GM. This is Milk Road AI PRO, where we cut through the AI noise so you can invest with clarity.
Quick recap of where we've been.
In our report “The investor’s guide to AI adoption”, we built the AI adoption framework that scores which industries adopt AI fastest and why. We ranked sectors by ROI potential, AI readiness, and friction.
Pharma landed in Tier 2 right alongside retail and finance. High ROI pools, decent readiness, but meaningful friction from regulations and stakeholders.
Today, we go deep on pharma.
When people hear "AI in pharma", they picture a supercomputer discovering molecules. It's futuristic. It fits on a magazine cover. A robot in a lab coat.
But that's not where the immediate money is.
Pfizer's CEO, Albert Bourla, said on the company's February 2026 earnings call: "We didn't just cut costs, what we did is we improved productivity. And the main lever was the successful deployment of AI."
Not drug discovery. Productivity.
The real financial explosion isn't happening in the lab. It's happening in the supply chain, the regulatory filings, and on the factory floor.
Here's what we're covering today:
- 💊 The hidden value map: Why operations (not discovery) account for 39% of AI's value in pharma, nearly double that of R&D.
- 🤖 Agentic AI in action: How AI agents are already transforming clinical trials, data cleaning, and regulatory submissions.
- 🏭 The physical backbone: Supply chain, cold chain, and manufacturing; Where the margin expansion actually lives.
- 💰 The investment playbook: From pure-play AI biotechs to big pharma efficiency trades to infrastructure enablers.
Let's get into it.
The number that defines everything
Six years.
That's the standard timeline just to find a drug candidate worth testing. Not to get it approved. Not to manufacture it. Just to find something that might work.
Six years of burning cash, hitting dead ends, watching molecules fail. It's called the "valley of death" in pharma, and it's where most companies' R&D budgets go to die.
The math has gotten brutal.
Projected R&D returns fell from over 10% in 2010 to just 1.2% by 2022, the lowest in 13 years. There's been some recovery since (5.9% in 2024), but the long-term trend is clear: rising costs, declining returns.
The average cost to develop a drug now exceeds $2.2B per asset.
But the data we're seeing suggests that the timeline is about to get compressed hard.
We're not talking about shaving off a few months. AI technologies are already accelerating timelines from discovery to preclinical candidate stage by up to 50%.
That's not an incremental improvement. That's a regime change.
Forecasts project that pharma companies who fully industrialize AI could double their operating profits by 2030.
So how does AI fit in?
The obvious answer: use AI to find drugs faster.
Compress that six-year timeline. That's the story you see in headlines. AI discovers new molecules, screens billions of compounds in hours, and designs antibiotics that humans couldn't.
It's real. It's happening. But it's not where the immediate money is.
Here's why: even after you find a promising candidate, you've still got years of clinical trials, regulatory filings, manufacturing scale-up, and global distribution ahead of you.
Discovery is just the starting gun. The race is run in operations.
Forget sci-fi. Follow the deployment reality
If you look at where AI creates value in real-world use cases, the value distribution is not what you'd expect.
Strategy& analyzed over 200 AI use cases with 25 industry experts. They connected each use case to baseline elements of a pharma P&L and modeled the impact.
Here's what they found:
Operations account for the largest value share, and substantially more than discovery.
That feels backwards until you understand the logic.
R&D is high risk, high reward.
You might spend a billion dollars and get nothing. The probability of success for clinical development is hard to predict, and even AI-discovered drugs do not guarantee success and need years to prove their impact in actual patients.
Operations, on the other hand, is a reliability game.
Major pharma companies are essentially massive logistics and manufacturing entities with a research lab attached. They have billions tied up in infrastructure: factories, supply chains, quality systems, distribution networks.
If you use AI to optimize the machinery you already have, you aren't gambling on a new molecule. You're taking existing profit margins and making them wider.
The global numbers are staggering.
Pharma companies could gain an additional $254B in annual operating profits worldwide by 2030, assuming high AI industrialization.
For context, pharma companies' spending on AI solutions is projected to grow from about $4B today to $25.7B by 2030. So, the value unlocked by AI is 10x the market itself.
The thesis: Come for the sci-fi drug discovery, but stay for the supply chain optimization. That's where the reliable cash is.
Uh, Oh… 😧 The rest of this report is exclusive to AI PRO & PRO All Access members!
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WHAT’S LEFT INSIDE? 👀
- Where AI is paying off right now: Clinical trials, data cleaning, regulatory docs with specific company examples.
- The physical backbone: Supply chain, cold chain, and predictive maintenance numbers.
- The R&D reality check: Separating the hype from what's actually working.
- Connection to Big Bet #3: Decoupling growth from human labor.
- The full investment playbook: Two lanes to play AI in healthcare.
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