AstraZeneca spurned a new £63 billion 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 7% 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 21% 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 20% 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 32% 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 £1 billion 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.
Speaking at a Tory election campaign event in north Staffordshire, Mr Cameron said the Government had received "robust" assurances from Pfizer.
After being asked what guarantees he could give that jobs and investment in the UK would be protected, Mr Cameron responded: "My priority is absolutely clear - British jobs, British science, British inventiveness, British research and development.
"We are seeing a revival in those things and I want to see that go further.
"AstraZeneca has a fantastic role in the British economy. You see it in the jobs it's created, in the investments it's made and the medicines it has delivered.
"We should be really proud of it but, of course, the decision on any merger is a decision for the two companies and their shareholders.
"My job is to protect the United Kingdom's interests. I want to see great jobs in these industries here in Britain.
"That is why we have sought and received robust assurances from Pfizer were a deal to go ahead.
"But it is not for us to endorse any deal, it is for us - the British Government, the British Prime Minister - to fight hard for Britain's interests and deliver Britain's interests.
"That is exactly what I will do.
"I will not make the mistakes of some previous governments.
"Outright hostility, abject surrender - that's what you have seen in the past. What I am interested in is results for Britain and that's exactly what you will see from our stance over this issue."
The Prime Minister spoke with Mr Johansson by telephone before the announcement of the decision.
His official spokesman declined to give any details of the discussion but said the Government was "engaging very directly" with both companies.
Mr Cameron would examine Lord Heseltine's comments, he told reporters.
A Downing Street spokesman later said: "The Prime Minister has received a letter from the chief executive of Pfizer and today spoke to the chairman of AstraZeneca who set out the board's confidence in AstraZeneca's strategy as an independent company. The Prime Minister is clear that the UK Government regards the potential takeover bid as a matter for the respective boards and shareholders of the two companies.
"However, the Government is determined to secure great British science, research and manufacturing jobs in the life sciences sector. We want to see the sector continue to flourish and grow, with Britain retaining its scientific leadership and key R&D operations for the long-term, as well as its role as a leading manufacturing base. That is also the clear and consistent message we have given to Pfizer.
"The letter from the chief executive of Pfizer is a positive sign with significant undertakings on research, jobs and investment. The Government will consider these proposals carefully as to whether they offer sufficient protection of our priorities.
"Obviously it remains unclear whether Pfizer's takeover will actually proceed."
Mr Cable said: "It's not for the Government to get involved in the detailed bid with the shareholders. What the Government's concern is - and it's something I've been expressing with the chief executive of Pfizer this week, along with my other colleagues in Government - is we're concerned with protecting the science base of Britain, an outstanding science base in pharmaceuticals with almost 7,000 jobs alone attached to AstraZeneca in the UK, we're concerned with protecting British manufacturing and decision making.
"And the letter we have received this morning is encouraging; it's positive. We need to study it very, very carefully, look at the small print, look at how binding it would be, but this is a positive reaction in terms of our concerns, our national interest concerns about jobs and science and manufacturing".