Pfizer, which makes Viagra, said it would seek to pay a combination of cash and shares for the deal. In January, Pfizer made a bid for AstraZeneca that valued the company at just under $100 billion.
"Pfizer hopes that the increased proposal will provide the basis for AstraZeneca to engage with Pfizer and enter into discussions relating to a possible combination of the two companies," the company said in a statement.
Ian Read, Pfizer's chairman and chief executive, commenting on the raised offer, said: "We believe our proposal is responsive to the views of AstraZeneca shareholders and provides a sound basis upon which to arrive at recommendable terms for the combination of our two companies."
AstraZeneca said its board will review the offer, but gave no further comment.
"The new revised higher offer should be sufficient to bring AstraZeneca to the table for the first time," said Mick Cooper, an analyst at Edison Investment Research. "AstraZeneca's management will, as part of its defense strategy, start to indicate how it will realize value."
AstraZeneca's shares declined around 0.8% on the London Stock Exchange while Pfizer's New York Stock Exchange-listed pre-market shares showed little reaction to the development.
If the deal goes through it would be one of the largest ever foreign takeovers of a British firm as well as one of the biggest acquisitions in the drug industry.
As part of the revised offer, Pfizer contacted British Prime Minister David Cameron seeking to reassure his office over what affect a successful bid would have on the British economy, where critics fear the takeover could lead to sizable job losses.
In the letter, Pfizer vowed to keep AstraZeneca's corporate and tax residence in Britain, and promised that the "golden triangle of Oxford, Cambridge and London would represent a vital component" of the deal.
Those three cities are seen as key parts of Britain's efforts to be a world leader in science and technology.
"Pfizer's assurance (to Downing Street) over completing AstraZeneca's move to Cambridge and the promise of 20% of the combined workforce of R&D jobs staying in the U.K. will go some way to appease the government's concerns over (lost) jobs," said Edison's Cooper.
"The size of the bid is bound also to act as a catalyst for the government to consider introducing safeguards to vet overseas takeovers of U.K. assets and companies of strategic importance,' Cooper said.
Source: Kim Hjelmgaard, USA TODAY