(Adds company comment, AG comment, background)

Dec 11 (Reuters) - A U.S. judge said in a preliminary injunction on Thursday that Actavis Plc must continue to sell its Alzheimer's drug after a lawsuit alleged the company was trying to limit generic competition while it launched an extended-release version of the widely used medicine.

Actavis said in a statement the ruling would have "no impact" on its ability to transition patients to the "more convenient and innovative" once-daily drug, known as Namenda XR.

The older, immediate release version of Namenda faces competition from makers of lower cost generic copies starting in July 2015.

In September, New York Attorney General Eric Schneiderman sued Actavis and its New York-based unit, Forest Laboratories, to stop the company from discontinuing sales of Namenda IR.

"Today's decision prevents Actavis from pursuing its scheme to block competition and maintain its high drug prices," Schneiderman said in a statement.

The company planned to withdraw Namenda IR from the market in August to focus sales on its new drug, called Namenda XR, which is taken once instead of twice daily, according to the lawsuit.

The move, also called a "forced switch," asks doctors to transition patients to Namenda XR, which will not face generic competition for years.

"Physician, patient and caregiver demand for the once-daily Namenda XR is strong, with current scripts trending at more than 40 percent of the total product line and growing," Actavis Chief Executive Officer and President Brent Saunders said in a statement.

Actavis, headquartered in Dublin, Ireland, completed the acquisition of Forest Labs for about $28 billion in July.

The decision by the judge, which Actavis said it will appeal, has not yet been made public.

Actavis said the court has set a hearing for Monday on the scope of the injunction.

The case is People of the State of New York v. Actavis Plc and Forest Laboratories LLC, U.S. District Court, Southern District of New York 14-cv-7473.

(Reporting by Deena Beasley and Karen Freifeld. Additional reporting by Nate Raymond.; Editing by Lisa Shumaker and Andre Grenon)