SK Group will launch a new entity in the U.S. that will oversee its three medical producing affiliates to better manage its contract manufacturing organization (CMO) business and enhance its global competitiveness.

SK Holdings Co., the holding company of South Korea’s SK Group, said Monday its board on Friday approved a plan to set up SK Pharmteco in California, the U.S. SK Pharmteco, which will be officially launched in January next year, will combine SK Biotek with its overseas affiliates SK Biotek Ireland and AMPAC. The holding company will invest its stakes in SK Biotech and assets in SK Pharmteco to make SK Biotek, SK Biotek Ireland and AMPAC fully-owned subsidiaries of the new entity. Aslam Malik, chief executive officer of AMPAC, was nominated to head SK Pharmteco.

The holding company said the integration is to simplify the ownership structure of the group’s CMO business as well as to enhance synergy between the affiliates. The company expects the integration would help bolster its competitiveness in the global medical producing market and improve cost efficiency.

A view of AMPAC Fine Chemicals’ plant in the US. [Photo provided by SK Holdings]

The Korean conglomerate has been accelerating to expand its presence in the global CMO market, which is anticipated to grow at 7 percent on average every year until 2023.

In 2017, SK Biotek, a CMO that provides drug development and drug manufacturing services in the pharmaceutical industry on a contract basis, acquired raw material medicines producer SK Biotek Ireland. In July in the following year, SK Holdings acquired AMPAC, a U.S-based contract manufacturer of active pharmaceutical ingredients, one of few major deals worth hundreds of billions of won in the local pharma industry’s history.

The Korean conglomerate boasts a CMO production capacity of 1 million liters, which is among the largest in the world, and plans to push up the level to the top next year at the earliest.

Operating margin of its CMO business has been above 20 percent in recent years. Last year, the business delivered combined revenue of 480 billion won ($395.4 million), nearly tripled before its acquisition of overseas medical producing affiliates.

SK Holdings vowed to bump up the value of its CMO business to over 10 trillion won after 2025.

Shares of SK Holdings gained 0.25 percent to finish Monday at 200,500 won in Seoul.

By Noh Hyun and Cho Jeehyun

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