Degussa sells Raylo Chemicals to Gilead Sciences

Degussa, of Dusseldorf in Germany has signed a definitive agreement under which California-based biopharmaceutical company Gilead Sciences plans to acquire Degussa's subsidiary Raylo Chemicals Inc. with its assets at the Clover Bar site. Under the terms of the agreements and subject to certain closing conditions, Gilead will pay approximately Euro 115m to Degussa.

In addition, Degussa has entered into long-term agreements with Gilead for the supply of raw materials and the manufacture of certain active pharmaceutical ingredients (APIs) for Gilead products. The companies expect the transaction to close in the fourth quarter of 2006.

Located in Edmonton, Canada, Raylo Chemicals is currently part of Degussa's Exclusive Synthesis & Catalysts Business Unit with approximately 200 employees at two sites, Clover Bar and Argyll Road. Raylo's operations encompass custom manufacturing of API and advanced intermediates for the pharmaceutical and biopharmaceutical industries.

Gilead has worked with Raylo over the course of the last 14 years, during which time Raylo has provided both development expertise and commercial product on a large scale for Gilead.

Gilead intends to utilize the Clover Bar site primarily for manufacturing development of investigational products, supplying API for clinical research programmes and contributing to new product launch supplies. Degussa will ensure the business and supply relationships with Raylo's existing customers (other than Gilead). The Raylo name and the Argyll Road site will remain assets of Degussa.

"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 co-operation with a leading pharmaceutical company," said Dr Klaus Engel, chairman of Degussa's management board. "The sale of Raylo is a key step in our strategy to shift production capacity from the Western Hemisphere to Asia."

Degussa will focus its European custom manufacturing sites to produce high-value regulated intermediates and on-patent API from now on. In executing its Asian strategy, the Business Line Exclusive Synthesis will concentrate the production of pharmaceutical raw materials, certain intermediates and off-patent API in the newly formed Degussa Lynchem joint venture in Dalian/China or with other long-term co-operations in India and China.