Gilead Expands Into Manufacturing

STRATEGY

D'egussa's strategy shift came at an opportune moment for Gilead Sciences. Driven by sales of its HIV treatments, Gilead boasted a compounded annual sales growth rate of more than 50% between 2001 and 2005. But maintaining that growth "is going to be the challenge of the future," says Ernest J. Prisbe, Gilead's vice president of chemical development. "That's why we felt the need to invest in Raylo," Degussa's active pharmaceutical ingredient (API) manufacturing subsidiary in Edmonton, Alberta.

Phase II clinical trials. Prisbe notes that producing the API for toxicology studies is often the rate-limiting step when pushing a drug through development. Gilead's hope is to accelerate time to market by bringing development-scale synthesis in–house.

Another goal behind the purchase is better response to changes in demand. "With the capricious nature of regulatory agencies," there's always uncertainty around when a product will actually be launched, Prisbe says. Internal manufacturing capacity will allow Gilead to be more flexible and responsive, while also giving the company direct control over the quality aspects of API production.

At the same time, Gilead acknowledges that it will continue to rely on partners to manufacture its current portfolio. "We realize this facility certainly can???t do everything for us," Prisbe says. Gilead sees Degussa as a key part of its supply chain for intermediates and APIs, particularly now that the German company can offer lower-cost production through Lynchem and Hikal.

As part of the purchase, Gilead has agreed not to compete with Degussa in the exclusive synthesis market for a period of several years. Prisbe emphasizes that Gilead has no ambitions of eventually becoming a player in the contract manufacturing arena.