Updated from 7:58 a.m. EST

Shares of

Pfizer

(PFE) - Get Report

dropped Monday after the company reaffirmed over the weekend that it will keep selling Celebrex even though it will temporary suspend the drug's direct-to-consumer advertising.

The company will hold off on the ads until the Food and Drug Administration reviews two recent clinical trials, one of which showed that high doses of Celebrex caused a significantly higher cardiovascular risk compared to patients who took placebos. Pfizer said the result was inconsistent with all other tests, which demonstrated that Celebrex didn't cause an extra heart-related risk. The tests were measuring Celebrex's ability to prevent colon polyps.

The stock lost 51 cents, or 3.1%, to $24.94 on Monday, after tumbling more than 11% on Friday. Trading volume on Friday was 289.7 million shares, about eight times the normal daily volume. Trading volume Monday was heavy, too, as some 55 million shares were exchanged before noon.

Responding to Food and Drug Administration concerns, Pfizer agreed to suspend television, newspaper and radio advertising on Celebrex, which is in the same class of COX-2 inhibitor as

Merck's

(MRK) - Get Report

Vioxx, which was pulled off the market on Sept. 30.

The FDA said it is leaving its regulatory options open on Celebrex. "We do have great concerns about this product and this class of products," said acting Commissioner Lester Crawford on Friday. Crawford told the

Financial Times

that the agency will offer an "announcement" on COX-2 drugs sometime soon. In a Friday news conference, Crawford said the agency needed to conduct a complete review of the Celebrex tests before taking action.

The agency said doctors should evaluate "alternative therapy," adding that if doctors believe that patients would benefit from Celebrex that they should prescribe "the lowest effective dose" of the drug.

Although Wall Street's Pfizer-watchers have prepared their economic models for the worst-case scenario of Pfizer withdrawing Celebrex, most view such action as unlikely. They believe that the toughest response will be a more restrictive label for Celebrex. Another Pfizer COX-2 drug, Bextra, just had its label strengthened to emphasize potential side-effects. In any case, Pfizer's sales, earnings and stock can expect to get hammered.

Surprising News

Pfizer reported on Friday that patients in one clinical trial taking 400 milligrams of Celebrex twice daily had a 3.4 times greater risk of "cardiovascular events" compared with patients taking a placebo. For patients in the trial taking 200 milligrams of Celebrex twice daily, the risk was 2.5 times greater. The average duration of treatment in the trial was 33 months. The test was sponsored by the National Cancer Institute, which stopped giving patients Celebrex.

But another study comparing Celebrex at 400 milligrams once daily to placebo, in patients followed for a similar period of time, there was no increased risk. Pfizer conducted this test.

Celebrex is approved in the U.S. at doses of 100 milligrams to 200 milligrams daily for osteoarthritis and 200 milligrams to 400 milligrams daily for rheumatoid arthritis. It is also approved for a rare colon polyp condition called familial adenomatous polyposis in doses up to 800 milligrams daily.

Pfizer said a third long-term study of Alzheimer's disease patients is ongoing, with about one-third of the 2,000 patients receiving 400 milligrams of Celebrex daily. As with the two colon polyp cancer studies, this test is monitored "by independent safety experts who meet regularly to assess adverse events," Pfizer said. As of Dec. 10, the Alzheimer's disease study review board found no reason to change the study.

Fast-Moving Events

The FDA's response on Friday and over the weekend indicate that its effort to study the COX-2 drugs is being overrun by events, raising concerns among physicians and patients as well as investors.

The flurry of news involving Vioxx and, more recently, Pfizer's Bextra and Celebrex, has fueled some critics' contentions that all COX-2 drugs present sufficient cardiovascular dangers and should be drastically restricted or withdrawn from the market.

Both Merck and Pfizer have maintained that each COX-2 drug is different. After it removed Vioxx from the market, Merck used that argument when it said it would still seek approval of Arcoxia, which had been viewed as Vioxx's successor. Pfizer used a similar argument after Vioxx was withdrawn, saying Celebrex and Bextra were safe.

In light of the Vioxx withdrawal, two FDA advisory panels had been scheduled to review the Merck drug and all of the COX-2 drugs in mid-February. But as negative COX-2 news has expanded, Crawford's comments indicate the FDA is ready to take faster action even though the advisory panels are still scheduled to meet in February.

After Pfizer made its announcement Friday, analysts urged clients to exercise caution. Only one investment banking firm tracked by Thomson First Call cut its rating.

On Monday, however, analysts started sounding more nervous. "Investors should not view Friday's 11% drop in Pfizer as a buying opportunity considering Pfizer's COX-2 sales will likely halve in the coming year," said Catherine J. Arnold, of Credit Suisse First Boston, in a report to clients on Monday. "And there is further risk that the drug will be withdrawn."

Arnold, who is neutral on the stock, said the withdrawal of Celebrex has a "40% to 50% probability," provoked by the one adverse test result as well as by "public and congressional pressure on the FDA on the issue of drug safety." The argument for keeping Celebrex on the market is the fact that the adverse heart-related tests results came at doses that are used only by a minority of patients, she said.

"Reputational damage dampening future sales of the company's core COX-2 franchise comes at a time when Pfizer can least afford to absorb a hit to one of its key growth drivers," Arnold said. Celebrex accounted for $2.3 billion in sales for the first nine months of 2004; Bextra produced $869 million. (She doesn't own shares; her firm has an investment banking relationship).

Morgan Stanley analyst Jami Rubin told clients Monday that she expects Celebrex's sales to be cut in half and Bextra's sales to be cut by one-fourth, thus prompting her to reduce next year's earnings per share prediction by 19 cents to $2.10 and 2006's prediction by 21 cents to $2.20. She cut her price target to $30 from $35.

Rubin, who has an equal weight rating on the stock, said the odds of Celebrex being pulled from the market by the FDA "are less than 50%." Keeping one eye on the test results and another on trial lawyers, Rubin said the liability risk "should be tempered by a strong safety database." Although Pfizer's management credibility "will likely take a beating for prematurely touting Celebrex's safety profile in the aftermath of the Vioxx news, this should not hurt them in court," she said. (Rubin owns shares of Pfizer, as does a member of her research team. Her firm has an investment banking relationship).