Updated from 1:44 P.m. EST

Pfizer

(PFE) - Get Report

fell Wednesday to a new 52-week low on heavy trading, following a report citing health risks about its Bextra arthritis drug. This is the second time this week that the drugmaker's stock fell on unfavorable Bextra news.

Shares dropped to as low as $27.13, or 7 cents less than the previous 52-week low. At the close of trading, the stock was down 52 cents, or 1.9%, to $27.46. Some 47 million shares had already changed hands. The daily average is about 23.6 million.

The report in

The New York Times

said people taking Bextra had more than double the risk of heart attacks and strokes compared with people who took placebos. The study was presented Tuesday at the American Heart Association meeting in New Orleans.

In a statement released Wednesday afternoon, Pfizer said the article "draws unsubstantiated conclusions about the cardiovascular safety" of Bextra and "is based on information that has not been published in a medical journal or subject to independent scientific review."

The study pooled data from 5,930 patients participating in 12 clinical trials. These preliminary results said patients taking Bextra reported 2.19 times more heart attacks or strokes than did patients being given placebos.

The

Times

quoted a Pfizer spokeswoman as saying the greater cardiovascular risk appeared only in studies involving patients at high risk for heart disease who were undergoing cardiac surgery. Pfizer acknowledged on Oct. 15 that two studies involving patients undergoing heart bypass operations showed Bextra patients had a higher risk of heart-related problems than did patients receiving a placebo. Pfizer did not provide details of the studies at the time.

The

Times

quoted Dr. Garrett A. FitzGerald, a cardiologist at the University of Pennsylvania, as saying Bextra "is a time bomb waiting to go off." FitzGerald presented the study's results at the medical conference. FitzGerald said that the "magnitude of the signal with Bextra is even higher than what we saw in Vioxx."

Vioxx was pulled from the market Sept. 30 by

Merck

(MRK) - Get Report

after the company said Merck-sponsored research showed that long-term use -- more than 18 months -- of the arthritis drug caused statistically significant higher rates of cardiovascular problems in comparison to patients who took placebos. At less than 18 months, there was no difference, according to the Merck research.

FitzGerald is one of two cardiologists who wrote editorials in the

New England Journal of Medicine

last month raising questions about the class of arthritis drugs known as COX-2 inhibitors, which includes Vioxx as well as Pfizer's Bextra and Celebrex.

Criticizing Merck and the Food and Drug Administration, he also said "it is essential to determine whether the cardiovascular risk is or is not a class effect. ... We must remember that the absence of evidence is not the evidence of absence."

However, he didn't advocate banning all COX-2 drugs. They remain "a rational choice" for patients who have a low risk of cardiovascular problems but who have experienced "serious gastrointestinal events" especially while taking ordinary pain relievers.

Defending the Franchise

Ever since Merck pulled Vioxx from the market, Pfizer has been trying to position its COX-2 drugs as safe alternatives. Bextra sales for the first nine months of 2004 were $869 million, while Celebrex sales were $2.3 billion during the period. Celebrex is Pfizer's fourth-best-selling drug thus far this year. Vioxx contributed $2.5 billion for full-year 2003, before its 2004 recall.

Initial Wall Street reaction to the latest Pfizer news was cautious.

"We view

that the burden of proof has shifted towards Pfizer to show Bextra's safety," said James Kelly, a Goldman Sachs analyst, in a research note on Wednesday. Kelly previously predicted that Bextra's sales would fall next year, adding that the drug now accounts for 11 cents a share of his 2005 prediction of $2.27 a share.

"Of course, if the drug is found damaging and is pulled, it raises questions about liability and commercial risk to Celebrex," which now represents 30 cents of his 2005 EPS estimate. Still, Kelly maintained his outperform rating. (He doesn't own shares; his firm has had an investment banking relationship with Pfizer.)

Another analyst keeping an outperform rating is Winton Gibbons of William Blair & Co. "Regarding the ongoing COX-2 controversy, we don't believe that Pfizer is intentionally misreading safety data or itself not pursuing aggressively clarification through proper human clinical trials," he wrote.

"While Bextra news flow is causing short-term headline risk and could even fare less well after additional, well-run clinical trial data have been gathered, we believe that the relative net effect would be rather modest given the entire Pfizer franchise and portfolio," he added. "Even in recent weeks, we see a market share shift not just from Vioxx to Pfizer's COX-2 drugs but also from Bextra to Celebrex." (He doesn't own shares; his firm doesn't have an investment banking relationship.)

More Changes, More Testing

Pfizer revealed late Friday in a filing with the

Securities and Exchange Commission

that it is negotiating with the FDA for toughening the label on Bextra, which has been linked to a rare, aggressive and sometimes fatal skin rash. On Monday, the stock dropped 38 cents to $28.41, after falling as low as $27.85.

The SEC document says Pfizer's talks with the FDA about a revised Bextra label "likely will include the addition of a black-box" warning about the rare and occasionally fatal skin rash side effect. The black-box warning is the FDA's strongest warning, and it probably will hurt Bextra's sales and will restrict certain advertising.

The current Bextra label alerts doctors and patients to this side effect known as Stevens-Johnson syndrome. This warning was inserted in 2002, a year after Bextra was approved by the FDA. "Fatalities due to Stevens-Johnson syndrome ... have been reported," the current label says. "Bextra should be discontinued at the first appearance of skin rash or any other sign of hypersensitivity."

Pfizer said the skin rash side effect "exists with many other medications," adding that the Bextra-linked risk occurs primarily within the first two weeks of therapy. Although such reactions are rare, "they have been detected at a reported rate greater than other COX-2 products, such as Celebrex," Pfizer said.

The SEC document also said the FDA rejected in August a Pfizer application that Bextra be approved as a treatment for migraine.

On Oct. 15, Pfizer had reported in a press release that it "is working with regulatory authorities around the world to update the Bextra product label," due to the rare skin reaction, but it didn't mention the prospects of a black-box label. Pfizer has written doctors about its efforts. The Oct. 15 announcement focused more on Pfizer's decision to conduct long-term tests on Bextra's cardiovascular effects.