Generic drugs are hot. Hard on the heels of Daiichi Sankyo’s surprise $4.6 billion deal to take control of India’s Ranbaxy Laboratories, a bidding war has broken out for Czech drugmaker Zentiva, a major supplier of off-patent medicines in central and eastern Europe.

Gerard Le Fur, CEO of France’s Sanofi-Aventis, which already owns nearly a quarter of Zentiva, has been bounced into a planned $2.6 billion counterbid for the group by rival bidder PPF but is clearly eager to get the whole of the Czech business under his belt. Sanofi argues it makes strategic sense and most analysts agree. Here’s why.

In the past, big pharmaceutical companies and many investors shunned the generics business, with the notable exception of Novartis and its large Sandoz operation. But with traditional branded drug sales flagging, more patents expiring and emerging markets a top priority, any sense of superiority seems to be evaporating.

Fitch Ratings sees an emerging trend towards more diversification into generics to cash in on the sector’s strong growth, though it cautions that embracing generics could impact profit margins. In today’s market environment, however, diversification is the name of the game, so it may not be long before other generic drugmakers in Asia or eastern Europe are put into play.