Lilly expands manufacturing in China with Novast deal

Eli Lilly ($LLY) has said China looms large in its financial future and has made another move there to expand its manufacturing capabilities.

The company says it has invested $20 million in Novast Laboratories of Nantong, China, a generic and specialty drugmaker. Several years ago, Lilly made an initial investment in the drugmaker through its Lilly venture capital unit, Lilly Asian Ventures. The company says in a release that Novast has built high-quality systems and manufacturing facilities that can help Lilly expand its branded generic business in China.

As part of the deal, Novast will expand its manufacturing capacity at its Nantong facility over the next several years, with Lilly providing expertise in quality standards. While the expansion will support their arrangement, it will not be used exclusively for Lilly products. The companies have "an initial list of medicines across multiple therapeutic areas that will be manufactured by Novast once the facilities are operational," Lilly says.

In March, Eli Lilly CEO John C. Lechleiter emphasized the importance of China to Lilly's growth, saying it has plans to be "the fastest growing pharmaceutical company in China." Its 2011 revenue there was up 25%. He said part of its plan there was to find a distribution partner because keeping distribution costs manageable was key to increasing bottom line results.

As for the Novast deal, Lilly's Senior VP and President of Emerging Markets Jacques Tapiero says, "We are excited to expand our collaboration with Novast. As we develop a platform of high-quality Lilly branded generic medicines in China, we are supporting the Chinese government's current 5-year plan, which calls for significant improvement in the quality of medicines in the pharmaceutical industry." 

- read Eli Lilly's announcement