2023 Biotechnology Stock Investment Map | Why Should You Pay Attention to Biotechnology Stocks Now?

Why Do Biotech Stocks Outperform During Economic Downturns?

Starting in 2023, the global markets are filled with uncertainty. The Ukraine-Russia conflict, aggressive Federal Reserve rate hikes, bank collapses like Silicon Valley Bank… a series of black swan events have caused investors to panic. In such an environment, most assets are declining, but did you know? There is a category of stocks that perform quite resiliently—biotech stocks.

Comparing the performance of ETFs tracking the S&P 500 and those tracking biotech indices over the past year clearly shows that biotech stocks are more resistant to declines. This is not a coincidence but is determined by the unique nature of biotech stocks themselves.

Why can biotech stocks resist inflation? Because the core revenue drivers for biotech companies are the progress of new drug development, not short-term economic conditions. In other words, when the stock market crashes and consumers cut back on spending, the demand for medicines remains relatively stable. That’s why, during economic downturns, biotech stocks tend to become market favorites.

What Exactly Are Biotech Stocks?

Simply put, biotech stocks are publicly listed companies that utilize genetic engineering, cell engineering, protein engineering, and other biological technologies to develop new drugs, produce, and sell medical devices.

Biotech stocks are generally divided into two categories:

• New drug research and sales: Focused on developing new drugs and bringing them to market
• Medical devices and consumables: Producing medical equipment, consumables, and related products

Globally renowned biotech companies include Pfizer, Novartis, Amgen, and others. In Taiwan, we can track the overall performance of local biotech stocks through the “Taiwan Biotech Index.”

What Does the Taiwan Biotech Index Say?

The Taiwan Biotech Index is compiled by Taiwan Index Plus, consisting of representative stocks among listed biotech and medical companies, reflecting the development trend of Taiwan’s biotech industry. The index includes major biotech firms such as PharmaEngine, Joincare, Grape King, and Taiwan Biotech.

It’s important to note that not all biotech stocks are included in the index. For example, popular stocks like Johnson & Johnson and TAI Medical are not listed. Therefore, looking at the index alone is not enough; in-depth analysis of individual stocks is also necessary.

In-Depth Analysis of Five Taiwan Biotech Stocks

PharmaEngine(4162.TW) — A Rising Star in New Drug Development

Company Overview: PharmaEngine was founded in 2003, focusing on long-acting protein drugs for blood diseases, chronic hepatitis, cancer, and other fields. Over 95% of revenue comes from drug sales, which is the main income source.

Key Indicators (as of March 2023):

• Market Cap: NT$13.53 billion
• Annualized Return: -1%
• Dividend Yield: None

Investment Highlights: PharmaEngine’s stock price has surged 45% in the past year, far outperforming the overall Taiwan stock market. Over three years, the increase exceeds 600%. In January-February 2023, revenue totaled NT$540 million, up 351% year-over-year. In March, the company’s new blood disease drug Ropeg was included in European health insurance, priced at €7,550, which is expected to become a major revenue driver.

Risk Warning: As a growth stock, it is more volatile, and short-term prices may still decline. Investors are advised to wait patiently for entry opportunities.

Joincare(4743.TW) — The Harvest Period for New Drug Launches

Company Overview: Joincare was established in 2008, focusing on innovative biotech drugs for chronic skin and immune diseases. Over 75% of revenue comes from new drug sales, making it core business.

Key Indicators (as of March 2023):

• Market Cap: NT$10.17 billion
• Annualized Return: 0.3%
• Dividend Yield: 0.01%

Investment Highlights: Joincare’s stock price increased 13% over the past year, outperforming the Taiwan market. Since 2019, the company has launched several new drugs, turning losses into profits by 2022. In 2021, its self-developed drug “SuBi” for diabetic foot ulcers showed significant efficacy and received Taiwan’s new drug approval. Earlier this year, the new drug Bonvadis cream gained import approvals in New Zealand and India, opening new markets.

Development Outlook: Business signals are positive, and new drug launches are entering the harvest phase.

TAI Medical(4126.TW) — The Top Choice for Stable Returns

Company Overview: TAI Medical was founded in 1977, mainly producing medical consumables, medical instruments, and gas pipeline equipment. Medical consumables account for over 90% of revenue, leading in Taiwan’s niche.

Key Indicators (as of March 2023):

• Market Cap: NT$5.997 billion
• Annualized Return: 5%
• Dividend Yield: 3.6%

Investment Highlights: The stock price increased 17.5% in the past year. If you seek stable performance and profits, TAI Medical is a good choice. The company has shown steady growth over the past 23 years, with profit margins above 10%, except for a loss in 2009. In recent three years, profit margins have remained above 15%.

Features: This is a relatively mature and stable biotech company with low volatility, suitable for investors with lower risk tolerance.

BaoDao Tech(5312.TW) — The Leading Eyewear Company with Stable Income

Company Overview: BaoDao Tech was founded in 1989, and is Taiwan’s largest eyewear retailer, mainly engaged in eyewear design, sales, and optometry services. Eyewear sales account for over 95% of revenue.

Key Indicators (as of March 2023):

• Market Cap: NT$3.838 billion
• Annualized Return: 7.6%
• Dividend Yield: 4.5%

Investment Highlights: The stock price rose 5% over the past year, outperforming the market. Profit margins are stably around 10%. As Taiwan’s leading eyewear brand, it enjoys high brand recognition and trusted service. Its annualized return and dividend yield are competitive among peers.

Caution: Revenue declined in the past two years, which is a risk signal to watch.

Johnson & Johnson(4747.TW) — Last Year’s Big Winner

Company Overview: Johnson & Johnson (J&J) was founded in 1959, mainly manufacturing and selling Western medicines, including capsules, tablets, suppositories, etc., mainly for central nervous system, respiratory, and gastrointestinal diseases.

Key Indicators (as of March 2023):

• Market Cap: NT$1.517 billion
• Annualized Return: 3%
• Dividend Yield: 3.2%

Investment Highlights: J&J has been a recent standout. Since March last year, its stock price has surged 61.2%, far ahead of other Taiwanese biotech stocks. From 2021-2022, the stock hovered around NT$30-40, then accelerated from December 2022, now stable above NT$45. In January, monthly revenue increased 41.52% year-over-year, hitting a high for the year. Revenue growth in January-February remained steady at 24.29% and 9.97%, respectively, compared to last year.

Technical Analysis: The medium- to long-term upward trend is clear, but short-term correction is underway, suitable for buying on dips.

Three Core Risks in Biotech Stock Investment

To profit from biotech stocks, you must recognize these realities:

1. Low success rate for new drug development — The success rate from R&D to approval and market launch is less than 10%, taking up to ten years. This means companies burn money for many years, with the possibility of ending up empty-handed.

2. Short patent protection period — In Taiwan, new drug patents are protected for a maximum of 10 years, usually 5 years basic protection plus 5 years extension. Once patents expire, generic manufacturers flood the market, making the monopoly period for new drugs very short.

3. Debt issues cannot be ignored — Long-term R&D spending, coupled with weak financing ability or insufficient competitiveness of existing drugs, can lead to high debt problems, even threatening daily operations.

Winning Strategies for Biotech Stock Investment

Strategy 1: Diversify to Reduce Risk

Don’t put all your eggs in one basket. Allocate funds across multiple biotech stocks, balancing different company performances and industry fluctuations. Choose companies with strong fundamentals and growth potential to ensure portfolio stability.

Strategy 2: Regular Monitoring and Flexibility

Review your portfolio weekly or monthly, paying attention to financial reports, new drug progress, and market trends. Adjust holdings promptly based on new information—buying promising companies and selling riskier ones. This is not frequent trading but rational risk management.

Strategy 3: Use Reliable Analysis Tools

Use reputable stock analysis platforms to review financial indicators, R&D pipelines, clinical trial progress, and other key information. Combine this with your investment goals and risk tolerance to make more precise decisions.

2023 Biotech Investment Recommendations

Based on fundamental analysis, debt levels, stock price position, and new drug development progress, we recommend investors focus on the following three stocks:

Taiyi — Stable performance, profitable, suitable for conservative investors Johnson & Johnson — Rapid growth, clear upward trend, likely to continue rising BaoDao Tech — Relatively high dividend yield, suitable for investors seeking stable cash flow

Of course, if you have higher risk tolerance, PharmaEngine and Joincare, as leading new drug companies, are also worth watching—the potential returns from successful new drug launches are significant.

Finally, a reminder: biotech stocks do have inflation-resistant features, but they are also full of risks. Do your homework, diversify, and review regularly—these are the keys to long-term success in this field.