Mergers and acquisitions are nothing new in the generic and specialty drug space, but the latest round has taken on the quality of a romantic farce: Everybody's chasing after someone who's chasing after somebody else.

But a growing number of investors and analysts are wondering whether the actual wedding season is nearly done.

In the past month Teva Pharmaceutical Industries (TEVA), the world's largest generic-drug maker, made a $40.1 billion offer for the third-largest, Mylan (MYL). Mylan turned the deal down to pursue Perrigo (PRGO), the leading supplier of store-brand over-the-counter drugs. On April 24, Mylan made a formal offer of $60 a share in cash plus 2.2 Mylan shares per Perrigo share. The offer came to a little over $31 billion at Mylan's then-price, near 76. Last week, Mylan raised its offer to $75 per share, plus 2.3 Mylan shares for every Perrigo share, but still got the cold shoulder.

The standoffish Perrigo charged that the M&A speculation in the industry was making Mylan's offer appear more generous than it was. If Mylan buys Perrigo, the reasoning went, the loss of the Teva deal would send Mylan shares lower.

"Based on Mylan's unaffected price of $55.31 per share on March 10, 2015, the last day of trading prior to widespread public speculation that Teva was considering an offer for Mylan, the value of the Offer is $181.67 per Perrigo share," or about $25.6 billion, Perrigo said in a statement a week ago. It strongly urged shareholders "to take no action in relation to the Offer.

Thwarted Advances

Mylan used harsher terms when it turned down Teva's offer on April 27. Mylan Executive Chairman Robert Coury used the standard critique of how Teva's offer "grossly undervalues" Mylan. He also said that the proposal asked Mylan shareholders to accept "low-quality Teva shares in exchange for their high-quality Mylan shares," and he knocked the Teva leadership team's "poor record of delivering sustainable shareholder value.

Griping about valuation is typical during buyout negotiations. Still, the hostility of the current round is striking. Most of the time, such details are hashed out in private. Clearly there are reasons beyond price for the resistance. And yet, so far no one's raised the sort of philosophical issues that came up last year, when specialty drugmaker Allergan fled into the arms of Actavis (ACT). It was attempting to escape the hostile bid of Valeant Pharmaceuticals International (VRX), which Allergan feared would decimate its R&D operations due to its obsession with cost-cutting.

Instead, what may be going on is that, after years of consolidation in the space where a small number of players rapidly bought up companies, the big consolidators can only turn to — or on — each other.

"It's gotten to the point where, if the bigger players really want to move the needle, then they have to start going after fewer and fewer opportunities," Morningstar analyst Michael Waterhouse told IBD. "Management teams don't want to step down from the helm, and they have a lot of pride in their business, so it will be interesting to see how this plays out.

Sorting Out The Script

How things play out is of central interest to investors who've been chasing these stocks based on M&A potential — certainly a profitable strategy over the last few years. Waterhouse remarked that, a few years ago, when Actavis was still Watson Pharmaceuticals and doing less than $2 billion in revenue a year, he would never have guessed that it would get as big as it is now. Its stock price has tripled since it became Actavis in late 2012.

Other big acquirers have similarly bulked up: Valeant has nearly quadrupled in price. Mylan had more than doubled even before the Teva rumors started. Since Endo International (ENDP) decided to adopt a Valeant-like strategy in 2013, its stock also has tripled.

But given the shrinking number of targets and their increasing resistance to takeovers, some investors have been asking if the whole M&A game is in the "ninth inning," according to an April 16 video recorded for clients by Evercore ISI analyst Umer Raffat. The corresponding question, Raffat said, was whether any of these stocks were still worth pursuing, based on fundamentals.

Critical investors had noted that Actavis' previously torrid stock has gone downhill since the Allergan deal closed March 17.

Chris Pultz, portfolio manager for Kellner Capital's merger arbitrage fund, says that he expects M&A to continue. But he granted that competitive bidding was helping drive valuations to levels that might eventually scare off potential buyers.

"At some point, somebody's got to say it got a little too hot here," he told IBD. "But it doesn't seem like we've reached that point yet.

Cost Cutting Vs. Pipeline

Raffat didn't venture an opinion on whether M&A is in its final stages — he was in fact forbidden to do so, given that such M&A is a large part of Evercore's business. But he did say that he believed that drugmakers with real pipelines would be able to grow on improving fundamentals. He flagged Teva and Actavis as especially promising on that front. Waterhouse also picks Actavis as a favorite in a post-M&A world, noting that it could leverage its recent acquisitions of Allergan, Warner Chilcott and Forest Laboratories for some time to come.

The lack of pipeline value in the proposed Teva-Mylan deal is one reason why some analysts oppose it. When Mylan first offered to buy Perrigo on April 9, Citi analyst Liav Abraham wrote that Teva would be better off making smaller acquisitions to fill out the portfolio. The Teva-Mylan bid, the Street agrees, is all about cost-cutting.

Not that cost-cutting hasn't been a factor even in the growth-driven acquisitions. The basic model, pioneered by Valeant, involves buying up assets and paring costs to the bone. Though the Valeant-Actavis-Allergan battle brought out the difference in cutting philosophy between Valeant and Actavis, they've all followed this basic approach. And after years of piling on the buyouts, Raffat believes that it's about to become apparent whether the strategy works in the long run.

"For the sector in general, the most important thing that needs to happen is that Actavis and Valeant report good quarters the next few quarters," he said.

"I say that because them reporting good quarters or not is either going to validate or invalidate this business model that you should just buy and cut costs dramatically. Everybody agrees that costs need to be cut, but do they need to be cut to these levels?"