RBC analysts are bullish on large-cap pharma stocks as artificial intelligence transforms drug development, with Eli Lilly and AbbVie receiving top ratings. The firm sees AI unlocking $90 billion in cost savings across U.S. pharma over five years, potentially boosting earnings per share by 5% to 13% and driving 12% to 25% upside in discounted cash flow valuations.

AI could shorten preclinical timelines by 30% to 40% and cut development costs by 20% to 30% through more efficient trials, while expanding manufacturing margins by 200 to 300 basis points. Early adopters like Eli Lilly and Merck are already advancing AI-designed molecules into clinical testing faster than traditional approaches. Pharma stocks currently trade at a 25% discount to their 10-year averages despite improving earnings momentum.

RBC rates Eli Lilly as Outperform with a $1250 price target, citing its obesity franchise and potential oral GLP-1 candidate orforglipron. AbbVie also receives an Outperform rating with a $260 target, as RBC believes concerns over slowing immunology growth are overstated. Merck is rated Outperform at $142, while Bristol Myers Squibb gets a Sector Perform rating at $60, and Pfizer is rated Underperform at $25.