Eli Lilly has increased its stake in Novast Laboratories of China as part of an expanded collaboration with the generics specialist.

Under the terms of the pact, Novast has "committed to set up a platform to support Lilly branded generic products" and increase manufacturing capacity at its Nantong site over the next several years. The US major will provide technical support to enhance quality standards and notes that additional capacity created at the facility "will not be solely dedicated to Lilly products".

The two companies gave few specific details about the agreement but said they have selected an initial list of medicines across multiple therapeutic areas that will be manufactured by Novast once the facilities are operational. Further down the line, the Nantong plant may provide local and regional manufacturing capabilities for Lilly's own pipeline of potential new medicines in development.

Cashwise, Lilly will increase its holding in Novast by $20 million, having made an initial (and undisclosed) equity investment in Novast several years ago through its Lilly Asian Ventures unit. Jacques Tapiero, the firm's president of emerging markets, made reference to the Chinese government's current five-year plan, "which calls for significant improvement in the quality of medicines in the pharmaceutical industry".

He added that with regards to Lilly's emerging markets business, "we are focused on providing patients with innovative medicines from our own pipeline, as well as select Lilly branded generic medicines that meet our quality standards". Mr Tapiero concluded by saying that "the additional manufacturing capabilities provided by Novast will allow us to better deliver on that strategy".

Lilly has made a number of strategic moves in China of late. Earlier this month, its R&D research centre in Shanghai was officially opened which will focus on discovering diabetes medicines with novel mechanisms of action that can be tailored specifically for the Chinese population.

The firm is currently constructing an insulin production, packaging and warehouse facility in Suzhou that is expected to open this year, and has also just signed a new agreement to establish a diabetes discovery collaboration in China with long-term partner Covance.