Case Analysis: Biopure Corporation

Indian Institute of Management Kozhikode

Marketing Management Case Analysis: Biopure Corporation Submitted to: Prof. Rahul Kumar Sett

Situation Analysis 

Oxyglobin and Hemobpure were Biopure’s entries in the field of blood substitutes, Hemopure targeting the Human Market and Oxyglobin, the animal market.

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Biopure’s primary goal was the development of a Human Blood Substitute and its entry into the animal market was somewhat opportunistic. However Oxyglobin had received the final FDA approval while Hemopure was about to enter phase III clinical trails.

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Oxyglobin and Hemopure were almost identical in physical properties and appearance, hence it was possible that launching Oxyglobin, that too at a low price would create an unrealistic price expectation for Hemopure eventually.

Problem Identification 

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When is the best time to introduce Oxyglobin? What should be the launch strategy for Oxyglobin, that ensures that the potential of Hemopure is not  jeopardized?

Qualitative Analysis  About Biopure Corp.: 

Founded in 1984 by Carl Rausch and David Judelson.

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In the process of launching two products, namely Oxyglobin:animal blood substitute and Hemopure:for the human market. The primary source of both the products is the blood of cattle.

Human blood substitute. Anticipated price between $600 and $800. Baxter constructed a $ 100,000,000 facility with a production capacity of 1,000,000 units per year. 

Northfield Laboratories: Northfield was a small 45-person firm founded in 1985. Their entire focus on developing a human blood substitute. Their product ‘PolyHeme’ was similar to Baxter’s HemeAssist in production and usage profile. They had spent $70,000,000 in development of ‘PolyHeme’ and construction of a production facility with output capacity of 10,000 units per year.

Customer  

The market for hemopure consisted of customers who had lost blood in large quantities in accidents, gunshots, wounds, etc.

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Demand for RBCs to treat chronic anaemia was expected to remain stable whereas the demand for RBCs to treat acute blood loss was expected to rise with the aging US population. By the year 2030, the over 65 segment was expected to double in absolute numbers.

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Biopure conducted two surveys in 1997. The survey of 285 Veterinarians revealed that with increasing the criticality of the case, the customers were willing to try the product at higher price. A similar behavior was seen in the survey of 200 dog owners.

Qualitative analysis SWOT analysis Strengths 

Since obtaining FDA approval was a time consuming process, the first player to catch hold of the market had an edge.

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Oxyglobin was likely to create an unrealistic price expectation for hemopure.

Quantitative Analysis The Break Even analysis for $100, $150 and $200 is shown in Appendix – A and profit margin for high price and low price is shown. This shows Biopure should launch as soon as possible and with the price of $200 as the market demand is so high that break even will be achieved early on. Recommendations 

Introduce Oxyglobin with the price of $200

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As the success of Hemopure largely depends on the image built by Oxyglobin, emphasis should be laid on establishing the latter as a successful brand.

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Advertisements should be in Vet journals and trade shows.

 Appendix - A

Numerical Analysis Assumption: Marketing costs = 10% of max. revenue Biopure- Oxyglobin calculations Price

100

150

200

300,000

300,000

300,000

3,000,000

4,500,000

6,000,000

Production Cost

15,000,000.00

15,000,000.00

15,000,000.00

Total Fixed Costs

18,000,000.00

19,500,000.00

21,000,000.00

1.50

1.50

1.50

Capacity Veterinary per yr Marketing cost Vet (10%) Fixed costs

Contribution Blood cost per unit Distribution Cost Total Contribution Break Even Percentage

15.00

15.00

15.00

83.50

133.50

183.50

215,569

146,067

114,441

71.86%

48.69%

38.15%

20,550,000

34,050,000

Profit= Contribution* Capacity - (Production Cost+Marketing Cost) Profit Difference high- low

7,050,000

27,000,000

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