Pfizer, Inc. and Allergan PLC are in talks about a possible merger of the two companies, people familiar with the matter told The Wall Street Journal.
The deal, if it pushes through, would be one of the largest deals in the history of the healthcare industry.
The people said that Pfizer is the one who approached Allergan about the possible merger, according to The Wall Street Journal.
One of the people said that the discussions are still in the early stages and an agreement may not yet take place.
Reuters adds that the healthcare industry has been experiencing a record number of deals since early 2014.
The industry has seen deals like large drug makers buying smaller rivals, consolidation among generic makers, and tie-ups between insurers.
Reuters adds that Pfizer has already played a part in the recent wave of deals when it acquired Hospira, Inc., last month.
Pfizer, which has a market value of $219 billion, paid $15 billion for the acquisition.
The Wall Street Journal adds that the merger with Allergan, if it pushes through, could be the biggest announced takeover in a year.
Allergan currently has a market value of $112.5 billion.
Reuters adds that last year, New York-based Pfizer went after a bigger target when it unsuccessfully pursued a $118 billion combination with AstraZeneca Plc.
The deal, had it pushed through, would have lowered Pfizer's tax bill by moving its headquarters to England.
The Wall Street Journal adds that a deal with Allergan could also allow Pfizer to lower its corporate tax rate.
Allergan is based in Dublin and it has a significantly lower tax rate than the U.S.
For the deal to happen, Pfizer needs to overcome several big obstacles, according to The Wall Street Journal.
One of the obstacles would be the price as Ian Read, the CEO of Pfizer, said during an earnings conference call that he noticed the shares of rival drug companies to be falling.
But he said that the falling shares won't be reflected on the value of the company when it is in a "transactional situation."
The people also told The Wall Street Journal that the general makeup of the combined companies' management team would look like, and the fate of Allergan CEO Brent Sanders, are some of the other obstacles that needed to be overcome for a deal to push through.
The extent in which Pfizer will lay off employees and shut down facilities will also need to be considered for a deal to happen.
