Glaxo said it is on track to meet earnings targets

Anti-depressant Paxil CR and diabetes treatment Avandamet failed to meet quality standards but did not pose a health risk, the regulators said.

The agreement with the FDA provides for an independent review of the plant in Puerto Rico, which makes the two drugs.

In afternoon trade, GSK shares were up 81 pence or 6.5% at 1322p.

Investors were also buoyed by a 17% increase in first-quarter profit.

Operations have continued at the factory in Cidra but production of the drugs in question will not resume until the independent review of the plant is completed.

GSK said it had already implemented changes to the manufacturing processes for the two treatments.

Earnings on track

The FDA did not impose a fine but GSK could face a penalty of up to $10m (�5.25m) a year if it fails to comply with the agreement.

GSK will also have to ensure an earlier-produced batch of products are destroyed or reconditioned.

Investors had feared GSK's earnings could be hit as a result of the inquiry but the company said on Thursday it was set to meet full-year targets.

GSK posted pre-tax profits of �1.7bn in the three months to 31 March - ahead of analysts' forecasts - on the back of sales of �5.03bn.

The company said rising sales of asthma drug Advair had helped offset currency effects and competition from generic antidepressant products.