SK Holdings will launch SK Pharmteco in January in California, consolidating its contract manufacturing organizations in Korea, the US and Europe with a long-term aim of a market debut in the US, the company said Monday.

“With the future US IPO (initial public offering) of SK Pharmteco and with additional mergers and acquisitions, we will grow to become a global top 10 CMO,” said an SK Holdings representative.

A contract manufacturing organization refers to a company that provides contract-based services to other pharmaceutical companies for drug development and drug manufacturing. CMOs are sought by both small-scale new pharmas and traditional big pharmas that need cutting-edge plants for varying quantities in pharmaceuticals production. SK Holdings said it expects annual average growth of 7 percent for the CMO market up to 2023.

In a decision reached through SK Holdings’ board meeting, SK Pharmteco will launch its headquarters in California’s capital city of Sacramento in January. The new CMO body will own 100 percent share of SK Biotek in Korea, SK Biotek Ireland in Europe and Ampac Fine Chemicals in the US.

Ampac’s CEO Aslam Malik was internally appointed as CEO of SK Pharmteco. Malik will be charged with boosting SK’s global CMO business.

Consolidation of the formerly spread out CMO businesses is SK’ global expansion strategy to streamline its corporate governance and hike up synergy between the organizations.

An integrated marketing program for a single brand will enhance its brand name in a global setting and optimize operational costs of each CMO, SK Holdings said.

The company will also adjoin its information and communication technology to CMO business for differentiated competitiveness and to grow its valuation through additional global mergers and acquisitions.

From clinical trial phases to commercialization, the ability to manufacture diverse types of raw drug materials is key to CMO deals.

SK Holdings has been competitively expanding its CMO body through the acquisitions in 2017 of SK Biotek Ireland and in 2018 of Ampac Fine Chemicals.

Through integration of all of SK’s CMO units, SK Pharmteco will accelerate the diversification of manufacturing portfolio and production capacity.

Currently, SK plants are able to manufacture up to 1 million liters. SK Holdings said it plans to enlarge this capacity to the world’s biggest level from 2020. The company also vowed it will boost its CMO business value to 10 trillion won ($8.2 billion) from 2025.

Last year, SK Holdings’ CMO businesses had notched a combined 480 billion won in revenue, three times the figure compared to before Ampac’s acquisition.

By Lim Jeong-yeo (kaylalm@heraldcorp.com)