AstraZeneca Plc rejected Pfizer Inc.’s sweetened takeover proposal, saying the 63.1 billion-pound ($106.5 billion) offer fails to appreciate the value of the promising medicines under development by the U.K.’s second- biggest drugmaker.

The cash-and-stock offer, which values AstraZeneca at about 50 pounds a share based on yesterday’s closing price for Pfizer, also still relies too heavily on equity, London-based AstraZeneca said in a statement today. AstraZeneca earlier rejected a proposal of 46.61 pounds a share, announced April 28.

“Pfizer’s proposal would dramatically dilute AstraZeneca shareholders’ exposure to our unique pipeline and would create risks around its delivery,” AstraZeneca Chairman Leif Johansson said in the statement. “As such, the board has no hesitation in rejecting the proposal.”

AstraZeneca may not get much help from the government of U.K. Prime Minister David Cameron in fending off Pfizer. The government today signaled it wouldn’t interfere, rebuffing calls from members of other political parties to step in to protect jobs in the country’s science base.

AstraZeneca rose 0.5 percent to 48.41 pounds at 2:45 p.m. in London. Pfizer fell 0.5 percent to $31 in New York.

CEO Meetings

Pfizer raised its bid after Chief Executive Officer Ian Read met with AstraZeneca shareholders and government officials in the U.K. In a letter to Cameron, New York-based Pfizer pledged to follow through on AstraZeneca’s plan to build a substantial campus in Cambridge, England, and to keep key scientific management at the site.

“This is ultimately a decision for AstraZeneca shareholders,” said Universities and Science Minister David Willetts in an interview.

The U.K. government has been in talks with Pfizer about preserving jobs, particularly in research and manufacturing, in the country, Willetts said.

“I think those messages are getting home to Pfizer, but there’s a lot more hard-headed negotiation to come,” Willetts said.

Cameron spoke with Johansson today about the deal, said Jean-Christophe Gray, Cameron’s spokesman.

“AstraZeneca has a fantastic role in the British economy,” Cameron told reporters today in Newcastle-Under-Lyme, England. “Action on any merger is a decision for both companies. We’ve sought and received robust assurances from Pfizer should the deal go ahead.”

Tax Rate

Buying AstraZeneca would give Pfizer a lower tax rate because the combined company would be a corporate resident of England. The company, which would maintain its head office in New York, also would gain a portfolio of experimental cancer drugs from the purchase.

AstraZeneca in its April 28 statement rejecting the initial offer said Pfizer’s decision to move its tax domicile to the U.K. may be problematic. The U.K. company highlighted that issue again in today’s statement.

Pfizer’s earlier offer, made in January, valued AstraZeneca at 58.8 billion pounds. The acquisition would be the largest ever of a U.K. company, according to data compiled by Bloomberg, and would create the world’s biggest drugmaker by sales.

“The consistent message from leading shareholders reinforces our belief that there is a highly compelling strategic, business and financial rationale for combining our businesses, with significant benefits for all our stakeholders,” Read said in a letter to Johansson. “We believe our revised terms will be viewed by the market as a basis for engagement.”

Cash Mix

Stockholders would get 15.98 pounds in cash and 1.845 shares of the combined company for each share in AstraZeneca, Pfizer said. The new bid was 7.3 percent above the previous proposal and 39 percent above the closing price Jan. 3, before AstraZeneca made its initial offer.

The new proposal consists of about 32 percent cash and 68 percent stock, versus about 30 percent cash and 70 percent stock in the original offer. AstraZeneca said April 28 the initial bid “very significantly undervalued” the company, and said it was concerned that too much of the payment was in stock rather than cash.

Limited Commitment

Pfizer, in the letter to Cameron, pledged to keep at least 20 percent of the combined company’s research and development workforce in the U.K., retain “substantial” manufacturing facilities at AstraZeneca’s site in Macclesfield, England, and invite at least two AstraZeneca directors to join Pfizer’s board.

The U.S. company is committing to the steps for at least five years, though it could “adjust these obligations should circumstances significantly change,” according to the Pfizer statement.

AstraZeneca employs almost 2,000 people in Macclesfield, and the company is in the process of moving its corporate headquarters from London to Cambridge.

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