Biopure

Executive Summary

Marketing Plan for launching Oxyglobin
Push and Pull strategy will be implemented to enhance the marketing plan of launching Oxyglobin. One of the most important aspect in medical is communication, we will have sales representation frequently visit practices and doctor in order to align the understanding and needs between Oxyglobin and Doctors. This is to ensure their understanding of the product benefits, why the product is selling at premium and why people should choose this option which in turn increase the chance that each practice will use Oxyglobin in treating their patients. In order to push products, we will contract with nonoverlapping national, regional and local distributor in order to widely distribute the products. We will also have 15-minute visit per week from sales representative to primary distributors in order to discuss current promotion of exiting products as well as new product to the market. A number of series of training will be provided by the training team in order to ensure full understanding of complex product to distributors.
Veterinarians understanding of the product is vital in this market. We will use trade publication and trade shows for our pull strategy in order to attract attention from Veterinarians. According to the market data, five journals had almost universal coverage across veterinarians and trade fair attracted 2,000 to 10,000 veterinarian each.
In additional to all the strategies above, we recommend BioPure to launch campaign “Love Me Love My Pet” in order to increase awareness to people and encourage them to save pet’s life like our own. For people not to differentiate human life and animal life but rather think of it in the same aspect. BioPure should joint this campaign with non-profit organizer and government in order to emphasize the important of the issue publicly and enrich the effects.
The potential of human market
Human market is large and the potential is very high due to the following reasons. First, current market situation can be characterized by high demand and low supply especially during the winter holidays and summer months (high travel and accidents rate) which resulted in RBCs market shortage. On the supply side, while 75% of adults are qualified as blood donor, less than 5% actually donated blood. Contributing to the low supply are the fear of needles, lack of time, and misconception of contracting diseases such as AIDS from the donation process. Adding to these, many (2.7 million units in the US in 1995) were discarded due the expiration (limited shelf-life of RBCs of 6 weeks storage) or contamination.
While there’s shortage in supply, the demand has been high and is expected to continue to grow higher in the coming years. Blood transfusion has been used mainly for 1 “chronic anemia” patients who suffered from ongoing deficiency in the oxygen- carrying ability of the blood (3.2 million units) and 2. “acute blood loss” patients by elective surgeries, emergency surgeries or trauma (8.1 million units). Due to the current market shortage and the effort and resources required to store, type, and administer RBCs, only 10% of the approximately 500,000 trauma cases that happened every year in the US received RBCs at the site of an accident. The rest was delayed to the hospital. As a consequence, 20,000 trauma victims per year bled to death (30% fatality rate). Furthermore, the demand of RBCs to treat acute blood loss is expected to rise due to the rising of the US aging population (over 65 years). This population size is expected to double in the year 2030.
Other than current market shortage condition, RBCs downside such as current complication, inconvenience, issues and high cost of acquiring and storing donated RBCs further contribute to Hemopure high market potential. First, the RBCs antigens raise the complexity of allowable transfusion between donors and patients. Second, even though the RBCs are donated, there are costs that the non-profit blood collection organizations have to incurred in acquiring these blood such as the advertisement, donation facility cost and expense, mobile units cost, medical equipment cost, testing, sorting and separating processes cost and etc. Added to these cost are the hospital cost of storage, handling, transporting, screening, typing, cross matching, and documenting the blood. This result in high total cost ($425/unit on the high estimate – (exhibit 6), lengthy, and time consuming process. Third, the blood also need to be refrigerated at 4 degree Celsius which raised the storage cost and space limitation issues. Fourth, the limited shelf life of 6 weeks is very short and RBCs stored for 10 days or more has lower oxygen-carrying efficiency ability (only 50% in the first 8-12 hours of transfusion). Lastly, there is a potential risk of disease transmission from blood transfusion (1:500,000 for AIDs, 1:200,000 for Hepatitis B, and 1:1,000,000 for Hepatitis C).
Given the importance of blood to one’s life, the market shortage, and current complication and high cost, we can conclude that the human market is very attractive. Porter’s 5 forces analysis (low rivalry –only 3 competitors, low threats of new entrants, low supplier’s bargaining power, low buyers/distributors bargaining power, and no substitutes) further support the industry/market high potential.
Our produce Hemopure will not only solve the shortage issue but also remove all the complications and high cost of obtaining donated blood. It can be reproduced unlimitedly from the production facility, store at room temperature and has much longer shelf life of up to 2 years. This would solve the shortage issue and the need for freezer storage making it more convenience and less costly to store/transfer blood to the site of accident in trauma cases (especially in military) and hence reduce the fatality rate. The “universal” blood also eliminate the need for blood typing and cross-matching which takes effort, incur cost and could result in serious effects (death in some cases) when mistakes occurred. Hemopure is also free from infectious agents and contaminations eliminate the issue of disease transmission and are also 100% immediately efficient in transporting oxygen. Additional benefit also include the smaller size of hemoglobin which are able to flow to regions that RBCs cannot reach and hence able to treat stroke and heart attack patients more effective.
The potential of animal market
The animal market is considerably small as there were only about 15,000 small-animal veterinaries in the US in 1995 in which 95% were “primary care” which provided preventative care and routine treatments (referred 75% of severe cases to emergency) while the rest of 5% provided “emergency/ specialty care” practices. Adding to the small market size, blood transfusion is infrequent (small the moderate demand rate) in the veterinary market (in 1995, 800 dogs suffered from acute blood and while 30% would have benefit from the transfusion only 2.5% received the blood).
The supply level is low as there are only few animal blood banks available. Primary source of blood were from donor animals housed for the sole purpose of donating blood (provide 93% of all transfused blood in normal cases and 78% in emergency cases). The cost and time required to draw blood were never properly tracked but would properly be high and include the cost of housing, raising and feeding the donor animals. There could be pet lover’s resistance of such process as well. In addition, most practices lack the time and resource to properly type and cross-match the blood which resulted in longer animal recovery period. In overall, 84% of veterinary doctors are still dissatisfy with current blood transfusion alternatives in the market. Given this opportunity, Oxyglobin would have high potential success rate in the market as it is the first and only company with FDA approved animal blood substitute (will take new entrants 2-5 years to bring products to the market) which would solve the high cost and shortage of supply issues as well as the complication from donated blood. With similar benefits to the Hemopure, the Oxyglobin would also eliminate the blood matching, freezer storage, and animal housing cost and complications issues. The Oxyglobin would also be more effective than donated RBCs.
In conclusion, given the advantages of Oxyglobin over donated blood and the strong industry attractiveness from low porter’s 5 forces model analysis (zero rivals in the industry, low threat of new entrants, low supplier bargaining power, and low buyer (distributors and centenaries) , no substitutes products) but small animal market and low demand of blood transfusion, we conclude that the market for Oxyglobin is moderately attractive.
Barriers to success in the human market and the animal market
Strong competition, one very important barrier to success in the human market is the strong competition from Baxter International. Baxter was a well-established firm specializing in the development, manufacture, and sale of blood-related medical products. They are being regarded as a pioneer in many product breakthroughs including the first sterile blood collection device, first artificial kidney machine, and first factor VII blood-clotting factor for the treatment of hemophilia. That means they have learning curve and advertising experience. Strong relationship with distributors. Northfield is another contender with a hemoglobin-based blood substitute. Both are in the Phase 3 trials and are expected to get an approval from the FDA at about the same time (i.e. late 1999 or early 2000). Baxter already in Phrase 3 in 1996 while we are only enter in 1998 having 2 years behind.
Readiness to the market, One point that suggests that Biopure is behind its two competitors is the readiness of the manufacturing facilities. While Baxter had a plant with the capacity of producing 1million units of HemAssist per year, Biopure was only capable of producing 300,000 units of Oxyglobin or 150,000 units of Hemopure. Since Baxter has a higher producing volume, they are able to leverage from the economy of scale to reduce manufacturing cost. Also, larger volume means that they are able to distribute to more clinics to increase product accessibility to prevent out-of-stock situation and consequently loss of sales.
Lack of experience and strong distribution networks, Since Biopure is very new to this industry, they do not have any experience selling to this market unlike Baxter who currently carries a variety of blood-related products. The firm needs to build the brand from scratch and gain confident as soon as possible. Moreover, Biopure has not developed a relationship with any distributor to help promote or sales the products. They must look for best distribution channel for their products and must make sure that consumers are easily accessible.
Product Acceptance of cattle blood, currently, it is widely accepted to perform blood transfusion using blood donation from other human beings. However, with the new introducing concept of Hemopure, which is made from cattle blood, it may be very controversial to many customers.
Low Capital, Currently there are only approximately 50 million of capital venture financing which is only enough to support another 2 years. It is a border line to get FDA approval. If the FDA approval process needs to be extended just like we see in Baxter case, the firm might run out of money even before the approval.
Uncertainty of the FDA approval and Side effect with human, last, and perhaps, the most important barrier to success to the human market is the approval from the FDA. The firm will only become successful in launching the product only if the FDA has approved that the products are safe to use with humans and that they are effective. However, if the FDA did not approve the products after a long procedure, the company may go out of business without any products to sell since Biopure only rely on only one type of product.
Product Short coming, Hemopure shortcomings includes short half-life (excreted from human body within only 2-7 days) and higher potential of toxicity (even though there is no limit for donated blood transfusion in human, blood substitutes transfusion had been demonstrated only up to 5-10 units).
Price Sensitivity, in the animal market, the most important barrier to success is price. The price sensitivity in the veterinary market is quite prominent. Though some people are real pet lovers, but when it comes to financial issue, they will think twice. The market for Oxyglobin is very small since pet owners are only willing to pay only a small amount per each visit. Therefore, not many pet owners will be able to afford a high price and could potential let the pet die rather than to pay so much for it. The firm must make sure that they come up with a good pricing strategy and take into account the doubling rules that are currently being adopted by the animal clinics.

The marketing effect between Oxyglobin and Hemopure on each other
The marketing of Oxyglobin and Hemopure will surely affect each other. Even though they target different segmentations, the two products are very similar to each other. The only difference is the additional production process that reduces the size of the hemoglobin clusters in Hemopure, reducing the side effects to human body. However, before launching the products, Biopure needs to carefully consider the three factors that can affect the two products: pricing strategy, brand image, and experience curve.
Firstly, there can be a lot of questions regarding the price of the two products if they are charged at significantly different level. By following the law of supply and demand, it would make perfect sense that Biopure should set higher price for Hemopure ($600 to $800 per unit) and lower price for Oxyglobin ($80 to $100 per unit) since there are much more demands for human blood than the demands for animal blood. Furthermore, people are willing to spend more to save themselves than to save their pets. However, since Hemopure and Oxyglobin are nearly identical to each other, Biopure should justify the significant price gap between the two products in order to avoid negative feedback on the price of Hemopure.
Secondly, there can be misperception if Hemopure is launched two years after Oxyglobin because people may think that Hemopure is the modified version of Oxyglobin, in another word, the modified version of blood substitute for dogs. Moreover, people may perceive Biopure as the brand for animals, and hesitate to use Hemopure as the substitute to human blood. It is important that Biopure make a distinct marketing campaign to differentiate and avoid any misperception of brand images between the two products.
Lastly, since Biopure has no experience in marketing any of its products before, they can consider the opportunity of launching Oxyglobin before Hemopure as the trial period to perform their marketing mix strategies and see how effective those strategies can be. Good pricing strategy and marketing campaign will create good perception on the new product. The effective distribution channel will help contributing to the good brand images, and therefore, the good sales revenue. Moreover, the promotion campaign can be the tools to drive the sales of the new products. In order to be successful, Biopure should analyze the 4Ps that were used with Oxyglobin, and carefully apply to the case of Hemopure that yields a much higher volume market. However, Biopure should take into account that Oxyglobin and Hemopure target different segments, and that the response from customers can be different.
Recommendation
We recommend Biopure to launch their Oxyglobin immediately for two significant reasons. First reason is to capture the first mover advantages and to fully optimize the capability of its product before other competitors. Since there are potential segment markets that value this product as a critical source, especially in the case of emergency it generates benefits to both trauma animals and pet owners. It shows that the percent chance for the injured pets to survive will approximately increased by 27.5%. On the other hand, there is no direct substitute product available in market and this product require specific know-how and expertise, thus this innovation can promote Biopure to be a pioneer and gain large advantages from niche markets for a long period. Furthermore, FDA plays the significant role as potential barrier for the new entrance to compete against Biopure because approximately it will take 2-5 years for FDA approval. On the organizational structure, Biopure already established the R&D and the marketing team of 7 people that will effectively supports Oxyglobin once it launched. Second reason is to spend the profits that gain from Oxyglobin to finance Hemoglobin and ensure it sustainable success. As we have ability to control over price, so setting the most profitable price will promote the highest revenue for overall corporation. Additionally, Biopure can use profits that they gain from Oxyglobin for two emphasized proposes which are to minimize the risk of its financial structure because recently it rely heavily only on the capital venture and to finance marketing and advertising for Hemoglobin. Additionally, Oxyglobin represents the first product of Biopure, therefore they will learn from the mistakes of Oxyglobin to ensure that Hemoglobin won’t follow the same mistakes again. In short, it has been expected that demand for alternative blood supply will rising over time, hence the ability for Biopure to maintain its expertise and expand its first mover advantages is essential to stimulate its sales and expand its brand image over customer’s perspective.
As monopoly of the market, BioPure could set premium price in order to maximize its profit. This is to capture as much market share as possible. Moreover, the company already hired marketing and sales team for the product. According to market data of consumers’ willingness to try Oxyglobin. The optimal retails price is 400 USD (BioPure get 200 USD each), 14% profit margin. The company will make a loss by setting the retail price from 100 to 200 USD and only make 6% profit margin by setting the price at 300 USD. This is mainly due to the high fix cost and limited capacity in producing Oxyglobin. The total market potential demand is approximately 1,400,000 units, however BioPure is able to produce at 300,000 unit per year. We also recommend the company to expand its production line in order to meet the demand of the market and maximize its profit.
In order to distribute Oxyglobin, we suggest Biopure to use Pull and Push strategy to ensure customer’s awareness and to encourage distributors. Basically, the aim of Pull strategy is to provide useful information and communicate directly to our customers. Beside, the Push strategy emphasizes on the sales stimulation and establishes both the sense of involvement and relationship with each distributor.
Under Pull strategy, we recommend to establish the internal store to sale our Oxyglobin and to act as the learning center in the early stage because Oxyglobin require high level of understanding before use it effectively. Furthermore, we must avoid the misunderstanding and miscommunication because they will affect our brand image and have an impact on the future growth of the company. In the meanwhile, we will also launch new marketing campaign to ensure customer’s awareness on our product availability and capability. Moreover, this campaign will focus on our target customers, which are the dog lover, cat lovers, and veterinarians. Even though, these target groups are small, they have a growing potential and are affordable for our products. Adding to above activities, the trade show and international exhibition are another major channels for our products as well. Therefore, we will attend these events because from the record it shows that veterinarians seem these exhibitions as the source of knowledge and learning center. Generally, they attend these show because they would like to figure out new innovation on the field and keep themselves up to date. Finally, as Oxyglobin is the new innovation, therefore to ensure it sustainable success, we must educate potential veterinarians in the future. Hence, veterinary school will be our next target, thus to acknowledge them and offer them workshop in school will generate greater understanding to veterinary students. So, when they aware of positive and side affect of our product, they can apply and utilize it in the most preferable way. On the other hand, the recommendation and feedback from them can create dynamic improvement in our products because it motivates us to non-stop innovation. Moreover, we believed that the power of the next generation would strengthen our brand and consolidate our future success.
On the other hand, we will use Push strategy to boost our sales and create relationship with our distributors. Basically, our Oxyglobin will be launched to three significant levels, which are the regional level, national level, and local level, to become widespread and to be available for customers. Nevertheless, we have to make sure that these distributors are not over lapping between each other to minimize further conflicts in the specific areas. However, the key success of our Oxyglobin is the right information that our distributor will pass next to our customers or veterinarians, therefore we have to set up the training center to acknowledge our distributor of the ability of Oxyglobin, what are pros and cons of our products and of course how to maximize the usage of our products. Beside, as distributors are normally close to our final customer, so they can provide the feedback from their selling experience back to the center. Once the center received feedbacks, they can analyze and give information directly back to the R&D department to solve problem or improve customer satisfaction. In general, we will stimulate sales and establish the sense of involvement to each distributor by offering 30% commission of our final price to our distributors. The reason behind this setup price because we can maintain our ability to control over our final price to avoid over pricing and we still generate potential profits. At the same time, this commission will motivate every distributor to sale more and crate win-win situation between Biopure and distributors. However, we will not only please our distributor, we will also establish the relationship with veterinary doctors to ensure that they understand our product and use our product in the most efficient direction. In short, we believe that when we combine all these elements, we can dynamically generate long-term potential profits for Oxyglobin. Furthermore, this profit will strengthen our foundation and ensure the success of Hemoglobin that expected to be launch in the next 2 years.

Price to Pet Owner
Retails Price
100
200
300
400
Selling Price
50
100
150
200
Non-Critical
Willingness
60%
40%
35%
30%
Number of Case 3,902,250
3,902,250
3,902,250
3,902,250
Demand
2,341,350
1,560,900
1,365,788
1,170,675
Revenue
234,135,000
312,180,000
409,736,250
468,270,000
Critical
Willingness
90%
85%
75%
65%
Number of Case
354,750
354,750
354,750
354,750
Demand
319,275
301,538
266,063
230,588
Revenue
31,927,500
60,307,500
79,818,750
92,235,000
Financial
Total Demand
2,660,625
1,862,438
1,631,850
1,401,263
Max Capacity
300,000
300,000
300,000
300,000
Total Revenue
15,000,000
30,000,000
45,000,000
60,000,000
Distribution Expenses 30%
9,000,000
18,000,000
27,000,000
36,000,000
VC $1.5 each
450,000
450,000
450,000
450,000
Fixed Cost
15,000,000
15,000,000
15,000,000
15,000,000
Net profit
-9,450,000
-3,450,000
2,550,000
8,550,000
Profit Margin
-63%
-12%
6%
14%