With the deadline for the offer expiring at 8 a.m. ET, Mylan said just 40 percent of Perrigo's outstanding shares had been tendered, short of the required 50 percent.
The tendered shares will now be returned, Mylan said. Perrigo will aggressively buy back stock at the start of trading, sources told CNBC.
The failure ends nearly seven months of bitter wrangling between the generic drugmakers, and hands a big victory to Perrigo Chief Executive Joseph Papa.
Mylan Executive Chairman Robert Coury, who snubbed an takeover offer from Teva Pharmaceutical Industries Ltd to pursue Perrigo, said the company was ready to move on.