UK drugs firm AstraZeneca has rejected the new takeover offer from Pfizer.
The US company had earlier raised the price it was offering for AstraZeneca to the equivalent of £50 a share, valuing the firm at £63bn.
But Astra said the new terms offered were, "inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage with Pfizer".
If the deal were to go through it would be the biggest takeover of a UK company by a foreign firm.
AstraZeneca employs more than 51,000 staff worldwide, with 6,700 in the UK. Pfizer - whose drugs include Viagra - has a global workforce of more than 70,000, with 2,500 in the UK.
Announcing Pfizer's new offer, Pfizer chairman and chief executive Ian Read said the firm believed "that there is a highly compelling strategic, business and financial rationale for combining our businesses, with significant benefits for shareholders and stakeholders of both companies".
"We believe our proposal is responsive to the views of AstraZeneca shareholders and provides a sound basis upon which to arrive at recommendable terms for the combination of our two companies."
Pfizer also sent a letter to Prime Minister David Cameron to try to address concerns over the bid.
On Wednesday, four scientific bodies raised concerns about possible UK lab closures following a Pfizer deal, and a committee of MPs is considering an inquiry into the issue.
Pfizer told Mr Cameron it would go ahead with Astra's planned research and development (R&D) base in Cambridge, and retain its Macclesfield manufacturing facilities.
Pfizer also pledged that if the deal went ahead, 20% of the combined company's R&D workforce would be based in the UK.
The US firm said its commitments would be valid for five years, unless circumstances changed significantly.
Business Secretary Vince Cable told the BBC: "We've now received some assurances from the company that they will strengthen the British science base, they will protect British manufacturing.
"We need to look at that in detail, we need to look at the small print, we need to establish that it is binding, but as far as it goes, on the basis of what we've seen so far, it is welcome and encouraging."
On Friday, Conservative peer Lord Heseltine called for greater powers for the UK government to intervene in foreign takeovers if crucial UK interests were at risk.
Defence
On Monday it emerged that Pfizer had originally made a takeover approach for AstraZeneca in January, worth £46.61 a share, which was rejected.
Business Secretary Vince Cable said talks with the company were encouraging.
The latest offer from Pfizer is a mixture of cash and shares equivalent to £50 per AstraZeneca share. If the deal goes through, Pfizer also wants to establish its corporate and tax residence in the UK, as well as its European headquarters.
AstraZeneca
LAST UPDATED AT 02 MAY 2014, 15:39*CHART SHOWS LOCAL TIME
AstraZeneca's board said the offer was too low, and that it believed a major driver for Pfizer's takeover was the move to establish a tax residence in the UK by changing its company structure.
"The large proportion of the consideration payable in Pfizer shares and the tax-driven inversion structure remain unchanged. Accordingly, the board has rejected the proposal," AstraZeneca said.
Leif Johansson, chairman of AstraZeneca, added that the company's product "pipeline" of new drugs was "rapidly progressing".
"Pfizer's proposal would dramatically dilute AstraZeneca shareholders' exposure to our unique pipeline and would create risks around its delivery," Mr Johansson said.
Heather Self, a tax expert at Pinsent Masons, told the BBC: "Pfizer want[s] to put a UK company on top of the whole group which is taking the whole company outside the US tax system."
US federal corporation tax is 35%, while the UK's rate is 21% and is due to be cut to 20% in 2015.
But Ms Self added that a significant tax gain for the UK would be unlikely.
"All it will mean is moving a few senior people here and having a few board meetings here. It doesn't mean anything for the UK tax industry," she said.
Labour shadow business secretary Chuka Umunna expressed concerns over job security for AstraZeneca staff.
"Pfizer has a very poor record on previous acquisitions. Do we really want a jewel in the crown of British industry, our second biggest pharmaceutical firm, to basically be seen as an instrument of tax planning?" he said.
Union worries
The GMB union, which represents workers at AstraZeneca's Macclesfield plant, called for the proposed deal to be investigated on competition grounds and queried Pfizer's promises over UK jobs.
"Pfizer are said to have given undertakings to the UK Government as they increase the money they are offering the AstraZeneca shareholders," said Allan Black, GMB national officer for the chemicals industry.
"Similar undertakings were given by US multinationals before which have proved to be worthless."
The GMB also questioned how committed Pfizer was to manufacturing and R&D in the UK. In 2011, Pfizer laid off 1,500 staff from its research facility at Sandwich in Kent.
"Pfizer walked away from a purpose built manufacturing plant in an economic bleak spot in Kent with the loss of many jobs," Mr Black said.
The Institute of Directors (IoD) said that the government should not be involved, as the matter is for directors and shareholders to decide.
"The IoD does not support any extension of any national interest test for takeovers," said IoD director of corporate governance Roger Barker.
"Takeovers are primarily a matter for boards and shareholders to determine, not government."
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When it was revealed on Monday that Pfizer was looking to bid for AstraZeneca, a major shareholder I spoke to said a £50 a share offer might just seal the deal by Friday. Well, he was half right. There was a £50 offer. But it didn't seal it.
AstraZeneca is betting that Pfizer has a little more in the tank, both in terms of the overall offer and the cash element. Shareholders would like more money up front and less of the offer paid out in Pfizer shares.
The American business is a willing buyer for three reasons. It has a large amount of cash to deploy that it doesn't want to repatriate to the US where there would be a hefty tax bill. Britain is highly attractive because of its low corporation tax levels and the tax incentives for scientific research. AstraZeneca has a potentially lucrative pipeline of cancer drugs.
There are always many acts to a deal of this size. I am sure this latest rejection is just one of them.
Finally, is the government interested in increasing its powers over foreign takeovers, as Lord Heseltine suggested this morning? According to Whitehall sources I have spoken to, I wouldn't hold your breath.
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