Projecting out drugs that are in FDA approval process

Dude - make up some peak sales number, say it takes 7 or 8 years to ramp up to peak sales and just project your revenue as a % of peak sales. You can build in sensitivities around peak sales value and and time to peak sales. Then just grow at inflation until patent expiry (assume like 15 years if you don't have info from the company). Then decline 80%, 20% and 20% in the three years to capture the patent cliff.

Depending on the stage of approval, assume 50% chance it goes from Phase II to Phase III, 75% chance it goes from Phase III to NDA and 90% chance it goes from NDA to actual approval and launch. Then take a straight haircut to the future cash flows. So a Phase II drug has a 34% chance of getting to market above, and you haircut the cash flows accordingly.

Expenses are a little bit trickier. For a biologic, go with 80% gross margin, otherwise assume 90%. Sales and other stuff is not as straight forward, so sensitize this. Assume you get to a run-rate EBITDA margin of like 30-40%.

If you're going to assume any nol values from losses, just net against income for tax purposes until they run out. You can debate this for a zillion years, but at the end of the day it doesn't make much difference.

Oh, and look at company information about their cash burn pre-launch. They usually have it in their investor presentations what the expect to spend to actually get a drug to market. Obviously there are some pretty hefty negative years before you actually get somewhere with the drug.