Charles River Laboratories ( CRL), the U.S. drug research firm, has called off a $1.6 billion deal to buy China's Wuxi PharmaTech ( WX)after its largest shareholders voiced strong opposition and influential proxy voting organizations advised investors not to back the transaction.

Charles River late on Thursday said it has "mutually agreed" with Wuxi to terminate the agreement. It would pay the Chinese company a $30 million break-up fee.

James Foster, Charles River's chairman, president and chief executive, said although the company believed the acquisition would have created long-term benefits for its business and shareholders, it decided to withdraw it because of investors' "concerns about the proposed transaction and our commitment not to proceed without their support".

In April, the Massachusetts-based company, one of the world's largest drug contract researchers, said it planned to acquire Wuxi to expand its presence in China and gain access to the country's abundance of scientists and cheap R&D facilities.

The deal would have been among the top three foreign takeovers of a Chinese company and the largest in the pharmaceutical sector.

But the proposal was met with strong disapproval from investors, who questioned its rational and the "excessive premium" offered by Charles River. Shares of Charles River fell nearly 17% on the day the acquisition was announced.

Jana Partners, the U.S. activist hedge fund and Charles River's biggest shareholder with a 7% stake, said the deal would be "the wrong choice" for the U.S. company because of the lack of synergies from the merger and the large takeover premium.

"The proposed revenues synergies are highly speculative and run counter to established industry dynamics," Jana said. "Even if the proposed transaction could generate the claimed benefits, the return on Charles River's investment would still be inadequate."

Other large shareholders including asset managers Neuberger Berman and Relational Investors also opposed the deal. Proxy advisory firms RiskMetrics and Glass Lewis have recommended Charles River's shareholders to vote against it.

Charles River added it remained confident of its future prospects and announced a $500 million stock repurchase plan to take advantage of its "substantially undervalued" share price.

Wuxi said while it was disappointed at the termination of the deal, it would continue to grow as an independent company.

"WuXi's strategy has not changed. Our goal is, and has long been, to build a broad, integrated R&D service platform designed to help our customers improve the success of research and shorten the time of new product development," said Ge Li, chairman and chief executive.