Dr Reddy's was downcast on Monday, continuing its recent downtrend, on the back of a few negative developments and expectations of unimpressive results.

In fact, the scrip of the domestic pharma major shed 11.3% to its current level of Rs 890.05 from Rs 1,003 on 15 January 2003.

Today, the scrip lost 3.02%. A total of 42,404 Dr Reddy's Labs shares were traded on BSE by 13:25 IST.

The market expects the company's third quarter ended 31 December 2002 results to turn out dismal. For Q3, analysts expect DRL to register a fall of 34-42% to Rs 936-1,059 crore in net profit on net sales of Rs 413.5-440 crore, a rise of 0.5-7%.

A poor performance on the export front is the key reason for the drop in profit. Another reason is the lack of exclusivity to any products in the US.

In a major recent negative, Novartis decided to discontinue further development of DRF 4158 ( a drug licensed by DRL). However, Novartis will continue to collaborate with the company for an additional dual acting insulin sensitizer compound. Under the terms of this agreement, Novartis has the right for an additional development compound that is a dual acting insulin sensitizer. The terms and conditions of the original agreement remain unchanged. The company also intends to carry out additional pre-clinical studies to determine the appropriate development path for the molecule.

An earlier setback came in July 2002 when Novo Nordisk decided to suspend the clinical development of its dual acting insulin sensitiser Ragaglitazar (DRF 2725). The molecule was licensed out by Dr Reddy's Laboratories to Novo Nordisk in August 1998. Novo had discontinued development of DRF 2725 since tumours were seen in rats and mice after the exposure of these animals for a period of time equivalent to from between half to all of their life expectancy. Novo had said that the rat findings in the clinical trials of Ragaglitazar were not alarming, but it stopped the trials as it was unethical to continue the same.

On the other hand, recently, an US court ruled in the company's favour in respect of a patent infringement case relating to a blockbuster hypertension drug.

DRL now expects to launch its modified version of Norvasc in August 2003 after the expiry of Pfizer's pediatric exclusivity and receipt of a final approval from the US Food and Drug Administration. The district court of New Jersey last month dismissed Pfizer's complaint on the grounds that the patent term extension does not cover DRL's amlodipine maleate product. Amlodipine maleate differs chemically from the amlodipine besylate form of Pfizer's anti-angina and hypertension blockbuster, which had sales of $2.5 billion in 2001.

Analysts say the ruling in favour of DRL, was quite a positive development for the company as the drug has a huge market. But they still feel that it is better to wait and watch, as the final approval of NDA is contingent upon the successful completion of ongoing discussions with USFDA on issues relating to specific chemistry manufacturing controls and product labeling.

Earlier, DRL reported the launch of Ibuprofen in the US generics market under its brand name. The company commenced shipment of prescription Ibuprofen tablets 400 mg, 600 mg and 800 mg to the US. Another favourable development was the final report of the Ganguly Committee, set up to look into the allegation of efficacy and purity of DRL's DNA biotech drug Grastim. The committee said that the purity profile of DRL's drug is almost similar to Swiss major Roche's Neopogen (Filgrastim), marketed in India exclusively by Nicholas Piramal India.

Meanwhile, DRL, with a view to strengthening its position in the urology segment, recently launched a drug called tolterodine tartrate for the treatment of urinary incontinence. Dr Reddy's will market the drug under the brand name Torq. The product will be available as 1 mg and 2 mg tablets.

In early January 2003, DRL said it had commenced shipment of prescription ibuprofen Tablets 400, 600 and 800 mg to the United States market. Ibuprofen is the first generic product to be marketed under the Dr Reddys label. It said the direct marketing of ibuprofen Rx was the first step in building the company's commercial organisation in the US. Ibuprofen is the generic version of Pharmacias Motrin, which had sales of about $290 million in the US in 2001.

DRL reported a 31% fall in net profit to Rs 99.20 crore for the second quarter ended 30 September 2002, compared to Rs 143.43 crore (Rs 1.43 billion) in the corresponding period last year. Total income (net of excise) decreased by 15% to Rs 420.44 crore (Rs 4.2 billion), from Rs 494.34 crore (Rs 4.94 billion) in SQ 2001.

As on 30 September 2002, the promoters' holding in DRL was at 26.5%, while that of the public, domestic and foreign institutions was 15.5%, 11.3% and 46.4% respectively.

BSE Code: 500124