Biopure Case Study

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Table of Contents
Executive Summary3
Analysis of Internal and External Environment3
Alternatives - Evaluation5
Decision Criterion Grid7
Exhibit 1: Exhaustive SWOT Analysis9
Exhibit 2 : Estimated Market Demand for Oxyglobin13
Exhibit 3: Estimation of veterinary Market and per year14
Exhibit 4: Financial Projections – Sensitivity Analysis15

Executive Summary

In 1998, Biopure Corporation is one of the three legitimate contenders in the emerging field of “blood substitutes”. Biopure has invested $200M on the R&D on blood substitutes in the past with its primary goal being the development of a human blood substitute ( Hemopure) but Its entry into animal market (Oxyglobin) had been some somewhat opportunistic. Oxyglobin got FDA approval recently, whereas the Hemopure will enter phase 3 clinical trials and is expected to get FDA approval by 1999. Now Biopure has to decide whether it has to launch the Oxyglobin or should it wait till the Hemopure is approved. The following analysis examines the current market demand for both the blood substitutes, the pricing strategy for Oxyglobin and how it will impact the future pricing of Hemopure and proposed IPO, the contingency plan if Hemopure is not approved and the treats by the competitors (Baxter International and Northfield Laboratories).

Analysis of Internal and External Environment

An exhaustive analysis of the strengths, weakness, opportunities and threats were analyzed based on the internal and external environment (Exhibit 1) of the long-simmering debate with Biopure on whether to launch Oxyglobin or wait until Hemopure is approved. The Five most weighted prime outcomes of the analysis are represented below.


Alternatives - Evaluation

On analyzing the current situation the following alternatives has been considered as possible

1. Launch Oxyglobin

a. Pricing at $150 using “manufacturing direct”

b. Pricing at $200 using “manufacturing direct”

2. Don’t launch Oxyglobin until Hemopure gets FDA approval

Based on the estimated market demand for Oxyglobin and Hemopure (Exhibit 2 & 3), financial projections (Exhibit 4) and based on other factors, the alternatives have been evaluated as below.

Alternative 1: Launch Oxyglobin
- The product is already approved by FDA
- No other competition for at least 5 years
- Marketing team is already in place
- Provides at least 2 years of experience in producing and marketing synthetic blood products prior to lunch of Hemopure - Solid revenue stream may improve IPO price
- Lunching Oxyglobin will mitigate risk or loss for current investors - Provides additional positive cash flow
- Veterinary market is small and limited
- May takes focus away from Hemopure development
- Further association of Hemopure with animals rather than human treatment (may reinforces negative connotation of “bovine” blood source) - May require future investment in production capacity to lunch Hemopoure or reduction in supply of Oxyglobin - Production of Oxyglobin will not provide sufficient return on initial investment

Alternative 1-1: Launch Oxyglobin at $150 using “manufacture direct” Pros
- Estimated demand of Oxyglobin exceeds the production capacity - Able to achieve the highest estimated profit $ __M with __% ROI - More affordable to customers
- Greater gap between Oxyglobin Price and Estimated Hemopure sale price - Lower pricing of veterinary product may negatively effects ability to set higher price for Hemopure

Alternative 1-2: Launch Oxyglobin at $200 using “manufacture direct” Pros
- Smaller price difference between Oxyglobin and Hemopure; therefore, it may be easier to justify

- Estimated demand of Oxyglobin at this price is lower than the production capacity

Alternative 2: Don’t launch Oxyglobin until...
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