British drugmaker Shire confirmed it has held talks with US rival AbbVie for a merger between the companies, after AbbVie approached it with improved terms.
"Shire confirms it has held a meeting with representatives of AbbVie," the company said in a statement.
It noted that the talks held in New York were at an early stage.
"There can be no certainty that any firm offer will be made nor as to the terms on which any firm offer might be made," the company added.
"Shareholders are strongly advised to take no action in relation to AbbVie's proposal."
Media reports earlier said the companies are in talks for a £30bn ($51.34bn, €37.8bn) merger, which would change North Chicago, Illinois-based AbbVie's tax regime to the UK. The move is expected to reduce the company's corporate tax rate to 13% from the current 22%.
In June, Shire rejected a £27bn merger proposal from AbbVie, valuing each Shire share at £39.50.
"The board of Shire decided unanimously to reject the proposal on the basis that it fundamentally undervalued the company and its prospects," Shire said in a statement.
Shire added that the proposal would deny its shareholders full benefits of its growth strategy, under which it expects to double annual product sales to $10bn by 2020.
It noted that the company had significantly accelerated growth and increased shareholder returns over the last 12 months.
Shire generates about 40% of its sales from medicines for attention deficit hyperactivity disorder. In addition, the firm has developed drugs treating rare genetic disorders, and is developing unique treatments in ophthalmology and other specialty disease areas.
With its tax base in Ireland, Shire has been an acquisition target of US drugmakers that are trying to shift tax base to European countries due to the high corporate tax rate in the home country.
Shire's shares rose 5.9% to close at £48.70 in London on 11 July.
A similar move by US drugmaker Pfizer to reduce its tax rates by acquiring AstraZeneca fell apart in May, as the latter rejected a $118bn offer.