Biopure ? Overarching problem: ? Whether to launch Oxyglobin and how to market it ? One Possible Recommendation: ? Launch Oxyglobin, price it at $150, target the practices that do the higher number of transfusions (emergency care and largest primary care, about 1,500 total), use own sales-force ? Target Hemopure to trauma market and price it at $700 Launch or not ? Pros for launching ? FDA?s approval for Hemopure isuncertain; ? 2-3 years of revenues would be lost; ? First mover advantage; ? Different products/different markets, so product comparison is unlikely; ? Test marketing skills before launching Hemopure; ? The Oxyglobinmarketing team is in place and ready to go; ? Oxyglobinhas potential to greatly expand the current animal transfusion market, making the animal market very attractive . Launch or not ? Cons for launching ? Oxyglobinwill create downward price pressure on Hemopure; ? The potential of the animal market is small and the potential of the human market is large; ? There is no foreseeable competition in the animal market, allowing for a successful launch of Oxyglobinin several years; ? Jeopardizing brand image (you are human products company) ? Hemopure is bovine-sourced and will be prone to attacks from competitors who have human-sourced products ; ? Limited production capacity ? A recent round of venture capital financing ($50MM) is sufficient to support operations for the next two years, until Hemopure is projected to gain FDA approval. The Market Potential for Oxyglobin ? Current Market: 15,000 practices x 800 dogs/year/practice x 2.5%=300,000 units/year 300,000 units x $150 =$45MM per year ? Based on the potential to expand the market: 15,000 practices x 800 dogs/year/practice x 30%=3,600,000 units/year 3,600,000 units x $150 =$540MM per year ? No foreseeable competition The Market for Human Blood Substitute ? The Whole market: 11.3 MM x $700 = 7.9 billion per year ? Shortcoming of Hemopure for chronic anemia cases, especially the high price and short half-life of hemopure make it inappropriate as a replacement for the 3.2 MM units of donated blood used to treat chronic anemia. ? 8MM units of acute blood loss market is also questionable, given that donated human blood is: ? Well-entrenched and widely accepted in modern human medicine ? Readily available through a well-established network ? Relatively inexpensive and relatively safe with little change of infection. ? Appropriate for applications where donated blood is not readily available , e.g. Trauma cases, possible 2MM units and $1.4 billion per year ( assuming each case needs 4 units) ? Stiff competition in the human market Possible Reference Prices for Hemopure ? Possible reference prices for Hemopure: ? cost (1.5 + 100) ? not relevant because we should not use a cost plus strategy but a customer value strategy ? Oxyglobin (150) ? not relevant because two different markets, the same product cannot be used in the two markets, products are perceived as different. ? Donated blood (175) ? make sense for most regular transfusions ? Autologous (350) ? make sense for risk averse blood recipients ? Competitors (700) ? makes sense in the trauma ? Human life (priceless) ? make sense in the trauma Target Market for Oxyglobin ? Target those practices that perform the greatest number of transfusions. The ?high incidence? practices tended to be the emergency care practices and large primary care practices. ? Reduce the scope of their efforts from 15,000 practices to about 1,500 practices. ? These practices see greater value from Oxyglobin ? These practices are likely to be thought leaders ? The cost of treatment at an emergency care practice is greater, suggesting lower price sensitivity. Oxyglobin Distribution ? Independent Distribution + speed and scale - 30% margin - They covers 100 new products each year, little attention on each new product - Need train their sale reps ? Direct Salesforce + fully dedicated to Oxyglobin + A Biopure sales rep would have far greater knowledge about Oxyglobin - Length of time it would take to reach Veterinary practices. However, by focusing on selective practices, it is doable. biopure
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