Dr Reddy's Laboratories was in the negative territory on Tuesday even after the company announced that it has filed an application with the US regulator to market a generic form of Eli Lilly's schizophrenia drug Olanzapine.

The scrip of the pharmaceutical major was down by 1.33% at Rs 878 on the BSE by 11:50 IST, off from its early high of Rs 890 and recovering from its low of Rs 875. A total of 8,079 shares changed hands on the counter. In the last seven sessions (between 27 February and 10 March 2003), the scrip had risen by 4.3% to Rs 889.85 from Rs 853. In the morning, Dr Reddy's Laboratories announced the filing of an Abbreviated New Drug Application with the US Food and Drug Administration for Olanzapine orally disintegrating tablets, equivalent to 5mg, 10mg, 15mg and 20mg, with a Paragraph IV certification on the 5,229,382 patent.

DRL has also notified Eli Lilly, upon which the latter filed a lawsuit against the company in the Southern district court of Indiana alleging patent infringement on the ‘382' patent. DRL, however, said it has the first-to-file status on all dosage strengths and, if successful in its litigation, would enjoy a 180-day marketing exclusivity. The company also stated that the drug delivery system for the Olanzapine ODT ANDA was developed in-house.

Analysts said this was a positive development for DRL, but the market has ignored it purely due to the overall poor sentiment. In a weak market, players are not willing to take positions in the DRL stock as the ruling on the patent infringement case is still awaited, they added. However, analysts said the market size for the generic drug is $106 million. Meanwhile, DRL has seen a slew of negative developments of late. The company has dropped three new compounds (DRF 4848, DRF 3188 and DRF NPPC) from its research pipeline. The same were undergoing/ completed pre-clinical development or animal trials. However, it did not provide any reasons for this move.

Meanwhile, players are eagerly awaiting the launch of DRL's modified version of Norvasc. The company was expected to launch amlodipine maleate (generic version of Norvasc), a hypertension drug in August 2003, but it has delayed the launch to December 2003. 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. DRL has also disappointed the market with its Q3 results.

For the third quarter ended 31 December 2002, the company reported a 5% fall in sales to Rs 374.45 crore (3.74 billion) and a 42% drop in profit after tax to Rs 93.16 crore. 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 losing its exclusivity in sales of Fluoxetine during the quarter. The company has some positive triggers as well. To cite an example, DRL's joint venture with Gribbles of Australia, Pathnet India, is planning an expansion by establishing a hub facility along with satellite centres and patient centres in all metros of India this year. The JV company will be investing $40 million (around Rs 100 crore) in the next four years. The expansion will be funded by both partners. Meanwhile, the promoters' holding in DRL stands at 26%, while that of the public, domestic and foreign institutions are at 15%, 11.78% and 46%, respectively.

BSE code: 500124