UK-based Mylan NV [NASDAQ:MYL], a global company for branded generic and specialty pharmaceuticals, said today that the company has offered to acquire Dublin, Ireland-based Perrigo Company PLC [NYSE:PRGO], a generic prescription pharmaceuticals and over-the-counter (OTC) pharmaceutical products manufacturer and distributor, for about U.S. $29 billion. 

If the deal is approved, the combined company will offer specialty pharmaceuticals, generic drugs, OTC treatments and nutritional products, with more than U.S. $15 billion in annual sales. According to U.K.-based Evaluate Ltd., there were more than 180 merger and acquisition (M&A) deals in the biotech and pharmaceutical spheres, totaling U.S. $212 billion last year.

Shares of Jazz Pharmaceuticals [NASDAQ:JAZZ], which has always been on investors' lists of prime acquisition targets, ran up 6.89% today as the news of the acquisition of Perrigo by Mylan broke. According to Jacob Plieth, a senior analyst at Evalute Ltd, one potential suitor for Jazz is New Jersey-based Merck & Co. [NYSE:MRK], the second largest U.S. pharmaceutical company. 

Jazz's Xyrem, a drug for the treatment of patients with narcolepsy-related daytime sleepiness and narcolepsy-related acute muscle fatigue, and Erwinaze, a drug for the treatment of patients with acute lymphoblastic leukemia (ALL), are perfect complements to Merck’s sleep disorder drug, Belsomra, and their oncology medications, including Keytruda (pembrolizumab), a drug for the treatment of metastatic melanoma.

According to Bloomberg, there is also a rumor that Jazz is interested in making a U.S. $1 billion bid for Sigma-Tau’s rare-diseases business, a unit of Sigma-Tau Group, a closely-held Italian pharmaceutical company. Sigma-Tau’s rare-diseases group develops and manufactures drugs, including Adagen® (pegademase bovine) for the treatment of severe combined immunodeficieny (ADA-SCID), and generates annual sales of about 165 million euros.

Jazz has already acquired Sigma-Tau’s rights to defibrotide in the U.S., for as much as U.S. $250 million last year. Defibrotide is a drug for the treatment of severe hepatic veno-occlusive disease, a condition in which veins in the liver become obstructed. The drug generated 2014 fourth-quarter revenues of U.S. $19.2 million, up 51% year-on-year.

M&A has always been part of Jazz’s growth strategies. In September 2011, the company acquired Dublin, Ireland-based Azur Pharma, adding new central nervous system (CNS) drugs to its list of approved drugs and moved its headquarters from Palo Alto, California to Dublin, Ireland to lower tax rates, known as a tax inversion.

In the fourth-quarter ended December 2014, Jazz reported revenues of U.S. $328.1 billion, up 39.1% year-over-year and non-GAAP EPS of U.S. $2.44 per share, up 44.4% year-over-year. Wall Street was expecting earnings of U.S. $2.30 per share on revenues of U.S. $319.1 billion.

Looking forward, Jazz sees revenues of U.S. $1.31 to $1.37 billion in 2015 and a non-GAAP diluted EPS of U.S. $9.45 to $9.75 per share, compared with analysts' estimates for U.S. $10.11 per share on revenues of U.S. $1.4 billion. Analysts said the company's weak 2015 outlook was reflective of currency headwinds, especially its sales estimates for its drugs Erwinaze® and Defitelio®.

Investors may need to be aware of the looming generic threat to Jazz’s Xyrem drug from multiple generic drugmakers, including Amneal Pharmaceuticals, Par Pharmaceuticals, and Roxane Laboratories. Although a series of patents for Xyrem will not expire until 2019 to 2024, Roxane made an argument that Jazz's patents for Xyrem are invalid. Jazz subsequently filed a lawsuit against Roxane as an attempt to block the entry of a generic version. 

From our technical viewpoint, JAZZ has been moving in an ascending triangle pattern, with the head resistance at U.S. $176.60, since the beginning of 2014. The stock has made several breakout attempts. In mid-March 2015, JAZZ appeared to have a successful breakout as the stock hit an all-time high of U.S. $190.17. The breakout was, however, false as the stock dropped below the U.S. $176.60 support during the broader market pull back.

In the event of a successful breakout event, our projected price target for JAZZ, based upon technical analysis, is U.S. $285 in the next 14 months, or about U.S. $269 in the next 12 months. According to Yahoo Finance, JAZZ has a 12-month price target of U.S. $192.21 and a forward P/E of 15.16. In order to achieve our projected price target, JAZZ’s forward P/E is required to expand to 21.22. Last week, Citigroup issued a buy rating on the stock with a price target of U.S. $195 per share.

Jazz Pharmaceuticals will release its first quarter 2015 earnings report on May 6-11. Wall Street is expecting revenues of U.S. $308.29 million, up 24.9% year-on-year and an EPS of U.S. $2.14 per share, up 32.9% year-on-year.

Disclosure: Long Position in JAZZ. No Positions in any other stocks mentioned.