Japanese drug maker Takeda faces an uphill battle to acquire Irish rival Shire after a £42.4bn bid for the firm was rejected.
On a turbulent day for the FTSE 100 firm – which saw fellow Dublin-based pharmaceutical company Allergan emerge as another potential bidder before later backing off – Shire said Takeda's offer "significantly undervalued the company".
Shire told its Japanese suitor to find more cash, adding that Takeda had previously privately made two lower offers. Both parties said discussions were ongoing.
Shire shares surged as much as 8pc on the London stock exchange before paring back its gains, closing up 5.9pc at £39.75.
Takeda may struggle to fund a larger takeover, as analysts have raised concerns about the debt levels it would be taking on.
Any deal would add to further consolidation in the global medicines market. Analysts said Shire's lucrative portfolio of highly profitable medicines for rare diseases made it an attractive takeover target and could potentially smoke out other bidders.
Shire: the humble start-up that became a giant
Shortly after Takeda's bid was rejected, Allergan told its investors it was in the "early stages of considering a possible offer".
However its interest was almost immediately thrown into doubt after reports emerged that it had dropped its bid plans, with a shareholder backlash reportedly putting the company off.
Allergan later confirmed those reports, saying it "does not intend to make an offer for Shire". It said it continued to evaluate a "full range of potential strategic actions that will create value for shareholders, such as divestitures, combinations and acquisitions".
However, despite the swift U-turn by Allergan, one City analyst told the Telegraph they believed further bids were likely: "If you look at the Shire share price it's lower that you would expect for its level of earnings.
"It's not just Takeda that could look at Shire and come to the conclusion that its earnings would be worth more to us."
Takeda's chief executive Christophe Weber has been meeting with investors in recent weeks to try to persuade them of the merits of the deal.
Shire share price 1-year
Reports in Japan last week said Takeda had approached lenders for tens of billions of dollars of funding to help pay for a swoop.
City sources have suggested that a break-up – with Takeda selling Shire’s neurosciences division focussed on ADHD drugs – could help fund any deal.
Takeda's proposed deal comprised £17.75 in cash and £28.75 of new Takeda shares.
Takeda said that it "will remain disciplined with respect to the terms of any such offer" and was determined to maintain a dividend and its investment grade credit rating.
The Japanese firm added: "Building on Takeda's existing momentum, the acquisition of Shire would accelerate its transformation and result in a global, value-based, R&D-driven biopharmaceutical leader headquartered in Japan, with a balanced geographic footprint, a robust, modality-diverse pipeline and enhanced financial strength."