DR. REDDY'S ANNOUNCES INDIA’S FIRST MAJOR DRUG CO-DEVELOPMENT AND COMMERCIALIZATION DEAL
Co-development and Commercialization of Balaglitazone (DRF 2593) with Rhoescience

Hyderabad, India, September 28, 2005: Dr. Reddy’s Laboratories (NYSE: RDY) announced today that the Company has entered into a co-development and commercialization agreement with Denmark based Rheoscience A/S for the joint development and commercialization of balaglitazone (DRF 2593), a partial PPAR-gamma agonist, for the treatment of Type 2 diabetes.

Under the terms of the agreement, Rheoscience shall fund all the costs associated with the Phase III clinical trials of DRF 2593 and Dr. Reddy’s shall pay Rheoscience a pre-determined amount towards its share of the development costs. Rheoscience will retain the marketing rights to European Union and China and Dr. Reddy’s will retain the marketing rights in the territories of United States and Rest of the world. Rheoscience shall obtain all necessary regulatory approvals on behalf of Dr. Reddy's in the United States. On receiving final approval from the U.S.FDA, Dr. Reddy’s to make a pre-determined milestone payment to Rheoscience. The agreement will be valid for a period of ten years from the date of commercialization. The financial terms and conditions of the agreement have not been disclosed.

Under the terms of the agreement, if the partners choose to commercialize the product on their own, then there is a staggered royalty on sales payable by the partners to each other. However, if the partners choose to commercialize the product through a third party, then each partner is entitled to share a pre-determined percentage of the net proceeds of commercialization received by it with the other partner. Dr. Reddy’s will also retain the right to supply clinical development and commercial quantities on arms-length basis.

Commenting on the partnership with Rheoscience, GV Prasad, Chief Executive Officer, Dr. Reddy’s Laboratories, said, “We are excited about our first co-development deal for the joint development and commercialization of balaglitazone (DRF 2593). This deal together with the announcement of Perlecan earlier today reflects Dr. Reddy’s commitment to accelerate its discovery efforts as well as clinical development programs toward realizing our vision of becoming a discovery-led global pharmaceutical Company. The addition of balaglitazone, a partial PPAR-gamma agonist, would expand the treatment options available to the physicians globally for management of type 2 diabetes. Overall the PPAR class of drugs continues to be of major clinical relevance and has the potential to address important unmet needs of the millions of diabetic patients worldwide. Rhoescience brings in significant development expertise required to take drugs intended for treatment of metabolic disorders all the way to final registration for clinical use and we are looking forward to work with them.”

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 diabetes, cardiovascular, anti-infectives, inflammation and cancer.

About Rheoscience
Rheoscience A/S is an independent biopharmaceutical company providing novel drug targets as well as state of the art discovery services in the field of obesity and diabetes. Based on unique competencies Rheoscience and its partner, Nordic Bioscience A/S, embrace development expertise required to take drugs intended for treatment of metabolic and endocrine disorders from early discovery phases to final registration for clinical use.

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.

Contact Information
Dr. Reddy’s:
Investors and Financial Analysts:
Nikhil Shah at nikhilshah@drreddys.com
or on +91-40-55511532
Media: M Mythili at mythilim@drreddys.com
or on +91-40-55511620

Rheoscience
Philip Just Larsen, CEO, Tel: +45 4450 1960


Notes to Editor:

• Balaglitazone (DRF 2593), a partial PPAR-gamma agonist, belongs to the class of blockbuster glitazones like pioglitazone (Actos®, Eli Lilly and Takeda) and rosiglitazone (Avandia®, GSK) and is indicated for management of Type 2 diabetes. In USA, during the period 2002-2004 pioglitazone sales increased by 35% to $ 1.8 billion and that of rosiglitazone by 25% to $ 1.4 billion (IMS Sales).
  
• The U.S.FDA now requires pharmaceutical companies to conduct a two-year carcinogenicity studies for new drugs in the PPAR class. Balaglitazone is currently in the last phase of its 2-year carcinogenicity studies.
• Balaglitazone is the most advanced molecule from its class in the pipeline. In Phase II clinical trials, 20 mg of balaglitazone was comparable to the top dose, 45 mg, of pioglitazone. Further, balaglitazone owing to its partial PPAR-gamma agonistic property, may offer a better safety profile compared to currently marketed glitazones.
• Earlier in 1997, Dr. Reddy’s had licensed balaglitazone to Novo Nordisk and in 2004, Novo Nordisk returned this molecule to Dr. Reddy’s due to their portfolio related reasons.