Biopure Corp., a privately owned biopharma firm, specializes in the purification of proteins for human and veterinary use. It entered the “blood substitutes” market through Oxyglobin for the vet market and Hemopure for the human market. Should the corporation launch Oxyglobin right now, or should it wait for the FDA to approve Hemopure?
John T. Gourville
Harvard Business Review (598150-PDF-ENG)
May 29, 1998
Case questions answered:
- Should Biopure Corp. launch Oxyglobin right now, or should it wait for the FDA to approve Hemopure?
- If Biopure launch Oxyglobin right now, then what price to set for Oxyglobin?
- What should be the distribution strategy for Oxyglobin?
- How should Biopure market Oxyglobin i.e. do they use trade publications and trade shows to increase awareness?
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Case answers for Biopure Corp.
Biopure Corp. – Overview:
Biopure Corp., a privately owned biopharma firm, specializes in the purification of proteins for human and veterinary use. It entered the “blood substitutes” market through Oxyglobin for the vet market and Hemopure for the human market.
Although other competitors exist in the human market segment but the source of raw material for these hemoglobin-based “blood substitutes” differentiates Biopure Corp. from others, i.e., “bovine sourced” for bio pure and “human-sourced” for other competitors in the market.
Oxyglobin has been approved for launch by the FDA, whereas Hemopure is still in phase-3 clinical trials and is expected to take 2 years before final approval from the FDA. Because of these prevailing circumstances, the firm is faced with certain decisions that it needs to undertake.
Problem Statement and Decisions:
Should Biopure Corp. launch Oxyglobin right now, or should it wait for the FDA to approve Hemopure?
If we launch Oxyglobin right now, then what price to set for Oxyglobin?
And what should be the distribution strategy for Oxyglobin?
How we market Oxyglobin, i.e., do we use trade publications and trade shows to increase awareness?
Decision # 1
“I will launch Oxyglobin right now and will not wait for FDA approval of Hemopure.”
The reasons for my decision are:
Market Potential in the current Veterinary Market:
We know that the biggest constraint to veterinary transfusions is the lack of adequate blood supply because currently, in the market, only a few animal blood banks exist. Thus, for most veterinary practices, the sole source of blood supply is in-house donor animals.
If we analyze the dynamics of the market, we note that 15% of the veterinary practices find this “donor animal” system to be financially prohibitive and do not offer it.
Of the remaining 85% that use this system, only a few are aware of the costs associated with this system and use the price charged by animal blood banks as a proxy to charge their units.
Furthermore, the veterinary practices that do conduct transfusions often lack resources and time to type the donor and recipient blood. However, the complications related to incompatible blood types are not as severe for animals as humans, but it does prolong a patient’s recovery.
Overall, 84% of the veterinary doctors are dissatisfied with the current blood transfusions alternatives and use them as a last resort.
Thus, by launching Oxyglobin now without any fear of new competitors hindering my progress and market share (as it can take 2-5 years for other competitors to catch up), Biopure Corp. can fill this scarcity in the market of the animal blood supply and maximize the market share in this segment.
Learnings and an Established Marketing Channel Strategy:
By launching Oxyglobin now, we will not only have a first-mover advantage in the Veterinary market segment, but we also are the first company to launch any “blood substitutes” product in the market that can revolutionize the medical industry by eliminating the safety hazards associated with traditional blood transfusion method.
Similarly, in reaching our end customer for Oxyglobin, we will establish a distribution strategy, and within these 2 years that we expect Hemopure to get FDA approved, we will possess a platform to launch our premier product and have and already established deep distribution network, which can then also be used for Hemopure.
Within these two years, we will also receive a lot of feedback from our end consumers and the value added by each player involved in the distribution network. We will also have some data and findings regarding the public acceptance of “blood substitutes” in general.
All of these learnings and mistakes made in launching the Oxyglobin can then be considered when launching Hemopure because, in that segment, I will be competing for market share against formidable players such as Baxter International and Northfield Labs.
Revenues for Promoting Hemopure:
Currently, Biopure Corp. does not generate any revenues and are continuously incurring costs and eroding its limited financing from venture capitalists. And have also spent over $200 million in developing Oxyglobin and Hemopure and a manufacturing facility.
While launching Hemopure, it will face stiff competition from…