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Biopure

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Background - Biopure is planning to introduce two new blood substitutes: Hemopure for human market and Oxyglobin for animal market. Oxyglobin, expected to command $150-$200 per unit, is already FDA approved whereas Hemopure, expected to command $600-$800 per unit, has entered final stage of clinical trials. The main issue is whether to launch Oxyglobin now and Hemopure later when it receives FDA approval or wait until Hemopure is approved, launched and established as a product and then launch Oxyglobin. The reason for concern is that some members in Biopure management feel that releasing Oxyglobin first will jeopardize the high price that Hemopure will eventually command.

Market Potential for Oxyglobin and Hemopure– The potential market for Oxyglobin is significantly smaller than that for Hemopure, yet both are attractive because demand for blood exceeds supply. Absence of competitive products, lack of adequate blood banks for animal market, low cost advantage of just $1.50 per unit of blood against its competitor and the fact that its blood substitutes eliminates the need for storage and refrigeration makes BioPure an attractive option for both primary care and emergency care vet practices. The total potential for the animal market is 354,750 units per year. Since production of Oxyglobin is limited to 300,000 units per year, the total potential revenue generated by Oxyglobin could be projected at (300,000 units * $150) = $45M. In contrast, demand for blood substitutes in the human market appears to grow with the aging US population as elderly patients account for roughly 2,800,000 units of RBCs in the event of acute blood loss and is expected to double by the year 2030, thereby generating potential revenue through Hemopure at (5,600,000 units * $700) = $3920M .

Advantages of launching Oxyglobin immediately - Quickly capture significant market, generate brand equity, revenues can be used to promote Hemopure, enable Biopure to spread out risk, could have a positive effect on IPO as people would relate the success of oxyglobin to the release of Hemopure, profits could be used to expand existing manufacturing line to support future demand.
Disadvantages of launching Oxyglobin immediately - Impacts the pricing strategy of Hemopure which may not command higher premiums, IPO may hit negatively, Biopure products might be perceived good for animal market only and would be difficult to generate awareness among customers of the potential difference in the prices of the two products.

Recommendation and Pricing – Biopure should launch patented Oxyglobin immediately at the premium price of $150 as market statistics suggests that pet owners are willing to pay this price. Despite the limited manufacturing capacity, early launch of Oxyglobin would still be able to support the target vet market. Biopure can utilize production to full potential instead of splitting up with Hemopure, generate profits and expand the manufacturing line to support Hemopure later on, take the company public and attract more investors into the company to generate more revenue to support the production process for Hemopure. Biopure could also forecast the future of Hemopure and prevent and fix early problems before launching it in the market. Consequently, they can increase their brand value and market share. With the success of Oxyglobin, Biopure can easily command premium price $600-$800 per unit of Hemopure once it is FDA approved and launched in the market. Since competitors are also planning to launch blood substitutes in the same price range, it would not be difficult for Biopure to generate awareness among customers that both Oxyglobin and Hemopure are in different segments and therefore command different prices.

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