Biopure Case Study

MARKETING MANAGEMENT - BIOPURE CASE

1.a) Based on the human blood demand, the Hemopure market can be divided into four segments: Elective surgery, Emergency surgery,  in field trauma, and chronic anemia.

1.b)

The suggested price ($600-$800) is valuable to each segment. First, there were approximately 1 million “borderline transfusion” surgeries which consist of elective and emergency surgeries. For these segments, the human blood demand of Hemopure can be approximately estimated 1.5 million units. Second, there were about 500,000 trauma cases each year. For the trauma segment, the blood demand was about 500,000 units each year. Third, in 1995, the blood demand of chronic anemia was about 3.2 million units. However, for Biopure, it’s annual capacity of Hemopure was about 150,000 units which was far lower than the demand of human blood (less than 1/10 human blood demand). So, the exceeding demand for Hemopure gives Biopure the freedom to charge a premium price. The price range between $600 and $800 is about 4 times the price of the donated human blood. In addition to the demand, which is much higher than the maximum level of Hemopure production, there are some other facts which can make the price of Hemopure range between $600 and $800:

• No need for exact blood typing and crossmatching
• Free of infections and contamination
• Extended shelf life
• Can be stored in room temperature

1.c)

2.a)

The calculation of the market potential is defined as follows:

A rough estimate of the target market volume for Oxyglobin in the year 1995 can be provided as the product of the number of veterinary practices(a), the number of animals in each practice(b), the willingness to trial Oxyglobin(c) and the number of units each animal requires(d). We estimated the factors as following:

Target Market Volume for Oxyglobin =a * b* c* d,

where

a) No. of veterinary practices: 15,000(mentioned in the case study)

b) No. of animals in each practice:

800/85% (dogs take up 50% of patient volume and cats take   up 35% of volume)

c) Willingness to trial Oxyglobin:

As explained in the case study under Veterinary Blood Demand, only 30% of these dogs would have benefited significantly from blood transfusion, 2.5% of which are critical cases and 27.5% are non-critical cases. Further, we can calculate each weighted willingness to trial Oxyglobin for veterinarians and pet owners individually. The product of the two percentages will be the integrated willingness to trial Oxyglobin.

(27.5%*70%+2.5%*95%)*(27.5%*60%+2.5%*90%)

The values of 70% and 95% are obtained from Table A(Veterinarians' Reported Willingness to Trial Oxyglobin) and the values of 60% and 90% are obtained from Table B (Pet Owners' Willingness to Trial Oxyglobin) respectively, as we have assigned $100 per unit.

d) Unit each animal needs: 1 unit

By entering the estimations in the acquired equation we get,

Target market volume for Oxyglobin =

15,000*800/85%*(27.5%*70%+2.5%*95%)*(27.5%*60%+2.5%*90%)*1= 572,426 units

Priced at $100/unit, the market potential in dollar terms is $57,242,600

B)

If Biopure stalls on the launch of Oxyglobin and sells Hemopure at an expensive price of $800 , we get $800 x 150,000 units = $120,000,000.

If Biopure launches Oxyglobin immediately, then Hemopure cannot be priced at a premium price.  Hemopure will cost around $600 to match the price of the Oxyglobin and will not look extravagant.  $600 x 150,000 units = $90,000,000

Biopure loses $30,000,000 by decreasing the price of Hemopure technically.