Lilly to invest $700M in plant expansions

Eli Lilly ($LLY) has been slashing jobs and freezing salaries as it hunkers down before it loses patent protection on its top-selling Cymbalta. But with its diabetes franchise providing a ray of sunshine during this dark period, it is ready to build on it further, proposing to spend another $700 million on new insulin related facilities worldwide.

Lilly twice this year announced insulin-related expansions at its headquarters in Indianapolis totaling $320 million. Now it says it intends to add active pharmaceutical ingredient (API) capacity there and in Puerto Rico and insulin cartridge production in France and China, bringing the expansion to more than $1 billion. The planned expansion in manufacturing capacity is tied to its insulin products like Humulin and Humalog.

The company emphasized its investment in China, a country 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 says it will invest $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 or start or finish dates, for example. A spokeswoman said that 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's insulin portfolio has provided some of the better news in a year that has included a 40% reduction in its sales force and company-wide salary freezes. Today's news comes a month after Lilly reported earnings for the quarter were down 9% to $1.11 a share. But that dreary news 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.

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