Shares in Shire plummeted 26 percent by 0757 GMT after AbbVie said it would reconsider a recommendation to shareholders to vote in favour of the 32 billion pound merger due to changing U.S. tax regulations.

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.

Wednesday's drop, the sharpest since Feb 2002, takes Shire's stock back where it was when news of AbbVie's interest broke in June.

Other UK healthcare stocks including AstraZeneca, which turned down a Pfizer approach earlier this year, also fell as the chances of a bid from U.S. suitors were seen as diminishing.

"In the absence of a bid, these stocks will return to their previous levels," Justin Haque, a broker at Hobart Capital Markets, said.

At 0757 GMT (08:57 a.m. BST), the pan-European FTSEurofirst 300 index was down 0.6 percent at 1,285.72 points, with Britain's FTSE 100 down 1 percent.

The FTSEurofirst has fallen roughly 9 percent since mid-September as the region's economic outlook has worsened and stimulus measures unveiled by the European Central Bank, which include a programme to buy asset-backed securities and covered bonds, failed to reassure the market.

Norwegian oil firm Statoil fell nearly 3 percent in brisk volume after its chief executive Helge Lund resigned to become the new head of Britain's BG. Shares in the UK gas major rose 1 percent. French food group Danone bucked the trend, rising 4.4 percent after a better-than-expected rise in underlying third-quarter sales on Wednesday, helped by improving baby food sales in Asia.

(editing by John Stonestreet)

By Francesco Canepa