Biopure Oxyglobin Launch

Company:

Biopure's greatest strength lies in its ability to market its blood substitute technology for both animal and human use. Further, Biopure has the patents and FDA approval to forge ahead in the animal market with a two-to-five year time buffer from new competition (using similar technology). One of the company's weaknesses is that it has not received FDA approval on Hemopure, and there are two other companies that could beat Biopure to the market with similar products. But if the FDA does not approve Hemopure, which could have the potential to cripple a single product biopharmaceutical company, the company may still withstand such a disruption with Oxyglobin sales and future research and development. Another weakness is the uncertainty of market acceptance for Hemopure, in the face of a deeply-rooted blood donation network.

Biopure has the potential to lead the market with blood substitutes for human and animal use. With Hemopure on the fringe of FDA approval, one of the largest challenges for Biopure is deciding how Oxyglobin will affect the launch of Hemopure. First, it is important to decide whether the market will accept Hemopure at a price point that is substantially greater than Oxyglobin. This concern is accentuated because the two products are almost identical in physical properties and appearance, and hospitals and insurance firms will require a justification for the price differential.

Second, Biopure colleagues are growing anxious to take the company public in the near future. The desire to go public seems to support the immediate release of Oxyglobin to start paying the costs associated with both Oxyglobin and Hemopure, capture market share in the animal and human use blood substitute markets, and alleviate investor concerns regarding the future success as Hemopure.

Customers:

For Hemopure, potential customers all stem from the hospital, which includes emergency medical technicians (in field), elective surgery centers, and emergency surgery centers. The market potential for Hemopure is 12.8M units/year, which (assuming a $700/unit price) translates to a market potential of $8.96B/year (see Exhibit 1). Currently, 92% of the blood transfusion supply is provided by volunteer donors, while the other 8% is provided by autologous donations. Due to concerns such as fear of getting a disease, fear of needles, and lack of time, Hemopure has a strong position to alleviate these concerns and capture a large percentage of the total market share.

For Oxyglobin, potential customers include primary care and emergency care veterinarian service providers. The conservative market potential for Oxyglobin is 1.99M units/year, which translates (assuming a $100 /unit price) into a market potential of $199M /year (see Exhibit 2). Considering the facts that the primary source of transfusion is the strained use of donor dogs, the price is very competitive, and Biopure is the only provider in the market, Biopure stands to capture a large percentage of the total potential market.

Competition:

Competition in the human blood market starts with the American Red Cross and other small providers that collect voluntary blood donations for transfusions. Blood substitutes have the following advantages over donated human blood: they are "universal" (eliminating the need for blood typing and cross-matching); they are free of infectious agents and contamination; they increase shelf-life and are immediately 100% efficient at transporting oxygen. Hemopure also faces competition from two other blood substitute companies, if/when they gain FDA approval, Baxter International (HemAssist) and Northfield Laboratories (PolyHeme). Hemopure's strength in comparison to these other blood substitutes is that is that it is shelf-stable at room temperature while Baxter and Northfield need to be frozen or refrigerated until use. Also, Baxter and Northfield products rely on human blood as their source of hemoglobin (Baxter - $8 /unit; Northfield - $26 /unit), whereas Hemopure uses cattle as its source of hemoglobin ($1.50 /unit). A further complication for companies that rely on "outdated" human red blood cells (RBC) is that there is a limited supply of RBCs (currently 1.5M units/year) discarded in this manner.

Competition in the animal use market is limited to current transfusion providers through donor animals and animal blood banks. Donor animals provide 93 percent of primary and 78 percent of emergency care transfused blood; the remainder is provided by animal banks. While donor dogs are the largest source of transfused blood, the costs to provide this service are prohibitive for many care providers and unknown by the ones using it. Also, because 84 percent of veterinarian doctors are unsatisfied with the blood transfusion system, there is a strong population of customers ripe for change in this industry. Currently, there are not any other companies seeking to develop an animal-use blood substitute and the time to obtain FDA approval will take at least two to five years.

Segmentation:

Veterinarians are the primary customers who will purchase Oxyglobin. These customers can be broken down into two segments:

* Primary care veterinarians: This segment makes up approximately 95% the 15,000 small animal veterinarians in the U.S. and provides preventative care, routine treatment of illness, and limited emergency care. Seventy-five of these practices refer some or all of their major surgeries and severe trauma cases to emergency care practices. On average, each primary care practice used 17 units of blood in 1995.

* Emergency care veterinarians: This segment makes up approximately 5% of the 15,000 small animal veterinarians in the U.S. and provides emergency treatments such as surgeries and trauma cases. On average, each emergency care practice used 150 units of blood in 1995.

Pet owners were also considered as a potential target segment. However, typical pet owners do not have the ability or expertise to transfuse blood. Therefore they were excluded as a potential segment.

Targeting:

While both targets identified will benefit from the features provided by Oxyglobin, it is recommended that Biopure target the primary care veterinarians. The primary consideration when choosing this segment was necessity to build the Biopure brand. The network of primary care veterinarians is substantially larger than the emergency care network, thereby lending to increased word of mouth advertising and the potential to gain greater market share. In addition,