Blood Transfusion

BIOPURE INDUSTRIESA Marketing summary Based on the data from the case study by Jonn Gourville, Biopure Corporation , HBS, 1998April 20, 2005By Veronica Stepanova Executive compendium 2 Situation compendiumI. HumanMarket.. 3II. AnimalMarket.. 5 Marketing Planfor oxyglobin. 6 Finaldecision 7 Appendix 1 A (Excel documents, separate attachment) Appendix 1 B Executive Summary Many opport unit of measurementies are available in the gay subscriber line market referable to several disadvantages of the presently available alternatives. Even more opportunities exist in theanimal pipeline market. Oxyglobin should be positioned as a high-quality product designed for middle- to upper-classbudgets. The bell for Oxyglobin should be about $200 for the consumer and around $100 for the supplier(animal hospital) to trace for distribution markups and separate motorcarrying costs. Distribution should be oriented in the regionalvicinity of the operation and mechanism oversizedrclinics.In additi on, only emergency clinics are to be crossed. Current opportunities are favorable for Oxyglobins launch. Situation Analysis I. Human blood market. Patients with acute blood loss fromtraumaand surgery 40% individuals aged 65+. Chronic anemiapatients (any age) 1. 5 jillion for the year 1995. Blood loss, resulting from trauma (e. g. car accident) and exceeding 2-3 units (1 unit = 10% oftotal blood content of human body) needs immediateblood blood blood transfusion. Price is mostly cost-based (storage, implementation) blood donation is free.Existing options. Redblood cellsand their components (hemoglobin, platelets, and plasma) arecollected viadonations, organized by blood line of battle centers andthen transfused into patients. Current options allow for storage for 6weeks in refrigerated conditions, consequently disposed ofif unused. hemoglobin uses oxygen-carrying efficiency by 50% if not usedwithin the first few weeks. Blood transfusion is subject to blood typing (A, B,AB, O, positive, negative) andreception/rejection by the body. Incorrect hiting may be fatalfor the patient. infection risks slow down the make for ofexamination blood prior to its use and aregreater if blood isnot separated into components. Infections include the risks of AIDS, hepatitis B,and contamination. Blood transfusion is available on-site only (hospital or emergency room) as aresult, 30% traumapatients die prior to operation. Blood turn in is lower than inquire, especially during peak periods (summermonths and winterholidays, during which car and other travel increases ? fewer donors and more patients). Blood substitutes. 3 companies in final stages awaiting FDAapproval (clinical testing). entry into market is difficult (all current processes patented) andtime-consuming may takeup to 17 years (See case Exhibit 3). electric potential to replace current blood drawing process bycomponent separation and purification, aswell as chemical modification and stabilization of hemog lobin. make outd risk of contamination and increased storage capability of 2 years. Added benefits for patients with press or restricted blood vessels (smaller size improvedaccessibility to organs). Possibility of adapting animal blood cells for use inhumans. peril of toxicity and body rejection (sped upexcretion). Competitors/industry players .A. Baxter &Northfield Laboratories. Both rely on human blood supply toderive hemoglobin. Red blood cells obtained from expired banks. Require refrigeration. Baxter Leader in development and manufacturing of blood-oriented medical equipment. stupendous facility exertion capacity of 1 million units/year, spent $250million on R&D. overlap HemAssist to bepriced surrounded by $600-$800. Northfield Small facility 10,000-unit production capability but possible expansion into300,000 units/year. contract on single product (PolyHeme), $70 million spent on development. B. Biopure Corporation. Specializes in protein purification for pharmaceu tical use. Hemopure 2 years away from final approval. Derived from the blood of cattle. Production capacity of cl,000 butpossible production limitations due to expected concurrentusage of production equipment for animal version. Need for removal ofhemoglobin clusters from product? excess process inproduction ability. Cost for Biopure at $1. 50 per unit of animal blood, but plan to match Baxters price for finalconsumer product.II. Animal blood market. Mainly cats (35%) and dogs (50%). 800 dogs were brought to emergencytreatment due to acute blood loss in 1995,2. 5% severe. Existing options. 15,000 veterinary clinics. 5% of vet clinics perform emergency consider, with a 75% referral rate from unproblematic wangleclinics. Current blood banks insufficient, demand greatly exceeds supply 2. 5 out of 30cases treated. 93% blood drawn from donor animals (78%in emergencies) an ethically questionable practice. 150 units of blood transfused per emergency care, 17 perprimary care center (App endix A). No effective blood typing or cross-matching systems. Blood collection, storage, and transfusion too costly for proper operation. Current cost of clinical careto animal owners relatively high, undesirable. ? 84% doctor dissatisfaction with current alternatives. Blood substitutes. Biopures Oxyglobin currently the only briskFDA-approved substitute ready for launch. No evident chemical difference in theproduction process between animal and human supplement. Animal supplement approved sooner than human equivalent due to less-strict regulations in theanimal consumer market. Production capacity of 300,000 units, $200 million spent on development (combined withHemopure) Marketing Plan for OxyglobinPositioning strategy. almost animal owners (enthusiasts) gouge beassumed to be within the middle toupperincome class, based on the immaterial costs of owning an animal (refer to case Exhibit 8 for a summary ofaverage costs of memory apet). However, many consumers proved to beprice-c onscious about overlookingadditional funds on optional services (this go out be analyzed further in thepricing strategy) therefore, nopremium strategy should be used.The product should be positioned asa high-quality supplement forblood transfusion, available to (affordable by) most animal owners. Pricing strategy. As cited, animalowners expect to spend limited amounts of money onanimal care thisis slightly different for emergency situations, where customers are voluntary to spend more,as demonstratedby the survey results (Exhibit 8 Table B). The typical cost of ablood transfusion to the customer iscurrently $100 for the traditional method however, this price wassaid to have been cost-unjustified.Still, veterinarys were cited as thetrusted ascendent for determining a patients treatment selection, which putspressure on the new substitute segment to instala competitive price standard. While profit margins mayprove higher on a higher-priced item, theproducts sensitivity to reputati on for being a supposedlybetter, cheaper alternative to currently available options, which would satisfy the currently largely-unfulfilled demand for blood transfusion, would pressure Biopure to price its Oxyglobin according tocustomer expectations (See Existing options, page 5 of this report).Those expectations, aswe can seefrom the attached appendix (Appendix 1 A and B), are that the price to the consumer be about $200 ($100to the veterinarian keeping the50% markup), which would give the company the largestmarginal gainin revenues (higher prices are actually marginallosses ), magical spell still retaining the major demand (weconsider emergency care centers more important here,since they have, proportionally, a much bigdemand than primary care centers).In terms of theprice difference between Oxyglobin and its competitorin the human segment, Baxter, the latter spent $50 million more on R&D than Biopure, so the pricepremium on Baxter can bejustified by higher costs in addition, Bi opures per-unit costs are significantlysmaller because it uses cattle blood. In addition, Biopure may price Hemopure slightly higher because ofthe extra processing that goes into making it,as well as the variation inthe segment and target audience(people are willing to spend more onthemselves than on animals). Distribution.Biopure should only target emergency carepractices. Although those only make up 5% ofthe overall industry, 75% primary care specialists will referan acute blood loss case (such as a trauma)toone of these centers. Furthermore, Biopure should target large practices (3+ doctors) through regionaldistributors, both of which account for the largest sales inthe industry. Considering the limited volume ofsupplies Biopure is going to have, a internal distribution may not be desirable right away, until thecompany at least increases its production capabilities.A regional distributor would be local enough tounderstand the specific needs of its market (e. g. , New England), an d a larger vet practice could provemore efficient (and less costly) interms of the availability of materials andthe reduction of transfers,thereby also trim down the consumers costs and increasing the rateof success by providing a quickerservice (in other words, it would have morecases, but more doctors available tohelp overall, fewercases per doctor see Exhibit 7).Of course, the drawback is that a large clinic would not be as personal. The 1 million dollar question Should Oxyglobin be launched? Yes. launching early allows for an audience test? Achieve acclaim/recognition for a break-through discovery that is beneficial because it-Fulfills an restless/dissatisfied need (better quality bloodtransfusion, availability)-Reduces costs to both suppliers and consumers.? Easier entry into secondary (human) market tested on animals more trustedthan untestedcompetitors.?Potential to utilize production to full potential (instead of splitting up with Hemopure) later on, dividebased on lar ger per-unit profit (andnot necessarily the stated 150300 ratio).? If fails or doesnt test well Would aid in the decision about improving current human version (complete discontinuation notan option due tothe immense initial investment in R&D)- Reduce the shock of having to change both formulas (processes) simultaneously longer timespan gives better flexibility and more time for testing and improvement less drastic. Hemopure and Oxyglobin,although similar in purposes, are meant for two completelydifferent segments they should not be compared based on price because price expectations aredifferent for humans than they arefor animal needs the demand for Oxyglobinis clear andsignificant, while the demand for the same product in the human market is questionable. Therefore, stick with Oxyglobin which already has the approval and launch it.