[Report] SK Bio Expands Production Capacity... "CDMO Financial Story Near Completion"

Contract Development and Manufacturing of Pharmaceuticals 'SK Biotek'
Sejong Plant Phase 3 Operation Begins... Phase 4 Construction
Annual Production of 150t Active Pharmaceutical Ingredients... 220 Billion KRW Sales Expected This Year

SK Biotech employees are working at the Sejong factory located in Myeonghak Industrial Complex, Sejong City, using low-temperature continuous reaction equipment. (Provided by SK Biotech)

[Sejong=Asia Economy Reporter Oh Hyung-gil] Long pipes, intricately intertwined like a maze and surrounded by black insulation material, were densely connected. Inside, chemical materials flowed incessantly, resembling a scaled-down petrochemical plant. The monitoring system on a small screen displayed all the numbers indicating that a consistent internal temperature and pressure were maintained within the pipes.

SK Biotek's core technology, the low-temperature continuous reaction system, was not easy to understand as a pharmaceutical manufacturing facility just by its appearance. Um Moo-yong, head of SK Biotek's production division, explained, "When producing products in large reactors, many variables arise, whereas in continuous reactors, stable and consistent production is possible under specific conditions," adding, "It also effectively prevents workers from being exposed to chemicals in advance."

On the 29th, we visited SK Biotek's Sejong plant, which is responsible for 'Contract Development and Manufacturing Organization (CDMO)' in the bio sector, considered SK Group's new growth engine alongside semiconductors and batteries. SK Biotek is the domestic business entity (100% owned) of SK Pharmteco, SK Corporation's integrated CDMO subsidiary.

CDMO is a concept that adds contract development (CDO) to contract manufacturing (CMO) of pharmaceuticals, providing integrated services from drug development to analysis and production, and has recently been growing explosively. This is because pharmaceutical and biotech companies focus on new drug development and outsource production to external companies.

SK Biotech Sejong Plant Exterior (Provided by SK Biotech)

SK Biotek's core technology, separated from SK Biopharm in 2015, originated during the days of Yukong (now SK Innovation). Both the low-temperature continuous reaction system and the continuous catalyst system are unique technologies that other companies find difficult to imitate. By integrating petrochemical production know-how, they produce their own catalysts to induce specific chemical reactions, enabling immediate response to customer demands.

At the Sejong plant, following the first process (M1) applying the low-temperature continuous reaction system and the second process (M2) with the continuous catalyst system, a third process (M3) was recently expanded with an investment of 56 billion KRW to meet increasing orders. Production capacity increased by more than 50%, from about 190㎥ to 290㎥. The scale allows for an annual production of 150 tons of active pharmaceutical ingredients.

With this expansion, SK Biotek's annual sales are expected to increase from 150 billion KRW last year to 220 billion KRW this year. Construction of the fourth process (M4) is currently underway, and design for the fifth process (M5) has also begun. With a site area exceeding 80,000㎡, equivalent to 11 soccer fields, continuous production expansion is possible.

Along with continuous and catalytic processes, SK Biotek is also enhancing its quality control capabilities. The Sejong plant has obtained 'current Good Manufacturing Practice (cGMP)' facility certifications from the Korea Food and Drug Administration, the U.S. Food and Drug Administration (FDA), Japan's Pharmaceuticals and Medical Devices Agency, and Australia's Therapeutic Goods Administration.

Yoo Yong-chae, head of SK Biotek's planning office, explained, "In the CMO business, government approvals and customer certifications are key, and in the past five years, the number of approvals passed after customer audits and government regulatory inspections has increased since the launch of Pharmteco." Recognized for quality management both domestically and internationally, SK Biotek has successfully conducted 16 regulatory inspections and more than 40 customer audits annually over the past five years.

SK Biotek employees are packaging the final products produced at the Sejong factory. (Provided by SK Biotek)

SK Corporation is investing in the bio business with SK Biopharm, which develops new drugs, and SK Pharmteco, the CDMO, as its 'dual engines.' Under SK Pharmteco, headquartered in the U.S., SK Biotek and production plants acquired through active mergers and acquisitions (M&A) in the U.S. and Europe are unified to expand the CDMO business.

In Europe, SK Biotek Ireland and the French company IFPOSCES, acquired in 2017 and last year respectively, and in the U.S., following the acquisition of Ampac in 2018, SK Pharmteco has become the second-largest shareholder of CBM, a cell and gene therapy (CGT) CDMO company. Last year, SK Pharmteco achieved sales of 830 billion KRW, and with the completion of expansions at SK Biotek and overseas production facilities, it expects to surpass annual sales of 1 trillion KRW within the next 2 to 3 years.

Kim Yeon-tae, vice president of SK Corporation's Bio Investment Center, said, "There is a growing trend of small and medium-sized biotech companies outsourcing production due to lack of their own manufacturing facilities," adding, "We aim to become a global leading CDMO company capable of producing all products that customers want, from synthetic drugs to new bio drugs."

This content was produced with the assistance of AI translation services.