R&D spending by large pharmaceutical companies is stabilizing despite continued restructuring. However, as pharmaceutical companies continue to streamline R&D, resources are shifting to clinical trials. Forced to balance between cost containment and drug development to secure future revenues, companies are prioritizing investments in drugs with the strongest growth potential, especially for therapies that will both benefit patients and increase value for health care payers.

For the 10 major pharmaceutical companies listed in the table above, total core R&D spending, which excludes impairments and other exceptional items, increased 1.0% in US dollars for the first nine months. Most companies increased late-stage development trials, which accounted for the majority of R&D costs. Novartis, Bristol-Myers Squibb, Eli Lilly and Teva Pharmaceutical Industries expanded R&D due to large Phase III trials and increased investments in biologics. Pfizer, Merck, AstraZeneca and Sanofi controlled R&D expenses either through new or existing restructuring plans.

This year, Pfizer announced plans to close a 30-employee clinical research unit focused on Phase I studies in Singapore, and its CovX research unit in San Diego, California, which has 100 employees. Pfizer continues to shift R&D spending from early research to development and has prioritized a number of Phase III programs in areas such as oncology, vaccines and autoimmune disease. In fact, the company is currently running a 22,000 patient Phase III trial for a cholesterol drug and is allocating additional resources to late-stage projects in oncology. Pfizer will also pay milestone payments and clinical development costs in the fourth quarter to Merck & Co. as a result of a partnership for Phase III trials for type 2 diabetes. The company raised the low end of its R&D outlook by $200 million to $6.3–$6.6 billion for the year. For the first nine months, R&D declined 6.1% to $4.8 billion.

Merck and AstraZeneca both announced major R&D reorganizations this year. Merck revealed this month a $2.5 billion restructuring plan, including the reduction of 8,500 jobs over the next two years primarily in R&D, marketing and administrative positions. Merck will relocate its headquarters within New Jersey and close or divest unused facilities. Certain lab work will be relocated to other facilities in New Jersey or Pennsylvania, while other positions will be eliminated. The company acknowledged the discontinuation of drugs with limited commercial viability or failed clinical trials, and will also eliminate research for primary care medicines. Merck will focus on late-stage therapeutics for oncology, diabetes, acute hospital care and vaccines. In fact, this year, the company accelerated R&D spending for an early-stage cancer therapy study, a vaccine for hepatitis C and viral treatments for HIV. R&D spending fell 6.1% in the first nine months.

AstraZeneca, which announced plans in 2012 to lay off 2,200 R&D positions primarily in neuroscience research, said in March that it will cut an additional 1,600 employees over the next three years. It will close its R&D facility at Alderley Park, UK, and consolidate roughly 2,500 positions at research centers in the US, Sweden and the UK. However, as part of the overhaul, the company will invest roughly £330 million ($500 million = £0.65 = $1) in a new R&D complex in Cambridge, UK, which will serve as its small molecule and biologics R&D center and corporate headquarters. The company said this month that it will close its Environmental Laboratory in Brixham, UK, which provides services to assess the impact of active pharmaceutical ingredients on the environment, affecting 71 jobs. Much like Merck, AstraZeneca will reduce the number of disease-area targets. It will focus on respiratory and inflammatory diseases, cardiovascular and metabolic disease, and oncology. Core R&D spending was relatively flat at $3.0 billion for the first nine months.

Like AstraZeneca, Sanofi is streamlining R&D. In July, the company announced plans to eliminate 376 research positions in France, but create 169 new jobs, mostly near Paris. Sanofi is developing small regional R&D hubs in the US, France, Germany and Asia to improve collaboration with outside research organizations and will close excess facilities. R&D spending for the first three quarters slipped only 0.8% to €3.5 billion ($4.6 billion) due to research for a vaccine for dengue, which is being tested in a Phase III trial involving more than 30,000 people. Additional resources are being directed into biologics, which like AstraZeneca, accounted for roughly half of the company’s products.

GlaxoSmithKline’s R&D spending also declined in the first nine months, dropping 5.8% to £2.8 billion ($3.9 billion). R&D spending is projected to decline further in 2014 as a number of Phase III trials will be completed.

In contrast, Novartis’s core R&D spending climbed 6.6% to $7.2 billion in the first three quarters. The company plans to open a vaccine R&D lab in Research Triangle Park, North Carolina, and will relocate 30 research staff from another facility in North Carolina, with plans to increase the head count to 100, according to wraltechwire.com. The one area the company has cut R&D spending in 2013 is in India, following the Gilvec patent rejection.

Similar to Sanofi and AstraZeneca, Bristol-Myers Squibb is investing in biologics. The company announced it would invest $250 million to add roughly 200,000 square feet of lab and office space to its Massachusetts biologics facility. One of the two proposed buildings will support process development for early production of biologics. Construction is expected to be completed by 2015 and will add roughly 350 employees. R&D spending grew 3.9% to $2.8 billion in the first nine months.

Like Sanofi, Johnson & Johnson invested in R&D for the treatment of dengue. In August, the company acquired the rights, including an up-front fee and future milestone and royalty payments, for the compounds to fight the virus. The company’s R&D spending grew 8.2% to $5.8 billion for the first three quarters.

Both Eli Lilly and Teva Pharmaceutical Industries ramped up R&D spending this year despite pressure from patent expirations and mixed results for clinical trials. Eli Lilly’s R&D spending climbed 6.3% to $4.1 billion in the first nine months due to higher early- and late-stage development costs. However, the company expects fourth quarter R&D spending to decline slightly and continue to slide in 2014, as the number of Phase III trials is projected to decrease from 13 to 8. Full-year 2103 R&D spending is estimated to be $5.3–$5.5 billion. R&D is expected to fall from 23% of sales in 2013 to roughly 18%–20% next year.