Biopure

t@¡@@l Harvard Business Schoot

9-598-150
Rev.

May 27,7999

Biopure Corporat¡on
It was February 5, 1998, as Carl Rausch, president and CEO of Biopure Corporaüon, opened his Boston Globe and read about the U.S. government's final approval of Oxyglobin (see ExhiÚit r). Oxyglobin was the first of two new "blood substitutes" on which Biopure's future dependedOxyglobin for the veterinarymarket and Hemopure for the human market. Vühile Oxygiobin was ready for launch, Hemopure was still two years away from final government approval. This timing was the source of an ongoing debate within Biopure.
Ted ]acobs, vice president for Human Clinical Trials at Biopure, argued that the release of Oxyglobin should be delayed urrtll after Hemopure was approved and had established itself in themarketplace (see Exhibit 2 for an organizational chart of Biopure). Given that the two products were almost identical in physical properties and appearance, he felt that Oxyglobin would create an unrealistic price expectation for Hemopure if released first. As he made clear in a recent management meeting,
... [T]he veterinary market is small and price sensitive. We'll be lucky to get unit. The humanmarket, on the other hand, is many times larger and we can realistically achieve price points of $600 to $800 per unit. But as soon as we come
$150 per

out with Oxyglobin at $150, we jeopardize o.ur ability to price Hemopure at

Hospitals and insurance firms will be all over us to justify a 500% price difference for what they see as the same product. That's a headache we just don't need.We've spent $200 million developing Hemopure-to risk it at this point is crazy. We should just shelve Oxyglobin for now.

$800.

At the same time, Andy Wright, vice president for Veterinary Products, had his sales organization in place and was eager to begin selling Oxyglobin. He argued that the benefits of immediately releasing Oxyglobin outweighed the risks,
Oxyglobin would generate our firstrevenues ever-revenues we could use to launch Hemopure. And while the animal market is smaller than the human market, it is still attractive. Finally, I can't stress enough the value of Oxyglobin in learning how to "go to market." would you rather make the mistakes now, with oxyglobin, or in two years, with Hemopure?

Professor lohn Gouruille prepared this case as the basis for class discussionrather than to illustrate either effectfue or ineffectiae handling of an administratiae situation. Some nonpublic data hat;e been disguised anil some business details haoe been simplified to aid in classroom discussion.

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Biopure Corporation

While Carl Rausch listened to this debate, he also considered hiscolleagues' growing desire to take Biopure public in the near future. He wondered whether a proven success with Oxyglobin might not have a greater impact on an IPO than the promise of success with Hemopure.

An Overview of Biopure
Biopure Corporation was founded in 1984 by entrepreneurs Carl Rausch and David ]udelson as a privately owned biopharmaceutical firm specializing in theultrapurification of proteins for human and veterinary use. By 1998, üis mission had taken Biopure to the point where it was one of three legitimate contenders in the emerging field of "blood substitutes."l Blood substitutes were designed to replicate the oxygen-carrying function of actual blood, while eliminating the shortcomings associated with the transfusion of donated blood. Through the end of 7997, no...