Biopure Corporation

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- Trauma (in field): With better storage potential and no need for blood typing blood transfusions could be increased to 100% instead of the current10%

- Borderline Cases: In borderline cases where such as surgeries where one to two units of blood is required, doctors avoid transfusions due to fear of disease transmission. With Hemopure, doctors will definitely be more confident about giving blood transfusions. Assuming an average of 1.5 unit per patient, the market potential will be 1.5 million units

- Chronic Anaemia: Hemopure is ill-suited for chronic anaemia applications because of the short half-life, potential for toxicity, and very high price

Baxter’s Hemassist and Northfield’s PolyHeme would both take market-share when they are introduced. Both of these products are made with human blood, which may prove an advantage. In addition, Baxter’s history of product success may make it a formidable competitor. Also, having spent 200 mil. $ in R&7D and due to superior qualities of Hemopure (eg. No requirement of refrigeration, better shelf life), Biopure would at least gain 50% market share out of this grand total in the first year. We expect, Baxter and Northfield to perform better in emergency and elective surgery segments, Biopure is expected to win the trauma segment.

Hemopure’s Expected Total sales in the 1st year: 2.376 million units

- Recommendations:

We recommend that Biopure Corporation should launch Oxyglobin immediately, and not wait for the FDA approval for Hemopure, for the following reasons:

- It would have 100% market share in blood substitutes immediately upon launch, thus having the privilege of being the only alternative to real blood for 2-5 years, due to the tedious FDA approval process

- It offers an instant revenue source for Biopure, rather than waiting for 2 years and then launching Oxyglobin

- As analysed in the appendix calculations, a price of $200 per unit would be ideal Biopure will most probably break-even within a year at this price

- The launch of a new product should increase interest of the investors towards an IPO

- Launching Oxyglobin and Hemopure simultaneously after 2 years will be extremely costly

- The launch of Oxyglobin would help Biopure set up a smooth distribution channel for the sales of Hemopure in future and also give the company a chance to improve shortcomings if any through its experience with Oxyglobin

- If successful, Oxyglobin could help in building trust for Biopure Corporation, and credibility for Hemopure, when launched in due time

- Successful use in the animal market may build confidence in FDA to approve Hemopure

However, although the launch of Oxyglobin will set the platform for Hemopure’s entry into the human blood substitute market, Oxyglobin will not have a great influence on Hemopure’s pricing because:

- Hemopure’s pricing strategy will depend more on the prices of its competitors. Moreover, since lowest price for Hemopure substitutes is not less than $600, there will be no significant pressure on Biopure to lower price for Hemopure

- Markets of Hemopure and Oxyglobin are completely different. Thus, if Biopure can position Hemopure as a more complex product, requiring additional processing and production cost, it will be able to successfully differentiate both its products, and price Hemopure independently

Pricing& Distribution of Oxyglobin

Price

- According to our calculation(Appendix) the price to be charged for product should be $200

- Our survey of Pet Owner willing to pay $400 for even Noncritical case shows that customer have ability to pay high prices

- For Emergency Care Practices pet owner are spending $200 to $1000, it shows they have ability to afford such prices

Distribution

- Distribution Cost

- Network of distributors

= 30% of Selling Price

= $60(30% of 200)

- Direct Selling

= $15 + Cost of Maintaining Sales Force

Independent Distribution is recommended as a Channel of Distribution as it is assumed that cost for recruiting and maintaining sales force is higher than $13,500,000($45*300000) and it will also allow Biopure to concentrate on its core function.

PRICING (APPENDIX)

Our Maximum Production Capacity in 300000 which is much less than the expected market potential for each of the considered prices so at all prices we will be able to produce same quantity

Income Statement & Break Even Point

Price to Pet Owner

200

300

400

Price to veterinarian

100

150

200

Demand per year

1.86 Mil

1.54 mil

1.4 mil

Production

300,000

300,000

300,000

Revenue

30,000,000

45,000,000

60,000,000

Fixed Cost(Production Cost)

15,000,000

15,000,000

15,000,000

Raw Material Cost(Blood Cost per unit)

1.5

1.5