The idea of GlaxoSmithKline (GSK) buying AstraZeneca took centre stage yesterday after Merck agreed to buy Schering-Plough for $41.1 billion (£29.8 billion) in a deal that would create the world's second-largest pharmaceuticals group.

GSK insisted that it was not interested in a merger with AstraZeneca or any other group, but its shares fell by 3 per cent as investors concluded that Merck's takeover of Schering-Plough made such a tie-up more likely.

GSK said: “We see a huge deal as a risk that could cause us to take our eye off core strategy for two or three years while it bedded in - not a luxury we can afford.”

Shares in GSK rebounded slightly to close down 16p, more than 1.5 per cent, at £10.06. AstraZeneca shares rose 76p, more than 3.5 per cent, to close at £22.23 as investors reacted positively to the prospect of a takeover offer. The Merck/Schering-Plough deal has been concluded five weeks after Pfizer agreed to buy Wyeth for $68billion, a purchase that will increase Pfizer's lead over GSK by raising its share of the global pharmaceuticals market from 6.2 per cent to 8.6 per cent.

Hours after Merck's announcement, it emerged that Roche was close to agreeing a deal with the Genentech board under which the Swiss drugs group would buy the 44 per cent of the American biotech company that it does not already own for $46.7billion.

The Merck/Schering-Plough tie-up would give the group 5.6 per cent of the world's pharmaceuticals market, pushing GSK into third place in the global league, with a 5.4per cent share, according to Datamonitor/IMS Health.

Merck said that 16,000 jobs, 15 per cent of the enlarged group's workforce, would go as it tried to cut $3.5billion costs annually. JPMorgan is advising Merck and Morgan Stanley and Gold-man Sachs are at Schering-Plough.

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