Biopure Case Questions

1.(a)We can find the market segment from Exhibit5 as follow:

elective surgery

emergency surgery

trauma

chronic anemia

With the rising population of old people (over 65 years of age), there are more and more demand for RBCs. The supply amounts of RBCs are stable but demand are increasing, so it is worth to pay $600~$800 for these RBCs when people want to save their lives especially in acute blood loss.

(b) As we know the RBCs transfusions in 1995 is 14million, but only 10% trauma victims received RBCs, so we plus the left 90% of trauma and 1 million “borderline transfusion” surgeries. The total demand RBCs amount is 16.8million in 1995. Market potential for Hemopure is 16.8million.

The Exhibit 6 shows that the low estimate price of anonymous donations is $125 and high estimate is $225, so the average is $175. The low estimate of autologous donations is $275 and high estimate is $425, so the average is $350. Because the donation rate is low and RBCs shelf-life are short , there are never enough RBCs for people to use. Doctors avoided transfusions for fear of disease transmission or negative reaction caused by the transfused RBCs, so these patients who do not have autologous donations are willing to pay $600~$800 for Hemopure to get treatment.

(c)As we know the annual capacity of Hemopure are 150000 units and Biopure production costs of $15million per year and raw material price is $1.5 per unit. The average price of Hemopure is $700. So the annual profits is 150000*$700-$1.5*150000-$15million＝$89775000(89million).

We know that Baxter has production capacity of 1million units per year and Northfield with a capacity of 300000 units per year. So the market share of Hemopure is 150000/1450000=10.34%.

Biopure was confident that the Phase 3 trials would be successful so the probability of successful introduction is 100%.

The expected profits from Hemopure=$89775000*10.34%*100%=$12million

2. We know that about 15000 veterinary practices in the United States in 1995 and 95% are “primary care” and it needed 17 units blood each practice. The other 5% are “emergency care” and it need 150 units blood each practice. The average price of primary care practice is $100 and the average price of emergency price is $150.

There are 15000*95%*17+15000*5%*150=354750 units blood demand in 1995, the market potential of Oxyglobin is 354750 units. But Biopure only can produce 300000 units Oxyglobin per year.

The dollar terms is 15000*95%*17*$100+15000*5%*150*$150=41million.

If the blood transfusions are frequent. About 30% of dogs will received. 30%/2.5%=12.8

The market potential will be: 41million*12.8=524.8million units.

The potential proftis of Oxyglobin is 300000*$150-300000*$1.5-15million=$29million.

3.

1.Do not launch Oxyglobin

There are more human blood needed than veterinary. Veterinary has a small marketing.

No competitor in veterinary market.

Launch Oxyglobin will affect the price of Hemopure.

Biopure can product Oxyglobin and Hemopure in the same time.