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CASE ANALYSIS OF BIOPURE CORPORATION

Situation Analysis

Oxyglobin and Hemobp ure were Biopure’s entries in the field of blood targeting the Human M arket and Oxyglobin, the animal market.

substitutes, Hemopure

Biopure’s primary goal

was the development of a Human Blood Substit

te and its entry into the

animal market was so mewhat opportunistic. However Oxyglobin had

received the final FDA

approval while Hemopu re was about to enter phase III clinical trails. Oxyglobin and Hemopu re were almost identical in physical properties a nd appearance, hence it was possible that launc hing Oxyglobin, that too at a low price would cr eate an unrealistic price expectation for Hemopu re eventually.

Problem Identification

1. Identify SWOT (more fo cus is likely to be on strengths and weaknesses) of Oxyglobin as a blood substitute for animals.

2. Identify SWOT (more fo cus is likely to be on strengths and weaknesses) of Hemopure as a blood substitute for humans.

3. What are the reasons to

4. Assess the market pote ntial/demand for Oxyglobin and for the Hemo pure (this question may

launch and the reasons not to launch Oxyglobin

in the market?

take space due to calcul ations).

Q1. SWOT Analysis (Oxyglobi n)

Threats Opportunity There was little to prevent Biopure’ s competitor Baxter is the Leader in
Threats
Opportunity
There was little to prevent Biopure’ s competitor
Baxter is the Leader in innovation a nd development,
manufacture and sale of blood relat ed medical products.
Oxyglobin was likely to create an un realistic price
expectation for hemopure.
•The possibility of success of Ox yglobin will bring along an
opportunity for Hemopure to t ake advantage of a brand
image built by the former.
•Any company trying to enter th e veterinary blood
substitute market would have t o wait for 2-5 years to get
an FDA approval.
Competitor with production capacit y three times larger,
established distribution network an d additional products in
other markets.
Oxyglobin
Weakness
Strengths
•No distribution channel.
•Lack of prior experience in launchi ng a product
incorporating immense R&D.
•Stockholders were expecting a goo d product from
Biopure if it resulted, otherwise th ere could be a dip in
the stock.
•Enlargement of production plant n eeded for expansion.
•Since obtaining FDA approval w as a time consuming
process, the first player to catc h hold of the market had
an edge.
•Time & development advantag e on animal market.
•Lack of adequate blood supply.
•Biopure was the only company that was actively engaged
in the development of a blood substitute for the small-
animal veterinary market.

Q2. SWOT Analysis (Hemopure )

Strengths Weakness Both products are nearly identica l in terms of production processes. Dissension within
Strengths
Weakness
Both products are nearly identica l in terms of production
processes.
Dissension within BIOPURE’ s top management.
Funds are sufficient for 2 years.
Had a single manufacturing f acility with the same equipment
being used for either produ ct, thus only product could be
produced at a time.
Innovative product
If Oxyglobin is not launched
first the following weakness will
The products of Baxter and Northfi eld needed to be frozen or
Referigerated until used, while he mopure was Self-stable at
room temperature.
also be present while launchi ng Hemopure :
No distribution network
No experience in going to ma rket
Stockholders with high exp ectations
Enlargement of production pl ant needed for expansion
Hemopure)
Threats
Opportunity
Uncertain market price, Oxyglobin was
price expectation for hemopure.
likely to create an unrealistic
•Demand on blood that
can not be satisfied due to periodic
Hemopure’s market entry depends on th e FDA approval process.
shortage and anemia.
•High benefits for autologous
donators.
Stockholders were expecting a good
product
from
Biopure
if
it
•The possibility of success o f Oxyglobin will bring along an
resulted, otherwise there could be a dip in the stock.
to take advantage of a brand
Competitor with production capacity t hree times larger, established
distribution network and additional prod ucts in other markets
opportunity for Hemopure
image built by the former.
Baxter is the torchbearer in inn ovation and development,
manufacture and sale of blood related m edical products.

Q3. Reasons to launch and the reasons not to launch Oxyglobin in th e market

Reasons to launch

Reasons not to launch

Hemopure is at least 2 approval

years away from FDA

Small, price-sensitive mark et

Biopure could make a s mall profit rather than sit idle during FDA a pproval process. This money could be used to launch Hemopure.

Cost of Oxyglobin at $150 price of Hemopure by expectations.

per unit may affect raising low cost

Failure of other drugs

makes introduction of

Manufacturing two pro ducts would limit production if facilities aren ’t expanded

Hemopure a financial ris k

Blood substitute comp etitors have a more established brand and m ore money; success of Oxyglobin would help Bi opure compete against these factors

Spent $200 million to ma ke Hemopure- can’t take the chance

Q-4 The Break Even analysis for $100, $150 and $200 and profit margin for high price and low price is shown below. This shows Biopure should launch as soon as possible and with the price of $200 as the market demand is so high that break even will be achieved early on.

Assumption: Marketing costs = 10% of max. revenue

Biopure- Oxyglobin calculations

 

Price

100

150

200

Capacity Veterinary per yr

300,000

300,000

300,000

Marketing cost Vet (10%)

3,000,000

4,500,000

6,000,000

Fixed costs

     

Production Cost

15,000,000.00

15,000,000.00

15,000,000.00

Total Fixed Costs

18,000,000.00

19,500,000.00

21,000,000.00

Contribution

     

Blood cost per unit

1.5

1.5

1.5

Distribution Cost

15

15

15

Total Contribution

83.5

133.5

183.5

Break Even Volume

215,569

146,067

114,441

Breakeven Percentage of Capacity

71.86%

48.69%

38.15%

Profit= Contribution* Capacity - (Production Cost+Marketing Cost)

     

Total Profit

7,050,000

20,550,000

34,050,000

Recommendations :

1. As the success of Hemopure largely depends on the image built by Oxyglobin, emphasis should be laid on establishing the latter as a successful brand.

2. As soon as FDA approval is received, Hemopure should be lunched at price tag of $ 600-800, production of Oxyglobin to be reduced to free the production capcity and to increase the production of Hemopure

3. Advertisement of Hemopure to start with the selling of Oxyglobin so as to setup a brand image of Biopure.

“To sum it up, we recommend that Biopure introduce Oxyglobin into the veterinary blood substitute market at a price of $150 per unit in order to gain respect and brand awareness in the blood substitute market and to provide a source of income for Biopure while they await FDA approval for Hemopure."Upon approval of Hemopure, the price of Oxyglobin can be increased to $200, this will free the production capacity as breakeven volume reduces(from 146,067 to 114,441). Later, as the demand further increases for hemopure, the production of Oxyglobin can be completely stopped”.