PHARMACEUTICAL companies must be allowed to protect their intellectual property if the development of life-saving drugs is to continue, an analyst said.

The warning comes after major manufacturer GlaxoSmithKline settled a lawsuit on Thursday night with New York attorney-general Eliot Spitzer over its blockbuster anti-depressant drug Paxil.

GSK agreed to pay $2.5m and publish all tests on the medicine since December 2000 after allegations that it withheld negative information about the pill, which is also known as Seroxat. The December 2000 cut-off marks the point at which Glaxo Wellcome merged with Smithkline Beecham.

The Anglo-American company, which has a base in Barnard Castle, County Durham, denied it had withheld important information from patients and agreed in June to publish some of the data on Paxil in a clinical trials register, only weeks after Mr Spitzer's lawsuit was launched. Anthony Platts, assistant director at stockbroker Wise Speke, said: "The research and development stages of large pharmaceutical companies are very strictly regulated and Glaxo clearly believes that it has nothing to hide in publishing summaries of all of its drug trials for Paxil.

"Full disclosure of trial data is only a major problem at the development stage. Generic competitors are only too ready to snatch any trial information to advance the progress of their copy drugs. For the future of research and development, it is important that this issue be treated sensitively."

Mr Platts said that it was cheaper for GSK to make the payout rather than fight to keep its information private, adding: "Glaxo has stated that the charges brought by Mr Spitzer were unfounded, but agreed to pay the $2.5m fine to avoid the very much higher litigation costs that a legal defence would have incurred.

"The original lawsuit had sought disgorgement of all profits obtained as a result of alleged inappropriate prescription to children. With sales of Paxil to children in the US of around $55m in 2002, a fine of $2.5m seems insignificant."

In legal action, the New York attorney general said Glaxo had carried out five studies on Paxil's effects on children and young people, but had only published one.

The unpublished ones suggested a possible increased risk of suicidal thinking in some individuals, the suit alleged.

It also accused the company of not including the data in its regular advice to doctors.