Indeed, the Parsippany, N.J.-based generics giant could be close to planting a stake in the ground in Europe by reportedly being on the verge of paying about $7 billion for Actavis, a privately held generics titan in its own right based in Switzerland. Such a transaction would continue Watson's planned expansion push, increasing its footprint in various international markets, chiefly in Western and Eastern Europe.

A spokesman for Watson declined comment Thursday, March 22.

Speaking at the J.P. Morgan Healthcare Conference in San Francisco in early January, Bisaro said that Watson's "appetite for a larger transaction is there," mentioning that the company was "one or two large transactions away on the generic side" from where he'd like it to be. Bisaro also noted that Watson wanted to use M&A to become more balanced on the branded side. Watson makes branded pharmaceuticals in urology and women's health, a division that accounted for 10% of its $4.6 billion in 2011 revenue.

Watson has been one of the more conservative generics companies on the acquisition front. Its only recent purchase was in May 2011 when it bought Greece's Specifar Pharmaceuticals SA for $561.8 million, gaining access to a portfolio of off-patent medications and a sales network in Europe and Greece.

Watson finished 2011 with a debt-to-Ebitda ratio below 1.0 and expanded its net revenue by 29% in 2011 (from $3.6 billion to $4.6 billion) and it struck just weeks after Bisaro's announcement, buying Australia generics group Ascent Pharmahealth Ltd. from India's Strides Arcolab Ltd., enabling it to become Australia's fifth-largest generics company and add operations in Singapore, Malaysia, Hong Kong, Vietnam and Thailand.

If it buys Actavis, the world's 15th-largest generics entity with $1.2 billion in sales (Watson is fifth, by comparison, according to IMS Health Inc.), it would more clearly stamp the company as a global generics force. Watson has never made an acquisition larger than the $1.9 billion buyout it engineered for Andrx Corp. in 2006 and hasn't made a purchase eclipsing $1 billion since it paid $1.6 billion for Arrow Group in 2009.

"I think it would be a big deal for Watson, and a lot more transformative [of a transaction] than I would've expected," analyst Michael Waterhouse of Morningstar Inc. said in an interview. "I think the deal, overall, makes sense from the competitive need to achieve the operating scale that a lot of these bigger competitors have."

Investors are clearly intrigued by the potential combination. Watson's shares jumped from a $58.53 close on Tuesday to $63.69 apiece on Wednesday, when news of the potential deal broke. Shares traded up to $66.23 apiece midday Thursday.

Leerink Swann LLC analyst Jason Gerberry also supported the buyout, noting it would diversify Watson's revenue stream and give the generics company additional muscle in non-U.S. generic markets.

The U.S. accounted for 84% of its global generics revenue in 2011, with the remaining 16% coming internationally, according to regulatory filings. As such, Watson lags behind rivals Teva Pharmaceutical Industries Ltd., Sandoz (the generics arm of Novartis AG) and Mylan Inc. in terms of its international might and ability to handle the dwindling generics opportunities in the U.S.

"They need to get away from the U.S. patent cliff, and that's something management has recognized as well," Waterhouse said.

Watson would be able to do that by snapping up Actavis in what would be, Gerberry wrote, a relative merger of equals. Little is known of Actavis' financials since it hasn't been publicly traded since 2007 when its chairman, Icelandic billionaire Björgólfur Thor Björgólfsson, engineered a $5 billion leveraged buyout and took it private. But sales outside of the U.S. accounted for roughly two-thirds of its total revenue, with a presence in several Eastern European markets that Watson doesn't operate in, such as Bulgaria, Russia, the Ukraine and Romania. At the time, Actavis posted €103 million ($136 million) in net income on €1.38 billion in revenue. Waterhouse believes that an acquisition would roughly double Watson's revenue.

Gerberry forecast a "base case" deal structure of $4 billion in debt and $3 billion in equity. While Watson's top-line numbers have been rising, in part because of its recent launch of a generic version of Pfizer Inc.'s blockbuster cholesterol drug Lipitor, Waterhouse will be keeping an eye on how the company chooses to finance the deal.

"It'll be interesting to see what it would do for that balance sheet," he said. "I think they can [pull it off] but it will definitely put a lot more financial pressure on it."