Eli Lilly

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Company: Eli Lilly ($LLY)
Investment: $80 million, plus undisclosed R&D spend
Themes: Diabetes and branded generics

Eli Lilly was an early mover into China. Very early, in fact. Lilly hired a sales rep for Shanghai--its first outside the U.S.--in 1918. Yet despite the head start, Lilly is playing catch-up in a pivotal market: diabetes. And the importance of the market is such that Lilly is making big moves to increase its slice of the pie.

Its latest push is the creation of a diabetes R&D center that employs 150 people. By locating the center in China, Lilly hopes to tailor its new diabetes drugs to the genetics of the population. And it is working with local academic centers and other partners to bring more expertise to the effort. Regular Lilly collaborator Covance is among the partners, with the CRO offering pharmacology studies and other services to the diabetes R&D hub. ShangPharma also remains a close partner, opening a facility dedicated to Lilly in January.

The focus on collaborating to create innovative medicines that tackle major unmet needs shows Lilly is taking the high-risk strategy its is pursuing in the West to China. "Conquering a devastating disease like diabetes requires innovation, collaboration and investment. The establishment of the Lilly China Research and Development Center demonstrates we are serious about discovering and developing desperately needed breakthrough medicines for Chinese people with diabetes," Lilly EVP Jan Lundberg said in a company statement.

Lilly was tight-lipped when asked how much it spent on the diabetes center but was more forthcoming with details of its insulin production plant. A Lilly spokesperson confirmed that the company spent $60 million on its "second packaging and warehousing facility in the 200-square-mile Suzhou Industrial Park." Lilly broke ground in 2005 and opened the second facility earlier this year.

The insulin plant and R&D center reflect the decision of CEO John Lechleiter to make diabetes one of two primary markets for Lilly in China, the other being cancer. In both sectors Lilly is aiming to grow rapidly by developing innovative drugs to treat major unmet needs. But Lilly is willing to get involved at the other end of the market too and has made investments in a local branded generics partner. The latest saw the U.S. drugmaker back Novast with $20 million. Lilly will work with Novast to improve drug production quality at the Chinese plants and outsource manufacture of some branded generics to its partner.