BIOPURE CORP, S-1, 1999-05-19

BIOPURE CORP
S-1, 1999-05-19

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 1999.

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BIOPURE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 2836 04-2836871
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

11 HURLEY STREET
CAMBRIDGE, MA 02141
(617) 234-6500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JANE KOBER, ESQ.
BIOPURE CORPORATION
11 HURLEY STREET
CAMBRIDGE, MA 02141
(617) 234-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:

<TABLE>
<S> <C>
LARS BANG-JENSEN, ESQ. GERALD S. TANENBAUM, ESQ.
LEBOEUF, LAMB, GREENE & MACRAE, L.L.P. CAHILL GORDON & REINDEL
125 WEST 55TH STREET 80 PINE STREET
NEW YORK, NY 10019-5389 NEW YORK, NY 10005
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Class A Common Stock.............................. $86,250,000 $23,978
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</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS
Subject to Completion
Dated May 19, 1999

[Biopure Logo]

Class A Common Stock

Biopure Corporation is selling all of the shares of class A common stock in this
offering.

Prior to the offering, there has been no public market for our class A common
stock. It is currently anticipated that the initial offering price will be
between $ and $ per share. We intend to apply to have the shares of
class A common stock listed on the Nasdaq National Market under the symbol
"BPUR".

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY
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<S> <C> <C> <C>
Per share $ $ $
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Total $ $ $
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</TABLE>

We have agreed to grant the underwriters the right to purchase up to an
additional shares of class A common stock to cover
over-allotments.

It is expected that delivery of the shares will be made to investors on or about
, 1999.

J.P. MORGAN & CO.

ADAMS, HARKNESS & HILL, INC.

ROBERT W. BAIRD & CO.
INCORPORATED

, 1999
<PAGE> 3

[Inside front cover.]
<PAGE> 4

You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of class A common stock only in jurisdictions where offers and sales
are permitted.
------------------------

TABLE OF CONTENTS

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PAGE
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Prospectus Summary.......................... 5
Risk Factors................................ 8
Use of Proceeds............................. 12
Dividend Policy............................. 12
Capitalization.............................. 13
Dilution.................................... 14
Selected Consolidated Financial Data........ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 16
Business.................................... 20
</TABLE>

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PAGE
<S> <C>
Management.................................. 33
Certain Relationships and Related
Transactions.............................. 39
Principal Stockholders...................... 40
Description of Capital Stock................ 43
Shares Eligible For Future Sale............. 47
Underwriting................................ 48
Legal Matters............................... 50
Experts..................................... 50
Available Information....................... 50
Index to Consolidated Financial
Statements................................ F-1
</TABLE>

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Until , 1999, all dealers that effect transactions in the class A
common stock, whether or not participating in the offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.

We intend to furnish to our stockholders annual reports containing audited
financial statements and quarterly reports containing unaudited interim
financial information for the first three quarters of each fiscal year.
------------------------

Biopure(R), Hemopure(R) and Oxyglobin(R) are registered trademarks of Biopure.

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[This page intentionally left blank.]
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PROSPECTUS SUMMARY

This summary may not contain all the information that may be important to you.
You should read the entire prospectus, especially "Risk Factors" and the
Consolidated Financial Statements and the related Notes, before deciding to
invest in shares of our class A common stock. When we refer to "us", "we", "our"
and "Biopure" in this prospectus, we mean Biopure Corporation.

THE COMPANY

Biopure is a leading developer, manufacturer and marketer of oxygen
therapeutics. Our oxygen therapeutics are pharmaceuticals that are intravenously
administered into the circulatory system to increase oxygen delivery to the
body's tissues. We have developed and manufacture two hemoglobin-based oxygen
therapeutic products -- Hemopure, for human use, and Oxyglobin, for veterinary
use. Hemopure is currently in a pivotal Phase III clinical trial in the United
States. Oxyglobin, the only hemoglobin-based oxygen carrier approved by the U.S.
Food and Drug Administration, or the FDA, has been commercially available since
March 1998 for the treatment of anemia in dogs, regardless of cause.

Oxygen delivery can be affected by acute blood loss or medical conditions such
as anemia, ischemia or cardiopulmonary failure. The standard therapy for anemia
resulting from blood loss is a red blood cell transfusion. Hemopure compares
favorably to transfused red blood cells in that it:

- - is highly purified by proprietary and patented processes to remove possible
infectious agents;

- - has a two-year shelf life as compared to blood's 42-day shelf life;

- - does not require refrigeration;

- - maintains full oxygen-releasing capability during storage;

- - does not require blood typing or other tests for compatibility; and

- - has an abundant, low-cost raw material source -- bovine red blood cells.

We believe that Hemopure also has potential for use in the treatment of other
critical care conditions such as trauma, ischemic conditions, including stroke
and heart attack, and malignant hypoxic tumors. Hemopure:

- - is significantly smaller in molecular size than red blood cells, so it can
flow around partial blockages and through constricted vessels;

- - is less viscous than red blood cells and, therefore, possesses better flow
characteristics;

- - is chemically designed to release more oxygen than the hemoglobin contained in
red blood cells; and

- - facilitates the release of oxygen from red blood cells.

Hemopure has been infused into 421 humans in 19 completed clinical trials at
doses of up to 244 grams of hemoglobin contained in approximately two liters, or
eight units, of Hemopure. We believe Hemopure is a safe, effective alternative
to red blood cell transfusion after blood loss from surgery. Our trials
demonstrate Hemopure's efficacy as measured by the elimination of a significant
percentage of red blood cell transfusions. Biopure expects to file for Hemopure
marketing approval as an alternative to red blood cell transfusions for
specified surgical procedures in South Africa in 1999 and in the United States
and the European Union in 2000.

Oxyglobin is identical to Hemopure except for its molecular size distribution.
Veterinarians report successful use of Oxyglobin in critical care situations
involving blood loss, destruction of red blood cells and ineffective production
of red blood cells in dogs. In 1998, Biopure filed for regulatory approval to
market Oxyglobin to treat canine anemia in the European Union.

Biopure operates a large-scale manufacturing facility with adequate capacity to
produce both Oxyglobin for commercial sale and Hemopure for clinical trials and
market introduction following FDA approval. Biopure believes that its
manufacturing facilities comply with current Good Manufacturing Practices
prescribed by the FDA.

We were incorporated in 1984 in Delaware. Our address is 11 Hurley Street,
Cambridge, Massachusetts 02141 and our telephone number is (617) 234-6500.

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THE OFFERING

The following information reflects shares of class A common stock
outstanding as of the date of this prospectus and the conversion of our
convertible preferred stock into shares of class A common stock upon
consummation of this offering. The number of outstanding shares of class A
common stock does not include shares of class A common stock issuable
on the exercise of outstanding stock options and warrants or between 970,000 and
1,908,179 shares of class A common stock issuable upon the conversion of our
class B common stock following FDA approval of Hemopure.

CLASS A COMMON STOCK OFFERED............. shares of class A common stock

CLASS A COMMON STOCK TO BE
OUTSTANDING AFTER THE OFFERING........... shares of class A common stock;
shares of class A common
stock if the underwriters'
over-allotment option is exercised in
full

OVER-ALLOTMENT OPTION.................... shares of class A common stock

USE OF PROCEEDS..........................$ to repay a loan from Pharmacia &
Upjohn, Inc., $ for capital
expenditures and the balance for
general corporate purposes, including
$ for clinical trials for
Hemopure and $ for
pre-marketing expenditures for Hemopure
and expanded marketing efforts for
Oxyglobin

PROPOSED NASDAQ NATIONAL MARKET SYMBOL..."BPUR"

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SUMMARY CONSOLIDATED FINANCIAL DATA

Set forth below are consolidated statements of operations data for the fiscal
years ended October 31, 1996, 1997 and 1998 and the three months ended January
31, 1998 and January 30, 1999. Also set forth below are consolidated balance
sheet data at January 30, 1999, on an actual basis and on a pro forma as
adjusted basis. The following consolidated statements of operations data for the
fiscal years ended October 31, 1996, 1997 and 1998 are derived from our
consolidated financial statements that appear elsewhere in this prospectus and
that have been audited by Ernst & Young LLP, independent auditors. The
consolidated statements of operations data for the three months ended January
31, 1998 and January 30, 1999 and the consolidated balance sheet data at January
30, 1999 are derived from our unaudited consolidated financial statements that
appear elsewhere in this prospectus, which include all adjustments that we
consider necessary for a fair presentation of the financial position and results
of operations for such periods. The consolidated financial data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
related Notes included elsewhere in this prospectus. Diluted earnings per share
are not presented in the consolidated statements of operations data because we
had losses in all periods.

The pro forma loss per common share data give effect to the conversion of our
convertible preferred stock upon consummation of this offering, the repurchase
of 2,541,410 shares of class A common stock at $2.08 per share and imputed
interest expense on the related obligation, and the issuance of shares
of class A common stock at an assumed initial public offering price of $ per
share, the midpoint of the range set forth on the cover page of this prospectus,
and the use of the net proceeds from that issuance to repay long-term debt and
the related reduction in interest expense. The pro forma as adjusted balance
sheet data also reflect the sale of all shares of class A common stock offered
by us in this offering at the same assumed initial public offering price, after
deducting the underwriting discounts and offering expenses payable by us.

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<CAPTION>
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FISCAL YEAR ENDED OCTOBER 31, THREE MONTHS ENDED
-------------------------------- --------------------------
JANUARY 31, JANUARY 30,
1996 1997 1998 1998 1999
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(UNAUDITED)
<S> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues..................................... $ 71 $ -- $ 1,131 $ 54 $ 733
Cost of revenues................................... -- -- 1,543 -- 1,680
-------- -------- -------- ----------- -----------
Gross profit (loss)................................ 71 -- (412) 54 (947)
Operating expenses:
Research and development......................... 18,924 23,494 22,950 5,728 4,283
Sales and marketing.............................. -- 694 2,444 258 729
General and administrative....................... 3,506 2,920 4,660 1,032 1,092
-------- -------- -------- ----------- -----------
Total operating expenses........................... 22,430 27,108 30,054 7,018 6,104
-------- -------- -------- ----------- -----------
Income (loss) from operations...................... (22,359) (27,108) (30,466) (6,964) (7,051)
Total other income (expense)....................... 765 (310) 419 248 207
-------- -------- -------- ----------- -----------
Net income (loss).................................. $(21,594) $(27,418) $(30,047) $ (6,716) $ (6,844)
======== ======== ======== =========== ===========
Historical basic net income (loss) per common
share............................................ $ (1.18) $ (1.49) $ (1.61) $ (0.36) $ (0.37)
Historical weighted average common shares
outstanding...................................... 18,322 18,450 18,690 18,624 18,633
Pro forma basic net income (loss) per common
share............................................ $ $ $
Pro forma weighted average common shares
outstanding......................................
</TABLE>

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<CAPTION>
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AT JANUARY 30, 1999
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PRO FORMA
ACTUAL AS ADJUSTED
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(UNAUDITED)
<S> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................................... $14,892 $
Total current assets........................................ 22,230
Working capital............................................. 11,985
Net property and equipment.................................. 29,244
Total assets................................................ 52,558
Long-term debt (including current portion).................. 5,500
Obligation for repurchased shares (including
current portion).......................................... --
Total stockholders' equity.................................. 36,834
</TABLE>

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RISK FACTORS

You should carefully consider each of the risks and uncertainties described
below and all of the other information contained in this prospectus before
deciding to invest in shares of our class A common stock. If any of the
following risks and uncertainties develop into actual events, our business,
financial condition or results of operations could be harmed. In such case, the
trading price of our class A common stock could decline.

COMPANY RISKS

OUR FUTURE SUCCESS DEPENDS ON ONE PRODUCT--HEMOPURE
Our operations to date have consisted primarily of developing and testing one
product, Hemopure. We do not expect to succeed as a company unless we develop
Hemopure commercially and sell enough Hemopure at a high enough price to
generate a profit. Even if Hemopure is developed commercially, future sales of
Hemopure depend, in part, on whether Hemopure is accepted by physicians or
clinicians as a therapeutic alternative for other products, including donated
red blood cells. In addition, reimbursement for the cost of Hemopure may be
unavailable or limited and, as a result, Hemopure may not be used by physicians
or clinicians. The commercial success of Hemopure will also depend, in part, on
the acceptance by the public of a natural protein product derived from bovine
red blood cells for use in transfusions.

WE MUST OBTAIN REGULATORY APPROVALS IN ORDER TO MARKET HEMOPURE
We will not be able to market Hemopure in the United States until FDA approval
is obtained, a process that generally takes years and consumes substantial
capital resources with no assurance of ultimate success. We cannot apply for FDA
approval to market Hemopure until the product successfully completes an ongoing
U.S. pivotal Phase III clinical trial. Several factors may prevent successful
completion of this clinical trial, including an inability to enroll the required
number of patients and insufficient demonstration that Hemopure is safe and
effective enough to be approved by the FDA for use in humans. If safety problems
develop, the FDA could stop our trial before it is complete. Even if we complete
the trial, we are not certain that we will be able to obtain FDA approval of
Hemopure. We believe that our ongoing U.S. Phase III clinical trial is
consistent with the FDA's most recent guidance on the design and efficacy and
safety endpoints required for approval of products such as Hemopure. However,
the FDA could change its view or require a change in study design, additional
data or even further clinical trials prior to approval of Hemopure. Failure to
complete our ongoing U.S. pivotal Phase III clinical trial and obtain FDA
approval would harm our business and would adversely impact our ability to
succeed as a company.

We also intend to market our products in international markets, including the
European Union and South Africa. We will not be able to market our products in
the European Union, South Africa and many other foreign jurisdictions without
separate regulatory approvals. The regulatory approval processes may differ
among these jurisdictions. Approval in any one jurisdiction does not ensure
additional approvals. As a result, we may be required to undertake additional
trials and incur additional expense before obtaining foreign approvals.

WE MUST RECEIVE FDA APPROVAL TO EXPAND INDICATIONS FOR OUR PRODUCTS
The FDA will require a separate approval for each proposed indication for use of
Hemopure. We expect that our first indication for Hemopure will be for use in
elective orthopedic surgery. Subsequently, we expect to expand Hemopure's
indications. In order to do so, we will have to design additional clinical
trials, submit the trial designs to the FDA for approval and complete those
trials successfully. We cannot guarantee that the FDA will grant approval of
Hemopure for any indication. Until Hemopure is approved for use in these other
indications, it is possible that the FDA may require a label cautioning against
Hemopure's use for any or all of these other indications. A significant delay in
our future clinical trials or a failure to achieve FDA approval of Hemopure
following our future clinical trials would harm our business and could prevent
us from becoming profitable.

Our veterinary product, Oxyglobin, has received FDA approval for treatment of
anemia in dogs, regardless of cause. We will be required to seek supplemental
approvals to market Oxyglobin for any new indications or additional species. We
cannot guarantee that we will receive such approvals.

WE LACK SALES AND MARKETING CAPABILITY
We have no experience in the sale or marketing of medical products for humans.
In the past, we entered into agreements with two established pharmaceutical
companies to market our products upon successful completion of clinical
development. These arrangements ended in 1996 and 1997. In the event that we
obtain FDA approval of Hemopure, we may not be able to market and distribute
Hemopure effectively without the assistance of one or more experienced
pharmaceutical companies.

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If we seek an alliance with an experienced pharmaceutical company:

- - we may be unable to find a collaborative partner, enter into an alliance on
favorable terms or enter into an alliance that will be successful;

- - any partner to an alliance might, at its discretion, limit the amount and
timing of resources it devotes to our company; and

- - any marketing partner or licensee may terminate its agreement with us and
abandon our products at any time for any reason without significant payments.

If we do not enter into an alliance with a pharmaceutical company to market and
distribute our products, we may not be successful in entering into alternative
arrangements, whether engaging independent distributors or recruiting, training
and retaining a marketing staff and sales force of our own. Any such failure
could harm our business.

WE WILL NEED TO INCREASE MANUFACTURING CAPACITY
We will need to construct additional manufacturing facilities to meet annual
demand in excess of 120,000 units of Hemopure. The costs and risks associated
with building and validating these new facilities will be significant. It is
possible that we will incur significant costs in connection with the
construction of additional manufacturing facilities in advance of FDA approval
of Hemopure. In addition, if we experience rapid market acceptance of Hemopure,
we may have difficulty manufacturing enough of the product to meet the demand. A
failure to have adequate manufacturing capacity could harm our business.

OUR COMPANY WILL NEED TO RAISE ADDITIONAL FUNDS IN THE FUTURE
We require substantial working capital to properly develop, manufacture and sell
our products. We expect to use a significant portion of the net proceeds of this
offering to fund our working capital requirements. Additional manufacturing
facilities will require additional financing. If such financing is not available
when needed or is not available on acceptable terms, we may be delayed in
developing products, building manufacturing capacity or fulfilling other
important goals, any of which could harm our business.

WE HAVE NO OPERATING HISTORY
Almost all of our funding to date has consisted of licensing fees, payments to
us from investors and payments to fund our research and development activities.
We have no operating history upon which to base an evaluation of our company and
our prospects. We must successfully develop our products and product
enhancements, achieve market acceptance of our products and respond to
competitive developments. There can be no assurance that we will be successful
in doing so, that we will ever be profitable or, if we are, that we will remain
profitable on a quarterly or annual basis.

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES
We have had annual losses from operations since our inception in 1984, and we
expect to continue to incur losses from operations until we are able to develop
Hemopure commercially and generate a profit. As of January 30, 1999, we had
accumulated a deficit of $203.8 million. Our 1998 auditors' report stated that
our recurring losses from operations raise substantial doubt about our ability
to continue as a going concern.

OUR BUSINESS IS DEPENDENT ON OUR INTELLECTUAL PROPERTY
We believe that our patents, trademarks and other intellectual property rights,
including our proprietary know-how, will be important to our success. Our
business position will depend, in part, upon our ability to defend our existing
patents and engage in our business free of claims of infringement by third
parties. We will need to obtain additional patents for our products, the
processes by which they are made and their uses. There can be no assurance that
additional products or processes will achieve patent protection. It is possible
that our patents may be challenged successfully. Oppositions to one of our
European patents have already led to a narrowing of this patent in Europe and,
since some oppositions are still pending, may lead to further narrowing or even
a loss of this European patent.

We have not filed patent applications in every country of the world. In certain
countries, obtaining patents for our products, processes and uses may be
difficult or impossible. Patents issued in countries other than the United
States and in regions other than Europe may be harder to enforce than, and may
not provide the same protection as, patents obtained in the United States and
Europe.

WE FACE A RISK OF INFRINGEMENT CLAIMS
We may, in the future, be involved in litigation involving our intellectual
property or the intellectual property of others. Such litigation may involve a
claim that our activities, our products, the processes used to make our products
or the manner in which our products are used constitute patent infringement.
Such litigation may also be initiated by a third party seeking to

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challenge the validity, enforceability or scope of our patents. In addition, our
intellectual property could be subject to litigation involving a third party's
claim of ownership to part or all of our intellectual property. The outcome of
any such litigation cannot be predicted in advance and an adverse result in any
such litigation could harm our business.

WE MAY INCUR PRODUCT LIABILITY CLAIMS
The testing and marketing of medical products, even after FDA approval, have an
inherent risk of product liability. We maintain limited product liability
insurance coverage in the total amount of $10.0 million. Our business may be
harmed by a successful product liability claim in excess of our insurance
coverage. We cannot guarantee that product liability insurance will be available
in the future or be available on reasonable terms. A failure to obtain or
maintain adequate product liability insurance could harm our business.

OUR BUSINESS IS DEPENDENT ON OUR SUPPLIERS
We obtain some key materials, including membranes and chemicals, from sole
source suppliers. If such materials were no longer available at a reasonable
cost from our existing suppliers, we would need to obtain supply contracts with
new suppliers for substitute materials. If we need to locate a new supplier, we
will likely be required to test the replacement materials for equivalency. Such
evaluations could delay development of a product, limit commercial sales of an
FDA-approved product and cause us to incur significant additional expense. The
marketing of an FDA-approved drug could be delayed while such tests are
conducted.

INDUSTRY RISKS

WE ARE COMPETING IN A RAPIDLY CHANGING, HIGHLY COMPETITIVE INDUSTRY
There are a number of companies, universities and research organizations
actively engaged in research and development of products that may be similar to
Hemopure. The biotechnology and pharmaceutical industries are highly
competitive. Our existing or potential competitors:

- - are also conducting clinical trials of their products;

- - may have substantially greater resources than our company and may be better
equipped to develop, manufacture and market their products;

- - may have their products approved for marketing prior to Hemopure; and

- - may develop superior technologies or products rendering our technology and
products non-competitive or obsolete.

THE MANUFACTURE AND MARKETING OF OUR PRODUCTS IS SUBJECT TO STRINGENT GOVERNMENT
REGULATION
When a product is granted FDA approval, the product continues to be subject to
review and challenge. Newly discovered information may force the FDA to withdraw
a previously approved product from the market. If and when the FDA approves
Hemopure, its manufacture and marketing will be subject to ongoing regulation.
We will be required to comply with current Good Manufacturing Practices, adverse
event reporting requirements and the FDA's general prohibitions against
promoting products for unapproved or "off-label" uses. We are also subject to
inspection and market surveillance by the FDA for compliance with these
requirements. Any enforcement action resulting from failure to comply with these
requirements could harm our business. In addition, our competitors could
challenge the marketing or advertising of our products by initiating a complaint
with the FDA or other regulatory agency. A successful challenge by a competitor
of our marketing or advertising could harm our business.

We will be subject to a variety of regulations governing clinical trials and
sales of our products outside the United States. Whether or not FDA approval has
been obtained, approval of a product by the comparable non-U.S. regulatory
authorities must be obtained prior to the commencement of marketing of the
product in a country. The approval process varies from country to country and
the time needed to secure additional approvals may be longer than that required
for FDA approval. These applications may require the completion of preclinical
and clinical studies and disclosure of information relating to manufacturing and
controls. Unanticipated changes in existing regulations or the adoption of new
regulations could also harm our business.

OUR BUSINESS COULD BE HARMED BY HEALTH CARE REFORM AND CHANGES IN THE HEALTH
CARE INDUSTRY
The federal government and private insurers have considered ways to change, and
have changed, the manner in which health care services are provided in the
United States. Potential approaches and changes in recent years include controls
on health care spending and the creation of large purchasing groups. In the
future, it is possible that government price controls and limits on Medicare and
Medicaid spending could be instituted. This might affect the payment we collect
from sales of our

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products. Because of uncertainties regarding future health care reform and
private market practices, if we succeed in bringing Hemopure to market, it is
not certain that we will be able to sell Hemopure in large quantities at
profitable pricing.

UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT
Sales of medical products largely depend on patients being reimbursed for their
medical expenses by governmental health care programs and private health
insurers. There is no guarantee that such reimbursement will be available for
our sales of Hemopure, or that it will permit us to sell our products at high
enough prices to generate a profit.

OFFERING RISKS

FUTURE SALES OF CLASS A COMMON STOCK COULD DEPRESS THE PRICE OF OUR CLASS A
COMMON STOCK
After this offering, our existing stockholders will hold % of the
outstanding shares of class A common stock. A decision by one or more of our
stockholders to sell their class A common stock could depress the market price
of our class A common stock.

PURCHASERS OF SHARES OF CLASS A COMMON STOCK IN THIS OFFERING WILL EXPERIENCE
SUBSTANTIAL DILUTION
Purchasers of shares of class A common stock in this offering will experience
immediate and substantial dilution of $ in pro forma net tangible book
value per share, or approximately % of the offering price, assuming an
initial public offering price of $ per share, the midpoint of the range set
forth on the cover page of this prospectus. In contrast, existing stockholders
paid an average price of $ per share.

------------------------

This prospectus also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
the risks faced by us described above and elsewhere in this prospectus. We
assume no obligation to update any forward-looking statements or reason why
actual results might differ.

11
<PAGE> 13

USE OF PROCEEDS

The net proceeds we will receive from the sale of the shares of class A
common stock offered by us are estimated to be $ , or $ if the
underwriters' over-allotment option is exercised in full, after deducting the
estimated underwriting discounts and offering expenses payable by us and
assuming an initial public offering price of $ per share, the midpoint of
the range set forth on the cover page of this prospectus.

We currently intend to use the net proceeds of this offering as follows:

- - $ to repay the principal amount of our loan from Pharmacia & Upjohn,
Inc., which bears interest at the prime rate, 7.75% per annum at April 30,
1999, and is payable in quarterly installments ending October 1, 2001;

- - $ for capital expenditures; and

- - the balance for general corporate purposes, including

-- $ for clinical trials for Hemopure, and

-- $ for pre-marketing expenditures for Hemopure and expanded
marketing efforts for Oxyglobin.

Pending such uses, we intend to invest the proceeds in short-term,
investment-grade securities. Although we do not contemplate any changes in the
use of proceeds, the amounts shown may be adjusted among the uses indicated
above, or portions of the net proceeds may be used for other purposes.

DIVIDEND POLICY

We do not intend to pay any cash dividends on our class A common stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
fund the development and growth of our business. Future dividends, if any, will
be determined by our board of directors.

12
<PAGE> 14

CAPITALIZATION

The following table sets forth, as of January 30, 1999, our capitalization on an
actual basis and on a pro forma as adjusted basis. The pro forma as adjusted
data give effect to the retirement of all treasury shares in February 1999, the
repayment of all long-term debt with a portion of the net proceeds from this
offering, the repurchase of 2,541,410 shares of class A common stock at $2.08
per share and the related obligation, the sale of shares of class
A common stock offered by us in this offering at an assumed initial public
offering price of $ per share, the midpoint of the range set forth on the
cover page of this prospectus, after deducting underwriting discounts and
offering expenses payable by us, and the conversion of all shares of our
convertible preferred stock upon consummation of this offering. This information
should be read in conjunction with our Consolidated Financial Statements and the
related Notes appearing elsewhere in this prospectus.

This table does not include shares of class A common stock issuable
upon the exercise of outstanding options and warrants or between 970,000 and
1,908,179 shares of class A common stock issuable upon conversion of our class B
common stock following FDA approval of Hemopure.

<TABLE>
<CAPTION>
------------------------
AT JANUARY 30, 1999
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
In thousands, except par value and share data
Long-term debt (including current portion).................. $ 5,500 --
Obligation for repurchased shares (including current
portion).................................................. --
Stockholders' equity:
Preferred stock (9,000,000 shares authorized):
Series A convertible preferred stock, $0.01 par value
(346,663 shares outstanding actual; none pro forma as
adjusted)............................................. 3 --
Series B convertible preferred stock, $0.01 par value
(2,127,251 shares outstanding actual; none pro forma
as adjusted).......................................... 22 --
Series C convertible preferred stock, $0.01 par value
(2,830,188 shares outstanding actual; none pro forma
as adjusted).......................................... 28 --
Series D convertible preferred stock, $0.01 par value
(1,489,498 shares outstanding actual; none pro forma
as adjusted).......................................... 15 --
Common stock (40,000,179 shares authorized):
Class A common stock, $0.01 par value (18,363,898
shares outstanding actual; shares
outstanding pro forma as adjusted).................... 187
Class B common stock, $1.00 par value (117.7 shares
outstanding actual and pro forma as adjusted)......... -- --
Capital in excess of par value.............................. 219,675
Contributed capital......................................... 24,574 $ 24,574
Notes receivable............................................ (2,337) (2,337)
Treasury stock.............................................. (1,583) --
Accumulated deficit......................................... (203,750) (203,750)
--------- ---------
Total stockholders' equity............................. 36,834
--------- ---------
Total capitalization.............................. $ 42,334 $
========= =========
</TABLE>

13
<PAGE> 15

DILUTION

Our pro forma net tangible book value as of January 30, 1999 was $ , or
approximately $ per share of class A common stock. Pro forma net tangible
book value per share is equal to the amount of our total tangible assets, or
total assets less intangible assets and total liabilities, divided by the number
of shares of class A common stock outstanding as of January 30, 1999, and gives
effect as of January 30, 1999 to the conversion of our convertible preferred
stock into shares of class A common stock upon consummation of this
offering and the repurchase of 2,541,410 shares of class A common stock at $2.08
per share and the related obligation. In addition, if we receive FDA approval of
Hemopure, shares of our class B common stock will be converted into shares of
our class A common stock. Our pro forma class A common stock outstanding also
gives effect to the conversion of our class B common stock into 1,908,179 shares
of class A common stock, the maximum number of shares that could be issued on
conversion. Assuming the sale by us of shares of class A common
stock in this offering at an initial public offering price of $ per share,
the midpoint of the range set forth on the cover page of this prospectus, after
deducting the underwriting discounts and offering expenses payable by us, and
the application of the proceeds from this offering, our pro forma net tangible
book value as of January 30, 1999 would have been $ , or $ per
share of class A common stock. This represents an immediate increase in pro
forma net tangible book value of $ per share to our existing stockholders
and an immediate dilution in pro forma net tangible book value of $ per
share to new investors. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
------------------
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of January
30, 1999............................................... $
Increase to present stockholders attributable to this
offering...............................................
-------
Pro forma net tangible book value per share after the
offering..................................................
-------
Dilution per share to new investors......................... $
=======
</TABLE>

The following table summarizes, on the pro forma basis described above, the
total number of shares of class A common stock issued, the total consideration
provided and the average price per share paid by existing stockholders,
including holders of our class B common stock and convertible preferred stock as
if they had purchased, for the investment made for their class B common stock or
their convertible preferred stock, the number of shares of class A common stock
into which their class B common stock or their convertible preferred stock is
convertible, and the price paid by new investors.

<TABLE>
<CAPTION>
-----------------------------------------------------------
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders................................ % $ % $
Purchasers of class A common stock in the offering... $
-------- ----- -------- -----
Total...................................... 100.0% $ 100.0% $
======== ===== ======== =====
</TABLE>

The foregoing tables and calculations assume no exercise of outstanding options
and warrants. At January 30, 1999, there were shares of class A
common stock reserved for issuance upon exercise of outstanding options and
warrants with a weighted average exercise price of $ per share. To the
extent that these options or these warrants are exercised, there will be further
dilution to new investors.

14
<PAGE> 16

SELECTED CONSOLIDATED FINANCIAL DATA

Set forth below are consolidated statements of operations data for the fiscal
years ended October 31, 1994, 1995, 1996, 1997 and 1998 and the three months
ended January 31, 1998 and January 30, 1999. Also set forth below are
consolidated balance sheet data at October 31, 1994, 1995, 1996, 1997 and 1998
and at January 30, 1999, on an actual and a pro forma as adjusted basis. The
following consolidated financial data with respect to our statements of
operations for the years ended October 31, 1996, 1997 and 1998 and with respect
to our balance sheets as of October 31, 1997 and 1998 are derived from our
consolidated financial statements that appear elsewhere in this prospectus and
that have been audited by Ernst & Young LLP, independent auditors. The following
consolidated financial data with respect to our statements of operations for the
years ended October 31, 1994 and 1995 and with respect to our balance sheets as
of October 31, 1994, 1995 and 1996 are derived from our audited consolidated
financial statements that are not included herein. The consolidated financial
data for the three months ended January 31, 1998 and January 30, 1999 are
derived from our unaudited consolidated financial statements that appear
elsewhere in this prospectus, which include all adjustments that we consider
necessary for a fair presentation of the financial position and results of
operations for such periods. The consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
related Notes included elsewhere in this prospectus. Diluted earnings per share
are not presented in the consolidated statement of operations data because we
had losses in all periods.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
THREE MONTHS ENDED
FISCAL YEAR ENDED OCTOBER 31, --------------------------
-------------------------------------------------------- JANUARY 31, JANUARY 30,
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues........................... $ -- $ 46 $ 71 $ -- $ 1,131 $ 54 $ 733
Cost of revenues......................... -- -- -- -- 1,543 -- 1,680
-------- -------- -------- -------- -------- ----------- -----------
Gross profit (loss)...................... -- 46 71 -- (412) 54 (947)
Operating expenses:
Research and development............... 17,896 16,498 18,924 23,494 22,950 5,728 4,283
Sales and marketing.................... -- -- -- 694 2,444 258 729
General and administrative............. 3,811 3,945 3,506 2,920 4,660 1,032 1,092
-------- -------- -------- -------- -------- ----------- -----------
Total operating expenses................. 21,707 20,443 22,430 27,108 30,054 7,018 6,104
-------- -------- -------- -------- -------- ----------- -----------
Income (loss) from operations............ (21,707) (20,397) (22,359) (27,108) (30,466) (6,964) (7,051)
Total other income (expense)............. (1,161) (623) 765 (310) 419 248 207
-------- -------- -------- -------- -------- ----------- -----------
Net income (loss)........................ $(22,868) $(21,020) $(21,594) $(27,418) $(30,047) $ (6,716) $ (6,844)
======== ======== ======== ======== ======== =========== ===========
Historical basic net income (loss) per
common share........................... $ (1.24) $ (1.15) $ (1.18) $ (1.49) $ (1.61) $ (0.36) $ (0.37)
Historical weighted average common shares
outstanding............................ 18,502 18,256 18,322 18,450 18,690 18,624 18,633
Pro forma basic net income (loss) per
common share........................... $ $ $
Pro forma weighted average common shares
outstanding............................
</TABLE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
AT JANUARY 30, 1999
AT OCTOBER 31, -----------------------
-------------------------------------------------------- PRO FORMA
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED
-------- -------- -------- -------- -------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 4,503 $ 7,924 $ 12,772 $ 13,527 $ 6,063 $14,892 $
Total current assets...................... 10,047 10,453 13,636 15,221 13,175 22,230
Working capital........................... 1,848 3,406 8,111 5,368 1,986 11,985
Net property and equipment................ 12,723 28,272 29,438 27,408 29,606 29,244
Total assets.............................. 24,237 40,218 43,462 44,054 44,848 52,558
Long-term debt (including current
portion)................................ -- -- 9,000 8,000 6,000 5,500
Obligation for repurchased shares
(including
current portion)........................ -- -- -- -- -- --
Total stockholders' equity................ 14,911 31,875 26,417 26,522 27,749 36,834
</TABLE>

15
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements and the
related Notes included elsewhere in this prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth under "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

Biopure is a leading developer, manufacturer and marketer of oxygen
therapeutics. Our oxygen therapeutics are pharmaceuticals that are intravenously
administered into the circulatory system to increase oxygen delivery to the
body's tissues. We have developed and manufacture, using a proprietary process
and patented technology, two hemoglobin-based oxygen carriers. Hemopure, for
human use, is currently in a pivotal Phase III clinical trial in the United
States. Oxyglobin, for veterinary use, is the only hemoglobin-based oxygen
carrier approved by the FDA.

Since inception, we have devoted substantially all of our resources to our
research and development programs and manufacturing. We have been dependent upon
funding from debt and equity financings, strategic corporate alliances,
licensing agreements and interest income. We have not been profitable since
inception and had an accumulated deficit of $203.8 million as of January 30,
1999. We expect to incur additional operating losses over the next several years
in connection with clinical trials, pre-marketing expenditures for Hemopure,
expanded marketing of Oxyglobin and increases in production. We began generating
revenue from the sale of Oxyglobin in fiscal 1998.

RESULTS OF OPERATIONS

Three Months Ended January 30, 1999 and January 31, 1998
Total revenues increased to $733,000 in the first quarter of fiscal 1999 from
$54,000 in the first quarter of fiscal 1998. Revenues in the first quarter of
fiscal 1999 included $671,000 of Oxyglobin sales reflecting the national launch
of Oxyglobin in October 1998. Total revenues also reflect $62,000 in the first
quarter of fiscal 1999 and $54,000 in the first quarter of fiscal 1998 from
license and development activities unrelated to our oxygen therapeutic products.

Cost of revenues was $1.7 million in the first quarter of fiscal 1999. We did
not realize any cost of revenues in the first quarter of fiscal 1998 because
Oxyglobin had not yet been approved by the FDA. All such costs were allocated to
research and development expenses prior to FDA approval of Oxyglobin.

Research and development expenses decreased 25.2% to $4.3 million in the first
quarter of fiscal 1999 from $5.7 million in the first quarter of fiscal 1998.
This decrease was primarily attributable to the allocation of that portion of
manufacturing expenses associated with the production of Oxyglobin to cost of
revenues.

Sales and marketing expenses increased 182.6% to $729,000 in the first quarter
of fiscal 1999 from $258,000 in the first quarter of fiscal 1998. This increase
was primarily attributable to increased sales and marketing personnel and
product launch, selling, marketing and distribution expenses related to
Oxyglobin.

General and administrative expenses increased 5.8% to $1.1 million in the first
quarter of fiscal 1999 from $1.0 million in the first quarter of fiscal 1998.
This increase was primarily attributable to the addition of five people in our
general and administrative department.

Total other income (expense) decreased 16.5% to $207,000 in the first quarter of
fiscal 1999 from $248,000 in the first quarter of fiscal 1998. This decrease was
primarily associated with a $313,000 decrease in interest income associated with
a decrease in average cash balances. Average cash balances were approximately
$10.7 million in the first quarter of fiscal 1999 compared to $31.0 million in
the first quarter of fiscal 1998. The decrease in interest income was partially
offset by the receipt of $200,000 under a settlement agreement associated with a
discontinued development project unrelated to oxygen therapeutics.

Fiscal Years Ended October 31, 1998 and 1997
Total revenues were $1.1 million in fiscal 1998. We did not realize any revenues
in fiscal 1997. Revenues in fiscal 1998 included $942,000 of Oxyglobin sales.
Oxyglobin sales commenced in mid-March of fiscal 1998 to a discrete number of
emergency and specialty practices in the United States. Our national product
launch of Oxyglobin occurred in October 1998.

16
<PAGE> 18

Total revenues in fiscal 1998 also reflect $189,000 from license and development
activities and product sales unrelated to our oxygen therapeutic products.

Cost of revenues was $1.5 million in fiscal 1998. We did not realize any cost of
revenues in fiscal 1997. Cost of revenues in fiscal 1998 reflects the allocation
of a portion of the manufacturing costs after FDA approval for Oxyglobin and
completion of a process expansion project in August 1998. These costs were
entirely allocated to research and development expenses prior to August 1998.

Research and development expenses decreased 2.3% to $23.0 million in fiscal 1998
from $23.5 million in fiscal 1997. This decrease was attributable to the $1.5
million allocation of manufacturing expenses associated with the production of
Oxyglobin to cost of revenues from research and development expenses. This
decrease was partially offset by an increase in preclinical activities during
fiscal 1998 as compared to fiscal 1997.

Sales and marketing expenses increased 252.2% to $2.4 million in fiscal 1998
from $694,000 in fiscal 1997. This increase was primarily attributable to
increased sales and marketing personnel and product launch, selling, marketing
and distribution expenses related to Oxyglobin.

General and administrative expenses increased 59.6% to $4.7 million in fiscal
1998 from $2.9 million in fiscal 1997. This increase was primarily attributable
to the addition of five people in the general and administrative department and
expenses related to Hemopure market research and public relations activities.

Total other income (expense) was income of $419,000 in fiscal 1998 compared to
an expense of $310,000 in fiscal 1997. This change of $729,000 was primarily
associated with increased interest income from higher average cash balances
which were approximately $21.6 million in fiscal 1998 compared to $10.6 million
in fiscal 1997.

Fiscal Years Ended October 31, 1997 and 1996
We did not realize any revenues in fiscal 1997 as compared to $71,000 in fiscal
1996. Fiscal 1996 revenues were primarily attributable to license and
development revenues and were not associated with oxygen therapeutics.

Research and development expenses increased 24.1% to $23.5 million in fiscal
1997 from $18.9 million in fiscal 1996. This increase in research and
development expenses was primarily attributable to the completion of plant
construction projects, resulting in increased validation and depreciation
expenses, and increased preclinical and clinical trial activity.

Sales and marketing expenses were $694,000 in fiscal 1997. We did not have any
sales and marketing expenses in fiscal 1996 because our products were awaiting
FDA approval. The increase in sales and marketing expenses was primarily
attributable to pre-launch sales activities for Oxyglobin, which commenced in
1997.

General and administrative expenses decreased 16.7% to $2.9 million in fiscal
1997 from $3.5 million in fiscal 1996. This decrease was primarily attributable
to expenses recorded in 1996 as bonuses related to our agreement with Pharmacia
& Upjohn, Inc.

Total other income (expense) was an expense of $310,000 in fiscal 1997 compared
to income of $765,000 in fiscal 1996. This change of $1.1 million was primarily
due to a gain of $1.0 million in 1996 as a result of a merger between an
affiliate in an unrelated business into another company. As a result of the
merger, we were relieved of loan guarantee obligations and were paid for
accounts receivable for enzymes previously shipped to the affiliate, both of
which had been fully reserved prior to 1996.

LIQUIDITY AND CAPITAL RESOURCES

At January 30, 1999, we had current assets of $22.2 million, which consisted
primarily of $14.9 million in cash and cash equivalents, $3.2 million in net
inventory and $3.5 million held in an escrow account by Biopure as a settlement
payment by which we reacquired shares of class A common stock and license
rights. At January 30, 1999, current liabilities were $10.2 million.

We have financed operations from inception primarily through sales of equity
securities, development and license agreement payments, interest income and
debt. In June, July and August 1997, we issued class A common stock with net
proceeds of $2.4 million. In separate transactions between June and November
1997, we issued series B and series C convertible preferred stock with aggregate
net proceeds of $49.9 million. In May and October 1998, we issued class A common
stock with net proceeds of $2.5 million. In December 1998, we issued series D
convertible preferred stock with aggregate net proceeds of $17.0 million. Our
primary investment objective is preservation of principal and currently we
invest in high grade commercial paper.

17
<PAGE> 19

In October 1996, we incurred $9.0 million in long-term debt to Pharmacia &
Upjohn, Inc. in connection with the mutual termination of a strategic alliance.
As of April 30, 1999, we have repaid $4.0 million of the principal amount of
this debt. At April 30, 1999, the $2.0 million current portion of this debt was
reflected in current liabilities and the balance of $3.0 million was classified
as long-term debt. The loan is payable quarterly in equal installments of
$500,000 principal amount through October 1, 2001. The outstanding principal
balance is subject to mandatory prepayment upon certain financing events,
including a financing in excess of $50.0 million or this initial public
offering.

As of October 31, 1998, we had net operating loss carryforwards of approximately
$140.0 million to offset future federal and state taxable income through 2013.
Due to the degree of uncertainty related to the ultimate realization of such
prior losses, no benefit has been recognized as of October 31, 1998. Utilization
of such losses in future years may be limited under the change of stock
ownership rules of the Internal Revenue Service.

We have not been profitable since inception and had an accumulated deficit of
$203.8 million as of January 30, 1999. We will continue to generate losses from
operations for the foreseeable future. Any need for an additional manufacturing
facility will require additional financings. We will explore opportunities to
finance these needs through sales of equity and debt securities, bank borrowing
or leasing arrangements.

We believe our current cash, cash equivalents and short-term investments,
together with the net proceeds of this offering, should be sufficient to meet
our projected requirements until our anticipated filing in 2000 for FDA approval
of Hemopure, exclusive of major capital expenditures. Cash requirements may vary
significantly from current projections.

YEAR 2000 COMPLIANCE

Some currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.

State of Readiness
We have made an assessment of the ability of our critical information and
non-critical information systems to function properly with respect to dates in
the year 2000 and thereafter. We have based this assessment upon communications
with equipment and software vendors, literature supplied with software and in
connection with maintenance contracts and test evaluations of our systems. Our
critical systems are defined as: transactional systems affecting product
manufacturing, delivery and quantity; systems which play an infrastructure role
in supporting our business and scientific operations; and systems which use
forward-looking or date-based forecasting such as sample or batch expiration
dates.

We have identified potential problems in some of our critical systems and began
repairing, upgrading or replacing such systems in the second quarter of fiscal
1999. We expect to complete this process by the end of the fourth quarter of
fiscal 1999. We expect to repair, replace or upgrade non-critical systems by the
end of calendar year 1999. We will continue to monitor and remediate our
critical and non-critical systems.

Costs
To date, we have incurred approximately $30,000 in costs in connection with
identifying and evaluating Year 2000 compliance issues. Most of our expenses
relate to, and are expected to continue to relate to, the operating costs
associated with time spent by employees in the assessment process, the repair,
upgrade or replacement process and Year 2000 compliance matters generally. We
estimate that the total cost of our Year 2000 project will be $300,000 and
intend to expense such costs as they are incurred. We expect to fund all of
these expenses from working capital. In the event that we incur expenses higher
than anticipated, such additional expenses could harm our business.

Risks
We have also commenced an assessment of the Year 2000 risks of our key
suppliers, including contract research organizations working on our clinical
trials, vendors and veterinary distributors of Oxyglobin. Our assessment is
based upon questionnaires submitted to these third parties. We believe that any
Year 2000 risks associated with these third parties will not have a material
effect on our business. We base our beliefs on the following facts: our key
suppliers, vendors and veterinary distributors are in the process of upgrading
to Year 2000-compliant systems, and our clinical trial information that might be
sensitive to the change from 1999 to 2000 is minimal.

18
<PAGE> 20

Contingency Plan
In the event that we do not complete our Year 2000 conversion, we will manually
perform those tasks which would otherwise be performed by our non-Year
2000-compliant systems until such systems are repaired, upgraded or replaced. In
this event, we anticipate that we will experience delays in our production runs.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information, or
Statement 131, which establishes standards for public companies to report
information about operating segments in financial statements. Statement 131
supersedes Statement No. 14, Financial Reporting for Segments of a Business
Enterprise; however, Statement 131 retains the requirements to report
information about major customers. We adopted Statement 131 effective November
1, 1998. Disclosures required in future periods under Statement 131 are not
expected to be significant.

In March 1998, the Accounting Standards Executive Committee, or AcSEC, issued
Statement of Position No. 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, or SOP No. 98-1. SOP No. 98-1 provides
guidance for the capitalization of certain costs incurred to develop or obtain
internal-use software. SOP No. 98-1 is effective for fiscal 2000. The adoption
of this standard is not expected to have a material effect on our financial
position or operating results.

19
<PAGE> 21

BUSINESS

The following section contains forward-looking statements which involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth in "Risk Factors" and elsewhere in this prospectus.

OVERVIEW

Biopure is a leading developer, manufacturer and marketer of oxygen
therapeutics. Biopure's oxygen therapeutics are pharmaceuticals that are
intravenously administered into the circulatory system to increase oxygen
delivery to the body's tissues. Biopure has developed and manufactures, using a
proprietary process and patented technology, two hemoglobin-based oxygen
carriers. Hemopure, for human use, is currently in a pivotal Phase III clinical
trial in the United States. Oxyglobin, for veterinary use, is the only
hemoglobin-based oxygen carrier approved by the FDA.

Biopure believes Hemopure is a safe, effective alternative to donated red blood
cells for transfusion after blood loss from surgery. Biopure also believes that
Hemopure has potential for use in the treatment of other critical care
conditions, such as trauma, ischemic conditions, including stroke and heart
attack, and malignant hypoxic tumors. Hemopure has been infused into 421 humans
in 19 completed clinical trials at doses of up to 244 grams of hemoglobin
contained in approximately two liters, or eight units, of Hemopure solution.
These trials demonstrate Hemopure's efficacy as measured by the elimination of a
significant percentage of red blood cell transfusions. In Biopure's advanced
clinical trials, Hemopure has shown equivalent safety to the control groups,
which were patients receiving red blood cell transfusions. Biopure expects to
file for Hemopure marketing approval as an alternative to red blood cell
transfusions for specified surgical procedures in South Africa in 1999 and in
the United States and the European Union in 2000.

Hemopure compares favorably to donated human blood for transfusions in that it:

- - is highly purified by proprietary and patented processes to remove possible
infectious agents;

- - has a two-year shelf life as compared to blood's 42-day shelf life;

- - does not require refrigeration;

- - maintains full oxygen-releasing capability during storage;

- - does not require blood typing or other tests for compatibility; and

- - has an abundant, low-cost raw material source -- bovine red blood cells.

In addition, Biopure believes that Hemopure has therapeutic advantages over red
blood cells in a number of indications. Hemopure:

- - is significantly smaller in molecular size than red blood cells, so it can
flow around partial blockages and through constricted vessels;

- - is less viscous than red blood cells and, therefore, possesses better flow
characteristics;

- - is chemically designed to release more oxygen than the hemoglobin contained in
red blood cells; and

- - facilitates the release of oxygen from red blood cells.

Oxyglobin is identical to Hemopure except for its molecular size distribution,
and has the same advantages over red blood cells as Hemopure. It has been
commercially available in the United States since March 1998 for the treatment
of anemia in dogs, regardless of cause. Biopure has sold more than 18,000 units
of Oxyglobin since the nationwide launch in October 1998. Veterinarians report
successful use of Oxyglobin in critical care situations involving blood loss,
destruction of red blood cells and ineffective production of red blood cells. In
1998, Biopure filed for veterinary approval to market Oxyglobin to treat canine
anemia in the European Union.

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<PAGE> 22

SCIENTIFIC OVERVIEW

Oxygen is indispensable to the life of all human tissues. Hemoglobin, a protein
normally contained within red blood cells, is the molecule responsible for
carrying and releasing oxygen to the body's tissues. Hemoglobin's protein
structure is similar in many different animal species, including humans. Under
normal conditions, approximately 98% of the body's oxygen is carried by
hemoglobin contained within red blood cells, while the remaining two percent is
dissolved in the plasma, or fluid part of the blood.

As the heart pumps blood, hemoglobin within the red blood cells takes up oxygen
in the lungs and carries it to various parts of the body. Blood travels through
progressively smaller blood vessels to the capillaries, some of which are so
narrow that red blood cells can only pass through them in single file. Most of
the oxygen release occurs in the capillaries. Blood then returns to the lungs to
reload the red blood cells with oxygen. Adequate blood pressure and red blood
cell counts are crucial to this process. Oxygen deprivation, even for several
minutes, can result in cell damage, organ dysfunction and, if prolonged, death.

The causes of inadequate tissue oxygenation generally can be classified into
three categories:

- - anemia -- insufficient hemoglobin. Anemia may be caused by blood loss from
injury or surgery or by disorders that affect red blood cell production or
maintenance, such as bone marrow disease;

- - ischemia -- inadequate red blood cell flow for tissue oxygenation. Ischemia
may be caused by obstructed or constricted blood vessels and can lead to
stroke, heart attack or other organ or tissue dysfunction; and

- - cardiopulmonary failure -- impaired function of the heart or lungs.
Cardiopulmonary failure may be caused by the inability of the heart to pump
sufficient quantities of blood to meet the needs of the tissues or the failure
of the lungs to oxygenate blood adequately.

The standard therapy for anemia resulting from blood loss is a red blood cell
transfusion. Sources of red blood cells include stored supplies of donated blood
or of the recipient's own pre-donated blood. Medications that stimulate red
blood cell production may also be used if anemia is anticipated, for example, as
a result of planned surgery.

Red blood cell transfusions have certain risks and limitations. As HIV,
hepatitis and other diseases have infected the world's blood supply, the need
for a sterile blood product has become increasingly apparent. There is currently
no 100% effective method for detecting blood-borne diseases or for sterilizing
donated blood. As a result, the risk of disease transmission from donated blood
is an ongoing concern to physicians and patients, although less so than in the
past. Significant medical problems can also result from handling errors in
typing and cross-matching blood, as well as the inadvertent introduction of
pathogens. Blood typing and handling requirements, particularly refrigeration,
limit the feasibility of red blood cell transfusions in pre-hospital emergency
treatment situations. Shortages of certain types of blood can occur due to
seasonal factors or disasters. Since donated red blood cells are available for
use in transfusions for only 42 days after collection, the ability to stockpile
red blood cell supplies is limited. Although the life of red blood cells can be
extended through freezing, the freezing and thawing processes require chemical
treatment of the red blood cells and reduce the efficacy of those red blood
cells. Finally, the longer red blood cells are stored, the longer it takes them
to reach their maximum oxygen-releasing capacity and the more they break down,
limiting their effectiveness in delivering oxygen. Red blood cells lose
approximately 75% of their oxygen-releasing ability after eight days of storage.
Blood banks generally release the oldest stored blood first to prevent outdating
after 42 days.

Red blood cell transfusions generally are not effective for ischemic conditions
because the localized oxygen deprivation results from an obstructed or
constricted blood vessel that is too narrow to permit the normal passage of red
blood cells. Similarly, red blood cell transfusions are generally not effective
in overcoming poor oxygenation resulting from impaired heart or lung function.

Existing alternatives to red blood cell transfusions are limited. In trauma
situations, victims may experience massive bleeding resulting in rapid loss of
blood volume and oxygen-carrying capacity. In an effort to stabilize trauma
patients, emergency caregivers typically administer commonly used intravenous
fluids, such as Ringer's lactate or saline. These fluids restore blood volume,
but do not carry oxygen.

For anemia in non-acute situations, there are currently two biological products
on the market. Both of these products are formulations of a protein called
erythropoietin. Erythropoietin stimulates the body's ability to produce its own
red blood cells. This stimulation is called an erythropoietic effect. In a
surgical setting, these products are administered in anticipation of blood loss
during surgery, thereby potentially reducing the need for red blood cell
transfusions. However, erythropoietin does not deliver oxygen to the body's
tissues and does not act as a blood volume expander. As a result, these products
are not effective in treating acute blood loss and are generally not used in
cases of unplanned surgeries or emergency need. In addition, the labels on these
products caution against their use in cardiac surgery patients.

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<PAGE> 23

BIOPURE'S OXYGENATION TECHNOLOGY

Biopure has two proprietary oxygen therapeutic products that are identical
except for their molecular size distributions. Biopure
defines its products as therapeutics because they remediate oxygen deprived
tissues. These products are intravenously administered and consist of bovine
hemoglobin that has been purified, chemically modified and cross-linked for
stability. The resulting hemoglobin solutions do not contain red blood cells and
are formulated in a balanced salt solution similar to Ringer's lactate.

The average Hemopure molecule is less than 1/1000th the size of a red blood
cell. Once infused into a patient, the Hemopure molecules disperse throughout
the entire plasma space, including the area between and around red blood cells,
and are in continuous contact with the blood vessel wall where oxygen transport
to tissues takes place. The following diagram illustrates the movement of red
blood cells and Hemopure in blood vessels.
[Diagram illustrating the movement of red blood cells and Hemopure in blood
vessels.]

The channels represent small blood vessels. The large circles represent red
blood cells, which are surrounded by plasma. The small particles shown in the
plasma solution represent Hemopure molecules. Hemopure, by filling plasma with
hemoglobin molecules, immediately turns the plasma into an oxygen-delivering
substance. Plasma containing Hemopure flows everywhere that blood ordinarily
flows and can also bypass partial blockages or pass through constricted vessels
that impede the normal passage of red blood cells. Furthermore, introducing
Hemopure into the bloodstream enables red blood cells to release more oxygen to
the tissues than they otherwise would. In addition to delivering oxygen to
tissues, Hemopure also acts as a blood volume expander and may have an
erythropoietic effect.

Hemopure molecules hold the same amount of oxygen as the hemoglobin molecules in
red blood cells on a gram-for-gram basis. Hemopure molecules, however, are
chemically modified to have less affinity for oxygen than red blood cells,
enabling Hemopure to release oxygen to tissues more efficiently than red blood
cells. Human hemoglobin, unlike bovine hemoglobin, depends on the action of 2,3
diphosphoglycerate, or 2,3 DPG, a substance found in high concentrations only
within the red blood cell, for optimal offloading, or release, of oxygen to
tissues. The 2,3 DPG breaks down rapidly in stored blood causing red blood cells
to lose approximately 75% of their ability to release oxygen after eight days of
storage. The 2,3 DPG breakdown reduces the oxygen offloading efficiency of
transfused red blood cells until its levels are restored. It can take transfused
red blood cells hours to regain their oxygen offloading capability. Biopure's
bovine hemoglobin permits the efficient offloading of oxygen in the absence of
2,3 DPG, thereby allowing Hemopure to be at its optimal oxygen offloading
effectiveness immediately upon infusion.

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<PAGE> 24

Hemoglobin molecules in different species have demonstrated low antigenicity,
which means that they do not readily elicit an immune or allergic response.
Biopure has confirmed Hemopure's low antigenicity, as indicated by the absence
of certain effects, through in vitro and in vivo studies. No clinically
significant levels of antibodies were observed in Biopure's trials, including
one human study lasting more than a year with multiple doses.

The following chart lists Hemopure's characteristics in comparison to transfused
red blood cells:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
CHARACTERISTIC HEMOPURE TRANSFUSED RED BLOOD CELLS
-------------- -------- --------------------------
<S> <C> <C>
Onset of action Immediate -- not 2,3 DPG-dependent Initially limited -- 2,3
DPG-dependent
Oxygen affinity More efficient oxygen release to Less efficient oxygen release to
tissues tissues
Oxygen transport Red blood cells and plasma Red blood cells only
Risk of disease transmission Product purity maintained through Risk minimized by testing, donor
a reproducible and controllable selection and administration
manufacturing process that protocols, and ongoing
complies with current Good surveillance for emerging
Manufacturing Practices; no pathogens; leukocyte exposure
leukocyte, or white blood cell,
exposure
Storage Room temperature; no loss of Refrigeration required; loss of
efficacy efficacy
Shelf life 2 years 42 days
Compatibility Universal Type-specific
Preparation Ready-to-use Requires typing and cross-matching
Viscosity Low High
Raw material source Controlled Not controlled
</TABLE>

In addition to Hemopure's use as an alternative to red blood cell transfusions
in surgery, human clinical testing and preclinical studies suggest that Hemopure
also could be a readily available therapeutic with a broad range of potential
applications, such as the treatment of trauma, ischemic conditions, including
stroke and heart attack, and malignant hypoxic tumors.

Hemopure has a two-year shelf life at room temperature, is universally
compatible and can be stocked well in advance of anticipated use. Consequently,
when blood is not available, Hemopure could be used to maintain a patient until
the needed type and quantity of red blood cells arrive, until the patient can be
transported to a hospital or until a patient's body produces its own red blood
cells. Hemopure thus could be an effective "oxygen bridge" to a red blood cell
transfusion or the body's ability to regenerate its own fresh red blood cells.
Hemopure may be particularly well-suited for this "oxygen bridge" function
because the duration of action of a single infusion is about two to three days
with 50% of the Hemopure molecules retained in the circulatory system for 24 to
36 hours following administration. This effect may be prolonged by redosing
Hemopure over several days, as demonstrated in Biopure's clinical trials.

STRATEGY

Biopure intends to expand its leadership position in the development,
manufacture and marketing of oxygen therapeutics through the following strategy:

- - Develop and Commercialize Hemopure as an Alternative to Red Blood Cell
Transfusions. Biopure's advanced clinical trials have demonstrated Hemopure's
efficacy as an alternative to red blood cell transfusions in certain surgical
procedures. While Biopure does not anticipate that Hemopure will replace all
red blood cell transfusions, Hemopure's use in surgery will demonstrate
Hemopure to be a safe and effective oxygen therapeutic in a wide range of
patients. Biopure expects to file for marketing approval of Hemopure in South
Africa in 1999 and to complete its U.S. pivotal Phase III clinical trial and
file for approval in the United States and the European Union in 2000.

- - Pursue Approvals of Hemopure for Additional Therapeutic Applications. Biopure
will seek regulatory approvals for the use of Hemopure as an adjunct to red
blood cell transfusions and, because of its special oxygen therapeutic
characteristics, as a therapy for conditions such as trauma, ischemic
conditions, including stroke and heart attack, and as an adjunct to therapy
for malignant hypoxic tumors. Observations from Biopure's clinical trials, the
results of preclinical studies and field reports support the use of Hemopure
for these conditions.

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<PAGE> 25

- - Increase Market Awareness for Hemopure. Biopure intends to increase market
awareness for Hemopure by identifying the issues and promoting standards
necessary for widespread acceptance of oxygen therapeutics by the medical
community. Biopure has contracted with a medical education firm to work with
physician thought leaders to advocate the clinical benefits of Hemopure and
expects to expand this effort.

- - Expand Market for Oxyglobin. Biopure will seek to broaden Oxyglobin's use to
other canine indications, other animal species and selected international
markets. In 1998, Biopure filed for marketing approval in the European Union
for canine anemia. Biopure will continue advertising and educational
initiatives to further penetrate U.S. veterinary practices. Biopure may also
seek one or more marketing alliances in the United States or other geographic
areas.

BIOPURE'S PRODUCTS

Biopure's two products are oxygen therapeutics. Hemopure, for human use, is
currently in a U.S. pivotal Phase III clinical trial. This trial, together with
the results of prior clinical trials, is expected to form the basis for an FDA
marketing application in the year 2000 for the use of Hemopure as an alternative
to red blood cell transfusions before, during or after elective orthopedic
surgery. Oxyglobin, Biopure's veterinary product, has been approved in the
United States for the treatment of anemia in dogs, regardless of cause, and is
being actively marketed and sold to veterinary hospitals and to small animal
veterinary practices. Hemopure and Oxyglobin have been tested in approximately
19 completed clinical trials and 150 completed preclinical studies involving
more than 400 humans and 1,500 animals from 10 species.

HEMOPURE

Biopure is pursuing the development and approval of Hemopure both as an
alternative to red blood cell transfusions and as a therapeutic for indications
such as trauma, ischemic conditions, including stroke and heart attack, and
malignant hypoxic tumors.

Red Blood Cell Transfusion Alternative
Biopure plans to file for human approval in South Africa in 1999 for Hemopure's
use as an alternative to red blood cell transfusions for elective surgery.
Hemopure would serve as an alternative to a red blood cell transfusion or as an
"oxygen bridge" pending the acquisition or production of suitable red blood
cells. Biopure does not expect Hemopure to replace all red blood cell
transfusions. However, Hemopure's oxygen-carrying properties, storage and
infusion advantages address many of the limitations associated with red blood
cell transfusions. The National Blood Data Resource Center, a subsidiary of the
American Association of Blood Banks, estimated that approximately 11.5 million
units of red blood cells and whole blood, including the patient's own previously
donated blood, were transfused in the United States in 1997.

Biopure's clinical trials have demonstrated Hemopure's efficacy as an
alternative to red blood cell transfusions in surgery patients as measured by
the elimination of red blood cell transfusions. In all of Biopure's advanced
clinical trials, Hemopure's efficacy as an oxygen therapeutic was evaluated by
determining, within the context of a written set of guidelines known as a
protocol, the percentage of patients given Hemopure who did not require a
subsequent transfusion of red blood cells. In these trials, Hemopure was
administered only to patients who needed a red blood cell transfusion. Trial
design limited the amount of Hemopure that could be infused and the number of
post-operative days during which it could be infused. Elimination was deemed to
occur if the patient did not require a subsequent red blood cell transfusion.
Elimination was deemed not to occur if the patient was administered the maximum
number of Hemopure units permitted by the particular trial design and
subsequently needed a red blood cell transfusion. Despite these trial
limitations, Hemopure's clinical trials demonstrate statistically significant
elimination of red blood cell transfusions.

In 1998, the FDA agreed to a protocol with a primary endpoint of 35% elimination
for Biopure's ongoing U.S. pivotal Phase III trial in orthopedic surgery
patients. The most recently completed trial, a Phase III trial conducted in
Europe and South Africa with non-cardiac surgery patients, showed elimination of
43%.

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<PAGE> 26

The following chart summarizes Biopure's advanced clinical trials that will be
used for initial applications for marketing approval of Hemopure as an
alternative to red blood cell transfusions.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NO. OF TOTAL
DOSING: GRAMS PATIENTS/NO. OF
HEMOGLOBIN/ UNITS PATIENTS TREATED
TYPE OF SURGERY DEVELOPMENT STATUS HEMOPURE WITH HEMOPURE RESULTS
- --------------- ------------------ ----------------- ---------------- -------
<S> <C> <C> <C> <C>
Elective orthopedic U.S. pivotal Phase III Up to 300 grams (10 640/320 Trial ongoing
surgery (ongoing) trial ongoing units) over 6 days

Non-cardiac elective Phase III trial Up to 210 grams (7 160/83 43% elimination of red
surgery (1998) completed in Europe and units) over 6 days blood cell
South Africa; the basis transfusions
for filing in South
Africa in 1999

Post cardiopulmonary Phase II trial Up to 120 grams (4 98/50 34% elimination of red
bypass surgery (1996) completed in the U.S.; units) over 3 days; blood cell
supportive trial for first dose transfusions
the South African 1999 administered post-
filing surgery

Aortic aneurysm Intraoperative Phase II Up to 150 grams (5 72/48 27% elimination of red
reconstruction surgery trial completed in the units) over 4 days; blood cell
(1996) U.S.; supportive trial first dose transfusions
for the South African administered during
1999 filing surgery, if required
</TABLE>

U.S. Pivotal Phase III Orthopedic Surgery Trial. Biopure, with FDA agreement,
began a pivotal Phase III trial in the United States in March 1999. The primary
objective of this trial is the avoidance of red blood cell transfusions for six
weeks after orthopedic surgery. This randomized, red blood cell controlled,
multi-center study is designed to enroll a total of 640 patients in the United
States, Europe, Canada and South Africa, of whom approximately one-half will be
in the Hemopure treatment group and the other half will receive red blood cells.
Up to 300 grams of hemoglobin, or ten units of Hemopure, may be infused before,
during or after surgery for a total of up to six treatment days. The primary
endpoint of this trial is the elimination of red blood cell transfusions in 35%
of the patients who receive Hemopure.

Non-U.S. Phase III Non-cardiac Surgery Trial. Biopure completed a Phase III
trial in Europe and South Africa in 1998. The primary objective of this trial
was the avoidance of red blood cell transfusions for 28 days after non-cardiac
surgery. This randomized, red blood cell controlled, multi-center study enrolled
160 patients, 83 of whom were infused with Hemopure. Up to 210 grams of
hemoglobin, or seven units of Hemopure, were permitted during a six-day
treatment period. The trial resulted in the statistically significant
elimination of red blood cell transfusions in 43% of the patients who received
Hemopure.

U.S. Phase II Post Cardiopulmonary Bypass Surgery Trial. Human testing was
completed in 1997 in a double-blind, randomized, red blood cell controlled,
multi-center study in post cardiopulmonary bypass surgery patients. The primary
objective of this trial was the avoidance of red blood cell transfusion for 28
days after surgery. The study treated 98 patients, 50 of whom were infused with
Hemopure. Up to 120 grams of hemoglobin, or four units of Hemopure, were
administered over a three-day treatment period following surgery. The trial
resulted in the statistically significant elimination of red blood cell
transfusions in 34% of the patients that received Hemopure. In this study, 100%
of the patients who received Hemopure did not require any red blood cells during
the day of surgery.

Additionally, Biopure observed that the hematocrit, or packed red blood cell
volume as a percentage of total blood volume, of the patients treated with
Hemopure recovered to a degree that was indistinguishable from the red blood
cell treated patients at both six and 28 days post-surgery, supporting the
potential of Hemopure as an erythropoietic agent.

U.S. Phase II Aortic Aneurysm Reconstruction Surgery Trial. In 1998, Biopure
completed a randomized, red blood cell controlled, multi-center trial in
abdominal aortic aneurysm reconstruction surgery. This study treated 72
patients, 48 of whom were infused with Hemopure. The maximum dosage was 150
grams, 30 grams more than the post cardiopulmonary bypass trial. Usually aortic
aneurysm reconstruction surgery involves much more blood loss than post
cardiopulmonary bypass surgery. In this trial, Hemopure was used during the
surgery in contrast to the post cardiopulmonary bypass trial, where use began
after surgery. The trial resulted in the statistically significant elimination
of red blood cell transfusions in 27% of the patients that received Hemopure.

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<PAGE> 27

Trauma
Biopure has observed a 100% elimination of red blood cell transfusions on the
day of surgery in patients infused with Hemopure. As a result, Biopure believes
that Hemopure could be infused immediately at the site of an accident,
potentially extending the time that a trauma patient could be supported awaiting
definitive hospital care. Hemopure also acts as an expander of blood volume, a
common therapy used to stabilize trauma patients. Biopure has initiated a Phase
II trial in non-cardiac surgery patients, including stabilized trauma patients.
This trial includes both military and civilian hospitals. In this Phase II
trial, Hemopure will be administered to a maximum dose of 300 grams. Biopure
expects this trial to provide information useful in designing a clinical
development plan for trauma.

In addition, preclinical animal model studies performed in academic and military
research laboratories have shown the benefit of using Hemopure in severe trauma,
hemorrhagic shock, hemorrhagic shock with tissue injury and resuscitation from
cardiac arrest resulting from severe hemorrhage.

Ischemia
The ability of Hemopure molecules to circumvent partial occlusions could
potentially benefit patients suffering from ischemic conditions by supplying
oxygen to tissues that are receiving inadequate numbers of red blood cells.
Tissue oxygenation might be inadequate due to partial vessel blockage or
constriction, and can cause heart attack, angina and transient ischemic attack,
which is a precursor to stroke. In situations like these, treatment with red
blood cell transfusions would not be effective because red blood cells are too
large to navigate around blockages. Biopure has completed preclinical studies
with results supporting these potential indications. One preclinical study
demonstrated that infusing Hemopure before there is a blockage in a coronary
artery leading to a heart attack can limit potential damage to the heart.
Although Hemopure would not attack the root cause of the ischemia, such as a
clot or plaque in the arteries, it could maintain oxygenation under certain
circumstances and thereby sustain tissue pending a correction of the blockage or
could lessen the damage from ischemia if infused in time. In 1996, the American
Heart Association reported that approximately 900,000 people in the United
States each year experience heart attacks, of which approximately one-quarter
are fatal. In its 1999 Heart and Stroke Statistical Update, the American Heart
Association reported that approximately 600,000 people suffer a new or recurrent
stroke each year.

Cancer Therapy Adjunct
Radiation therapy and many types of chemotherapy depend on the adequate
oxygenation of tumors to kill cancer cells. Malignant cancer tumors, such as
breast, prostate and other solid tumors, are dense tumors which often outgrow
their blood supply, leaving much of the tumor without oxygen. Consequently, they
resist chemotherapy and radiation treatment. Biopure, in collaboration with the
Dana-Farber Cancer Institute in Boston, has developed a patented method for
oxygenating hypoxic, or oxygen deficient, tumor cells that could potentially
increase the tumor-killing effects of radiation and chemotherapy. Preclinical
studies have shown the feasibility of this application. In 1999, Biopure
initiated clinical development of this indication through preliminary human
trials at two cancer treatment institutions.

Plasma-Expanding Agent
After blood loss, human serum albumin, or HSA, or other volume expanding fluids
are typically administered to restore blood volume, which is necessary to
maintain effective blood pressure and heart rate. HSA is a naturally occurring
protein that is part of the plasma. Hemopure molecules are also proteins.
Hemopure maintains the volume of blood in a manner similar to HSA. In patients
suffering from severe blood loss, Biopure believes that Hemopure would be
preferable to currently available plasma expanding agents, which do not carry or
offload oxygen.

Hemodilution Agent
Acute normovolemic hemodilution, or ANH, is a technique that reduces the need
for donated blood. ANH refers to a practice where the patient donates one to
three units of blood immediately before surgery and is infused with a non-oxygen
plasma expander such as Ringer's lactate. The patient is then transfused with
his or her own blood during or after surgery. Hemopure has been administered in
three clinical safety trials involving humans undergoing ANH. As an oxygen
carrier and a plasma-expanding agent, Hemopure could potentially temporarily
replace the oxygen-carrying support and volume lost from donating blood. Used in
this manner, Hemopure may enhance the safety of ANH or allow more units to be
safely withdrawn prior to surgery. Additionally, use of Hemopure in ANH
procedures would also allow for greater blood conservation, which could be
particularly valuable in times of shortages. At present, ANH is not widely used
in the United States but is more commonly used in Europe.

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<PAGE> 28

Erythropoietic Agent
In Biopure's Phase II post cardiopulmonary bypass clinical trial, which compared
the post-operative use of Hemopure to donated red blood cells in cardiac
surgery, the hematocrit, or packed red blood cell volume as a percentage of
total blood volume, was similar for both the Hemopure-infused and the control
patients on the sixth day following surgery. Both groups maintained this
similarity when measured again at a follow-up visit 28 days after surgery,
suggesting that Hemopure may promote the regeneration of red blood cells. In
addition, in one "compassionate use" case, a patient with a critically low
hematocrit, who received Hemopure but not red blood cells, was stabilized for
several days and then was able to restore her hematocrit. As such, Hemopure
could potentially be used in conjunction with, or as an alternative to,
erythropoietin, a hormone that enhances the production of red blood cells. The
use of Hemopure as an erythropoietic agent is supported by a preclinical study
in which eight conscious sheep underwent an exchange transfusion in which at
least 95% of their blood was replaced with an early formulation of Hemopure.
Even with a critically low hematocrit, these animals achieved stable
hemodynamics, demonstrated no clinical signs of distress and survived long term
with a rapid resynthesis of their red blood cells.

OXYGLOBIN

Oxyglobin was approved by the FDA Center for Veterinary Medicine in January 1998
for the treatment of canine anemia, regardless of cause. Oxyglobin's
characteristics are well suited for use by small animal practitioners for
treatment of anemia and other critical care situations involving acute blood
loss. These situations often result from surgery, trauma, hemolysis,
gastrointestinal blood loss, which is most frequently a result of parasitism or
intestinal infection, urinary tract blood loss, iron deficiency and rodenticide
toxicity. Biopure estimates that there are at least 15,000 small animal
veterinary practices in the United States and another 4,000 mixed animal
practices treating small and large animals. Biopure believes that the average
veterinary practice treats only a small percentage of canine anemia cases with a
red blood cell transfusion. The remainder receive either cage rest or a
minimally effective treatment such as fluid administration, iron supplements,
nutritional supplements or inspired oxygen.

Biopure's strategy to increase the market for Oxyglobin includes expanding the
Oxyglobin label as follows:

- - add European, Japanese and other foreign approvals -- filed for European Union
approval in 1998;

- - change to flexible dosing -- this application has been filed with the FDA;

- - add the opportunity for repeat dosing -- expected FDA filing in 1999;

- - add other applications;

- - offer a smaller package size; and

- - add other species.

MANUFACTURING

Biopure uses proprietary and patented purification and polymerization processes
in the manufacture of its oxygen therapeutic products. Biopure believes its
processes comply with current Good Manufacturing Practices prescribed by the FDA
and comparable standards required in the European Union for biopharmaceutical
and chemical manufacturing and permit large-scale production of the products for
commercial use. Biopure's scientific and engineering team has designed and built
much of its large-scale critical equipment. Most aspects of the process are
operated and monitored by a proprietary computer software system. Biopure has
produced consistent product, both Hemopure and Oxyglobin, since 1991 and its
facilities currently have the capacity to produce 40,000 units of Hemopure or
140,000 units of Oxyglobin per year. Through the installation of additional
water supply and the completion of its automated filling line, Biopure can
attain capacity to produce 120,000 units of Hemopure or 360,000 units of
Oxyglobin per year in its current facilities. This capacity can be used for any
combination of Oxyglobin and Hemopure units.

Raw Material Source
Biopure's products consist of bovine hemoglobin that has been purified,
chemically modified and cross-linked for stability. Controlled herds of U.S.
cattle destined for meat processing provide the raw material used in Biopure's
products. Biopure monitors the source, health, location, feed consumption and
quality of the cattle to be used as a raw material source, a safety standard
that is not and cannot be established for donated human blood. Suppliers to
Biopure contract to maintain traceable records on animal origin, health, feed
and care to assure the use of known, healthy animals.

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<PAGE> 29

Raw Material Collection
At a high volume slaughterhouse, Biopure collects bovine whole blood into
individual presanitized containers and transports them to a separation facility.
Following blood collection, the animals pass U.S. Department of Agriculture, or
USDA, inspection for use as beef for human consumption. If an animal is not
approved for human consumption, Biopure also rejects the corresponding container
of whole blood. The USDA considers the United States to be free of pathogens
associated with "mad cow disease".

Safety
In addition to safety from bacterial and viral pathogens, such as those leading
to AIDS and hepatitis, Biopure's sourcing and manufacturing processes safeguard
humans from potential risks associated with diseases including transmissible
spongiform encephalopathies, more commonly known as the cause of diseases such
as "mad cow disease". Health and regulatory authorities have given guidance
directed at three factors to control these diseases: source of animals, nature
of tissue used and manufacturing process. Biopure complies with, and believes it
exceeds, all current guidelines regarding such risks for human pharmaceutical
products. Bovine red blood cells are considered to be safe, and blood generally
has been found to have little or no potential for transmitting transmissible
spongiform encephalopathies. Furthermore, Biopure's patented purification and
manufacturing process has been tested to demonstrate that the infectious agents
for these diseases, if present, would be effectively removed or inactivated.

Manufacturing Processes
At Biopure's separation facility, plasma proteins in the bovine blood are
removed using filtration. Washed cells are next placed in a centrifuge that
separates the red blood cells from the rest of the blood. The hemoglobin is
extracted from the red blood cells and is then diafiltered to remove red blood
cell wall debris and other contaminants. The resulting material is a cell-free
hemoglobin intermediate. The hemoglobin intermediate is then purified in a
semi-continuous purification process involving a high performance liquid
chromatography process. Next, the purified hemoglobin is polymerized, or linked,
by the addition of a cross-linking agent. Polymerized and stabilized material is
then fractionated and concentrated. The final product is filtered into
sterilized batch holding tanks until it is sterile filled into bags.

MARKETING

Hemopure
Biopure expects that Hemopure will be marketed to physician practices and
hospitals. It also believes that military customers will be significant. Biopure
recognizes that it is crucial to establish a core belief among opinion leaders
that Hemopure fills an important medical need and that systematic development of
opinion leader advocacy is necessary for capturing and maintaining a leadership
position. Consequently, Biopure has contracted with a medical education agency
to build product awareness and to position the company in a leadership role
through the development of advocates at the national and regional levels. As
part of this process, Biopure engaged a medical advisory board consisting of 13
leading physicians who participated in an educational program and forum with
Biopure. Biopure expects to reach anesthesiologists, surgeons, oncologists,
critical care and other physician-specialists through publications and
educational forums, such as seminars and presentations at meetings of
specialists.

Biopure will explore various means of selling Hemopure. Among other options,
Biopure may seek to enter into licensing or co-marketing agreements for parts or
all of the world in order to avail itself of the marketing expertise of one or
more seasoned pharmaceutical companies. Alternatively, it could engage
"contract" sales organizations from vendors, contract pharmaceutical companies
that supply sales services or recruit and train its own marketing and sales
force.

Oxyglobin
Biopure began selling Oxyglobin were initiated in March 1998 to a discrete
number of emergency and specialty practices in the United States. Biopure began
selling Oxyglobin nationally in October 1998. Since October 1998, Biopure has
sold more than 18,000 units of Oxyglobin.

Biopure sells Oxyglobin directly to veterinarians in the United States through
veterinary product distributors -- one national and eight regional. Biopure
coordinates marketing and distribution activities through five full-time sales
employees.

Marketing programs have included advertising, direct mail, educational seminars,
conference calls and attendance at trade shows. Biopure has established a core
group of veterinary practices that use the product regularly. These
veterinarians are effective advocates of the product when interacting with other
veterinarians. Biopure sponsors evening seminars featuring these veterinarians.
Most veterinarians who buy the product reserve its use for the most severe
clinical situations. Biopure sells a 15-

28
<PAGE> 30

gram hemoglobin unit for an average of $124 a unit. Biopure may seek one or more
marketing alliances for marketing and distribution of Oxyglobin in selected
geographic areas.

COMPETITION

Hemopure will compete with traditional therapies and with other oxygen
therapeutics. Comparisons with traditional therapies, including red blood cell
transfusions, are described under "-- Scientific Overview", "-- Biopure's
Oxygenating Technology" and "-- Biopure's Products". Oxygen therapeutics under
development fall into two categories:

- - hemoglobin-based oxygen carriers, including Hemopure and Oxyglobin, consist of
natural hemoglobin from a mammal or genetically engineered source that has
been modified to improve stability, efficacy and safety; and

- - perfluorocarbon emulsions are chemicals that are intravenously administered
and are effective principally under conditions of high oxygen partial pressure
to assist in oxygen delivery by forcing dissolved oxygen into the plasma
space.

Biopure believes that the competitive factors for oxygen therapeutics will be
efficacy, safety, ease of use and cost. Biopure believes that it has significant
advantages as compared to its competitors including:

- - patents covering its processes, its products and their uses;

- - large molecule size resulting in longer duration of action than most other
oxygen therapeutics under development;

- - long-term room temperature stability;

- - completed and operational large-scale manufacturing facility compliant with
current Good Manufacturing Practices;

- - safe, ample, inexpensive source of raw material; and

- - FDA approval of Oxyglobin in 1998.

Competitors with hemoglobin-based investigational products use outdated human
red blood cells or bovine hemoglobin as their raw material. There was also one
first generation recombinant investigational product in human clinical trials,
but its development was discontinued. Biopure believes that its advantage over
products made from outdated human-donated red blood cells is derived from the
availability, abundance, cost and safety of bovine red blood cells. Biopure also
believes that competitors may find it difficult to make or offer a
hemoglobin-based oxygen carrier product having the product characteristics of
Hemopure without infringing on one or more Biopure patents. In addition, the
relatively low viscosity of Hemopure is a potential advantage, particularly in
large doses, in permitting perfusion at low blood pressure.

Biopure is aware of one perfluorocarbon oxygen carrier in advanced clinical
trials. This product is a chemical fluid infused into the body. This chemical
attracts oxygen and takes it into the plasma. The patient needs an oxygen mask
for this process, because perfluorocarbons require high oxygen environments in
order to be effective. The perfluorocarbon solution does not persist in the
body, so repeat dosing is necessary. These limitations may reduce the number of
potential applications for the product. As far as Biopure is aware, applications
pursued for this product do not include any of the applications Biopure might
pursue other than acute normovolemic hemodilution.

Biopure knows of no companies developing oxygen therapeutics intended to compete
with Oxyglobin in the veterinary market.

INTELLECTUAL PROPERTY

Patents, trademarks, trade secrets, technological know-how and other proprietary
rights are important to Biopure's business. Biopure actively seeks patent
protection both in the United States and abroad. Its initial patent filing was
in 1986 in the United States. Three U.S. patents have issued from this filing.
These patents describe and claim ultra-pure semi-synthetic blood substitutes and
methods for their preparation.

In total, Biopure has 14 U.S. patents granted and six applications pending,
three of which are allowed, relating to oxygen therapeutics. Biopure's granted
U.S. patents relating to oxygen therapeutics cover:

- - an ultra-purification process for hemoglobin solutions, regardless of the
source of hemoglobin, and the ultra-pure oxygen therapeutic solutions produced
by this process;

- - compositions having improved stability;

- - improvements in preservation of such solutions;

- - improved methods for separating polymerized from unpolymerized hemoglobin;

29
<PAGE> 31

- - methods of oxygenating tissue affected by inadequate red blood cell flow; and

- - the removal of pathogens, if present, from Biopure's source material.

Biopure's original patent was also filed in Europe. The European patent was
granted but subsequently opposed by third parties. As a result of the opposition
proceeding, the patent was revoked. However, Biopure filed an appeal that
reinstated the patent during the appeal and is awaiting a decision on the
appeal. In the opposition process, Biopure narrowed its claims. Despite the
narrowing, Biopure believes that these claims provide protection for Biopure's
existing process and products. Biopure further believes that a narrowed European
patent should be sustained. During the opposition proceeding, certain prior art
references not presented to the United States Patent Office during the
prosecution of patents already issued in the United States were presented to the
European Patent Office by the opponents. These references are not expected to
affect claims of Biopure patents in the rest of the world. Biopure also has
foreign patents and patent applications.

It is not economically practicable to determine in advance whether Biopure's
products, product components, manufacturing processes or the uses infringe the
patent rights of others. It is likely that, from time to time, Biopure will
receive notices from others of claims or potential claims of intellectual
property infringement or Biopure may be called upon to defend a customer, vendee
or licensee against such third-party claims. Responding to these kinds of
claims, regardless of merit, could consume valuable time, result in costly
litigation or cause delays, all of which could harm Biopure's business.
Responding to these claims could also require Biopure to enter into royalty or
licensing agreements with the third parties claiming infringement. Such royalty
or licensing agreements, if available, may not be available on terms acceptable
to Biopure.

FACILITIES

Biopure has manufacturing facilities in Pennsylvania for the collection and
separation of blood and in Cambridge, Massachusetts where processing is
completed. These facilities have been inspected by the FDA and the Medicines
Control Agency on behalf of the European Medicines Evaluation Agency and comply
with current Good Manufacturing Practices. Biopure manufactures separation
materials in a 10,000 square foot plant in New Hampshire. It leases 37,000
square feet of office and research space, 18,000 square feet of warehouse space
and 32,000 square feet of manufacturing space in Massachusetts. Biopure also
leases 18,000 square feet of manufacturing space in Pennsylvania. Biopure's
current process is designed to be scalable, such that additional capacity can be
obtained by adding duplicate equipment and additional raw material including
power and water. However, Biopure is space constrained at its existing facility
in Cambridge, Massachusetts, so it anticipates that it will need to add a new
facility at a new location prior to large-scale commercialization of Hemopure.

EMPLOYEES

As of April 30, 1999, Biopure employed 177 persons. Of its total work force, 101
employees are engaged in manufacturing and related manufacturing support
services, 38 are engaged in research and development activities, nine are
engaged in sales and marketing, primarily veterinary, and 29 are engaged in
support and administrative activities. None of Biopure's employees are covered
by a collective bargaining agreement. Biopure believes its relations with its
employees are good.

PAST COLLABORATIONS

In December 1990, Biopure and The Upjohn Company entered into an alliance to
develop and market Biopure's human and veterinary products. From that time until
1996, Biopure benefitted from equity investment and development expenditures of
approximately $140.0 million and from the experience, personnel and facilities
of Upjohn. From 1987 until 1996, Biopure had a license agreement with B. Braun
Melsungen AG, a German hospital supply company. This license agreement and
certain related agreements contemplated the product testing, approval,
manufacture and marketing of Biopure's products by B. Braun Melsungen AG in
Europe. See "Certain Relationships and Related Transactions" for additional
information concerning these collaborations.

GOVERNMENT REGULATION

New Drug or Biologic Approval for Human Use
The testing, manufacturing, labeling, advertising, promotion, export and
marketing, among other things, of Biopure's oxygen therapeutic products are
subject to extensive regulation by governmental authorities in the United States
and other countries. Oxygen therapeutic products that are administered to human
patients are regulated as drugs or biologic drugs and require regulatory
approval before they may be commercialized.

In the United States, Hemopure is regulated as a human biologic. Biopure will be
required to file and obtain approval of a Biologics License Application covering
both Hemopure and the facility in which it is manufactured.

30
<PAGE> 32

The steps required before a biologic may be approved for marketing in the United
States generally include: preclinical laboratory tests and animal tests; the
submission to the FDA of an Investigational New Drug, or IND, application for
human clinical testing, which must become effective before human clinical trials
may lawfully commence; adequate and well-controlled human clinical trials to
establish the safety and efficacy of the product; the submission to the FDA of a
Biologics License Application; FDA review of the Biologics License Application;
and satisfactory completion of an FDA inspection of the manufacturing facilities
at which the product is made to assess compliance with current Good
Manufacturing Practices which includes elaborate testing, control, documentation
and other quality assurance procedures. The testing and approval process
requires substantial time, effort and financial resources. After approval is
obtained, a supplemental approval is generally required for each proposed new
indication, often accompanied by data similar to that submitted with the
original Biologics License Application.

Preclinical studies include laboratory evaluation of the product and animal
studies to assess the safety and potential efficacy of the product. The results
of the preclinical studies, together with manufacturing information and
analytical data, are submitted to the FDA as part of the IND. The IND
automatically will become effective in 30 days unless the FDA, before that time,
raises concerns or questions and imposes a "clinical hold". In such case, the
IND sponsor and the FDA must resolve any outstanding concerns before the trial
can proceed. Once trials have commenced, the FDA may stop the trials, or
particular types of trials, by imposing a clinical hold because of concerns
about, for example, the safety of the product being tested or the adequacy of
the trial design.

Clinical trials involve the administration of the investigational products to
healthy volunteers or patients under the supervision of a qualified principal
investigator consistent with an informed consent. Each clinical trial must be
reviewed and approved by an independent Institutional Review Board, or IRB, at
each institution at which the study will be conducted. The IRB will consider,
among other things, ethical factors, the safety of human subjects and the
possible liability of the institution.

Clinical trials typically are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug into human
subjects, the drug is usually tested for safety or adverse effects, dosage
tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics.
Phase II clinical trials usually involve studies in a limited patient population
to evaluate the efficacy of the drug for specific, targeted indications,
determine dosage tolerance and optimal dosage and identify possible adverse
effects and safety risks. Phase III clinical trials generally further evaluate
clinical efficacy and test further for safety within an expanded patient
population and at multiple clinical sites. Phase IV clinical trials are
conducted after approval to gain additional experience from the treatment of
patients in the intended therapeutic indication. If the FDA approves a product
while a company has ongoing clinical trials that were not necessary for
approval, a company may be able to use the data from these clinical trials to
meet all or part of any Phase IV clinical trial requirement. These clinical
trials are often referred to as Phase III/IV post-approval clinical trials.

Biopure believes that its ongoing U.S. pivotal Phase III clinical trial is
consistent with the FDA's most recent guidance on the design and efficacy and
safety endpoints required for approval of products such as Hemopure. However,
the FDA could change its view or require a change in study design, additional
data or even further clinical trials prior to approval of Hemopure.

The results of the preclinical studies and clinical trials, together with
detailed information on the manufacture and composition of the product, are
submitted to the FDA in the application requesting approval to market the
product. Before approving a Biologics License Application, the FDA will inspect
the facilities at which the product is manufactured and will not approve the
product unless the manufacturing facility is in compliance with current Good
Manufacturing Practices. The FDA may delay approval of a Biologics License
Application if applicable regulatory criteria are not satisfied, require
additional testing or information, and/or require postmarketing testing and
surveillance to monitor safety or efficacy of a product. It may also limit the
indicated uses for which an approval is given.

New Drug Approval for Veterinary Use
New drugs for companion animals must receive New Animal Drug Application, or
NADA, approval prior to marketing in the U.S. The requirements for approval are
similar to those for new human drugs. Obtaining NADA approval often requires
clinical field trials and the submission of an Investigational New Animal Drug
Application, or INADA, which for non-food animals becomes effective upon
acceptance for filing.

Pervasive and Continuing Regulation
Any FDA approvals that may be granted will be subject to continual review, and
newly discovered or developed safety or efficacy data may result in withdrawal
of products from marketing. Moreover, if and when such approval is obtained, the
manufacture and marketing of Biopure's products remain subject to extensive
regulatory requirements administered by the FDA and other regulatory bodies,
including compliance with current Good Manufacturing Practices, adverse event
reporting

31
<PAGE> 33

requirements and the FDA's general prohibitions against promoting products for
unapproved or "off-label" uses. Biopure is subject to inspection and market
surveillance by the FDA for compliance with these regulatory requirements.
Failure to comply with the requirements can, among other things, result in
warning letters, product seizures, recalls, fines, injunctions, suspensions or
withdrawals of regulatory approvals, operating restrictions and criminal
prosecutions. Any such enforcement action could have a material adverse effect
on Biopure. Unanticipated changes in existing regulatory requirements or the
adoption of new requirements could also have a material adverse effect on
Biopure.

Biopure also is subject to numerous federal, state and local laws relating to
such matters as safe working conditions, manufacturing practices, environmental
protection, fire hazard control and hazardous substance disposal.

Foreign Regulation
Biopure will be subject to a variety of regulations governing clinical trials
and sales of its products outside the United States. Whether or not FDA approval
has been obtained, approval of a product by the comparable non-U.S. regulatory
authorities must be obtained prior to the commencement of marketing of the
product in a country. The approval process varies from country to country and
the time needed to secure approval may be longer or shorter than that required
for FDA approval. The European Union requires approval of a Marketing
Authorization Application by the European Medicines Evaluation Agency. These
applications require the completion of extensive preclinical and clinical
studies and manufacturing and controls information.

Reimbursement
Biopure's ability to successfully commercialize its human product will depend in
significant part on the extent to which reimbursement of the cost of such
product and related treatment will be available from government health
administration authorities, private health insurers and other organizations.
Third-party payors are increasingly challenging the price of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, and there can be no assurance that adequate
third-party coverage will be available to enable Biopure to maintain price
levels sufficient for realization of an appropriate return on its investment in
product development. The public and federal government have recently focused
significant attention on reforming the health care system in the United States.
A number of health care reform measures have been suggested, including price
controls on therapeutics. Public discussion of such measures is likely to
continue, and concerns about the potential effects of different possible
proposals have been reflected in the volatility of the stock prices of companies
in the health care and related industries.

LITIGATION

Biopure is a party to litigation filed on July 18, 1990 in the United States
District Court for the District of Massachusetts under the caption Peter Fisher
et al. v. William P. Trainor et al. In this litigation, the plaintiffs alleged
breach of agreements by Biopure and against one another. The plaintiffs sought
$250 million in damages.

Summary judgments were entered against the plaintiffs in both lawsuits in 1994.
The plaintiffs appealed. One appeal was voluntarily dismissed and the other
appeal was remanded to the trial court for further findings based on lack of
jurisdiction. This remaining issue has been briefed following additional
discovery and is before the trial court. Biopure believes that the ultimate
resolution of this matter will not have a material adverse effect on its
financial position or results of operations.

In addition, proceedings in Europe are ongoing with regard to Biopure's European
patent. Biopure was granted a patent on April 1, 1992 by the European Patent
Office. Within the nine-month period from the grant date for the filing of
oppositions, six parties filed oppositions requesting that all of the claims of
this patent be revoked. Of these, three opposing parties remain: Baxter
International, Enzon, Inc. and Northfield Laboratories, Inc. Following oral
proceedings conducted by the Opposition Division at the European Patent Office
in November 1995, the Opposition Division revoked the patent.

Biopure has appealed this decision of the Opposition Division and is currently
awaiting a decision on its appeal. The appeal has the technical result of
reinstating the patent during the appeal process. Prior to filing its appeal
papers, Biopure narrowed its claims further to increase the probability of
winning at the appeal level. Biopure further believes that a narrowed patent
should be sustained.

Future claims against Biopure may arise and, if they do, there can be no
assurance that they will be successfully defended.

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<PAGE> 34

MANAGEMENT

The following table lists members of our board of directors and our executive
officers, with the position held by each and their ages as of April 30, 1999.
Directors may hold office until removed by a resolution of our stockholders,
removal by all members of the board of directors, resignation, death or the
expiration of the term of their appointment.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carl W. Rausch.................................. 50 Chairman, Chief Executive Officer and President
David N. Judelson............................... 70 Vice Chairman
Stephen A. Kaplan............................... 40 Director
C. Everett Koop, M.D............................ 82 Director
Charles A. Sanders, M.D......................... 67 Director
Daniel R. Davis................................. Senior Vice President and Chief Financial
33... Officer
Maria S. Gawryl, Ph.D........................... 45 Senior Vice President, Research and Development
Edward E. Jacobs, Jr., M.D...................... 58 Senior Vice President
Jane Kober...................................... Senior Vice President, General Counsel and
55 Secretary
Bing L. Wong, Ph.D.............................. 52 Senior Vice President, International
Bernadette L. Alford, Ph.D...................... 50 Vice President, Regulatory Affairs
Geoffrey J. Filbey.............................. 55 Vice President, Engineering
Carolyn R. Fuchs................................ 46 Vice President, Human Resources
William D. Hoffman, M.D......................... 45 Chief Medical Officer
Brian A. Lajoie................................. 52... Vice President, Controller
Andrew W. Wright................................ 39 Vice President, Veterinary Products
</TABLE>

CARL W. RAUSCH is a co-founder and serves as Chairman, Chief Executive Officer
and President of Biopure. Prior to Biopure's founding, Mr. Rausch was Vice
President, Preparative and Process, at Millipore Corporation. He holds an M.S.
degree in chemical engineering from Tufts University, an M.S. degree in chemical
engineering from the Massachusetts Institute of Technology and a B.S. degree in
chemical engineering from Tufts University.

DAVID N. JUDELSON is a co-founder and serves as Vice Chairman of Biopure. Mr.
Judelson is also a co-founder of Gulf and Western Industries, Inc., currently
known as Paramount Communications, Inc., where he served as President and Chief
Operating Officer from 1967 to 1983. Since 1985, he has been Vice Chairman of
Horsehead Industries, Inc., a privately owned industrial company. Mr. Judelson
holds an M.E. degree from New York University College of Engineering and a B.S.
degree in mechanical engineering from New York University.

STEPHEN A. KAPLAN has served as a director of Biopure since November 1997. Since
May 1995, Mr. Kaplan has been a principal in the Oaktree Financial Management
Principal Activities Group. From November 1993 to April 1995, he was Managing
Director of Trust Company of the West. Since November 1993, Mr. Kaplan has also
served as portfolio manager of The Principal Fund. He holds a J.D. degree from
New York University School of Law and a B.S. degree in political science from
the State University of New York at Stony Brook.

C. EVERETT KOOP, M.D. has served as a director of Biopure since December 1990.
From September 1994 to November 1997, Dr. Koop was the Chairman of the Board of
Patient Education Media, Inc. Dr. Koop served as the Surgeon General of the
United States from 1981 until 1989 and continues to educate the public about
health issues through his writings and the electronic media, as Senior Scholar
of the C. Everett Koop Institute at Dartmouth College. Dr. Koop received an
Sc.D. degree from the Graduate School of the University of Pennsylvania, an M.D.
degree from the Cornell University Medical College and an A.B. degree from
Dartmouth College.

CHARLES A. SANDERS, M.D. has served as a director of Biopure since October 1997.
From July 1989 to May 1995, Dr. Sanders was the Chairman and Chief Executive
Officer of Glaxo Inc. Dr. Sanders serves on the boards of Magainin
Pharmaceuticals Inc., Vertex Pharmaceuticals, Inc., StaffMark, Inc., Scios Inc.,
Trimens, Inc., Kendle International Inc. and Pharmacopeia, Inc. and is a member
of the President's Committee of Advisors on Science and Technology. He was
previously General Director of Massachusetts General Hospital and Professor of
Medicine at Harvard Medical School. He received his M.D. degree from the
Southwestern Medical College of the University of Texas.

DANIEL R. DAVIS joined Biopure in December 1998 as Senior Vice President and
Chief Financial Officer. From 1995 to November 1998, Mr. Davis was at Knowledge
Universe. Mr. Davis holds an M.B.A. degree in finance from The Wharton School at
the University of Pennsylvania and a B.A. degree in political science from Brown
University.

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<PAGE> 35

MARIA S. GAWRYL, PH.D. has been Senior Vice President, Research and Development
of Biopure since April 1999. From September 1990 to April 1999, she was Vice
President, Research and Development. Dr. Gawryl holds a Ph.D. in immunology from
the University of Connecticut. She did post-doctoral work at the University of
Connecticut Health Center and Rush Presbyterian, St. Luke's Medical Center. She
holds a B.S. degree in math and chemistry from Antioch College.

EDWARD E. JACOBS, JR., M.D. has been a Senior Vice President of Biopure since
August 1997. From April 1995 to August 1997, he was Senior Medical Advisor of
Biopure. Since 1988, he has been an Assistant Clinical Professor at Harvard
Medical School. He holds an M.D. degree from Harvard Medical School and a B.A.
degree in philosophy from Princeton University.

JANE KOBER has been Senior Vice President, General Counsel and Secretary of
Biopure since May 1998. From June 1989 to April 1998, she was a partner in
LeBoeuf, Lamb, Greene & MacRae, L.L.P. Ms. Kober holds a J.D. degree from Case
Western Reserve University, an M.A. degree from the University of Chicago and a
B.A. in English from the Pennsylvania State University. She serves as a director
of HTV Industries, Inc.

BING L. WONG, PH.D. has been a Senior Vice President, International of Biopure
since May 1999. From June 1992 to May 1999, Dr. Wong was a Senior Vice
President, Development of Strategic Business Ventures. Dr. Wong taught in the
Chemical Engineering Department at Tufts University as Assistant Professor and
Adjunct Associate Professor while he served as Associate and Acting Director of
the New England Enzyme Center. He holds M.S. and Ph.D. degrees from the
Department of Chemical Engineering, Tufts University and a B.S. degree from the
Department of Chemical Engineering, National Taiwan University.

BERNADETTE L. ALFORD, PH.D. has been Vice President, Regulatory Affairs of
Biopure since September 1998. From September 1994 to September 1998, she was
Senior Vice President, Product Development for Alexion Pharmaceuticals Inc. She
holds a Ph.D. degree in molecular biology and an M.S. degree in biochemistry
from Texas University and a B.S. degree in biology from Marywood University.

GEOFFREY J. FILBEY joined Biopure in 1985 and has served as Vice President,
Engineering since 1995. Mr. Filbey holds a B.Sc. degree in engineering from the
City University in London, England.

CAROLYN R. FUCHS has served as Vice President, Human Resources since June 1998.
From October 1996 to June 1998, she was an independent consultant. From May 1991
to October 1996, she worked at National Medical Care. Ms. Fuchs holds an M.Ed.
degree in counseling and a B.S. degree in psychology from the University of
Massachusetts at Amherst.

WILLIAM D. HOFFMAN, M.D. joined Biopure in January 1998 as Director of Medical
Affairs and was named Chief Medical Officer in March 1999. From 1994 until
January 1998, Dr. Hoffman was Director of Surgical Intensive Care at The
Cleveland Clinic Foundation. He holds an M.D. degree from the University of
Massachusetts Medical School and a B.S. degree in physics from Carnegie-Mellon
University.

BRIAN A. LAJOIE has served as Vice President, Controller of Biopure since May
1999. From August 1989 to May 1999, he served as Vice President, Finance. He
holds a B.A. degree in economics from the University of Massachusetts at
Amherst.

ANDREW W. WRIGHT has been Vice President, Veterinary Products of Biopure since
August 1996. From March 1992 to August 1996, Mr. Wright worked with IDEXX
Laboratories, Inc. where he held several management positions, including
Director of Corporate Development, Director of Marketing and Senior Product
Manager. He holds an M.B.A. degree from the University of Chicago and a B.A.
degree in economics from Carleton College.

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<PAGE> 36

EXECUTIVE COMPENSATION

Summary Compensation Table
The following summary compensation table sets forth information regarding the
compensation of our Chief Executive Officer and our other four most highly
compensated executive officers for the fiscal years ended October 31, 1996, 1997
and 1998. The non-recurring bonus Mr. Rausch received in 1996 was related to our
agreement with Pharmacia & Upjohn, Inc. The other annual compensation received
by Dr. Jacobs in fiscal 1997 and fiscal 1996 represents the difference between
the fair market value and the exercise price of non-qualified stock options at
the date of exercise. Dr. Esseltine resigned in April 1999.

<TABLE>
<CAPTION>
--------------------------------------------------
ANNUAL
COMPENSATION
--------------------------------------------------
FISCAL OTHER ANNUAL
YEAR SALARY($) BONUS($) COMPENSATION($)
NAME AND PRINCIPAL POSITION ------ --------- -------- ---------------
<S> <C> <C> <C> <C>
Carl W. Rausch.............................................. 1998 307,008 75,000 --
Chairman, Chief Executive 1997 252,866 30,000 --
Officer and President 1996 243,208 22,000 182,692
Edward E. Jacobs, Jr., M.D.................................. 1998 205,010 25,000 --
Senior Vice President 1997 169,698 -- 228,000
1996 160,004 8,000 388,800
Maria S. Gawryl, Ph.D....................................... 1998 195,000 40,000 --
Senior Vice President -- 1997 162,040 20,000 --
Research and Development 1996 153,037 15,225 --
Dixie L. Esseltine, M.D..................................... 1998 185,016 10,000 --
Vice President -- Clinical 1997 24,194 5,000 --
Research 1996 -- -- --
Brian A. Lajoie............................................. 1998 169,000 18,000 --
Vice President -- Controller 1997 156,529 17,000 --
1996 148,070 14,810 --
</TABLE>

Summary Long-Term Compensation
The following table sets forth information regarding the long-term compensation
of our Chief Executive Officer and our other four most highly compensated
executive officers for the fiscal years ended October 31, 1996, 1997 and 1998.
Dr. Esseltine resigned in April 1999.

<TABLE>
<CAPTION>
--------------------------------------------------
AWARDS PAYOUTS
---------- --------------------------
SECURITIES EARNINGS ON
FISCAL UNDERLYING DEFERRED
YEAR OPTIONS(#) COMPENSATION($) 401K($)
NAME AND PRINCIPAL POSITION ------ ---------- --------------- -------
<S> <C> <C> <C> <C>
Carl W. Rausch............................................. 1998 125,000 104,408 4,370
Chairman, Chief Executive Officer and 1997 -- 94,353 4,725
President 1996 -- 90,393 4,372
Edward E. Jacobs, Jr., M.D. ............................... 1998 15,000 -- 4,565
Senior Vice President 1997 -- -- 4,852
1996 -- -- 4,410
Maria S. Gawryl, Ph.D. .................................... 1998 80,000 -- 4,653
Senior Vice President -- Research and 1997 -- -- 4,839
Development 1996 3,500 -- 4,591
Dixie L. Esseltine, M.D.................................... 1998 10,000 -- --
Vice President -- Clinical Research 1997 -- -- --
1996 -- -- --
Brian A. Lajoie............................................ 1998 15,000 -- 4,607
Vice President -- Controller 1997 -- -- 4,795
1996 2,500 -- 4,374
</TABLE>

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<PAGE> 37

Option Grants in Last Fiscal Year
The following table sets forth information regarding options granted to our
Chief Executive Officer and our other four most highly compensated executive
officers during the fiscal year ended October 31, 1998. Dr. Esseltine resigned
in April 1999.

Amounts in the following table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent an estimate or projection of our future class A common stock prices.
These amounts represent certain assumed rates of appreciation in the value of
our class A common stock from the fair market value on the date of grant. Actual
gains, if any, on stock option exercises are dependent on the future performance
of the class A common stock and overall stock market conditions. The amounts
reflected in the following table may not necessarily be achieved.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------------
GRANTED(#) 1998(%) SHARE($) DATE 5% 10%
NAME AND PRINCIPAL POSITION ----------- ------------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl W. Rausch..................... 96,600 20.32 12.80 01/19/08 777,616 1,970,631
Chairman, Chief Executive 28,400 5.98 14.08 01/19/03 110,477 244,126
Officer and President
Edward E. Jacobs, Jr., M.D. ....... 15,000 3.16 12.80 01/19/08 120,748 305,999
Senior Vice President
Maria S. Gawryl, Ph.D. ............ 80,000 16.83 12.80 01/19/08 643,988 1,631,992
Senior Vice President -- Research
and Development
Dixie L. Esseltine, M.D............ 10,000 2.10 12.80 11/19/07 80,499 203,999
Vice President -- Clinical
Research
Brian A. Lajoie.................... 15,000 3.16 12.80 01/19/08 120,748 305,999
Vice President -- Controller
</TABLE>

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table sets forth information concerning options to purchase our
class A common stock exercised by our Chief Executive Officer and our other four
most highly compensated executive officers during the fiscal year ended October
31, 1998 and the number and value of unexercised options held by each of them at
October 31, 1998.

There was no public market for our class A common stock on October 31, 1998. The
fair market value on October 31, 1998 was determined by the board of directors
to be $12.80 per share. Dr. Esseltine resigned in April 1999.

<TABLE>
<CAPTION>
------------------------------------------------------------
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) Fiscal Year End($)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME AND PRINCIPAL POSITION ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Carl W. Rausch....................................... -- 125,000 -- --
Chairman, Chief Executive Officer and President
Edward E. Jacobs, Jr., M.D. ......................... -- 15,000 -- --
Senior Vice President
Maria S. Gawryl, Ph.D. .............................. 10,750 84,750 -- --
Senior Vice President -- Research and Development
Dixie L. Esseltine, M.D.............................. -- 10,000 -- --
Vice President -- Clinical Research
Brian A. Lajoie...................................... 5,000 17,500 -- --
Vice President -- Controller
</TABLE>

36
<PAGE> 38

NON-COMPETITION AGREEMENTS

Some of our executive officers have agreed not to engage in any activities that
would compete with our current business or any potential business during their
employment terms and for five years thereafter.

DEFERRED COMPENSATION AGREEMENT

On August 8, 1990, we entered into a deferred compensation agreement with Carl
Rausch, our Chairman, Chief Executive Officer and President, which, as amended
on December 12, 1995, provides that we will pay him on July 31, 2000 a lump sum
of $700,000 plus interest accrued from August 8, 1990.

THE 1998 STOCK OPTION PLAN

In March 1998, our board of directors adopted the 1998 Stock Option Plan
providing options for employees and consultants to purchase a maximum of 147,440
shares of class A common stock, which shares represent the number of shares
remaining under our 1988 Stock Option Plan, which expired in March 1998. The
1998 Stock Option Plan is administered by our board. Awards under this plan may
be in the form of incentive options, which are defined in the Internal Revenue
Code of 1986, or non-statutory options. Options under this plan may be granted
on or after March 13, 1998, but not later than March 13, 2008. Options granted
under this plan vest in such installments, cumulative or non-cumulative, as the
board may determine. Attendant to the adoption of the 1999 Omnibus Securities
and Incentive Plan described below, no further grants will be made under this
plan.

1999 OMNIBUS SECURITIES AND INCENTIVE PLAN

In 1999, we intend to establish the 1999 Omnibus Securities and Incentive Plan
which we anticipate will have the terms described below. This plan is intended
to promote our long-term financial interests and growth by providing incentives
to key management employees and directors to encourage them to continue their
employment with us and to acquire a proprietary interest in our long-term
success.

General
The 1999 Omnibus Securities and Incentive Plan will provide for the granting of
stock options, restricted stock awards, deferred stock awards, unrestricted
stock awards, performance share awards, distribution equivalent rights, or any
combination of the foregoing to key management employees and directors. This
plan is to be administered by a committee of the board of directors. The maximum
number of shares of class A common stock reserved for issuance under this plan
is . No awards have yet been made under this plan.

Stock Options
Under the plan, the committee may award stock options, the term and vesting
rules of which are to be specified in the option agreement. The option price
will be determined by the committee, but will in no case be less than the fair
market value of a share of class A common stock on the date of the grant of the
option. The granting of "incentive stock" options, as defined in the Internal
Revenue Code of 1986, is subject to certain limitations as described in the
plan.

Restricted Stock Awards
The committee may grant restricted stock awards to key management employees and
directors pursuant to a restricted stock award agreement. The restricted stock
award agreement must set forth the rights of the recipient of the restricted
stock award, which rights may include or exclude voting rights. During the
restriction period, the recipient of a restricted stock award will not take
possession of the certificate representing shares of class A common stock, will
not receive dividends and will not be entitled to sell, transfer, pledge or
otherwise dispose of the shares. At the end of the restriction period, assuming
the recipient has not breached the terms and conditions contained in the
restricted stock award agreement, the recipient will take possession of the
certificate.

Deferred Stock Awards
The committee may grant deferred stock awards to key management employees and
directors, whereby a recipient of such award will receive shares of class A
common stock only upon satisfaction of requirements set forth in a stock award
agreement.

Unrestricted Stock Awards
The committee may, in its discretion, award, or sell at a discount, shares of
class A common stock that are not subject to restrictions on transfer and other
rights as compensation for past services rendered to us.

37
<PAGE> 39

Performance Share Awards
The committee has discretion to set performance goals for an employee or
director which, if met, will result in the granting of performance share awards.
The holder of a performance share award will have no rights as a stockholder
until such time, if any, as the holder actually receives shares of class A
common stock pursuant to the performance share award.

Distribution Equivalent Rights
The committee has discretion to grant an award entitling the holder to receive
bookkeeping credits, cash payments and/or class A common stock distributions
equal in an amount to the distributions that would have been made to the holder
had the holder held a specified number of shares of class A common stock during
the period that the holder held the distribution equivalent right.

Other Features of the 1999 Omnibus Securities and Incentive Plan
In the event of a change of control, as defined in the plan, all outstanding
awards will become fully vested and/or immediately exercisable. The committee,
however, can determine that upon a change of control, all outstanding awards
terminate within a specified time period. Upon termination, the holder of the
award will receive, with respect to each share of class A common stock subject
to such award, consideration as described in the plan.

Our board of directors may terminate, alter or amend the 1999 Omnibus Securities
and Incentive Plan; provided, however, that no such action may, without the
consent of a holder, change the rights of any outstanding award. In addition,
our board of directors cannot amend this plan, without our stockholders'
approval, if such amendment would: increase the maximum number of shares of
class A common stock issuable under the plan, change the incentive stock option
price, change the class of individuals eligible to receive awards or modify the
eligibility requirements pursuant to this plan; or decrease the committee's
authority.

INCENTIVE COMPENSATION PLAN

We have an incentive compensation plan in place for employees selected at the
beginning of each fiscal year by a committee of the board of directors. At the
end of each fiscal year, the committee determines the total amount of funds to
be made available for incentive compensation for the previous fiscal year. The
allotment of the incentive compensation funds among the participants is at the
sole discretion of the committee. Awards are not paid out until the April
following the third anniversary of the date on which the award was credited to
the participant's account. Biopure's general funds are the sole source of
payment under this plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors consists of Dr. Sanders and
Mr. Judelson, neither of whom has been an officer or employee of Biopure at any
time since our inception. No executive officer of Biopure serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our board of directors or
compensation committee. Certain members of our board of directors are or have
been parties to consulting agreements with Biopure. These agreements are
described under "Certain Relationships and Related Transactions".

DIRECTOR COMPENSATION

For each board of directors' meeting attended, our directors receive a fee of
$500 plus expenses.

38
<PAGE> 40

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In December 1990, we entered into an alliance with The Upjohn Company, or
Upjohn, to develop and market our human and veterinary products. From that time
until the alliance ended in July 1996, we received equity investment and funding
for development of approximately $140.0 million from Upjohn and benefitted from
its experience, personnel and facilities. When our company and Upjohn mutually
agreed to end the alliance in July 1996, Upjohn loaned us $9.0 million, at an
interest rate based on the prime rate. This loan is due on October 1, 2001. As
of April 30, 1999, the remaining principal balance of the loan was $5.0 million.
Upjohn retained no license or other rights to our technology or products. Upjohn
maintains an equity stake in Biopure, holding class B common stock convertible
after FDA approval of Hemopure according to a formula under which a maximum of
1,908,179 shares of our class A common stock may be issued.

In 1987, we entered into a license agreement with B. Braun Melsungen AG, also
known as Braun, a German hospital supply company. The license and related
agreements contemplated product testing, approval, manufacture and marketing of
Hemopure by Braun in Europe. In 1997, our company and Braun mutually agreed to
end this collaboration. Our termination agreement with Braun provides for both
the repurchase by us of all of the shares of our class A common stock then owned
by Braun and the reacquisition of the exclusive rights to manufacture and market
Hemopure in Europe for the approximate amount previously paid by Braun for these
shares and rights.

We agreed to pay Braun a total of $6.3 million by 2002 in order to reacquire the
3,020,934 shares of class A common stock owned by Braun. Our termination
agreement with Braun requires us to place in escrow installment payments of the
purchase price equal to an annual amount of $1.0 million plus five percent of
our revenues from human product sales and license fees in a certain European
region. We paid one installment of $1.0 million in 1998 and completed the
repurchase of 479,524 shares. We paid a second installment of $1.0 million in
February 1999. We have the right to prepay the balance of the purchase price and
reacquire the remaining 2,541,410 shares at any time. As part of the termination
agreement, we will also pay a royalty at the rate of two percent of our revenues
from human product sales and license fees received in the European region
covered by the license we terminated up to an aggregate of $7.5 million.

We have consulting arrangements with two of our directors: C. Everett Koop and
David N. Judelson. For the fiscal years ended October 31, 1997 and 1998, we paid
Dr. Koop $92,941 and $123,780, respectively. We paid $75,500 to Mr. Judelson in
each of fiscal 1997 and fiscal 1998.

In August 1990, we made loans to some of our directors and officers and they
used the proceeds from such loans to purchase our class A common stock. The
principal and interest on each loan is due to be paid in full on July 31, 2000.
The interest rate of each loan is set with reference to the "base rate"
announced by Fleet Bank of Massachusetts, N.A. At April 30, 1999, the interest
rate was 7.75% and the amount of indebtedness due under the remaining loans with
a principal balance of $60,000 or more was:

Carl W. Rausch, Chairman, Chief Executive Officer and President, owes us
approximately $1.7 million;

Edward E. Jacobs, Jr., Senior Vice President, owes us $356,632;

Bing L. Wong, Senior Vice President, International, owes us $96,212; and

Geoffrey J. Filbey, Vice President, Engineering, owes us $64,909.

39
<PAGE> 41

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of April 30, 1999, with
respect to the beneficial ownership of shares of our class A common stock,
series A convertible preferred stock, series B convertible preferred stock,
series C convertible preferred stock and series D convertible preferred stock.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. A person is deemed to be the beneficial owner
of shares that can be acquired by such person within 60 days of April 30, 1999
upon the exercise of options or warrants. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants held by such person
which are exercisable within 60 days from April 30, 1999 have been exercised.
Except as indicated by the footnotes to the table below, we believe, based on
information furnished to us, that the persons and entities named in the table
below have sole voting and investment power with respect to all shares of class
A common stock and convertible preferred stock shown as beneficially owned by
them and the shares of class A common stock that will be issued to them when
their convertible preferred stock is converted upon consummation of this
prospectus. Percent of pro forma class A common stock includes shares of class A
common stock issuable upon conversion of our convertible preferred stock
outstanding, but does not include shares of class A common stock issuable upon
conversion of our class B common stock, which is non-voting stock.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------

PREFERRED STOCK
CLASS A -------------------------------------------------------------
COMMON STOCK SERIES A SERIES B SERIES C
-------------------- ------------------- ----------------- -------------------
SHARES PERCENT SHARES PERCENT SHARES PERCENT SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS ---------- ------- --------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl W. Rausch(1)................. 8,257,882 44.2% -- --% -- --% -- --%
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited
Partnership(2).................. 4,056,292 21.7 -- -- -- -- -- --
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited
Partnership II(2)............... 3,340,000 17.9 -- -- -- -- -- --
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
OCM Principal Opportunities
Fund, L.P. ..................... -- -- -- -- -- -- 2,618,773 92.5
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
B. Braun Melsungen AG(3).......... 2,541,410 13.6 -- -- -- -- -- --
Carl Braun Strasse 1
D-34212 Melsungen, Germany
HTV Industries, Inc.(4)........... 1,876,878 10.0 -- -- -- -- -- --
Pavilion Office Building
24100 Chagrin Boulevard
Suite 340
Beachwood, OH 44122
TVI Corp.(4)...................... -- -- -- -- -- -- -- --
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Aspen Venture Partners, L.P....... 1,174,062 6.3 133,330 7.7 283,020 13.3 -- --
222 Berkeley Street
Boston, MA 02116
Allan Ferguson(5)................. 1,206,562 6.5 133,330 7.7 313,020 14.7 10,000 0.4
222 Berkeley Street
Boston, MA 02116
New Enterprise Associates, L.P.... 194,445 1.0 1,066,665 61.5 -- -- -- --
1119 St. Paul Street
Baltimore, MD 21202
Henry W. Kendall Revocable Trust... 10,000 0.1 -- -- 801,889 37.7 -- --
c/o Faneuil Hall Associates
176 Federal Street, 2nd Floor
Boston, MA 02110

<CAPTION>
--------------------------------
PERCENT OF
PREFERRED STOCK
-----------------
SERIES D PRO FORMA
----------------- CLASS A
SHARES PERCENT COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNERS ------- ------- ------------
<S> <C> <C> <C>
Carl W. Rausch(1)................. -- --% %
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited
Partnership(2).................. -- --
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited
Partnership II(2)............... -- --
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
OCM Principal Opportunities
Fund, L.P. ..................... 83,333 3.8
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
B. Braun Melsungen AG(3).......... -- --
Carl Braun Strasse 1
D-34212 Melsungen, Germany
HTV Industries, Inc.(4)........... -- --
Pavilion Office Building
24100 Chagrin Boulevard
Suite 340
Beachwood, OH 44122
TVI Corp.(4)...................... 166,667 7.5
300 Delaware Avenue
Suite 1704
Wilmington, DE 19801
Aspen Venture Partners, L.P....... 166,666 7.5
222 Berkeley Street
Boston, MA 02116
Allan Ferguson(5)................. 170,833 7.7
222 Berkeley Street
Boston, MA 02116
New Enterprise Associates, L.P.... -- --
1119 St. Paul Street
Baltimore, MD 21202
Henry W. Kendall Revocable Trust... 166,666 7.5
c/o Faneuil Hall Associates
176 Federal Street, 2nd Floor
Boston, MA 02110
</TABLE>

40
<PAGE> 42
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------

PREFERRED STOCK
CLASS A -------------------------------------------------------------
COMMON STOCK SERIES A SERIES B SERIES C
-------------------- ------------------- ----------------- -------------------
SHARES PERCENT SHARES PERCENT SHARES PERCENT SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS ---------- ------- --------- ------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
KBC Insurance N.V. ............... -- --% -- --% -- --% -- --%
Wasistraat 6
B-3000 Leuven, Belgium
Providence Partnership II......... 56,250 0.3 300,000 17.3 -- -- -- --
c/o Kinship Capital Corporation
400 Skokie Blvd, Suite 675
Northbrook, IL 60062
Schooner Capital LLC.............. -- -- -- -- 66,038 3.1 -- --
745 Atlantic Avenue
Boston, MA 02111
Zesiger Capital Group LLC......... -- -- -- -- 745,300 35.0 -- --
320 Park Avenue, 30th Floor
New York, NY 10022
NEGF II, L.P. .................... -- -- -- -- -- -- 188,679 6.7
c/o New England Partners
One Boston Place, Suite 2100
Boston, MA 02108
J.B. Partners..................... -- -- 133,330 7.7 -- -- -- --
645 Madison Avenue
New York, NY 10022
David N. Judelson(6).............. 2,542,123 13.6 -- -- -- -- -- --
375 Park Avenue, #2507
New York, NY 10152
Stephen A. Kaplan(7).............. 3,750 0.0 -- -- -- -- 2,618,773 92.5
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
C. Everett Koop, M.D.(8).......... 3,750 0.0 -- -- -- -- -- --
Charles A. Sanders, M.D........... 3,750 0.0 -- -- 10,000 0.5 -- --
Edward E. Jacobs, Jr., M.D.(9).... 30,750 0.2 -- -- -- -- -- --
Maria S. Gawryl, Ph.D.(10)........ 34,625 0.2 -- -- -- -- -- --
Dixie L. Esseltine, M.D.(11)...... 2,500 0.0 -- -- -- -- -- --
Brian A. Lajoie(12)............... 10,625.... 0.1 -- -- -- -- -- --
All Officers and Directors as a
Group(13)....................... 10,970,180 58.7 10,000 0.5 2,618,773 92.5

<CAPTION>
--------------------------------
PERCENT OF
PREFERRED STOCK
-----------------
SERIES D PRO FORMA
----------------- CLASS A
SHARES PERCENT COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNERS ------- ------- ------------
<S> <C> <C> <C>
KBC Insurance N.V. ............... 250,000 11.3% %
Wasistraat 6
B-3000 Leuven, Belgium
Providence Partnership II......... -- --
c/o Kinship Capital Corporation
400 Skokie Blvd, Suite 675
Northbrook, IL 60062
Schooner Capital LLC.............. 191,666 8.7
745 Atlantic Avenue
Boston, MA 02111
Zesiger Capital Group LLC......... -- --
320 Park Avenue, 30th Floor
New York, NY 10022
NEGF II, L.P. .................... 83,333 3.8
c/o New England Partners
One Boston Place, Suite 2100
Boston, MA 02108
J.B. Partners..................... -- --
645 Madison Avenue
New York, NY 10022
David N. Judelson(6).............. -- --
375 Park Avenue, #2507
New York, NY 10152
Stephen A. Kaplan(7).............. 83,333 3.8
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
C. Everett Koop, M.D.(8).......... -- --
Charles A. Sanders, M.D........... -- --
Edward E. Jacobs, Jr., M.D.(9).... -- --
Maria S. Gawryl, Ph.D.(10)........ -- --
Dixie L. Esseltine, M.D.(11)...... -- --
Brian A. Lajoie(12)............... -- --
All Officers and Directors as a
Group(13)....................... 113,433 5.1
</TABLE>

- ---------------
(1) Mr. Rausch's shares of class A common stock consist of: sole power to vote
and dispose of 4,056,292 shares owned by Biopure Associates Limited Partnership;
sole power to vote and dispose of 3,340,000 shares owned by Biopure Associates
Limited Partnership II; sole power to vote 257,750 shares held in a voting trust
of which he is the voting trustee; sole power to vote and dispose of 572,590
shares owned directly by Mr. Rausch, his family and family trusts; and options
exercisable 60 days from April 30, 1999 to purchase 31,250 shares.

(2) Biopure Associates Limited Partnership is a Massachusetts limited
partnership originally formed to hold shares owned primarily by our officers,
employees and consultants. Mr. Rausch, as the sole general partner, has sole
power to vote and dispose of these shares. Biopure Associates Limited
Partnership II was formed for a similar purpose. Mr. Rausch, as the sole general
partner, has sole power to vote and dispose of these shares. The underlying
shares of class A common stock in the two partnerships owned indirectly by
directors and persons named in the compensation table are as follows: Mr. Rausch
2,094,895 shares; Mr. Judelson 500,000 shares; Dr. Koop 60,000 shares; Dr.
Jacobs 773,590 shares; Dr. Gawryl 55,000 shares; and Mr. Lajoie 135,000 shares.

(3) The ownership of B. Braun Melsungen AG consists solely of voting power.
These shares are subject to a purchase agreement whereby Biopure will reacquire
them, as described under "Certain Relationships and Related Transactions".

(4) HTV Industries, Inc. may be deemed indirectly to have the sole power to
vote and dispose of the series D convertible preferred stock owned of record by
TVI Corp., a wholly owned subsidiary of HTV Industries, Inc.

(5) Includes all of the shares owned by Aspen Venture Partners, L.P. of which
Mr. Ferguson serves as Managing Partner, and all of the shares owned by Aspen
Investment Associates, L.P. of which Mr. Ferguson is a General Partner. Mr.
Ferguson has shared voting and investment power with respect to the shares owned
by these partnerships. Mr. Ferguson has sole voting and investment powers with
respect to 30,000 shares of series B convertible preferred stock, 10,000 shares
of series C convertible

41
<PAGE> 43

preferred stock and 4,167 shares of series D convertible preferred stock owned
by him. Mr. Ferguson disclaims beneficial ownership of the shares held by Aspen
Venture Partners, L.P. and Aspen Investment Associates, L.P., except to the
extent of his proportionate pecuniary interest in Aspen Venture Partners, L.P.
and Aspen Investment Associates, L.P.

(6) Mr. Judelson's shares consist of sole power to vote and dispose of
2,510,873 shares, include options exercisable 60 days from April 30, 1999 to
purchase 31,250 shares and do not include his 500,000 shares referenced above in
note 2.

(7) Mr. Kaplan's shares consist of shares owned of record by OCM Principal
Opportunities Fund, L.P., for which Mr. Kaplan has sole power to vote and
dispose and options exercisable 60 days from April 30, 1999 to purchase 3,750
shares.

(8) Dr. Koop's shares include options exercisable from April 30, 1999 to
purchase 3,750 shares and do not include his 60,000 shares referenced above in
note 2.

(9) Dr. Jacobs' ownership consists of sole power to vote and dispose of 27,000
shares and options exercisable 60 days from April 30, 1999 to purchase 3,750
shares and do not include his 773,590 shares referenced above in note 2.

(10) Dr. Gawryl's shares include options exercisable 60 days from April 30, 1999
to purchase 34,625 shares and do not include her 55,000 shares referenced above
in note 2.

(11) Dr. Esseltine's shares consist of options exercisable 60 days from April
30, 1999 to purchase 2,500 shares.

(12) Mr. Lajoie's shares include options exercisable 60 days from April 30, 1999
to purchase 10,625 shares and do not include his 135,000 shares referenced above
in note 2.

(13) Includes options exercisable 60 days from April 30, 1999 to purchase
202,275 shares.

42
<PAGE> 44

DESCRIPTION OF CAPITAL STOCK

The following description of our securities and various provisions of our
restated certificate of incorporation and our by-laws are summaries.

Our authorized capital stock consists of shares of common stock,
consisting of shares of class A common stock, par value $.01 per
share, and 179 shares of class B common stock, par value $1.00 per share and
shares of preferred stock, par value $.01 per share.

CLASS A COMMON STOCK

The holders of our class A common stock are entitled to one vote per share on
all matters to be voted on by our stockholders and are entitled to receive
dividends as and when declared by our board of directors.

Upon any liquidation, dissolution or winding up of Biopure, holders of class A
common stock are entitled to ratable distribution, with the holders of the class
B common stock, of our remaining assets available for distribution to our
stockholders, after payment of the liquidation preferences due to the holders of
our convertible preferred stock.

Holders of class A common stock are not entitled to preemptive rights and do not
have cumulative voting rights.

CLASS B COMMON STOCK

Except as required by law, the holders of class B common stock have no voting
rights and are not entitled to receive dividends on their class B common stock.

The shares of class B common stock are subject to conversion into class A common
stock, after the receipt of all regulatory approvals required for the commercial
sale of Hemopure for in vivo use as an oxygen transport material in humans in
the United States. The conversion ratio will be based on a valuation of Biopure
at that time, subject to a maximum valuation of Biopure and a maximum number of
shares. The aggregate number of shares of class A common stock issuable upon
conversion of the class B common stock will be a maximum of 1,908,179 shares and
a minimum of 970,000 shares. We will not issue any additional shares of class B
common stock.

In the event of a liquidation, dissolution or winding up, holders of class B
common stock are entitled to ratable distribution, with the holders of the class
A common stock, of our remaining assets available for distribution to our
stockholders, after payment of the liquidation preferences due to the holders of
our convertible preferred stock.

SERIES A CONVERTIBLE PREFERRED STOCK

The holders of shares of series A convertible preferred stock are entitled to
receive dividends and other distributions only as and when declared on our class
A common stock, based on the number of shares of class A common stock into which
the series A convertible preferred stock could be converted on the record date
for such dividend or distribution.

Holders of shares of series A convertible preferred stock are entitled to vote
on all matters submitted to the stockholders, the number of votes being equal to
the largest number of whole shares of class A common stock into which such
shares of series A convertible preferred stock could be converted on the record
date for determining which stockholders are entitled to vote on the matters. In
addition, the affirmative vote of 66 2/3% of the outstanding shares of series A
convertible preferred stock is required to permit us to engage in certain
transactions, including: redemption or repurchase of our stock, authorization of
new issuances of stock, merger, consolidation or disposition of substantially
all our assets, assignment of our accounts receivable, or amending our restated
certificate of incorporation to change the relative seniority rights of the
series A convertible preferred stock, reduce the amounts payable to holders of
series A convertible preferred stock or change the priority of the series A
convertible preferred stock upon a liquidation, dissolution or winding up,
authorize any equity securities senior to or on a parity with the series A
convertible preferred stock, cancel or modify the conversion rights of the
series A convertible preferred stock or otherwise adversely change any of the
rights, preferences, privileges or limitations which are provided for the
benefit of the holders of the series A convertible preferred stock.

Upon a liquidation, dissolution or winding up, the holders of shares of series A
convertible preferred stock will be entitled to receive either the greater of
(i) a preferential liquidation payment of $3.75 per share, approximately
$1,300,000 in the aggregate, plus all declared but unpaid dividends thereon or
(ii) the amount the holders would have received had their shares of series A
convertible preferred stock been converted into class A common stock immediately
prior to such event of liquidation, dissolution or winding up.

43
<PAGE> 45

Each share of series A convertible preferred stock may be converted into five
shares of class A common stock at the option of the holder and will
automatically be converted in the event of an initial public offering of shares
of class A common stock with specified minimum characteristics.

SERIES B CONVERTIBLE PREFERRED STOCK

The holders of shares of series B convertible preferred stock are entitled to
receive dividends and other distributions only as and when declared on our class
A common stock or series A convertible preferred stock, based on the number of
shares of class A common stock into which such series B convertible preferred
stock could be converted on the record date for such dividend or distribution.
Such series B convertible preferred stock dividends shall be paid prior to any
payment of any dividends on the class A common stock.

Holders of shares of series B convertible preferred stock are entitled to vote,
the number of votes being equal to the number of shares of class A common stock
into which each such share of series B convertible preferred stock could then be
converted, on all matters submitted to the stockholders. In addition, the
affirmative vote of 75% of the outstanding shares of series B convertible
preferred stock is required to permit us to engage in certain transactions,
including: reclassifying any class A common stock into shares having any
preference or priority as to dividends or assets superior to any such preference
or priority of the series B convertible preferred stock, creating or issuing any
other class or classes of stock or series of stock or debt securities having any
preference or priority as to dividends or assets superior to any such preference
or priority of the series B convertible preferred stock, creating or issuing any
other class or classes of stock ranking on a parity as to any preference or
priority as to dividends or assets other than preferred stock with an aggregate
liquidation preference not to exceed $30.0 million and having terms no more
favorable to an investor than the terms of the series B convertible preferred
stock or amending or repealing any provisions of our restated certificate of
incorporation or by-laws to change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the series B convertible
preferred stock generally or to increase the number of authorized shares of the
series B convertible preferred stock.

Holders of shares of series B convertible preferred stock, voting as a class,
are entitled to elect one representative to our board of directors, which
representative shall be reasonably acceptable to us.

Upon a liquidation, dissolution or winding up, the holders of shares of series B
convertible preferred stock will be entitled to receive a preferential
liquidation payment, subject to equitable adjustment of stock splits,
combinations, reclassifications and similar events, equal to all declared but
unpaid dividends thereon, plus an amount per share equal to the greater of:
(a)(i) if such liquidation, dissolution or winding up occurs prior to the third
anniversary of the original issue date of the series B convertible preferred
stock, the series B return amount per share or (ii) if such liquidation,
dissolution or winding up occurs on or after the third anniversary of the
original issue date of the series B convertible preferred stock, $21.73 per
share or (b) such amount per share of series B convertible preferred stock as
would have been payable had the shares of series B convertible preferred stock
been converted into class A common stock immediately prior to such liquidation,
dissolution or winding up so long as the amount distributable per share of class
A common stock exceeds $31.80. The term "series B return amount" as of any date,
means an amount equal to $10.60 plus a 35% annualized rate of return on $10.60
from the original issue date of the series B convertible preferred stock to such
date.

Each share of series B convertible preferred stock may be converted into one
share of class A common stock at the option of the holder and automatically
converts upon (i) the closing of an initial public offering of shares of class A
common stock at a minimum public offering price of $15.00 per share and net
proceeds to us in excess of $40.0 million or (ii) the written consent of the
holders of 80% or more of the series B convertible preferred stock then
outstanding. The holders of shares of series B convertible preferred stock have
agreed with us to convert all shares of series B convertible preferred stock
upon consummation of this offering at a conversion ratio of 1.197 shares of
class A common stock for each share of series B convertible preferred stock.

SERIES C CONVERTIBLE PREFERRED STOCK

The holders of shares of series C convertible preferred stock are entitled to
receive dividends and other distributions only as and when declared on our class
A common stock, series A convertible preferred stock, series B convertible
preferred stock or series D convertible preferred stock, based on the number of
shares of class A common stock into which the series C convertible preferred
stock could be converted on the record date for such dividend or distribution.
Such series C convertible preferred stock dividends shall be paid prior to any
payment of any dividends on any class A common stock, series A convertible
preferred stock, series B convertible preferred stock or series D convertible
preferred stock.

Holders of shares of series C convertible preferred stock are entitled to vote,
the number of votes being equal to the number of shares of class A common stock
into which each such share of series C convertible preferred stock could then be
converted, on all matters submitted to the stockholders. In addition, the
affirmative vote of two-thirds of the outstanding series C
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<PAGE> 46

convertible preferred stock is required to permit us to engage in certain
transactions, including: creating, by reclassification or otherwise, any new
class or series of stock having rights, preferences or privileges senior to or
on a parity with the series C convertible preferred stock, amending or repealing
any provisions of our restated certificate of incorporation or by-laws to change
the rights, preferences or privileges of the series C convertible preferred
stock, to increase or decrease the number of authorized shares of the series C
convertible preferred stock, results in the redemption of any shares of common
stock (other than pursuant to employee agreements or in connection with
redemption of shares held by Braun) or amends, restates or waives any provision
of our restated certificate of incorporation or by-laws relative to the series C
convertible preferred stock.

Holders of shares of the series C convertible preferred stock, voting as a
class, are entitled to elect one representative to our board of directors, which
representative shall be reasonably acceptable to us.

Upon a liquidation, dissolution or winding up, the holders of shares of series C
convertible preferred stock will be entitled to receive a preferential
liquidation payment, subject to equitable adjustment for stock splits,
combinations, reclassifications and similar events, plus all declared but unpaid
dividends thereon, an amount per share equal to the greater of: (a)(i) if such
liquidation, dissolution or winding up occurs prior to the third anniversary of
the original issue date of the series C convertible preferred stock, the series
C return amount per share or (ii) if such liquidation, dissolution or winding up
occurs on or after the third anniversary of the original issue date of the
series C convertible preferred stock, $21.73 per share or (b) such amount per
share of series C convertible preferred stock as would have been payable had the
shares of series C convertible preferred stock been converted into class A
common stock immediately prior to such liquidation, dissolution or winding up so
long as the amount distributable per share of class A common stock exceeds
$31.80. The term "series C return amount" as of any date, means an amount equal
to $10.60 plus a 35% annualized rate of return on $10.60 from the original issue
date of the series C convertible preferred stock to such date.

Each share of series C convertible preferred stock may be converted into one
share of class A common stock at the option of the holder and automatically
converts upon (i) the vote of the holders of at least two-thirds of the series C
convertible preferred stock or (ii) the closing of an initial public offering of
shares of class A common stock at a minimum public offering price of $23.00 as
of the date of this prospectus and minimum net proceeds to us of $40.0 million.
The holders of shares of series C convertible preferred stock have agreed with
us to convert all shares of series C convertible preferred stock upon
consummation of this offering at a conversion ratio of 1.424 shares of class A
common stock for each share of series C convertible preferred stock.

SERIES D CONVERTIBLE PREFERRED STOCK

The holders of shares of series D convertible preferred stock are entitled to
receive dividends and other distributions only as and when declared on our class
A common stock, series A convertible preferred stock, series B convertible
preferred stock or series C convertible preferred stock, based on the number of
shares of class A common stock into which the series D convertible preferred
stock could be converted on the record date for such dividend or distribution.
Series D convertible preferred stock dividends shall be paid prior to any
payment of any dividends on any class A common stock, the series A convertible
preferred stock, the series B convertible preferred stock or the series C
convertible preferred stock.

Holders of shares of series D convertible preferred stock are entitled to vote
on all matters on which stockholders may vote, including election of directors,
and shall have a number of votes equal to the largest number of full shares of
class A common stock into which the series D convertible preferred stock held by
them could then be converted.

Upon a liquidation, dissolution or winding up, each holder of shares of series D
convertible preferred stock shall be entitled to receive, prior and in
preference to any distribution of any of our assets or surplus funds to the
holders of class A common stock or class B common stock by reason of their
ownership thereof, an amount equal to any declared but unpaid dividends on such
share of series D convertible preferred stock to and including the date full
payment is so tendered to the holders of the series D convertible preferred
stock with respect to such liquidation, dissolution or winding up, plus an
amount equal to the greater of: (a)(i) if such liquidation, dissolution or
winding up occurs prior to the third anniversary of the series D original issue
date, the series D return amount per share or (ii) if such liquidation,
dissolution or winding up occurs on or after the third anniversary of the series
D convertible preferred stock original issue date, $24.60 per share or (b) such
amount per share of series D convertible preferred stock as would have been
payable had each share of preferred stock been converted to class A common stock
immediately prior to such liquidation, dissolution or winding up so long as the
amount distributable per share of class A common stock exceeds $36.00. The term
"series D return amount" as of any date, means an amount equal to $12.00 plus a
35% annualized rate of return on $12.00 from the issue date of the series D
convertible preferred stock to such date.

Each share of series D convertible preferred stock may be converted into a share
of class A common stock at the option of the holder and will be automatically
converted into class A common stock upon (i) the vote of the holders of at least
two-thirds of the series D convertible preferred stock or (ii) the closing of
this offering; provided that, if the initial price to the public in this

45
<PAGE> 47

offering is less than $16.00 per share, such conversion ratio will, if more
favorable to the holders of the series D convertible preferred stock, be
adjusted proportionately so that the holders of the series D convertible
preferred stock will receive additional shares of class A common stock which,
valued at the price of this offering, will represent a 35% annualized return
from the date of original issue on the original issue price of the series D
convertible preferred stock and if the price of this offering is less than
$10.60, the adjustment shall be made as if the price were $10.60, and no further
adjustment will be made. If the price per share in this offering is equal to or
greater than $16.00, there will be no adjustment.

ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND BIOPURE'S
RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to various exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, fifteen percent
or more of the corporation's voting stock. This statute could prohibit or delay
the success of mergers or other takeover or change in control attempts with
respect to Biopure and, accordingly, may discourage attempts to acquire us.

In addition, various provisions of our restated certificate of incorporation and
our by-laws, which provisions will be in effect upon the completion of this
offering and are summarized in the following paragraphs, may be deemed to have
an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders.

Classified Board of Directors
Following the completion of this offering, our board of directors will be
divided into three classes of directors serving staggered three-year terms. As a
result, approximately one-third of the board of directors will be elected each
year. These provisions, when coupled with the provision of the by-laws
authorizing the board of directors to fill vacant directorships or increase the
size of the board of directors, may deter a stockholder from voting to remove
incumbent directors and simultaneously gaining control of the board of directors
by filling the vacancies created by that removal with its own nominees.

Advance Notice Requirements for Stockholder Proposals and Director Nominations
The by-laws provide that stockholders who wish to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice in
writing to the secretary of Biopure. To be timely, a stockholder's notice must
be delivered at our principal executive offices, not less than 90 days prior to
the first anniversary of the date of our previous year's annual meeting of
stockholders. However, if no annual meeting of stockholders was held in the
previous year or the date of the annual meeting of stockholders has been changed
to be more than 30 calendar days earlier than or 60 calendar days after the
anniversary, notice by the stockholder, to be timely, must be received by us not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which the public
announcement of the date of such meeting is first made. The by-laws also provide
specific notice requirements applicable where the number of directors has been
increased. The by-laws specify various requirements as to the form and content
of a stockholder's notice. These provisions may preclude stockholders from
bringing matters for a vote before an annual meeting of stockholders or from
making nominations for directors at an annual meeting of stockholders.

Authorized But Unissued Shares
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without further stockholder approval. These
additional shares may be used for a variety of corporate purposes, including
future public or private offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved common stock and preferred stock could make more
difficult or discourage an attempt to obtain control of Biopure by means of a
proxy contest, tender offer, merger or otherwise.

The Delaware General Corporation Law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage, or unless the by-law provision being amended was
originally adopted by the board of directors, in which case the amendment
requires only the affirmative vote of a majority of the members of the board of
directors or unless the certificate of incorporation provides that the board of
directors may amend the by-laws, in which case the amendment requires only the
affirmative vote of a majority of the members of the board of directors.

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<PAGE> 48

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has not been any public market for our class A
common stock, and no prediction can be made as to the effect, if any, that sales
of shares of class A common stock or the availability of shares of class A
common stock for sale will have on the market price of the class A common stock
prevailing from time to time. Nevertheless, sales of substantial amounts of
class A common stock in the public market, or the perception that such sales
could occur, could adversely affect the market price of our class A common stock
and could impair our future ability to raise capital through the sale of our
equity securities.

Upon the completion of this offering, we will have an aggregate of
shares of class A common stock outstanding, assuming no exercise
of the underwriters' over-allotment option and no exercise of options or
warrants outstanding at January 30, 1999. Of the outstanding shares, the
shares sold in this offering will be freely tradeable, except
that any shares held by our "affiliates", as that term is defined in Rule 144
promulgated under the Securities Act, may be sold only in compliance with the
limitations described below. The remaining shares of class A
common stock will be deemed "restricted securities" as defined under Rule 144
and may not be sold publicly unless they are registered under the Securities Act
or are sold pursuant to Rule 144 or another exemption from registration. Our
directors, executive officers and substantially all of our other stockholders,
holding shares in the aggregate after conversion of our preferred
stock, have agreed that they will not sell, directly or indirectly, any shares
of class A common stock without the prior written consent of J.P. Morgan
Securities Inc. for a period of 180 days from the date of this prospectus.
Subject to these lock-up agreements, the shares of class A common stock
outstanding upon the completion of this offering will be available for sale in
the public market as follows:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES DESCRIPTION
<S> <C>
After the date of this prospectus, freely tradeable shares
sold in this offering and shares saleable under Rule 144(k)
that are not subject to the 180-day lock-up
After 90 days from the date of this prospectus, shares
saleable under Rule 144 that are not subject to the 180-day
lock-up
After 180 days from the date of this prospectus, the 180-day
lock-up is released and these shares are saleable under Rule
144, subject, in some cases, to volume limitations, Rule
144(k), or pursuant to a registration statement to register
for resale shares of class A common stock issued upon the
exercise of stock options
After 180 days from the date of this prospectus, restricted
securities that are held for less than one year and are not
yet saleable under Rule 144
</TABLE>

In general, under Rule 144, as currently in effect, a person, or person whose
shares are required to be aggregated, including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (i) 1.0% of the then
outstanding shares of class A common stock, approximately shares
immediately after this offering, or (ii) the average weekly trading volume in
the class A common stock during the four calendar weeks preceding the date on
which notice of such sale is filed, subject to certain restrictions. In
addition, a person who is not deemed to have been an affiliate of ours at any
time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years would be entitled to sell such
shares under Rule 144(k) without regard to the volume restrictions described
above. To the extent that shares were acquired from an affiliate, such person's
holding period for the purpose of effecting a sale under Rule 144 commences on
the date of transfer from the affiliate.

As of April 30, 1999, options and warrants to purchase a total of 1,872,415
shares of class A common stock were outstanding, of which 325,445 were
exercisable.

We have agreed not to sell or otherwise dispose of any shares of class A common
stock during the 180-day period following the date of the prospectus, except
that we may issue, and grant options to purchase, shares of class A common stock
under our 1999 Omnibus Securities and Incentive Plan. In addition, we may issue
shares of class A common stock in connection with any acquisition of another
company if the terms of such issuance provide that the class A common stock so
issued shall not be resold prior to the expiration of the 180-day lock-up
period.

Following this offering, under specified circumstances and subject to customary
conditions, holders of shares of class A common stock will have demand
registration rights with respect to their shares of class A common stock,
subject to the 180-day lock-up arrangement described above, to require us to
register their shares of class A common stock under the Securities Act, and they
will have rights to participate in any future registration of securities by us.

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<PAGE> 49

UNDERWRITING

Biopure and the underwriters named below have entered into an underwriting
agreement covering the class A common stock to be offered in this offering. J.P.
Morgan Securities Inc., Adams, Harkness & Hill, Inc. and Robert W. Baird & Co.
Incorporated are acting as representatives of the underwriters. Each underwriter
has agreed to purchase the number of shares of class A common stock set forth
opposite its name in the following table.

<TABLE>
<CAPTION>
-----------
NUMBER OF
SHARES
-----------
<S> <C>
UNDERWRITERS
J.P. Morgan Securities Inc..................................
Adams, Harkness & Hill, Inc.................................
Robert W. Baird & Co. Incorporated..........................
-----------
Total.............................................
===========
</TABLE>

The underwriting agreement provides that if the underwriters take any of the
shares set forth in the table above, then they must take all of these shares. No
underwriter is obligated to take any shares allocated to a defaulting
underwriter except under limited circumstances.

The underwriters are offering the shares of class A common stock, subject to the
prior sale of shares, and when, as and if such shares are delivered to and
accepted by them. The underwriters will initially offer to sell shares to the
public at the initial public offering price set forth on the cover page of this
prospectus. The underwriters may sell shares to securities dealers at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell shares to certain other brokers or dealers at a
discount of up to $ per share from the initial public offering price. After
the initial public offering, the underwriters may vary the public offering price
and other selling terms.

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have the option to buy up to an additional
shares of class A common stock from Biopure to cover such sales. They
may exercise this option during the 30-day period from the date of this
prospectus. If any shares are purchased with this option, the underwriters will
purchase shares in approximately the same proportion as set forth in the table
above.

The following table shows the per share and total underwriting discounts that
Biopure will pay to the underwriters. These amounts are shown assuming both no
exercise and full exercise of the underwriters' option to purchase additional
shares.

<TABLE>
<CAPTION>
----------------------------
PAID BY BIOPURE
----------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share.............................................. $ $
----------- -----------
Total............................................. $ $
=========== ===========
</TABLE>

The underwriters may purchase and sell shares of class A common stock in the
open market in connection with this offering. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or slowing a decline in the market price of the class A common stock
while the offering is in progress. The underwriters may also impose a penalty
bid, which means that an underwriter must repay to the other underwriters a
portion of the underwriting discount received by

48
<PAGE> 50

it. An underwriter may be subject to a penalty bid if the representatives of the
underwriters, while engaging in stabilizing or short covering transactions,
repurchase shares sold by or for the account of that underwriter. These
activities may stabilize, maintain or otherwise affect the market price of the
class A common stock. As a result, the price of the class A common stock may be
higher than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National Market,
in the over-the-counter market or otherwise.

We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be $ .

We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.

Biopure and our directors, officers and substantially all our other stockholders
have agreed with the underwriters not to transfer, dispose of or hedge any of
our class A common stock, or securities convertible into or exchangeable for
shares of class A common stock, for a period of 180 days after the date of this
prospectus, except with the prior written consent of J.P. Morgan Securities Inc.
This agreement does not apply to any of our employee benefit plans existing on
the date of this prospectus.

At our request, the underwriters have reserved shares of class A common stock
for sale to directors, officers, employees and retirees of Biopure who have
expressed an interest in participating in this offering. We expect these persons
to purchase no more than % of the class A common stock offered in the
offering. The number of shares available for sale to the general public will be
reduced to the extent such persons purchase such reserved shares.

We intend to apply to have our class A common stock listed on the Nasdaq
National Market under the symbol "BPUR".

It is expected that delivery of the shares will be made to investors on or about
, 1999.

There has been no public market for the class A common stock prior to this
offering. We and the underwriters will negotiate the initial offering price. In
determining the price, we and the underwriters expect to consider a number of
factors in addition to prevailing market conditions, including:

- - the history of and prospects for the oxygen therapeutic industry;

- - an assessment of our management;

- - our present operations;

- - our historical results of operations; and

- - our earnings prospects.

We and the underwriters will consider these and other relevant factors in
relation to the price of similar securities of generally comparable companies.
Neither we nor the underwriters can assure investors that an active trading
market will develop for the class A common stock, or that the class A common
stock will trade in the public market at or above the initial offering price.

From time to time in the ordinary course of their respective businesses, certain
of the underwriters and their affiliates may in the future engage in commercial
banking and/or investment banking transactions with Biopure and our affiliates.

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<PAGE> 51

LEGAL MATTERS

The validity of the class A common stock offered hereby will be passed upon for
us by LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability partnership
including professional corporations, New York, New York.

Legal matters in connection with the offering will be passed upon for the
underwriters by Cahill Gordon & Reindel, a partnership including a professional
corporation, New York, New York.

Legal matters in connection with our patents and intellectual property interests
will be passed upon for us by Hamilton, Brook, Smith & Reynolds, P.C.,
Lexington, Massachusetts.

Legal matters in connection with FDA regulation will be passed upon for us by
Hogan & Hartson, L.L.P., Washington, D.C.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our Consolidated Financial
Statements at October 31, 1997 and 1998, and for each of the three years in the
period ended October 31, 1998, as set forth in their report, which contains an
explanatory paragraph describing conditions that raise substantial doubt about
our ability to continue as a going concern as described in Note 2 to the
Consolidated Financial Statements. We have included our financial statements in
the prospectus and elsewhere in the Registration Statement in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and
auditing.

AVAILABLE INFORMATION

We have not previously been subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended. We have filed with the Securities
and Exchange Commission, or the Commission, a Registration Statement, which term
shall include all amendments, exhibits, schedules and supplements thereto, on
Form S-1 under the Securities Act with respect to the class A common stock
offered hereby. This prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to
Biopure and the class A common stock offered hereby, reference is made to the
Registration Statement, copies of which may be examined without charge at the
Commission's principal office at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and the regional offices of the Commission located at 7 World Trade
Center, New York, New York 10048 and 500 West Madison Street, 14th Floor,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at its public reference facilities in New
York, New York and Chicago, Illinois at prescribed rates, or on the internet at
http://www.sec.gov. Statements contained in this prospectus as to the contents
of any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each statement being qualified in
all respects by such reference. Copies of materials filed with the Commission
may also be inspected at the offices of the Nasdaq National Market located at
1735 K Street, N.W., Washington, D.C. 20006.

50
<PAGE> 52

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2

Consolidated Balance Sheets at October 31, 1997, October 31,
1998 and January 30, 1999 (unaudited)..................... F-3

Consolidated Statements of Operations for the Years Ended
October 31,
1996, 1997 and 1998 and the Three Months Ended January 31,
1998 (unaudited) and January 30, 1999 (unaudited)......... F-4

Consolidated Statements of Stockholders' Equity for the
Years Ended
October 31, 1996, 1997 and 1998 and the Three Months Ended
January 30, 1999 (unaudited).............................. F-5

Consolidated Statements of Cash Flows for the Years Ended
October 31,
1996, 1997 and 1998 and the Three Months Ended January 31,
1998 (unaudited) and January 30, 1999 (unaudited)......... F-6

Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 53

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
Biopure Corporation

We have audited the accompanying consolidated balance sheets of Biopure
Corporation (the Company) as of October 31, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended October 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Biopure
Corporation at October 31, 1997 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1998, in conformity with generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company's
recurring losses from operations raise substantial doubt about its ability to
continue as a going concern. Management's plans as to these matters are
described in Note 2. The 1998 consolidated financial statements do not include
any adjustment that might result from the outcome of this uncertainty.

ERNST & YOUNG LLP

Boston, Massachusetts
December 11, 1998, except for
Note 14, as to which the date
is January 27, 1999

F-2
<PAGE> 54

BIOPURE CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
-------------------------------------
OCTOBER 31,
---------------------- JANUARY 30,
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
In thousands, except share and per share data
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 13,527 $ 6,063 $ 14,892
Accounts receivable, less allowance of $28 and $40 at
October 31, 1998 and January 30, 1999, respectively.... -- 346 362
Inventory, net............................................ -- 3,072 3,218
Current portion of restricted cash........................ 1,419 3,508 3,508
Other current assets...................................... 275 186 250
--------- --------- ---------
Total current assets.............................. 15,221 13,175 22,230
Property and equipment:
Equipment................................................. 22,330 23,021 23,079
Leasehold improvements.................................... 13,214 13,330 13,330
Furniture and fixtures.................................... 813 1,078 1,078
Construction in progress.................................. 756 5,144 5,708
--------- --------- ---------
37,113 42,573 43,195
Accumulated depreciation and amortization................. (9,705) (12,967) (13,951)
--------- --------- ---------
Net property and equipment.................................. 27,408 29,606 29,244
Investment in affiliate..................................... 166 131 131
Other assets................................................ 1,259 1,936 953
--------- --------- ---------
Total assets...................................... $ 44,054 $ 44,848 $ 52,558
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 431 $ 1,523 $ 816
Accrued expenses.......................................... 7,422 7,666 7,429
Current portion of long-term debt......................... 2,000 2,000 2,000
--------- --------- ---------
Total current liabilities......................... 9,853 11,189 10,245
Long-term debt.............................................. 6,000 4,000 3,500
Deferred compensation....................................... 1,679 1,910 1,979
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $0.01 par value, 9,000,000
shares authorized:
Series A, 346,663 shares designated, issued and
outstanding (aggregate liquidation value of $1,300)... 3 3 3
Series B, 2,358,490 shares designated; 2,127,251 shares
issued and outstanding (aggregate liquidation value of
$35,185).............................................. 22 22 22
Series C, 2,830,188 shares designated, issued and
outstanding at October 31, 1998 and January 30, 1999
(aggregate liquidation value of $42,396).............. -- 28 28
Series D, 3,333,333 shares designated; 1,489,498 issued
and outstanding at January 30, 1999 (aggregate
liquidation value of $18,529)......................... -- -- 15
Common stock:
Class A, $0.01 par value, 40,000,000 shares authorized,
18,919,876, 19,134,689 and 18,668,815 shares issued,
18,614,959, 18,829,772 and 18,363,898 shares
outstanding at October 31, 1997 and 1998 and January
30, 1999,
respectively......................................... 189 191 187
Class B, $1.00 par value, 179 shares authorized, 117.7
shares issued and outstanding......................... -- -- --
Capital in excess of par value............................ 172,286 203,711 219,675
Contributed capital....................................... 24,574 24,574 24,574
Notes receivable.......................................... (2,110) (2,291) (2,337)
Treasury stock, at cost (304,917 shares of Class A
common)................................................ (1,583) (1,583) (1,583)
Accumulated deficit....................................... (166,859) (196,906) (203,750)
--------- --------- ---------
Total stockholders' equity........................ 26,522 27,749 36,834
--------- --------- ---------
Total liabilities and stockholders' equity........ $ 44,054 $ 44,848 $ 52,558
========= ========= =========
</TABLE>

See accompanying notes.

F-3
<PAGE> 55

BIOPURE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
-------------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, -------------------------
--------------------------------------- JANUARY 31, JANUARY 30,
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
In thousands, except share and per share
data
Revenues:
Oxyglobin(R).......................... $ -- $ -- $ 942 $ -- $ 671
Other................................. 71 -- 189 54 62
----------- ----------- ----------- ----------- -----------
Total revenues.......................... 71 -- 1,131 54 733
Cost of revenues........................ -- -- 1,543 -- 1,680
----------- ----------- ----------- ----------- -----------
Gross profit (loss)..................... 71 -- (412) 54 (947)
Operating expenses:
Research and development.............. 18,924 23,494 22,950 5,728 4,283
Sales and marketing................... -- 694 2,444 258 729
General and administrative............ 3,506 2,920 4,660 1,032 1,092
----------- ----------- ----------- ----------- -----------
Total operating expenses...... 22,430 27,108 30,054 7,018 6,104
----------- ----------- ----------- ----------- -----------
Income (loss) from operations........... (22,359) (27,108) (30,466) (6,964) (7,051)
Other income (expense):
Interest income....................... 691 705 1,417 486 173
Interest expense...................... (839) (1,015) (799) (238) (166)
Other................................. 913 -- (199) -- 200
----------- ----------- ----------- ----------- -----------
Total other income
(expense)................... 765 (310) 419 248 207
----------- ----------- ----------- ----------- -----------
Net income (loss)....................... $ (21,594) $ (27,418) $ (30,047) $ (6,716) $ (6,844)
=========== =========== =========== =========== ===========
Historical:
Basic net income (loss) per common
share.............................. $ (1.18) $ (1.49) $ (1.61) $ (0.36) $ (0.37)
=========== =========== =========== =========== ===========
Weighted average shares used in
computing basic net income (loss)
per common share................... 18,321,774 18,449,516 18,690,046 18,623,605 18,632,776
=========== =========== =========== =========== ===========
Pro forma (unaudited):
Pro forma basic net income (loss) per
common share....................... $ $ $
Weighted average shares used in
computing pro forma basic net
income (loss) per common share
</TABLE>

See accompanying notes.

F-4
<PAGE> 56

BIOPURE CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
COMMON STOCK
------------------------------------- CAPITAL IN
PREFERRED STOCK CLASS A CLASS B EXCESS
------------------ ------------------- --------------- OF PAR CONTRIBUTED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT VALUE CAPITAL
--------- ------ ---------- ------ ------ ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
In thousands, except share data
Balance at October 31, 1995........ 346,663 $ 3 18,614,219 $ 186 101.5 $ -- $131,927 $ 20,655
Exercise of stock options........ 34,695 26
Stock repurchases................
Sale of common stock............. 13.0 13,000
Services contributed by
stockholder.................... 3,590
Accrued interest.................
Dividends declared ($.015 per
share).........................
Net loss.........................
--------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1996........ 346,663 3 18,648,914 186 114.5 -- 144,953 24,245
Exercise of stock options........ 75,650 1 45
Sale of preferred stock.......... 2,127,251 22 21,715
Sale of common stock............. 195,312 2 3.2 5,573
Services contributed by
stockholder.................... 329
Accrued interest.................
Net loss.........................
--------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1997........ 2,473,914 25 18,919,876 189 117.7 -- 172,286 24,574
Exercise of stock options........ 41,675 1 67
Sale of preferred stock.......... 2,830,188 28 28,181
Sale of common stock............. 138,888 1 2,463
Common stock issued in exchange
for release of debt
obligation..................... 34,250 -- 438
Equity compensation.............. 276
Accrued interest.................
Net loss.........................
--------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1998........ 5,304,102 53 19,134,689 191 117.7 -- 203,711 24,574
Exercise of stock options
(unaudited).................... 13,650 -- 28
Sale of preferred stock
(unaudited).................... 1,489,498 15 16,931
Repurchase of common stock
(unaudited).................... (479,524) (4) (995)
Accrued interest (unaudited).....
Net loss (unaudited).............
--------- ------ ---------- ------ ----- ------ -------- -----------
Balance at January 30, 1999
(unaudited)...................... 6,793,600 $ 68 18,668,815 $ 187 117.7 $ -- $219,675 $ 24,574
========= ====== ========== ====== ===== ====== ======== ===========

<CAPTION>
---------------------------------------------------

TOTAL
NOTES TREASURY ACCUMULATED STOCKHOLDERS'
RECEIVABLE STOCK DEFICIT EQUITY
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
In thousands, except share data
Balance at October 31, 1995........ $ (1,787) $(1,568) $(117,541) $ 31,875
Exercise of stock options........ 26
Stock repurchases................ (15) (15)
Sale of common stock............. 13,000
Services contributed by
stockholder.................... 3,590
Accrued interest................. (159) (159)
Dividends declared ($.015 per
share)......................... (306) (306)
Net loss......................... (21,594) (21,594)
---------- ------- --------- -------------
Balance at October 31, 1996........ (1,946) (1,583) (139,441) 26,417
Exercise of stock options........ 46
Sale of preferred stock.......... 21,737
Sale of common stock............. 5,575
Services contributed by
stockholder.................... 329
Accrued interest................. (164) (164)
Net loss......................... (27,418) (27,418)
---------- ------- --------- -------------
Balance at October 31, 1997........ (2,110) (1,583) (166,859) 26,522
Exercise of stock options........ 68
Sale of preferred stock.......... 28,209
Sale of common stock............. 2,464
Common stock issued in exchange
for release of debt
obligation..................... 438
Equity compensation.............. 276
Accrued interest................. (181) (181)
Net loss......................... (30,047) (30,047)
---------- ------- --------- -------------
Balance at October 31, 1998........ (2,291) (1,583) (196,906) 27,749
Exercise of stock options
(unaudited).................... 28
Sale of preferred stock
(unaudited).................... 16,946
Repurchase of common stock
(unaudited).................... (999)
Accrued interest (unaudited)..... (46) (46)
Net loss (unaudited)............. (6,844) (6,844)
---------- ------- --------- -------------
Balance at January 30, 1999
(unaudited)...................... $ (2,337) $(1,583) $(203,750) $ 36,834
========== ======= ========= =============
</TABLE>

See accompanying notes.

F-5
<PAGE> 57

BIOPURE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
--------------------------------------------------------------
THREE MONTHS ENDED
YEAR ENDED OCTOBER 31, --------------------------
-------------------------------- JANUARY 31, JANUARY 30,
1996 1997 1998 1998 1999
-------- -------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
In thousands
OPERATING ACTIVITIES:
Net income (loss).............................. $(21,594) $(27,418) $(30,047) $(6,716) $(6,844)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................. 1,483 3,090 3,262 759 984
Equity compensation.......................... -- -- 276 276 --
Deferred compensation........................ 191 192 231 63 69
Accrued interest on stockholders' notes
receivable................................ (159) (164) (181) (43) (46)
Equity in affiliate's operations............. 100 59 35 -- --
Services contributed by stockholder.......... 3,590 329 -- -- --
Provision for bad debts...................... (309) -- -- -- --
Accrued interest on settlement............... 698 -- -- -- --
Gain from affiliate.......................... (742) -- -- -- --
Changes in assets and liabilities:
Inventories............................... -- -- (3,072) (350) (146)
Accounts receivable....................... -- -- (346) -- (16)
Other receivable (affiliate).............. 205 654 -- -- --
Other current assets...................... 279 (65) 89 50 (64)
Accounts payable.......................... 1,326 (769) 441 (36) (707)
Accrued expenses.......................... (940) 2,354 682 (190) (237)
-------- -------- -------- ------- -------
Net cash used in operating activities... (15,872) (21,738) (28,630) (6,187) (7,007)
INVESTING ACTIVITIES:
Purchase of property and equipment............. (3,175) (1,350) (4,809) (308) (622)
Sales of short-term investments................ 1,490 -- -- -- --
Other assets................................... 341 (78) (341) 59 (16)
Restricted cash................................ 664 (2,437) (2,425) (1,417) --
-------- -------- -------- ------- -------
Net cash used in investing activities... (680) (3,865) (7,575) (1,666) (638)
FINANCING ACTIVITIES:
Net proceeds from sale of common stock......... 13,000 5,575 2,464 -- --
Net proceeds from sale of preferred stock...... -- 21,737 28,209 28,209 16,946
Proceeds from long-term debt................... 9,000 -- -- -- --
Payment of long-term debt...................... -- (1,000) (2,000) (500) (500)
Acquisition of treasury stock.................. (15) -- -- -- --
Dividends paid................................. (611) -- -- -- --
Proceeds from exercise of stock options........ 26 46 68 35 28
-------- -------- -------- ------- -------
Net cash provided by financing
activities........................... 21,400 26,358 28,741 27,744 16,474
-------- -------- -------- ------- -------
Increase (decrease) in cash and cash
equivalents.................................. 4,848 755 (7,464) 19,891 8,829
Cash and cash equivalents at beginning of
period....................................... 7,924 12,772 13,527 13,527 6,063
-------- -------- -------- ------- -------
Cash and cash equivalents at end of period..... $ 12,772 $ 13,527 $ 6,063 $33,418 $14,892
======== ======== ======== ======= =======
Interest paid.................................. $ -- $ 1,131 $ 693 $ 248 $ 120
======== ======== ======== ======= =======
</TABLE>

See accompanying notes.

F-6
<PAGE> 58

BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND ORGANIZATION

Biopure Corporation (the Company) uses proprietary technologies in the
development of a stabilized oxygenating molecule used as an alternative to red
blood cells in transfusion medicine. Subsequent research has revealed the
potential for the Company's products to be used as oxygen therapeutics in the
treatment of other critical care conditions. The Company's mission is to become
the world leader in oxygen therapeutics in both human and veterinary medicine.

During 1998, the Company began selling its veterinary product, Oxyglobin.
Initially, sales were made on a limited basis directly to emergency and
specialty veterinary practices. In October 1998, the Company began selling
Oxyglobin nationwide through several veterinary distributors, who purchase
product for immediate and direct sale to veterinary practices.

Costs of revenues include significant depreciation of production equipment and
other fixed and variable costs associated with the production of Oxyglobin. The
manufacturing process requires certain machinery to run on 24-hour cycles even
when production runs are not occurring. These costs are anticipated to be better
rationalized if demand/production increases.

Additionally, during 1998, the Company continued human clinical trials of its
Hemopure(R) solution in the United States, Europe and South Africa. These
clinical trials are expensive and a significant cause of the Company's operating
losses. Although there cannot be any assurance that its Hemopure solution will
be approved by a country's regulatory authority, the trials to date have
produced satisfactory results, which have allowed the Company to continue
clinical progress.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The consolidated financial statements reflect the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. All intercompany accounts and
transactions have been eliminated.

The consolidated financial statements of the Company have been presented on the
basis of a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. Because of its
continuing losses from operations, the Company will be required to obtain
additional capital to satisfy its ongoing capital needs and to continue its
operations. Although no assurances can be given, the Company is confident that
it will be able to obtain additional capital in 1999.

Unaudited Interim Financial Statements
The condensed consolidated financial statements as of and for the three months
ended January 31, 1998 and January 30, 1999 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for the three
months ended January 30, 1999 are not necessarily indicative of the results that
may be expected for the full year.

Risks and Uncertainties
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Some of the Company's key materials used in production are obtained from sole
source suppliers. Although such materials are available from other suppliers,
the Company must test materials not previously used in order to assure the
materials meet the Company's requirements.

Cash and Cash Equivalents
The Company considers all liquid securities with original maturities of three
months or less to be cash equivalents.

F-7
<PAGE> 59
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market.

Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the assets using the straight-line method. The estimated useful
lives of these assets are as follows:

<TABLE>
<S> <C>
----------------
Leasehold improvements...................................... Life of the lease
Major equipment............................................. 12 years
Equipment................................................... 5-7 years
Furniture and fixtures...................................... 5 years
Computer equipment.......................................... 3 years
</TABLE>

Revenue Recognition
The Company recognizes revenue from product sales at the time of shipment.

Stock-Based Compensation
The Company grants stock options for a fixed number of shares, generally with an
exercise price equal to the market value of the shares at the date of grant, as
determined by the board of directors. The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25), in accounting for its stock-based compensation plans, rather
than the alternative fair value accounting method provided for under Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), as this alternative requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, when the exercise price of options granted to employees
under these plans equals the market price of the underlying stock on the date of
grant, no compensation expense is required.

Earnings Per Share
Historical basic earnings per share is computed based on the weighted-average
number of common shares outstanding during the period. Diluted earnings per
share is computed based upon the weighted-average number of common shares
outstanding during the year, adjusted for the dilutive effect of shares issuable
upon the conversion of preferred stock outstanding and the exercise of common
stock options and warrants determined based upon average market price of common
stock for the period. Diluted earnings per share are not presented in the
accompanying consolidated financial statements because the Company had losses
for all periods presented.

Unaudited Pro Forma Net Income (Loss) Per Common Share
The unaudited pro forma basic net income (loss) per common share is computed
using the weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares (at date of
original issuance), which will occur upon completion of the initial public
offering, as contemplated herein, the planned repurchase of 2,541,410 shares of
Class A Common Stock at $2.08 per share and the imputed interest expense on the
related obligation, and the planned use of a portion of the net proceeds from
this offering to repay long-term debt and related reduction in interest expense.
Common share equivalents are excluded from the calculation as their effect is
anti-dilutive.

F-8
<PAGE> 60
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Calculation of Net Loss Per Share

<TABLE>
<CAPTION>
-------------------------------------------- ----------------------------
YEAR ENDED OCTOBER 31, THREE MONTHS ENDED
-------------------------------------------- ----------------------------
JANUARY 31, JANUARY 30,
1996 1997 1998 1998 1999
In thousands, except share ------------ ------------ ------------ ------------ ------------
and per share data (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Historical:
Net income (loss)................ $ (21,594) $ (27,418) $ (30,047) $ (6,716) $ (6,844)
Preferred stock dividends........ (26) -- -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) applicable
to common stockholders...... (21,620) (27,418) (30,047) (6,716) (6,844)
============ ============ ============ ============ ============
Weighted-average number of common
shares outstanding............ 18,321,774 18,449,516 18,690,046 18,623,605 18,632,776
============ ============ ============ ============ ============
Net income (loss) per common
share............................ $ (1.18) $ (1.49) $ (1.61) $ (0.36) $ (0.37)
============ ============ ============ ============ ============
Pro forma (unaudited):
Historical net income
(loss)...................... $ (30,047) $ (6,716) $ (6,844)
Interest expense related to
planned repurchase of Class
A
Common Stock................
Interest expense reduction
related to repayment of
long-term debt..............
------------ ------------ ------------
Pro forma net income (loss)...... $ $ $
============ ============ ============
Weighted-average number of
common shares:
Historical outstanding........ 18,690,046 18,623,605 18,632,776
Issued upon assumed conversion
of preferred stock..........
Retired upon planned
repurchase
of Class A Common Stock.....
Assumed issued to fund
repayment of long-term
debt........................
------------ ------------ ------------
Total weighted-average number of
common shares used in
computing
net income (loss) per common
share.........................
============ ============ ============
Net income (loss) per common
share......................... $ $ $
============ ============ ============
</TABLE>

Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures About Segments of an Enterprise and Related Information (Statement
131), which establishes standards for public companies to report information
about operating segments in financial statements. Statement 131 supersedes
Statement No. 14, Financial Reporting for Segments of a Business Enterprise;
however, Statement 131 retains the requirements to report information about
major customers. The Company adopted this statement effective November 1, 1998.
Disclosures required in future periods under Statement 131 are not expected to
be significant.

In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
Statement of Position (SOP) No. 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. The SOP provides guidance for
the capitalization of certain costs incurred to develop or obtain internal-use
software. SOP No. 98-1 is effective for the Company in fiscal 2000. The adoption
of this standard is not expected to have a material effect on the Company's
financial position or operating results.

F-9
<PAGE> 61
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. TRANSACTIONS WITH RELATED PARTIES

A substantial portion of the common stock of the Company is owned by two limited
partnerships, Biopure Associates Limited Partnership (BALP) and Biopure
Associates Limited Partnership II (BALP II). The primary purpose of these
partnerships is to own shares of common stock of the Company. The general
partners of these partnerships are officers of the Company, and the limited
partners include certain employees, officers, directors and consultants to the
Company. During 1996, 1997 and 1998, the Company made payments of approximately
$787,000, $301,000 and $344,000, respectively, to directors and consultants who
have ownership interests in the Company. The Company also had a development and
license agreement with a stockholder, Pharmacia & Upjohn, Inc. (P&U), through
July 1996 (see Note 9).

4. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
--------------------------
OCTOBER 31, JANUARY 30,
1998 1999
In thousands ----------- -----------
<S> <C> <C>
Raw materials............................................... $ 935 $ 1,253
Work-in-process............................................. 542 400
Finished goods.............................................. 1,595 1,565
----------- -----------
$ 3,072 $ 3,218
=========== ===========
</TABLE>

5. INVESTMENTS

The Company accounts for its investments in affiliated companies under the
equity method of accounting. In July 1994, the Company acquired a 50% general
partnership interest in Eleven Hurley Street Associates (EHSA), a real estate
partnership which owns the Company's principal office and research and
development facilities. The Company's lease with EHSA requires annual rental
payments of $239,000 through 2002 and $262,000 from 2003 through 2007. The
partnership's income was not significant for any of the periods presented. At
October 31, 1997 and 1998, the Company's proportionate share of EHSA's net
equity was approximately $166,000 and $131,000, respectively.

Prior to 1996, the Company had made equity investments, provided services and
guaranteed loans for its affiliate, Cephagen Corporation, a Taiwan-based
manufacturer of enzymes, in which the Company had a 33.0% ownership interest.
The Company had written off its investment, fully reserved its receivable and
recorded loan obligations it had assumed by the end of 1995 as a result of
Cephagen's recurring losses. In October 1996, Cephagen was merged with Taiwan
Biotech, whereupon the Company received a 1.6% ownership interest. As a result
of the merger, the Company received payment of its receivable, was relieved of
its loan obligations and, accordingly, recorded a gain of $1,013 in 1996.

6. LONG-TERM DEBT

Long-term debt consists of a loan from P&U in the original principal amount of
$9,000,000. Principal payments are made in equal quarterly installments of
$500,000 through October 1, 2001. Interest is paid quarterly on the unpaid
principal balance at the prime rate of interest. The prime rate at October 31,
1998 was 8%. The note is secured by a substantial portion of the Company's
assets and is required to be repaid on completion of a public offering of the
Company's equity securities or certain other financing events.

7. DEFERRED COMPENSATION

The Company has a deferred compensation agreement with an officer/stockholder
requiring a base payment of $700,000 plus accrued interest of $621,000 at
October 31, 1998 to be paid on July 31, 2000, subject to certain conditions.

The Company has an Incentive Compensation Plan for all employees which provides
for discretionary deferred bonus awards annually. Commencing three years after
grant, awards are paid ratably over a five-year period. Plan expenses were
$114,000, $130,000 and $160,000 in 1996, 1997 and 1998, respectively.

F-10
<PAGE> 62
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. STOCKHOLDERS' EQUITY

Convertible Preferred Stock
Holders of convertible preferred stock are entitled to voting rights and
dividend rights on a per-share basis, computed as the number of equivalent
shares of common stock. The Series A Convertible Preferred Stock may be
converted into Class A Common Stock on a five-for-one basis, adjusted for
certain events. The Series A shares automatically convert in the event of a
public offering of shares in which gross proceeds to the Company exceed
$5,000,000 and shares are offered at a minimum of $2.40 per share. The Series A
shares are entitled to priority in liquidation at $3.75 per share.

The Series B Convertible Preferred Stock may be converted into Class A Common
Stock on a one-for-one basis, adjusted for certain events. The Series B shares
automatically convert in the event of a public offering of shares in which net
proceeds to the Company exceed $40,000,000 and shares are offered at a minimum
of $15.00 per share. As of October 31, 1998, the Series B shares were entitled
to priority in liquidation of $14.31 per share. The priority in liquidation of
Series B increases to $15.37 per share in June 1999 (see Note 14 for subsequent
event).

In November 1997, the Company sold 2,830,188 shares of Series C Convertible
Preferred Stock at $10.60 per share. The Series C Convertible Preferred Stock
may be converted into Class A Common Stock on a one-for-one basis, adjusted for
certain events. The Series C shares automatically convert in the event of a
public offering of shares in which net proceeds to the Company exceed
$40,000,000 and shares are offered at a price of $20.00 per share at the end of
the first year, pro-rated based upon the number of months elapsed during the
first year, increasing in monthly increments during the second and third years
following the original issue date, up to a maximum of $35.00 per share. The
Series C shares are entitled to priority in liquidation at $13.25 per share
during the first year following the original issue date, $14.31 per share during
the second year and $15.37 per share thereafter (see Note 14 for subsequent
event).

Common Stock
The Company has a right of first refusal on dispositions of substantially all of
the outstanding Class A Common Stock.

The Class B Common Stock is authorized for issuance only to P&U. The holder of
Class B Common Stock is not entitled to vote or receive dividends. The Class B
Common Stock is convertible into shares of Class A Common Stock according to a
formula that is based upon a future fair market value of the Class A Common
Stock and is dependent upon the Company achieving U.S. FDA approval for its
Hemopure solution.

Dividends
The terms of the Company's loan described in Note 6 prohibit the payment of
dividends prior to its repayment. Additionally, at this time, the Company does
not intend to pay dividends.

Stock Accumulation Plan
In August 1990, the Company issued 2,409,000 shares of Class A Common Stock to
certain employees, officers, consultants and directors for $.90 per share, which
was $2.70 per share less than the then fair market value of $3.60 per share.
This $2.70 per share market value differential is associated with a permanent
nonlapse restriction on the value of the stock. Upon the repurchase by the
Company or other investors, the future value will be equal to the then-current
fair market value less the permanent discount of $2.70 per share, adjusted for
an annual interest factor.

In order to facilitate the purchase of these shares, the Company provided
interest-bearing loans to these individuals. These loans, aggregating $2,291,000
at October 31, 1998, bear interest in relation to a bank's base rate, which was
8% at October 31, 1998; principal and interest are due July 31, 2000.

Contributed Capital
In accordance with the P&U strategic alliance discussed in Note 9 below, the
Company recorded as contributed capital $3,590,000 and $329,000 of research and
development costs incurred by P&U on behalf of the Company in 1996 and 1997,
respectively. Upon conversion of the Class B Common Stock, the cumulative amount
of contributed capital will be treated as consideration for the Class A Common
Stock issued in the conversion.

F-11
<PAGE> 63
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Stock Options and Warrants
The Company has one active stock option plan under which key employees,
directors and consultants may be granted options to purchase Class A Common
Stock at a price determined by the Board of Directors at the date of grant.
Under this plan and a previous plan, substantially all options become
exercisable on a pro rata basis over a four-year period and expire ten years
from date of grant.

Presented below is a summary of transactions under the stock option plans during
1996, 1997 and 1998:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------------
1996 1997 1998
------------------------ ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- -------------- ------- -------------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year.... 353,895 $ 5.09 365,475 $ 8.01 199,825 $ 9.96
Granted..................................... 86,900 15.00 10,000 15.00 684,200 12.45
Exercised................................... (34,695) 0.76 (75,650) 0.68 (41,675) 1.61
Expired..................................... (40,000) 3.60 (28,000) 2.95 -- --
Forfeited................................... (625) 11.40 (72,000) 13.26 (22,400) 13.72
------- ------- -------
Options outstanding at end of year.......... 365,475 $ 8.01 199,825 $ 9.96 819,950 $12.36
======= ======= =======
Options exercisable......................... 214,825 125,075 134,025
======= ======= =======
</TABLE>

During 1998, the Company granted 30,000 options with an exercise price of $3.60
to certain consultants to replace options that had expired in March 1996. The
exercise price of the new options is the same as the exercise price of the
expired options, and the new options are fully vested. The Company used an
estimated fair market value of its stock as determined by its Board of Directors
in order to determine the related expense to be recorded as a result of issuing
options to nonemployees. The Company recorded expense and increased capital in
excess of par value by $276,000.

The following table summarizes information about stock options outstanding at
October 31, 1998:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED- WEIGHTED-
REMAINING CONTRACTUAL AVERAGE EXERCISE AVERAGE EXERCISE
EXERCISE PRICE SHARES LIFE (YRS.) PRICE SHARES PRICE
- -------------- ------- --------------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$1.60-$3.60 45,250 3.0 $ 3.00 45,250 $ 3.00
$5.00-$9.00 29,900 3.9 8.73 29,900 8.73
$12.00-$15.00 744,800 8.8 13.07 58,875 14.33
------- -------
819,950 8.3 $12.36 134,025 $ 9.26
======= =======
</TABLE>

During 1998, the Company's 1988 stock option plan expired. In March 1998, the
Board of Directors approved the adoption of a 1998 stock option plan to provide
for the granting of options for up to 147,440 shares of Class A Common Stock,
the number of shares remaining in the expired 1988 plan. Options outstanding
under the Company's 1988 plan forfeited in future periods will be available for
grant under the new plan. At October 31, 1998, there were 99,440 shares
available, for future grants under stock option plans.

In December 1998 and February 1999, the Company issued to an officer options to
purchase 175,000 shares of Class A Common Stock at exercise prices of $6.67 and
$12.00 per share. The Company recorded an increase to capital in excess of par
value and a corresponding charge to deferred compensation in the amount of
$400,000 to recognize the aggregate difference between the deemed fair value for
accounting purposes of the stock options at the date of grant and the option
exercise price. The deferred compensation is being amortized over the option
vesting period of four years.

One of the Company's vendors holds an option to acquire 40,000 shares of Class A
Common Stock. The exercise price of $25 per share is payable by the contribution
of certain property, equipment and facilities rights. The option expires in
September 2000.

F-12
<PAGE> 64
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the sale of Series C Convertible Preferred Stock in November
1997, the Company issued to the placement agent warrants to purchase 100,000
shares of Common Stock at a price per share equal to the initial offering price
to the public in the Company's initial public offering. The warrants expire
three years from the date of the initial public offering.

Statement 123 Disclosures
The Company has adopted the disclosure provisions only of Statement 123. The
fair value of options granted was estimated at the date of grant using the
minimum value method with the following assumptions for 1996, 1997 and 1998:
risk-free interest rates ranging from 5.49% to 6.32%; dividend yield of 0% and a
seven-year expected life. If the compensation cost for options granted had been
determined based on the fair value of the options at the date of grant, the pro
forma net loss for 1996, 1997 and 1998 would have been $21,665,000, $27,538,000
and $30,712,000, respectively. The pro forma net loss per share for 1996, 1997
and 1998 would have been $(1.18), $(1.49) and $(1.64), respectively.
Compensation expense under Statement 123 for 1996, 1997 and 1998 is not
representative of future expense, as it includes one, two and three years of
expense, respectively. In future years, the effect of determining compensation
cost using the fair value method will include additional vesting and associated
expense.

The weighted-average fair value per option of options granted during 1996, 1997
and 1998 was $4.96, $5.36 and $4.07, respectively.

Reserved Shares
At October 31, 1998, there were 9,889,562 shares of Class A Common Stock
reserved for issuance under the stock option plans, a stock option agreement and
warrants and upon conversion of Class B Common Stock and Convertible Preferred
Stock.

9. CONTRACTS

The Company had a strategic alliance with P&U beginning in 1990. Under the
alliance agreement, P&U purchased $117,700,000 of Class B Common Stock in
increments based generally on the achievement of mutually agreed-upon progress
points or goals. Additionally, in exchange for the future issuance of Class A
Common Stock, as described in Note 8 above, P&U funded clinical development
undertaken by the Company and P&U for the Company's oxygen therapeutic products.
The Company's agreement with P&U was terminated in accordance with its terms in
July 1996. Final payments from P&U were realized in 1997.

10. EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan, the Biopure Corporation Capital
Accumulation Plan, qualified under the provisions of Internal Revenue Code
section 401(k). Employees are eligible for enrollment upon becoming employed and
for discretionary matching after one year of service. The Company's
discretionary contribution vests after a period of four years from the date of
employment. In 1996, 1997 and 1998, the Company contributed $144,000, $158,000
and $163,000, respectively, to the plan.

11. INCOME TAXES

At October 31, 1998, the Company has available for the reduction of future
years' federal taxable income and income taxes net operating loss carryforwards
of approximately $140,000,000, expiring from the year ended October 31, 2004
through 2013, along with research and development and investment tax credits of
approximately $3,300,000, expiring from the year ended October 31, 1999 through
2013. Since the Company has incurred only losses since inception and due to the
degree of uncertainty related to the ultimate use of the loss and credit
carryforwards, the tax benefit of these items has been fully reserved.
Additionally, the future use of these carryforwards may be subject to
limitations pursuant to sections 382 and 383 of the Internal Revenue Code.

F-13
<PAGE> 65
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of October 31, 1997 and
1998 were as follows:

<TABLE>
<CAPTION>
----------------------
1997 1998
--------- ---------
<S> <C> <C>
In thousands
Deferred tax assets:
Net operating loss carryforward........................... $ 42,659 $ 56,138
Capitalized research and development...................... 14,887 17,287
Accruals and reserves..................................... 3,614 2,364
Tax credit carryforwards.................................. 2,588 3,388
Depreciation.............................................. 444 --
--------- ---------
Total deferred tax assets................................... 64,192 79,177
Deferred tax liabilities:
Depreciation.............................................. -- 2,159
--------- ---------
Total deferred tax liabilities.............................. -- 2,159
--------- ---------
Net deferred tax assets..................................... 64,192 77,018
Valuation allowance for deferred tax assets................. (64,192) (77,018)
--------- ---------
Net deferred tax assets..................................... $ -- $ --
========= =========
</TABLE>

A valuation allowance has been established to reflect the uncertainty of future
taxable income to utilize available tax loss carryforwards and other deferred
tax assets.

12. COMMITMENTS

In 1997, the Company entered into an agreement with B. Braun Melsungen A.G.
(Braun) to repurchase 3,020,934 shares of the Company's common stock for
$6,300,000. The agreement requires the Company to place in escrow installment
payments of such purchase price equal to an annual amount of $1,000,000 plus
five percent of the Company's revenues from human product sales and license fees
in a certain European region. The Company received the stockholder's agreement
to delay the deposit of $1,000,000 due in August 1998 to February 1999. The
aggregate repurchase amount of $6,300,000 must be funded by the year 2002. At
any time, the stockholder may withdraw funds in escrow to complete the
repurchase in installments by simultaneous delivery out of escrow to the Company
of a pro rata portion of the stock (see Note 14 for subsequent event). At
October 31, 1998, the Company has $1,046,000 in escrow in connection with this
agreement and has included the restricted cash in other assets.

The agreement also requires the Company to pay the stockholder a royalty of two
percent of the Company's revenues from human product sales and license fees in a
certain European region. Payments must be made on a quarterly basis until such
amounts aggregate $7,500,000. In exchange for this royalty commitment, the
rights to manufacture and market specified products in the stockholder's
territory were reacquired by the Company.

Future minimum lease payments under operating leases for the Company's various
office, laboratory, warehouse and processing facilities, with terms of more than
one year at October 31, 1998 are as follows:

<TABLE>
<S> <C>
$----------
1,012,000
1999........................................................
2000........................................................ 983,000
2001........................................................ 681,000
2002........................................................ 259,000
2003........................................................ 279,000
Thereafter.................................................. 1,316,000
----------
$4,530,000
==========
</TABLE>

F-14
<PAGE> 66
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rent expense was approximately $599,000, $643,000 and $803,000 in 1996, 1997 and
1998, respectively.

13. LITIGATION

The Company is a party to litigation initially filed in 1990 arising from
certain joint venture agreements for development and distribution of product in
Central and South America. Summary judgments were entered against the two
plaintiffs in 1994. The plaintiffs each appealed the judgments; one of the
appeals was voluntarily dismissed. The other appeal was denied in part and
remanded to the trial court for further findings based on lack of jurisdiction.
It is anticipated that the trial court will make the requisite findings in the
calendar year 1999. In connection with the summary judgments, the Company agreed
to a settlement with a third-party intervenor with claims against one of the
plaintiffs. Final payment of the settlement is subject to the outcome of the
pending appeal; however, the Company has provided for such settlement in the
accompanying financial statements. At October 31, 1998, the Company had
$3,508,000 in escrow in connection with this settlement and included this amount
in other current assets. The settlement amount has been recorded as a current
obligation.

14. SUBSEQUENT EVENTS

In December 1998, Braun withdrew all funds from escrow to complete an
installment of the repurchase of 479,524 shares of Class A Common Stock as
described in Note 12 above. This repurchase reduces the number of outstanding
Class A Common Stock shares accordingly.

In December 1998, the Company increased its authorized capital to 40,000,000
shares of Class A Common Stock and 9,000,000 shares of preferred stock.
Concurrently, 3,333,333 shares of Series D Convertible Preferred Stock were
designated.

Each share of Series D Convertible Preferred Stock is convertible into one share
of Class A Common Stock. The Series D shares automatically convert on a
one-to-one basis in the event of a public offering of the Company's Common
Stock, but if the price to the public in an initial public offering is less than
$16.00 per share, the conversion ratio is increased so that the number of shares
of Class A Common Stock will provide a 35% annualized rate of return on the
Series D price per share of $12.00.

The Series D shares are entitled to priority in liquidation, as of any date, at
$12.00 per share plus a 35% annualized rate of return from their date of
original issuance. In connection with the issuance of the Series D, the
liquidation preferences of the Series B Convertible Preferred Stock and the
Series C Convertible Preferred Stock, as described in Note 8 above, were
adjusted to provide a 35% annualized rate of return from their respective
original issue dates. The Series B, Series C and Series D shares also
participate with the Common Stock on liquidation up to an aggregate liquidation
payment of three times the original issue prices.

On December 23, 1998, the Company sold 1,489,498 units at $12.00 per unit, each
consisting of one share of Series D Preferred Stock plus a warrant to purchase
1/10th of a share of Class A Common Stock. In connection with the issuance of
the Series D, warrants were issued to the placement agents to purchase 46,000
shares of Class A Common Stock and warrants were issued to the holders of the
Series B and Series C Convertible Preferred Stock to purchase 1/10th of a share
of Class A Common Stock for each share of Series B and Series C Convertible
Preferred Stock held by them. Warrants issued to the placement agents have an
exercise price of $12.00 per share, and warrants issued to the stockholders will
have an exercise price equal to the offering price to the public in the
Company's initial public offering. Warrants issued to the placement agents and
the preferred stockholders expire three years and four years, respectively, from
the date of the initial public offering. Net cash proceeds, after deducting
approximately $930,000 in commissions and expenses associated with the offering,
were $16,946,000.

F-15
<PAGE> 67

[This page intentionally left blank.]
<PAGE> 68

[Inside back cover.]
<PAGE> 69

[Biopure Logo]
<PAGE> 70

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth various expenses payable in connection with the
offering of the shares being registered hereby, other than underwriting
discounts and commissions. All the amounts shown are estimates, except the
Securities and Exchange Commission registration fee and the NASD filing fee. We
are paying all of the expenses incurred with the offering.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $23,978
NASD Filing Fee............................................. 9,125
Nasdaq National Market Listing Fee.......................... *
Blue Sky fees and expenses.................................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Transfer Agent fees and expenses............................ *
Printing, engraving and postage expenses.................... *
Miscellaneous............................................... *
Total............................................. $
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our Restated Certificate of Incorporation provides that each of our directors
and officers shall be indemnified and held harmless by Biopure, to the fullest
extent authorized by the Delaware General Corporation Law, against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred by reason
of the fact that he or she is a director or officer.

The Delaware General Corporation Law authorizes a corporation to indemnify its
directors and officers provided that the corporation shall not eliminate or
limit the liability of a director as follows:

- for any action brought by or in the right of a corporation where the
director or officer is adjudged to be liable to the corporation, except
where a court determines the director or officer is entitled to
indemnity,

- for acts or omissions not in good faith or which involve conduct that the
director or officer believes is not in the best interests of the
corporation,

- for knowing violations of the law,

- for any transaction from which the directors derived an improper personal
benefit, and

- for payment of dividends or approval of stock repurchases or redemptions
leading to liability under Section 174 of the Delaware General
Corporation Law.

The Delaware General Corporation Law requires a corporation to indemnify a
director or officer to the extent that the director or officer has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding for which indemnification is lawful.

Our Restated Certificate of Incorporation also provides directors and officers
with the right to be paid by Biopure for expenses (including attorneys' fees)
incurred in defending any proceeding in advance of the proceeding's final
disposition. If a claim is not promptly paid in full by Biopure, as further
described in the Amended and Restated Certificate of Incorporation, the director
or officer who is entitled to indemnification may bring suit against Biopure to
recover the unpaid amount of the claim. These rights of indemnification and
advancement of expenses conferred in our Amended and Restated Certificate of
Incorporation are not exclusive of any other right which may be acquired under
any statute, by-law, agreement or otherwise.

II-1
<PAGE> 71

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Within the past three years, we have issued securities without registration
under the Securities Act as follows:

(a) Class A Common Stock

In June, July and August 1997, we issued 195,312 shares of class A common
stock to non-U.S. persons for an aggregate purchase price of $2,500,000. In
May and October 1998, we issued 138,888 shares of class A common stock to
non-U.S. persons for $2,500,000.

(b) Class B Common Stock

On January 22, 1997, we issued 3.2 shares of class B common stock pursuant
to an agreement with Pharmacia & Upjohn, Inc. for an aggregate purchase
price of $3,200,000.

Between June and October 1997, we issued 2,127,251 shares of series B
convertible preferred stock to "accredited investors" (as defined in
Regulation D of the Securities Act) for an aggregate purchase price of
$22,548,861.

(d) Series C Convertible Preferred Stock

On November 20, 1997, we issued 2,830,188 shares of series C convertible
preferred stock to "accredited investors" (as defined in Regulation D of
the Securities Act) for an aggregate purchase price of $30,000,000. In
connection with the issuance of the series C convertible preferred stock,
we issued compensatory warrants to purchase 100,000 class A common stock to
Shoreline Pacific Institutional Finance, which acted as placement agent in
connection with the offering.

(e) Series D Convertible Preferred Stock

On December 23, 1998 and April 30, 1999, we issued 2,213,014 shares of
series D convertible preferred stock to "accredited investors" (as defined
in Regulation D of the Securities Act) for an aggregate purchase price of
$26,556,168. Each purchaser of series D convertible preferred stock
received warrants to purchase one share of class A common stock for every
ten shares of series D convertible preferred stock purchased. In addition,
all existing holders of series B and C convertible preferred stock received
warrants to purchase one share of class A common stock for every ten shares
of series B and C convertible preferred stock held. We also issued
compensatory warrants to purchase 50,220 shares of class A common stock to
Shoreline Pacific Institutional Finance and KBC Securities, each of whom
acted as a placement agent in connection with the offering.

(f) Exercises of Stock Options

Since January 1, 1996, options to purchase 151,270 shares of class A common
stock were exercised at an aggregate purchase price of $137,000.

The securities issued in the transactions described in paragraphs (a)-(f)
above were issued in reliance on the exemption from registration under
Section 4(2) and/or Regulation D of the Securities Act as transactions not
involving a public offering. The recipients in each such case represented
their intentions to acquire the securities for investment purposes only and
not with a view for distribution thereof, and appropriate restrictive
legends were affixed to the securities issued in each transaction. All
recipients were furnished or had adequate access, through employment or
other relationships, to information about Biopure.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement
*3(i).1 Restated Certificate of Incorporation of Biopure
*3(i).2 Certificate of Amendment to the Restated Certificate of
Biopure
*3(ii).1 By-laws of Biopure
*4.1 See Exhibits 3(i).1 and 3(ii).1 for provisions of the
Restated Certificate of Incorporation of Biopure and By-laws
of Biopure, as amended, defining rights of security holders
of Biopure
*5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., regarding
the validity of the class A common stock of Biopure being
registered
*10.1 Promissory Note, dated October 8, 1996, from Biopure
Corporation in favor of Pharmacia & Upjohn, Inc.
</TABLE>

II-2
<PAGE> 72

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
*10.2 Security Agreement, dated October 8, 1996, between Biopure
and Pharmacia
*10.3 Trademark Security Agreement, dated October 8, 1996, between
Biopure and Pharmacia
*10.4 Patent Security Agreement, dated October 8, 1996, between
Biopure and Pharmacia
*10.5 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia (Pennsylvania)
*10.6 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia, Hurley Street (Massachusetts)
*10.7 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia, Spring Street-Hurley Street (Massachusetts)
*10.8 Agreement of Settlement and Mutual General Release dated
December 19, 1996, between Biopure, Biopure Associates
Limited Partnership and Credit Francais International
*10.9 Agreement of License Termination, Stock Repurchase and
Mutual General Release, dated August 29, 1997, between
Biopure Corporation, Biopure Europe, Ltd. and B. Braun
Melsungen AG
*10.10 Escrow Agreement between Biopure, B. Braun Melsungen and
State Street Bank and Trust Company, Escrow Agent dated
September 2, 1997
*10.11 Purchase Agreement between Biopure Corporation and INPACO
Corporation, dated August 28, 1997
*10.12 Agreement with Moyer Packing Company dated October 21, 1994
*10.13 Agency Agreement between Biopure and The Butler Company
dated March 29, 1999
*10.14 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $1,009,772.01
*10.15 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $216,033.05
*10.16 Promissory Note dated July 31, 1995, from Edward Jacobs, Jr.
in favor of Biopure in the amount of $262,120.10
*10.17 Promissory Note dated July 31, 1995, from Bing Wong in favor
of Biopure in the amount of $70,714.82
*10.18 Promissory Note dated July 31, 1995, from Maria Gawryl in
favor of Biopure in the amount of $12,601.93
*10.19 Promissory Note dated July 31, 1995, from Brian Lajoie in
favor of Biopure in the amount of $30,748.70
*10.20 Promissory Note dated July 31, 1995, from James Weston in
favor of Biopure in the amount of $10,333.58
*10.21 Promissory Note dated July 31, 1995, from Geoffrey Filbey in
favor of Biopure in the amount of $47,707.30
*10.22 Lease Agreement dated October 12, 1990, between Biopure and
Tarvis Realty Trust
*10.23 Lease Agreement dated May 23, 1997, between Biopure and
Karpowicz Family Trust
*10.24 Lease Agreement dated March 31, 1995, between Biopure and
New England Innovations, Corp.
*10.25 Lease Agreement dated August 29, 1994, between Biopure and
Eleven Hurley Street Associates
*10.26 Lease Agreement dated May 10, 1994, between Biopure and
Tarvis Realty Trust
*10.27 Lease Agreement dated August 23, 1994, between Biopure and
Tarvis Realty Trust
*10.28 Lease Agreement dated October 21, 1994, between Biopure and
Moyer Packing Company
*10.29 Deferred Compensation Agreement with Carl Rausch dated
August 8, 1990, as amended December 12, 1995
*10.30 1993 Incentive Compensation Plan
*10.31 1998 Stock Option Plan
*10.32 1999 Omnibus Securities and Incentive Plan
23.1 Consent of Ernst & Young LLP
24.1 Powers of Attorney
27.1 Financial Data Schedule
</TABLE>

- ---------------
* To be filed by amendment.

ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the

II-3
<PAGE> 73

securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 74

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on May 19, 1999.

BIOPURE CORPORATION

By: /s/ DANIEL R. DAVIS
---------------------------------------
DANIEL R. DAVIS
Senior Vice President and Chief
Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

* Chairman, Chief Executive Officer and President May 19, 1999
- ---------------------------------------------------
Carl W. Rausch

* Vice Chairman May 19, 1999
- ---------------------------------------------------
David N. Judelson

* Director May 19, 1999
- ---------------------------------------------------
Stephen A. Kaplan

* Director May 19, 1999
- ---------------------------------------------------
C. Everett Koop, M.D.

* Director May 19, 1999
- ---------------------------------------------------
Charles A. Sanders, M.D.

/s/ DANIEL R. DAVIS Senior Vice President and Chief Financial May 19, 1999
- --------------------------------------------------- Officer
Daniel R. Davis

* Vice President, Controller May 19, 1999
- ---------------------------------------------------
Brian A. Lajoie

*By: /s/ DANIEL R. DAVIS
- --------------------------------------------------
Daniel R. Davis
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 75

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement..............................
*3(i).1 Restated Certificate of Incorporation of Biopure............
*3(i).2 Certificate of Amendment to the Restated Certificate of
Biopure.....................................................
*3(ii).1 By-laws of Biopure..........................................
*4.1 See Exhibits 3(i).1 and 3(ii).1 for provisions of the
Restated Certificate of Incorporation of Biopure and By-laws
of Biopure, as amended, defining rights of security holders
of Biopure..................................................
*5.1 Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P., regarding
the validity of the class A common stock of Biopure being
registered..................................................
*10.1 Promissory Note, dated October 8, 1996, from Biopure
Corporation in favor of Pharmacia & Upjohn, Inc. ...........
*10.2 Security Agreement, dated October 8, 1996, between Biopure
and Pharmacia...............................................
*10.3 Trademark Security Agreement, dated October 8, 1996, between
Biopure and Pharmacia.......................................
*10.4 Patent Security Agreement, dated October 8, 1996, between
Biopure and Pharmacia.......................................
*10.5 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia (Pennsylvania)....................................
*10.6 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia, Hurley Street (Massachusetts)....................
*10.7 Mortgage, dated October 8, 1996, between Biopure and
Pharmacia, Spring Street-Hurley Street (Massachusetts)......
*10.8 Agreement of Settlement and Mutual General Release dated
December 19, 1996, between Biopure, Biopure Associates
Limited Partnership and Credit Francais International.......
*10.9 Agreement of License Termination, Stock Repurchase and
Mutual General Release, dated August 29, 1997, between
Biopure Corporation, Biopure Europe, Ltd. and B. Braun
Melsungen AG................................................
*10.10 Escrow Agreement between Biopure, B. Braun Melsungen and
State Street Bank and Trust Company, Escrow Agent dated
September 2, 1997...........................................
*10.11 Purchase Agreement between Biopure Corporation and INPACO
Corporation, dated August 28, 1997..........................
*10.12 Agreement with Moyer Packing Company dated October 21,
1994........................................................
*10.13 Agency Agreement between Biopure and The Butler Company
dated March 29, 1999........................................
*10.14 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $1,009,772.01.............
*10.15 Promissory Note dated July 31, 1995, from Carl Rausch in
favor of Biopure in the amount of $216,033.05...............
*10.16 Promissory Note dated July 31, 1995, from Edward Jacobs, Jr.
in favor of Biopure in the amount of $262,120.10............
*10.17 Promissory Note dated July 31, 1995, from Bing Wong in favor
of Biopure in the amount of $70,714.82......................
*10.18 Promissory Note dated July 31, 1995, from Maria Gawryl in
favor of Biopure in the amount of $12,601.93................
*10.19 Promissory Note dated July 31, 1995, from Brian Lajoie in
favor of Biopure in the amount of $30,748.70................
*10.20 Promissory Note dated July 31, 1995, from James Weston in
favor of Biopure in the amount of $10,333.58................
*10.21 Promissory Note dated July 31, 1995, from Geoffrey Filbey in
favor of Biopure in the amount of $47,707.30................
*10.22 Lease Agreement dated October 12, 1990, between Biopure and
Tarvis Realty Trust.........................................
*10.23 Lease Agreement dated May 23, 1997, between Biopure and
Karpowicz Family Trust......................................
*10.24 Lease Agreement dated March 31, 1995, between Biopure and
New England Innovations, Corp. .............................
*10.25 Lease Agreement dated August 29, 1994, between Biopure and
Eleven Hurley Street Associates.............................
*10.26 Lease Agreement dated May 10, 1994, between Biopure and
Tarvis Realty Trust.........................................
*10.27 Lease Agreement dated August 23, 1994, between Biopure and
Tarvis Realty Trust.........................................
*10.28 Lease Agreement dated October 21, 1994, between Biopure and
Moyer Packing Company.......................................
*10.29 Deferred Compensation Agreement with Carl Rausch dated
August 8, 1990, as amended December 12, 1995................
</TABLE>
<PAGE> 76

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------- ----------- ------------
<C> <S> <C>
*10.30 1993 Incentive Compensation Plan............................
*10.31 1998 Stock Option Plan......................................
*10.32 1999 Omnibus Securities and Incentive Plan..................
23.1 Consent of Ernst & Young LLP................................
24.1 Powers of Attorney..........................................
27.1 Financial Data Schedule.....................................
</TABLE>

- ---------------

* To be filed by amendment.

<PAGE> 1
Exhibit 23.1

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the captions "Summary
Consolidated Financial Data", "Selected Consolidated Financial Data", and
"Experts" and to the use of our report dated December 11, 1998 (except for Note
14, as to which the date is January 27, 1999) in the Registration Statement
(Form S-1) and related Prospectus of Biopure Corporation for the registration
of shares of its common stock.

/s/ Ernst & Young LLP

Boston, Massachusetts
May 17, 1999

<PAGE> 1
Exhibit 24.1

POWERS OF ATTORNEY

WHEREAS, Biopure Corporation (the "Company") proposes to file a
registration statement on Form S-1 and amendments thereto pursuant to the
Securities Act of 1933, as amended, in connection with a public offering (the
"Public Offering") of the Company's Class A Common Stock; and

NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that the Company and the
undersigned directors and officers of the Company, individually as a director
and/or as an officer of the Company, hereby make, constitute and appoint each of
Carl W. Rausch, Daniel R. Davis and Jane Kober their true and lawful
attorney-in-fact for each of them and in each of their names, places and steads
to sign and cause to be filed with the Securities and Exchange Commission said
registration statement, including prospectuses, and any appropriate amendments
thereto, to be accompanied by any necessary exhibits.

The Company hereby authorizes said persons or any one of them to execute
said registration statement and amendments thereto on its behalf as attorney-in-
fact for it and its authorized officers, and to file the same as aforesaid.

The undersigned directors and officers of the Company hereby authorize said
persons or any one of them to sign said registration statement on their behalf
as attorney-in-fact and to amend, or remedy any deficiencies with respect to,
said registration statement by appropriate amendment or amendments and to file
the same as aforesaid, hereby giving and granting to said attorneys full power
and authority to do so and perform all and every act and hereby ratifying and
confirming all that said attorneys may or shall do, or cause to be done, by
virtue hereof.

DONE this the 19th day of April, 1999.

/s/ Carl W. Rausch
----------------------
Carl W. Rausch

<PAGE> 2
POWER OF ATTORNEY

DONE this the 19th day of April, 1999.

/s/ David N. Judelson
----------------------
David N. Judelson

<PAGE> 3
POWER OF ATTORNEY

DONE this the 19th day of April, 1999.

/s/ Stephen A. Kaplan
----------------------
Stephen A. Kaplan

<PAGE> 4
POWER OF ATTORNEY

DONE this the 24th day of April, 1999.

/s/ C. Everett Koop
----------------------
C. Everett Koop, M.D.

<PAGE> 5

POWER OF ATTORNEY

DONE this the 22nd day of April, 1999.

/s/ Charles A. Sanders
----------------------
Charles A. Sanders, M.D.

<PAGE> 6

POWER OF ATTORNEY

DONE this the 19th day of April, 1999.

/s/ Daniel R. Davis
----------------------
Daniel R. Davis

<PAGE> 7
POWER OF ATTORNEY

DONE this the 17th day of May, 1999.

/s/ Brian A. Lajoie
----------------------
Brian A. Lajoie

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<EXCHANGE-RATE> 1
<CASH> 12,772
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,636
<PP&E> 36,053
<DEPRECIATION> 6,615
<TOTAL-ASSETS> 43,462
<CURRENT-LIABILITIES> 5,525
<BONDS> 0
0
3
<COMMON> 186
<OTHER-SE> 26,228
<TOTAL-LIABILITY-AND-EQUITY> 43,462
<SALES> 0
<TOTAL-REVENUES> 71
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 18,924<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 839
<INCOME-PRETAX> (21,594)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,594)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES are for R&D incurred in developing product for market
</FN>

</TABLE>

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 13,527
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,221
<PP&E> 37,113
<DEPRECIATION> 9,705
<TOTAL-ASSETS> 44,054
<CURRENT-LIABILITIES> 9,853
<BONDS> 0
0
25
<COMMON> 189
<OTHER-SE> 26,308
<TOTAL-LIABILITY-AND-EQUITY> 44,054
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,494<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,015
<INCOME-PRETAX> (27,418)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,418)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,418)
<EPS-PRIMARY> (1.49)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES are for R&D incurred in developing product for market
</FN>

</TABLE>

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<EXCHANGE-RATE> 1
<CASH> 6,063
<SECURITIES> 0
<RECEIVABLES> 374
<ALLOWANCES> 28
<INVENTORY> 3,072
<CURRENT-ASSETS> 13,175
<PP&E> 42,573
<DEPRECIATION> 12,967
<TOTAL-ASSETS> 44,848
<CURRENT-LIABILITIES> 11,189
<BONDS> 0
0
53
<COMMON> 191
<OTHER-SE> 27,505
<TOTAL-LIABILITY-AND-EQUITY> 44,848
<SALES> 942
<TOTAL-REVENUES> 1,131
<CGS> 1,543
<TOTAL-COSTS> 1,543
<OTHER-EXPENSES> 22,950<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 799
<INCOME-PRETAX> (30,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (30,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (30,047)
<EPS-PRIMARY> (1.61)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES are for R&D incurred in developing product for market
</FN>

</TABLE>

<ARTICLE> 5
<CURRENCY>U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<EXCHANGE-RATE> 1
<CASH> 33,418
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,479
<PP&E> 37,421
<DEPRECIATION> 10,464
<TOTAL-ASSETS> 65,152
<CURRENT-LIABILITIES> 9,627
<BONDS> 0
0
53
<COMMON> 189
<OTHER-SE> 48,041
<TOTAL-LIABILITY-AND-EQUITY> 65,152
<SALES> 0
<TOTAL-REVENUES> 54
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,728<F1>
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> (6,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,716)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES ARE FOR R&D INCURRED IN DEVELOPING PRODUCT FOR MARKET
</FN>

</TABLE>

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-30-1999
<EXCHANGE-RATE> 1
<CASH> 14,892
<SECURITIES> 0
<RECEIVABLES> 402
<ALLOWANCES> 40
<INVENTORY> 3,218
<CURRENT-ASSETS> 22,230
<PP&E> 43,195
<DEPRECIATION> 13,951
<TOTAL-ASSETS> 52,558
<CURRENT-LIABILITIES> 10,245
<BONDS> 0
0
68
<COMMON> 187
<OTHER-SE> 36,579
<TOTAL-LIABILITY-AND-EQUITY> 52,558
<SALES> 671
<TOTAL-REVENUES> 733
<CGS> 1,680
<TOTAL-COSTS> 1,680
<OTHER-EXPENSES> 4,283<F1>
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 166
<INCOME-PRETAX> (6,844)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,844)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,844)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> 0
<FN>
<F1>OTHER EXPENSES ARE FOR R&D INCURRED IN DEVELOPING PRODUCT FOR MARKET
</FN>

</TABLE>