Gilead Sciences says that it has signed a definitive agreement to acquire the Canadian subsidiary Raylo Chemicals and most of its assets from German specialty chemicals company Degussa.

Under the terms of the agreement, Gilead will pay approximately 115 million euros ($148m) to Degussa for the business.

In addition, Gilead has entered into long-term agreements with Degussa for the supply of raw materials and the manufacture of certain active pharmaceutical ingredients for the US enterprise's products. The companies expect the transaction to close in the fourth quarter of this year.

Located in Edmonton, Canada, Raylo Chemicals is currently part of Degussa's Exclusive Synthesis & Catalysts business unit. Raylo's operations encompass custom manufacturing of APIs and advanced intermediates for the pharmaceutical and biopharmaceutical industries.

Gilead has worked with Raylo over the course of the last 14 years, tapping into the Canadian firm’s development expertise and commercial production. Gilead said it intends to use Raylo primarily for manufacturing development of investigational products, supplying APIs for clinical research programs and contributing to new product launch supplies. The Raylo name will be retained by Degussa.

John Martin, the US firm's chief executive, said: "As our company continues to grow, so does our need for chemical and manufacturing expertise."