Irish based botox maker Allergan (NYSE:AGN) and US drugs behemoth Pfizer (NYSE:PFE) confirmed they are in merger talks.
It could potentially create the world's largest drug maker, but debate is already swirling about potential tax avoidance.
It is the latest merger and acquisition (M&A) story to come from the sector, which has been rife with such activity this year.
Indeed there was a whopping US$221 billion in M&A deals in the pharma space made in the first half of this year alone.
In separate statements yesterday, both Viagra maker Pfizer and Allergan said no agreement has been reached and did not discuss any terms that might lead to such a tie-up.
Allergan shares rose 6% US$304.38 on Wall Street while Pfizer closed down 1.9% at $34.77.
Meanwhile, Allergan reiterated that it remained committed to its formerly announced US$40.5bn deal to sell its generics business to Teva Pharmaceutical.
A tie-up with Allergan could be a way for New York-based Pfizer to lower its corporate tax rate, because, based in Dublin, Allergen has a significantly lower tax rate than companies in the US.
This tax issue is a hot topic in the US at the moment.
Yesterday, before talks were confirmed, Pfizer's chief executive Ian Read made clear his criticism of US corporate taxes.
He was reported as saying: "Our tax rate highly disadvantages American multinational high-tech businesses."
Pfizer's effective tax rate is 25%, while Allergan's is 10$ lower at 15%.
Elsewhere, the vocal and controversial billionaire US investor Carl Icahn, has said a Pfizer-Allergan deal would result in the loss of the country's 10th largest company to Ireland.
Presidential candidate Hillary Clinton has also been a high profile commentator on drug companies' pricing recently and is an opponent of any move where US firms relocate to take advantage of lower tax rates.
Allergan reportedly expects revenue of more than US$8 billion in the second half of this year, not including the generic drugs it is selling to Teva.