Hyderabad-based, New York-listed Dr Reddy's Laboratories, which has in the past surfed over troubles linked to patents, faced a safety challenge on Wednesday following a gas leak at one of its plants that killed two staff members.
The event, coming barely a day after the company entered a landmark licensing, technology, manufacturing and marketing agreement with Russia's R-Pharm, potentially raises questions related to its manufacturing environment.
The company's stock, part of the National Stock Exchange's benchmark 50-share Nifty index, lost 4.1 per cent in early trading before closing 0.6 per cent down at Rs 1,677.40.
Industry experts say the company could face concerns over its business if the US Food and Drug Administration (FDA) takes the gas leak seriously and decides to scrutinize its plants.
"It is a serious development as two people have died. The problem for the company may become grave if US-FDA decides to re-inspect their plant and broaden the scope to their other plants too," said Praful Bohra, pharmaceutical industry analyst at Jaypee Capital.
The company said that investigations were being conducted by agencies including the factories inspectorate, the Drugs Control Administration, Hyderabad and police — to ascertain the cause of the leak in which Chiranjeevi Sreedhar Reddy (38), a production chemist and Deepak Jena (22), a contract worker, lost their lives.
While the company has not yet announced a compensation structure for the two families, a company official said that they are working on that and other liabilities that may come up.
"At the time of the accident, the deceased were handling the process of micronisation of Omeprazole powder. The incident happened in the "clean room" located in one of the production blocks," said the company in a statement. "The access to that area has been restricted. Manufacturing in the rest of the facility is continuing as the problem is limited to that particular area."
Industry experts say environmental health and safety (EH&S) norms are a big issue for the Indian manufacturing sector.
"Many Indian companies do not follow the global EH&S norms," said a senior pharma expert at a leading consultancy on condition of anonymity.