The all-cash settlement was disclosed on Friday, one month after Pfizer agreed to pay $164 million to settle a separate lawsuit accusing it of misleading investors about clinical trial results for the arthritis drug Celebrex.

Wyeth shares lost more than $7.6 billion of market value on July 24, 2007, after the company said the U.S. Food and Drug Administration would not approve Pristiq to treat "hot flashes" in post-menopausal women until it learned more about potential heart and liver problems associated with the drug.

Shareholders led by the Pipefitters Union Local 537 Pension Fund in Boston said Wyeth's failure to reveal adverse effects sooner caused its stock price to be inflated during the June 26, 2006, to July 24, 2007, class period.

Pfizer bought Wyeth in 2009. Several former Wyeth officials, including onetime Chief Executive Robert Essner, are also defendants in the case.

Christopher Loder, a Pfizer spokesman, said the defendants denied wrongdoing in agreeing to settle.

Laurie Largent and David Rosenfeld, lawyers for the plaintiffs, did not immediately respond to requests for a comment.

Pristiq generated $461 million of sales from January to September for Pfizer.

Analysts once hoped annual sales would top $2 billion for the drug, whose chemical name is desvenlafaxine.

The settlement followed nearly six months of mediation. It requires approval by U.S. District Judge Richard Sullivan in Manhattan, who certified the class action in September.

Lawyers for the plaintiffs plan to seek attorneys' fees of roughly $16.5 million, plus as much as $650,000 for expenses, court papers show.

Pfizer's shares closed Friday at $24.17 on the New York Stock Exchange.

The case, which has a Michigan retirement system as the named plaintiff, is City of Livonia Employees' Retirement System v. Wyeth et al, U.S. District Court, Southern District of New York, No. 07-10329.

(Reporting By Jonathan Stempel and Nate Raymond in New York; Editing by Maureen Bavdek)

• A Permanent Economic Emergency