Biopure case analysis
Date
October 31, 2013
TO: Carl Rausch
FROM:
RE: Biopure Market Analysis
DATE: Oct 31, 2013
Deciding whether to go into the veterinary blood market now or not is a critical decision to Biopure right now. To maximize the profits and capture the valuable opportunity, Biopure is recommended to step into the marketplace and be the first to offer Oxyglobin, blood substitute for the animal market. Pioneering the veterinary blood market is expected to generate gross profits of $26.55 miilion to Biopure annually, with a breakeven of 7.5 years to the $200 million in the development cost, without taking into account profits from human sector in the next few years. (Please see Appendix, Figure 1: Oxyglobin Cost/Profits Spreadsheet) From the market analysis, if we set our price of Oxyglobin at $200, the expected demand from the veterinarians will be approximately 345,000 units per year. This demand exceeds our production capacity of 300,000 units per year, indicating that we can maximize our profits at this price. For the veterinarian side, they can expect their margins from Oxyglobin to be 50-100% since the demand from pet owners are speculated to be more than one million units per year at the price of $300-400. Even though these prices seem to be high, comparing to the price that pet owners typically pay nowadays at around $100 for blood transfusion, there are still abundant number of pet owners who are willing to pay at a higher price for Oxyglobin. Considering that Biopure is the only active player in the animal blood substitute market, pricing Oxyglobin at $200 for the veterinarians who then will sell it to the upper segment of pet owners seems to be just the right strategy. As far as the human blood market is concerned, if we wait for another two years to launch Oxyglobin at the same time as Hemopure, our ability to make profits will tremendously decrease since we'll have to share the production capacity between the two blood substitutes.
October 31, 2013
TO: Carl Rausch
FROM:
RE: Biopure Market Analysis
DATE: Oct 31, 2013
Deciding whether to go into the veterinary blood market now or not is a critical decision to Biopure right now. To maximize the profits and capture the valuable opportunity, Biopure is recommended to step into the marketplace and be the first to offer Oxyglobin, blood substitute for the animal market. Pioneering the veterinary blood market is expected to generate gross profits of $26.55 miilion to Biopure annually, with a breakeven of 7.5 years to the $200 million in the development cost, without taking into account profits from human sector in the next few years. (Please see Appendix, Figure 1: Oxyglobin Cost/Profits Spreadsheet) From the market analysis, if we set our price of Oxyglobin at $200, the expected demand from the veterinarians will be approximately 345,000 units per year. This demand exceeds our production capacity of 300,000 units per year, indicating that we can maximize our profits at this price. For the veterinarian side, they can expect their margins from Oxyglobin to be 50-100% since the demand from pet owners are speculated to be more than one million units per year at the price of $300-400. Even though these prices seem to be high, comparing to the price that pet owners typically pay nowadays at around $100 for blood transfusion, there are still abundant number of pet owners who are willing to pay at a higher price for Oxyglobin. Considering that Biopure is the only active player in the animal blood substitute market, pricing Oxyglobin at $200 for the veterinarians who then will sell it to the upper segment of pet owners seems to be just the right strategy. As far as the human blood market is concerned, if we wait for another two years to launch Oxyglobin at the same time as Hemopure, our ability to make profits will tremendously decrease since we'll have to share the production capacity between the two blood substitutes.