U.S. Pharmaceutical Stocks Investment Guide: Analysis of Global Top Pharma Companies' Strategies

The global pharmaceutical industry is currently in a golden growth period. With increasing aging populations, continuous emergence of new therapies, and rapid adoption of telemedicine, U.S. pharmaceutical stocks have become a key focus for investors worldwide. Compared to traditional industries that must contend with economic cycle fluctuations, the pharmaceutical sector has a natural advantage during economic downturns—people need medication regardless of the economy. This gives U.S. pharmaceutical stocks unique defensive value and growth potential.

Why Does the U.S. Dominate Global Pharmaceutical Innovation?

The U.S. has become the most active hub for the global biopharmaceutical industry. Market forecasts show that the U.S. biotech and pharma market will continue to expand, with a stable mid-to-high single-digit compound annual growth rate. This leadership is no accident.

The U.S. boasts the most comprehensive biotech ecosystem in the world. The industry employs nearly a million people across the entire value chain—from basic R&D, clinical trials, manufacturing, to commercialization. Top universities and research institutions cluster here, continuously supplying talented professionals and creating a positive feedback loop. Meanwhile, the U.S. capital markets are unmatched in their investment in innovative medicines, providing ongoing funding that fuels continuous innovation.

More importantly, the U.S. adopts a market-based pricing model. Unlike Taiwan, which relies on national health insurance to control drug prices, the U.S. allows pharmaceutical companies to set prices freely based on market demand and efficacy, with insurance companies covering the costs. Although this system results in higher healthcare costs, it also incentivizes the development of new drugs. Profitable pharmaceutical companies are willing to invest heavily in high-risk basic research. As a result, most innovative drugs are first launched in the U.S., and FDA approval is almost equivalent to global recognition.

The Value of Pharmaceutical Stocks Comes from the Future, Not Current Profits

Understanding U.S. pharmaceutical stocks hinges on grasping their unique valuation logic. Unlike traditional manufacturing, biotech companies are mostly in the R&D stage, lacking stable cash flow or current profits. Many investors wonder how these companies can command high valuations—the answer is simple: the market is buying the future.

Once a new drug passes clinical trials and gains FDA approval, its commercial prospects can explode. The industry has a term called “blockbusters,” referring to drugs with annual sales exceeding $1 billion. Successful companies, even with steady cash flow from existing blockbuster drugs, often reinvest 50-60% of revenue into R&D to seek the next breakthrough. Large institutional investors tend to assign higher valuations to such companies because their ongoing innovation commitments imply continuous growth momentum.

This also explains why traditional financial metrics like PE ratios are less relevant for pharma stocks. The industry commonly uses the Price-to-Sales Ratio (PSR) to evaluate R&D-stage companies, focusing on sales rather than current profits. Taiwan’s PharmaDrug (藥華藥) is a typical example—its stock doubled in 2022 despite negative EPS, as investors valued its pipeline of drugs approved as orphan drugs in the U.S. and the growth potential from upcoming clinical trial approvals.

Three Major Challenges in Investing in Pharmaceutical Stocks

Investing in U.S. pharma stocks is not without hurdles. First is high volatility. Clinical trial results, competitor developments, regulatory policy changes, patent disputes, and other uncertainties can cause sharp stock price swings. A company might soar after a successful trial or plummet due to patent expiry fears. Investors need strong psychological resilience and long-term patience.

Second is the high level of government and insurance intervention. The FDA enforces the strictest drug approval standards globally, with every step critical. Different countries also have their own pricing and reimbursement policies. While Taiwan’s national health insurance provides broad coverage, it also suppresses drug prices, discouraging many pharmaceutical companies from introducing their latest drugs locally. These policy differences impact global revenue expectations.

Third is the high professional threshold. Unlike investing in consumer or tech stocks, pharma investing requires deep industry knowledge—including drug development processes, clinical trial phases, FDA approval mechanisms, and market size assessments. Relying solely on financial statements is insufficient for accurate judgment.

Top U.S. Pharmaceutical Stocks to Watch

The U.S. healthcare market is divided into four main sectors: pharmaceuticals, biotech, medical devices, and healthcare services. Each has leading companies worth paying attention to.

1. Eli Lilly (LLY)—Beneficiary of the Weight Loss Wave

Lilly’s market cap has surged into the top ten globally, making it one of the largest pharmaceutical companies worldwide. Its main growth driver is the weight loss market, accounting for about 60% of its North American sales. With rising obesity rates and increased health awareness worldwide, the weight loss drug market still has huge growth potential. Lilly’s ability to continue innovating and developing related products will determine its long-term trajectory.

2. Pfizer (PFE)—A Cash Cow

Pfizer gained fame for its COVID oral antiviral treatment, which effectively treats mild cases. The company’s stock performance is steady, making it a good long-term investment during market dips. Its stable cash flow and dividend payments make it a defensive pharma stock.

3. Johnson & Johnson (JNJ)—A Healthcare Multinational

J&J operates across pharmaceuticals, medical devices, and consumer health products, with a broad and highly recognized product portfolio. Its stock price tends to be relatively stable, with generous and steady dividends, making it ideal for dollar-cost averaging or long-term holding. Its resilience against economic cycles has earned it the reputation as the “King of Biotech.”

4. AbbVie (ABBV)—Guardian of Patent Value

AbbVie’s main profit driver is Humira, a top choice for treating rheumatoid arthritis. Despite patent expiry concerns, AbbVie holds over a hundred patents protecting Humira, making it difficult for competitors to break through. The company has licensing agreements with giants like Pfizer and Amgen, allowing it to collect royalties even after biosimilar competition begins. AbbVie also invests heavily in R&D to develop the next blockbuster drug, making it a good buy on dips.

5. Merck (MRK)—Leader in Cancer Treatment

Merck’s flagship product, Keytruda, is one of the world’s best-selling cancer immunotherapies. The company’s stock has steadily risen, and its dividend is among the industry’s highest. Market downturns are good entry points for long-term investors seeking attractive compounded returns.

6. UnitedHealth (UNH)—Beneficiary of Healthcare Demand

UnitedHealth benefits from the increasing healthcare needs driven by the aging U.S. population. As the elderly demographic expands, its revenue and profits continue to grow. The stock has a long-term upward trend, and its dividends are attractive.

These companies all possess strong competitiveness, continuous innovation, solid financial foundations, and good dividend yields. They represent core assets within the U.S. pharmaceutical sector.

The Reality of Taiwanese Pharma Stocks

Taiwan also has some noteworthy pharmaceutical companies, but overall, they lag behind U.S. stocks.

Sino Biopharm (1720) is a diversified pharma company involved in Western medicine, health supplements, and medical devices. Its fundamentals are average, but it is known for stable dividends, making it popular among dividend investors.

Kangchen Biotech (1783) engages in biotech, medical devices, and skincare products. Its fundamentals have been stable recently, with healthy assets and low debt levels, warranting ongoing attention.

The core issue facing Taiwan’s pharma industry is the limited capital market size. The overall investment trend remains focused on electronics stocks. Even excellent companies struggle to garner sustained market enthusiasm like their U.S. counterparts. The national health insurance system, while protecting the public, exerts strong pressure on drug prices, limiting local pharma profits. The Asian pharmaceutical market is still developing, with significant gaps in technology and industry ecosystem compared to the U.S.

How to Trade U.S. Pharma Stocks via Investment Platforms

Through platforms like Mitrade, Taiwanese investors can easily participate in U.S. stock trading. You don’t need to buy individual stocks directly; instead, you can track U.S. stock prices and trade on both upward and downward movements. This approach has low barriers and high flexibility, suitable for short-term trading strategies.

The account opening process is simple: choose a demo or real account, apply online (via mobile app), search for the target instrument, review contract details, open long or short positions based on your outlook, set trading volume, stop-loss, and take-profit parameters, then submit the order. The entire process is quick and supports mobile, web, and PC platforms.

Summary: Why Choose U.S. Pharma Stocks

Biotech stocks attract attention because of their large growth potential and the possibility of sudden surges. However, Taiwan’s capital market remains dominated by electronics stocks, and even the best local biotech firms rarely see the multi-hundred-fold gains seen in U.S. stocks.

The advantages of U.S. pharma stocks lie in their mature market mechanisms, ample capital investment, talent concentration, and clear regulation—FDA approval is almost synonymous with global recognition. These factors create the most fertile ground for pharmaceutical innovation worldwide.

For investors interested in the healthcare sector, focusing on the U.S. market is highly recommended. Globally, U.S. pharma stocks remain the best investment option. In contrast, Asian markets, while developing, still lag in industry technology, capital scale, and investor professionalism. Seizing opportunities in U.S. pharma stocks allows investors to participate in the global pharmaceutical innovation and reap its benefits.