The outlook for Bayer as an independent drug manufacturer was thrown into doubt yesterday as the old-established German group withdrew a key anti-cholesterol drug because of concerns over side effects.

The news sent the shares plunging €17.5 per cent to €37.40, a record one-day fall. The tumble returned shares to levels last seen in late October 1999.

News of the withdrawal of Baycol, which had been expected to generate more than €1 billion in sales this year, took the markets by surprise. The company accompanied the announcement with news that the withdrawal would slash 2001 profits by €600 million-€650 million and prevent the group from meeting already-reduced targets.

Restructuring measures are to be announced by Bayer today when it unveils second-quarter results. The group said it would review its drug strategy, but ruled out selling the business.

The announcement marked another setback for the company this year after shipments of its haemophilia drug Kogenate were halted in January when the US Food and drug administration found bacteria in some of the manufacturing stages. And in June it was forced to abandon development of an asthma drug because of unidentified side effects. "Baycol was Bayer's only real growth product, and this news is concerning, leaving the company with no visible sales growth over the next five years," JP Morgan said in a note to clients.

Telecoms stocks lurched lower in the face of grim corporate news from the US, broker downgrades for a number of heavyweight operators and escalating share flow-back concerns.

France Telecom and Deutsche Telekom fell after Merrill Lynch cut both stocks from from "accumulate" to "reduce".

Lehman Brothers took Telefonica down from "buy" to "market perform" and Morgan Stanley Dean Witter reduced Sonera to "underperform".