Business Development Case Study: Biopure Corporation's Launch Strategy

This case study analyzes Biopure Corporation's decision regarding the launch of its blood substitute product, Oxyglobin, targeting the veterinary market, while also considering the future launch of Hemopure for the human market. The analysis identifies the problem of determining the optimal launch time for Oxyglobin and its potential impact on Hemopure's future success. The study employs SWOT, break-even, and comparative analyses to evaluate the best course of action. It examines the strengths, weaknesses, opportunities, and threats associated with both products, calculates break-even points, estimates market demand, and compares the implications of launching Oxyglobin immediately versus delaying its launch. The study recommends an immediate launch of Oxyglobin, emphasizing pricing and distribution strategies, to establish a market presence, generate revenue, and prepare for Hemopure's future introduction. The document also includes a detailed break-even analysis, demand estimation, and discussion of implementation strategies.

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Biopure Corporation Case Study
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Overview
Biopure is considering an entry into the field of blood substitutes. The organization is focusing
on offering two categories of products, that is, the Hemopure targeted at the Human market and
the Oxyglobin targeted at the veterinary market. The Oxyglobin has already been approved by
the Food & Drug Agency (FDA) and is ready to be launched into the market. However, it would
take another two years before the Hemopure is approved by the FDA. Currently, Hemopure is
under the third phase of trials by the human clinical.
Identification of the problem
The existing debate at the Biopure is the time to introduce Oxyglobin product in the market.
Should it be introduced at the moment? Should the launched date wait until the Hemopure is
approved by the FDA? Will the timing of the launching jeopardize the success of the Hemopure?
The case analysis seeks to address these issues.
Specifically, the following issues should be addressed
a) Examining the best time to launch Oxyglobin in the market,
b) Identification of the best launching strategy for Oxyglobin which would not jeopardize
the performance of Hemopure was it is launched in the future (after two years from now).
Case Analysis
Based on the identified case problems, the flowing analysis have been conducted;
a) SWOT analysis ( Qualitative analysis),
b) Break-even analysis ( Quantitative analysis),
c) And, comparative analysis.

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a) SWOT analysis for Oxyglobin and Hemopure
Strengths
i) Oxyglobin is the first blood substitute product to receive full approval from the FDA.
ii) The company has technological expertise that ensures that the product is produced using
bovine RBC (Davenport & Jeanne , 2007, p. 56).
iii) Oxyglobin is the first blood substitute product in the veterinary market.
iv) There is a good relationship between the company and the veterinarians.
v) Both Hemopure and Oxyglobin are regarded as universal blood substitutes (Viardot, 2017,
p. 33).
Weaknesses
i) Lack of market experience and expertise.
ii) The expected price for Hemopure is unrealistic.
iii) Lack of established distribution network.
iv) Lack of current financial performance of the products to approximate future performance.
Opportunities
i) Availability of market exclusivity because currently there are no other available products.
ii) Considering the market exclusivity nature in the market, the revenue generated from the
sales of Oxyglobin would be used to 1) mitigate the losses arising from the sales of
Hemopure and 2) expand the Oxyglobin’s production capacity (Camm, et al., 2014, p. 43).
iii) The current blood supply does not meet the market demand. The products would bridge the
gap.
iv) Biopure has a good brand image.

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Opportunities
i) There is an ease of entry into the market by new competitors.
ii) There is a possibility that the Hemopure product might be rejected.
iii) Unpredictable perception of blood substitutes since most people accept donated blood
(Brennan, 2010, p. 43).
Probability of success for the products
The success factors for the products are based on the;
a) In the event of an accident occurrence, there are no developed products currently in the
market to be delivered on the spot,
b) The number of the targeted customers, in both market segments, is increasing,
c) The demand for blood substitutes in the market is increasing the amount of blood
donation cannot meet the current demand.
d) Lastly, there is low competition for the Oxyglobin product in the veterinary market
segment.
However, the success factors are affected by the anticipated aggressive competition on
Hemopure from the Poly-Heme and Hem-Assist. Likewise, delayed approval by the FDA also
impact the success of Hemopure. It would also affect Oxyglobin’s success is the launching time
for the product is delayed until Hemopure is approved (Sekhar, 2009, p. 77).
b) Break-even analysis

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The break-even analysis refers to the technique applied by the management accountants and
production management to determine the lowest sales or point when the sales are equal to the
cost (Spicer & Hyatt, 2017, p. 51). Break-even point refers to the sales or production point when
neither profit nor losses are made. The items used in determining the break-even point/ sales are
fixed costs, variable costs, and price (Peirson, et al., 2015, p. 47).
i) For Oxyglobin
Assumptions
Annual Oxyglobin units= 300,000
Fixed production costs per annum = $15 million
Variable costs per Oxyglobin unit;
a) Cattle blood: $ 1.50
b) Distribution: $ 10-$15
c) Marketing: 30% of the selling price
Calculation
$ $
Price of Oxyglobin 200 per Unit
Fixed Cost (Total) 15 million
Variable cost per Unit
Cattle blood cost 1.5
Distribution cost 15
Marketing cost (0.30 *200)= 60 76.5
Contribution Margin 123.5
Break-even point $15million/ $123.50 121,457
units
Maximum Profit (300,000* $123.50)
-$15 million
$22,050,000
22 million

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Therefore, the Biopure will have to sell 121, 457 units to break the even. Moreover, the
maximum profit that would be generated from the sale of 300,000 units is $22 million.
ii) For Hemopure
Assumptions
Annual Oxyglobin units= 300,000
Fixed production costs per annum = $30 million
Variable costs per Oxyglobin unit;
a) Cost of RBC: $ 26
b) Distribution: $ 10-$15
c) Marketing: 30% of the selling price
d) Selling price $700 (mean of the $600-800 range)
Calculation
$ $
Price of Oxyglobin 700 per Unit
Fixed Cost (Total) 30 million
Variable cost per Unit
RBC cost 26
Distribution cost 15
Marketing cost (0.30 *700)= 210 251
Contribution Margin 449
Break-even point $30million/ $449 66,815 units
Maximum Profit (300,000* $66,815)
-$30 million
$20,074,542
20 billion
Therefore, the Biopure will have to sell 66,815 units to break the even for Hemopure. Moreover,
the maximum profit that would be generated from the sale of 300,000 units is $20 billion.

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Estimating the expected demand
Assuming that the Oxyglobin is introduced in the market today, the estimated demand would be;
There exist approximately 15,000 small veterinary practices in America. Approximately 800
dogs suffering from acute blood loss in each practice. If 30% of the dogs have previously
benefited from a blood transfusion. Let’s assume that 240 dogs (0.3* 800) receive Oxyglobin.
At a launch price of $200 per Oxyglobin unit, 60% of the veterinarians are willing to buy for
critical situations and 5% for non-critical situations.
Therefore, Biopure will sell Oxyglobin for 180,000 dogs (0.05 *15,000*240) in the non-critical
category and 2.16 million dogs in the critical category (0.6* 15,000*240).
A combination of the sales in the two categories shows that the company would sell 2.34 million
units of Oxyglobin per year. The analysis shows that if the product is launched today, Biopure
would easily meet the break-even point.
Assuming that the Hemopure is introduced in the market today, the estimated demand would be;
With over 10 million medical facilities, assume that 20% (2,000,000) will buy Hemopure. There
exist approximately 8 million human blood transfusions in America per annum. Let’s assume
that 1,600,000 people (0.2* 8,000,000) receive Hemopure. At a launch price of $700 per
Hemopure unit, 70% of the medical facilities are willing to buy for general use. Therefore,
Biopure will sell Hemopure for 180,000 dogs (0.7* 1.6million*2 million).
The calculation shows that the company would sell 2.24 million units of Hemopure per year. The
analysis shows that if the product is launched today, Biopure would easily meet the break-even
point.

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The preferred action plan
Biopure has two options of action. The first option is to go ahead with the planned launching of
Oxyglobin immediately and option two is to hold the launch of Oxyglobin until the Hemopure is
approved and launched. Below is a comparative analysis of the two options.
Option 1: Immediately launching
Oxyglobin
Option 2: Holding the launch until Hemopure is
launched
a) Will ensure that the company has built
its reputation in the market before
Hemopure is launched.
b) The revenue generated from IPO and
sales would help in the future
promotion of Hemopure (Gupta, 2017,
p. 43).
c) Feedback from the customers will be
collected of the acceptance of the
products.
d) An already established distribution
network before Hemopure is launched.
a) The products will be launched before building
up a market reputation.
b) There would be no revenue before Hemopure
is launched.
c) There would be no any feedback before
Hemopure is launched.
d) No established distribution network; It would
be developed after Hemopure is launched in
the market (Gitman, et al., 2011, p. 77).
The chosen action plan
Form the analysis, immediately launching of the Oxyglobin has many benefits to the Biopure
Company as proposed by Andy Wright. I disagree with the position held by Ted Jacobs that the
veterinary market is price sensitive and small. He also believes that the huge difference in pricing
the two products is a challenge. I believe that the pricing of the products should be determined by
the forces of demand and supply in the market (Raghunath & Rose, 2017, p. 83). Moreover, the
two products are different because Oxyglobin is targeted to the animal market while the
Hemopure products belong to the human market. Likewise, there is a readily available market for
the Oxyglobin product.

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84% of the veterinary doctors in the animal market stated shortage of blood for transfusion as
well as blood substitutes. This shows an opportunity for the Biopure Company to enter the
animal market. Since the Oxyglobin has already been approved by the FDA there is no need for
delaying its launching. Waiting for two years to launch the products together will put the
company at risk (Viardot, 2017, p. 43). Another company might enter the market and take
control before Biopure does. Launching the Oxyglobin immediately would ensure that not only
does Biopure controls a larger market share but also create a market reputation and distribution
network in preparation for the launching of Hemopure. In short, immediately launching of
Oxyglobin will help Biopure in attracting a human market for Hemopure was it is approved in
two years’ time (Berry, 2006, p. 27).
Implementation Strategies
a) The pricing strategy:
The Company should heavily rely on pricing strategy and distribution strategy in the launching
of Oxyglobin. Although the market is hoping for less expensive blood substitute majority of the
pet owners are willing to be a quality blood alternative to treat their pets. Therefore, the
Oxyglobin should have a premium price which is not above $200 per unit (Viardot, 2017, p. 55)
b) The Distribution Strategy:
Instead of contracting distributors to supply Oxyglobin, the company should employ salespeople
to do the job. The company would not spend 20% of the selling price on the distributors. Biopure
would save many by choosing to employ salespeople to distribute the product (Marshall, 2017, p.
76).

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Recommendation and Conclusion
Biopure should launch Oxyglobin immediately. The decision has been reached based on the
analytical methods formulated in the report. There many benefits associated with immediately
launching of the product. Most importantly, revenue realized will be used in expanding the
market share as well as preparing for the launching of Hemopure product after its approval. The
benefits associated with immediately releasing Oxyglobin outweighs the risks.

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