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Business case Biopure

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Simone Huygens

on 17 April 2013

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Transcript of Business case Biopure

Background Biopure enters the field of blood substitutes:
Human market - Hemopure
Veterinary market - Oxyglobin
Oxyglobin already received final FDA approval and is ready for launch
Hemopure is about to enter phase III of the human clinical trials (approximately 2 years away from final FDA approval) Debate within Biopure on the timing of the introduction of Oxyglobin on the market Problem identification What is the best time to launch Oxyglobin on the market?
What should be the launch strategy for Oxyglobin to ensure that the potential of Hemopure is not jeopardized? Brenda Leeneman
Lilian van Donk
Marit van Barreveld
Simone Huygens Business case Biopure Recommendation The immediate release of Oxyglobin on the veterinary market, because the benefits of Oxyglobin will outweigh the risks of creating an unrealistic price expectation for Hemopure Qualitative analysis: SWOT analysis
Quantitative analysis: Break-even analysis
Life cycle management SWOT analysis Strengths FDA Approval for Oxyglobin is already received
First blood substitute for the veterinary market
Costumer relationship with veterinarians Weaknesses Unrealistic price expectation for Hemopure
No market experience Opportunities Market exclusivity
Generated revenues because of market exclusivity can be used to: (1) counteract possible loss in price of Hemopure and (2) expand production capacity
Dissatisfaction regarding current blood supply
High expected demand for blood substitutes
Brand image Biopure
Discover side effects
Threats Acceptance of donated blood
Possible rejection of Hemopure
Little to prevent competitors Break even analysis (1) Assumptions 300.000 units of Oxyglobin per year
Constant overall production costs: $15 million per year
Variable costs per unit:
Cattle blood costs: $1.50
Distribution costs: $10 - $15
Marketing costs: 30% of selling price Price of Oxyglobin = $200 per unit
Total fixed costs = production costs = $15 million
Variable costs per unit = costs of cattle blood + distribution costs +
marketing costs
= 1.50 + 15 + (0.30 * 200) = $76.50
Revenues per unit = 200 - 76.50 = $123.50
Break even point = total fixed costs / revenues per unit
= 15 million / 123.50 = 121,457 units
Maximum profit = (300.000 * 123.50) - 15 million = $22 million Break even analysis (2) 15.000 small veterinary practices in the US
On average 800 dogs suffer from acute blood loss per practice
30% of these dogs would have benefited significantly from a transfusion of blood
Assume these dogs (0.30 * 800 = 240 dogs per practice) will get Oxyglobin
At a price of $200 per unit 5% of the veterinarians are willing to pay this for non-critical situations and 60% for critical situations
This means we will sell Oxyglobin for the treatment of 0,05 * 15.000 * 240 = 180.000 dogs in non-critical situations and 0,6 * 15.000 * 240 = 2,16 million dogs in critical situations
Therefore we can easily achieve the minimum of 121,457 units of Oxyglobin to break even Estimation of expected demand Life cycle management Conclusion (1) What is the best time to launch Oxyglobin? Immediate introduction of Oxyglobin:
FDA approval for Oxyglobin is already received;
First blood substitute for the veterinary market;
Market exclusivity;
Dissatisfaction regarding current blood supply - Demand for blood substitutes;
Costumer relationship;
Generated revenues because of market exclusivity;
Brand image;
Product experience;
Experience regarding to side effects.
Conclusion (2) What should be the launch strategy for Oxyglobin to ensure that the potential of Hemopure is not jeopardized? Price of Oxyglobin $200

It is not possible to ensure that the price of Hemopure will not be influenced by the price of Oxyglobin. However, early introduction of Oxyglobin has several advantages for Hemopure:
Experience with market for blood substitutes;
Generated revenues can be used to counteract the loss in price of Hemopure if Oxyglobin would decrease the overall price of Hemoglobin;
Generated revenues expand the production capacity;
Improve brandname of Biopure;
Acceptance of blood substitutes;
Discover unobserved side effects;
There is a possibility that Hemopure will be rejected after phase III. In that case, a delay of the introduction of Oxyglobin might lead to missed revenues. Summary The early introduction of Oxyglobin might lead to a decreased willingness to pay for Hemopure. However, the benefits of the immediate release of Oxyglobin will outweigh this risk.
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