US pharmaceutical giant Pfizer and Allergan have formally announced they are scrapping their $160 billion merger.
The move marks a big win for US President Barack Obama, who has been pushing to curb tax-slashing "inversion" deals.
The announcement followed the unveiling of new US Treasury rules on Monday aimed at curbing such deals.
The merger would have allowed New York-based Pfizer to cut its tax bill by redomiciling to Ireland, where tax rates are lower.
Pfizer said today it had agreed to pay Allergan $150m for reimbursement of expenses associated with the deal.
While the new rules did not name Pfizer and Allergan, one of their provisions targeted a specific feature of their merger - Allergan's previous history as a major acquirer of other companies.
This is not the first time a tightening of the US inversion rules have caused a merger to unravel.
US pharmaceutical company AbbVie abandoned its $55 billion takeover of Ireland-domiciled peer Shire after Mr Obama's administration cracked down on inversions in 2014.
AbbVie had to pay Shire a $1.6 billion break-up fee.
Pfizer shares had ended trading in New York last night up 2% on hopes the company would walk away or renegotiate the deal in its favour.
But Allergan shares closed down 14.8% to their lowest level since October 2014.
Besides Pfizer-Allergan, other pending inversion deals that have not yet closed include the proposed $16.5 billion merger of Johnson Controls with Ireland-based Tyco International, Waste Connections's $2.67 billion deal with Canada's Progressive Waste Solutions and IHS's $13 billion acquisition of London-based Markit.
Without Allergan's new, fast-growing medicines, Pfizer may need to look for other companies with attractive products, such as Biogen, Regeneron Pharmaceuticals and AbbVie, analyst said.
Pfizer had planned to make a decision by 2016 whether to split off its hundreds of generic medicines, but delayed the decision until 2019 after announcing its merger with Allergan.
Analysts said the decision could now be moved to late 2017 or 2018 as the deal with Allergan collapsed.
Pfizer, which had announced the merger deal in November, had said its tax rate would drop to about 17-18% after the deal, from around 25%. That would have represented more than $1 billion in annual cost savings.
Pfizer said in a statement the two companies "terminated by mutual agreement" plans to merge.
"Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies," the company's chairman and CEO Ian Read said in a statement.
Allergan CEO Brent Saunders said in a separate statement that while he is "disappointed" that the merger will not proceed, his company is nevertheless "poised to deliver strong, sustainable growth built on a set of powerful attributes."
Allergan - which has its headquarters in Dublin but with much of its operations managed out of New Jersey in the US - said the US Treasury's reforms will not have any material impact on the tax rates it pays.
Allergan has about 30,000 employees and operations in about 100 countries.
It said today it would move ahead with plans for its $40.5 billion sale of its generic drug business to Israel's Teva Pharmaceutical Industries. It expects the transaction to close by June.
Pfizer and Allergan had said in November that the merger would create an industry leader with more than 100 treatments in mid- to late-stage development.
The plan was for the combined business to carry the Pfizer name and be legally domiciled in Ireland while retaining a global operational headquarters in New York.
It would have seen Pfizer shareholders hold 56% of the enlarged group, with the rest owned by Allergan investors.
