Indian drug maker Dr Reddy's Laboratories said on Friday its fiscal 2003 profit fell 28 per cent, on lower sales of a Prozac generic drug to the key US market and slowing domestic sales.

The firm, based in Hyderabad, said it earned Rs 353 crore (Rs 3.53 billion) under Indian accounting standards in the fiscal year ended March 31. That compared with a profit of Rs 492 crore (Rs 4.92 billion) the prior year.

In US dollars, the company earned $74 million, or 97 cents per share, for the fiscal year, down from fiscal 2002's $104 million, or $1.36 a share.

Net sales rose 9 per cent to Rs 1,807 crore (Rs 18.07 billion).

The firm earns about 60 per cent of its revenue from international markets including key ones like the United States, Russia, Europe, China, Brazil and Mexico. Sales growth excluding India increased 10 per cent for the fiscal year.

Sales in India were expected to have taken a hit in the quarter because distributors likely held off on stocking up amid confusion over the implementation of value added tax.

Dr Reddy's and larger rival Ranbaxy Laboratories have broken into the profitable US generic drugs market. The firms have established exclusive marketing rights to copycat versions of blockbuster drugs, but now face increasing competition as some of these agreements expire.

For example, Dr. Reddy's six-month exclusive marketing rights for a 40 mg generic dose of Eli Lilly's anti-depressant Prozac ended in January 2002. Sales of the drug, which contributed 21 per cent of Dr Reddy's turnover in the fiscal year ended in March 2002, have dwindled as competition set in.

Rival Ranbaxy has had a good run as it is still enjoying exclusivity for a generic form of GlaxoSmithKline's Ceftin antibiotic, besides stepping up other generic launches.

Worries about competition have caused Dr Reddy's shares to underperform Ranbaxy's share price. Dr Reddy's shares have fallen 1 per cent this year, compared with a 15 per cent jump in shares of Ranbaxy.

Dr Reddy's also makes bulk drugs -- active ingredients that go to make ready-to-take medicines, and has also made inroads in drug discovery, having licensed some molecules to European drug makers.

It has a rich pipeline of generic drugs and is awaiting approvals from the US FDA for more than 23 Abbreviated New Drug Applications, the regulatory filing to sell a generic version of a drug.

But its fortunes has been mixed in the past year.

Danish pharmaceutical group Novo Nordisk dropped the development of insulin sensitizer drug Ragaglitazar, licensed from Dr Reddy's, although it's continuing with the development of another Dr Reddy's licensed drug, anti-diabetes drug Balaglitazone.

Switzerland's Novartis dropped work on another insulin sensitizer from Dr Reddy's, in January.