Dr. Reddy's Q3 FY04 revenue at Rs.5138 million; Net income at Rs.592 million.

Business Editors/Health/Medical Writers

HYDERABAD, India--(BUSINESS WIRE)--Jan. 30, 2004

Dr. Reddy's Laboratories Ltd. today announced its unaudited financial results for the quarter ended December 31, 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.

Key highlights

-- Revenues at Rs 5.1 billion as against Rs 4.3 billion in Q3

FY03; YoY growth of 18%

-- Revenues outside India at Rs 3.5 billion as against Rs 2.8

billion in Q3 FY03; YoY growth of 25%; Contribute 68% to total

revenues as against 64% in Q3 FY03.

-- In the Branded Formulations segment, revenues outside India

increase by 34% to Rs 912 million as against Rs 679 million in

Q3 FY03; contribute a record 47% to the segment revenues

driven primarily by the growth in Russia by 39% to Rs 615

million.

-- Revenues in Europe at Rs 779 million as against Rs 323 million

in Q3 FY03; YoY growth of 142%. The growth has been driven

primarily by the sales of Ramipril in Europe API segment,

which recorded sales of Rs 465 million.

-- R&D investments increase by 59% to Rs 516 million as against

Rs 325 million in Q3 FY03. As a % of revenues, R&D expenditure

is at 10% as against 7.5% in Q3 FY03.

-- Company filed 6 Drug Master Files (DMFs) during the

quarter, the highest from India. This takes the cumulative

DMF filings to 50.

-- Company submitted 4 ANDAs with Para IV certifications,

taking the total ANDAs pending at the USFDA to 31. Of

these, 23 include patent challenges.

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

billion as against Rs 1.3 billion in Q3 FY03. As a %, SG&A

expenses remain unchanged at 30% of total revenues. As in the

earlier quarters, the Company's investments in patent

challenge projects and human resources remain a significant

factor for the increase in SG&A.

-- As a result of the above, net income is at Rs 592 million (12%

of total revenues) as against Rs 661 million (15% of total

revenues) in Q3 FY03. This translates to a diluted EPS of Rs

7.72 as against Rs 8.63 in Q3 FY03.

 Unaudited US GAAP Financials for the quarter ended December 31, 2003

                                   All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = Rs
45.55

    UNAUDITED INCOME STATEMENT


                               Q3 FY04          Q3 FY03
----------------------------------------------------------------------

Particulars                   ($)  (Rs.)   %   ($)  (Rs.)   % Growth %
----------------------------------------------------------------------
Total Revenues                113  5,138  100   95 4,348  100    18
----------------------------------------------------------------------
Cost of revenues               54  2,464   48   43 1,981   46    24
----------------------------------------------------------------------
Gross profit                   59  2,674   52   52 2,367   54    13
----------------------------------------------------------------------
Selling, General &
 Administrative Expenses       34  1,548   30   29 1,309   30    18
----------------------------------------------------------------------
R&D Expenses                   11    516   10    7   325    7    59
----------------------------------------------------------------------
Amortization Expenses           2     97    2    2   101    2    (4)
----------------------------------------------------------------------
Forex loss/ (gains)            (1)   (62)  (1)   1    36    1    NC
----------------------------------------------------------------------
Total operating expenses       46  2,099   41   39 1,771   41    19
----------------------------------------------------------------------
Operating income               13    575   11   13   596   14    (4)
----------------------------------------------------------------------
Equity in loss of affiliates    0     13    0    0    20    0   (32)
----------------------------------------------------------------------
Other expenses/(income) net    (4)  (162)  (3)  (4) (167)  (4)   (3)
----------------------------------------------------------------------
Income before income taxes     16    724   14   16   743   17    (3)
                               ---------------------------------------
Income tax (benefit)/expense    3    132    3    2    82    2    61
----------------------------------------------------------------------
Minority interest               0      0    -    0     0    -     -
----------------------------------------------------------------------
Net income                   13.0    592   12 14.5   661   15   (11)
----------------------------------------------------------------------
DEPS                         0.17   7.72      0.19  8.63
----------------------------------------------------------------------

Key Revenue Highlights

Active Pharmaceutical Ingredients (APIs)

-- Revenues at Rs 1.9 billion as against Rs 1.5 billion in Q3

FY03, a YoY increase of 32%; Growth driven by Europe and

India.

-- Revenues outside India at Rs 1.4 billion as against Rs 1

billion in Q3 FY03, a YoY increase of 31%.

-- North America and Europe together contribute a record 53% to

the total revenues of the APIs segment.

-- Revenues from Europe increased to Rs 534 million as against Rs

59 million in Q3 FY03. This increase was driven by the sales

of Ramipril, which contributed Rs 465 million in revenues.

-- Revenues in India increased by 34% to Rs 538 million driven by

volume growth in our key products.

-- Revenues from North America declined to Rs 491 million as

against Rs 589 million in Q3 FY03. This decline was primarily

on account of decline in revenues from Nizatidine.

-- The Company filed 6 US DMF during the quarter, taking the

total filings to 50.

Generics

-- Revenues in this segment at Rs 1 billion as against Rs 998

million in Q3 FY03; YoY growth of 6%, driven primarily by the

growth in North America.

-- Revenues from North America recorded a growth of 16% to Rs 856

million; Contributed 81% to the segment revenues.

-- Revenues from fluoxetine capsules 40mg in North America

increased by Rs 63 million to Rs 420 million as against Rs 357

million in Q3 FY03.

-- Revenues from tizanidine tablets 2 & 4 mg in North America

declined by Rs 89 million to Rs 134 million as against Rs 223

million in Q3 FY03. Tizanidine was launched in Q3 FY03.

-- New products launched in North America in the last 12 months

including Ibuprofen and Nefazodone contributed Rs 102 million

to the segment revenues.

-- Revenues from Europe declined to Rs 198 million from Rs 247

million in Q3 FY03. The decrease was largely on account of the

decline in revenues from Omeprazole due to increased

competition. Omeprazole was launched in UK in Q3 FY03.

-- During the quarter, the Company submitted 4 ANDAs with Para IV

certifications, taking the total ANDAs pending at the USFDA to

31.

Branded Formulations - International

-- Revenues increased by 34% to Rs 912 million over Q3 FY03;

Growth driven primarily by Russia; International revenues

contribute a record 47% to Branded Formulations segment

-- Revenues from Russia increased by 40% to Rs 615 million as

against Rs 438 million in Q3 FY03.

Branded Formulations - India

-- Revenues remain flat at about Rs 1 billion compared to Q3

FY03.

-- Growth in key brands of Omez, Stamlo Beta and Gaity was offset

by the decline in revenues from other key brands such as

Ciprolet. In addition, year on year growth comparisons are

also impacted due to the product rationalization program

carried out earlier this fiscal.

Other Businesses

-- Revenues from the oncology & biotechnology segment increased

to Rs 150 million from Rs 126 million in Q3 FY03. This

increase was driven primarily by the sales in Brazil, which

contributed Rs 60 million in revenues. This was however,

offset by the discontinuance of trading operations in

diagnostics business effective April 1, 2003, which

contributed Rs 34 million in revenues in Q3 FY03.

-- Revenues from the Custom Chemical Services segment remain

unchanged at Rs 9 million.

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 December 31,

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.