotech Stocks

TianDa Chemical & Pharmaceutical (1720)

Diversified operations in Western medicine, health supplements, and medical devices. Recent years have seen slow growth in revenue and net profit, but assets steadily increase, and debt ratios remain stable. Dividend policies are stable, making it popular among Taiwanese dividend investors, with overall moderate fundamentals.

HeKang Biotech (1783)

Operations include consumer products (facial cleansers, skincare, medical aesthetic products) and biomedical products (bone repair materials, injectable products, ophthalmic drugs). Since 2017, it has turned profitable; recent fundamentals are stable, with healthy asset-liability structures, and low long-term debt levels, warranting attention.

Fundamental Differences Between US and Taiwan Medical Markets

Taiwan’s overall capital market remains dominated by electronics stocks, and even excellent biotech companies rarely achieve the multi-hundred-fold gains seen in the US. This stems from several differences:

Market Scale Gap—The US healthcare market is far larger than Taiwan’s, supporting greater capacity.

Capital Liquidity—US biotech stocks attract abundant capital, with highly professional investors.

Industry Technology Level—US pharmaceutical companies lead globally in R&D capabilities, with rapid commercialization of new drugs.

Policy Environment—While Taiwan’s national health insurance guarantees universal healthcare, it also suppresses new drug pricing and corporate R&D incentives.

The Asian pharmaceutical market is still developing, and even outstanding companies find it difficult to match the comprehensive performance of US biotech stocks. As coexistence with COVID-19 becomes a government consensus, Taiwanese investors’ focus on biotech stocks may increase, but in the short term, the US remains the best investment territory for the industry.

Risks in Investing in Medical Biotech Stocks

Policy Uncertainty

The healthcare industry is highly regulated by governments. Changes in healthcare policies and insurance systems can directly impact revenue expectations. Regulatory policy shifts often cause sharp stock price fluctuations.

Clinical Trial Risks

The success rate of new drug R&D is inherently low. Failures in clinical trials, unmet indications, or adverse effects can destroy investor confidence, leading to stock price halts or declines.

Patent Expiry Risks

After patent expiration of blockbuster drugs, generic competition can cause revenue to plummet. Whether the company has subsequent innovative products to replace them is a critical factor.

Valuation Bubble Risks

Popular biotech stocks are prone to hype, with stock prices diverging significantly from fundamentals. Investors should beware of overvaluation traps.

Conclusion

Biotech stocks attract investors with their large imagination space and strong anti-cyclical characteristics, but high risks and volatility are inherent. Investing in pharma requires industry expertise, understanding FDA approval mechanisms, drug pipelines, patent protections, and other core concepts.

Looking globally, the US pharmaceutical market, with its完善的 capital mechanisms, strict regulatory standards, and abundant innovation momentum, has become the top destination for biotech investment. Leading US biotech companies combine growth potential and stability, making it easier to identify investment-worthy targets.

For investors aspiring to enter the biotech sector, it is recommended to closely monitor developments in the US pharmaceutical industry and grasp the core logic of biotech stock recommendations worldwide—choosing leading companies with continuous innovation, strong patent moat, and stable cash flow as the long-term winning strategy.