Britain's GlaxoSmithKline is one of several groups exploring a potential takeover of Ache Laboratorios Farmaceuticos, one of Brazil's biggest drugmakers, people familiar with the matter said.
The privately owned business is attractive to a number of drug companies looking to increase their footprint in Latin America and could fetch $3 billion (2 billion pounds) to $4 billion, or even more if competition is keen, they added.
"It's something Glaxo has looked at in the past and they've been knocking on the door," said one source.
Other drugmakers likely to be interested include Novartis , Pfizer and Abbott Laboratories , other sources said.
Officials for all four multinational companies declined to comment. Ache also declined to comment on whether the group would be sold.
Sources said last week that investment bank Lazard had been mandated by key shareholders to investigate a sale, although whether a deal will go ahead is still uncertain given divisions among the families controlling the company.
The Baptista and Siaulys families, who hired Lazard, are ready to sell up but the Depieri family would like to hold on to its stake.
Lazard officials declined to comment on the bank's role in the process.
Although it ranks fourth in terms of overall Brazilian drug sales, Ache is the leader in prescription medicines and is also active in the fast-growing over-the-counter (OTC) business, where there is keen competition for assets.
Britain's Reckitt Benckiser agreed on Tuesday to pay Bristol-Myers Squibb $482 million to get its hands on a number of top-selling OTC remedies in Brazil, Mexico and other parts of Latin America.
The U.S. drugmaker is less interested in OTC products in emerging markets than bigger rivals like GSK and Pfizer.
Ache's earnings before interest, tax, depreciation and amortisation (EBITDA) were 540 million reais $270 million (173 million pounds) in the year to September 30. 2012, on sales of 1.5 billion reais, and the company's market position is strong, according to a report last month by Fitch Ratings.
Assuming earnings for the current year of some $300 million, a price of $3 billion to $4 billion would be in line with current valuations for emerging market drug companies of a low- to mid-double digit multiple of EBITDA, sources said.
(Additional reporting by Soyoung Kim; Editing by Helen Massy-Beresford)