Biopure Corporation

Version 1.0

BIOPURE CORPORATION
MEMORANDUM
DATE:
TO:
FROM:
RE:

6th February1998
Carl Rausch
President & CEO, Biopure
Rachit Sachdeva, Chief Strategy Officer, Biopure
Regarding the launch of Oxyglobin

As the medicine industry braces itself to the idea of blood substitutes, we find
ourselves in a very unique situation. Oxyglobin, a blood substitute developed by
Biopure for the veterinary market, just received an FDA approval while we will have
to wait another two years for an FDA approval for Hemopure, a blood substitute for
the human market. At this juncture we have an option to introduce Oxyglobin to the
market at a retail price of $160- $200 per unit, which might or might not hinder our
ability to sell Hemopure, two years down the line at a premium pricing of $600 to
$800.
Based on the SWOT analysis of both the products (see Table 1 & Table 2) and a
comparative analysis of the options available with Biopure (see Table 3) I
recommend that the company goes ahead with the launch of Oxyglobin & launch
Hemopure as & when the FDA is approval is obtained.

This action will result a

revenue generation of approximately of 26.7 million per year 1 for the company. I
would recommend this decision, keeping in cognizance the risk of selling Hemopure
at an unfavorable price in the coming future, as I believe that with a smart
marketing strategy this risk can be controlled.

1 The opportunity cost calculation of $26.7 million is done taking the minimum price
scenario. Refer to Table 4 to see the calculation details.

Private & Confidential

1

Biopure Corporation
Version 1.0

Options available with Biopure

At this juncture Biopure has two options with their merits & weaknesses:A. Biopure goes ahead with the launch of Oxyglobin immediately
Biopure decides to go for the low hanging fruit and start a new revenue stream for
the company. Oxyglobin would establish Biopures presence in the blood
substitute market and with the absence of any major players in the veterinary
market would compensate Biopures apparent lack of experience in marketing &
distribution of drugs. Its been established that the biggest constraint to veterinary
transfusions has been the lack of adequate blood supply & 85% of the practice that
were using a donor system (the prevalent system) didnt had a good sense of the
cost. Oxyglobin, introduced at a price range of $160-$200 would fill this gap.
One of the biggest possible threats of introducing Oxyglobin now is that it might
jeopardize the launch of similar blood substitute & Biopures primary product, for
human market once the FDA approval is obtained. Hemopure, the blood substitute
for human market can prospectively be priced between $600-$800 because of the
unique value proposition it would offer. The fact that blood substitute for human
market would be priced at 400%-500% times the price of veterinary market might
be a hard sell to hospitals & insurance companies.
B. Biopure delays the launch of Oxyglobin till Hemopure is launched
Its undisputed that Hemopure is the primary product for Biopure keeping in mind
the size of the human market for blood substitutes and the possible revenue
Biopure expected to be generated from this product. The relatively low pricing of
Oxyglobin might make it hard to sell Hemopure at a premium price of $600-$800 as

Private & Confidential

2

Biopure Corporation
Version 1.0

the market was expected to see both the products as fundamentally same but with
little tweaks to cater to different target audience.
Our efforts to achieve smaller short term gains might lead to sacrificing the bigger
long term gains.

Recommended course of action

A smart and strategically focused marketing campaign, when we are about to
release Hemopure would help us position the product in the market at the right
price. Our market research tells us that Baxter International & Northfield
Laboratories are expected to price their blood substitute product in the same
range of $600-$800 which would give us more leverage to validate/set our prices.
Biopure, as of now have no experience in distributing its products and an immediate
release of Oxyglobin would help us the improve/optimize our go-to market
strategy for Hemopure later. It also puts us in a good standing with the investors, if
we choose to do an IPO in the coming 1-2 years.
As the opportunities with releasing the Oxyglobin now outweighs the risks
associated, the recommended course of action is to immediately launch Oxyglobin.

Table 1

Private & Confidential

3

Biopure Corporation
Version 1.0

Table 2

Table 3

Private & Confidential

4

Biopure Corporation
Version 1.0

Comparative Evaluation
Option 1

Option 2

Distribution network is built &

tested before the launch of
Hemopure

Hemopure would be launched as the

first product with no prior experience
in selling the product

Early sale of Oxyglobin brings in

revenue, which can be utilized for
other purposes like doing an IPO

No revenue generation before sale of

Hemopure

Oxyglobin has received it's FDA

approval

Hemopure is expected to receive FDA

approval in 2 years time

A smart & strategic marketing plan

can help differentiate the difference
between Oxyglobin & Hemopure

Late launch of Oxyglobin won't

jeopardize Biopure's ability to price
Hemopure at a premium rate

Table 4
Current Usage of Blood Transfusions
Number of Practices

15000

Primary Care (95% of 15000)

Emergency Care (5% of 15000)

14250
750

Blood Transfusions Numbers in

1995
Primary Care- 17 Units/Primary
Care
Emergency Care- 150 Units/ Emergency Care

242250
112500

units
units

Total

354750

units through Donor System

Potential Market
30% of dogs ( 50% of total patients ) would have benefitted from blood
tranfusions if there was easy availability. 2.5% actually recieved it and
its assumed that they are factored in.
*Potential Market in Units
Price to Pet Owner

4257000
100
Non-Critical

Critical

Private & Confidential

5

Biopure Corporation
Version 1.0

Probability of using the product

Percentage of Cases
Number of Units
Price to Pet Owner
Probability of using the product
Percentage of Cases
Number of Units
Price to Pet Owner
Probability of using the product
Percentage of Cases
Number of Units
Price to Pet Owner
Probability of using the product
Percentage of Cases
Number of Units

60%
91.67%
2341350

90%
8.33%
319275

Total Revenue
$2660,62,500

200
Non-Critical
40%
91.67%
1560900

Critical
85%
8.33%
301537.5

Total Revenue
$3724,87,500

300
Non-Critical
35%
91.67%
1365787.5

Critical
75%
8.33%
266062.5

Total Revenue
$4895,55,000

400
Non-Critical
30%
91.67%
1170675

Critical
65%
8.33%
230587.5

Total Revenue
$5605,05,00

Private & Confidential

6