Dr. Reddy's Announces the Formation of Perlecan Pharma; Perlecan Pharma Raises USD 52.5 Million as Initial Equity Capital; Perlecan Pharma: India's First Integrated Drug Development Company

-- Perlecan Pharma gets equity capital commitment of U.S.$52.5 million for funding the clinical development of Perlecan Pharma assets; Perlecan Pharma to receive the first tranche of U.S.$26 million; Dr. Reddy's to ultimately hold majority stake in Perlecan Pharma subject to various conditions

-- India's leading Private Equity Investors ICICI Venture and Citigroup Venture Capital International Mauritius Limited lead investment in Perlecan Pharma equity

-- Dr. Reddy's to transfer all rights and title, including the development and commercialization rights of 4 NCE assets to Perlecan Pharma in the area of Metabolic Disorders and Cardiovascular

-- Perlecan provides Dr. Reddy's Drug Discovery program, a model, to rapidly advance its existing as well as future NCE assets through Phase II trials and seek out-licensing, co-development or joint commercialization opportunities thereby enhancing the value of the pipeline. Further, it also enables Dr. Reddy's to aggressively accelerate its new discoveries to clinical development in the areas of Metabolic Disorders and Cardiovascular

Dr. Reddy's Laboratories (NYSE:RDY) today announced the formationof India's first integrated drug development Company 'Perlecan PharmaPrivate Limited' with equity capital commitment of USD 52.5 millionfrom India's leading venture capital investors, Citigroup VentureCapital International Growth Partnership Mauritius Limited ('CitigroupVenture') and ICICI Venture Funds Management Company ('ICICI Venture')and Dr. Reddy's.

Perlecan Pharma will be engaged in the clinical development andout-licensing of NCE assets. Perlecan Pharma's early priorities willbe to advance the clinical development of NCE assets received from Dr.Reddy's through Phase II and thereafter seek out-licensing,co-development or joint commercialization opportunities. Perlecan willbuild on its initial pipeline through a combination of in-licensingand alliancing opportunities. Perlecan will be managed by anindependent Board and an Executive management team.

Commenting on the formation of Perlecan, Dr. Anji Reddy, Chairman,Dr. Reddy's Laboratories, said, "These are exciting times for IndianPharmaceutical Companies and we are pleased to announce the formationof India's first integrated drug development company. The formation ofPerlecan acts as a precursor to many more exciting partnerships in thearea of drug discovery and development for the Indian pharmaceuticalindustry. We have made significant progress in the last decade inbuilding a strong drug discovery platform and look forward to furtherbuilding on this foundation to realize Perlecan Pharma's potential.This partnership marks an important milestone for the Company and willput Dr. Reddy's at the forefront of drug discovery and developmentover the next decade. We are pleased to welcome the involvement ofCitigroup Venture and ICICI Venture, who bring important skills andexperience to the new company. We value their support and confidencein future potential of Perlecan."

Citigroup Venture and ICICI Venture will contribute USD 22.5million each and Dr. Reddy's will contribute USD 7.5 million towardsPerlecan Pharma's initial equity capital. Perlecan will immediatelyissue warrants to Dr. Reddy's, which will be exercised inter aliabased on the development milestones.

Perlecan Pharma provides Dr. Reddy's Drug Discovery program, amodel, to rapidly advance its existing as well as future NCE assetsthrough Phase II trials and seek out-licensing, co-development orjoint commercialization opportunities thereby enhancing the value ofthe pipeline. Further, it also enables Dr. Reddy's to aggressivelyaccelerate its new discoveries to clinical development in the areas ofMetabolic Disorders and Cardiovascular.

In connection with this transaction, Dr. Reddy's and PerlecanPharma will enter into agreements covering the transfer of all titlesand rights including the development and commercialization rights of 4NCE assets to Perlecan Pharma and provision of support services,supply of clinical development quantities and commercial quantities toPerlecan on an arms-length basis. The details of the 4 NCE assets areprovided in the table below.
Compound Therapeutic Development Remarks
Area Status
----------------------------------------------------------------------
-- Non-fibrate
predominantly PPAR
Metabolic Phase I alpha agonist for
DRF 10945 disorders completed the treatment of
dyslipidemia

-- Clinical trials in
Canada
----------------------------------------------------------------------
-- Perlecan inducer for
the treatment of
RUS 3108 Cardiovascular Phase I in atherosclerosis
progress
-- Clinical trials in
Europe
----------------------------------------------------------------------
-- Pan PPAR ((alpha),
(delta),(gamma))
agonist for the
DRF 11605 Metabolic Preclinical treatment of obesity
disorders and dyslipidemia

-- Toxicology studies
in progress
----------------------------------------------------------------------
-- AMPK modulator for
Metabolic the treatment of
DRF 16536 disorders Preclinical dyslipidemia

-- Late stage
preclinical
discovery
----------------------------------------------------------------------

Commenting on the partnership, Renuka Ramnath, CEO and managingDirector, ICICI Venture, said, "We are pleased to build on ourlong-standing partnership with Dr. Reddy's to create India's firstintegrated drug development company. We believe that Dr. Reddy'sproprietary discovery platforms in Metabolic Disorders andCardiovascular will lead to development of innovative discoveries.These therapeutic areas continue to be of major clinical relevance andaddress important patient needs. We now have the charge of advancingpromising NCEs through clinical trials, the success of which isimportant for the long-term success of Dr. Reddy's and to the promiseof addressing unmet metabolic and cardiovascular therapy needs acrossthe world. Through Perlecan, we will extend these new discoveries intoclinical development and unlock the value of the pipeline throughfocused diversification of NCEs and intelligent market alliancesincluding out-licensing to large innovator pharmaceutical companies.We are excited about being able to back this innovative drugdevelopment model, which we believe will create a win-win situationfor all participants."

Perlecan Pharma will have the first right of refusal on futurepipeline of Dr. Reddy's at fair market value. Dr. Reddy's will beoffered commercial rights to Russia, India, China and other countriesin the Commonwealth of Independent states at fair market value for allNCE assets of Perlecan Pharma.

Commenting on the partnership, Ajay Relan, Managing Director,Citigroup Venture Capital International, said, "The decision topartner with Dr. Reddy's demonstrates our confidence in the progressof Dr. Reddy's to date in discovering and developing innovative drugsin Metabolic Disorders and Cardiovascular segments. Perlecan Pharma,represents a unique and extremely promising strategy to rapidlyadvance the clinical development of Dr. Reddy's discoveries and we arequite excited to be a part of Perlecan Pharma."

The exact financial terms and conditions of the agreement withfinancial investors have not been disclosed.

About Dr. Reddy's

Established in 1984, Dr. Reddy's Laboratories (NYSE: RDY) is anemerging global pharmaceutical company with proven researchcapabilities. The Company is vertically integrated with a presenceacross the pharmaceutical value chain. It produces finished dosageforms, active pharmaceutical ingredients and biotechnology productsand 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 ICICI Venture

ICICI Venture, incorporated in 1988, as a wholly owned subsidiaryof ICICI Bank, is the most experienced and largest private equity andventure fund management company in India with funds. Since itsinception, ICICI Venture has managed assets in excess of Rs. 44billion (US$ 1 billion). Over the last 15 years, ICICI Venture hasbeen successful in identifying trends well ahead of the curve; be itretail, media and entertainment, information technology, real estateor pharmaceuticals and biotechnology. During this period ICICI Venturelaunched and managed 8 funds, with each fund having a distinctinvestment theme. ICICI Venture today has some of the best known andmanaged companies in India in its portfolio.

About Citigroup Venture Capital International

Citigroup Venture Capital International Mauritius Limited (CVCIML)is an investment company incorporated under the laws of Mauritius andis a wholly owned subsidiary of Citigroup Venture CapitalInternational Growth Partnership Mauritius Limited, also a companyincorporated in Mauritius. CVCIML is registered under the CompaniesAct 2001 of Mauritius and has been granted a license by FinancialServices Commission, Mauritius. CVCIML is also registered, subsequentto approval by the Reserve Bank of India, as a foreign venture capitalinvestor under the Securities and Exchange Board of India (ForeignVenture Capital Investor) Regulations, 2000. CVCIML is a companywithin the structure of the Citigroup Venture Capital InternationalGrowth fund (the Fund). The Fund is a $1,606 million private equityfund whose investors include several private investors and Citigroup(which is a significant, but a minority investor). The Fund's targetareas of investment are Asia and Emerging Europe. Citigroup VentureCapital International Partnership G.P. Limited (a subsidiary ofCitigroup) is the General Partner of the Fund.

Disclaimer

This press release includes forward-looking statements, as definedin the U.S. Private Securities Litigation Reform Act of 1995. We havebased these forward-looking statements on our current expectations andprojections about future events. Such statements involve known andunknown risks, uncertainties and other factors that may cause actualresults to differ materially. Such factors include, but are notlimited to, changes in local and global economic conditions, ourability to successfully implement our strategy, the market acceptanceof and demand for our products, our growth and expansion,technological change and our exposure to market risks. By theirnature, these expectations and projections are only estimates andcould be materially different from actual results in the future.