Lilly and its partner Novast start work on a plant in China

Alfonso Zulueta, Eli Lilly's president of emerging markets--Courtesy of Eli Lilly

Eli Lilly and Chinese partner Novast have started on a new plant in China to manufacture generic versions of Lilly drugs. The announcement Wednesday was a bit of good news on a day when manufacturing issues had otherwise cast a shadow over the Indianapolis-based drugmaker.

Lilly ($LLY) and Novast are building a 260,000-square-foot manufacturing facility in Nantong, Jiangsu, China, where Novast already has an FDA-approved plant that has been producing drugs for the U.S. market. The new plant will make branded generic versions of some of Lilly's sustained-release and containment solid oral dosage drugs for sale in China. It will have the potential to hit more than 2.2 billion units a year.

Lilly will spend between $60 million and $70 million on the facility, Alfonso Zulueta, president of emerging markets at Lilly, said in a statement. He said the plant will have about 350 employees when it goes online, which is expected to happen at the end of next year.

The two companies have been nurturing their relationship for some time. Lilly some years back made an initial investment in Novast through its Lilly Asia Ventures, and then in 2012 invested $20 million in the Chinese manufacturer to further secure production for its own products. The companies emphasized a focus on quality, saying "the facility will be state of the art and world class with emphasis on total quality and safety at each step of the design process."

Meanwhile, a problem with quality at a plant operated by another Lilly partner, Boehringer Ingelheim, was at the center of an FDA rejection of a new Type 2 diabetes drug from the two companies. The duo, which have partnered to develop new diabetes treatments, said Wednesday they had received a complete response letter from the FDA citing "previously observed deficiencies at a Boehringer Ingelheim facility where empagliflozin will be manufactured." In May 2013, the FDA sent the German drugmaker a warning letter for its plant in Ingelheim am Rhein citing it for not getting to the root cause of particulate contamination found in some batches of an active pharmaceutical ingredient manufactured there.

The project with Novast is not the only manufacturing expansion that Eli Lilly has going on in China. In November, the drugmaker said it would spend $350 million to expand insulin cartridge manufacturing in China. That investment was part of $700 million it said it would spend to build up its insulin-related facilities worldwide.

- here's the announcement