By Sudip Kar-Gupta
LONDON (Reuters) - Britain's top equity index dropped on Wednesday, as a slump in Shire (L:SHP) hit healthcare stocks and pegged back the broader stock market near 15-month lows.
The blue-chip FTSE 100 index (FTSE) was down by 0.8 percent, or 48.61 points, at 6,344.07 points in early session trading, hovering close to 15-month lows reached earlier in the week.
Shire was the worst-performing stock in percentage terms, plummeting by 29 percent after its U.S. rival and suitor AbbVie (N:ABBV) warned it could reconsider its plans to buy Shire.
Shire suffered its worst one-day percentage drop in its share price since February 2002, with some $14 billion wiped off the company's market capitalisation.
AbbVie had previously been eager to buy Shire, partly due to the opportunity to reduce its U.S. tax bill by moving its tax base to Britain.
However, last month the U.S. government announced tough new rules on corporate "inversion" deals - tie-ups which allow companies to escape high U.S. taxes by reincorporating abroad, prompting concerns about the attractiveness of the deal.
Shire's slump also dragged down rival AstraZeneca (L:AZN), which turned down an approach from U.S. peer Pfizer (N:PFE) earlier this year, with AstraZeneca falling 4.2 percent.
"It's the change in policy on tax inversions that has caused AbbVie to reconsider its position on Shire, and it's having a knock-on effect on sector peers such as Astra," said Dafydd Davies, partner at Charles Hanover Investments.
"A bit of the shine has come off the bid premium on the pharma sector," added Davies.
The FTSE 100 hit a peak of 6,904.86 points at the start of September, which marked its highest level since early 2000.
However, the index has since lost ground and is down 6 percent since the start of 2014, as concerns have increased about the fragile state of the European economy given weak data coming out of Germany.
"I won't be buying the dips any more, I'd rather be selling into rallies in the near-term," said Kyri Kangellaris, director and head of trading at Horizon Stockbroking.
(additional reporting by Vikram Subhedar; Editing by Toby Chopra)