AstraZeneca spurned a new £63bn takeover offer from US rival Pfizer today, saying it "substantially" undervalued the business.
The UK firm rejected the latest advance from the Viagra maker hours after Pfizer stepped up its pursuit by making the increased offer and giving a direct pledge to the Prime Minister on the future of British jobs and research.
At £50 a share, it represented a 7pc hike on a previous proposal in January.
But Astra said: "The financial and other terms described in the proposal are inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer."
AstraZeneca also noted that the large proportion of the consideration payable in shares and the "tax-driven inversion structure" of the deal - which had previously raised concerns - remained unchanged.
"Accordingly, the board has rejected the proposal," it said.
The offer would see Pfizer re-domiciled in the UK but retain headquarters in New York and remain listed on Wall Street.
It has admitted it hopes to slash its tax bill as part of the deal, paying 21pc on earnings in Britain compared with 38% in the US.
If a deal were ultimately to go through, it would be the largest ever foreign takeover of a British company.
But Astra chairman Leif Johansson said: "AstraZeneca continues to invest significantly in research, development and manufacturing in the UK, Sweden and the US.
"We are showing strong momentum as an independent company, in particular with our exciting, rapidly progressing pipeline, which the board believes will deliver significant value for shareholders.
"Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery. As such, the board has no hesitation in rejecting the proposal."
It is the third time that Astra has rebuffed Pfizer, following the initial January offer and a further approach last month.
The possibility of a deal is politically contentious because of Astra's key role in the UK's life sciences industry and manufacturing exports, and because it accounts for nearly 7,000 British jobs.
Today's letter to David Cameron from Pfizer's Scottish-born chief executive, Ian Read, attempted to sweeten the pill, pledging a commitment to Astra's planned research and development (R&D) hub in Cambridge.
It also said that 20pc of the post-merger R&D workforce of the newly-formed pharmaceutical giant would be in the UK.
The assurances came after Mr Read held direct talks with Chancellor George Osborne and Business Secretary Vince Cable. Labour accused the Government of going over the heads of the British company's board.
Shadow business secretary Chuka Umunna said there was "grave concern" in the sector over the deal.
He told the BBC Radio 4 Today programme: "Do we really want a jewel in the crown of British industry, our second biggest pharmaceutical firm, to basically be seen as an instrument in some tax-planning game?"
Pfizer boss Mr Read argued that there was a "compelling" logic behind the mega-merger, which would bring together world-leading expertise in key areas such as oncology, inflammation and cardiovascular and metabolic disorders.
He said resources in the "golden triangle" of Oxford, Cambridge and London would represent a vital component of the new company.
Pfizer said it would actively look to locate manufacturing operations in the UK and retain Astra's commercial manufacturing facilities in Macclesfield.
In a letter to AstraZeneca chairman Leif Johansson, Mr Read said his preference was for Pfizer and Astra to pursue a "friendly, negotiated transaction" which can be recommended by both boards.
He stressed that a key attraction of the deal for the US firm was its "great skills base of researchers, clinicians and technicians" as well as its "proximity to leading academic institutions" around Cambridge, and to the NHS.
Pfizer's latest cash-and-shares offer valued Astra at a premium of more than 32pc to its worth prior to the start of takeover speculation last month.
AstraZeneca was formed through the merger of Sweden's Astra and Britain's Zeneca in 1999. It is one of the world's biggest pharmaceutical firms and produces a large range of medicines including cancer and diabetes drugs.
The FTSE 100-listed group employs more than 50,000 people around the world, including 6,700 in the UK, but numbers are being reduced as it shifts its headquarters to Cambridge, closing a research centre in Cheshire and offices in London.
Pfizer employs more than 70,000 people around the world, including 2,500 in the UK, with 900 at its regional headquarters in Surrey.
Science Minister David Willetts told the Today programme that the Government had been having "tough conversations" with the US firm and had made clear the importance it attached to research and manufacturing in the UK.
He said the Government had been putting £1bn of public money into R&D each year, matched by the private sector, and indicated that this had made it an attractive place for Pfizer to invest.
Mr Willetts said ministers had been pressing the US firm "in a very hard-nosed way" and that the company had now beefed up its commitments in the new assurances to Downing Street.
"Their letter has a set of proposals for research and development and manufacturing in the UK that have moved a long way from where they were a week ago," he said.
Mr Willetts said it was "absurd" to suggest that the Government was acting "in concert" with Pfizer.
Details of the latest offer emerged as former deputy prime minister Lord Heseltine said he believed the Government should have greater powers to intervene when British companies are targeted for takeover by foreign firms.