Biopure Technology Case Study

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Case study for “Biopure Technology” The case explained the current situation of the Biopure Corporation at the point of making a strategic decision. The company is evaluating the risks and benefits of launching an ancillary product, the Oxyglobin, which could affect the pricing of their major product, the Hemopure, which they need to wait for another two years for approval. The case also analyzed the demand and supply of both human and small animal markets to aid the evaluation. The major risk of launching the Oxyglobin two years before the human product is the potential to bring down the market value of the Hemopure. The effect could diminish the potential profit from the human market, which is considered to be the company’s major market. My opinion is to hold the launch of Oxyglobin. First of all, although the market for the Oxyglobin is significant and the competition is relatively low, the little margin on the pricing of such product cannot bring the company sufficient revenue. The company is considering pricing the Oxyglobin at $80-$100 per unit due to the high price elasticity of the small animal market. After the 30% distribution commission for new products and physical distribution cost of $10-$15 per unit, the revenue per unit comes down to $41-$60. In order to even the fixed production costs of $15 million per year, Biopure need to sell as much as 366,000 units. But the annual capacity of the current facility is only 300,000 units for Oxyglobin. Not counting in other major costs like labor costs and marketing activities, it is impossible to break even. So by launching and producing Oxyglobin, the company will suffer substantial loses in their financial reports, which isn’t good for their IPO at all. Secondly, the psychological effect might decrease the demand for Hemopure at later launch. When people used to consider the product to be used on

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