For more than a year, pharmaceutical giant Eli Lilly & Co. has quietly been piecing together a pool of biomedical researchers who specialize in discovering, engineering and testing new biotech drugs.

Late last year, Lilly signed a 10-year lease on 125,000 square feet of space at Campus Pointe in University Towne Center, where it has combined San Diego subsidiaries SGX Pharmaceuticals and Applied Molecular Evolution into a single biotech center of excellence.

Tom Bumol, vice president of biotech discovery research at Lilly and head of the new West Coast facility, says the company is quickly moving toward a more robust biotechnology pipeline.

San Diego, he said, offered an innovative biotech environment alongside top biomedical research institutes such as Salk Institute, Burnham Institute for Medical Research and The Scripps Research Institute, along with the academic strength of UC San Diego.

“You have to be in San Diego to really be part of the future of biotech,” he said.

Lilly has embarked on a period of investment in recent years, potentially in preparation for generic competition of its best-selling drug, Zyprexa, which goes off patent in 2011. Other upcoming patent expiration dates on drugs like Cymbalta, Gemzar and Evista could further impact Lilly’s top-line revenues.

Since biotech drugs prove more difficult to copy than their chemical counterparts, Big Pharma companies like Lilly are increasingly recognizing that the future of pharmaceuticals heavily depends on coming up with new biologics. Clinical stage biotechnology drugs already account for more than half of Lilly’s drugs under development, and that number could approach a majority in just a few years, according to Bumol.

“We think this is a very important part of how pharmaceutical innovation will evolve,” he said.

On the other hand, biotechs are increasingly relying on Big Pharma to conduct large clinical trials and manufacture and commercialize its innovations.

“It’s better to take the product to a certain stage then have a strong partnership with a company like Eli Lilly & Co. to take it through commercialization,” said Camille Sobrian, chief operating officer of local trade group Connect. “Having the company in our backyard really increases the chances of those kinds of partnerships.”

Designing New Biotech Drugs

With emphasis on designing new biotech drugs to combat cancer, diabetes and autoimmune diseases, such as rheumatoid arthritis and multiple sclerosis, the center’s 170 researchers will work toward a companywide goal of two new biologics a year by 2013. Many of them stem from former San Diego biotechs.

Lilly acquired SGX in a $64 million deal announced in July 2008. The company, which specializes in visual technologies that allow scientists to better see the structure of their drug and its intended target in action, employed 120 people.