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An Israeli flag flies outside Teva Pharmaceutical facility building in Neot Hovav, Israel, Thursday, Dec. 14, 2017.

Tsafrir Abayov/The Globe and Mail

Jeremy Desai, who stepped down on Friday as chief executive officer of Apotex Inc., had been ensnared in a legal dispute over claims of a romantic relationship that led to an alleged leak of a competitor's trade secrets.

The U.S. arm of rival Israeli drug maker Teva Pharmaceutical Industries Ltd. filed a lawsuit in a Pennsylvania federal court last July alleging one of its former senior employees, defendant Barinder Sandhu, had been siphoning hundreds of company documents into personal files and leaking confidential information to Dr. Desai and Apotex.

None of the allegations have been proven in court. Teva's claims have been challenged by Dr. Desai, Ms. Sandhu and Apotex. Earlier this month, Apotex filed a new motion asking for the disclosure of 643 documents it alleges Teva has improperly withheld.

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The British-born Dr. Desai is a pharma industry veteran with a PhD and an MBA, and had previously worked at Roche Pharmaceuticals and GlaxoWellcome, which is now a part of GlaxoSmithKline PLC. In a written statement provided to The Globe and Mail on Friday, Apotex said Dr. Desai "resigned to pursue other opportunities."

Apotex co-founder and vice-chairman Jack Kay will return to the CEO role as the company grapples with the loss of founder Barry Sherman and his wife, Honey, who were found dead in their Toronto mansion last month. In a news conference on Friday, local police said the couple's deaths had been ruled as a double homicide and the investigation is continuing.

According to Teva's complaint, Ms. Sandhu was hired as a director of regulatory affairs in May, 2012. For Ms. Sandhu, the job meant a move from Brampton, Ont., to live closer to Teva's office in New Jersey. In 2014, she was transferred to be closer to Teva's Horsham, Pa., office and moved once again.

Around the time of this relocation, Teva alleges Ms. Sandhu was in a romantic relationship with Dr. Desai, and that he "resided and/or co-habitated" with her.

By Teva's account, Ms. Sandhu was promoted to a senior director role in May, 2014. The job included working in regulatory affairs overseeing the company's generic-drug products after they'd received U.S. Food and Drug Administration approvals, and came with a raise to a salary of $193,000 (U.S.), with the potential for a bonus payment of up to 30 per cent. In that role, the company says Ms. Sandhu had access to trade secrets, such as when products would go to market, as well as information about issues related to products it already had on the market.

About three months later, Dr. Desai was promoted to CEO of Apotex after 11 years at the company, having previously been chief operating officer.

Teva alleges it was informed in the summer of 2016 by a former Apotex employee alerted it in the summer of 2016 that Ms. Sandhu had shared a specific, confidential message from the FDA about a Teva application for a drug referred to as "Product X." Teva alleges that Apotex employees used the information to speed up their own regulatory approval process for an unspecified competing generic drug.

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Teva says a subsequent investigation of Ms. Sandhu found more information had been shared. Teva claims Ms. Sandhu had been using her work laptop to send internal documents to her personal Gmail account as well as to Dr. Desai's work e-mail address. According to the allegations, she also used about 10 USB keys to move files and uploaded 900 documents to a folder called "My Drive," which was linked to a cloud-based storage system, from October, 2014, to August, 2016. Both Apotex and Ms. Sandhu have pushed back against the allegations and have filed various motions to dismiss the case as well as Teva's attempt to expedite the discovery process.

In its most recent filings, Apotex says Teva is hiding documents and made requests that the company produce them. It also took issue with the information-sharing allegations. "With regard to the My Drive allegations, Apotex has searched for and found nothing to substantiate those claims," the company says. It added that its search indicated that Ms. Sandhu "shared nothing of substance from her My Drive folder."

Apotex says there isn't a sufficient factual basis to move the case forward, arguing Teva's claims are often cited as based on "information and belief." For instance, it says Teva doesn't map out how Apotex used any of the trade secrets it purportedly received. Teva has countered that it had provided more than 38,166 pages of documents to back up its claims.

Apotex also noted that Teva has not – and would not – identify the name or position of the ex-Apotex employee who acted as a whistle-blower. "Apotex has no way of knowing if this person was terminated by Apotex and/or whether this person had a grudge against Apotex or Dr. Desai," the company said in its reply.

Some of the defendants' arguments question the effect the alleged data leak had on Teva's business.

In her motion, Ms. Sandhu states that the only Teva document specifically identified as being acquired by Apotex was one FDA letter. The motion argues Teva has failed to specify its concerns about the protected material within the letter. It also states that "Teva's failure to make specific allegations about the contents of those devices, and/or transmissions to or from them, is telling – and requires the court to disregard the conclusory 'information and belief' allegations that Teva does make."

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Apotex doesn't explicitly deny that Dr. Desai and Ms. Sandhu were romantically involved and only makes reference to that idea as it relates to Teva's claim that Apotex "engaged in efforts to induce" Ms. Sandhu to share trade secrets.

"Instead of supporting this assertion with facts showing any form of active involvement by Apotex's motion in Sandhu's alleged scheme, Teva seemingly supports this allegation only upon the alleged fact that Sandhu and Desai were in a romantic relationship," Apotex states in its motion to dismiss the case.

Dr. Desai's attorney, Barry Gross of the firm Drinker Biddle & Reath LLP, declined to comment as the case is in the pretrial discovery phase. Lawyers and representatives for Ms. Sandhu and Teva didn't immediately respond to requests for comment. Apotex declined to comment, saying the matter is before the courts.

Editor’s note: An earlier version of this story said that Barry and Honey Sherman couple had been murdered. In fact, the police have ruled their deaths as a double homicide.

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