Indian Institute of Management

Kozhikode

Marketing Management
Case Analysis: Biopure Corporation
Submitted to: Prof. Rahul Kumar Sett

Submitted By:
PGP/14/258 Alok Kumar PGP/14/279 Lokesh Singh PGP/14/280 Mahtaab
Kajla PGP/14/283 Naveen Vyas PGP/14/303 Shruti Kabdal
PGP/14/304 Sneha Ramtake

Situation Analysis

Oxyglobin and Hemobpure were Biopures entries in the field of blood substitutes, Hemopure targeting the
Human Market and Oxyglobin, the animal market.

Biopures primary goal was the development of a Human Blood Substitute and its entry into the animal
market was somewhat opportunistic. However Oxyglobin had received the final FDA approval while
Hemopure was about to enter phase III clinical trails.

Oxyglobin and Hemopure were almost identical in physical properties and appearance, hence it was possible
that launching Oxyglobin, that too at a low price would create an unrealistic price expectation for
Hemopure eventually.

Problem Identification

When is the best time to introduce Oxyglobin?

What should be the launch strategy for Oxyglobin, that ensures that the potential of Hemopure is not
jeopardized?

Qualitative Analysis
About Biopure Corp.:

Founded in 1984 by Carl Rausch and David Judelson.

In the process of launching two products, namely Oxyglobin:animal blood substitute and Hemopure:for the
human market.

The primary source of both the products is the blood of cattle.

Had a single manufacturing facility with the same equipment being used for either product, thus only
product could be produced at a time.

Annual capacity 300,000 units of oxyglobin or 150,000 units of Hemopure or some linear combination.

Marketing Management | 7/1/2010

Competitors

As of 1998, Baxter international and Northfield Laboratories were the only other companies in the later
stages of development of blood substitutes.

Both competitors relied on human blood as their source of hemoglobin, specifically both had developed
technologies to extract raw hemoglobin from outdated human RBCs.

The products of Baxter and Northfield needed to be frozen orRefigerated until used, while hemopure was
Shelf-stable at room temperature.

Baxter International: Over $5.4 bn insales, $670 mn net income in 1996, Acknwoldeged leader in
development, manufacture and sale of blood related medical products.Their product HemAssist was the first

Human blood substitute. Anticipated price between $600 and $800. Baxter constructed a $100,000,000
facility with a production capacity of 1,000,000 units per year.

Northfield Laboratories: Northfield was a small 45-person firm founded in 1985. Their entire focus on
developing a human blood substitute. Their product PolyHeme was similar to Baxters HemeAssist in
production and usage profile. They had spent $70,000,000 in development of PolyHeme and construction
of a production facility with output capacity of 10,000 units per year.

Customer

The market for hemopure consisted of customers who had lost blood in large quantities in accidents,
gunshots, wounds, etc.

Demand for RBCs to treat chronic anaemia was expected to remain stable whereas the demand for RBCs to
treat acute blood loss was expected to rise with the aging US population. By the year 2030, the over 65
segment was expected to double in absolute numbers.

Biopure conducted two surveys in 1997. The survey of 285 Veterinarians revealed that with increasing the
criticality of the case, the customers were willing to try the product at higher price. A similar behavior was
seen in the survey of 200 dog owners.

Qualitative analysis
SWOT analysis
Strengths

Since obtaining FDA approval was a time consuming process, the first player to catch hold of the market had
an edge.

No distribution channel.

Lack of prior experience in launching a product incorporating immense R&D.

Stockholders were expecting a good product from Biopure if it resulted, otherwise there could be a dip in
the stock.

Opportunity

The possibility of success of Oxyglobin will bring along an opportunity for Hemopure to take advantage of a
brand image built by the former.

Threats

There was little to prevent Biopures competitors.

Baxter is the torchbearer in innovation and development, manufacture and sale of blood related medical
products.

Marketing Management | 7/1/2010

Weakness

Oxyglobin was likely to create an unrealistic price expectation for hemopure.

Quantitative Analysis
The Break Even analysis for $100, $150 and $200 is shown in Appendix A and profit margin for high price and low
price is shown. This shows Biopure should launch as soon as possible and with the price of $200 as the market
demand is so high that break even will be achieved early on.

Marketing Management | 7/1/2010

Recommendations

Introduce Oxyglobin with the price of $200

As the success of Hemopure largely depends on the image built by Oxyglobin, emphasis should be laid on
establishing the latter as a successful brand.

Advertisements should be in Vet journals and trade shows.

Appendix - A
Numerical Analysis
Assumption: Marketing costs = 10% of max. revenue
Biopure- Oxyglobin calculations

Price
Capacity Veterinary per yr
Marketing cost Vet (10%)
Fixed costs
Production Cost
Total Fixed Costs
Contribution
Blood cost per unit
Distribution Cost
Total Contribution

100
300,000
3,000,000

150
300,000
4,500,000

200
300,000
6,000,000

15,000,000.00 15,000,000.00 15,000,000.00

18,000,000.00 19,500,000.00 21,000,000.00
1.50
15.00
83.50

1.50
15.00
133.50

1.50
15.00
183.50

215,569

146,067

114,441

Percentage
71.86%
Profit= Contribution* Capacity - (Production Cost+Marketing Cost)
Profit
7,050,000

48.69%

38.15%

20,550,000

34,050,000

Break Even

Difference high- low

27,000,000

t | 7/1/2010