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Founded in 1984 by Carl Rausch and David Judelson as a private biopharmaceutical firm specialising in ultrapurification of
trials and would hopefully see final FDA approval for release sometime in 1999
Has a single manufacturing facility with an output capacity varying by the production mix of both the products. Since same
equipment was to be used to produce either of the products, only one product could be produced at a time
Annual capacity : Oxyglobin- 300,000 units; Hemopure- 150,000 units or some linear combination in between
Competitors:
As of 1998, Baxter International and Northfield Laboratories were the only other companies in the late-stage development of a
Baxter International: With over $5.4 bil in sales and $670 mil in net income, 1996, Baxter was an acknowledged leader in the
development, manufacture and sale of blood related medical products. HemAssist is their patented blood substitute. They plan on
pricing this product between $600-$800 per unit
Northfield Laboratories: Its a small 45-person firm, founded in 1985, for solely developing human blood substitute. Their productPolyHem was in Phase 3of clinical trials. They had an output capacity of 10,000 units per year but sensing the future demand they
hoped to construct a facility with a capacity of 300,000 units per year with an investment of $45 mil
STRENGHTS:
- Oxyglobin-first blood substitute in veterinary market with
full government approval
- Only products with cattle based primary source
- Free of infectious agents and contamination
-Increased shelf life (2 years), shelf stable at room
temperature
WEAKNESSES:
- Short half life, excreated from the body within 2-7 days
- Potential for high toxicity, transfusion levels of only 5-10
units
- Production capacity low as compared to one of its main
competitors- Baxter
- FDA approval awaited for Hemopure
SWOT ANALYSIS
OPPORTUNITIES:
- Can Build a strong brand name with Oxyglobin before the
launch of Hemopure
- No other blood substitute available in the animal market
- Since products are shelf stable, are better suited for
mergency cases
THREATS:
- Delay in the FDA approval, if Hemopure fails to pass the
FDA tests then can it will cost the compnay heavily
- Tough competition from PloyHem and HemAssist
Situational analysis:
Biopure Corporation wants to launch two new blood substitutes Oxyglobin for veterinary market, which is ready for launch and
Hemopure for human market which is approximately two years away from FDA approval.
Oxyglobin will be the first in the animal market which is price sensitive, therefore to be priced lower i.e. around $150. Hemopure,
on the other hand, is planned to be priced at around 600$-800$, since human market is many times larger.
Complication:
Oxyglobin is ready for launch. Its the first in the market and has a big head-start. It can generate the first revenue for the firm which
can be used to launch Hemopure and cover operations till Hemopure is launched. It will help us learn the go-to market strategy as
well. Also, there is a desire to take Biopure public and a proven success of Oxyglobin can improve the IPO.
But the low pricing of Oxyglobin will jeopardise our ability to price Hemopure at a high price since the two products look very alike,
a 500% price differentiation would be hard to explain.
Questions to be answered:
When should Oxyglobin be launched?
What should be the pricing of Oxyglobin and Hemopure?
QUANTITATIVE ANALYSIS:
Revenue Analysis
Case I
$
Sale Price
NonCritica
l
Market
Critica
l
Market
50
242,250
95%
230,138
$11,506,875
Case II
$
100
Case III
$
242,250
70%
169,575
$16,957,500
150
Case IV
$
242,250
25%
60,563
$ 9,084,375
112,500
242,250
5%
12,113
$ 2,422,500
112,500
Oxy Adoption
112,500
100%
95%
80%
Sales Potential1
112,500
106,875
90,000
200
112,500
60%
$5,625,000
$10,687,500
$13,500,000
$13,500,000
342,638
$17,131,875
276,450
$27,645,000
150,563
$22,584,375
79,613
$15,922,500
15,000,000
30,000,000
45,000,000
60,000,000
276,450
$414,675
150,562
$225,844
79,612
$119,419
$
30.0
$
15.0
$ 4,146,750
$19,561,425
$
45.0
$
15.0
$ 2,258,438
$17,484,281
$
60.0
$
15.0
$ 1,194,188
$16,313,606
4Total Marketing Cost = Minimum price ( Distributor Price, Channel Price)/unit X Total Units
Profit
Break Even Sales
(4,950,000)
447,761
Recommendation
1.
8,083,575
218,978
5,100,094
144,928
(391,106)
108,303
2.
Although we expect the FDA approval to come through, in case it doesnt we need to recover the costs through Oxyglobin itself.
Also, pricing it at a low level would endanger the price plans for Hemopure. On the other hand, we can always slash the market
3.
4.
5.
Variable Costs
Raw material Cost
Production Cost*
Marketing Cost**
Cost/unit
*Assuming the production at full capacity
**Assuming same across firms
Biopure
Baxter
1.5
100.0
15.0
116.5
Northfield
8.0
50.0
15.0
73.0
26.0
96.8
15.0
137.8