hankyoreh

Projections and scale of contract manufacturing organizations (CMO) industry

SK Bioscience, a South Korean company specializing in developing and manufacturing vaccines, has inked a deal to produce a COVID-19 vaccine for British pharmaceutical firm AstraZeneca. The move has drawn attention to contract manufacturing organizations (CMO), which are expected to be a future driver of growth in the biotech industry. The deal may also put SK Bioscience on the front lines of the fight against COVID-19, since a certain portion of the resulting vaccines would be earmarked for domestic distribution.

Sources at South Korea’s Ministry of Health and Welfare and the pharmaceutical industry told the Hankyoreh on July 22 that SK Bioscience will begin production next month of AZD 1222, a candidate COVID-19 vaccine, developed by AstraZeneca. Production will take place at L House, a facility in Andong, North Gyeongsang Province. The vaccine is the first in the world to enter the third phase of clinical trials, with some predicting that inoculation of the general public can begin early next year.

L House is a vaccine manufacturing facility built by SK Bioscience, at the cost of 200 billion won (US$166.9 billion), in 2012. The facility can produce enough vaccines to inoculate 150 million people a year.

“AstraZeneca will determine whether the vaccine that we produce starting next month will be used in the third phase of clinical trials or in the commercialization phase. Our production contract runs through early next year, and the contract’s renewal will be discussed at that point,” a SK Bioscience employee told the Hankyoreh over the phone.

Particularly noteworthy is the fact that South Korea will get priority access to a certain volume of the vaccine produced by AstraZeneca.

“Significantly, the three parties confirmed in writing that an effort will be made to give Koreans some of the domestically produced vaccines,” said Vice Health Minister Kim Kang-lip in a daily briefing the day before. AstraZeneca CEO Pascal Soriot has also said he will increase cooperation to ensure that Korea has fair access to the vaccine.

As a COVID-19 vaccine draws closer to mass production, the CMO model by which such drugs are produced is in the spotlight as an emerging area in biotech. A CMO is a company that makes newly developed drugs for the market, taking advantage of its manufacturing expertise and access to the massive amount of capital needed up front to build factories.

In South Korea, Samsung Biologics and Celltrion have seen their stock market capitalization rise to third and fifth, respectively, through their CMO businesses. SK Bioscience was set up as a wholly owned affiliate of SK Chemical in 2018 and posted more than 180 billion won (US$150.2 million) of sales last year alone. These companies are expanding their reach by taking on contracts for developing new medication and by adopting a two-track approach, in which they produce pharmaceuticals developed at their own affiliates.

Korea isn’t the only country where the market is growing, however. According to a report titled “Trends and Prospects in the Global Biopharmaceutical Industry,” released last year by the Biotech Policy Research Center, the value of the global CMO market was set to reach US$108.7 billion this year. The industry has seen 7-8% in annual growth since 2012, when it was worth US$58.6 billion, nearly doubling in value over that time.

“There’s surging demand for the development of medications and vaccines for COVID-19, but for now, there’s a marked shortage in facilities capable of producing them. Given this situation, CMO-related firms will continue to receive more attention moving forward,” wrote Lee Dong-geon, an analyst at Shinhan Investment Corporation, in an investment report.

By Hong Seock-jae, staff reporter

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