What Is the Potential Market for Human Blood Substitute?

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?

To estimate the potential impact of the introduction Oxyglobin as a major product, it was assumed that Biopure would be able to produce and sell its full capacity of 300,000 units per year. As can be seen in Table 1, the results of such an aggressive marketing strategy would give a positive gross margin between 49 and 66, assuming that the product has been sold at a price of $ 100 to $ 150 per unit. If the company was not able to sell much of their product as expected, it could lose money. As the current average price charged by veterinary clinics across the country is $ 100 for a blood transfusion centers will increase their prices to make a profit on the procedure, which could reduce sales of Biopure. While Oxyglobin marketing has the potential for success, Biopure must be extremely careful to create enough energy to cover the sale of 15 million fixed costs that the product will cost them

Biopure's HemoPure product on the other hand is in a unique market position. Looking at Exhibit 5 in the case we see that approximately 14 million units of blood were donated in 1995.We must first adjust this number for patients and uses for which Hemopure would not be a good substitute. If Hemopure only stays in the human system for 2 to 7 days than it is not of much use to patients with Anemia. Also, unused units would have no market potential. Autologous uses can be removed because of the obvious benefits of using one's own blood in elective surgery. So what remains are approximately 7 million units used for acute blood loss. It is also important to remember the 100% efficiency of Hemopure, so the total unit market potential is about 3.5 million units per year. Given this potential it can be assumed that Biopure will sell 100% of its current yearly capacity of Hemopure, 150,000 units. Since Biopure has little information on the price sensitivity of the human market, the multiple prices were explored (See exhibit 2). It can be seen from exhibit 2 that Hemopure will be profitable across a range of prices. Even at half capacity and a price of $400 Biopure will make a gross margin of 50%. This scenario also assumes that Biopure can produce Oxyglobin on a second production line that is not yet built. If the market is more price sensitive, Biopure will be able to lower prices given their low cost of production compared to their competitors.

Oxyglobin is the only blood substitute approved by the FDA for the small-animal verterinary market, the expectation of competition from similar products in the market is small. It has been estimated that it would take 2 to 5 years for another blood substitute producer to bring a product to the veterinary market. The veterinary market willingness and ability to accept a high price for the product is less than that of the human medical market, and because of this Biopure has a great deal of pressure to price Oxyglobin lower than the human blood substitute product. The challenge for marketing Oxyglobin will be in gaining the mindshare of the veterinarians that act as gatekeepers to the product. The current source of blood for animal transfusions comes from donor animals. This method generally does not include blood typing and cross matching and has been shown to prolong the recovery of the animal because of this lack of preparation. The potential for Oxyglobin lies in teaching the veterinarians the prospective benefits from using it.

2. What