Alliance Pharmaceutical Corp.'s stock plunged in heavy tradingon Thursday after the company announced that it will notresume Phase I clinical trials of Imagent BP and Oxygent HTthis month as had been expected

The San Diego company's stock (NASDAQ:ALLP) fell $4.75 ashare on volume of 2.5 million shares traded to close Thursdayat $10 .

Alliance said it observed minor changes in the lungs of certainanimals after intravenous administration of the products inroutine preclinical studies using the two products.

Alliance said it does not consider the transient effect to besevere and that there is no evidence it will occur with itsother products, including Imagent GI, Imagent LN or LiquiVent,or with the cardiovascular and cancer applications of Oxygent.

"We view the (drop in the stock's value) as an overreaction, butit's been a fairly weak market for secondary biotech companieslately," said Stuart Gauld, vice president for investor relationsat Alliance.

He said the problem with the trials was a "delay rather than aninsurmountable obstacle" and was "disappointing, but not amajor problem."

"We have the people and capital to solve the issues we'refacing," Gauld said.

Imagent BP and Oxygent Ht are perfluorochemical emulsionsdesigned to serve, respectively, as a liver contrast agent andas a temporary oxygen carrier during surgery.

In broader trading, both biotechnology indexes rose Thursday.The AMEX index jumped 4.26 to close at 150.11, and the CBOEindex went up 1.68, ending at 140.75.

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