* FTSEurofirst 300 up 0.4 percent after Thursday's 3 pct rally
* Continental shares underperform Britain's FTSE
* Roche hit as two drugs fail tests
* Air France tumbles after third profit warning (Updates with detail, closing prices)
By Alistair Smout
LONDON, Dec 19 (Reuters) - Continental European stocks edged lower on Friday as a late advance was hindered by Swiss drugmaker Roche after two of its major drugs failed tests, with Italian banks under pressure from a downgrade by S&P.
The euro zone blue-chip EuroSTOXX 50 and the Swiss SMI both ended down 0.4 percent as all major continental indexes fell.
However, the FTSEurofirst 300 index of top European shares , which was boosted by a 1.2 percent surge in stocks on Britain's FTSE 100, rallied with Wall Street to end 0.4 percent higher at 1,361.07.
Healthcare stocks took the most points off the FTSEurofirst 300, with Roche the top faller, down 6.3 percent after tests of new Alzheimer's and breast cancer drugs both failed. Analysts said forecasts for 2015 would have to be revised downwards.
"The upcoming drug pipeline was priced into the stock, but it looks unlikely these revenues will materialise," Jasper Lawler, market analyst at CMC Markets, said.
The STOXX Europe 600 Health Care index fell 0.7 percent, the biggest sectoral faller.
The FTSEurofirst 300 built on a 3 percent advance on Thursday to reverse earlier losses and end 3 percent higher on the week, its biggest weekly gain in a year, helped by the U.S. Federal Reserve's commitment to be "patient" about raising interest rates.
"The Fed's statement earlier in the week helped to squeeze us higher. But the market doesn't have a high degree of conviction at the moment," said Jeremy Batstone-Carr, market analyst at Charles Stanley.
"The outlook remains one of sub-trend growth and low inflation. The downgrades in Italy illustrate that we're not out of the woods as far as growth is concerned."
Peripheral euro zone indexes were under pressure after Standards and Poor's cut Italian bank ratings, saying growth would be slower than expected.
Banks Monte Paschi, Intesa Sanpaolo and UniCredit were down between 1.9 and 4.2 percent. Italy's FTSE MIB index fell 0.4 percent.
Some of the pressure on euro zone stocks came from sources telling Reuters that European Central Bank officials were considering ways to place conditions on any potential stimulus programme.
Air France-KLM tumbled 8.1 percent after issuing its third profit warning in six months. It cut its 2014 earnings goal by 200 million euros as higher-than-expected costs from a recent pilot strike added to weaker unit revenues.
Germany's BASF was down 1.6 percent, accounting for half the fall on the DAX, after abandoning an asset swap with Russia's Gazprom.
"(The) earnings impact from termination of asset swap is likely to be mild, but investors may be disappointed that BASF retains a low-growth business it wanted to exit," Paul Walsh, analyst at Morgan Stanley, said in a research note.
The DAX was down 0.3 percent on the day.
European bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Editing by Kevin Liffey)