AstraZeneca pain weighs on FTSE, Diageo makes merry after results

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* FTSE 100 down flat, mid caps up 0.5 pct

* Worst day ever for AstraZeneca (NYSE: AZN - news) after drug study fails

* Earnings boost Diageo (LSE: DGE.L - news) , Rentokil

* Anglo American (LSE: AAL.L - news) rises on dividend news

By Kit Rees

LONDON, July 27 (Reuters) - A punishing fall in AstraZeneca's shares after the failure of a key lung cancer study for the pharma company offset the impact of earnings-led gains for drinks giant Diageo on Britain's top share index.

Britain's FTSE 100 index was flat in percentage terms at 7,450.92 points by 0836 GMT on Thursday, while the broader European market was slightly negative.

It was a rough day for AstraZeneca which lost around $13 billion of its market value as its shares plunged 15.8 percent, putting it on track for its worst day on record.

The healthcare firm's combination of two injectable immunotherapy drugs, durvalumab and tremelimumab, failed to help patients as hoped in a study which was seen as key to proving the value of the group's new drug pipeline.

Analysts at Jefferies estimated that the failure of the study, known as MYSTIC, removed around 10 to 15 percent of mid-term earnings and valuation from the stock.

"With (Other OTC: WWTH - news) the failure of MYSTIC ... now likely to be fully factored into expectations, the dividend may now look less safe and we expect some investors will start to question its long-term sustainability, despite prior reassurances from management," analysts at Jefferies said in a note.

Wednesday's decision by the U.S. Federal Reserve to keep interest rates on hold was also weighing on the internationally-exposed FTSE, with banking stocks coming under pressure.

"The general interpretation from the Fed meeting in Europe has been that it's sending the euro and the pound higher, which is not good for our exporters," said Jasper Lawler, senior market analyst at London Capital Group.

"That environment probably exacerbated the fall we are seeing in Astra and some of the other shares as well."

It was better news for mid cap pharma stock Indivior (Swiss: OXINDV.SW - news) , whose shares surged more than 12 percent after reporting first quarter earnings, with Jefferies analysts highlighting a boost to the firm's operating leverage from a stronger U.S. market.

An earnings update also boosted shares in distilled drinks company Diageo, which jumped 6.4 percent to an all-time high after raising its profitability target and announcing a share buyback programme.

Likewise pest control company Rentokil Initial (Other OTC: RKLIF - news) gained 4.3 percent after reporting half-year results.

News that miner Anglo American would resume dividend payment six months early helped its shares add around 3 percent.

The miner was forced to suspend its dividend during the commodity rout in 2015, but was helped by a rise in commodities prices last year as well as by cost-cutting measures. (Reporting by Kit Rees; Editing by Keith Weir)