Feb. 25 at 2:54 PM
RBC Capital Markets says large-cap U.S. pharma offers defensive exposure and earnings upside as AI reshapes drug development. The group trades at roughly a 25% discount to its 10-year average despite improving earnings momentum and over
$1 trillion in balance-sheet capacity for M&A.
RBC estimates AI could unlock about
$90 billion in cost savings over five years, boosting EPS by 5%–13% and lifting DCF valuations by 12%–25%. AI may cut preclinical timelines by 30%–40%, reduce development costs by 20%–30%, and expand manufacturing margins by 200–300 basis points. Early adopters such as Eli Lilly and Merck are already advancing AI-designed molecules more quickly into clinical trials.
Top picks include Eli Lilly (Outperform,
$1,250 target), AbbVie (Outperform,
$260), and Merck (Outperform,
$142). Bristol Myers Squibb is rated Sector Perform (
$60 target) given patent-loss risks through 2030.
$LLY $ABBV $MRK $BMY