Lilly goes on $1B global binge to boost its insulin capacity

While other areas of its business have stumbled, Eli Lilly ($LLY) has been betting on diabetes treatments to help it pull through a bad patch. And like a gambler on a winning streak, Eli Lilly will double down on its investments in insulin production with expansions at plants in China, France, Puerto Rico and the U.S. This is after having doubled its bet earlier this year.

Lilly will pour $700 million into facilities around the world to add cartridge manufacturing capabilities and API production. That is on top of the investment it announced in April for expansion of its headquarters in Indianapolis, IN, which brought what it would put into facilities there from $140 million to $320 million. With today's three-continent news, its planned investments in its diabetes production capabilities now stand at more than $1 billion.

So where is Lilly placing these bets? There will be $350 million to expand insulin cartridge manufacturing in China, $245 million to expand insulin API and delivery device manufacturing capacity in Indianapolis and Puerto Rico and $120 million to "enhance" cartridge manufacturing capacity in France. The company was not big on details, putting no job numbers to the expansions nor start nor finish dates, for example. A spokeswoman said the projects would happen over the next several years and that "the extent to which these planned investments will produce new jobs is still to be determined and will vary by location."

Lilly pointed out that diabetes is a global problem that is on the rise. It put special focus on its investment in China, an emerging market where it hopes to draw a growing part of its revenues.  "In particular, our ongoing investment in China will help Lilly bring medicines to the country with the largest population of people with diabetes--and which is projected to rise to more than 142 million by 2035," said Jacques Tapiero, senior vice president and president, Lilly Emerging Markets.

Lilly's insulin portfolio has offered some of the better news in a year that has included a 40% reduction in its sales force in May and company-wide salary freezes in July. Today's news comes a month after Lilly reported earnings for the quarter were down 9% to $1.11 a share. But that dreary update was better than analysts expected because of a 6% sales jump powered in part by higher insulin prices. Humulin sale were up 22% in the U.S., and Humalog revenues increased by 6% in the U.S. and 8% abroad.

Lilly today noted that it has 14 diabetes drugs in development, including three that could hit the market next year, assuming approval. But not everyone is convinced that Lilly is going to get the big payoff from all of this focus on diabetes. When the drugmaker reported earnings last month, Goldman Sachs analyst Jami Rubin cautioned that Lilly's diabetes franchise faced some formidable competition with heavyweights like Merck ($MRK), Pfizer ($PFE) and Johnson & Johnson ($JNJ) also with products in the works. "Lilly has a clinical program heavy in diabetes where differentiation and reimbursement are likely to be challenging," she said.

- here's the release