Biopure Case Study

Biopure Corporation have two new products that are Oxyglobin and Hemopure. Oxyglobin is the first blood substitute for the veterinary market and is ready for launch. Hemopure is another new blood substitute for the human market and will take two years to launch. Ted Jacobs, VP (Human Clinical Trials), is concerned about creating an unrealistic price expectation for Hemopure by marketing Oxyglobin before Hemopure. Whereas, Andy Wright, VP (Veterinary Products), believes that selling Oxyglobin has benefits as it will generate revenues that can be used for smooth operations of company & for launching Hemopure and learning how to market Hemopure. Carl Rausch, (President and CEO) of Biopure, has to decide whether the launch of Oxyglobin would be beneficial for the company without jeopardizing the future of Hemopure.
Recommendation:
I think that launching Oxyglobin has many benefits for the company. Even though the veterinary market is small and price sensitive, being the first mover will make a huge difference and impact the company’s reputation in a positive way. 84% of veterinary doctors complained about the lack of alternatives to the blood transfusion in the market & there will be no competition for at least five years. Waiting for Hemopure can put the company in a risk because of the possibility of competitors’ entrance to the veterinary market. Once Oxyglobin achieves its purpose and satisfies the veterinary doctors and pet owners, the success of Oxyglobin will help Biopure to easily launch Hemopure and attract the human market.
Basis of Recommendation:
SWOT ANALYSIS OF HEMOPURE & OXYGLOBIN
STRENGTHS
WEEKNESSES
HEMOPURE
OXYGLOBIN
HEMOPURE
OXYGLOBIN
Eliminating need of Blood typing
Eliminating need of Blood Typing
Short Life in body (2 - 7 days)
Short Life in body (2 - 7 days)
Free from Contamination
Free from Contamination
Max dosage of 5 - 10 Units
Max dosage of 5 - 10 Units
Shelf Life of 2 Years
Shelf Life of 2 Years
No Distribution Network
No distribution Network
RBC 100% efficient from Start
RBC 100% efficient from Start
No prior exp. In product launch
No prior exp. In product launch
Stored at Room Temperature
Stored at Room Temperature

Small RBC - Better Reach
Small RBC - Better Reach

Made from Bovine Blood (Availability & Margin)
Made from Bovine Blood (Availability & Margin)

OPPERTUNITIES
THREATS
HEMOPURE
OXYGLOBIN
HEMOPURE
OXYGLOBIN
Large & Realistic Market
No Competition
Competition (2 More Companies)
Small & price sensitive mkt. Can be launched immediately
FDA By Laws
Vet Reluctance for Use
Price: $600 - $800
Price: $200
2 Years in Launch Market Potential:-
Market Potential:
Made from Bovine Blood (Negative Perception)
Made from Bovine Blood (Negative Perception)

Marketing Strategy: Even though the surveys show that veterinarians recommend less-expensive treatments, 90% of pet owners are willing to know about all the available alternatives to treat their pets. Therefore, taking into account the advantages of Oxyglobin relative to alternatives, Oxyglobin should be priced at $200 per unit (matching price with Hemopure). Instead of selling through distributors, Biopure should directly sell through its sales forces (cost of distributing $10 -$15); by doing so, the company will save 30% on distributor’s margin ($60 per unit). Oxyglobin can be advertised through Vet Journals and Trade Shows. Hemopure can take advantage of brand image built by Oxyglobin. Revenue generated by Oxyglobin can be used for expanding Biopure’s production capacity. By the time Biopure is ready to launch Hemopure they can establish a robust marketing team & distribution channel and they will have on hand experience of launching new product.
HEMOPURE

No of Units (Transfusion)

Anonymous Donation (A)
5800000
Trauma taken as 100% (as we can store Hemopure in Ambulance (at room temp & shelf life 2 yrs.). Borderline Surgeries are included because Hemopure eliminates contamination risks.

Emergency Surgery (B)
1000000

Trauma ( C )
2000000

Borderline Transfusion Surgeries (D)
1500000

Market Potential (In Units) (E=A+B+C+D)
10300000

Price (Per Unit) (F)
600

Market Potential (in $ Value) (E*F)
6180000000

All the available units of RBC's were consumed in 1995. I am assuming that consumption remains same in 1999. So I am calculating Market Potential keeping the present level of consumption.

OXYGLOBIN Non Critical
Critical
Total
No of Vets (A)
14250
750
15000
Av. No of Transfusion (Per vet Care) (B)
17
150 Total No of Transfusion (C=A*B)
242250
112500
354750
Market Potential (Units) {D=(C/2.5%)*30%}
2907000
1350000
4257000
Price (Per Unit) ( E )
200
200 Potential Market (in $ Value) (D*E)
581400000
270000000
851400000

Price 1
Price 2
Price 3
Suggested Price (A)
100
150
200
Production Capacity (B)
300000
300000
300000
Fixed Cost ( C )
15000000
15000000
15000000
Bovine Blood Cost/Unit (D)
1.5
1.5
1.5
Approx. Distribution Cost ( E )
12.5
12.5
12.5
Total Variable Cost (F=D+E)
14
14
14
Contribution (G=A-F)
86
136
186
Break Even Point (H=C/G)
174419
110294
80645