Kim Le
BBUS 438
July 9, 2014

Case Write-up #5
Biopure Corporation

Oxyglobin and Hemopure are Biopure’s products in the field of blood substitutes. Hemopure targets the human market and oxyglobin for the animal market. Oxyglobin received the final FDA approval to enter the market, while Hemopure still has another two years for approval. The two products are almost identical in physical properties and appearance, are being priced with a tremendous price gap: Oxyglobin being set at a price almost 500% less than Hemopure. The problem that arises is determining when the best time would be to introduce Oxyglobin and at what price, and how should the company market the product that ensures that the potential for Hemopure is not jeopardized. I recommend that Biopure introduce Oxyglobin to the veterinarian market as soon as they can with the price of $200 to satisfy demand. The expected demand will be treating 2,340,000 dogs, parallel with the same amount of Oxyglobin units. There are currently 15,000 small vet practices according to the case. 800 dogs suffer from acute blood loss per practice, while 30% of these dogs would have benefited significantly from a transfusion of blood. I made the assumption that this 30% will be treated Oxyglobin (800 * .30 = 240 dogs). At a price of $200 per unit, 5% of veterinarians are willing to pay for non-critical situations and 60% for critical situations. This means we will sell Oxyglobin for the treatment (.05 * 15,000 * 240 dogs = 180,000 dogs) for 180,000 non-critical dog situations. Doing the same math for critical situations, we come out with (.60 * 15,000 * 240 dogs = 2,160,000 dogs) 2,160,000 dogs. Together, there is a total of an estimated 2,340,000 in demand we can fulfill within the first year of introducing the product. I chose $200 because my break-even analysis shows that it is easily achievable to break even within the first year while meeting and exceeding the expected demand calculated above. While calculating the break-even analysis, I made the assumption that marketing costs would account for 25% of the selling price of $200. I also assumed that Biopure would produce at a 300,000-unit capacity. The fixed costs include $15,000,00 in production, while variable costs are a total of $66.50. Below showcases variable costs stated from the case (excluding my assumption that marketing costs account for 25% of the selling price): * $1.50 per bovine blood cell * $15 (max) distribution costs * $200 * .25 = $50 * Total: $66.50
Break even analysis = fixed costs/selling price-variable costs
$15,000,000/$200-$66.50=112359.55 units With an expected demand of 2,340,000 units, the break-even analysis depicts that Biopure can easily meet the minimum of 112350.55 units to make profit. Blood substitution is an untapped market, with very little competitors; therefore, if Biopure enters the market it will show a great deal to their advantage. This also creates a great opportunity for Biopure to create value for their brand by introducing a product that has potential of being very successful. Because veterinarians are their primary market who will generate most of their revenue, I suggest that Biopure advertises their product in veterinarian publications, and present the product in tradeshows. It will also be in their best interest to emphasize the value of their brand to create brand loyalty and brand recognition and to create an attracted market for their next product launch, Hemopure. Lastly, in order to ensure that the price of Oxyglobe does not impede on the potential of Hemopure, the company should differentiate the two products in a way that justifies the price jump.