These aren’t the best of times for Lupin. Its net profit in the April-June 2018 quarter declined 43% over a year to Rs 202 crore and sales fell marginally (0.8%) to Rs 3,775 crore. Then there were quality issues raised by the U.S. Food and Drug Administration (USFDA) with respect to a couple of Lupin’s factories in India, which may delay approval for new products proposed to be made at these locations.

But, chief executive Vinita Gupta is confident that Lupin will overcome the odds. In an exclusive interview with Fortune India, Gupta, 50, says that newly launched complex generic and branded products, easing pricing pressure in the US, and focus on the untapped area of women’s healthcare would help the company improve its performance in the second half of the current fiscal. Edited excerpts:

A large part of Lupin’s underperformance in the April-June 2018 period was due to subdued sales in the US and Japan. What went wrong?

We anticipated the challenges in the US and Japan a while ago. The pricing pressure on account of channel partners in the US and the supply chain consolidation started a few years ago. We decided to focus on transforming our generics business to develop more complex generics and specialty products, while ensuring that we invest adequately in India and other emerging markets to tap into the growth momentum here.

What has gone wrong is that the erosion of the simple generics business and evolution of complex generics and speciality products hasn’t happened at the pace which we had ideally hoped for. There has been more pressure than we anticipated on the generics side, and it has taken our complex generics and specialty business longer to evolve.

In the inhalations business, for instance, it took us four years to file for two big products, which is a big deal. But, it would have been great to have one of those products in the market by now. It has taken a little longer to play out, but we have made progress. Likewise on complex injectable drugs and biosimilars, we have made progress and feel confident that our investments will pay off over the next three to five years.

Lupin is very bullish on women’s healthcare in the US. Why so?

We are on our way to building a strong women’s healthcare franchise in the US. Our whole journey in this space started with Methergene, which came to us post the acquisition of Gavis (another US-based pharmaceuticals company). Then we started looking at this area in greater depth and realised that many of the big pharma companies had abandoned this space to focus on areas such as oncology and neurology, and not much innovation has happened in this space. We also have a wonderful product in the form of Solosec (used to treat bacterial vaginosis). The market for bacterial vaginosis drugs is $1 billion, and we hope to corner at least 20-25% share of the market with Solosec.

Beyond that, women’s healthcare is a $11-12 billion market in the US, which is substantial. We are systematically looking at other therapeutic areas in this space, such as contraception, endometriosis, hormone replacement, fertility, and evaluating where we can participate.

You have guided that Q2 (July-September 2018) will be subdued quarter as well. When can we expect profits to stabilise?

We are expecting the second half of the fiscal to be better. The challenges we faced in the first quarter will remain in the second quarter as well. But, with the ramp-up of Solosec, anticipated higher sales of Tamiflu, and some new products that we expect to bring to the market this fiscal, the second half of 2018-19 should be better.

The challenges of price erosion and supply chain consolidation in the US have persisted for a few years now. Are these problems bottoming out?

Two years ago we were seeing double-digit percentage price erosion in the US. Last year that has become high single-digit. We are also finding a lot of large pharma companies exiting products which aren’t remunerative and where customers aren’t willing to take a price hike. Customers (pharmacies and wholesalers) have also realised that the industry has reached a pain point, owing to which they are finding gaps in supply. Many of these customers are asking for our help with availability of products made by other companies earlier.

Sometimes the exit of certain large players from the market helps in bringing rationalisation in the marketplace, which is happening in the US. A sense of balance is returning, which is important for a healthy generic drugs industry that is essential to contain healthcare spend.

What is the status of the warning letter that you received from the USFDA for a couple of your manufacturing sites in Pithampur and Goa?

We have responded to the letter and committed to the USFDA that we will undertake remedial measures on key observations raised by them. We now plan to meet and apprise them of the steps we have taken. We believe they will likely visit the facilities again before clearing them. The warning letter doesn’t hamper our production but new products proposed to be made at these facilities will take time to get approvals.

The quality enhancement actions we have taken aren’t only restricted to Pithampur and Goa. We have implemented them at all our manufacturing sites. It was a tough lesson for us and disappointing. But we certainly learnt that there were areas we needed to improve on.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.