A writedown of asset value for its German business saw Dr Reddy’s Laboratories (DRL)

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post a loss in the third quarter. The country’s second-largest drug-maker also cut its revenue guidance for the current financial year.

DRL posted a loss of

Rs 521 crore for the quarter ended December 31 compared with a profit of Rs 245 crore last year. The loss was in sharp contrast to analysts’ expectations, who were predicting a slightly lower profit than last year.

The Hyderabad-based company now expects to post revenue growth in low single digit in percentage terms as against an earlier guidance of 10 per cent growth for the financial year. A greater than expected contraction of the German business and the slowdown in the US contributed to the cut in the outlook, chief executive officer GV Prasad said.

“We expect a much stronger fiscal 2011 with strong drug launches lined up,” he added.

For the last quarter, DRL recorded a one-time, non- cash charge of 109 million euros on its German subsidiary Betapharm. It had taken a charge of Rs 1,410 crore in the fourth quarter last year due to the German business. “A drop in the prices of generic medicines pulled down the value of intangible assets like the ‘beta’ brand,” Satish Reddy, managing director and chief executive officer, said.

The company may be forced to take more write-offs in coming quarters, if market conditions in Germany deteriorated further, he observed.

DRL had acquired Betapharm for $572 million in 2006. Since then, the Hyderabad-based company has been losing money in the German market due to regulatory issues.

Prasad admitted that Betapharm had turned into an albatross around DRL’s neck. “On hindsight, the acquisition wasn’t a good business decision. If we had known how things would pan out, we would not have gone for it,” he said.

Revenue from India went up 30 per cent to Rs 260 crore. Europe also posted an equivalent sales figure, with a gain of 4 per cent.

DRL expects Omiprazole, a generic version of AstraZeneca’s Prilosec, to boost earnings from the first quarter of FY11. The drug, which was launched in the US market last month, is used in the treatment of stomach ulcers and acid reflux.

The company, though, does not expect Omiprazole to have the kind of sales that last year’s launch Sumatriptan had. A generic version of GlaxoSmithKline’s blockbuster anti-migraine drug Imitrex, Sumatriptan had huge sales volumes, shoring up DRL’s revenues for the better part of the last financial year.