By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks advanced Wednesday, with drug-sector heavyweight Roche Holding AG higher on an acquisition move, but a potential tie-up involving French telecommunications firm Orange SA was shelved, pressuring its shares.

The Stoxx Europe 600 index picked up 0.4% at 346.21, looking for a second consecutive win. It closed Tuesday's session higher by 0.9%, the strongest percentage rise in two months, according to FactSet data.

Stock in Roche tacked on 0.5% after the Swiss drug company said it would buy privately held U.S. biotech firm Seragon Pharmaceuticals for up to $1.725 billion. Seragon researches breast-cancer treatment. Under the agreement, Genentech -- part of Roche Group -- will pay $725 million up front in cash, plus up to an additional $1 billion based on performance of "certain predetermined milestones." The deal is expected to close in the third quarter.

Elsewhere in the pharma group, shares of AztraZeneca PLC rose 1.3%, extending Tuesday's gains after Chief Executive Pascal Soriot spent GBP2 million ($3.4 million) to raise his stake in the British company.

AstraZeneca aided in pushing the U.K.'s FTSE 100 up 0.3%. Meanwhile, June construction figures showed expanded strength in the sector, topped by residential house-building. The pound (GBPUSD) rose against the U.S. dollar to $1.718 compared with $1.715 late Tuesday.

Wading near the bottom of the Stoxx 600 was Orange , with shares dropping 3.2% after the telecoms company ditched its pursuit of a potential merger or acquisition in France. After examining possibilities that would lead to consolidation in the French telecoms market, Orange said it "believes that it cannot pursue this avenue at the present time as the conditions that the group has set have not been met."

In recent weeks, Orange was reported to be in talks to acquire a stake in Bouygues Telecom amid a push by the French government for telecom-sector consolidation. Bouygues SA ,shares fell 3.1%. Shares of Iliad SA , which had previously put up a bid for the Bouygues unit, were down 3.9%.

But on the winning end, shares of Alcatel-Lucent were pushed up 4.4% after the telecommunications-equipment maker's rating was raised to overweight from neutral at J.P. Morgan Cazenove. "With the restructuring proceeding at a faster pace than guided originally and the stock having pulled back because some investors have taken profits, not because progress has stalled, we upgrade the stock to overweight," wrote analyst Sandeep Deshpande.

France's CAC 40 equity index reversed course and rose less than 1 point. Germany's DAX 30 gained 0.3% to 9,926.76.

Off major indexes, shares of Mothercare PLC rose nearly 12% after the British children's products retailer said it recently turned down a GBP266 million ($456.5 million) acquisition offer from Destination Maternity Corp. (DEST) . Philadelphia-based Destination Maternity's brands include A Pea in the Pod. Mothercare's board said the bid "significantly undervalued Mothercare and its attractive prospects," and the proposal was rejected on May 29.

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