I recommend that Biopure launch Oxyglobin immediately at a manufacturer price of $125 and focus primarily on emergency care and “3+ doctor” veterinarian practices that perform nearly 100% of animal blood transfusions. Beginning production now will raise capital for future expansion of Hemopure, strengthen investor confidence for the impending IPO, as well as provide valuable brand equity for Biopure and insights into the future launch of the highly lucrative Hemopure in the human market. Demand for the incredible medical breakthroughs of Oxyglobin and Hemopure is expected to be immense, however, the challenge for Biopure lies in the firm’s ability to differentiate these products through product education geared toward veterinarians, doctors, and insurance companies which provide the medical recommendation and critical link to the end consumer. Product differentiation in functionality and intended use will be crucial to alleviate downward price pressure for the impending launch of Hemopure. I recommend launching Hemopure with an initial price of $700 per unit to moderate any price war expectations of low cost and production maximizing competitors such as Baxter. Recommended distribution and sales for both Oxyglobin and Hemopure is through the manufacturer direct distribution method because of the sophisticated sales pitch that is required and geared toward expert medical practitioners. Promotion for Oxyglobin and Hemopure will be critical in the short term. In the case of Hemopure, promotion over the long term will be less critical due to the perceived value (human life) that consumers obtain as a result of product application. Consequently, long term promotion will be geared toward brand building in the context of competing with capital rich and brand established competitors like Baxter. *HEMOPURE: P*roduct & Competitive Environment
The main competitors in the market of RBC’s and blood substitutes are Baxter, Northfield, and the current volunteer blood donations market that exists for RBCs. Further competitive rivals are not expected due to the extensive FDA approval process (4-7 years), lengthy R&D testing requirements (5-10 years), substantial start-up and facility costs, and patent regulations. In terms of Hemopure’s product placement it is important to consider the types of applications that Hemopure is best suited as a blood substitute in the context of future anticipated competitive pressures from Baxter and Northfield. Baxter is a highly successful company that is significantly funded, has an established brand in the blood development market, and will be able to produce 1 mm units of HemAssist (666% more capacity than Biopure). Northfield is also in the human blood market, slightly better funded than Biopure, and will be able to produce 300,000 units of PolyHeme (100% more capacity than Biopure). As illustrated in exhibit 2, independent of distributor costs for each company, Baxter is the overall cost leader in the blood substitute market with total costs as a percentage of revenue of 8.29%, compared with 18% for Northfield, and 14.5% for Biopure. Also noteworthy in exhibit 2, Biopure is the variable unit cost leader at only 0.2% of total revenue which is likely due to competitor’s higher refrigeration costs and storage requirements for HemAssist and PolyHeme. In this position, there is considerable potential for expansion if Biopure can accumulate the capital required to increase production well beyond 150,000 units. With Baxter as the cost leader and both Baxter and Northfield targeting the “mass” market in comparison to Biopure, Hemopure’s optimal product positioning strategy is toward a “focused niche”. This strategy is a mix of “feature-based” and “cost-based” because Biopure is the variable unit cost leader. A visual depiction of this strategy using the “Sources of Competitive Advantage” diagram is available in exhibit 1. In this context, Biopure’s primary competitive advantages as...
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