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Biopure Case Study

Biopure Corporation Case Study Richard Addington PHD Table of Contents 1. Executive Summary 2. Situation Analysis a. Human Blood Demand b. Human Blood Pricing c. RBC limitations 3. Internal Environment d. Strengths and weaknesses of Oxyglobin e. Strengths and weaknesses of Hemopure 4. External/Competitive Environment f. Baxter g. Northfield h. Biopure 5. Animal Blood Market 6. Marketing Plan i. Positioning j. Pricing k. Communication 7. Way Forward for Hemopure Executive Summary

In 1998, Biopure Corporation is one of the three legitimate contenders in the emerging field of “blood substitutes” along with Baxter International and Northfield Laboratories. Many opportunities are available in the human blood market due to several disadvantages of the currently available alternatives. Biopure has invested $200M on the R&D of blood substitutes with its primary goal being the development of a human blood substitute, Hemopure. It has recently received FDA approval for Oxyglobin, a blood substitute for the veterinary market, whereas Hemopure will enter phase 3 clinical trials and s expected to get FDA approval by late 1999. Biopure is now faced with the big decision on whether to launch Oxyglobin now and reap the near-term benefits or wait till Hemopure is approved and established in the market. The following analysis examines the current market demand for the human and veterinary blood substitutes, the competitive environment, the pricing strategy for Oxyglobin and how it will impact the future launch of Hemopure. Situation Analysis Human blood supply 8 million people donated blood in 1995.

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Although 75% of adults qualify as a donor, fewer than 5% actually donate blood in a given year. Given the low rate of donation and short shelf life of RBCs several medical facilities suffered a shortage in RBCs Human blood demand 2. 5 million patients suffered from acute blood loss from trauma and surgery in 1995. An additional 1. 5million patients suffer from chronic anemia and also require blood transfusions. Blood loss resulting from trauma and exceeding 2 units needs immediate blood transfusion.

A total of 1 million “borderline transfusions” (blood loss was between 1 to 2 units) occur each year. Despite the potential benefit of a blood transfusion, the majority of these cases are avoided due to the fear of diseases or negative reactions caused by RBCs The demand for RBC’s to treat acute blood loss expected to rise with the ageing US population – 40% of all acute blood loss transfusions occur in individuals over 65 years of age. They comprised 15% of adult population in 1995 and are expected to double in absolute numbers to 25% of the adult population by 2030.

Human blood pricing Since the AIDS crisis it has been illegal to sell blood, as such all blood donations are free The cost of blood ranges from $275 to $425 per unit and covers the cost of collection and administration, storage, handling, cross-matching and documentation RBC limitations * Red Blood cells can only be stored for 6 weeks in refrigerated conditions * Blood transfusions are subject to blood type and incorrect matches can be fatal. RBC’s can be infectious and include the risk of AIDS among other diseases. Blood transfusion is only available in hospitals which results in over 30% of trauma patients dying prior to the operation * Blood supply is lower than demand especially during peak periods (summer and winter) Internal Environment Oxyglobin as a blood substitute for animals Strengths * No competitors – Sole approved product in the market * High supply of raw materials from cattle – Blood obtained at $1. 5/unit * Stored at room temperature * Disease Free * Longer shelf life * Immediately 100% effective Weaknesses & Threats * Short Half Life * 5-10 units max dosage Negative public perception of source (animal vs. human) * Historical lack of Vet transfusion usage Hemopure as a blood substitute for humans Strengths * High Market Potential * High supply of raw materials from cattle – Blood obtained at $1. 5/unit * Universal blood substitutes * Disease free * Longer shelf life * Immediately 100% effective Weaknesses & Threats * FDA final approval * Acceptance of use by medical professionals * Competitors – Baxter & Northfield * Negative public perception of utilizing blood from cattle * Production capacity of 150,000 units per year

External/Competitive Environment Blood substitutes have a reduced risk of contamination and increased storage capability. The main competitors in the market of RBC’s and blood substitutes are Baxter, Northfield, and the current volunteer blood donations market that exists for RBCs. Further competitive rivals are not expected due to the extensive FDA approval process, lengthy R&D testing requirements, and patent regulations Baxter * Leader in development and manufacturing of blood-oriented medical equipment * Large facility – production capacity is 1 million units/year, spent $250 million on R&D. Product – HemAssist – to be priced between $600-$800 * Rely on Human blood supply – Purchase outdated RBC’s for $8/unit * Production cost of approximately $50 million per year ($50/unit) Northfield * A Small firm with the sole purpose of developing its human blood substitute “PolyHeme”. * Production capacity is 10,000 units a year however they hope to construct a $45 million facility with a capacity of 300,000 units per year. * Product – PolyHeme – to be priced between $600-$800 * Rely on Human blood supply – Purchase outdated RBC’s for $26/unit * Production cost of approximately $30 million per year ($100/unit) Biopure Specializes in protein purification for pharmaceutical use. * Hemopure 2 years away from final approval. * Derived from the blood of cattle. * Production capacity of 150,000 but possible production limitations due to expected concurrent usage of production equipment for animal version. * Need for removal of hemoglobin clusters from product excess process in production ability. * Cost for Biopure at $1. 50 per unit of animal blood * Production cost of approximately $15 million per year ($100/unit)

Biopure’s primary competitive advantage is that Hemopure is shelf-stable at room temperature while the competitive products need to be frozen or refrigerated. Moreover, by utilizing cattle as the source of hemoglobin, Biopure have an abundance of raw material at a much lower cost that Baxter and Northfield who rely on human RBCs. Veterinary blood market There are a total of 15,000 veterinary clinics, 95% of which are primary care practices. Emergency care practices make up the remaining 5% however receive a 75% referral rate for major surgeries.

The patients are composed of mainly dogs (50%) and cats (35%). Veterinary blood demand 800 dogs suffered from acute blood loss in 1995 and required emergency care. 30% of these dogs required a blood transfusion but only 2. 5% were considered severe cases and received the procedure. Emergency care practices and larger primary care centers tend to handle all the blood transfusions: 15% of practices handled 65% of all canine surgeries with 10% of the practices handling 55% of all trauma cases. Veterinary blood supply Current blood banks are insufficient, and the demand greatly exceeds supply. 3% of blood is drawn from donor animals (78% in emergencies) with 150 units of blood transfused per emergency care compared to the 17 units per primary care center. Veterinary blood pricing Blood collection, storage, typing and cross matching are too costly for proper operations. Primary care practices charged pet owners between $80 and $100 per unit and a typical emergency care practice charged a pet owner $130 to $170 per unit. Analyzing the Veterinary blood market opportunity Biopure’s Oxyglobin is currently the only existing FDA-approved substitute ready for launch. Moreover, 84% of doctors are dissatisfied with current alternatives.

The total number of units of blood transfused in emergency care practices was 112,500 units in 1995 with a total of 242,250 units from primary care centers. These figures only represent 2. 5% of the total number of dogs who received a blood transfusion while 30% of the total would have benefited from the procedure. As a result there is a potential demand of 4,257,000 units per year. Oxyglobin’s production capacity of 300,000/year only represents 7% of the total potential market demand. Based on the above information, it is clear that there is a huge opportunity and Biopure should launch the product immediately.

In addition, there are several other advantages of launching the product instantly: * Biopure will receive recognition for a break-through discovery that is beneficial and fulfills a need in the market (better quality blood transfusion, availability). * Give the brand credibility and result in PR coverage increasing the overall awareness levels. * Facilitate Biopure’s entry into the human transfusion market. * Provides Biopure with the potential to optimize its production in the future: Biopure can split the production between Oxyglobin & Hemopure based on the larger per-unit profit and future demand and competitive environment. Raise capital for future expansion of Hemopure – Increase production capacity * Strengthen investor confidence for the impending IPO * Provide insights into the future launch of Hemopure in the human market. The challenge for Biopure lies in the firm’s ability to differentiate these products through product education geared toward veterinarians, doctors, and insurance companies which provide the medical recommendation and critical link to the end consumer Marketing Plan for Oxyglobin Positioning strategy The product should be positioned as a high-quality supplement for blood transfusion that the veterinarians can trust.

It should be available to animal owners at an affordable price. Pricing strategy The average cost of a blood transfusion to the customer is slightly above $100. (In 1995, primary care practices charged pet owners between $80-$100 per unit and a typical emergency care practice charged a pet owner $130 to $170 per unit). The cost of a visit to an emergency care practice on the other hand could easily run from $200 to over $1,000. Veterinarians were cited as the trusted source for determining a patient’s treatment selection, which puts pressure on the new substitute segment to target these veterinarians.

In order to determine the best price to launch Oxyglobin, we need to examine the results from the veterinarian survey conducted and combine the leanings with the potential market demand and production capacity of Oxyglobin. Almost all critical cases are attended to by emergency care units who handle the majority of blood transfusions; we need to focus our attention on them as they will help us drive our revenue. Oxyglobin’s production capacity represents only 7% of the total potential market demand. Given Biopure’s limited supply capabilities, it is not recommended to price the product at $100 or less.

Although a higher percentage of veterinarians and consumers would be willing to try the product, it would frustrate them in the long run as we would not be able to satisfy their demand for the product. Pricing Oxyglobin at $200 on the other hand is too high as only 5% of veterinarians would recommend the product for non-critical cases. This may also jeopardize Bipoure’s image as a new entrant into the blood substitute market which could affect the launch of Hemopure in the future. Hemopure is the company’s primary goal and we do not want to be perceived as an expensive product and negatively impact the future launch.

In conclusion, pricing Oxyglobin at $150/unit is the recommended option given the market demand and production capabilities of the firm. Conducting a sales exercise to predict the total revenues generated from emergency care centers at each price will further justify the recommendation. Since almost all critical cases are attended to by emergency care units we will take this into consideration for the following calculations. Price| Critical Cases| # Emergency Centers| Number of Units| Sales Revenue| $50/unit| 100%| 750| 112,500| $5. 63 M| $100/unit| 95%| 712| 106,800| $10. 8 M| $150/unit| 80%| 600| 90,000| $13. 5 M| $200/unit| 60%| 450| 67,500| $13. 5 M| As seen in the above table, charging the veterinarians $200 will yield the same sales revenue as a $150 for critical cases; this is where the noncritical cases need to be taken into account. A much higher percentage of vets are willing to try Oxyglobin at $150/unit (25%) for noncritical cases as opposed to $200/unit (5%). It is important to note that these figures do not represent the total sales revenues for Oxyglobin as we are only taking the emergency care practices into account.

Moreover, the market is expected to grow considering the advantages of the product and the demand for a substitute. Distribution Biopure should focus its targeting on emergency care practices. Although those only make up 5% of the overall industry, 75% primary care specialists will refer an acute blood loss case to one of these centers. Furthermore, Biopure should target large practices (3+ doctors) through regional distributors, both of which account for the largest sales in the industry.

Considering the limited volume of supplies Biopure currently faces, a national distribution may not be desirable right away, until the company at least increases its production capabilities and is established in the market. A regional distributor would be sufficient enough to understand the specific needs of its market and the current output capacity. A larger vet practice could prove more efficient in terms of the availability of materials and the reduction of transfers, thereby also reducing the consumer’s costs and increasing the rate of success by providing a quicker service.

The way forward for Hemopure Hemopure and Oxyglobin, although similar in several ways, are meant for two completely different segments and should not be compared based on price. Oxyglobin is targeted at veterinarians and the animal market while Hemopure is communicating to doctors and insurance companies for the human market. Price expectations are different for humans than they are for animal needs. The price for Hemopure will be compared to the other products in the market ($600-$800), whereas there are no direct competitors for Oxyglobin.

With the success of Oxyglobin, consumers will perceive the brand as providing good value for money and enable Biopure to increase the cost of Hemopure. It is vital for Baxter to monitor the developments in the human blood substitute market until they receive the FDA approval as technology is always changing and the demand for the product may vary. As a relatively junior company that is not as well known for human blood related products or as well funded as Baxter, potential Biopure consumers will require a large degree of product education in an effort to build loyalty and brand recognition for Hemopure.

The blood substitute market is currently non-existent and requires a highly sophisticated sales pitch aimed at a well-educated and technical consumers; namely doctors and insurance companies. It is recommended that Biopure adopt a “manufacturer direct” distributor policy for Hemopure. The distributor’s primary sales pitch will be an educational experience for the consumer regarding value based pricing and the unmet perceived need for this product. It is eminent that the sales pitch clearly identifies the advantages of Hemopure vs. he competitor’s products in order to generate interest and demand. Furthermore, it will educate the consumers on the additional processes required for Hemopure versus Oxyglobin thus justifying the higher cost. It is important for Biopure to conduct a survey on the doctor’s and consumer’s willingness to try Hemopure at different price options. If the results from the survey are in line with the expectations, I recommend launching Hemopure with an initial price of $700 per unit to moderate any price war with the competitors (Since the competitors are expected to launch between $600 and $800).

Baxter is a larger organization and benefit from economies of scale with an estimated production cost of $50/unit compared to the $100/unit currently applicable for Biopure. In summary, the high demand and lack of competition in the veterinary blood substitute market provides a great opportunity for Biopure to launch Oxyglobin. Doing so will help gain credibility, win the trust of the consumers, and expand the business to later tap into the human market.

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Biopure Case Analysis

Biopure Corporation has two new products that are Oxyglobin and Hemopure. Oxyglobin is the first new blood substitute for the veterinary market and is ready for consumer use. Hemopure is another new blood substitute for the human market and it will take two years to launch the product from now on. Ted Jacobs, vice president for Human Clinical Trials, is concerned about creating an unrealistic price expectation for Hemopure by marketing Oxyglobin before Hemopure.

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Biopure case study essay

Oxyglobin and Hemopure will be two blood vessels substitutes that Biopure Company was producing. Oxyglobin was recently given the green light by the FOOD AND DRUG ADMINISTRATION for vet use when Hemapure is estimated being approved in two years intended for human employ. If Oxyglobin is introduced it will be the first blood vessels substitute for the veterinary marketplace a small and price sensitive market. We have a perceived risk by Wyatt Jacobs, the VP of Human Trials at Biopure, that in the event Oxuglobin, the vet merchandise, is released before Hemopure and at the lower price of $150/unit, that it may become extremely challenging to sell Hemopure when launched for 0/unit.

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B. Marketplace Analysis a)Human 14 mil units of RBCs had been donated in america in 95, 12. on the lookout for Million by volunteer donors and 1 ) 1 , 000, 000 from autologous donors (donate to self, few weeks ahead of surgery). fifty percent of the bloodstream supplies are addressed by the American Red Get across. Of the 16 million devices donated installment payments on your 7 , 000, 000 are removed due to expiration or toxins, 3. two million transfused into anemia patients as well as the remaining eight.

you million transfused into surgery and stress patients.

Bloodstream Collection is actually a struggle as post AIDS blood contamination paying for charité of blood vessels units is prohibited by law; it must be done upon volunteer basis. Due to low rates of donation and short shelf-life, shortage of RBC units in medical services in not unusual and therefore the requirement of blood alternatives in the human being market is large. b)Veterinary The veterinary market is smaller than the humans just as 1995 2 . 5% of 800 dogs/vet GP experiencing acute loss of blood were regarded critical and received transfusion, for a total of 300, 000 canines (800×15, 1000 vet GPx 0. 025), although there is any to cover 30% of these domestic pets or about or several. 6 million dogs.

These kinds of veterinary GP lack sufficient supply of canine blood devices lack of pet blood banking companies. Vets depend on housed subscriber animals which in turn 84% are dissatisfied with all the current available blood transfusion alternatives. This constitutes a big opportunity for Oxyglobin. C. Competition Biopure offers two competition for a persons product, Baxter and Northfield both of whom are seeking a Hemoglobin purified via outdated RBC at device cost including $8-$26 vs .

Biopure’s hemoglobin purified from cattle by unit expense of $1. 40. Both Northfield’s and Baxter’s products are required to release 2 years after Oxyglobin and same year as Hemopure. Oxyglobin’s just competition is a blood gathered from in one facility animal donors. One important difference between Hemopure/Oxyglobin and competition is that Biopure’s goods do not need storage by 4C and is stored in room heat; this is a substantial difference as there is no added cost attributed to refrigeration. Deb. Pricing

Hemopure as Baxter’s Hem Aid and Northfield is likely to be priced between $600-$800/unit and I suggest that that prices with the highest variety of the variety because it will not require a fridge and there will be perceived cost savings by pharmacists and clinic managers. On the other hand Oxyglobin and because of the “doubling rule utilized by the vets meaning they will charge house animals owners dual the price of the ask price), it is debatable and to keep your drug cost-effective that the prices from $80-$100 per product.

Others argued that the cost should be established at $200/unit because of each of the advantages, added business and cost savings that brings to the practice and pet owners as well. II. Problem/Decision statement Two related problems need to be resolved by the CEO. ¢Should Oxyglobin be introduced before Hemopure? Although Oxyglobin was approved approval by FDA, few challenges continue to be to be fixed, such as: 1 . Reluctance of veterinarians to work with the product instead of blood by animal contributor 2 . Setting the price of the item at a rate that won’t affect the foreseeable future sales of Hemopure several.

Devise a great distribution strategy for the product (manufacturer direct or distributor) However Hemopure must overcome this obstacles: 1 . FDA acceptance 2 . Value of hemoglobin vs . blood vessels transfusion ($600 vs . $125) 3. Brutal competition by Human hemoglobin by Baxter and Northfield 4. Uptake by physicians Biopure needs to launch its first item to start generating revenue, take the business public, raise more cash to support Hemopure’s Phase a few trial and launch. Prior to deciding on releasing Oxyglobin before Hemopure, all the challenges mentioned previously need to be resolved.

III. Approaches for Improvement To overcome Oxyglobin’s challenges in the above list, the following standards need to be fulfilled: 1 . Goal Emergency care vet techniques 2 . Target large Vet practices (3+) 3. Arranged the price for $200 (see Appendix 1 for analysis) 4. Focus Marketing work on noncritical dogs Biopure should start by simply targeting crisis care veterinary practices since blood transfusion are more common there, 150 transfusion/year when compared with 17 in vet DOCTOR, penetration for this market will certainly measured by unit marketed per attention center and lower reliance on creature donors.

To enhance the market discuss further large vet procedures with 3+ doctors as according to indicate 7 pg 17 of the case, these procedures have the maximum “average regular monthly case load of about 435.00 dogs each month, it’s very important to evaluate a rapid incline in uptake of our product by these practices. Based on the evaluation in Appendix 1, it truly is clear that setting the price at $22.99 is more profitable but we must plan for the launch of Hemopure and so we should consider setting the cost at two-hundred dollar to justify its release at $600 to $800 in a couple of years.

We should monitor the product sales of Oxyglobin at this price and screen if the uptake from vets is raising from the five per cent predicted by the market analysis (table A). Finally, centering the marketing effort about non-critical puppies is crucial as they are a significant market and because although veterinarians can warrant using this item to essential dogs, it’s hard to justify that for non-critical dogs (pricing and efficacy should help support that). The end of using animal contributor in these treatment centers will show that Oxyglobin is successfully upgrading this older practice.

Additionally it is important to think about the possibility of placing the price of Oxyglobin at $22.99 to enjoy as much take advantage of being the first in support of vet blood-substitute, in the event that Hemopure doesn’t acquire approval from your FDA. Really highly potential that Hemopure won’t be powerful in the medical clinic because it can of cows origin, they will changed the formulation to get stable by room heat (excipients could be toxic) as well as the concentrations used are much higher than their human being counterparts.

In this case and to mitigate this risk, lowering the purchase price to a hundred buck will help the sales and uptake from the product with a larger market. The market exploration conducted prior to launch (Table A and B) shows that a high range of veterinarians and pet owners will use the product with the $100/$200(x2) selling price. Based on the calculations in Appendix you, it is obvious that placing the price in $100 is somewhat more lucrative to Biopure than pricing this at $150 or 200$ because of the dual price regulation which affects the uptake by both equally pet owners and vets.

Being cognizant and never to endanger the future Hemopure launch, I like to recommend that we collection the price by $200, because there is a need for the blood replace as 84% of the vets are confirming overall dissatisfaction with the bloodstream transfusion alternatives available in industry. Secondly, Oxyglobin provides an substitute for animal blood bestowed by various other animals which incurs the chance of matching and potential transfer of illnesses.

The storage space at area temperature gives value as this will reduce the need to buy high-priced refrigerators that need calibration, approval and maintenance. Finally, generally there no confidence that vets will immediately double the price of the product particularly if they foresee a high require by owners, a practice that we will need to encourage and help the vets appreciate the benefit. Although blood vessels transfusions in the veterinary marketplace are occasional and the industry scope is restricted, Oxyglobin has the potential to become a lucrative expense for Biopure.

It is possible that Hemopure will not be licensed by FDA, that humans will resist purchasing a product of cattle origins especially that human hemoglobins will be available throughout the same period by competitors and that doctors will not prescribe it to get the reasons referred to above. To minimize these risks and to commence generating revenue that will help the company expand, become open public and increase more financing, I as a result recommend that we all sell Oxyglobin first before the launch of Hemopure.

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Biopure Corporation

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| MKT 6301 | 09/16/2016

Sruthi Sara Jacob Thomas Jacob                      sxt160630

Naman Bader                                                       nxb161930

The following is a write-up of case study based on Biopure Corporation, a biopharmaceutical firm specialized in ultra-purification of protein for human and veterinary use, and their decision regarding the release of Oxyglobin and Hemopure, which are blood substitutes derived from bovine; Oxyglobin meant for small animals, and Hemopure for humans. Through this case study, we try to provide a conclusion on whether Oxyglobin (which is FDA approved) should be released before Hemopure (undergoing Phase 3 clinical trials), and we also estimate the revenue generated, on each case.

As per the data available in 1995, there’s a requirement for 11,300,000 units of blood every year in United States. As per our findings, blood substitutes will outperform donor blood even if it is priced in the range $600-$800 mostly in the following 4 cases: borderline transfusions, chronic anemic patients, accident trauma victims and patients having rare blood types  because of the reasons mentioned below:

1. Borderline transfusions  – approximately 1 million people require these transfusions every year, but not get it because of the risks involved. Hemopure solves this problem as the antigens which react in the body are removed during processing.

2. Chronic anaemic patients  – 1.5 million suffer from this disease and require 3.2 million units of blood each year. Since Hemopure is 100% effective at carrying oxygen, this can benefit the patients.

3. Trauma cases  – Around 500,000 accident cases happen in USA every year. 10% of the patients die because of non-availability of blood on site. Hemopure is a universal blood substitute and has a shelf life of 2 years, and can be stored in room temperature making it ideal for these type of cases.

4. Rare blood types  (typically Rh- blood types): Victims having rare blood types can use the blood substitute when donor blood is hard to obtain.

Market Potential and Potential profits of Hemopure and similar products:

*The share given to the distributers (20%) is taken as the same as that of distributors of veterinary products, mentioned in the case study. This is also calculated assuming Oxyglobin is released before Hemopure and has a name in the market.

*SP refers to selling price

Pricing of Hemopure:

The case study mentions Hemopure be priced in the range $600-$800. After some pondering over, it is recommended to price Hemopure conservatively around $600 because of the following reasons:

• To narrow down the price gap between Oxyglobin and Hemopure, which “look” similar.
• Biopure is expected to face considerable competition from rival firms especially from Baxter International and Northfield Labs, who are also planning to keep their selling prices in this range.
• Availability of cheaper alternative source of blood through donors.
• The production costs of Hemopure is comparatively lower than HemAssist and PolyHeme, which means we can afford to be at the lower cost range, and obtain significant profits. We can also use the lesser price to our advantage.

Expected Profits of Hemopure:

Market Share for Hemopure is assumed  to be at 30%  for Biopure,40% for Baxter (since Baxter has a strong presence in the market) and 30% for Northfield. Looking at huge market potential, it can be assumed  that Hemopure would be successfully introduced, since Biopure has created a reputation through Oxyglobin. For calculation purposes, probability is taken as 1. The reason we claim high probability is because there is a high demand for blood substitutes, and there is no developed product which can be stored at room temperature, and as such be used at the site of accidents.

• MLA 7  
• CHICAGO  

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International Strategic Management - “biopure” Case Study

Autor: Mikki   •  January 20, 2018  •  1,585 Words (7 Pages)  •  999 Views

Question 3A: What are the possible reference prices [what consumers may anticipate paying or consider reasonable to pay] for Hemopure?

- The coefficient between products will affect the price

When comes to the early 1998, the Hemopure was in the third phase in Europe. In anticipation of this allowance, Biopure had prepared to proceed immediately upon approval. And Biopure planned to sell this product at a high price like $600 to $800 per unit. However, the market department advised that they should bound to the statement of company in the market. The proportional relationship will appear in same type of products. Even, one is for animal, the other is for people. They are both blood products.” The coefficient is generally between 0.3 to 3 times. “

As the theory, if the Oxyglobin selling at $100, then Hemopure may be set from $30 to $300. But we must realize this is just a theory. Some internal reasons will also change the strategy of pricing. Such as the standard of human blood substitute must be higher than the veterinary blood substitute. The difficulties of production will increase the cost. As a result, the price of unit will rise. These links exist in this case.

- The competitors will also effect the strategy of setting a price.

As the case mentioned that the Baxter international and Northfield Laboratories were the most powerful competitors for Biopure Corporation. The price of their unit must be a reference. From the statistic，Baxter had make a contract with the Red Cross institute at a cost of $8 for each unit. The Northfield do the same contract with the government.

But the price has raise per year. In addition, these products from two companies should be kept in the frozen temperature. The advantage of Biopure’s products is easy to store. After comparing of the difference and advantages, there are the selling prices for Baxter and Northfield. They would price Between $600 and $800 for their products.

And Biopure also have the animal blood products which probably prices between 100-150. The price is not so high. According to the coefficient of two products the price of Hemopure should not over $450. But, in fact, Biopure wanted to set a higher price more than $450. Let’s imagine, if the quantity of using reflect the feeling of the consumer what will happen. When the hospital, patient and the insurance company feel the price is too high, the acceptance will have a direct impact. Although the Biopure will lose the profits could gain, the market possession will increase in a short term. As the sensitivity of medical consumed has not be tested in this market, the price battle will not happen in recent time. The price maybe a advantage for Biopure.

Question 4A: What are the reasons for and against launching immediately Oxyglobin?

3.1 Reasons for launching the product

There is an opportunity to be the leader of the veterinary market. In this field, Oxyglobin was the first one who succeed to produce the “blood substitutes. Which means in this market there are no competitors in recent time. The confidence of the consumer and the public praise will easy to build if the product has a good quality. By contrast, another company should take two to five years to inventor the new animal blood substitute to the market. In that time, the Oxyglobin has already widely used in the veterinary practice. The popularity in the market has opened for Biopure.

The invention of these two products has cost lots of money of Biopure. The construction of a manufacturing factory continuously need money. The company peremptorily need capital and gain the first revenues in order to launch Hemopure.

As there is a scarcity of animal blood, Oxyglobin will capture the market in that period. With the proven success, the investors might have a greater impact on Hemopure.

Launching of Oxyglobin will help the market to known this company and gain the attraction from the investors. The activity will help Biopure to collect the feedback of the market which may help them to successfully launch the Hemopure.

3.2 Reasons against launching the product

As mention before the price of Oxyglobin will be $100. Since it’s just for the animals, the standard is not as high as the human blood. For example, the small clusters will cause minor gastrointestinal problems and discoloration of urine. In the animal market, it’s acceptable, but these effects will not be acceptable in the human market. There is a possibility, if the patient appears the same situation they will suspect they get a product for animal. This may cause the serious problem. It also rises the standard of Hemopure if the Oxyglobin released first. In the other side the consumer also make a link between the Oxyglobin and Hemopure. They will think the basic element is the same the price should not have a huge gap. The market may have an unrealistic price expectation of Hemopure.Which will decrease the profit and force the company to lower down the Hemopure which sounds so negative.

As I learned in the investor relation, the investor always be sensitive to launching a new product. The investor will call back their investment if they think the product doesn’t have a perfect market prospect. Which means their wealth will be put into a very dangerous plan.

Furthermore, when Biopure is in IPO progress, the estimation of risk will be much higher than it should be.

It’s obviously, if the intern rate of return can’t match the need of investor they will lose the confidence of Biopure in short period. Once the crisis of company’s confidence happens, it’s very hard to stop the repeal of investment. The cash flow of Biopure may broke. Even the worst situation doesn’t appear, the process of IPO will full of netural.