Swiss pharma giant Novartis was hit by heavy selling following news, late on Monday, that the US Food and Drug Administration had refused to grant marketing approval for its Zelnorm drug.

The irritable bowel syndrome treatment, rated a blockbuster by some analysts, was also rejected by European regulators last month. The shares dropped 7.2 per cent to a three-month low of €63.10.

Novartis insisted yesterday that the FDA decision did not affect its forecast for drug sales growth. It still aims to match the industry average growth this year and exceed it in 2002. The reassurance was not enough to stave off downgrades on the stock.

Franco-German drugs group Aventis, by contrast, rose to a five-month high on plans to more than double sales in Japan over the next five years and switch out of Novartis. The shares finished 2.3 per cent better at €91.50, off a high of €92.80.

Aventis, which has outperformed the European sector by almost 20 per cent over the past 18 months, has forecast annual earnings of at least 30 per cent over the next three years. It has also won plaudits with plans to dispose of non-core assets to focus on its pharma activities.

German drugs group Altana put on 5 per cent to €42.40, still basking in Friday's news that the FDA had extended approval of Pantoprazole, its gastrointestinal drug, to its long-term application. Strong demand for the drug in the first quarter prompted Altana to raise its 2001 sales forecast for the drug to 1.1 billion from 900 million.