Dr. Reddy's Q2 FY04 Revenue at Rs.5377 Million; Net Income at Rs.929 Million.

Business Editors/Health/Medical Writers

HYDERABAD, India--(BUSINESS WIRE)--Oct. 28, 2003

Dr. Reddy's Laboratories Ltd. today announced its unaudited financial results for the quarter ended September 30, 2003.

Notes

1. In line with global disclosure standards, the company commenced

reporting its financials on a consolidated basis since Q1

FY03.

2. Current quarter financial discussions below are on a

consolidated basis as per the US GAAP.

3. Detailed analysis of the financials is available on the

Company's website at www.drreddys.com.

Unaudited US GAAP Financials for the quarter ended September 30,

2003

All figures in millions, except EPS

All dollar figures based on convenience translation rate of 1USD =

Rs 45.78

    UNAUDITED INCOME STATEMENT

                                 Q2 FY04          Q2 FY03
----------------------------------------------------------------------
                                                               Growth
Particulars                      ($) (Rs.)   %   ($) (Rs.)   %     %
----------------------------------------------------------------------
Total Revenues                  117  5,377  100  108 4,928  100     9
----------------------------------------------------------------------
Cost of revenues                 54  2,454   46   50 2,286   46     7
----------------------------------------------------------------------
Gross profit                     64  2,923   54   58 2,642   54    11
----------------------------------------------------------------------
Selling, General &
 Administrative Expenses         32  1,471   27   27 1,233   25    19
----------------------------------------------------------------------
R&D Expenses                     11    490    9    8   380    8    29
----------------------------------------------------------------------
Amortization Expenses             2     95    2    2    94    2     2
----------------------------------------------------------------------
Forex loss/ (gains)              (2)   (97)  (2)   1    36    1   NA
----------------------------------------------------------------------
Total operating expenses         43  1,960   36   38 1,743   35    12
----------------------------------------------------------------------
Operating income                 21    962   18   20   899   18     7
----------------------------------------------------------------------
Equity in loss of affiliates      0     13    0    1    39    1   (66)
----------------------------------------------------------------------
Other expenses/(income) net      (4)  (169)  (3)  (5) (242)  (5)  (30)
----------------------------------------------------------------------
Income before income taxes       24  1,118   21   24 1,102   22     1
                              ----------------------------------------
Income tax (benefit)/expense      4    190    4    4   172    3    10
----------------------------------------------------------------------
Minority interest                 0      0    0  0.1     4  0.1  (100)
----------------------------------------------------------------------
Net income                       20    929   17   20   926   19   0.3
----------------------------------------------------------------------
DEPS                           0.27  12.14      0.26 12.10
----------------------------------------------------------------------

Key highlights

-- Revenues at Rs 5.4 billion as against Rs 4.9 billion in

Q2FY03; YoY growth of 9%

-- Net Income at Rs. 929 million this quarter as against 926

million in the same quarter of previous fiscal

-- Revenues outside India at Rs 3.2 billion as against Rs 3

billion in Q2 FY03; YoY growth of 9%.

-- Revenues in Europe at Rs 816 million as against Rs 299 million

in Q2 FY03; YoY growth of 173%. This growth has been driven

primarily by the launch of Ramipril in Europe API segment and

performance of generic omeprazole in UK.

-- Revenues from the US generics segment increased by 14% to Rs

993 million as against Rs 868 million in Q2 FY03, driven by

the performance of fluoxetine and ibuprofen.

-- Driven by a sharp focus on key brands in the Indian

formulations segment, the top 10 brands, with the exception of

Ciprolet, collectively grew by 22% over Q2 FY03.

-- Gross profit for the quarter increased by 11%, driven by the

product and market mix; Gross profit margins remain consistent

at about 54% of total revenues.

Generics

-- Revenues in this segment at Rs 1.2 billion as against Rs 1

billion in Q2FY03; YoY growth of 22%, driven by the

performance of our key products.

-- North America contributed 80% to the total revenues while

Europe contributed the balance.

-- Fluoxetine capsules 40mg revenues in North America at Rs 502

million as against Rs 309 million in Q2 FY 03.

-- Tizanidine tablets 2 & 4 mg contributed Rs 212 million to the

revenues in North America as against Rs 337 million in Q2

FY03. Tizanidine was launched in Q2 FY03.

-- Ibuprofen, launched in the US in January 2003, contributed Rs

51 million to the revenues.

-- Revenues in Europe at Rs 244 million as against Rs 146 million

in Q2 FY03, representing a growth of 67%. This growth was

primarily driven by the performance of omeprazole, which

contributed Rs 89 million in revenues. Omeprazole was launched

in UK in Q3 FY03.

-- New product launches include nefazodone in the US and

simvastatin in UK.

-- During the quarter, the Company filed 4 ANDAs including 3 Para

IV certifications, taking the total ANDAs pending at the USFDA

to 27.

Active Pharmaceutical Ingredients (APIs)

-- Revenues at Rs 2 billion as against Rs 1.7 billion in Q2 FY03,

a YoY increase of 16%, driven by the growth in Europe and

India.

-- Revenues outside India at Rs 1.4 billion as against Rs 1.2

billion in Q2 FY03, a YoY increase of 9%.

-- Revenues from Europe increased to Rs 526 million as against Rs

122 million in Q2 FY03. This increase was driven by the launch

of Ramipril, which contributed Rs 380 million in revenues.

-- Revenues in India increased by 33% to Rs 660 million driven by

volume growth in our key products.

-- Revenues from North America declined to Rs 432 million as

against Rs 692 million in Q2 FY03. This decline was primarily

on account of decline in revenues from Nizatidine.

-- The Company filed 1 US DMF during the quarter, taking the

total filings to 44.

Branded Formulations - International

-- Revenues at Rs 576 million, a decrease of 15% over Q2 FY03.

This decline was primarily on account of the decline in

revenues from Russia.

-- On account of the longer customs clearance process in Russia,

the delivery of products to the customer was delayed,

resulting in lower revenues. However we believe that this will

get evened out in the coming quarter.

Branded Formulations - India

-- Revenues at Rs 1.4 billion as against Rs 1.3 billion in Q2

FY03, an increase of 4%.

-- Driven by a sharp focus on our key brands, the top 10 brands

with the exception of Ciprolet, collectively grew by 22% over

Q2 FY03. This was however offset by the decline in revenues

from our brands of Ciprolet and Becelac and discontinuation of

certain brands as a part of our brand rationalization

exercise.

-- As per September ORG MARG, the Company grew at a MAT of 4.1%

compared with industry average growth rate of 4.5%.

Other Businesses

-- Revenues in the critical care & biotechnology segment at Rs 89

million as against Rs 113 million in Q2 FY03. The decline has

been primarily on account of the closure of diagnostic

operations in Q1 FY04.

-- Revenues in the Custom Chemical Services segment at Rs 28

million as against Rs 17 million in Q2 FY03.

Income Statement highlights

-- Driven by the change in product and market mix, Gross profit

for the quarter increased 11% over Q2 FY03 to Rs 2.9 billion.

Gross profit margins remained consistent at about 54% of total

revenues.

-- R&D expenditure at Rs 490 million as against Rs 380 million in

Q2FY03. As a %, R&D expenditure is at 9.1% of total revenues

as against 7.7% in Q2 FY03. The increase in R&D expenditure is

primarily on account of increase in the number of projects in

the areas of Generics and Specialty and higher development

activity in APIs.

-- Selling, General & Administration (SG&A) expenses at Rs 1.5

billion as against Rs 1.2 billion in Q2 FY03. As a %, SG&A

expenses are at 27% of total revenues as against 25% in Q2

FY03. As in the earlier quarters, legal & consultancy charges

and personnel costs remain a significant factor in SG&A

spending.

General information

The following items were considered and adopted by the Board of Directors of Dr. Reddy's Laboratories today:

-- Unaudited financial results for the quarter ended September

30, 2003 as required under Clause 41 of the listing agreement.

About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is an emerging global pharmaceutical company with proven research capabilities. The Company is vertically integrated with a presence across the pharmaceutical value chain. It produces finished dosage forms, active pharmaceutical ingredients and biotechnology products and markets them globally, with focus on India, US, Europe and Russia. The Company conducts research in the areas of cancer, diabetes, cardiovascular, inflammation and bacterial infection.

Disclaimer

This press release includes forward-looking statements, as defined in the U.S. Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such factors include, but are not limited to, changes in local and global economic conditions, our ability to successfully implement our strategy, the market acceptance of and demand for our products, our growth and expansion, technological change and our exposure to market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future.