Generic drugmakers look set for breakthrough, says new study

The generic drugs sector has been strong lately as demand for these cheaper copy medicines is increasing. Now up to around 70% of the total prescription volume, generic drug use should continue to increase as many top selling patents are slated to expire through 2014, according to a new study by South Africa based www.stockcall.com.

This will largely benefit players like Watson Pharmaceuticals (NYSE: WPI). One potential obstacle to growth is the European Union's decision to cut prices on its generic offerings, says the report, which invites investors looking for complimentary research on Watson to sign up at www.stockcall.com/WPI210910.pdf for its new reports, that also cover fellow US generics major Mylan (Nasdaq: MYL)

As the demand for generic increases, it is expected that the sector should continue its trend of consolidation. On the M&A level, Mylan, one of the behemoths in this industry, has recently completed its acquisition of Ireland-based Bioniche Pharma Holdings. Without any form of patent protection, the generic drug market is very similar to commodities, where cost is the primary driving factor among purchasers. Companies hope that by consolidating in the historically fractured sector that they will be able to achieve economies of scale that allow them to decrease their prices.