In the cataclysmic fall by techs led by Infosys, the sudden downturn by Dr Reddy's Labs late Friday went virtually innoticed.
But market rumours suggested that the company is having to contend with certain adverse developments.
The sudden downswing had the Dr Reddy's Laboratories scrip plunging 8.2% to Rs 854.75 on BSE on Friday from Thursday's close of Rs 931.55. Around 130,000 DRL shares changed hands on Friday.
Friday's 8% drop pulled the scrip down to the lower end of the range of Rs 850-1000 that it has been moving during the past few months. Earlier, the stock witnessed volatile trading when a smart recovery from an early November 2002 low of Rs 700 to a peak of Rs 1,000 in mid-January 2003 proved short lived. The scrip came under selling pressure after it reached the Rs 1,000-peak around mid-January 2003. It then slipped to the Rs 900-levels by 27 January 2003.
What has caused the latest setback in the DRL counter? The market is abuzz with rumours that some adverse developments have taken place in the company's stable. These, as per market talk, relate to the company having lost a suit over one of its proposed generics for the U.S. markets.
DRL has been beset by negative developments of late on the research and development front as well. In early February 2003, Novo Nordisk said it had decided not to pursue further development of DRL's insulin sensitizer Ragaglitazar (DRF2725; NN622). The decision was taken after Novo performed a renewed benefit/risk assessment of the compound, including analysis of both the clinical phase III data and the tumour findings in long-term animal studies. The financial terms and conditions of the original agreement remain unchanged, DRL said in a statement.
The compound was out-licensed by DRL to Novo Nordisk in August 1998. Ragaglitazar (DRF 2725; NN622) is an insulin sensitizer that acts as a dual PPAR (peroxisome proliferator-activated receptor) alpha and gamma agonist. In July 2002, Novo Nordisk had announced that it was suspending phase 3 clinical trials of Ragaglitazar (DRF 2725; NN622) after it found tumors in one mouse and several rats in long-term animal studies.
DRL recently signed a 15-year exclusive product development and marketing agreement with the U.S.-based Leniner Health Products, exclusively for DRL's over-the-counter drug products. The agreement includes an exclusive marketing partnership for DRL's OTC products.
DRL recently filed with the US Food and Drug Administration to market a generic version of Aventis Pharmaceuticals' anti-allergy drug Allegra. The product is indicated for the relief of symptoms associated with seasonal allergic rhinitis. The brand has annual sales of approximately $1.35 billion in the United States .
For the third quarter ended 31 December 2002, DRL reported a 5% fall in sales to Rs 374.45 crore (Rs 3.74 billion) and a 42% drop in profit after tax to Rs 93.16 crore. A poll of analysts conducted by capitalmarket.com had projected that the company would post a 34.5% to 42% fall in net profit, in the range of Rs 93.60 crore to Rs 106 crore (Rs 1.06 billion). Sales were forecast between Rs 441 crore (Rs 4.41 billion) and Rs 530 crore (Rs 5.3 billion). The fall in Q3 sales was primarily on account of a 32% drop to Rs 78.55 crore in generic sales. This, in turn, was the result of the company's exclusivity in sales of fluoxetine during the quarter.
Revenues showed decent growth if one-time items were excluded. Excluding the revenues from Fluoxetine exclusivity of Rs 117.70 crore (Rs 1.17 billion) and the one-time R & D license fee income in the quarter ended 31 December 2001, revenues registered a growth of 33% over the corresponding previous quarter.
BSE code: 500124
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