The 1st US Circuit Court of Appeals has recently ruled in favor of AstraZeneca Plc (NYSE:AZN) and Ranbaxy Laboratories Limited (NYSE:RBXLY) on a long-lasting class action lawsuit involving an illegal agreement between the two companies related to the hampering of a generic heartburn drug.

A Lifted Burden

In 2012, the two companies had been confronted with a class action lawsuit, which claims that AstraZeneca has paid $700 million to Ranbaxy Laboratories for the latter to ditch its patent efforts on a generic Nexium.

The decision of the trial jury comes after it had been established that AstraZeneca and Ranbaxy Laboratories were not involved in an illegal transaction. Consequently, after the decision had been rendered, a number of wholesalers and health plan entities began claiming that they had been given limited evidence and insufficient information.

With the 1st US Circuit Court of Appeals favoring their side in the case, AstraZeneca and Ranbaxy Laboratories can now focus more on their respective growth strategies without fearing settlement charges that could result to revenue losses.

Protecting the Nexium Brand

AstraZeneca is eager to protect the Nexium brand from potential generic competition. The efforts of Ranbaxy Laboratories to produce and commercialize the first Nexium knockoff easily went off course when the US Food and Drug Administration (FDA) banned the company’s manufacturing plant for the generic drug.

However, AstraZeneca can only protect Nexium for so long. Last year, the US FDA has approved for commercialization the generic Nexium of Teva Pharmaceutical Industries Ltd (NYSE:TEVA). Since then, Nexium sales have declined substantially.

In the latest earnings report of AstraZeneca, Nexium sales have fallen 19% year-to-date. Aside from being hurt by generic competition, the company also attributes the loss to a drop in consumer demand.

“Sales in the US declined by 42% to $419m in the year to date, reflecting lower demand and inventory destocking, which followed the loss of exclusivity in 2015,” reiterated the company in its third quarter earnings report.

On Tuesday, AstraZeneca has declined 3.33%, closing at $26.43, while Teva Pharmaceutical Industries has lost 2.50%, closing at $37.83.