How to choose Taiwanese biotech stocks? A guide to understanding five popular stocks and investment tips

▶ In an Era of Economic Turmoil, Why Are Biotech Stocks Attracting Investors?

Since 2023, the global economy has faced multiple challenges—persistent inflation, continued interest rate hikes, frequent banking risk events—assets held by investors have shrunk, and traditional safe-haven assets are losing their effectiveness. Amidst this dilemma, biotech stocks have emerged as a bright spot, becoming a market focus.

According to recent market performance data, ETFs tracking the U.S. biotech index (XBI.US) demonstrate stronger resilience compared to ETFs tracking the S&P 500 index (SPY.US). The underlying logic is simple—the core value of biotech stocks comes from the companies’ own progress in new drug development, not external economic conditions. When the economy is in recession and various assets decline together, some biotech companies’ stock prices remain solid or even rise due to successful drug progress, embodying the “countercyclical assets” investors seek.

Therefore, biotech stocks are widely recognized for their strong anti-inflation characteristics, capable of finding their own upward momentum at different stages of the economic cycle.

▶ What Are Biotech Stocks? Key Indicators of Taiwan’s Biotech Industry

Biotech stocks refer to listed companies focused on biotechnology and bioengineering fields, including gene engineering, cell engineering, protein engineering, and related technologies. They mainly engage in new drug R&D, medical device manufacturing, and sales. These companies generally fall into two categories: one focused on new drug development and sales, and the other on medical device manufacturing.

Global industry giants include Amgen (AMGN.US), Pfizer (PFE.US), Novartis (NVS.US), among others. In Taiwan, the Taiwan Biotech Index is a key benchmark for industry performance—it is compiled by Taiwan Index Plus based on market capitalization, liquidity, and trading volume, used to track the development trends of the local biotech and healthcare sector.

The index covers representative companies such as TTY Biopharm, United Biomedical, Grape King, Taiwan Biotech, and M3Tech. Notably, due to the selection criteria, some well-known biotech stocks like TAI Medical and J&J are not included, but this does not diminish their value as investment targets.

▶ In-Depth Analysis of Five Taiwanese Biotech Stocks

1. TTY Biopharm (6446.TW)—A Model of Growth in New Drugs

Founded in 2003, TTY Biopharm focuses on long-acting protein drugs for blood diseases, chronic hepatitis, cancer, and other areas. The company collaborates with international medical research institutions, with over 95% of revenue from drug sales.

Fundamental Indicators:

• Market Cap: NT$135.3 billion (as of March 15, 2023)
• Annualized Return: -1%
• Stock Price Increase in Last Year: 45%

Investment Analysis:

This company is a typical growth biotech stock. Although the annualized return is negative, it reflects the unique nature of biotech stocks—profitability is unstable and depends on new drug approvals. Notably, TTY Biopharm’s stock price has surged over 600% in the past three years, driven by successful launches and rapid sales of self-developed drugs.

In the first two months of this year, revenue reached NT$540 million, a 351% increase compared to the same period last year. More importantly, its new drug Ropeg for treating polycythemia vera has been approved by Italy’s health authorities, with a high unit price of €7,550, which will become a strong revenue pillar for the company.

Investment Tip: These stocks carry higher risks but offer significant growth potential. The current stock price may still see short-term adjustments, making it suitable for patient investors waiting for entry opportunities.

2. United (4743.TW)—A Critical Period for Breakthroughs in New Drugs

Founded in 2008, United Biotech focuses on innovative drugs for chronic skin and immune diseases, with over 75% of revenue from biotech new drugs. The company went public in 2011.

Fundamental Indicators:

• Market Cap: NT$101.7 billion (as of March 15, 2023)
• Annualized Return: 0.3%
• Stock Price Increase in Last Year: 13%

Investment Analysis:

United’s stock price has been rising steadily since 2019 and remains relatively high, mainly driven by the successive approval of new drugs. The company turned profitable in 2022, with its self-developed drug “SuBi” for diabetic foot ulcer healing approved in Taiwan, and Bonvadis has obtained import permits in New Zealand and India.

These positive signals suggest the company has potential to expand into new markets and achieve performance breakthroughs. Currently, United is in a critical phase of drug commercialization, with promising upward potential.

3. TAI Medical (4126.TW)—A Choice for Stable Cash Flow

Founded in 1977, TAI Medical mainly develops and manufactures medical consumables and medical instrument equipment, with over 90% of revenue from medical consumables. The company holds a leading position in Taiwan’s medical device segment.

Fundamental Indicators:

• Market Cap: NT$5.997 billion (as of March 15, 2023)
• Annualized Return: 5%
• Dividend Yield: 3.6%
• Stock Price Increase in Last Year: 17.5%

Investment Analysis:

If TTY Biopharm and United are in the “high risk, high return” camp, TAI Medical exemplifies “steady income.” Over the past 20+ years, its performance has maintained steady growth, with only one loss year in 2009. Profit margins have remained above 15% in recent three years.

The stability of TAI Medical comes from its business model—manufacturing medical consumables avoids the long, risky cycle of new drug R&D (“years of no revenue, years of profit”), making income highly predictable. This also results in more moderate stock price fluctuations, suitable for risk-averse investors.

Investment Tip: A choice that can outperform the Taiwan stock market while providing stable cash flow.

4. Bao Dao Tech (5312.TW)—A Test of Brand Value

Founded in 1989, Bao Dao Tech is Taiwan’s largest eyewear retailer, with over 95% of revenue from eyewear sales, offering optometry, glasses, and contact lens services.

Fundamental Indicators:

• Market Cap: NT$3.838 billion (as of March 15, 2023)
• Annualized Return: 7.6%
• Dividend Yield: 4.5%
• Stock Price Increase in Last Year: 5%

Investment Analysis:

Like TAI Medical, Bao Dao Tech is a mature biotech stock with stable performance. Long-term profit margins hover around 10%, and its dividend yield is attractive among peers. As a market leader, brand recognition provides continuous revenue support.

However, attention is needed as the company’s revenue has declined over the past two years, and stock price gains have been modest, indicating potential growth concerns.

5. Johnson (4747.TW)—A Dark Horse with Growing Momentum

Johnson (full name: Johnson Chemical Pharmaceutical Co., Ltd.) was established in 1959, mainly engaged in manufacturing, processing, and sales of Western medicines, including capsules, film-coated tablets, suppositories, and other forms, used for central nervous system, respiratory, and gastrointestinal treatments.

Fundamental Indicators:

• Market Cap: NT$1.517 billion (as of March 15, 2023)
• Annualized Return: 3%
• Dividend Yield: 3.2%
• Stock Price Increase in Last Year: 61.2%

Investment Analysis:

Johnson has been the most impressive performer recently. Since March last year, its stock price has surged 61.2%, far exceeding the overall Taiwan market. Interestingly, between 2021-2022, the stock price hovered around NT$30-40, but since December last year, it accelerated upward, now stable above NT$45.

This is supported by strong fundamentals—last year, the company achieved its highest monthly revenue growth (41.52%), and in January-February this year, revenue growth remained steady at 24.29% and 9.97%, respectively. Technically, the long- to medium-term trend remains upward, though short-term adjustments are underway, making it suitable for investors looking to buy on dips.

▶ Investment Outlook and Risk Tips for Biotech Stocks

Opportunities: Currently, some biotech stocks have entered “Phase III clinical trials” (drug blind phase), which is a critical period for approval. Successful approval could yield substantial returns. Companies like TTY Biopharm and United are in this stage.

Risks: However, opportunities come with risks. The success rate from R&D to market approval is below 10%, and the cycle can take up to ten years. Additionally, patent protection in Taiwan lasts only up to 10 years; once expired, generic drugs flood in, significantly eroding revenue. Companies with single revenue streams and high R&D investment may also face high debt risks.

▶ Practical Investment Tips for Biotech Stocks

Diversify to Reduce Risks: Avoid heavy concentration in a single biotech stock; allocate funds across multiple stocks with different characteristics to balance growth and stability.

Regular Monitoring and Adjustment: Biotech performance and policies are sensitive; regularly review the progress of new drugs, financial health, and market dynamics of your holdings, and adjust positions as needed.

Use Analytical Tools: Choose reliable stock analysis platforms to access key data—financial indicators, R&D pipelines, clinical trial progress—and combine with your risk tolerance to make informed decisions.

▶ Summary of Investment Recommendations

To select biotech stocks that hedge against inflation in the current environment, consider factors like debt levels, stock price position, new drug development progress, and success rates.

Conservative Investors may prioritize TAI Medical and Bao Dao Tech, as they have stable earnings and cash flow, making them reliable choices against inflation.

Growth Investors might focus on TTY Biopharm and United, paying attention to their new drug blind phase progress, but should be prepared for higher volatility.

Aggressive Investors can closely follow Johnson’s recent revenue momentum and look for entry points during technical corrections.

Regardless of the type of biotech stocks chosen, diversification, regular monitoring, and risk control are always the top principles.