Biopure

Biopure Corporation

It was February 5, 1998, as Carl Rausch, president and CEO of Biopure Corporation, opened

his Boston Globe and read about the U.S. government’s final approval of Oxyglobin (see Exhibit 1).

Oxyglobin was the first of two new “blood substitutes” on which Biopure’s future depended—

Oxyglobin for the veterinary market and Hemopure for the human market. While Oxyglobin 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 Jacobs, vice president for Human Clinical Trials at Biopure, argued that the release of

Oxyglobin should be delayed until after Hemopure was approved and had established itself in the

marketplace (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

$150 per unit. The human market, 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

out with Oxyglobin at $150, we jeopardize our ability to price Hemopure at $800.

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.

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 first revenues ever—revenues we could use to

launch Hemopure. And...