GlaxoSmithKline’s woes with Avandia could well get worse following the news that the firm faces a lawsuit which claims that it misled shareholders and withheld information about the safety of the diabetes drug.

Law firm Kaplan Fox & Kilsheimer says that it has filed a class action suit in the US District Court for the Southern District of New York against GSK on behalf of anyone who bought securities between October 27, 2005 and May 21 this year, alleging that the firm publicly issued “a series of false and misleading statements” regarding Avandia (rosiglitazone).

In particular, the complaint alleges that GSK failed to adequately disclose the fact that it had performed a meta-analysis related to Avandia which showed an increased risk of heart attacks. Preliminary results of this analysis were presented to the US Food and Drug Administration in September 2005 and updated results were disclosed to the agency in August 2006 but “were never adequately disclosed to the investing public”.

This disclosure only happened two weeks after the New England Journal of Medicine published a meta-analysis authored by Steven Nissen which suggested that the drug might significantly increase the risk of heart attacks. Once the latter report became public, shares at GSK, which has yet to respond to the lawsuit, went through the floor.

alli launch in the USA later this week

On a much brighter note for GSK, the firm said that alli (orlistat) the only FDA-approved over-the-counter weight loss product which is lower dose version of Roche’s prescription drug Xenical, will be on shelves of pharmacies, grocery stores and mass merchandisers across the USA later this week.

The product will retail for $55-$60 for a month's supply and the launch is expected to be one of the biggest for an OTC treatment. Analysts expect GSK to spend around $150 million on US marketing this year alone but this could prove to be a shrewd investment. Backed with clinical trial data that shows it can lead to weight loss of five to six pounds over six months, alli could quickly become a leading brand with sales of more than $1 billion.

GSK is expected to roll out the product next year and regulatory approval in Canada, Latin America, China, Australia and New Zealand will be sought before the end of 2007.

Priority review for oral Hycamtin

GSK also announced that the FDA has granted a priority review to a capsule form of its oncology agent Hycamtin (topotecan), a topoisomerase I inhibitor, for the treatment of relapsed small cell lung cancer. This means that the agency will make its decision on whether to approve the drug within six months, rather than the usual 10-12 month review period.

Hycamtin in its current intravenous formulation requires five consecutive days of therapy every three weeks, noted GSK, while the capsule, if approved, will allow patients to be treated at home.