Medical Stocks Investment Outlook: Opportunities in the Healthcare Industry Driven by Global Aging

As the global population ages, new therapies continue to emerge, and telemedicine applications expand, healthcare stocks have become a key focus in the capital markets. Unlike traditional cyclical industries, the healthcare sector exhibits anti-cyclical characteristics—human demand for medical services does not change with economic fluctuations, making healthcare stocks a stable long-term investment choice. The global biopharmaceutical market is projected to reach $445 billion by 2027, with a compound annual growth rate of 8.5%, containing significant investment opportunities.

The Uniqueness of Investing in the Healthcare Industry

The Contradiction Between Stock Price and Actual Profitability

Valuation of biotech companies differs from traditional industries. Most companies in the R&D stage lack stable cash flow and often report negative net profits, but investors focus not on current financial data, but on future commercialization potential.

Once a drug passes FDA approval and is successfully launched, stock prices often surge significantly. Taking Taiwan’s PharmaDrug as an example, the company’s 2022 EPS was negative 2.93 NT dollars, yet its stock price doubled to 388 NT dollars. The core driver was the successful completion of Phase 3 clinical trials for its candidate drug treating primary thrombocythemia. Investors value the company’s promising future earnings, which are unaffected by economic cycles.

Policy and Event-Driven Factors

News events often have a greater impact on healthcare stock prices than fundamentals. During the COVID-19 pandemic in 2020, vaccine developers’ stock prices soared, but many failed to meet expectations as markets stabilized. Conversely, regulatory approvals, clinical data releases, patent litigation outcomes, and other events can trigger sharp stock price volatility.

High Uncertainty of Risks and Fluctuations

Drug development involves multiple failure risks: clinical trial setbacks, regulatory rejection, competitors launching substitutes, intellectual property disputes, etc. These factors cause healthcare stocks to be far more volatile than the broader market, requiring investors to have strong risk tolerance and psychological resilience.

Deep Government and Insurance Involvement

The healthcare industry is tightly regulated by governments worldwide, with policies restricting drug procurement, advertising, and pricing. Developed countries generally have national health insurance systems, exerting downward pressure on drug prices. In contrast, the US market is more market-oriented, allowing pharmaceutical companies to set higher drug prices, thereby attracting more R&D investment.

How to Assess the Intrinsic Value of Healthcare Stocks

Key Concept: Blockbuster Drugs

The industry defines a “blockbuster drug” as a single medication with annual sales exceeding $1 billion. Successful pharmaceutical companies typically allocate 50-60% of revenue to R&D, continuously developing new drugs, even if short-term profit margins decline. Large investment institutions tend to raise valuations for such companies because they see an endless pipeline of innovation. This is similar to the logic of TSMC versus UMC—companies that continuously innovate enjoy premium valuations.

Major US biotech giants adopt a strategy of maintaining certain profit margins, with remaining cash used for R&D or acquiring promising small biotech firms, forming a complete industry ecosystem.

Valuation Tool: PSR Indicator

Since many biotech companies are unprofitable before commercialization, traditional PE ratios are ineffective. The industry often uses PSR (Price-to-Sales Ratio, i.e., market cap to revenue) to evaluate R&D-stage companies. This metric downplays profitability and emphasizes market size and growth potential.

Determinants of Regulatory Pathways

FDA approval is critical. The US FDA has the strictest drug monitoring standards globally. Once a drug is approved by the FDA, approval in other countries tends to accelerate. Therefore, FDA progress directly impacts US healthcare stock prices.

The Ecosystem Advantages of the US Healthcare Market

The US healthcare market is the largest and far more market-oriented than Asia. US pharmaceutical companies can set drug prices based on market demand, with insurance companies covering costs, which boosts R&D investment and innovation. In contrast, Taiwan’s price controls under national health insurance limit the entry of some high-quality new drugs into the market.

The US biopharmaceutical workforce approaches one million, covering R&D, manufacturing, sales, and other segments. Top scientific talent and capital are concentrated here, forming a complete industry chain and ecosystem. The US capital markets also strongly support healthcare innovation, fostering a number of leading global biopharmaceutical companies.

Analysis of US Healthcare Investment Targets

The US healthcare market is divided into four main sectors: Pharmaceuticals, Biotechnology, Medical Devices, and Healthcare Services. Leading companies in each sector have distinct characteristics:

Eli Lilly (LLY)—Pharmaceutical Leader

In 2024, Lilly’s market cap reached $842.05 billion, becoming the largest pharmaceutical company globally. Its weight-loss drug product line performs strongly worldwide, with North America accounting for about 60% of revenue. As the obesity treatment market expands, this stock warrants long-term attention.

Pfizer (PFE)—Vaccine and Specialty Drug Expert

Pfizer’s oral COVID-19 medication provides effective treatment for mild cases. During US market corrections, the stock often shows resilience, making it a good long-term investment entry point.

Johnson & Johnson (JNJ)—Healthcare Stock King

J&J’s stock price is stable with relatively small fluctuations, offering generous dividends. Its business spans pharmaceuticals, medical devices, and consumer health products, with strong risk resistance. Suitable for regular investment or long-term holding, it is a defensive player in healthcare stocks.

AbbVie (ABBV)—Immunotherapy Specialist

The company’s core product, Humira, treats rheumatoid arthritis and has continuously gained new indications since its launch in 2002. Despite patent expiration risks, AbbVie holds over 100 patents and has licensing agreements with giants like Pfizer and Amgen, allowing it to collect royalties beyond 2023. The company continues R&D to find the next blockbuster drug, making it a good entry point during dips.

Merck (MRK)—Cancer Drug Leader

Merck’s Keytruda is one of the world’s best-selling anti-cancer drugs, with ongoing demand in the oncology market. The stock has steady growth and high dividend yield, making it an excellent entry during market corrections.

UnitedHealth (UNH)—Healthcare Service Innovator

UnitedHealth benefits from the aging US population and expanding healthcare needs. Its revenue and net profit grow steadily, with a clear long-term upward trend, and it offers attractive dividend yields.

All these companies are leaders in the US healthcare market, with strong competitiveness, continuous innovation, stable cash flow, and substantial investment returns.

Investment Opportunities in Taiwanese Healthcare Stocks

SynCore Chemical (1720)

SynCore is a diversified pharmaceutical company involved in Western medicine, health foods, medical devices, and cosmetics. Its assets have grown steadily in recent years, with a healthy debt ratio. Although growth momentum is modest, the company’s stable dividends attract dividend investors.

HopKang Biotech (1783)

HopKang Biotech engages in biomedicine, medical devices, and skincare products. After turning profitable in 2017, its fundamentals remain stable, with a healthy asset-liability structure and consistently low debt levels, making it worth tracking.

The Realities and Opportunities of Healthcare Stock Investment

Taiwan’s overall capital market remains dominated by electronics stocks. Even with high-quality biotech companies, replicating the multi-hundred-fold gains seen in the US is difficult. As post-pandemic economic coexistence becomes a consensus, Taiwanese investors’ focus on biotech stocks may increase, but from today’s perspective, the US remains the best healthcare investment market.

US healthcare companies are large-scale, highly innovative, and highly competitive, making it easier to identify quality investment targets. The Asian pharmaceutical market is still developing; even outstanding companies’ stock performance and overall competitiveness lag behind their US counterparts. This reflects differences in market depth, as well as disparities in medical technology levels and investor professionalism.

Investing in healthcare stocks requires industry expertise, including understanding drug development cycles, clinical trial processes, and regulatory impacts. Interested investors should closely monitor US healthcare industry developments and seek the most promising global healthcare investment targets.