Shareholders of GlaxoSmithKline have filed a class action lawsuit against the pharmaceutical giant for allegedly concealing problems with Paxil, its antidepressant drug for teenagers.

New York law firm Stull, Stull & Brody said a suit seeking class-action status had been filed in the US District Court for the Southern section of New York. The case is being fought on behalf of investors who bought shares in GSK between February 21, 2001 and August 5, 2004, the legal firn said.

The disgruntled shareholders allege the UK-based company violated securities laws by issuing "false or misleading public statements".

The move follows the discovery last year of a link between Paxil and suicidal tendencies in young people. After the revelation regulators from around the world took action to limit use of the drug and other similar medicines.

Paxil - also known as Seroxat - used to be GSK’s biggest-selling product but its importance to the company has diminished with the arrival of cheaper generic versions of the medicine.

GSK, which is also facing several patient lawsuits over Paxil, has always defended the way in which it handled findings from clinical studies suggesting a link with adolescent suicide risk.

On Tuesday the House of Commons Health Select Committee said regulation of the pharmaceutical industry was inadequate, leaving powerful drug companies free to promote "a pill for every ill." The committee highlighted the worldwide withdrawal of arthritis drug Vioxx, as a significant failing of the industry.

Although the committee praised the many life-saving medicines pharmaceutical companies had produced, it warned that the industry was becoming increasingly focused on marketing rather than science saying this was the source of many of the current problems.

But today’s news about the Paxil lawsuit failed to worry investors in GSK which moved almost two per cent higher in early trading. By 11.30pm it shares were up 23p to1247p.

The entire pharmaceutical sector was benefiting from hopes an American court would back drug-maker Eli Lilly in a high-profile patent case over its anti-psychotic drug Zyprex.

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