Future revenue for pharmaceutical companies is dependent on the likely continuation of revenues from existing products, which are already on the market and pipeline products, which are in the process of being developed for existing products.

Revenues need to be forecast on a product by product basis since the end of the patent or license period will be different for different products.

And once that patent period ends, other companies will be able to produce generic products, removing the monopoly position of the first company that held the patent, and therefore reducing market share and profit margins for pipeline products.

We also need to analyze revenues on a product by product basis, but since these products are not yet being sold to customers, revenues are probability weighted since there is significant uncertainty regarding the likelihood of successfully receiving regulatory approval.

Assumptions also need to be made regarding the size of the market that can be expected if regulatory approval is received, profit margins and the likely split of distribution channels between sales directly to consumers or sales made to medical facilities, whether hospitals, clinics, or doctor surgeries, and those sales made on an indirect basis, which involves licensing of the product to other pharmaceutical companies.

This is typically undertaken for overseas sales of products where the company that developed the drug doesn't have the necessary production or distribution facilities, so enters into a licensing arrangement with a overseas pharmaceutical company to access that market.

For these indirect sales, only a license fee revenue stream is created.