Watson Pharmaceuticals CEO Paul Bisaro said the company has around $6 billion to spend on acquisitions as it looks to buy brand-name drug assets, signaling a move away from the company's focus on generic medicines, Bloomberg reported Thursday. Bisaro remarked that "everything we need to be a branded pharma company we have, except for the sales force. And we can create that."
The drug maker generated $2.2 billion in revenue from generic products in the first nine months of 2011, compared with $320.1 million from branded medicines. Bisaro indicated that this is likely to change and with further growth in the future, Watson may be "in a much stronger position to buy a bigger specialty-brand company." Bisaro remarked "that would be a very nice scenario if it worked out that way."
However, he cautioned about the risks of such a change in strategy. "Generic companies in the past, their mistake has been to run their business like they run their generics model, which is pretty opportunistic," Bisaro said. "With brands, you have to pass on those things that, even though you like the idea, if it’s not in your wheelhouse and you don’t have the sales force, you probably ought not to spend the money on it," he added.
In July 2010, Watson acquired Columbia Laboratories' progesterone assets to bolster its branded products. Bisaro suggested that the company will consider branded drugs for gender-specific conditions and will restrict its focus to a few clinical areas. "We have a lot of goodwill built up in the urology space and we’re getting there in the women’s health space," he said, adding that Watson might also see opportunities in oncology, such as bladder cancer or malignancies specific to women.
Commenting on the news, Credit Suisse analyst Michael Faerm noted that it’s catch-up time for Watson as Teva "has been doing this for quite some time." According to Faerm, around a third of Teva’s revenue now comes from branded drugs, including from the company's multiple sclerosis treatment Copaxone (glatiramer acetate). The Israeli drug maker also recently announced the appointment of Jeremy Levin as CEO beginning in May. Levin "brings important strengths to the company on the branded side - the most obvious being deal-making," Faerm said.
Meanwhile, Gabelli & Co. analyst Jeff Jonas noted that the strategies being employed by Watson and Teva are going to lead to "a real blurring of the lines." The analyst suggested that by 2015, such drug makers may end up "looking a lot more like a brand than a generic."