The share price quickly fell 11.5p to 408p as incorrect, negative news about the company's application to sell Tagamet over the counter in the US bounced around dealing rooms. Volume trading was heavy: more than 5 million shares changed hands.
SmithKline's formal reaction to the share price move, however, was not made until after hours - too late to stop it moving in the opposite direction to the market.
Dealers initially took fright at news from the US that the Federal Drug Administration had rejected the company's application to sell Tagamet as a non-prescription treatment for heartburn.
The advisory committee to the FDA had actually raised concerns about consumers mixing Tagamet with other drugs, and suggested that SmithKline make changes to the labelling. Pharmaceuticals analysts had already anticipated this problem, and predicted that the FDA would probably allow Tagamet to be sold over the counter soon.
FDA approval is crucial to stop a decline in sales of Tagamet since the patent on the drug expired in May. Analysts said sales of Tagamet dropped 9 per cent in the second quarter of this year, during which there was only a month of competition from makers of generic versions of the drug.
More than 230 million prescriptions for Tagamet have been written in the US alone since 1977, and the race is on for SmithKline to establish it as a brand on pharmacy shelves before the opposition does.
Analysts estimate that Tagamet's market share of new prescriptions in the US has dropped from 15 to 7 per cent. Profits are also being squeezed by the costs of the recent over-the- counter launch in Britain.
While SmithKline may recover lost ground today, Medeva looks poised for rough treatment in the wake of after-hours news that the European Patent Office had reversed its 1992 decision to revoke Biogen's Hepatitis 'B' patent.
Medeva was surprised at the decision. The shares are 134p.
Glaxo, though, had a much better day than in recent sessions when it was dogged by concerns over possible challenges to its patent on the blockbusting Zantac anti-ulcer drug. Shares improved 13p to 572p.
This movement was indicative of the rest of the market, which bathed in a tepid report from Ofwat, the water industry's regulator, over future price increases for domestic customers.
The average 'K' factor allowing the water companies to raise prices by one percentage point over inflation for the next 10 years was not as onerous as had been expected.
All but one of the 11 privatised water utilities recorded smart gains, although several closed off best levels. South West, which charges customers far more for processing raindrops than its competitors and wants a Monopolies and Mergers Commission inquiry, missed the boat with a 12p fall to 517p.
Severn Trent, an FT-SE 100 index company that faces a stormy shareholders' meeting today over a big retirement cheque for its chairman, closed at its day's high of 572p, up 32p.
That alone was worth more than half-a-point on the Footsie, which came close to reclaiming 3,100 with a rise of 13.6 to 3,095.9. Gilts, which slumped pounds 2 on Wednesday, lost a further quarter-point.
Equity trading was the best this week. Nearly 660 million shares went through the books.
Footsie's advance was also aided by a solid performance by the banks ahead of Lloyds, up 12p to 562p, today opening the sector's interim reporting season.
Analysts predict good news for the banks, and envisage them collectively making more than pounds 4bn of first-half profits.
Market expectations for Lloyds, however, differ greatly - ranging between pounds 600m and pounds 672m. Investors are also hoping for fresh news on the proposed pounds 1.8bn merger with Cheltenham & Gloucester Building Society.
Elsewhere, speculators anticipating a raft of takeover bids and deals, were not disappointed. Sainsbury, up 1p, duly gazumped Tesco with a 305p bid for William Low. Dealers expect Tesco, down 7p to 233p, to re-bid and marked Low up 44p to 324p.
Hanson, up 3p to 258p, also whetted takeover appetites by rolling out a pounds 96m agreed bid for Scholes, which soared 57p to the 250p offer price.
Share prices reclaimed some lost ground on the back of a steadier session for gilts and better-than-expected pricing structures for water companies. The FT-SE 100 index homed in on 3,100 with a 13.6-point rise to 3,095.9. The FT-SE Mid rose 9.9 to 3,642.8.
Shares in Celtic Gold could be in for a bumpy ride when dealings resume. Its pounds 13.5m reverse takeover bid for Coyle Hamilton, the largest insurance and re-insurance broker in Ireland, has failed. Share dealings in Celtic were suspended at 16p ahead of the bid. Celtic failed to add to the 42 per cent acceptances it had when it extended the bid deadline three weeks ago.
Investors in AAH Holdings saw 13p wiped off their shares which, at 419p, are trading just 3p above this year's low and nearly 23 per cent below the peak 543p six months ago. Yesterday's fall was caused by some downbeat news from the annual meeting, particularly concerning the distribution and environmental divisions which have failed to achieve planned operating margins.Reuse content