NEW YORK (CNN/Money) - Schering-Plough Corp. said Friday it would pay the U.S. government $500 million to settle issues regarding the drugmaker's compliance with manufacturing rules, the largest penalty ever imposed by the U.S. Food and Drug Administration.

The FDA has been probing the New Jersey and Puerto Rico operations of Schering, the maker of popular allergy medicine Claritin and other drugs, since February 2001. The agreement is pending approval of the U.S. District Court for the District of New Jersey.

Shares of Schering (SGP: up $1.37 to $26.12, Research, Estimates) closed up more than 5 percent in trading Friday after the announcement. The stock has been cut in half since the manufacturing concerns first surfaced early last year.

Tony Butler, analyst with Lehman Brothers, said that while $500 million is large amount, the fine is not out of line with the company's balance sheet and it is good for the company to have the problem behind it.

A spokeswoman for the FDA said it is the largest settlement in the agency's history.

"Manufacturers who choose to wait until FDA investigators find violations rather than policing themselves will find that they have made a poor and costly decision," Dr. Lester M. Crawford, the FDA's deputy commissioner, said in a statement.

The agreement announced Friday does not affect a separate FDA criminal investigation into products at the Puerto Rico plant, which Kenilworth, N.J.-based Schering revealed Wednesday in a Securities and Exchange Commission filing, a company spokesman said.

Schering also lowered its forecasts for 2002 earnings, saying it now expects growth of less than 10 percent in earnings per share instead of higher than 10 percent. Second-quarter earnings are expected to be flat to up slightly from the year-earlier quarter.

Schering has been plagued with regulatory problems at its New Jersey and Puerto Rico manufacturing plants since February 2001. The company's president resigned in June after failing to satisfactorily resolve those concerns.

As part of the settlement , Schering said both the New Jersey and Puerto Rico facilities will operate under tightly controlled conditions requiring "additional levels of review and reporting." Schering said new controls could delay the shipments of some products to the U.S. market and that they are expected to raise production costs.

Pharmacia Corp. recently received a warning letter about manufacturing concerns at its Puerto Rico plant, while Eli Lilly & Co. has also been trying to resolve problems at its plants in Indianapolis.

Butler said the FDA is showing "increasing vigilance" towards the manufacturing of drugs that are inhaled or injected, noting that Wyeth and Pfizer Inc. have also had difficulties.

Schering set aside $500 million in the 2001 fourth quarter in anticipation of the agreement and plans to pay the fine in two equal installments of $250 million during the second quarter.

The company said it is temporarily suspending production of some products at the Puerto Rico plant, such as animal drugs Banamine, Fuflor and Optimmune, until its new manufacturing practices are in place.

Schering is also recalling and discontinuing two older asthma drugs, theophylline and Proventil Repetabs.