International Strategic Management - “biopure” Case Study

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                                                                                                                                      MBA Finance

Haoran LIN

Biopure Corporation Case Analysis

According to these questions, my first assignment will consist of three parts. Every part will give my responses to the questions in sequence.

Part one

    Question 1: What is the potential market (in units/in $) for Oxyglobin – at current levels and if there is market expansion?

    What is the potential market (in units/in $) for human blood substitute?

1.1 Potential Market of Oxyglobin

      It’s easy to find in this case the target markets are two different aspects. However, the way of calculating the market capitalization is the same. As the formula below we can easily get the answer.

The formula is defined as: The target market volume = Number of veterinary practices * number of animal in each practice * willingness to trial Oxyglobin * unit each animal needs.

     There are four elements in the calculation which means we need to estimate these factors.

     In this case, it mentioned there were nearly 15,000 small-animal veterinary practices during that period. Furthermore, each practice has different amounts of animals. In 1995, the average practice showed that 800 dogs suffered from the acute blood loss. In the article, dog (50% of patient volume) and cats (35% of patient volumes) are the main targets. Then the number of animal in each practice is: 800/(35%+50%)=941.

     The willingness to trial Oxyglobin. In the case the average fee of blood transfusion is $100. under the probability of 30% of these dogs would have benefited significantly from a transfusion of blood,  

There are 2.5% are critical cases and the rest are non-critical cases. With the figure from Table A and Table B, we are able to calculate the weighted willingness to trial Oxyglobin from both side. These two different willingness from doctor and owner can cut down the error of estimation and make sure the products is need for both sides.

      (27.5%*70%+2.5%*95%)*(27.5%*60%+2.5%*90%)*1.5=4.055%*1.5=6.082%

      We need the usage of blood usage for each animal. The unit for different types of animal will also be different. I assume the big type animal will need 2 units and the small one will just use 1 unit. The average is 1.5 unit/ animal. Ultimately, input all the estimations above. The target market volume presented like this:

15,000*941*(27.5%*70%+2.5%*95%)*(27.5%*60%+2.5%*90%)*1.5=858478,71

It is obviously, the potential market will increase in the future as the number of pet keeps going up. As the figure is from 1995, the market is blooming nowadays.

1.2 Potential Market calculation of human blood substitute

   As the human blood market is such different from the pet market. We can easily find the need unit of blood by checking the data of hospitals.  In the following table 1, the elective surgery is consisted of two parts. Anonymous donations was nearly 6000 units. There are two details not showed in this Table. The first is the borderline is one thousand unit. Based on the data of human market from the article. ‘Only 10% of trauma victims received RBCs “in the field” or at the site of the accident. In the other word, the lacking of blood for Trauma is 500,000*0.9=45000.

     The average required blood for each Trauma operation equals to 200,000/50,000*1=4

With this factor, we can add the Trauma need (1800).

        Table 1 Red Blood Cell Donations and transfusions in the United States in 1995

                                                  Source: Stover & Associates LLC

After all the calculation, we can add the answer together and get the potential market of the human blood.

Including the Elective Surgery (Anonymous), Emergency Surgery, Trauma (in field administration), Borderline and Trauma (injure operation).

The total estimation quantity is 9800. And for the company itself, the target market is 6800. The capitalization of the market is still expanding.