Speculation of a Pfizer takeover of British rival AstraZeneca moved beyond the rumor stage Monday. The New York drugmaker disclosed that, over the weekend, it redoubled efforts to buy the Anglo company, after the UK firm rebuffed an initial bid this past January. UPDATE: AZ has rejected a second offer by Pfizer. Please scroll down for the latest news, or continue here to read Monday’s story.

The renewed push, which followed January’s cash-and-stock offer worth about $100 billion, could expand Pfizer’s product lineup while giving it a presence in a very promising area of oncology treatment.

Under terms of the initial deal, Pfizer would give AZ shareholders £46.61 ($76.62) for each AZ share, a 30% premium, Pfizer said, to the firm’s share price before that offer was made. In a statement yesterday, AZ said its board concluded that the proposal “very significantly undervalued AstraZeneca and its prospects.”

To convince the shareholders of AZ, it seems likely that Pfizer will raise its bid. “This is not going to be a one-off negotiation. It will be a series of negotiations, and my belief is Pfizer will probably up their offer,” John Lyon, a professor at UK-based Warwick Business School, told MM&M.

ICI Pharmaceuticals (a precursor to Zeneca) “was a proud British company and the unknown of selling out the country’s best corporations can bring advantages and disadvantages,” Lyon added.

Were a deal with AZ to be reached by a May 26 deadline, it could lower Pfizer’s tax rate, from the 27% rate Pfizer paid last year to the 21% AZ pays, by creating a UK-based holding company headquartered in New York, and generate synergies both on the R&D and commercial side.

While Pfizer has gotten smaller by shedding its consumer, infant formula and animal health divisions, and has been readying financials for a possible split into three business units in 2017, a megamerger with AZ would be a change of course.

The rationale for the deal “relates back to our initial strategies…improving the innovative core and sound capital allocation,” Pfizer chairman and CEO Ian Read explained in a video posted to the firm’s website this morning. 

The value of an AZ takeover deal would eclipse Pfizer’s $90-billion purchase of Warner-Lambert. The Warner-Lambert deal in 2000 gave Pfizer full ownership of cholesterol pill Lipitor, which was launched in 1997 and became the best-selling drug of all time.

This time, Pfizer is attracted to a group of experimental drugs that have been pegged by analysts to grow into  perhaps the most lucrative new therapeutic area. Were a deal with AZ to be finalized, it would put Pfizer on the map in this new area of oncology drugs, immuno-oncology. 

“The crown jewel is the cancer franchise,” said ISI Group’s Mark Schoenebaum in a webinar for investors this morning to go over the deal.

AZ has several such compounds in early testing. In addition, PARP inhibitor olaparib is in Phase-III for ovarian cancer. Pfizer’s own pipeline includes the Phase-II CDK4/6 inhibitor palbociclib, being studied in breast cancer. Not having to repatriate monies used to buy AZ would leave more funds for the new company to develop products from their combined pipelines. 

The deal could also bolster Pfizer’s commercial side, because it gives them “more launches and takes away the risk from those launches,” Read said.

Buying AstraZeneca would broaden Pfizer’s established products lineup, too. In cardiovascular, the two firms have complementary, albeit slow-growing portfolios, namely AZ blood thinner Brilinta and Pfizer anticoagulant Eliquis (Pfizer also has bococizumab, a PCSK9 inhibitor for high cholesterol, in testing). The British drugmaker also markets drugs in the diabetes and respiratory area, two big categories where Pfizer currently doesn’t compete.

Lyon expects the deal will go through. “There is traction in the industry with GSK trading assets with Novartis,” he said.

Pfizer would also maintain flexibility for the potential future separation of its businesses. “Does this deal weaken the break-up thesis? On balance no,” said Schoenebaum.

UPDATE: AstraZeneca on Friday, May 2, turned down a higher offer by Pfizer to buy the British drugmaker. In a statement, AZ said the terms of Pfizer’s newest bid are “inadequate, substantially undervalue AstraZeneca and are not a basis on which to engage.”

The bid, which came in 7% higher than the one Pfizer first floated several months ago, was worth £50.00 ($84.47) per AZ share, and values AZ at £63 billion ($106.43 billion), according to the Wall Street Journal.

The deal also, the Journal noted, upped the cash component to 32% from 30%, which is significant because among the reasons cited by AZ Chairman Leif Johansson for rejecting the previous bid on Jan. 12 was what he called the “large proportion of Pfizer shares,” as well as the hurdles of structuring a deal so a combined entity could be taxed at UK rates.

The latest rejection came after the firms traded statements earlier in the week concerning Pfizer’s initial buyout proposal in January. Rumors of a possible megamerger of the two firms first surfaced the week prior, amid a series of asset swaps announced by GlaxoSmithKline and Novartis which kicked off a new flurry of pharma deal making.

A second statement issued Friday includes a letter sent by Pfizer Chairman and CEO Ian Read to UK Prime Minister David Cameron, seeking to assure the government of its “commitment to the UK where Pfizer already employs a significant number of colleagues across Research, Commercial, and Administrative roles.”

It contains commitments regarding UK science and jobs, as well as promising to establish the combined company’s corporate and tax residence in England.

“Ultimately, establishing the world’s largest research-based pharmaceutical company in the UK, together with the commitments made in this letter represent a strong indicator of the incentives that your Government has created to attract successful business to the UK,” Read noted.

The letter was meant to allay skepticism. As the New York Times reported Friday, Britain’s former minister for science and innovation told The Financial Times on Thursday that an AZ sale could deal “a devastating blow” to Britain’s role in the pharma industry.