AstraZeneca Plc rejected another takeover offer from Pfizer Inc. as too low, leaving the companies in a stalemate over a deal that would create the world’s biggest drugmaker. AstraZeneca shares plunged the most in more than 16 years.

The 69.4 billion-pound ($117 billion) proposal, which Pfizer said was final, fails to account for the value of the U.K. drugmaker’s pipeline of experimental medicines and presents risks for shareholders, AstraZeneca said today in a statement. The offer values the company at 55 pounds a share. AstraZeneca said the price would have to be more than 58.85 pounds for the board to be able to recommend it to shareholders.

The share price drop reflects investors’ view that Pfizer will walk away rather than sweeten the bid again before a May 26 deadline set by U.K. takeover law. Pfizer said the cash-and-stock offer would be its last under the current process, and it won’t go directly to AstraZeneca shareholders with a hostile bid.

“There’s still a chance that Astra shareholders will put pressure on management and try to push for a compromise, but the chances of this deal not being agreed on just increased,” said Savvas Neophytou, an analyst at Panmure Gordon & Co. in London.

With a deal, Pfizer would transfer its headquarters to the U.K to gain a lower tax rate, add new cancer drugs to its pipeline and take advantage of cost reductions from overlapping operations.

“We have tried repeatedly to engage in a constructive process with AstraZeneca,” Pfizer Chief Executive Officer Ian Read said in a statement yesterday.

"Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price,” Read said. “We remain ready to engage in a meaningful dialogue but time for constructive engagement is running out.”

Pfizer’s initial bids led to Read’s grilling in front of U.K. lawmakers, who have expressed concern a takeover will gut AstraZeneca’s research operations in the U.K. and hurt British jobs. Pfizer has said it will complete a campus being built by AstraZeneca in Cambridge, England, and keep 20 percent of the London-based company’s research and development workers in that country for at least five years.

Stock Slump

On May 2, New York-based Pfizer offered 50 pounds a share, following a previous bid made in January. AstraZeneca objected to Pfizer’s plan to pay only 32 percent of that price in cash, with the rest in shares. The new proposal contains 45 percent cash. Pfizer’s plan to move its tax domicile, and the fact that the majority of the price would be paid in shares, presents risks to shareholders, AstraZeneca said. 

AstraZeneca fell 11 percent to 42.70 pounds at 10:10 a.m. in London. The stock dropped as much as 15 percent, the biggest intraday decline since October 1997.

Pfizer’s CEO promised restraint. “We have said from the beginning that we will remain disciplined in the price we are willing to pay and we will not depart from that guiding principle,” Read said.

AstraZeneca’s board repeatedly rejected Pfizer’s advances, including a previously unreported offer of 53.50 pounds a share made on May 16, according to Pfizer’s statement.

Tax Minimization

Assuming other aspects of the offer were satisfactory, the price would need to be more than 10 percent above that 53.50 pound-proposal for the board to be able to recommend it, AstraZeneca said. Selling the company at 55 pounds a share would deprive shareholders of the full value of the experimental drugs that are under development, AstraZeneca said.

“Pfizer’s approach throughout its pursuit of AstraZeneca appears to have been fundamentally driven by the corporate financial benefits to its shareholders of cost savings and tax minimization,” AstraZeneca Chairman Leif Johansson said in the statement. “From our first meeting in January to our latest discussion yesterday, and in the numerous phone calls in between, Pfizer has failed to make a compelling strategic, business or value case.”

Pfizer’s offer expires on May 26, and the U.S. drugmaker said it was urging AstraZeneca shareholders to push the company’s board to start negotiating. If another company comes in with an offer, Pfizer could try again, otherwise it will be subject to a waiting period before it can attempt a new bid.

Cash, Stock

AstraZeneca stockholders would get 24.76 pounds in cash and 1.747 shares of the combined company for each share in AstraZeneca, Pfizer said. The new bid is 10 percent more than the May 2 proposal and is 53 percent above AstraZeneca’s closing price on Jan. 3, before Pfizer made its initial offer.

Pfizer has said it plans to keep its operational headquarters in New York and move its legal residence to the U.K.

An offer with more stock adds risk and long-term potential for AstraZeneca shareholders, while more cash gives them an immediate payout.

There’s a limit to how low Pfizer can drop the stock percentage of the offer and still enable the company to move its legal address to the U.K. for a lower tax rate than the U.S.’s 35 percent. For the lower rate 20 percent of the combined company’s shareholders must be from AstraZeneca’s base. The new offer would give Pfizer’s shareholders 74 percent of the combined company, and AstraZeneca’s 26 percent, Pfizer said.

Development Failures

A rejection will put pressure on AstraZeneca CEO Pascal Soriot to make the company’s experimental drugs for cancer and asthma pay off. Soriot said the company will boost sales to more than $45 billion a year by 2023 from $25.7 billion last year as new products reach the market. Revenue will drop through 2017 as some of the company’s best-selling drugs lose patent protection.

Some analysts are skeptical, especially given AstraZeneca’s failures in drug development in recent years. The company’s predictions should be “heavily discounted” because most drugmakers have gotten their long-term forecasts wrong, Timothy Anderson, an analyst at Sanford C. Bernstein & Co., said in a report today.

“Is AZN realistic in what it believes ‘fair value’ is?” he wrote. “Projecting the worth of new drug pipelines is notoriously difficult, and drug companies and financial analysts alike are often wrong to the tune of billions of dollars, especially when going out 5-10 years. Drug development is just not that predictable.”