AstraZeneca shares dropped as much as 7% after a report that the U.K.'s largest drugmaker was in talks with U.S. peer Bristol Myers Squibb over a megadeal that, if completed, could value the companies at roughly $400 billion.

AstraZeneca declined to comment. Bristol Myers Squibb didn't immediately respond to a request to comment outside of normal working hours.

The companies have discussed a potential merger over several months, the Financial Times reported on Sunday. It would be one of the biggest pharmaceutical deals ever.

AstraZeneca's London-listed shares were last seen trading 6.2% lower in early morning trading, weighing on the U.K.'s blue-chip index FTSE 100, which was largely flat.

Coming into Monday trading, AstraZeneca had a market cap of $264 billion. That number has risen steadily over the past decade and since CEO Pascal Soriot took the reins in 2012 as the company has developed a solid pipeline of new drugs. It is targeting $80 billion in sales by 2030, up from $58.7 billion last year.

Bristol Myers' market cap is roughly $133 billion.

While details are scarce and sources told the FT a deal may still not come together, analysts were puzzled by the news.

"Given the strength of AZ's growth and innovation profile, we are a bit perplexed," Jefferies analysts wrote Monday morning. "Of course financial accretion can look good and maybe more cash generation would allow for more R&D. But if there is one company that doesn't need financial engineering, it's AZ."

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