SK Holdings, the parent company of South Korea’s third-largest conglomerate SK Group, said Friday it has acquired a 100 percent stake in SK Biotek, a contract manufacturer of active pharmaceutical ingredients (API) used to produce chemical drugs.

At the same time, SK Biotek will issue new shares worth 40 billion won ($32.38 million) to expand its production facilities. The decisions were made during a company board meeting on Thursday.

SK’s holding company, at the apex of the group’s governance structure, will purchase Biotek’s shares from SK Biopharmaceutical, the group’s new drug developing unit.

SK Biotek was spun off from SK Biopharmaceuticals, a subsidiary of SK Holdings, in April 2015.

Under the new ownership structure, SK Holdings now directly owns both of its pharmaceutical units, with one focusing on new drug development and the other on production.

“The recent developments reflect the group’s active will to ramp up its pharmaceutical business and become an early leader in the segment,” SK Holdings said in a statement.

Pharmaceuticals are among five key businesses selected by SK Group as areas to lead its future growth, alongside IT services, ICT convergence technologies, liquefied natural gas and semiconductors/modules.

Eyeing robust future growth of the global pharmaceutical market, which is expected to grow about 6.5 percent annually until 2020, SK Biotek is looking to significantly expand its business scale and production capabilities.

The firm currently manufactures API used in producing medication developed by global pharma companies including Novartis, Pfizer and AstraZeneca.

Seeking to score new and expanded partnerships, SK Biotek is working to build a new production plant in Sejong City, which upon its completion in 2020 will drive up its net drug manufacturing capacity from 160,000 liters to 640,000 liters.

SK Group is also reportedly working swiftly to acquire at least two global pharma CMOs, presumably midsized firms from Europe and North America, in the near future, according to recent news reports and industry sources.

“We are actively looking into potential mergers and acquisitions to expand SK Biotek’s business to go beyond manufacturing API to producing finished drugs (developed by pharma companies),” SK Holding said.

Meanwhile, the conglomerate is also pinning high hopes on a number of new drugs under development by SK Biopharmaceuticals, including a new sleep disorder medication (SKL-N05) which began Phase III clinical trials overseas last year.

Alongside SK, Samsung Group is another major player which has jumped into the field of pharmaceuticals, focusing on a more advanced category of drugs known as biologics.

Biologic drugs are based on living cells and proteins genetically engineered using recombinant DNA technology. They are more difficult to develop than conventional chemical-based drugs.

Samsung BioLogics manufactures biologic drugs for global pharma companies while Samsung Bioepis develops biosimilars, or near-replicas of brand-name biomedicine whose patents have expired.

By Sohn Ji-young (jys@heraldcorp.com)