2023 Taiwan Biotech Stock Investment Guide | In-Depth Evaluation of Five Hot Picks

▶ Why should you pay attention to biotech stocks now?

Economic uncertainty, persistent inflation, market volatility—these are the investment characteristics of 2023. In such an environment, traditional stocks have fallen sharply, while biotech stocks have demonstrated noticeable resilience. The ETF tracking the S&P 500 (SPY.US) has performed poorly over the past year, but the ETF tracking the biotech index (XBI.US) remains relatively strong.

The reason is simple: Biotech stock performance mainly depends on the progress of new drug development, not short-term economic conditions. When the economy is sluggish and assets are generally declining, these companies focused on long-term R&D tend not to fall as much, and may even rise against the trend. Therefore, biotech stocks have strong anti-inflation and economic cycle resistance characteristics, making them a noteworthy option in asset allocation.

▶ How to understand the market structure of Taiwanese biotech stocks?

Biotech stocks cover three major areas: new drug development, medical device manufacturing, and pharmaceutical distribution. Globally renowned biotech companies like Amgen (AMGN.US), Pfizer (PFE.US), Novartis (NVS.US) are key players in these fields.

In Taiwan, the most important reference index is the Taiwan Biotech Index. Compiled by Taiwan Index Plus, it includes representative companies such as PhytoHealth, United Biomedical, Grape King, Taiwan Biotech, and M3Tech, reflecting the performance and development trends of the entire biotech medical industry. However, it’s worth noting that some popular biotech stocks (like Johnson & Johnson, TAI Medical) have excellent performance but are not included in this index.

▶ Practical evaluation of five biotech stocks

1. PhytoHealth (6446.TW)— A growth-oriented player, waiting for a low point

Company overview: Founded in 2003, focusing on long-acting protein drugs for blood diseases, chronic hepatitis, cancer, etc. Over 95% of revenue comes from drug sales.

Key financial indicators:

• Market cap: NT$135.3 billion (as of March 15, 2023)
• Annualized return: -1%
• One-year increase: 45%

Investment analysis: The stock price has surged over 600% in the past three years, mainly driven by the successful上市 of self-developed new drugs, leading to rapid revenue growth. From January to February this year, total revenue reached NT$540 million, a 351% increase year-over-year, showing strong performance. Notably, the new drug Ropeg for treating polycythemia vera has been included in Italy’s national health insurance, with a price of €7,550, which will become an important revenue source for the company.

However, as a growth stock, it carries higher risks. The current stock price may still have short-term adjustments, so patience and gradual accumulation at lower prices are recommended.

2. United Biomedical (4743.TW)— Continuous release of new drug listing benefits

Company overview: Founded in 2008, mainly engaged in innovative drug R&D for chronic skin diseases and immune disorders. Over 75% of revenue comes from biotech new drugs.

Key financial indicators:

• Market cap: NT$101.7 billion (as of March 15, 2023)
• Annualized return: 0.3%
• One-year increase: 13%

Investment analysis: The stock price has been rising since 2019, turning profitable in 2022. The core driver is the successive上市 of new drugs—“SupiOne” has made tangible progress in diabetic foot wound healing and received approval in Taiwan; early this year, new drugs Bonvadis (wound ointment) gained import permits in New Zealand and India, opening new markets. The business outlook is positive, with growth potential to be observed.

3. TAI Medical (4126.TW)— A stable choice with attractive dividend yield

Company overview: Founded in 1977, mainly engaged in medical consumables, medical devices, and hospital engineering. Over 90% of revenue from medical consumables, leading in Taiwan’s related segments.

Key financial indicators:

• Market cap: NT$5.997 billion (as of March 15, 2023)
• Annualized return: 5%
• Cash dividend yield: 3.6%
• One-year increase: 17.5%

Investment analysis: If you seek stable performance and profitability in biotech stocks, TAI Medical is an excellent choice. Over the past two decades, the company has maintained steady growth, with profit margins above 10% most years, only experiencing a loss in 2009. In recent three years, profit margins have remained above 15%. Compared to R&D-focused biotech firms that may have long development cycles, TAI Medical’s involvement in engineering services and consumables means less volatility, making it suitable for conservative investors.

4. PoDao Technology (5312.TW)— A biotech stock with consumer attributes

Company overview: Founded in 1989, Taiwan’s largest eyewear retailer, mainly engaged in eyewear and contact lens sales, optometry services. Over 95% of revenue from eyewear sales.

Key financial indicators:

• Market cap: NT$3.838 billion (as of March 15, 2023)
• Annualized return: 7.6%
• Cash dividend yield: 4.5%
• One-year increase: 5%

Investment analysis: As a stable-performing biotech stock, PoDao’s profit margin hovers around 10%, with leading cash yield and annual return among peers. However, a risk to watch is the continuous revenue decline over the past two years. The company’s core competitive advantage lies in brand recognition and service trust. Based on this, seeking new growth points is advisable. Compared to other growth-oriented biotech stocks, its performance has been relatively flat.

5. Johnson & Johnson (4747.TW)— A traditional pharmaceutical company’s comeback

Company overview: Founded in 1959, mainly engaged in manufacturing, processing, and sales of Western medicines. Products include capsules, tablets, suppositories, etc., used for central nervous system, respiratory, gastrointestinal diseases, mainly sold in Taiwan and Asia.

Key financial indicators:

• Market cap: NT$1.517 billion (as of March 15, 2023)
• Annualized return: 3%
• Cash dividend yield: 3.2%
• One-year increase: 61.2%

Investment analysis: This long-established traditional pharmaceutical company has recently performed remarkably. Its stock price has risen 61.2% since March last year, far outperforming most Taiwanese biotech stocks and the broader market. Between 2021-2022, the stock price consolidated in the NT$30-40 range, then accelerated upward from December 2022, stabilizing above NT$45. Monthly revenue peaked at 41.52% growth mid-2022, and maintained steady growth in January and February this year (24.29% and 9.97%). Technical indicators suggest a long- to medium-term upward trend, though short-term correction is underway. Investors planning to enter may consider buying on dips.

▶ How to choose among these five stocks?

For aggressive investors seeking high growth: PhytoHealth and United Biomedical are top picks, but be prepared for risk management and patience.

For conservative investors seeking certainty: TAI Medical and Johnson & Johnson are more suitable. TAI Medical’s stability and dividend yield are attractive; Johnson & Johnson offers growth opportunities typical of traditional pharma in current conditions.

For value investors focusing on brand and market position: PoDao Technology, as Taiwan’s leading eyewear company, has mediocre short-term performance but long-term value worth evaluating.

▶ Five major risks in biotech stock investment you must know

Risk 1: Low success rate of new drugs
From R&D to approval, the success rate of new drugs is less than 10%, but the cycle takes about ten years. This means companies must burn money for research over this period, facing the risk of “nothing gained.”

Risk 2: Short patent protection period
Taiwan’s new drug patents last up to ten years, with five years of protection upon initial approval, plus an additional five-year extension if applied for. Once patents expire, generic competition arrives, and market exclusivity is fleeting.

Risk 3: Debt risk
Long R&D cycles and high costs mean that if a company’s revenue sources are limited and R&D projects are not attractive enough, it can easily fall into high debt, severely impacting operations.

Risk 4: Technical failure risk
Even in Phase III clinical trials (“blinding” stage), failure is possible, and the final approval is uncertain.

Risk 5: Market acceptance risk
Even after approval, factors like market acceptance, insurance coverage, and prescribing habits influence actual sales.

▶ Practical risk management and investment strategies

Strategy 1: Diversify to reduce individual stock risk
Avoid putting all funds into a single biotech stock. Select two to three stocks with different characteristics (e.g., one growth, one stable), and build a balanced portfolio.

Strategy 2: Regular monitoring and dynamic adjustment
Establish monthly or quarterly review routines. Track new drug progress, financial performance, market reactions, and adjust holdings accordingly. Pay special attention to clinical trial progress, patent expirations, and earnings changes.

Strategy 3: Use professional analysis tools to improve decision quality
Leverage stock analysis platforms to understand company fundamentals, R&D pipelines, and financial indicators. Combine authoritative data with your risk tolerance for more rational decisions.

Strategy 4: Establish investment discipline to avoid emotional trading
Biotech stocks can be highly volatile; short-term swings may trigger emotional reactions. Set clear stop-loss and take-profit rules, and follow your plan to avoid chasing highs or panic selling.

▶ Conclusion

In the context of combating inflation and diversifying investment risks, biotech stocks are indeed worth including in your portfolio. But this must be based on thorough evaluation: whether the company has excessive debt, whether the stock price is reasonable, how new drug development is progressing, and the success probability.

Overall, we recommend investors focus primarily on three types of stocks:

Growth-oriented investors can consider PhytoHealth and United Biomedical, but should wait patiently for the right entry point; those seeking stable cash flow should prioritize TAI Medical and Johnson & Johnson, especially TAI Medical’s profitability and dividend yield; investors confident in long-term value can moderately watch PoDao Technology, but keep a close eye on its revenue trends.

Whatever you choose, remember a core principle: understand the risks, diversify holdings, monitor regularly, and operate with discipline—that’s the right approach to navigating the biotech market fog.