Biopure Corporation
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[pic 1]Picture: GoogleBiopureCase study| MKT 6301 | 09/16/2016 Sruthi Sara Jacob Thomas Jacob sxt160630Naman Bader nxb161930OverviewThe following is a write-up of case study based on Biopure Corporation, a biopharmaceutical firm specialized in ultra-purification of protein for human and veterinary use, and their decision regarding the release of Oxyglobin and Hemopure, which are blood substitutes derived from bovine; Oxyglobin meant for small animals, and Hemopure for humans. Through this case study, we try to provide a conclusion on whether Oxyglobin (which is FDA approved) should be released before Hemopure (undergoing Phase 3 clinical trials), and we also estimate the revenue generated, on each case.HemopureAs per the data available in 1995, there’s a requirement for 11,300,000 units of blood every year in United States. As per our findings, blood substitutes will outperform donor blood even if it is priced in the range $600-$800 mostly in the following 4 cases: borderline transfusions, chronic anemic patients, accident trauma victims and patients having rare blood types because of the reasons mentioned below: 1. Borderline transfusions – approximately 1 million people require these transfusions every year, but not get it because of the risks involved. Hemopure solves this problem as the antigens which react in the body are removed during processing.2. Chronic anaemic patients – 1.5 million suffer from this disease and require 3.2 million units of blood each year. Since Hemopure is 100% effective at carrying oxygen, this can benefit the patients.3. Trauma cases – Around 500,000 accident cases happen in USA every year. 10% of the patients die because of non-availability of blood on site. Hemopure is a universal blood substitute and has a shelf life of 2 years, and can be stored in room temperature making it ideal for these type of cases.4. Rare blood types (typically Rh- blood types): Victims having rare blood types can use the blood substitute when donor blood is hard to obtain.Market Potential and Potential profits of Hemopure and similar products:Blood requiredin unitsCost of Hemopure to patient(SP*=$600/unit)Cost of Hemopure to patient (SP*= $800/unit)Accident trauma200,000120000000160000000Emergency surgery1,000,000600000000800000000Chronic Anaemia3,200,00032000002560000000Borderline transfusion1,500,0009000000001200000000Total revenue(Market Potential)5,900,000 units$3,540,000,000$4,720,000,000Cost of bovine blood$ 8,850,000$ 8,850,000Cost of distributors*708000000944000000Profit $$2,832,000,000$3,776,000,000*The share given to the distributers (20%) is taken as the same as that of distributors of veterinary products, mentioned in the case study. This is also calculated assuming Oxyglobin is released before Hemopure and has a name in the market.
*SP refers to selling pricePricing of Hemopure:The case study mentions Hemopure be priced in the range $600-$800. After some pondering over, it is recommended to price Hemopure conservatively around $600 because of the following reasons:To narrow down the price gap between Oxyglobin and Hemopure, which “look” similar.Biopure is expected to face considerable competition from rival firms especially from Baxter International and Northfield Labs, who are also planning to keep their selling prices in this range.Availability of cheaper alternative source of blood through donors.The production costs of Hemopure is comparatively lower than HemAssist and PolyHeme, which means we can afford to be at the lower cost range, and obtain significant profits. We can also use the lesser price to our advantage.Hemopure (Biopure)HemAssist (Baxter)PolyHeme (Northfield)Cost of production$15 million$50 million$70 millionRaw material cost$1.5 per unitBovine blood$8 per unitOutdated RBCs$26 per unitOutdated RBCsStorageAt room temperatureFrozenFrozenExpected Profits of Hemopure:Market Share for Hemopure is assumed to be at 30% for Biopure,40% for Baxter (since Baxter has a strong presence in the market) and 30% for Northfield. Looking at huge market potential, it can be assumed that Hemopure would be successfully introduced, since Biopure has created a reputation through Oxyglobin. For calculation purposes, probability is taken as 1. The reason we claim high probability is because there is a high demand for blood substitutes, and there is no developed product which can be stored at room temperature, and as such be used at the site of accidents.