AstraZeneca has held talks with US rival Bristol Myers Squibb over a merger that could create a drugs giant worth more than £300billion.
A tie-up between the two firms, which have reportedly held discussions in recent months, would create the world's fourth-largest pharmaceutical company.
The Financial Times reported that a deal could develop further in the near future but 'may be delayed or fall apart'.
AstraZeneca shares fell 6.81 per cent, or 860.00p, to 11,772.00p on Monday morning.
Fears over UK exits
A string of British firms have this year announced take-private deals or takeovers by foreign firms, while others have shifted their primary listing away from London. It has prompted renewed scrutiny of London's ability to retain its brightest stars.
AstraZeneca completed its additional listing on the New York Stock Exchange in July, as chief executive Pascal Soriot tries to grow the firm's share of the US market.
Cambridge-based AstraZeneca is Britain's second most valuable company, with a market value of around £196billion. New York-listed Bristol Myers Squibb focuses on cardiovascular and oncology treatments and is currently worth approximately £133billion.
Regulatory hurdles ahead
Any deal is likely to face significant regulatory hurdles, amid growing scrutiny of the sector from competition and antitrust watchdogs. If it progresses, the deal would be scrutinised by the Trump administration's antitrust authorities, who have sought to increase domestic investment.
Soriot told reporters last week that AstraZeneca did not "need M&A to deliver" on its 2030 revenue target.
Analyst reaction
Chris Beauchamp, chief market analyst at IG, said: "Companies saying one thing and doing another is a well-trodden path, and AstraZeneca joins in with the reports of a proposed alliance with Bristol Myers Squibb, having only said recently that it didn't need M&A (mergers and acquisitions) to hit its targets."
He added: "Though a rare example of a big UK firm buying a smaller US firm is something to warm the cockles of the British heart, it risks the departure of yet another national champion, and in any case the pair's large cancer divisions are a major hurdle to a successful deal."
