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Gilead buys Degussa's API custom manufacturing unit

By Gregory Roumeliotis , 08-Jun-2006

Biotechnology firm Gilead has acquired Raylo Chemicals, a Canadian production unit of active pharmaceutical ingredients (APIs) and advanced intermediates, from Degussa for €115m, seeking to bring more manufacturing capacity and expertise in-house.

The move is the result of Gilead using the increased revenue from royalties of its flu drug Tamiflu, spurred by fears of an upcoming avian influenza pandemic, to streamline the development of its pipeline.

The Foster City-based company intends to utilise this site primarily for manufacturing development of investigational products, supplying API for clinical research programmes and contributing to new product launch supplies.

Among its several clients, Raylo has had a custom manufacturing relationship with Gilead for the last 14 years, providing it with both development expertise and commercial product on a large scale, so Gilead felt it was time to bring the unit onboard.

"Gilead has had a long-standing and successful partnership with Degussa and Raylo, and we look forward to welcoming our colleagues at Raylo to the Gilead team," said Gilead CEO John Martin.

"This agreement underscores our commitment to advancing new therapies that address significant unmet medical needs by enabling us to rapidly provide adequate supply of Gilead's investigational products for preclinical and clinical evaluation."

Degussa has also entered long-term agreements with Gilead for the supply of raw materials and the manufacture of certain APIs for Gilead products.

The German specialty chemicals group has decided to focus from now on on the production of high-value regulated intermediates and on-patent APIs in its European custom manufacturing sites.

As far as Asia is concerned, Degussa will concentrate on the production of pharmaceutical raw materials, certain intermediates and off-patent APIs in the newly formed Degussa/Lynchem joint venture in China and with other long-term co-operations.

"The sale of Raylo is a key step in our sustainable growth strategy in fine chemicals to shift production capacity from the Western Hemisphere to Asia," said Klaus Engel, chairman of Degussa's management board.

"The long-term supply agreements with an innovative company such as Gilead prove Degussa's strong position in exclusive synthesis and are a landmark for the successful cooperation with a leading pharmaceutical company."

Gilead will assist Degussa in transitioning non-Gilead business from Raylo to other sites while Degussa will ensure the business and supply relationships with Raylo's existing customers.

Located in Edmonton, Canada, Raylo Chemicals has approximately 200 employees at two sites, Clover Bar and Argyll Road.

The Raylo name and the Argyll Road site will remain assets of Degussa and the companies expect the transaction to close in the fourth quarter of 2006.

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