Forecast three years of US generics revenue for Kalpora Pharma, whose base erodes every year, which launches new products, and which has one limited-competition launch that falls away in year two.

US revenue goes from USD 400 million to about 488, 439 and 444 million, growth of +22%, -10% and +1.1%. Strip out the one-off product and the business grows only about 2% a year, because USD 40 million of launches barely outruns about USD 32 million of annual erosion. Year 1 is a peak to be modelled away, not a new base.

Think of a phone repair shop whose old services get cheaper every year as more shops learn them. To keep income flat, it has to learn new repairs as fast as the old ones lose value. A generics portfolio is the same: every molecule's price falls as competitors enter, so the base shrinks by a fixed share each year and new launches must fill the hole before anything counts as growth. At 8% erosion on USD 400 million, the hole is USD 32 million in year 1 alone.

So build three layers, not one growth rate: the existing base eroding at 8%, the cumulative launches (each also eroding once it is on the market), and the limited-competition launchA generic product where only one or a few makers can sell for a period, so prices stay high until more rivals are allowed in. as a separate line with its own cliff.

Read the layers from the bottom. The dark base shrinks every year; the green launches grow, but more slowly each year because earlier launches erode too. The lime block is why year 1 looks like a growth story and year 2 looks like a collapse, and neither is the real business. An analyst who extrapolates year 1's 22% or panics at year 2's fall is reacting to one product.

Three things. First, underlying growth is about 2%, and it depends on keeping launches at USD 40 million a year; a regulatory warning at a plant that delays approvals would turn it negative. Second, earnings will be more volatile than revenue, because limited-competition products carry far higher margins than the base, so the year 2 profit fall is larger than 10%. Third, value the one-off as a one-off: a year of excess cash, not a higher run-rate. The limitation is the fixed 8%: erosion speeds up when many rivals get approvals at once, so test 10% and 12%.