Biopharma has been spending more to achieve less. According to Deloitte's eighth annual industry tracking study, research and development returns have plummeted from 10.1% in 2010 to just 3.2% last year.

Despite the disturbing trend, some of the industry's biggest spenders are boosting their R&D outlays. Last year, Bristol-Myers Squibb Co. (BMY 0.28%)Celgene Corporation (CELG), and Johnson & Johnson (JNJ 0.46%) raised their research and development budgets by more than $1 billion each. 

Let's look at what they're doing with all that money.

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All about Opdivo

Bristol-Myers Squibb spent $6.4 billion on R&D last year, 30% more than a year earlier. Although the company has at least 20 novel drug candidates in clinical trials, Opdivo is the only program that soaks up more than 10% of the company's R&D budget. 

Opdivo and other PD-1 blockers are highly effective treatments for some, but patients with tumors that don't express much PD-L1 generally don't respond well. Certain cancer-fighting agents appear to give Opdivo something to latch onto, which suggests that combination therapies could be much stronger than the sum of their parts.

Running big clinical trials to test Opdivo combinations isn't cheap, but it's starting to pay off. A recent interim analysis showed Opdivo plus Yervoy provided a significant survival benefit over chemotherapy for an important group of newly diagnosed lung cancer patients, even for those with PD-L1 negative tumors.

Of course, Bristol-Myers is also looking outside of its own product line, with impressive results. A combination of Nektar Therapeutics(NKTR 9.86%) NKTR-214 and Opdivo shrank tumors for 26 of 36 patients in an exploratory early-stage study. Many of the most dramatic responses occurred among patients with PD-L1 negative tumors.

Don't be surprised if Bristol's R&D budget ticks higher next year, as well. The company recently signed a giant deal with Nektar to secure rights to NKTR-214 and expects to begin running further combination studies in around 20 separate indications.

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Replacing Revlimid

Celgene's multiple myeloma drug Revlimid racked up $8.2 billion in sales last year, but it will begin facing limited generic competition in 2022. Revlimid sales made up 63% of total revenue last year, so it's no wonder Celgene boosted its R&D budget 32% to $5.9 billion.

While Revlimid's imminent demise is tough to ignore, the extra research dollars are being put to good use. Last December, Celgene's collaboration with bluebird bio (BLUE 12.59%) took big steps toward cashing in on CAR-T, with stellar results for bb2121. The therapy involves reengineering a patient's own immune cells to recognize and destroy multiple myeloma, which has had outstanding results.

Celgene will need to split any revenue bb2121 might generate with bluebird bio, but the more recently announced $9 billion acquisition of Juno Therapeutics (JUNO) will give the company total control of JCAR017, a potential "best-in-class" CAR-T therapy for patients with non-Hodgkin lymphoma.

Celgene is bringing in so many new drug candidates that you might think it's compensating for a weak pipeline, but that's definitely not the case. The company has 15 programs in late-stage development and expects to launch 10 potential new blockbusters over the next five years.

A big budget gets bigger

Those of you most familiar with Johnson & Johnson's consumer goods might be surprised to learn the company spent $10.6 billion on R&D last year, which was 16% more than it spent in 2016. Pharmaceutical sales generated a little less than half of total revenue, but drug development probably consumed a much larger portion of R&D dollars.

Biosimilar competition for Remicade isn't as strong in the U.S. as abroad, but it's still a big factor influencing J&J's recent R&D push. The inflammatory bowel disease (IBD) therapy contributed 8.3% of total sales last year. Although Remicade sales fell 9.3% last year to $6.3 billion, heavy investment into a new prostate cancer drug could more than offset the losses.

Around 161,000 Americans received their first prostate cancer diagnosis last year. Keeping prostate tumors from spreading is crucial to long-term survival, but when standard hormone therapy stops working, there isn't much to do but wait with fingers crossed. There's a good chance that a big R&D investment of J&J's could change the treatment paradigm for this group, delivering billions in annual revenue in the process.

Johnson & Johnson spent heaps of its R&D budget following 1,207 of these patients around for years to see if Erleada, formerly apalutamide, can stop their tumors from spreading. The median patient treated with Erleada survived without metastasis 24.3 months longer than those given a placebo.

Those results are good enough that Evaluate Pharma expects the drug to generate $1.6 billion in annual sales by 2022. If the pricey new therapy's real-world performance matches the clinical trial data it produced, long treatment durations could drive sales much higher in the longer term.

Erleada might be the most exciting new drug to emerge from J&J's pipeline this year, but it probably won't be the last. The company intends to submit FDA applications for nine more new drug candidates between now and 2021. Whether the world's largest healthcare company will squeeze an above-average return out of its hefty R&D outlays remains to be seen, but it sure seems to be moving in the right direction.