As China embraces AI, only 24% of US pharma execs bet on it for drug-making

Citi's recent survey reveals that only 24% of US pharmaceutical executives anticipate significant improvements in drug success rates due to AI adoption. The main concern is that even with accelerated drug discovery, the quality of the drugs and their success probability may not improve. Instead, bottlenecks in human biology, clinical judgment, and execution are likely to persist, regardless of the extent of AI deployment.

The survey found that 72% of respondents reported scaling or fully scaling AI across their research and development efforts. However, despite this enthusiasm, 56% of executives expect only a moderate boost in drug success probability, viewing it as progressing beyond a mere "wholesale revolution."

AI is expected to have the most immediate impact on early-stage discovery, particularly in target identification and validation (cited by 70% of respondents), as well as lead optimization and hit identification/screening. Companies are looking to allocate double-digit budget increases to AI-related R&D spending over the next year.

To offset potential costs, businesses are seeking outside AI partners, with 84% of those surveyed engaging with external AI firms. Chinese companies specializing in AI-driven drug research, such as Shanghai-listed HitGen and Hong Kong-listed Xtalpi, have already proven profitable. These firms are expected to see earnings accelerate as demand grows, benefiting from stronger utilization and operating leverage.

However, Chinese AI drug discovery companies' valuations remain significantly lower than their US counterparts, with a median price-to-sales ratio of 19 times their projected 2026 sales.