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 UsageChangePotential Usage Trauma (in field)200,000*102,000,000 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 1995×5. 67x (85% / 15% = 5. 67) 20302×3 * 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)ChangePotential Usage (2000) Under 651,200,000*1. 0841,300,800 Over 65800,000*1. 14912,000 Current UsageChangePotential Usage Emergency Surgery1,000,000*. 5500,000 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)ChangePotential Usage (2000) Under 65300,000*1.
084325,200 Over 65200,000*1. 14228,000 Current UsageChangePotential Usage Elective Surgery6,900,000*. 05345,000 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)ChangePotential Usage (2000) Under 65207,000*1. 084224,388.
Over 65138,000*1. 14157,320 Current UsageChangePotential Usage Chronic Anemia3,200,000*00 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 human blood, do not have these advantages. Therefore, while Baxter and Northfield will probably take the emergency and elective surgery segments, Biopure can be expected to win the trauma segment. Our market potential is therefore 2,212,800 units. At $600. 00 per unit our market potential is $1. 33 billion. A table such as follows could help with this: Potential pre-competition Market Revised Potential Market Units (in 000’s) Biopure Baxter Northfield Anemia transfusions $0 Elective surgery patients Anonymous donated $382 NO YES YES.
Autologous donated $0 NO NO NO Emergency surgery patients $553 NO YES YES Borderline transfusion cases $1,500 NO YES YES Trauma Field administration $2,213 YES NO NO $2,213 $4,648 $2,213 Note that answers that rely strictly on production capacity ignore the likelihood that forward-looking organizations will choose to invest in additional production facilities if demand, which can be profitably served, is believed to exist. Supply is not an unreasonable way to look at satisfying demand, but alone does not answer the DEMAND or potential question. Question 3) Current usage of blood transfusions=.
5% of 15,000 vets use average of 150 units/year .05*15,000*150=112,500 95% of 15,000 vets use average of 17 units/year .95*15,000*17=242,250 Total current usage = 354,750 In calculation of potential market it is important to note that 2. 5% of animals treated get transfusions while 30% could have benefited from them. Assuming 2. 5% is built into the current usage numbers: 354,750 * . 3/. 025 = 4,257,000 potential market in units At $100 per unit: CriticalNoncriticalTotal Owner willingness90%60% Percentage of cases8. 3%91. 7% Potential recipients317,9982,342,2012,660,199$266,019,900 At $200 per unit:
CriticalNoncriticalTotal Owner willingness85%40% Percentage of cases8. 3%91. 7% Potential recipients300,3311,561,4681,861,799$372,359,800 At $300 per unit: CriticalNoncriticalTotal Owner willingness75%35% Percentage of cases8. 3%91. 7% Potential recipients264,9981,366,2841,631,282$489,384,600 At $400 per unit: CriticalNoncriticalTotal Owner willingness65%30% Percentage of cases8. 3%91. 7% Potential recipients229,6651,171,1011,400,766$560,306,400 (Note: The 8. 3% of cases that are considered critical comes from the original 2. 5% of cases that actually received transfusions – 2. 5% / 30% = 8. 3%. ).