Case Interview Question #00188: The client Xagenic is a Boston-based medical start-up company. It was founded by a professor at Boston College with past commercialization experience, whose research lab recently developed a new device that can efficiently filter blood. The client has hired you as a consultant because she wants to know the market potential and optimal price for this medical device. How would you approach the case?
- The only substitute for this new blood filtering device is bagged blood.
- Approximately 30 million pints of bagged blood in the U.S. was used last year.
- The filtration system is superior to bagged blood, for the increased assurance that the blood has been appropriately filtered.
- The price of using bagged blood in an operation is $2 per pint (equivalent to 1 bag), plus the cost for the attendant – $10.
- The cost of the new filtration system is the fixed cost for the machine, the cost for each filter (one used per operation), and $10 for an attendant.
- Operations can be segmented into 3 categories: Type 1 using 1-2 bags per operation (50%), Type 2 using 3-5 bags per operation (25%), and Type 3 using more than 5 bags per operation (25%). Type 2 and 3 operations use 90% of total bagged blood consumed.