Medical Stock Recommendations: Analysis of Long-term Investment Opportunities in the Biotechnology and Pharmaceutical Industry

As the global aging population trend intensifies, new drug development continues to advance, and telemedicine flourishes, the healthcare industry has become a high-growth market. Unlike traditional electronics affected by economic cycles, the core reason for recommending healthcare stocks lies in their inherently counter-cyclical business model—people’s demand for medical services remains consistently stable. Therefore, an increasing number of investors are paying attention to opportunities in this field. As the leader in the global pharmaceutical market, the United States gathers the highest quality investment targets. This article will analyze key directions and stock selection logic for healthcare stock recommendations.

Core Characteristics of the Biopharmaceutical Industry

Market Size and Growth Momentum

The US biopharmaceutical market size ranks first globally, projected to reach $445 billion by 2027, with a CAGR( of 8.5%. This figure reflects continuous market expansion and serves as an important fundamental support for healthcare stock recommendations.

) Unique Valuation Logic

Traditional financial indicators often do not apply to biotech companies, as most are in R&D stages without stable cash flows. The true value of such companies is hidden in their pipelines—once a drug passes clinical trials and gains FDA approval, the stock price often experiences explosive growth. Take Taiwan’s PharmaDrug as an example: despite a negative EPS of -2.93 NT$ in the first half of 2022, its stock surged 100% for the year after its primary thrombocytosis drug received orphan drug designation. As of May 2024, the stock price reached 388 NT$, reflecting the market’s valuation of its future commercialization prospects.

Clear Event-Driven Characteristics

Short-term fluctuations in healthcare stocks are often triggered by specific events—clinical trial progress, regulatory approvals, patent extensions, or competitor product launches. These factors can cause sharp stock price volatility in the short term. Investors need sufficient patience and risk tolerance to profit from such fluctuations.

Policy and Regulatory Risks

Biopharmaceuticals are highly regulated. Governments set strict approval standards; for example, the US FDA has the most rigorous drug approval criteria worldwide. Many developed countries also regulate drug prices through their healthcare systems. This protects patient rights but also creates competitive barriers for companies.

Valuation Framework for Biotech and Pharma Stocks

Future Earnings Expectations Are Key

The core of healthcare stock recommendations is assessing a company’s future profitability. The industry refers to a single drug with sales exceeding $1 billion as a “blockbuster.” Successful pharmaceutical companies typically allocate 50-60% of revenue to R&D. Although short-term EPS may be pressured, large institutions tend to raise their P/E multiples and target prices because a continuous pipeline of innovative products guarantees long-term growth—similar to TSMC’s logic of a high P/E compared to UMC: ongoing R&D investment signifies future competitiveness.

Top US biotech giants generally maintain moderate operating margins, with remaining funds used for in-house R&D or acquisitions of emerging innovative small companies to ensure continuous product pipeline updates.

PSR Valuation Method Suitable for Early-Stage Companies

Since many R&D-stage drugs do not generate revenue, institutional investors often use the PSR( (Price-to-Sales Ratio) to evaluate new drug companies. This metric avoids the limitations of earnings-based indicators in early-stage companies.

) FDA Approval Determines Global Outlook

Whether Taiwanese or American companies, FDA approval is crucial—FDA has the strictest standards globally. Once a drug passes FDA, approval processes in other countries tend to accelerate. This makes FDA the de facto standard-setter for the global healthcare industry.

Competitive Advantages of the US Pharmaceutical Market

Capitalist Market Mechanism

The US healthcare market differs fundamentally from Taiwan’s National Health Insurance system. Taiwan’s low drug prices due to annual price controls discourage many pharmaceutical companies from introducing new therapies. The US adopts a capital market-driven model—companies can price according to market demand and realize revenue through insurance reimbursements. This provides strong economic incentives for healthcare innovation.

( Robust Talent and Ecosystem

The US biotech and pharma industry employs nearly one million professionals across R&D, manufacturing, and sales. Graduates from related disciplines enjoy excellent employment opportunities. The world’s top talent continues to flow into this sector, creating a positive cycle and building a unique biopharmaceutical ecosystem. The capital markets also actively invest in this industry, further consolidating the US’s leading position.

) Global Investor Consensus

Investors worldwide generally recognize the US as the most favorable environment for pharmaceutical development, making it easier for high-quality companies to secure funding and accelerate innovation cycles.

US Healthcare Stock Recommendations: Four Major Sector Leaders

The US healthcare market is divided into four sectors: Pharmaceuticals, Biotechnology, Medical Devices, and Healthcare Services, each with numerous participants. Below are recommended leading stocks in each sector:

Eli Lilly (LLY): Leader in Emerging Drugs

Lilly rose to become the world’s largest pharmaceutical company by market cap in 2024, reaching $842.05 billion, ranking 10th globally. Its largest market remains North America###, accounting for about 60%###. Its weight-loss products are expected to continue growing over the next few years, making LLY a must-watch healthcare stock.

Pfizer (PFE): Post-COVID Revaluation

Pfizer’s oral COVID-19 medication offers treatment options for mild cases. Every time the US stock market pulls back, it presents an excellent entry point for long-term investors.

Johnson & Johnson (JNJ): Steady Growth Dividend Aristocrat

J&J’s stock price steadily rises, offering generous dividends with relatively mild volatility, making it suitable for dollar-cost averaging or long-term holding strategies. Its solid fundamentals make it a high-quality biotech stock.

( AbbVie (ABBV): Model of Patent Value

AbbVie’s main products include drugs in immunology, oncology, and virology. Its core profit comes from Humira, approved by FDA in 2002—an initial choice for rheumatoid arthritis treatment. The FDA has repeatedly approved expanded indications. Despite patent expiration risks, AbbVie maintains hundreds of patents for protection and has licensing agreements with giants like Pfizer and Amgen to sell biosimilars and collect royalties. The company continues R&D to seek the next blockbuster, remaining an attractive investment after dips.

) Merck (MRK): Leader in Cancer Treatment

Merck has a long history, with Keytruda being one of the best-selling cancer drugs worldwide. Its stock price has steadily risen, and it offers substantial dividends, making it a good long-term buy point during market corrections.

UnitedHealth (UNH): Beneficiary of Healthcare Growth

UnitedHealth benefits from the aging US population and increasing healthcare demand. Its revenue and profit continue to grow, with a long-term rising stock price and stable dividends, representing a top healthcare service stock.

All these companies are leaders in the US healthcare market, with strong competitiveness, innovation, solid financial performance, and attractive returns.

Selection of Taiwanese Healthcare Stocks

Sinphar Pharmaceutical (1720): Stable Dividend Traditional Player

Sinphar 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 steadily increasing assets and healthy debt ratios. Although growth momentum is modest, its stable dividends make it popular among Taiwanese dividend investors.

Kangchen Biotech (1783): Growth Stock with Dual Business Model

Kangchen operates in biomedicine, medical devices, and consumer products. Since turning profitable in 2017, its fundamentals are stable, with healthy asset-liability structure and low debt levels worth noting.

Investment Considerations for Healthcare Stock Recommendations

Taiwan’s overall capital market still mainly focuses on electronics stocks. Even with excellent biotech companies, it is difficult to see the multi-tenfold gains typical in the US. As coexistence with the pandemic becomes a policy norm, Taiwanese investors’ attention to biotech stocks may increase. However, currently, the US remains the most favorable market for healthcare.

The US pharmaceutical industry boasts a large scale, strong innovation capability, and mature competitive landscape, making it easier to identify high-quality investment targets. The Asian pharmaceutical market is still developing; even outstanding companies’ stock performance and overall returns are not comparable to US healthcare stocks. This reflects differences in market maturity, technological innovation levels, and investor professionalism.

Investing in healthcare stocks requires industry expertise. Interested investors are advised to closely monitor US pharmaceutical developments. Globally, US healthcare stocks should be the primary investment choice.