SK Group has decided to integrate its contract manufacturing organizations (CMOs) in South Korea, Europe and the United States.
SK Holdings Co., the group’s holding company, announced on Sept. 2 that its board approved on Aug. 30 a plan to set up SK Pharmteco in Sacramento, California by integrating SK Biotek Co. in South Korea, SK Biotek Ireland Ltd. in Ireland and AMPAC Fine Chemicals LLC in the United States.
The move is designed to enhance the global competitiveness of the group’s CMO business, which is regarded as a new growth engine after semiconductors.
The holding company will invest its stakes in SK Biotech and assets transferred from SK Biotech in SK Pharmteco. SK Biotek, SK Biotek Ireland and AMPAC will become fully-owned subsidiaries of the new entity.
SK Pharmteco, will be officially launched in January next year. With the integration, the South Korean conglomerate boasts an annual CMO production capacity of 1.01 million liters, which is among the largest in the world. SK Biotek has production facilities in Daejeon and Sejong City with a production capacity of 160,000 liters each, while SK Biotek Ireland can produce 100,000 liters and AMPAC 320,000 liters in California, 90,000 liters in Texas and 180,000 liters in Virginia.
Global CMO companies tend to get larger and larger. As the production process of medicines and medical supplies are becoming more complex, not only new pharmaceutical companies that do not own their own production facilities but also existing large drug manufacturers are relying on CMOs for production of their products. Global CMO firms are competitively enlarging their size as they can win large orders if they can produce various medicines. SK Group will be able to diversify its product portfolio and expand its production capacity when its regional CMO units are integrated under SK Pharmteco.
In particular, SK Group is planning to expand its production facilities to the world’s largest level after 2020 to bump up the value of its CMO business to over 10 trillion won (US$8.23 billion) after 2025.
Meanwhile, the global CMO market is forecast to grow at 7 percent on average every year until 2023 with global population aging and the increase in patients with chronic diseases.
Leading CMO companies have seen its annual average sales growth rate surpass 15 percent over the last three and four years. SK Group’s CMO business has also shown a higher sales growth rate than leading firms and achieved an annual rate of operating profits of more than 20 percent. It had combined sales of over 480 billion won (US$395.19 million) last year. The figure had nearly tripled compared to that before the acquisition.