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Biopure Corporation Recommendation

Essay by   •  October 6, 2013  •  Case Study  •  446 Words (2 Pages)  •  2,320 Views

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Biopure Corporation operates in a niche market of blood transfusion patients. The company specializes in creating blood substitutes from slaughtered cattle for patients in the veterinary (Oxyglobin) and human market (Hemopure). The target group in the human market is composed of individuals who require blood transfusions due to chronic anemia, are undergoing elective or emergency surgeries or are trauma patients. In addition, the human market is very large and price insensitive since the costs of a blood transfusion isn't considered when a person is dying. On the other hand, the veterinary market is very small and consists of price-sensitive animal owners whose pets require blood transfusions following a major surgery or severe trauma. Following the recent FDA approval of Oxyglobin, the company's CEO, Carl Rausch, is faced with an enormous decision concerning whether to enter the animal or human market and the optimal strategy to do so.

Recommendation:

Biopure should enter the animal market and launch Oxyglobin immediately as opposed to entering the human market. The reason for this recommendation is that Hemopure is 2 years away from being commercially viable and it isn't guaranteed that the FDA will approve the product. Furthermore, if Biopure chooses to enter the human market instead it is guaranteed that the company will face stiff competition from it's two major competitors, since they will be launching their own respective products around the same time as well, which will result in the companies sharing the total market. In addition, since the companies will be sharing the market, it could ignite a pricing war between them in which each company lowers their price in an attempt to increase their overall market share. Choosing to enter the animal market is Biopure's best and most profitable option since they will be the only company allowed to do so and can sell their products at a premium--they will be able to capture 65% of the total revenue potential for the veterinarians willing to trial Oxyglobin at $200.

Basis for Recommendation:

1. See Exhibit A

2. See Exhibit A

3. Oxyglobin can be a threat to Hemopure by creating an unrealistic price expectation, taking away the number of units that can be produced, and hurting its reputation by creating a perception that its animal blood. Oxyglobin can also be an asset to Hemopure by generating revenue to help launch the product and expand its production facility, learn how to effectively launch the product, and appease their stockholders through an IPO.

4. Biopure should educate and train its personnel about marketing Oxyglobin properly. It should utilize a distributor rather than having its own sales force because it will save them $15/unit. The company should price the product high enough to meet its demand.

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