Biopure

Biopure Market Potential Exercise

Suggested Solution

Question 1) How would you revise the market potential for Hemopure?

The best four-segment solution to the usage problem includes these categories: elective surgery; emergency surgery; in field trauma; and chronic anemia.

Current Usage Change Potential Usage

Trauma (in field) 200,000 *10 2,000,000

Currently only 10% of trauma cases get blood transfusions in the field. With better storage potential and no need for blood typing this could be increased to 100% (a factor of 10!).

This is the potential usage in 1995. In order to project the numbers forward to 2000 (the date of product release), we must estimate population growth. The elderly population (65 and older), which currently receives 40% of all acute blood loss transfusions, is expected to double by 2030. Assuming linear growth, we can expect this age group to grow 14% by 2000.

Similarly, the remaining adult population (under 65), which currently receives 60% of all acute blood loss transfusions, is expected to grow 5.9% by 2030 ((6 - 5.67) / 5.67 = 5.9%).

# over 65 # under 65

1995 x 5.67x (85% / 15% = 5.67)

2030 2x 3 * 2x (75% / 25% = 3)

Assuming linear growth, we expect this age group to grow .84% by 2000.

The revised estimates of usage for the year 2000 are as follows:

Potential usage (1995) Change Potential Usage (2000)

Under 65 1,200,000 *1.084 1,300,800

Over 65 800,000 *1.14 912,000

Current Usage Change Potential Usage

Emergency Surgery 1,000,000 *.5 500,000

Due to the fact that many more units will be used in the field, the usage in this category will decline. On the other hand, many more of the trauma victims will survive increasing probability of having emergency surgery. We estimate that the net of those two changes will mean a 50% decline in potential.

Revised estimates of usage for the year 2000 are as follows:

Potential usage (1995) Change Potential Usage (2000)

Under 65 300,000 *1.084 325,200

Over 65 200,000 *1.14 228,000

Current Usage Change Potential Usage

Elective Surgery 6,900,000 *.05 345,000

Evaluating the attractiveness of the Biopure offer compared to that of the generic human RBC competitor is essential to appropriately forecasting demand in the elective surgery segment. A simple analysis of the benefits demanded by elective surgery, the benefits provided by human RBC's, and the benefits provided by Hemopure would lead one to conclude that Hemopure is poorly suited to elective surgery. In particular, donated human blood is:

* Well entrenched and widely-accepted in modern medicine,

* Readily available through a well-established network of blood collection groups

* Relatively inexpensive, at $125-$225 per unit (vs. the proposed $600-$800 for Hemopure)

* Relatively safe, with little chance of infection (e.g., 1 in 5,000,000 chance of AIDS).

Consequently, Hemopure is probably only appropriate for applications where donated blood is not readily available and where the loss of blood is life threatening. Elective surgery certainly does not fall into this category.

Revised estimates of usage for the year 2000 are as follows:

Potential usage (1995) Change Potential Usage (2000)

Under 65 207,000 *1.084 224,388

Over 65 138,000 *1.14 157,320

Current Usage Change Potential Usage

Chronic Anemia 3,200,000 *0 0

Hemopure is ill-suited for chronic anemia applications because of the short half-life, potential for toxicity, and very high price (would you/your HMO want to spend $600-$800 per unit for the rest of you life if you were afflicted with this condition?).

Finally, there are 1 million "borderline" transfusion surgeries each year, where doctors avoid transfusions for fear of disease transmission or negative reaction. Hemopure could eliminate these fears, resulting in an additional potential of 1.5 million units.

Grand total: 4.65 million units

Question 2) Given Baxter and Northfield's relative strength in the market, to what would you revise the forecast?

Baxter's Hemassist and Northfield's PolyHeme would both take market-share when they are introduced. Both of these products are made with human blood, which may prove an advantage. In addition, Baxter's history of product success may make it a formidable competitor. The best responses to this question account for the relative strength of the competing organizations and offers. Here is a suggested solution:

Biopure's real competitive advantages are its shelf life and storage requirements. Baxter and Northfield's products, since they are made with