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QUALITATIVE ANALYSIS:

About Biopure Corporation:

Founded in 1984 by Carl Rausch and David Judelson as a private biopharmaceutical firm specialising in ultrapurification of

proteins for human and veterinary use.


Preparing to launch blood substitutes namely Oxyglobin for the animal market and Hemopure for the human market
Point of differentiation for Biopure from its competitors: primary source for the blood substitute is cattle based
Oxyglobin just received final FDA approval for its commercial release, while Hemopure would soon enter Phase 3 of clinical

trials and would hopefully see final FDA approval for release sometime in 1999
Has a single manufacturing facility with an output capacity varying by the production mix of both the products. Since same

equipment was to be used to produce either of the products, only one product could be produced at a time
Annual capacity : Oxyglobin- 300,000 units; Hemopure- 150,000 units or some linear combination in between

Competitors:

As of 1998, Baxter International and Northfield Laboratories were the only other companies in the late-stage development of a

hemoglobin-based blood substitute


Both companies developed technologies to extract raw hemoglobin from human RBCs which were stored for more than 6 weeks
Besides depending on human blood, both companies products needed to be frozen or refrigerated but Hemopure was shelf stable
at room temperature

Baxter International: With over $5.4 bil in sales and $670 mil in net income, 1996, Baxter was an acknowledged leader in the
development, manufacture and sale of blood related medical products. HemAssist is their patented blood substitute. They plan on
pricing this product between $600-$800 per unit
Northfield Laboratories: Its a small 45-person firm, founded in 1985, for solely developing human blood substitute. Their productPolyHem was in Phase 3of clinical trials. They had an output capacity of 10,000 units per year but sensing the future demand they
hoped to construct a facility with a capacity of 300,000 units per year with an investment of $45 mil

SWOT ANALYSIS FOR BIOPURE CORP:

STRENGHTS:
- Oxyglobin-first blood substitute in veterinary market with
full government approval
- Only products with cattle based primary source
- Free of infectious agents and contamination
-Increased shelf life (2 years), shelf stable at room
temperature

WEAKNESSES:
- Short half life, excreated from the body within 2-7 days
- Potential for high toxicity, transfusion levels of only 5-10
units
- Production capacity low as compared to one of its main
competitors- Baxter
- FDA approval awaited for Hemopure

SWOT ANALYSIS
OPPORTUNITIES:
- Can Build a strong brand name with Oxyglobin before the
launch of Hemopure
- No other blood substitute available in the animal market
- Since products are shelf stable, are better suited for
mergency cases

THREATS:
- Delay in the FDA approval, if Hemopure fails to pass the
FDA tests then can it will cost the compnay heavily
- Tough competition from PloyHem and HemAssist

Situational analysis:
Biopure Corporation wants to launch two new blood substitutes Oxyglobin for veterinary market, which is ready for launch and

Hemopure for human market which is approximately two years away from FDA approval.
Oxyglobin will be the first in the animal market which is price sensitive, therefore to be priced lower i.e. around $150. Hemopure,
on the other hand, is planned to be priced at around 600$-800$, since human market is many times larger.

Complication:
Oxyglobin is ready for launch. Its the first in the market and has a big head-start. It can generate the first revenue for the firm which
can be used to launch Hemopure and cover operations till Hemopure is launched. It will help us learn the go-to market strategy as
well. Also, there is a desire to take Biopure public and a proven success of Oxyglobin can improve the IPO.
But the low pricing of Oxyglobin will jeopardise our ability to price Hemopure at a high price since the two products look very alike,
a 500% price differentiation would be hard to explain.
Questions to be answered:
When should Oxyglobin be launched?
What should be the pricing of Oxyglobin and Hemopure?

QUANTITATIVE ANALYSIS:
Revenue Analysis

Case I
$

Sale Price
NonCritica
l
Market

Market Size (in Units of Blood)


Oxy Adoption
Sales Potential1
Oxy Revenue Potential2
Market Size (in Units of Blood)

Critica
l
Market

50

242,250
95%
230,138
$11,506,875

Case II
$

100

Case III
$

242,250
70%
169,575
$16,957,500

150

Case IV
$

242,250
25%
60,563
$ 9,084,375

112,500

242,250
5%
12,113
$ 2,422,500

112,500

Oxy Adoption

112,500
100%

95%

80%

Sales Potential1

112,500

106,875

90,000

200

112,500
60%

Oxy Revenue Potential2

$5,625,000

$10,687,500

$13,500,000

$13,500,000

Total Sales Potential


Total Oxy Revenue Potential
Total
Revenue Constraint based on
production capacity
2. Sales Potential = Market Size X Adoption

342,638
$17,131,875

276,450
$27,645,000

150,563
$22,584,375

79,613
$15,922,500

15,000,000

30,000,000

45,000,000

60,000,000

2. Revenue Potential = Sales Potential X Sale Price


Production Fixed Cost
$15000000
Variable Cost per unit
$1.50
Total Units
300,000
Total Variable Cost3
$450,000
Total Production Cost
Distributor Price
$
15.0
Channel
$
15.0
Total Marketing Cost4
$ 4,500,000
Total Cost
$19,950,000
3Total Variable Cost = Variable Cost/Unit X Total Units

276,450
$414,675

150,562
$225,844

79,612
$119,419

$
30.0
$
15.0
$ 4,146,750
$19,561,425

$
45.0
$
15.0
$ 2,258,438
$17,484,281

$
60.0
$
15.0
$ 1,194,188
$16,313,606

4Total Marketing Cost = Minimum price ( Distributor Price, Channel Price)/unit X Total Units

Profit
Break Even Sales

(4,950,000)
447,761

Recommendation
1.

We suggest the Oxyglobin, pricing to be done at 150$

8,083,575
218,978

5,100,094
144,928

(391,106)
108,303

2.

Although we expect the FDA approval to come through, in case it doesnt we need to recover the costs through Oxyglobin itself.
Also, pricing it at a low level would endanger the price plans for Hemopure. On the other hand, we can always slash the market

3.
4.

5.

prices, to increase adoption anytime we want to


These adoption numbers are based on current preference of veterinarians. We can put in some marketing efforts to increase
awareness among pet owners
Hemopure should be launched towards the lower end of price, say around 600$, for following reasons
a. Tough market competition
b. Explaining a big price difference from Oxyglobin would be difficult
c.
Production capacity should be increased, because even though our raw material cost is very low compared to competitors, our
variable costs are still high because of a very high per unit production cost

Variable Costs
Raw material Cost
Production Cost*
Marketing Cost**
Cost/unit
*Assuming the production at full capacity
**Assuming same across firms

Biopure

Baxter
1.5
100.0
15.0
116.5

Northfield
8.0
50.0
15.0
73.0

26.0
96.8
15.0
137.8