Problem Statement ? Biopure (BPC), is a small and private developer of human (Hemopure) and animal (Oxyglobin) blood substitutes. Biopure is faced with the decision of whether to immediately launch Oxyglobin (Og) or wait until after the launch of hemapure (Hp), which will be in about two years following FDA approval. If they decide to launch they must determine their pricing strategy. The concern is that launching Oxyblobin would create an obstacle to the pricing of Hemopure, the company's initial product focus.
Market Analysis ? The combination of lengthy approval process of the FDA, intellectual property laws, and R&D capital requirements, poses a high entry barrier in the blood substitute markets. The human market is expected to experience moderate future growth affected by an increase in population, and in particular the proportion of older citizens. Also, the human market suffers from uneven seasonal variations in blood supply and demand. There is higher demand in summer and winter holiday seasons and this demand is exacerbated by lower donations. Although the total potential size of the human market in the US is 13.5 million units (Exhibit 1), Hemopure's long shelf life and lack of need for refrigeration makes it particularly suitable for trauma cases estimated at 2 million units.
The existing system for supplying animal blood is poor at matching animal blood types and it is relatively costly, leading to an underserved market. Veterinarians use approximately 350,000 units of blood per year in canine transfusions, all of which could be captured by Og. The potential market size is estimated at only 2.3 million (Exhibit 2). Even with the smaller demand figure, however, BPC's capacity of 300,000 would still leave some excess demand. This, along with mini ...