Watson's deal appetite part of generic business shift

When Watson Pharmaceuticals ($WPI) CEO Paul Bisaro expressed an interest in a more-than-bite-size deal, it was just the latest sign that generics makers are looking toward branded drugs for future growth. Teva Pharmaceutical Industries ($TEVA) has, of course, channeled billions in that direction with its buyout of Cephalon, while smaller generics makers are aiming away from commodity-priced meds as well.

At the J.P. Morgan Healthcare Conference, Bisaro announced Watson's "appetite for a larger transaction"--and that appetite included hunger for a brand-name buyout. It makes sense. With fewer blockbuster drugs to go off patent in the coming years, the explosive generics growth expected in the short term will naturally fall off.

Now that typical copycat meds don't offer the same sort of promise as they once did, generics makers need alternatives. "We're seeing more of a trend toward generic companies diversifying away from pure generics and oral solids," Credit Suisse analyst Michael Faerm told Bloomberg.

Watson has already teamed up with Amgen ($AMGN) to develop biosimilar drugs, which are copycats of existing biologics, but will no doubt become brands in their own right. The company also already has a small portfoio of brand-name meds. Nonetheless, Faerm said, "Watson is further behind Teva in that progression. ... Deals are going to be an important way for them to grow that mix of the branded business."

- read the Bloomberg piece