AstraZeneca management said "absent a specific and attractive proposal, it was not appropriate to engage in discussions with Pfizer" in a statement Monday morning. It described a previous offer as "significantly undervaluing" the company.
Pfizer could end up paying as much as £55 per share for AstraZeneca in one of the sector's biggest ever deals, according to analysts.
A potential $100 billion-plus merger of two of the world's biggest pharmaceutical companies appeared to have moved a step closer Monday after Pfizer confirmed it had made a second approach to its U.K. rival.
The U.S. giant needs to make a £50-£55 per share offer to get AstraZeneca management to the table, according to Mark Clark, a veteran analyst of the sector at Deutsche Bank.
"We believe there is a 90 percent probability that Pfizer acquires AstraZeneca with a take-out price of at least £49/share," Andrew Baum, pharmaceuticals analyst at Citi, wrote in a note.
According to a statement issued Monday, Pfizer first approached AstraZeneca back in January, then renewed its approach on Saturday after reports last week of the first move sent the U.K. pharmaceutical company's shares up 8 percent. Monday's confirmation of the Pfizer approach pushed AstraZeneca's shares 15 percent higher in early London trading.
Following the release of the statement, Pfizer, the world's largest pharmaceutical company in terms of sales, now seems to be taking its approach directly to AstraZeneca shareholders, promising them "a significant premium" through a cash and shares deal.
The U.S. company and maker of Viagra, initially made an offer of £46.61 ($76.62) per share for AstraZeneca, which was trading at £47 Monday morning.
Ian Read, chairman and chief executive of Pfizer, said in a statement: "Pfizer has a proven track record of successful acquisitions and, if a transaction were consummated, would use its extensive integration experience to support a successful combination of the businesses and focus on delivering value to shareholders."
However, its chief executive Pascal Soriot said last week that he felt major mergers and acquisitions could be "disruptive."
Pfizer is believed to be attracted to AstraZeneca, long viewed as one of the most vulnerable big pharmaceutical companies, for its promising pipeline of new cancer drugs.
There could also be a tax reason for the approach. If it buys a foreign company with some of the cash it keeps abroad, this could cut its U.S. tax bill. The U.K. government also has tax breaks for income generated through patents, the life blood of the pharmaceutical industry.
Read said: "The United Kingdom has created attractive incentives for companies to manufacture products and maintain and protect intellectual property, and we have seen that capital and jobs have followed these types of incentives."
AstraZeneca is expected to unveil promising results for several treatments over this year's medical conference season.
If the Pfizer deal goes ahead, it would be the biggest ever takeover of a U.K.-listed company, and may cause political ructions.
Shadow business secretary Chuka Umunna has already warned of possible "asset-stripping" by Pfizer and potentially negative consequences for British science investment. The U.K. government has frequently stressed the importance of science for the country's economic development.
In its Monday statement, Pfizer said it would keep management and a holding company in the U.K., but added that the combined company's shares would be New York-listed.