The Gunners are resigned to losing Sanchez, who will become a free agent at the end of the season.
But according to the Sun, PSV striker Hirving Lozano has emerged as the ideal candidate to fill the Chilean's place.
The report states that the Gunners are prepared to slap in an offer of £42.5million to the Dutch club.
Lozano, 22, has tore up the Eredivisie this season, helping guide the Eindhoven club to first place on the table with ten goals and three assists.
Nicknamed 'Chucky', the former Pachuca man has 24 caps for his country.