Lilly Announces China R&D Center in Major Strategic Departure

| About: Eli Lilly (LLY)

Eli Lilly (NYSE: LLY) will build a bricks and mortar center dedicated to R&D work on diabetes in Shanghai. The center represents a major strategic departure for Lilly, which has touted its partnership approach with China’s innovative life science community. Lilly says diabetes in China, which has reached epidemic proportions, has a different molecular structure than diabetes elsewhere in the world. The company hopes to discover innovative solutions to the disease.

During the past few years, Lilly been divesting its in-house R&D facilities. In 2008, it sold some of its home-base labs in Indianapolis to Covance (NYSE: CVD) and then signed a 10-year contract under which Covance will provide Lilly with services. Last week, the company closed an R&D lab in Singapore (see story). At the time, ChinaBio said an announcement about a China R&D center was imminent.

Lilly did not disclose its financial commitment to the center. However, it did state the facility will open with 100 scientists and support staff in the second half of 2011, so the company clearly plans to build a major institution. Most of the employees will come from China, according to Lilly.

Lilly has a number of products aimed at the China diabetes market. In the US, Lilly’s diabetes portfolio includes Humalog and Humulin®product families for diabetes type 1, and Byetta and Actos, for treating type 2 diabetes.

The company said the center’s work will complement its existing partnerships. Lilly also intends to examine medical conditions that are created by diabetes, such as cardiovascular disease and obesity.

Bei Betty Zhang, PhD, will head the new Lilly center. A native of Shanghai, she is Vice-President of Research for Lilly Research Laboratories in China. Zhang graduated from Fudan University in Shanghai, completed her doctorate at the Indiana University School of Medicine and received a postdoctoral fellowship at Stanford University School of Medicine.

Lilly also announced it will spend $2.5 million to support collaborative programs between China and Europeans researchers, working with the China Diabetes Society and the European Foundation for the Study of Diabetes.

"What we are saying in announcing the establishment of this center is that we are committed to innovation, we are committed to diabetes, and we are committed to improving outcomes for individual patients with diabetes," said David Moller, M.D., Vice President of Endocrine and Cardiovascular Research at Lilly. "Given key differences in the molecular basis of diabetes in Chinese and other Asian populations, a major focus at this center will be on discovering therapies that target critical aspects of the disease."

Lilly has been active in China since the early 1990s. It established a venture capital fund in 2007 that has made six investments, totaling $40 million. One division of CRO ShangPharma (NYSE: SHP), Shanghai ChemExplorer, is devoted to work on Lilly’s projects. Since the late 1990s, Lilly has invested more than $300 million in various China projects.

Disclosure: none.