NEW YORK—Following initial reports by the Wall Street Journal and other financial sources overnight, Pfizer (NYSE: PFE)) and Allergan (NYSE:AGN) said this morning that they have terminated their $150 billion merger “by mutual agreement” just days after new rules were issued by the U.S. Treasury, meant to limit the ability of American companies to shift their home overseas simply to lower their tax bills.

The deal, announced in November, would have been the largest transaction of its kind, a so-called inversion that would allow an American company to change its U.S. corporate citizenship in order to move income beyond the reach of U.S. tax authorities. Allergan has its tax domicile in Ireland.

As reported by VMail, the new rules will limit such deals.

This morning, in its statement, Allergan reiterated its strong standalone growth profile and strategy. “While we are disappointed that the Pfizer transaction will no longer move forward, Allergan is poised to deliver strong, sustainable growth built on a set of powerful attributes," CEO and president Brent Saunders said in a statement. "Leading therapeutic franchises with strong brands across seven therapeutic areas provide the foundation for continued strong growth in 2016 and beyond."

In connection with the termination of the merger agreement, Pfizer has agreed to pay Allergan $150 million for reimbursement of expenses associated with the transaction.

Saunders added, “Our pipeline is one of the strongest in the industry, loaded with 70 mid-to-late stage programs including 14 expected approvals and 16 regulatory submissions in 2016 alone. Allergan is focused on delivering growth from an efficient operating structure while also being committed to investing in R&D through our Open Science model. The company is also poised to deliver additional growth opportunities from its attractive financial profile and balance sheet, propelled by approximately $40.5 billion pre-tax from the sale of our Actavis Generics business to Teva, expected to close in June 2016."

He added, “I would like to thank our more than 30,000 global employees for their continued focus and dedication to our business during a time of incredible transformation for our company. Their continued commitment to our customers and helping them meet the needs of their patients is remarkable, and I applaud them for their efforts."

Based on a preliminary review of the proposed regulations outlined in the U.S. Treasury Notice, Allergan believes that the regulations will have no material impact on the company's standalone tax rate, the company said. Allergan plans to report its first quarter earnings in its normal timeline by May 10, where it will also provide an update on its plans to simplify the company's operations post the close of the Teva transaction.

“Pfizer approached this transaction from a position of strength and viewed the potential combination as an accelerator of existing strategies,” stated Ian Read, chairman and CEO, Pfizer. “We remain focused on continuing to enhance the value of our innovative and established businesses. Our most recent product launches, including Prevnar 13 in Adults, Ibrance, Eliquis and Xeljanz, have been well-received in the market, and we believe our late stage pipeline has several attractive commercial opportunities with high potential across several therapeutic areas. We also maintain the financial strength and flexibility to pursue attractive business development and other shareholder friendly capital allocation opportunities.

“We plan to make a decision about whether to pursue a potential separation of our innovative and established businesses by no later than the end of 2016, consistent with our original time frame for the decision prior to the announcement of the potential Allergan transaction. As always, we remain committed to enhancing shareholder value,” Read said.