Purple haze: Dr. Reddy's strikes back at AstraZeneca in Nexium court battle

AstraZeneca ($AZN) has been battling it out in court with Dr. Reddy's Laboratories ($RDY) over generic Nexium, scoring a victory earlier this month after a Delaware district court ruled that Nexium's distinctive purple hue protects it from copycat competitors. Now Dr. Reddy's is striking back in a New Jersey district court, claiming that AstraZeneca not only knew about but also allowed sales of its purple Nexium generics before filing its recent suit, breaking the terms of a previous settlement between the two companies.

Back in 2011, AstraZeneca and Dr. Reddy's agreed to settle a patent dispute over generic Nexium. During the suit, Dr. Reddy's showed physical samples of its capsules to AstraZeneca, and the latter company "was made aware and had full knowledge" that Dr. Reddy's was going to use the color purple for its generics, the Hyderabad, India-based company said in a recent court filing.

In September 2015, Dr. Reddy's started selling its two-colored purple generic Nexium capsules. About a month later, AstraZeneca petitioned the Delaware district court to put the kibosh on sales, claiming that Dr. Reddy's infringed its Nexium trademark by using the color purple for its capsules. The Delaware district court agreed and temporarily barred Dr. Reddy's from selling its copycat meds, pointing to AstraZeneca's popular purple marketing for Nexium.

"As a result of such promotional efforts, there is undisputed evidence that the media and the public associate the color purple with AstraZeneca and its Prilosec and Nexium products," Judge Sue Robinson said in her memorandum.

Dr. Reddy's Nexium generics--Courtesy of Dr. Reddy's Laboratories

Unsurprisingly, Dr. Reddy's doesn't see things in quite the same light. AstraZeneca's actions "were committed willfully, knowingly, maliciously and in conscious disregard" of its previous settlement with Dr. Reddy's, the generics maker said. And if Dr. Reddy's isn't allowed to sell its Nexium generics, it will cause "immediate, great and irreparable harm" to business, the company said in its suit.

Now, Dr. Reddy's is demanding that AstraZeneca drop its suit, admit that the company hasn't infringed on its Nexium trademark and pay compensatory damages and attorney fees.

The courtroom battle is far from over, and things could get ugly because AstraZeneca and Dr. Reddy's both have a lot to lose when it comes to Nexium. The drug raked in $1.93 billion in sales for AstraZeneca during the first 9 months of 2015, and the company has spent more than $250 a year, on average, since 1995 to build the brand for its top-seller.

Even though Teva ($TEVA) and Mylan ($MYL) also make Nexium generics, the drug still does well for Dr. Reddy's. The company could reap an additional $25 million to $35 million in potential sales from the med in its fiscal 2016, according to analyst estimates. Dr. Reddy's sets estimates even higher and expects more than $50 million from sales of its copycat drug in the next year.

- here's Dr. Reddy's complaint (PDF)
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