U.S. pharmaceutical firm Eli Lilly & Co, maker of antidepressant Prozac and erectile dysfunction drug Cialis, said on Thursday it plans to develop more drugs in China because of lower costs and an ample pool of talent.

We need to find a way to establish leadership in China, not only by selling drugs, Darren Carroll, senior managing director of Lilly Asian Ventures, said in an interview.

The cost for a researcher in China is as little as 20 percent of the cost in the United States, where one out of five of Lilly's researchers is Chinese, Carroll said.

We believe we should find ways to come to the innovators, rather than having them all come to the U.S.

Lilly set up Lilly Asian Ventures in June to help find new technologies and strategic partners in Asia, especially in China, Carroll said. The fund has so far invested $10 million in Chinese start-up BioVeda.

Lilly has also said it plans to invest $100 million on research and development in China in the next five years.

In addition, Lilly has teamed up with China's Hisun Group and a unit of Hutchison Whampoa on drug development.

China, the world's most populous country, has also attracted research centres from other international players such as Novartis and Tamiflu maker Roche.

Lilly China President Jorg Ostertag has said China sales were rising about 26 percent a year, and he expected the country to become the company's 10th biggest global market by 2010, compared with 14th now.

Lilly Asian Ventures is a sister company of Lilly Ventures, which manages $175 million and invests globally. (Reporting by Samuel Shen; Editing by Edmund Klamann)

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