Ties Can Bind Generics

Despite a healthy 2006 and anticipation for a strong 2007, generic-drug companies still must be vigilant about managing growth.

Make sure your eyes aren't bigger than your stomach when contemplating acquisitions, or you could gag on debt, say credit-rating firms. Don't make deals just to get bigger, or you'll be stuck with extra costs without extra strategic advantages, equity analysts warn.

Generic-drug makers generally use acquisitions to reach foreign markets, where manufacturing costs are lower and where potential sales growth is faster than in the U.S. Big deals are tempting because the generics industry is consolidating and because companies don't want to be outdone by competitors. ...