BIOPURE CORP, 424B1, 2000-03-14

BIOPURE CORP
424B1, 2000-03-14
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration No. 333-30382

PROSPECTUS

2,500,000 Shares

[Biopure Logo]

Class A Common Stock

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

Biopure's class A common stock is listed on The Nasdaq National Market under the
symbol "BPUR". On March 13, 2000, the last reported sale price of our class A
common stock on The Nasdaq National Market was $35.25 per share.

INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 10.

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.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT BIOPURE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share $35.00 $2.10 $32.90
- ------------------------------------------------------------------------------------------------------------------
Total $87,500,000 $5,250,000 $82,250,000
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

We have agreed to grant the underwriters the right to purchase up to an
additional 375,000 shares of class A common stock to cover over-allotments.

The underwriters expect to deliver the shares of class A common stock to
investors on or about March 17, 2000.

J.P. MORGAN & CO.
SALOMON SMITH BARNEY
ROBERT W. BAIRD & CO.
ADAMS, HARKNESS & HILL, INC.

March 13, 2000
<PAGE> 2

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 we are permitted
to make offers and sales. The information in this prospectus is current only as
of its date.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.......................... 5
Risk Factors................................ 10
Forward-Looking Statements.................. 15
Use of Proceeds............................. 16
Dividend Policy............................. 16
Capitalization.............................. 17
Price Range of Common Stock................. 17
Selected Consolidated Financial Data........ 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 19
</TABLE>

<TABLE>
<CAPTION>
PAGE
<S> <C>
Business.................................... 22
Management.................................. 35
Certain Relationships and Related
Transactions.............................. 43
Principal Stockholders...................... 44
Description of Capital Stock................ 46
Underwriting................................ 48
Legal Matters............................... 49
Experts..................................... 49
Available Information....................... 49
Index to Consolidated Financial
Statements................................ F-1
</TABLE>

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

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

3
<PAGE> 3

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. Unless otherwise indicated, all
information in this prospectus assumes that the underwriters will not exercise
their right to purchase an additional 375,000 shares of class A common stock.

BIOPURE CORPORATION

Biopure is a leading developer, manufacturer and marketer of oxygen
therapeutics. Our oxygen therapeutics are pharmaceuticals administered
intravenously into the circulatory system to increase oxygen transport 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 in the
United States since March 1998 for the treatment of anemia in dogs, regardless
of cause.

Acute blood loss and other medical conditions can disrupt the delivery of oxygen
to the body's tissues. A red blood cell transfusion is the standard therapy for
blood loss. 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 30-month 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, or oxygen deficient, 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 oxygen more readily than the hemoglobin
contained in red blood cells; and

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

We have infused Hemopure into more than 650 humans in 21 completed or ongoing
clinical trials at doses of up to 300 grams of hemoglobin contained in
approximately two and one-half liters, or ten units, of Hemopure. We believe
Hemopure is a safe, effective alternative to red blood cell transfusions 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 filed for Hemopure marketing approval as an alternative to red blood
cell transfusions for specified surgical procedures in South Africa in July
1999. We expect to file an application for marketing approval for Hemopure in
the United States in 2000 and in the European Union after the U.S. filing.

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.

Biopure operates a manufacturing facility with adequate capacity to produce both
Oxyglobin for commercial sale, and Hemopure for clinical trials and initial
commercial launch immediately following FDA approval. Biopure believes that its
manufacturing facilities comply with current Good Manufacturing Practices
established by the FDA.

5
<PAGE> 4

PRINCIPAL DEVELOPMENTS SINCE OUR INITIAL PUBLIC OFFERING IN JULY 1999

Since our initial public offering in July 1999, the following events have
occurred:

- - Our pivotal Phase III clinical trial has now reached approximately 75%
enrollment. In December 1999, we received approval from Canada's Health
Protection Branch to include Canadian sites in this trial, thereby expanding
the pool of eligible patients. We now have a total of 45 sites enrolling
patients in the United States, Europe, South Africa and Canada.

- - Following 50% enrollment of our pivotal Phase III clinical trial, an
independent panel reviewed safety data from the trial. The role of the
independent panel, or safety data monitoring committee, is to determine
whether there are safety issues that would warrant modification or early
termination of the study. The committee completed its second and final
scheduled meeting in January 2000, and the trial is proceeding without
modification.

- - Our Phase II trial in non-cardiac surgery patients that allows enrollment of
consenting, stable trauma patients has reached approximately 40% enrollment.
This 60-patient study is taking place at Brooke Army Medical Center, Wilford
Hall Air Force Hospital and the University of Texas at San Antonio.

- - At a workshop on Criteria for Safety and Efficacy Evaluation of Oxygen
Therapeutics as Red Cell Substitutes, which was held in September 1999 and
sponsored by multiple government agencies, FDA representatives indicated that
elimination of red blood cell transfusions is an appropriate end point for
approval of oxygen therapeutics for surgery. This is the primary efficacy
endpoint of our pivotal Phase III clinical trial. These statements do not
necessarily represent the agency's official position.

- - The peer-reviewed Journal of Vascular Surgery published in its February 2000
issue an article describing the results from our Phase II study in aortic
aneurysm reconstruction surgery. The article reported that Hemopure eliminated
the need for allogeneic red blood cell transfusions in a significant number of
patients undergoing vascular surgery. The article also reported that Hemopure
was well tolerated in a patient population consisting largely of elderly
patients with complex medical conditions.

- - The peer-reviewed journal Shock reported in its February 2000 issue the
results of a preclinical study in animals with uncontrolled lethal hemorrhage
due to liver injury. The article showed that, in comparison with animals that
received Ringer's lactate, Hemopure improved early survival and stabilized
hemodynamics and metabolic parameters. This study simulated the pre-hospital
care environment where blood is not available.

- - An abstract published in The Journal of Trauma in January 2000 and presented
at the 30th Annual Scientific Meeting of the Western Trauma Association on
March 1, 2000 described a preclinical study using a pre-hospital hemorrhagic
shock in an animal model designed to model what happens to humans after an
accident. The study demonstrates that small-volume resuscitation with Hemopure
can restore and sustain brain oxygenation, blood pressure and cardiac output
following severe hemorrhagic shock.

- - At the August 1999 annual meeting of the International Society on Oxygen
Transport to Tissue, investigators presented the results of three preclinical
studies:

-- A study conducted at the University of California San Francisco showed in
an animal model that small-volume administration of Hemopure significantly
increased brain tissue oxygen tension, a measure of brain oxygenation.

-- Another study, conducted at Dartmouth Hitchcock Medical Center, showed
significantly higher levels of oxygenated hemoglobin in the brains of
animals treated with Hemopure than in animals that did not receive
Hemopure.

-- A study conducted at Louisiana State University Medical Center showed that
Hemopure significantly protected cardiac function and reduced the extent of
injury to the heart muscle following heart ischemia as compared to animals
not receiving Hemopure.

- - In the initial response to our application for human approval, the Medicines
Control Council, the South African regulatory agency reviewing the filing for
Hemopure, has indicated that our results look promising, but the evidence
submitted in support of the safety and efficacy of the product was not
accepted because the data base of patients is currently too limited to
consider approval. The Council's response contained no other information on
this issue. Following informal dialogue on this point, we are hopeful that we
can meet the conditions for approval with the data on over 700 patients that
we have already submitted and are applying for reconsideration in accordance
with applicable regulations. However, there is no assurance that this issue
can be satisfactorily resolved. The Council's additional comments did not
indicate any significant issues regarding the approval of our application.

6
<PAGE> 5

- - In January 2000, the FDA approved expanding the Oxyglobin label to allow for
flexible dosing. This change will permit veterinarians to adjust the dosage
based on the type of anemia and the severity of the animal's medical condition
and thereby afford the veterinarian greater treatment flexibility on a more
cost efficient basis.

- - In December 1999, Oxyglobin was approved for sale in all countries of the
European Union. We are currently evaluating our strategic options for European
marketing of Oxyglobin.

- - We received two additional U.S. patents covering improvements in our
ultra-purification process. We also received two European patents, each
covering a different fractionation process for cross-linked hemoglobin.

RECENT OPERATING RESULTS

On March 2, 2000, we announced our operating results for our first fiscal
quarter, which ended on January 29, 2000, as follows:

<TABLE>
<CAPTION>
--------------------------
THREE MONTHS ENDED
--------------------------
JANUARY 29, JANUARY 30,
2000 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $ 598 $ 733
Cost of revenues............................................ 1,189 1,680
-------- --------
Gross profit (loss)......................................... (591) (947)
Operating expenses:
Research and development.................................. 8,259 4,283
Sales and marketing....................................... 579 729
General and administrative................................ 3,112 1,092
-------- --------
Total operating expenses.................................... 11,950 6,104
-------- --------
Income (loss) from operations............................... (12,541) (7,051)
Total other income (expense)................................ 358 207
-------- --------
Net income (loss)........................................... (12,183) (6,844)
======== ========
Historical basic net income (loss) per common share......... $ (0.55) $ (0.55)
Historical weighted-average common shares outstanding....... 22,282 12,422
Pro forma basic net income (loss) per common share.......... $ (0.36)
Pro forma weighted-average common shares outstanding........ 18,948
</TABLE>

For the first quarter of fiscal 2000, we reported a net loss of $12.2 million,
compared with a net loss of $6.8 million for the corresponding period in fiscal
1999. The increase in net loss primarily reflects increased research and
development expenses associated with our ongoing pivotal Phase III clinical
trial for Hemopure. Research and development expenses increased to $8.3 million
for the first fiscal quarter of 2000, up from $4.3 million for the first fiscal
quarter of 1999.

Sales, general and administrative expenses increased to $3.7 million for the
first fiscal quarter of 2000, compared with $1.8 million for the same period in
1999. This increase was primarily due to a non-cash compensation expense for
stock options and warrants previously issued to certain consultants and
directors that was recorded in accordance with Financial Accounting Standards
Board Statement No. 123.

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

Biopure's incorporation occurred in 1984 in Delaware. Our address is 11 Hurley
Street, Cambridge, Massachusetts 02141 and our telephone number is (617)
234-6500.

7
<PAGE> 6

THE OFFERING

The following information is based on 22,303,912 shares of class A common stock
outstanding as of February 1, 2000. The number of outstanding shares of class A
common stock does not include 2,689,827 shares of class A common stock issuable
on the exercise of outstanding stock options and warrants as of February 1,
2000. In addition, the number of outstanding shares of class A common stock does
not include between 646,667 and 1,272,119 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.............2,500,000 shares of class A common
stock

CLASS A COMMON STOCK TO BE OUTSTANDING
AFTER THE OFFERING.......................24,803,912 shares of class A common
stock; 25,178,912 shares of class A
common stock if the underwriters' over-
allotment option is exercised in full

OVER-ALLOTMENT OPTION....................375,000 shares of class A common stock

USE OF PROCEEDS..........................We expect to use the net proceeds of
this offering as follows:

- $7.0 million for pre-marketing and
marketing of Hemopure;
- $10.0 million for Hemopure clinical
trials other than our ongoing pivotal
Phase III clinical trial;
- $10.0 million for expansion of our
existing manufacturing facility;
- $10.0 million for engineering and
site selection for a new
manufacturing facility; and
- the balance for other capital
expenditures and general corporate
purposes.

NASDAQ NATIONAL MARKET SYMBOL............"BPUR"

8
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated statements of operations data
for the fiscal years ended October 31, 1999, 1998 and 1997. Also included in
this table are our consolidated balance sheet data at October 31, 1999, on an
actual and on an as adjusted basis. The following consolidated statements of
operations data for the fiscal years ended October 31, 1999, 1998 and 1997 are
derived from our consolidated financial statements that appear elsewhere in this
prospectus and that have been audited by Ernst & Young LLP, independent
auditors. You should read the consolidated financial data 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 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. The actual conversions occurred upon completion of the
initial public offering. The as adjusted balance sheet data reflect the sale of
2,500,000 shares of our class A common stock in this offering, after deducting
the underwriting discounts and offering expenses payable by us.

<TABLE>
<CAPTION>
--------------------------------
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $ 2,866 $ 1,131 $ --
Cost of revenues............................................ 6,814 1,543 --
-------- -------- --------
Gross profit (loss)......................................... (3,948) (412) --
Operating expenses:
Research and development.................................. 24,166 22,950 23,494
Sales and marketing....................................... 2,922 2,444 694
General and administrative................................ 5,266 4,660 2,920
-------- -------- --------
Total operating expenses.................................... 32,354 30,054 27,108
-------- -------- --------
Income (loss) from operations............................... (36,302) (30,466) (27,108)
Total other income (expense)................................ 772 419 (310)
-------- -------- --------
Net income (loss)........................................... (35,530) (30,047) (27,418)
Stock dividends on preferred stock.......................... (17,915) -- --
-------- -------- --------
Net loss applicable to common stockholders.................. $(53,445) $(30,047) $(27,418)
======== ======== ========
Historical basic net income (loss) per common share......... $ (3.61) $ (2.41) $ (2.23)
Historical weighted-average common shares outstanding....... 14,813 12,460 12,300
Pro forma basic net income (loss) per common share.......... $ (2.62)
Pro forma weighted-average common shares outstanding........ 20,369
</TABLE>

<TABLE>
<CAPTION>
----------------------
OCTOBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
(UNAUDITED)
<S> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................................... $30,778 $112,408
Total current assets........................................ 38,277 119,907
Working capital............................................. 27,872 109,502
Net property and equipment.................................. 27,447 27,447
Total assets................................................ 66,230 147,860
Total stockholders' equity.................................. 54,037 135,667
</TABLE>

9
<PAGE> 8

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. The trading price of
our class A common stock could decline if any of the following risks and
uncertainties develop into actual events, and you may lose all or part of the
money you paid to buy our class A common stock.

COMPANY RISKS

IF WE CANNOT GENERATE ADEQUATE, PROFITABLE SALES OF HEMOPURE, WE WILL NOT BE
SUCCESSFUL
In order to succeed as a company, we must develop Hemopure commercially and sell
adequate quantities of Hemopure at a high enough price to generate a profit. We
may not accomplish either of these objectives.

Even if we succeed in developing Hemopure commercially, a number of factors may
affect future sales of our product. These factors include:

- - whether physicians, patients and clinicians accept Hemopure as a
cost-effective and therapeutic alternative to other products, including
donated human blood;

- - whether reimbursement for the cost of Hemopure is available; and

- - whether the public accepts the use of a natural protein product extracted from
bovine red blood cells in transfusions, particularly in light of public
perceptions in Europe and elsewhere about the risk of "mad cow disease".

IF WE FAIL TO OBTAIN FDA APPROVAL, WE CANNOT MARKET HEMOPURE IN THE UNITED
STATES
We will not be able to market Hemopure in the United States until we receive FDA
approval. Obtaining FDA approval 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 for use in humans. If safety problems develop, the FDA could stop our
trial before its completion. Publicity about enrollment abuses in the
pharmaceutical industry and regulatory actions taken with respect to some major
research institutes engaged in the clinical testing of pharmaceutical products
could affect the ability of Biopure to enroll patients in its clinical studies.

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. 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 as a replacement for red blood cells in surgical indications. However,
the FDA could change its view or require a change in study design, additional
data or even further clinical trials, including trials for indications other
than those for which we are likely to seek approval in the near term, prior to
approval of Hemopure. If we fail to complete our ongoing U.S. pivotal Phase III
clinical trial and obtain FDA approval, we cannot market Hemopure in the United
States.

OUR FAILURE TO OBTAIN REGULATORY APPROVALS IN FOREIGN JURISDICTIONS WILL PREVENT
US FROM MARKETING HEMOPURE ABROAD
We also intend to market our products in international markets, including the
European Union and South Africa. We must obtain separate regulatory approvals in
order to market our products in the European Union, South Africa and many other
foreign jurisdictions. The regulatory approval processes may differ among these
jurisdictions. Approval in any one jurisdiction does not ensure approvals in a
different jurisdiction. As a result, obtaining foreign approvals may require
additional trials and additional expenses.

WE CANNOT EXPAND INDICATIONS FOR OUR PRODUCTS UNLESS WE RECEIVE FDA APPROVAL FOR
EACH PROPOSED INDICATION
The FDA requires a separate approval for each proposed indication for the use of
Hemopure. We expect that our first indication for Hemopure will only involve its
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 review and complete those trials
successfully. We cannot guarantee that the FDA will approve Hemopure for any
indication. We can only promote Hemopure for indications which have been
approved by the FDA. The FDA may require a label cautioning against Hemopure's
use for indications for which it has not been approved.

10
<PAGE> 9

The FDA has approved the use of our veterinary product, Oxyglobin, for the
treatment of anemia in dogs, regardless of cause. Supplemental approvals are
required to market Oxyglobin for any new indications or additional species. We
cannot guarantee that we will receive such approvals.

IF WE CANNOT FIND APPROPRIATE MARKETING PARTNERS, WE MAY NOT BE ABLE TO MARKET
AND DISTRIBUTE HEMOPURE EFFECTIVELY

Our success depends, in part, on our ability to market and distribute Hemopure
effectively. 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 require the assistance of one or
more experienced pharmaceutical companies to market and distribute Hemopure
effectively.

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 marketing Hemopure; 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.

FAILURE TO INCREASE MANUFACTURING CAPACITY MAY IMPAIR HEMOPURE'S MARKET
ACCEPTANCE

We will need to construct additional manufacturing facilities to meet annual
demand in excess of 100,000 units of Hemopure. If Hemopure receives rapid market
acceptance, we may experience difficulty manufacturing enough of the product to
meet demand. If we cannot fill orders for Hemopure, customers might turn to
alternative products and choose not to use Hemopure even after we have addressed
our capacity shortage.

FAILURE TO RAISE ADDITIONAL FUNDS IN THE FUTURE MAY AFFECT THE DEVELOPMENT,
MANUFACTURE AND SALE OF OUR PRODUCTS

We require substantial working capital to properly develop, manufacture and sell
our products. We expect to use the net proceeds of this offering as follows:

- - $7.0 million for pre-marketing and marketing of Hemopure;

- - $10.0 million for Hemopure clinical trials other than our ongoing pivotal
Phase III clinical trial;

- - $10.0 million for expansion of our existing manufacturing facility;

- - $10.0 million for engineering and site selection for a new manufacturing
facility; and

- - the balance for other capital expenditures and general corporate purposes.

Additional manufacturing facilities will require additional financing. If such
financing is not available when needed or is not available on acceptable terms,
we may experience a delay in developing products, building manufacturing
capacity or fulfilling other important goals.

OUR LACK OF OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT

Licensing fees, payments to us from investors and payments to fund our research
and development activities comprise almost all of our funding to date. We have
no operating history upon which to base an evaluation of our business and our
prospects. We must successfully develop our products and product enhancements,
achieve market acceptance of our products and respond to competition. We cannot
guarantee 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.

11
<PAGE> 10

WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES
We have had annual losses from operations since our inception in 1984. We expect
to continue to incur losses from operations until we are able to develop
Hemopure commercially and generate a profit. As of October 31, 1999, we had
accumulated a deficit of $250.4 million. Our 1999 auditors' report stated that
our recurring losses from operations raise substantial doubt about our ability
to continue as a going concern.

IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY, COMPETITION COULD FORCE
US TO LOWER OUR PRICES, WHICH MIGHT REDUCE PROFITABILITY
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 utilized to make our products and our product uses. We cannot
guarantee that additional products or processes will achieve patent protection.
In addition, third parties may successfully challenge our patents. 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.

OUR PROFITABILITY WILL BE AFFECTED IF WE INCUR PRODUCT LIABILITY CLAIMS IN
EXCESS OF OUR INSURANCE COVERAGE
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 profitability will
be affected 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.

REPLACING OUR SOLE SOURCE SUPPLIERS FOR KEY MATERIALS COULD RESULT IN UNEXPECTED
DELAYS AND EXPENSES
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, the
substitute or replacement materials will most likely be tested 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. In
addition, the time expended for such tests could delay the marketing of an
FDA-approved product.

PROVISIONS OF OUR RESTATED CERTIFICATE OF INCORPORATION COULD DISCOURAGE
TAKEOVER TRANSACTIONS THAT A STOCKHOLDER MIGHT CONSIDER TO BE IN ITS BEST
INTEREST
Certain provisions of our Restated Certificate of Incorporation and by-laws, as
well as our stockholders rights plan, could discourage others from initiating a
potential merger, takeover or other change of control transaction, including a
potential transaction at a premium over market price that a stockholder might
consider to be in its best interest. For more information, see "Description of
Capital Stock -- Anti-Takeover Effects of Various Provisions of Delaware Law,
Biopure's Restated Certificate of Incorporation and By-laws and a Stockholders
Rights Plan".

INDUSTRY RISKS

INTENSE COMPETITION COULD HARM OUR FINANCIAL PERFORMANCE
The biotechnology and pharmaceutical industries are highly competitive. There
are a number of companies, universities and research organizations actively
engaged in research and development of products that may be similar to Hemopure.
Increased competition could diminish our ability to become profitable or affect
our profitability in the future. Our existing and potential competitors:

- - are also conducting clinical trials of their products;

- - may have substantially greater resources than we do 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.
12
<PAGE> 11

STRINGENT, ONGOING GOVERNMENT REGULATION AND INSPECTION OF OUR PRODUCTS COULD
LEAD TO DELAYS IN THE MANUFACTURE, MARKETING AND SALE OF OUR PRODUCTS

The FDA continues to review products even after they receive FDA approval. If
and when the FDA approves Hemopure, its manufacture and marketing will be
subject to ongoing regulation, including compliance 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 and other requirements. Any enforcement action resulting
from failure to comply with these requirements could affect the manufacture and
marketing of Hemopure. In addition, the FDA could withdraw a previously approved
product from the market upon receipt of newly discovered information.
Furthermore, the FDA could require us to conduct additional, and potentially
expensive, studies in areas outside our approved indications.

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, we must secure approval of a product by the comparable non-U.S.
regulatory authorities 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 affect the manufacture and marketing of our products.

HEALTH CARE REFORM AND CONTROLS ON HEALTH CARE SPENDING MAY LIMIT THE PRICE WE
CHARGE FOR HEMOPURE AND THE AMOUNT WE CAN SELL

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 the government may institute price controls and
limits on Medicare and Medicaid spending. These controls and limits might affect
the payments we collect from sales of our products. Assuming we succeed in
bringing Hemopure to market, uncertainties regarding future health care reform
and private market practices could impact our ability to sell Hemopure in large
quantities at profitable pricing.

UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT COULD AFFECT OUR PROFITABILITY

Sales of medical products largely depend on the reimbursement of patients'
medical expenses by governmental health care programs and private health
insurers. There is no guarantee that governmental health care programs or
private health insurers will reimburse our sales of Hemopure, or permit us to
sell our products at high enough prices to generate a profit.

OFFERING RISKS

THERE ARE SUBSTANTIAL SHARES ELIGIBLE FOR FUTURE SALE. THE SALE OF THESE SHARES
MAY DEPRESS OUR STOCK PRICE

Sales of substantial amounts of our class A common stock in the public market
could adversely affect prevailing market prices for our class A common stock and
our ability to raise equity capital in the future. As of February 1, 2000, we
had outstanding 22,303,912 shares of class A common stock. Of these shares, all
but 2,398,557 shares are either freely tradable in the public market, unless
acquired by our affiliates, or are "restricted securities" as that term is
defined in Rule 144 under the Securities Act of 1933 and eligible for immediate
sale in the public market pursuant to Rule 144, subject to certain volume and
manner of sale limitations.

Biopure and our directors, executive officers and some of our stockholders
holding an aggregate of 9,972,390 shares 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 90 days after the date of this prospectus, except with the prior
written consent of J.P. Morgan Securities Inc. This agreement with respect to
Biopure does not apply to any of our employee benefit plans existing on the date
of this prospectus.

Approximately 290,829 shares of class A common stock underlying stock options
outstanding as of February 1, 2000 under our 1988 Stock Option Plan and our 1998
Stock Option Plan are available for immediate sale in the public market. There
were also 688,952 shares of our class A common stock underlying certain warrants
outstanding as of February 1, 2000, none of which have been registered for
public sale and all of which will be subject to the public sale restrictions of
Rule 144 under the Securities Act.

13
<PAGE> 12

OUR STOCK PRICE MAY BE HIGHLY VOLATILE
In its brief market history, our class A common stock has generally experienced
relatively low daily trading volumes in relation to the aggregate number of
shares outstanding.

Factors that may have a significant impact on the market price or the liquidity
of our class A common stock include:

- - actual or potential clinical trial results relating to products under
development by us or our competitors;

- - delays in our testing and development schedules;

- - events or announcements relating to our relationships with others;

- - announcements of technological innovations or new products by us or our
competitors;

- - developments or disputes concerning patents or proprietary rights;

- - regulatory developments in both the United States and foreign countries;

- - FDA approval of Hemopure or competitors' products;

- - economic and other factors, as well as period-to-period fluctuations in our
financial results;

- - market conditions for pharmaceutical and biotechnology stocks; and

- - publicity regarding actual or potential medical results relating to products
under development by us or our competitors.

External factors may also adversely affect the market price for our class A
common stock. Our class A common stock currently trades on The Nasdaq National
Market. The price and liquidity of our class A common stock may be significantly
affected by the overall trading activity and market factors on The Nasdaq
National Market.

INVESTORS IN THIS OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
The public offering price of our class A common stock in this offering will be
substantially higher than the net tangible book value per share of our
outstanding class A common stock. As of October 31, 1999, our net tangible book
value was approximately $54.0 million. 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. If we assume conversion of our class B common stock into 1,272,119
shares of class A common stock, the maximum number of shares that could be
issued on conversion, then our pro forma net tangible book value per share is
$2.29 as of October 31, 1999. On a pro forma basis adjusted for this offering,
the pro forma adjusted net tangible book value will be approximately $135.7
million, and the pro forma adjusted net tangible book value will be $5.21 per
share of class A common stock. The amount of the increase in pro forma adjusted
net tangible book value to existing stockholders will be approximately $2.92 per
share of class A common stock. Purchasers of our class A common stock in this
offering will experience immediate pro forma dilution of approximately $29.79
per share of class A common stock.

14
<PAGE> 13

FORWARD-LOOKING STATEMENTS

This prospectus contains and incorporates by reference certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements give our current expectations or forecasts of
future events. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. Such statements may include
words such as "anticipate", "estimate", "expect", "project", "intend", "plan",
"believe" and other words or terms of similar meaning in connection with any
discussion of future operating or financial performance. In particular, these
forward-looking statements include statements relating to:

- - our history of operating losses and anticipation of future losses;

- - our need for additional capital and uncertainty of additional funding;

- - uncertainty of our product development;

- - government regulation and uncertainties of obtaining regulatory approval on a
timely basis or at all;

- - uncertainties related to our patent and proprietary rights;

- - uncertainties relating to clinical trials;

- - our lack of experience in marketing or selling products;

- - uncertainties regarding the acceptance, purchase and use of our products;

- - intense competition in the biopharmaceutical industry;

- - the price of our class A common stock; and

- - uncertainties relating to health care reform measures and third-party
reimbursement.

Any or all of our forward-looking statements in this prospectus may turn out to
be wrong. They can be affected by inaccurate assumptions we might make or by
known or unknown risks and uncertainties. Many factors mentioned in our
discussion in this prospectus, including those listed under the caption "Risk
Factors", will be important in determining future results. Consequently, no
forward-looking statement can be guaranteed. Actual future results may vary
materially from these Forward-Looking Statements.

We will not update these forward-looking statements, whether as a result of new
information, future events or otherwise. You should, however, review additional
disclosures we make in our Quarterly Reports on Form 10-Q, Annual Reports on
Form 10-K and Current Reports on Form 8-K filed with the Securities and Exchange
Commission, or SEC.

15
<PAGE> 14

USE OF PROCEEDS

The net proceeds we will receive from the sale of the 2,500,000 shares of class
A common stock offered by us are estimated to be $81,630,000, or $93,967,500 if
the underwriters' over-allotment option is exercised in full, after deducting
the underwriting discounts and estimated offering expenses payable by us.

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

- - $7.0 million for pre-marketing and marketing of Hemopure;

- - $10.0 million for Hemopure clinical trials other than our ongoing pivotal
Phase III clinical trial;

- - $10.0 million for expansion of our existing manufacturing facility;

- - $10.0 million for engineering and site selection for a new manufacturing
facility; and

- - the balance for other capital expenditures and general corporate purposes.

Pending such uses, we intend to invest the proceeds in high grade commercial
paper. Although we do not contemplate any changes in the use of proceeds, we may
adjust the amounts shown among the uses indicated above or use portions of the
net proceeds for other purposes. Our cash on hand as of the date of this
prospectus is sufficient to fund the completion of our pivotal Phase III
clinical trial.

DIVIDEND POLICY

We do not intend to pay any cash dividends on our common stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
fund the development and growth of our business. Our board of directors will
determine whether we will pay dividends in the future.

16
<PAGE> 15

CAPITALIZATION

The following table summarizes, as of October 31, 1999, our cash and cash
equivalents and capitalization on an actual and an as adjusted basis. The as
adjusted data reflect the sale of 2,500,000 shares of class A common stock in
this offering, after deducting the underwriting discounts and offering expenses
payable by us. You should read this information in conjunction with our
Consolidated Financial Statements and the related Notes appearing elsewhere in
this prospectus.

This table does not include 2,577,159 shares of class A common stock issuable
upon the exercise of outstanding options and warrants as of October 31, 1999. In
addition, this table does not include between 646,667 and 1,272,119 shares of
class A common stock issuable upon conversion of our class B common stock
following FDA approval of Hemopure.

<TABLE>
<CAPTION>
------------------------
OCTOBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
In thousands, except par value and share data
Cash and cash equivalents................................... $ 30,778 $ 112,408
========= =========
Long-term debt.............................................. $ -- $ --
--------- ---------
Stockholders' equity:
Common stock (100,000,179 shares authorized actual and as
adjusted):
Class A common stock, $0.01 par value (22,280,867
shares outstanding actual; 24,780,867 shares
outstanding as adjusted).............................. 223 248
Class B common stock, $1.00 par value (117.7 shares
outstanding actual and as adjusted)................... -- --
Capital in excess of par value.............................. 282,054 363,659
Contributed capital......................................... 24,574 24,574
Notes receivable............................................ (2,463) (2,463)
Accumulated deficit......................................... (250,351) (250,351)
--------- ---------
Total stockholders' equity............................. 54,037 135,667
--------- ---------
Total capitalization.............................. $ 54,037 $ 135,667
========= =========
</TABLE>

PRICE RANGE OF COMMON STOCK

Our class A common stock has been traded on The Nasdaq National Market under the
symbol "BPUR" since July 30, 1999. The following table sets forth, for the
quarters indicated, the high and low intra-day sale prices per share of our
class A common stock as reported on The Nasdaq National Market.

<TABLE>
<CAPTION>
----------------
HIGH LOW
------ ------
<S> <C> <C>
Fiscal 1999
Fourth Quarter............................................ $14.19 $ 6.31

Fiscal 2000
First Quarter............................................. $54.50 $ 9.00
Second Quarter (through March 13, 2000)................... $52.00 $23.50
</TABLE>

On March 13, 2000, the last reported sale price of our class A common stock on
The Nasdaq National Market was $35.25 per share. As of February 1, 2000, there
were approximately 455 stockholders of record of our class A common stock.

17
<PAGE> 16

SELECTED CONSOLIDATED FINANCIAL DATA

The following table summarizes our consolidated statements of operations data
for the fiscal years ended October 31, 1999, 1998, 1997, 1996 and 1995. Also
included in this table are our consolidated balance sheet data at October 31,
1999, 1998, 1997, 1996 and 1995. The following consolidated financial data with
respect to our statements of operations for the years ended October 31, 1999,
1998 and 1997, and our balance sheets as of October 31, 1999 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, 1996 and 1995 and our
balance sheets as of October 31, 1997, 1996 and 1995 are derived from our
audited consolidated financial statements that are not included herein. You
should read the consolidated financial data 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>
--------------------------------------------------------
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
In thousands, except per share data
STATEMENTS OF OPERATIONS DATA:
Total revenues.............................................. $ 2,866 $ 1,131 $ -- $ 71 $ 46
Cost of revenues............................................ 6,814 1,543 -- -- --
-------- -------- -------- -------- --------
Gross profit (loss)......................................... (3,948) (412) -- 71 46
Operating expenses:
Research and development.................................. 24,166 22,950 23,494 18,924 16,498
Sales and marketing....................................... 2,922 2,444 694 -- --
General and administrative................................ 5,266 4,660 2,920 3,506 3,945
-------- -------- -------- -------- --------
Total operating expenses.................................... 32,354 30,054 27,108 22,430 20,443
-------- -------- -------- -------- --------
Income (loss) from operations............................... (36,302) (30,466) (27,108) (22,359) (20,397)
Total other income (expense)................................ 772 419 (310) 765 (623)
-------- -------- -------- -------- --------
Net income (loss)........................................... (35,530) (30,047) (27,418) (21,594) (21,020)
Stock dividends on preferred stock.......................... (17,915) -- -- -- --
-------- -------- -------- -------- --------
Net loss applicable to common stockholders.................. $(53,445) $(30,047) $(27,418) $(21,594) $(21,020)
======== ======== ======== ======== ========
Historical basic net income (loss) per common share......... $ (3.61) $ (2.41) $ (2.23) $ (1.77) $ (1.73)
Historical weighted-average common shares outstanding....... 14,813 12,460 12,300 12,215 12,171
Pro forma basic net income (loss) per common share.......... $ (2.62)
Pro forma weighted-average common shares outstanding........ 20,369
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------
AT OCTOBER 31,
-------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
In thousands
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 30,778 $ 6,063 $ 13,527 $ 12,772 $ 7,924
Total current assets........................................ 38,277 13,175 15,221 13,636 10,453
Working capital............................................. 27,872 1,986 5,368 8,111 3,406
Net property and equipment.................................. 27,447 29,606 27,408 29,438 28,272
Total assets................................................ 66,230 44,848 44,054 43,462 40,218
Long-term debt (including current portion).................. -- 6,000 8,000 9,000 --
Common stock to be repurchased.............................. -- 6,300 6,300 -- --
Total stockholders' equity.................................. 54,037 21,449 20,222 26,417 31,875
</TABLE>

18
<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

We are a leading developer, manufacturer and marketer of oxygen therapeutics.
Our oxygen therapeutics are pharmaceuticals that one administers intravenously
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 and the European Medicines Evaluation Agency.

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 $250.4 million as of October 31,
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

Fiscal Years Ended October 31, 1999 and 1998
Total revenues were $2.9 million in fiscal 1999, as compared to $1.1 million in
fiscal 1998, an increase of approximately 153.4%. Revenues in fiscal 1999
included $2.7 million of Oxyglobin sales as compared to $942,000 in fiscal 1998,
an increase of approximately 191.8%. Product sales of Oxyglobin represent
approximately 95.9% of our total revenues in fiscal 1999 as compared to 83.3% in
fiscal 1998. Oxyglobin sales commenced in mid-March 1998 to emergency and
specialty practices in the United States. We launched Oxyglobin nationally in
October 1998. Total revenues also reflect $117,000 and $189,000 in fiscal 1999
and 1998, respectively, from license and development activities, grants and
product sales unrelated to our oxygen therapeutic products.

Cost of revenues totaled $6.8 million in fiscal 1999, an increase of $5.3
million or 341.6% as compared to fiscal 1998. We did not record any cost of
revenues in the first nine months of fiscal 1998. Cost of revenues in fiscal
1999 reflects the direct costs associated with the production of Oxyglobin and
allocation of a portion of the fixed costs of the unused production capacity.
The remainder of these fixed costs and the direct costs of production of
clinical trial materials were allocated to research and development.

Research and development expenses increased 5.3% to $24.2 million in fiscal 1999
from $23.0 million in fiscal 1998. The increase was primarily due to the
expenses associated with the pivotal Phase III clinical trial activities for
Hemopure and an increase in other development efforts related to ongoing
research and development programs. We expect that in the near term, research and
development expenses will remain stable as we continue our development efforts
with respect to potential uses for Hemopure.

Sales and marketing expenses increased 19.6% to $2.9 million in fiscal 1999 from
$2.4 million in fiscal 1998. This increase was primarily due to increased sales
and marketing personnel, as well as selling, advertising, marketing and
distribution expenses related to the U.S. product launch of Oxyglobin.

General and administrative expenses increased 13.0% to $5.3 million in fiscal
1999 from $4.7 million in fiscal 1998. This increase was primarily due to
increased management personnel, in part due to Biopure's becoming publicly
traded, offset by decreased market research, public relations and other
consulting expenses.

Total other income (expense) consists primarily of interest income and other
non-product related income partially offset by interest expense and other
non-operating expenses. Total other income (expense) was income of $772,000 in
fiscal 1999 compared to $419,000 in fiscal 1998. This increase of $353,000 was
primarily attributable to a reduction in interest expense resulting from the
retirement of long term debt with proceeds utilized from our initial public
offering, or IPO.

19
<PAGE> 18

Historical basic net loss per common share for fiscal 1999 was $3.61, compared
to $2.41 for the same period in 1998. The 1999 historical and pro forma basic
net loss per common share include a one-time charge of $1.21 and $0.88,
respectively, associated with $17.9 million in common stock dividends issued to
preferred stockholders. Historical basic net loss per share is computed based on
the weighted-average number of common shares outstanding during the period. Pro
forma basic net loss per 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.

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. We launched Oxyglobin
nationally in October 1998. 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.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 1999, we had current assets of $38.3 million, which consisted
primarily of $30.8 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 October 31, 1999, current liabilities were $10.4 million. The $30.8
million in cash and cash equivalents at October 31, 1999 is a net increase of
$24.7 million since October 31, 1998. The increase in cash and cash equivalents
is primarily attributable to $67.8 million in net proceeds from the sale of
preferred and common stock offset by expenditures of $31.0 million in
operations, $6.0 million to repay long-term debt, $6.0 million to repurchase
common stock and $1.8 million invested in property and equipment.

We have financed operations from inception primarily through sales of equity
securities, development and license agreement payments, interest income and
debt. Our primary investment objective is preservation of principal and
currently we invest in high grade commercial paper. We have not been profitable
since inception and had an accumulated deficit of $250.4 million as of October
31, 1999. We will continue to generate losses for the foreseeable future. We
believe our current cash and cash equivalents, together with the net proceeds of
this offering, should be sufficient to meet our projected operating requirements
at least through fiscal 2001. Our cash requirements may vary significantly from
current projections. We are exploring opportunities to obtain funds for the
construction of an additional manufacturing facility. However, additional
funding may not be available when needed, or, if available, may not be on
favorable terms.

On August 4, 1999, we received $39.1 million of proceeds from our initial public
offering of 3,500,000 shares of class A common stock at a price of $12.00 per
share, before estimated expenses of $1.4 million.

On August 5, 1999, we paid $4.0 million, which was in addition to an existing
balance of $1.0 million in an escrow account, to complete the repurchase of
1,694,273 shares of our class A common stock from a stockholder.

20
<PAGE> 19

In fiscal 1999, 1998 and 1997, our research and development expenses, including
clinical trials, were $24.2 million, $23.0 million and $23.5 million.

We plan to spend approximately $10.0 million for expansion of our existing
manufacturing facility and $2.0 million on general capital expenditures for our
existing facilities over the next two years. We will also need to construct
additional manufacturing facilities to attain annual capacity in excess of
approximately 100,000 units of Hemopure. We expect to spend $10.0 million in
calendar year 2000 to begin engineering and design work for these facilities.

As of October 31, 1999, we had net operating loss carryforwards of approximately
$161.0 million to offset future federal and state taxable income through 2019.
Due to the degree of uncertainty related to the ultimate realization of such
prior losses, no benefit has been recognized in our financial statements as of
October 31, 1999. Utilization of such losses in future years may be limited
under the change of stock ownership rules of the Internal Revenue Service.

YEAR 2000 COMPUTER SYSTEMS COMPLIANCE

All of our computer hardware and software has been upgraded for Year 2000
compliance. All of our key vendors have provided assurance that they are Year
2000 compliant. While there were no Year 2000 related problems at the transition
in the Year 2000, we are maintaining our contingency plans in the event any
problems arise in the future.

RECENTLY ISSUED ACCOUNTING STANDARDS

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 for the development or
acquisition of internal-use software. SOP No. 98-1 is effective for fiscal 2000.
We do not expect the adoption of this standard to have a material effect on our
financial position or operating results.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be effective for us in the first
quarter of fiscal 2001. We are currently evaluating the effect that
implementation of the new standard will have on our financial statements but
believe the effect will be immaterial.

21
<PAGE> 20

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.

Biopure develops, manufactures and markets oxygen therapeutics. Its products are
Hemopure, for human use, and Oxyglobin, for veterinary use. Biopure is
developing Hemopure as an alternative to red blood cell transfusions as well as
for use in the treatment of other critical care conditions. Hemopure is
currently in a pivotal Phase III clinical trial in the United States. In 1998,
following FDA approval, Biopure began selling Oxyglobin in the United States.

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, hemoglobin contained within red blood cells carries
approximately 98% of the body's oxygen and 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. Blood loss from injury or surgery or
disorders that affect red blood cell production or maintenance, such as bone
marrow disease, can cause anemia;

- - ischemia -- inadequate red blood cell flow for tissue oxygenation. Obstructed
or constricted blood vessels can result in ischemia. Ischemia can lead to
stroke, heart attack or other organ or tissue dysfunction; and

- - cardiopulmonary failure -- impaired function of the heart or lungs. The
heart's inability to pump sufficient quantities of blood to meet the needs of
the tissues or the failure of the lungs to oxygenate blood adequately can
cause cardiopulmonary failure.

A red blood cell transfusion is the standard therapy for anemia resulting from
blood loss. Sources of red blood cells for transfusions include stored supplies
of donated blood or of the recipient's own pre-donated blood. Health care
professionals also may use medications that stimulate red blood cell production
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. Handling errors in typing and cross-matching blood, as well as the
inadvertent introduction of pathogens, can also result in significant medical
problems. 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. Donated red blood cells are available for use in
transfusions for only 42 days after collection and this limitation affects the
ability to stockpile red blood cell supplies. Although freezing can extend the
life of red blood cells, 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.
In such situations, an obstructed or constricted blood vessel that is too narrow
to permit the normal passage of red blood cells can prevent oxygen from reaching
the body's tissues.

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<PAGE> 21

Similarly, red blood cell transfusions are generally not effective in overcoming
poor oxygenation due to 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. Ringer's lactate consists of water
and electrolytes and is generally administered to patients who have lost
substantial amounts of bodily fluids as a result of bleeding, vomiting or
diarrhea. Both Ringer's lactate and saline 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.

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. One administers
these products intravenously. Biopure's products consist of hemoglobin that has
been extracted from bovine red blood cells, 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 schematic illustrates the movement of red
blood cells and Hemopure in blood vessels.

[Schematic of Blood Vessel]

In the above schematic, 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,
supporting the body's ability to produce red blood cells.

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
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<PAGE> 22

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. Transfused red blood
cells can require 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.

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 surveillance
complies with current Good for emerging pathogens; leukocyte
Manufacturing Practices; no exposure
leukocyte, or white blood cell,
exposure
Storage Room temperature; no loss of Refrigeration required; loss of
efficacy efficacy
Shelf life 30 months 42 days
Compatibility Universal Type-specific
Preparation Ready-to-use Requires typing and cross-matching
Viscosity Low High
Raw material source Controlled Not controlled
Duration of action Maximum of 3 days Estimated 60 to 90 days
</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. These applications include the treatment of trauma, ischemic
conditions, including stroke and heart attack, and malignant hypoxic tumors.

Hemopure has a 30-month 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. In clinical trial data, Biopure has observed
that the redosing of Hemopure over several days can prolong Hemopure's "oxygen
bridge" effect.

Transfused red blood cells, however, have some advantages when compared to
Hemopure. Transfused red blood cells have a longer duration of action and can
persist in the body for an estimated 60 to 90 days. Hemopure, on the other hand,
depending on the amount infused, can last between one and three days and may
require repeat administration. Biopure has also observed slight increases in
blood pressure and abdominal discomfort in Hemopure-infused patients.
Fluctuations in a patient's blood pressure can affect the manner in which health
care professionals, who are accustomed to transfusing red blood cells, manage a
patient's care. Furthermore, Biopure cannot be certain that Hemopure will not
elicit an immune response in some individuals as do some other proteins. In
addition, it is anticipated that the cost of Hemopure will be significantly
greater to the patient than the cost of transfused red blood cells.

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<PAGE> 23

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, Biopure expects that Hemopure's use in surgery
will demonstrate Hemopure to be a safe and effective oxygen therapeutic in a
wide range of patients. Biopure filed for marketing approval of Hemopure in
South Africa in July 1999 and expects to complete its U.S. pivotal Phase III
clinical trial and file for approval in the United States 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. In addition, because of its special oxygen
therapeutic characteristics, Biopure will seek to develop Hemopure as a
therapy for indications 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 and the results of preclinical
studies and field reports support the use of Hemopure for these conditions.

- - 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.

- - Expand Market for Oxyglobin. Biopure will seek to broaden Oxyglobin's use to
other canine indications, other animal species and selected international
markets. In December 1999, Biopure received marketing approval in the European
Union for anemia in dogs, regardless of cause. Biopure will continue
advertising and educational initiatives to further penetrate U.S. veterinary
practices and is currently evaluating our strategic options for European
marketing of Oxyglobin.

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. Biopure expects that this
trial, together with the results of prior clinical trials, will 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. The FDA and the European Medicines Evaluation Agency have
approved the use of Oxyglobin, Biopure's veterinary product, for the treatment
of anemia in dogs, regardless of cause. Oxyglobin is marketed and sold to
veterinary hospitals and to small animal veterinary practices. Biopure has
tested Hemopure in 21 completed and ongoing clinical trials involving more than
650 humans and has tested Hemopure and Oxyglobin in 150 completed preclinical
studies involving animals from 10 species. Commercial sales of Oxyglobin have
resulted in thousands of administrations in animals.

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 filed an application for human approval in South Africa in July 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 by the body 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. In April
1999, the Health and Human Services Advisory Committee on Blood Safety and
Availability heard testimony projecting a shortage of up to 300,000 units of red
blood cells in the United States in the year 2000. In addition, it is believed
that new FDA donor deferral criteria restricting persons who were resident in
the United Kingdom during a specified time could increase this shortage to
almost 550,000 units.

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, Biopure evaluated Hemopure's efficacy as an oxygen therapeutic
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
25
<PAGE> 24

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.
Despite these trial limitations, Hemopure's clinical trials demonstrate
clinically significant elimination of red blood cell transfusions. 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.

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

The following chart summarizes Biopure's advanced clinical trials that Biopure
will use for the initial applications for marketing approval of Hemopure as an
alternative to red blood cell transfusions. The column labeled "Results" for the
completed trials lists efficacy, or elimination of red blood cell transfusions,
results. Another endpoint of our pivotal Phase III trial is a safety profile in
the Hemopure group that is no worse than the control group. We have attained
this safety comparability standard in the completed trials listed below.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
NO. OF TOTAL
DOSING: GRAMS PATIENTS/NO. OF
HEMOGLOBIN PATIENTS TREATED
TYPE OF SURGERY DEVELOPMENT STATUS (UNITS HEMOPURE) WITH HEMOPURE RESULTS
- --------------- ------------------ ---------------- ---------------- -------
<S> <C> <C> <C> <C>
Elective orthopedic U.S. pivotal Phase III Up to 300 grams 640/320 Pending completion
surgery (ongoing) trial ongoing (75% (10 units) over 6
enrollment achieved) days

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

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

Aortic aneurysm Intraoperative Phase II Up to 150 grams 72/48 27% elimination of red
reconstruction surgery trial completed in the (5 units) over 4 blood cell
(1996) U.S. and Europe; days; first dose transfusions
supportive trial for administered
the South African July during surgery,
1999 filing 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 in elective
orthopedic surgery. Elective orthopedic surgery includes non-emergency surgery
involving bones and joints. The primary objective of this trial is the avoidance
of red blood cell transfusions for six weeks after orthopedic surgery. Biopure
designed this randomized, red blood cell controlled, multi-center study 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 efficacy endpoint of this trial
is the elimination of red blood cell transfusions in 35% of the patients who
receive Hemopure. Another endpoint is a safety profile that is no worse than the
control group.

Non-U.S. Phase III Non-cardiac Surgery Trial. Biopure completed a Phase III
trial in Europe and South Africa in 1998 in non-cardiac surgery. Non-cardiac
surgery refers to surgery that does not involve the heart and can include
surgery of the digestive or urinary tract as well as orthopedic surgery. 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
clinically significant elimination of red blood cell transfusions in 43% of the
patients who received Hemopure.

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<PAGE> 25

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. During
cardiopulmonary bypass surgery, patients are connected to a heart and lung
machine that replaces functions of the heart and lungs during surgery. The
primary objective of this trial was the avoidance of red blood cell transfusions
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 clinically 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. This observation
supports the potential use of Hemopure as an erythropoietic support.

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. Aortic aneurysm reconstruction
surgery involves repairing a damaged segment of the aorta, the body's principal
artery. This study treated 72 patients, 48 of whom were infused with Hemopure.
The maximum dosage was 150 grams of hemoglobin, 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 clinically significant elimination of red blood cell transfusions in 27%
of the patients that received Hemopure. The trial was reported in the Journal of
Vascular Surgery, February 2000 issue.

Trauma; Stabilized Trauma Trial
Biopure has observed a 100% elimination of red blood cell transfusions on the
day of surgery in cardiac 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. As part of our approach to
trauma, Biopure is conducting a Phase II trial in non-cardiac surgery patients
that allows enrollment of consenting, stable trauma patients. This 60-patient
trial is being conducted at Brooke Army Medical Center, Wilford Hall Air Force
Hospital and University of Texas at San Antonio and has reached approximately
40% enrollment. In this controlled and randomized study, investigators dose with
Hemopure (or Ringer's lactate, the control treatment) based on the estimated
amount of blood the patient has lost. Endpoints include blood utilization and
safety. There have been no deaths in either group in this study. In this trial,
physicians are administering Hemopure to a maximum dose of 10 units or 300 grams
of hemoglobin. Biopure expects this trial to provide information useful in
designing a clinical development plan for trauma. Hemopure has been used on a
"compassionate use" basis in trauma patients. The design of pivotal trauma
trials will be complicated by heterogenous patient populations and logistical
issues. Bipoure intends to convene a panel of experts to advise in the design of
its trauma program.

In addition, preclinical animal model studies performed in academic and military
research laboratories have shown the benefit of using Hemopure in situations
involving 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.
Inadequate tissue oxygenation due to partial vessel blockage or constriction can
cause heart attack, angina and transient ischemic attack, which is a precursor
to stroke. In these situations, 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 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.

An abstract published in the The Journal of Trauma in January 2000 and presented
at the 30th Annual Scientific Meeting of the Western Trauma Association on March
1, 2000 described a preclinical study using a pre-hospital hemorrhagic shock
model

27
<PAGE> 26

designed to model what happens to humans after an accident. The study
demonstrates that small-volume resuscitation with Hemopure can restore and
sustain brain oxygenation, blood pressure and cardiac output following severe
hemorrhagic shock.

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, specifically the treatment of
glioblostoma. Enrollment in a clinical trial of patients diagnosed with
glioblostoma is expected to begin in the first half of 2000.

Plasma-Expanding Agent
After blood loss, health care professionals typically administer human serum
albumin, or HSA, or other volume expanding fluids to restore blood volume.
Adequate blood volume 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. Biopure has administered Hemopure
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.

Erythropoietic Support
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 support 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. A
preclinical study supports the use of Hemopure as an erythropoietic agent. This
study involved eight conscious sheep, all of which underwent an exchange
transfusion involving the replacement of at least 95% of their blood with an
early formulation of Hemopure. Even with critically low hematocrits, 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 is identical to Hemopure except for its molecular size distribution,
and has the same advantages over red blood cells as Hemopure. The FDA Center for
Veterinary Medicine approved Oxyglobin in January 1998 and the European
Medicines Evaluation Agency approved Oxyglobin in December 1999, in both cases
for the treatment of canine anemia, regardless of cause. Oxyglobin sales were
$2.7 million in fiscal 1999 and $942,000 in fiscal 1998.

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. Acute blood loss often results 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.
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<PAGE> 27

Biopure obtained FDA approval in January 2000 to modify its product label to
allow for flexible dosing. The original label specified 30 milliliters per
kilogram of animal patient weight. The new label permits a lower dosage range of
10 to 30 milliliters per kilogram. Biopure's strategy to increase the market for
Oxyglobin includes:

- - educating veterinarians on the range of uses for Oxyglobin and demonstrating
that using Oxyglobin represents better medical practice;

- - adding Japanese and other foreign approvals;

- - adding repeat dosing -- expected FDA filing in 2000;

- - adding other applications;

- - offering a smaller package size;

- - adding other species; and

- - increasing shelf life to three years.

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 established 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. A proprietary
computer software system operates and monitors most aspects of this process.
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 100,000 units of Hemopure or 350,000
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.

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. Blood as a tissue generally has been found to have little or no
potential for transmitting transmissible spongiform encephalopathies. Bovine red
blood cells do not contain prions, the proteins necessary for transmissible
spongiform encephalopathies. Furthermore, Biopure's patented purification and
manufacturing process has been tested to demonstrate that the potential risk of
infectious disease transmission is insignificant.

Manufacturing Processes

At Biopure's separation facility, a washing and a filtration process removes
plasma proteins in the bovine blood. 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. A semi-continuous purification process
involving a high performance liquid chromatography process purifies the
hemoglobin intermediate. Next, the purified hemoglobin is polymerized, or
linked, by the

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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
Upon receipt of FDA approval, if granted, Biopure expects to market Hemopure 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. 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 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 1, 1998, Biopure has sold
approximately 34,000 units of Oxyglobin. 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 December 1999,
Biopure received veterinary approval to market Oxyglobin to treat canine anemia
in the European Union.

Biopure sells Oxyglobin directly to veterinarians in the United States through
veterinary product distributors -- one national and eight regional. Orders are
then drop shipped by Biopure directly. 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. In January 2000, veterinarians paid an average of $126 per
15-gram hemoglobin unit.

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 administered intravenously.
Perfluorocarbon emulsions 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 its 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, controlled inexpensive source of raw material;

- - FDA approval of Oxyglobin in January 1998; and

- - EMEA approval of Oxyglobin in December 1999.

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<PAGE> 29

Many of Biopure's competitors and potential competitors in the development of
oxygen therapeutic products have significantly greater financial and other
resources to develop, manufacture and market their products. Existing
competitors in the development of hemoglobin-based investigational products use
outdated human red blood cells or bovine hemoglobin as their raw material.
Biopure is aware of one first generation, genetically engineered investigational
product that advanced to human clinical trials, but its development was
discontinued. We are aware of two human hemoglobin-based products currently in
advanced clinical trials. Biopure believes that its use of bovine red blood
cells is an advantage over products made from outdated donated human red blood
cells because of the availability, abundance, ability to control source, cost
and relative safety of bovine red blood cells. However, the use of bovine
derived blood products may encounter resistance from physicians and patients.
Among other things, public perceptions about the risk of "mad cow disease" may
affect market acceptance of Hemopure. 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. Biopure filed its initial
patent in 1986 in the United States. Four U.S. patents have been issued from
this filing. These patents describe and claim ultra-pure semi-synthetic blood
substitutes and methods for their preparation.

In total, Biopure has 17 U.S. patents granted and nine applications pending
relating to oxygen therapeutics. Biopure's granted U.S. patents relating to
oxygen therapeutics include:

- - two patents covering an ultra-purification process for hemoglobin solutions,
regardless of the source of hemoglobin, which expire in 2006 and 2014, and two
patents covering the ultra-pure oxygen therapeutic solutions produced by this
process expiring in 2009;

- - three patents regarding compositions having improved stability, of which two
expire in 2015 and the third expires in 2016, and one patent covering
processes for producing these compositions which expires in 2016;

- - one patent, which expires in 2015, covering improvements in preservation of
such hemoglobin solutions;

- - two patents, which expire in 2015 and 2016, covering improved methods for
separating polymerized from unpolymerized hemoglobin;

- - one patent, which expires in 2015, covering methods of oxygenating tissue
affected by inadequate red blood cell flow;

- - one patent, which expires in 2016, covering the removal of pathogens, if
present, from Biopure's source material; and

- - three patents, which expire in 2011, 2014 and 2015, covering methods for
treating tumors; and

- - one patent, which expires in 2010, covering a sample valve for sterile
processing.

Biopure also filed its original patent in Europe. Although granted, third
parties subsequently opposed Biopure's original European patent. 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,
some pre-existing patents and articles 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 preexisting
patents and articles are not expected to affect claims of Biopure patents in the
rest of the world. Biopure also has other foreign patents and patent
applications.

Biopure believes that it is not economically practicable to determine in advance
whether its products, product components, manufacturing processes or the uses
infringe the patent rights of others. It is likely that, from time to time,
Biopure will

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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. The FDA has inspected these facilities and determined that they
comply with current Good Manufacturing Practices. The Medicines Control Agency,
on behalf of the European Medicines Evaluation Agency, has also inspected
Biopure's facilities.

Biopure manufactures separation materials in a 10,000 square foot plant in New
Hampshire. The current annual lease payment for this facility is $38,000. The
lease expires on March 31, 2000. Biopure has an option to extend this lease for
an additional five years and has exercised this option.

Biopure leases two facilities for office and research space in Massachusetts.
One lease covers 24,000 square feet, and its current annual lease payment is
$239,000. This lease expires on December 31, 2007. Biopure has an option to
extend this lease for ten five-year periods, or an additional 50 years. The
other lease covers 13,000 square feet, and its current annual lease payment is
$378,000. We are in negotiations to reduce our lease commitment to approximately
7,000 square feet. This lease expires on August 31, 2001. Biopure does not have
an option to extend this lease. It leases 18,000 square feet of warehouse space
in Massachusetts. The current annual lease payment for this facility is $95,000.
The lease expires on September 30, 2001. Biopure has an option to extend this
lease for two five-year periods, or an additional ten years.

Biopure leases 32,000 square feet of manufacturing space under three leases in
Massachusetts. The current annual lease payments for these facilities is
$236,000. The leases expire on November 30, 2000. Biopure has an option to
extend these leases for five five-year periods, or an additional 25 years, with
an exclusive right to negotiate for an additional 25 years. Biopure has decided
to extend the terms of these leases to November 30, 2005. Biopure also leases
18,000 square feet of manufacturing space in Pennsylvania. The current annual
payment for a ground lease for this facility is $21,000. The lease expires on
October 20, 2014. Biopure has an option to extend this lease for nine years.

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 January 28, 2000, Biopure employed 160 persons. Of its total work force,
93 employees are engaged in manufacturing and related manufacturing support
services, 29 are engaged in research and development activities, 10 are engaged
in sales and marketing, primarily veterinary, and 28 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 benefited from equity investment and development expenditures of
approximately $140.0 million and from the experience, personnel and facilities
of The Upjohn Company. 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.

GOVERNMENT REGULATION

New Drug or Biologic Approval for Human Use

Governmental authorities in the United States and other countries extensively
regulate the testing, manufacturing, labeling, advertising, promotion, export
and marketing, among other things, of Biopure's oxygen therapeutic products. Any
oxygen therapeutic product administered to human patients is regulated as a drug
or a biologic drug and requires regulatory approval before it may be
commercialized.

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

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The steps required before approval of a biologic 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 investigational products to
healthy volunteers or patients under the supervision of a qualified principal
investigator consistent with an informed consent. An independent Institutional
Review Board, or IRB, or Ethics Committee must review and approve each clinical
trial at each institution at which the study will be conducted. The IRB or
Ethics Committee 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,
additional clinical trials may be necessary. 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, purity or potency 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, which for non-food animals becomes effective upon acceptance for
filing.

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Pervasive and Continuing Regulation

Any product approvals that are granted remain subject to continual FDA 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 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. Biopure must obtain
approval of its products by the comparable non-U.S. regulatory authorities prior
to the commencement of product marketing in the country whether or not Biopure
has obtained FDA approval. 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 the 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 an action 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. Biopure is also a party
to a related action filed on November 8, 1990 in the United States District
Court for the District of Massachusetts under the caption Bio-Vita Ltd., et al.
v. Carl W. Rausch, et al.

Summary judgments were entered against the plaintiffs in both of these actions
in 1994. The plaintiffs appealed. One appeal filed in Bio-Vita Ltd., et al. v.
Carl W. Rausch, et al. was voluntarily dismissed. The other appeal was remanded
to the trial court for further findings based on lack of jurisdiction, and on
February 23, 2000, the United States District Court for the District of
Massachusetts reaffirmed entry of final judgment in favor of Biopure and found
on the jurisdiction issue that there is no reason to delay the appeal. The
remaining plaintiff is seeking $250.0 million in damages. 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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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 January 31, 2000.
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.................................. 51 Chairman and Chief Executive Officer
David N. Judelson............................... 71 Vice Chairman
Paul A. Looney.................................. 60 Director and President
Daniel P. Harrington............................ 44 Director
Stephen A. Kaplan............................... 41 Director
C. Everett Koop, M.D. .......................... 83 Director
Charles A. Sanders, M.D. ....................... 67 Director
Francis H. Murphy............................... 61 Chief Financial Officer
Maria S. Gawryl, Ph.D. ......................... 46 Senior Vice President, Research and Development
Edward E. Jacobs, Jr., M.D. .................... 59 Senior Vice President
Jane Kober...................................... 56 Senior Vice President, General Counsel and
Secretary
Bing L. Wong, Ph.D. ............................ 52 Senior Vice President, International
Bernadette L. Alford, Ph.D. .................... 50 Vice President, Regulatory Affairs
William A. Eudailey............................. 55 Vice President, Marketing
Geoffrey J. Filbey.............................. 56 Vice President, Engineering
Carolyn R. Fuchs................................ 47 Vice President, Human Resources
William D. Hoffman, M.D. ....................... 46 Chief Medical Officer
Andrew W. Wright................................ 40 Vice President, Veterinary Products
</TABLE>

CARL W. RAUSCH is a co-founder and has served as Chairman and Chief Executive
Officer of Biopure since 1984. From 1996 until July 1999, Mr. Rausch was also
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 has served as Vice Chairman of Biopure
since 1984. 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 a bachelor of mechanical engineering degree from New
York University College of Engineering.

PAUL A. LOONEY has served as President of Biopure since July 1999 and as a
director since August 1999. From May 1995 until July 1999, Mr. Looney was a
consultant to various biotechnology companies. Between September 1993 and May
1995, Mr. Looney was the Chief Executive Officer, Chief Operating Officer and
President of Corning Costar Inc. Mr. Looney is a director of Biosphere Medical,
Inc.

DANIEL P. HARRINGTON has served as a director of Biopure since August 1999. He
has been President of HTV Industries, Inc. since 1991. HTV Industries, Inc. is a
holding company with manufacturing operations and investments in various
industries. He holds a B.B.A. degree from Stetson University and an M.B.A. from
Xavier University. Mr. Harrington is a director of Churchill Downs, Inc.

STEPHEN A. KAPLAN has served as a director of Biopure since November 1997. Since
June 1995, Mr. Kaplan has been a principal in Oaktree Capital Management LLC.
From November 1993 to May 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. Mr. Kaplan serves on the boards of directors of Acorn Products,
Inc., Cherokee International LLC, CollaGenex Pharmaceuticals, Inc., Geologistics
Corporation, KinderCare Learning Centers Inc. and Roller Bearing Holding
Company, Inc.

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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 serves as director of drkoop.com, an
internet health site company, and Biomedics, a pharmaceutical company. 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. He 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 until his retirement in May 1995, Dr. Sanders was the Chairman
and Chief Executive Officer of Glaxo Inc. Dr. Sanders serves on the boards of
Genentech, Inc., 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.

FRANCIS H. MURPHY has served as Chief Financial Officer of Biopure since
November 1999. Most recently Mr. Murphy had been International Vice President
and business manager for Japan, Latin America and Asia Pacific for the Science
Products Division of Corning Incorporated. He holds an M.B.A. degree from Boston
University and a B.S. degree in industrial engineering and a B.A. degree from
Rutgers University.

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.

WILLIAM A. EUDAILEY became Vice President, Marketing on February 14, 2000. From
1996 through 1999, Mr. Eudailey was Vice President of Separations Business of
Corning Incorporated, and from 1995 to 1996 he was Vice President World Wide
Marketing for the Science Products Division of Corning Incorporated. He holds a
Doctor of Pharmacy degree and a B.S. in pharmacy from the University of
Tennessee College of Pharmacy.

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.

36
<PAGE> 35

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.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee of the board of directors consists of Mr. Kaplan, Dr.
Sanders and Mr. Judelson. Mr. Rausch serves as a non-voting member of this
committee. Of the four, only Mr. Rausch has been an officer or employee of
Biopure at any time since our inception. Jane Kober, our Senior Vice President
and General Counsel, serves as a member of the board of directors of HTV
Industries, Inc., of which Mr. Harrington is President. No other 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".

Our audit committee consists of Mr. Harrington and Dr. Sanders.

DIRECTOR COMPENSATION

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

37
<PAGE> 36

EXECUTIVE COMPENSATION

Summary Compensation Table
The following summary compensation table summarizes 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, 1999, 1998
and 1997.

<TABLE>
<CAPTION>
--------------------------------------------------
ANNUAL
COMPENSATION
--------------------------------------------------
FISCAL OTHER ANNUAL
YEAR SALARY($) BONUS($) COMPENSATION($)
NAME AND PRINCIPAL POSITION ------ --------- -------- ---------------
<S> <C> <C> <C> <C>
Carl W. Rausch.............................................. 1999 307,008 -- --
Chairman and Chief Executive Officer 1998 307,008 75,000 --
1997 252,866 30,000 --
Edward E. Jacobs, Jr., M.D. ................................ 1999 205,010 -- --
Senior Vice President 1998 205,010 25,000 --
1997 169,698 -- 228,000
Maria S. Gawryl, Ph.D. ..................................... 1999 202,501 -- --
Senior Vice President -- 1998 195,000 40,000 --
Research and Development 1997 162,040 20,000 --
William D. Hoffman, M.D. ................................... 1999 184,692 -- 7,162
Chief Medical Officer 1998 123,767 -- 30,000
1997 -- -- --
Jane Kober.................................................. 1999 220,012 -- 80,001
Senior Vice President -- 1998 102,390 -- 40,000
General Counsel and Secretary 1997 -- -- --
</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, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
----------------------------------------------------
AWARDS PAYOUTS
---------- ----------------------------
SECURITIES EARNINGS ON
FISCAL UNDERLYING DEFERRED
YEAR OPTIONS(#) COMPENSATION($) 401(K)($)
NAME AND PRINCIPAL POSITION ------ ---------- --------------- ---------
<S> <C> <C> <C> <C>
Carl W. Rausch............................................. 1999 166,680 94,097 4,550
Chairman and Chief Executive Officer 1998 83,333 104,408 4,370
1997 -- 94,353 4,725
Edward E. Jacobs, Jr., M.D. ............................... 1999 16,680 -- 4,983
Senior Vice President 1998 10,000 -- 4,565
1997 -- -- 4,852
Maria S. Gawryl, Ph.D. .................................... 1999 100,000 -- 4,929
Senior Vice President -- 1998 53,334 -- 4,653
Research and Development 1997 -- -- 4,839
William D. Hoffman, M.D. .................................. 1999 68,000 -- 3,381
Chief Medical Officer 1998 5,333 -- --
1997 -- -- --
Jane Kober................................................. 1999 133,340 -- 2,285
Senior Vice President -- 1998 33,333 -- --
General Counsel and Secretary 1997 -- -- --
</TABLE>

38
<PAGE> 37

Option Grants in Last Fiscal Year
The following table summarizes 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, 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($)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------------
GRANTED(#) 1999(%) SHARE($) DATE 5% 10%
NAME AND PRINCIPAL POSITION ----------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Carl W. Rausch.................... 166,680 10.69 12.00 08/04/09 1,257,890 3,187,740
Chairman and Chief Executive
Officer
Edward E. Jacobs, Jr., M.D. ...... 16,680 1.07 12.00 08/04/09 125,880 319,003
Senior Vice President
Maria S. Gawryl, Ph.D. ........... 100,000 6.42 12.00 08/04/09 754,674 1,912,491
Senior Vice President --
Research and Development
William D. Hoffman, M.D. ......... 68,000 4.36 12.00 08/04/09 513,178 1,300,494
Chief Medical Officer
Jane Kober........................ 133,340 8.55 12.00 08/04/09 1,006,282 2,550,115
Senior Vice President --
General Counsel and Secretary
</TABLE>

Fiscal Year-End Option Values
The following table shows the number and value of unexercised options held by
our Chief Executive Officer and our other four most highly compensated executive
officers at October 31, 1999. None of these individuals exercised options in
fiscal 1999.

The fair market value on October 31, 1999 was determined to be $9.88 per share,
the closing price of our class A common stock as quoted on The Nasdaq National
Market on October 29, 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....................................... 20,833 229,180 -- --
Chairman and Chief Executive Officer
Edward E. Jacobs, Jr., M.D. ......................... 2,500 24,180 -- --
Senior Vice President
Maria S. Gawryl, Ph.D. .............................. 23,084 140,583 -- --
Senior Vice President --
Research and Development
William D. Hoffman, M.D. ............................ 1,333 72,000 -- --
Chief Medical Officer
Jane Kober........................................... 8,333 158,340 -- --
Senior Vice President --
General Counsel and Secretary
</TABLE>

39
<PAGE> 38

NON-COMPETITION AGREEMENTS

All 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 provided that
we would pay him a lump sum of $700,000 plus interest accrued from August 8,
1990 to the date of payment. The total payment will be due July 31, 2003. The
amount of the payment with interest, calculated at the prime interest rate
through July 1999 and thereafter at 4.71%, will be $1,686,000. The deferred
compensation agreement was entered into as part of Mr. Rausch's overall
long-term compensation agreement. Mr. Rausch borrowed money from us in 1990 to
purchase class A common stock. See "Certain Relationships and Related
Transactions" for more information about this loan.

EMPLOYMENT AGREEMENT

We have an employment agreement with Paul A. Looney. The agreement has a
three-year term and may be extended. Under the terms of his employment
agreement, Mr. Looney will serve as president of Biopure with all the duties and
responsibilities of chief operating officer. He is entitled to an annual base
salary of not less than $295,000, subject to annual adjustment, and is eligible
to participate in all incentive, savings and retirement plans and welfare
benefit plans and programs that we maintain or implement. In addition, under the
agreement, Mr. Looney was promised and has received stock options to purchase
233,340 shares of our class A common stock at an exercise price equal to the
price to the public in our initial public offering, $12.00 per share. These
options will have terms of 10 years and will be immediately exercisable in the
event of a change of control or in the event of Mr. Looney's death, disability,
retirement, termination of employment for reasons other than cause or voluntary
termination under certain circumstances. Otherwise, the options shall become
exercisable in 25% increments on July 1, 2000, 2001, 2002 and 2003.

This employment agreement also includes non-solicitation and non-competition
provisions, restricting Mr. Looney's ability to engage in any activities that
would compete with our business during his employment and for one year
thereafter.

CONSULTING AGREEMENT

Dr. Hoffman, our Chief Medical Officer, will become the Director of Cardiac
Surgical Critical Care at Massachusetts General Hospital in May 2000. At that
time he will become a consultant to us and will no longer be an employee. He has
agreed, among other things, in his role as a consultant:

- - To become a member of a medical advisory board we are forming;

- - To be available as needed for medical advice;

- - To consult both with us and the FDA on our pivotal trial and our non-U.S.
elective surgery trial completed in 1998;

- - To advise on protocols, or designs, for future clinical trials;

- - To give input into educational programs for the use of Hemopure.

He will be compensated by an option to purchase 24,800 shares of class A common
stock to vest in equal increments over a four-year period.

1990 INCENTIVE COMPENSATION AND COMPANY STOCK PURCHASE PLAN

Under an Incentive Compensation and Company Stock Purchase Plan, we sold
approximately 1,606,000 "non-lapse" restricted shares of class A common stock in
August 1990 to certain of our key employees, consultants and directors at a
purchase price of $1.35 per share. At the time of purchase, these shares had an
estimated fair market value of $5.40 per share. The price paid for these shares
represented a discount of $4.05 per share. All of these shares were contributed
to Biopure Associates Limited Partnership II.

Under the terms of separate stock purchase agreements entered into with each
purchaser, the resale price of these shares, whether sold to us or to a third
party, would be equal to the price of our class A common stock less the discount
with accrued interest. Any purchaser of such shares would be subject to the same
restrictions. At May 1, 1999, the discount plus accrued interest per share was
$7.92. These shares are subject to certain transfer and resale restrictions,
including a right of first refusal granted to us.

40
<PAGE> 39

Our board has agreed to modify these resale restrictions. In particular, the
discount plus accrued interest per share has been fixed at $7.92, and holders
may sell their shares or eliminate the restrictions at any time by the payment
to us of $7.92 per share. In addition, we will have the right, exercisable at
any time during the 12 months beginning August 1, 2004, to exchange these
restricted shares for a number of shares of class A common stock having
equivalent value after taking in account the discount of $7.92 per share.

THE 1998 STOCK OPTION PLAN

In March 1998, our board of directors adopted the 1998 Stock Option Plan as a
replacement for the 1988 Stock Option Plan which expired in March 1998. Awards
under this plan were in the form of incentive options, which are defined in the
Internal Revenue Code of 1986, or non-statutory options. Options granted under
this plan vest in such installments, cumulative or non-cumulative, as the board
may determine.

1999 OMNIBUS SECURITIES AND INCENTIVE PLAN

On June 24, 1999, our board adopted the 1999 Omnibus Securities and Incentive
Plan, which has the terms described below. This plan is intended to promote our
long-term financial interests and growth by providing incentives to employees
and directors and to align their interests with those of our stockholders by
acquiring a proprietary interest in our long-term success.

General
The 1999 Omnibus Securities and Incentive Plan provides for the granting of
stock options, restricted stock awards, unrestricted stock awards, performance
unit awards, performance share awards, distribution equivalent rights, or any
combination of the foregoing to employees and directors of Biopure or our
affiliates. Our Compensation Committee will administer this plan. The maximum
number of shares of class A common stock reserved for issuance under this plan
is 1,866,666.

Stock Options
Under the plan, the committee may award stock options, the term and vesting
rules of which are to be specified in the respective stock option award
agreements. The committee will determine whether to award incentive stock
options or nonqualified stock options, as described in the applicable stock
option award agreement. 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, including the requirement that incentive stock options
cannot be granted to non-employee directors. The committee will determine the
option price, but, in the case of an incentive stock option, the option price
will not be less than the fair market value of a share of class A common stock
on the date of the grant of the option.

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 agreements will describe 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 receive
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 receive the certificate representing
shares of class A common stock.

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

Performance Unit Awards
The committee has discretion to set performance goals for an employee or
director and related performance units with their dollar value. If the goals are
met, we will make payment of a cash award equal to the number of bookkeeping
units awarded at the dollar value assigned to each such unit.

Performance Share Awards
The committee has discretion to set performance goals for an employee or
director which, if met, will result in the receipt of shares of class A common
stock. 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.

41
<PAGE> 40

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
Unless otherwise provided in an award agreement, the plan provides that in the
event of a change of control, as defined in the plan, and the termination of
employment or removal, in the case of a director, under specified circumstances,
the holder's outstanding awards will become fully vested and immediately
exercisable, all transfer restrictions will lapse and all performance goals will
be deemed to have been fully satisfied. The committee, however, can determine
that upon a change of control, all outstanding awards will terminate and be
cashed out within a specified time period.

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, materially and adversely impair the rights under any
outstanding award.

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, if any, 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.

42
<PAGE> 41

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 benefited 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. With the proceeds from our initial public
offering, we repaid the $4.5 million remaining principal and interest
outstanding on this loan. 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, according to a formula, into a maximum of
1,272,119 shares of our class A common stock after FDA approval of Hemopure.

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 provided 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
2,013,956 shares of class A common stock owned by Braun. Our termination
agreement with Braun required 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 319,683 shares. We paid a second installment of $1.0 million in
February 1999. With the proceeds from our initial public offering, we completed
the repurchase of the remaining 1,694,273 shares of class A common stock held by
Braun for $5.0 million. The license repurchase price is $7.5 million, payable
without interest from a 5% royalty on future sales in the European countries
covered by Braun's terminated license.

We have a consulting arrangement with C. Everett Koop, M.D., one of our
directors. For the fiscal years ended October 31, 1999, 1998 and 1997, we paid
Dr. Koop $146,132, $123,780 and $92,941, respectively. We paid $75,500 to Mr.
Judelson, a director, for services in each of fiscal 1998 and fiscal 1997.

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. A loan
to Mr. Rausch with $1.4 million principal and interest outstanding on January
31, 2000 bears interest at an annual interest rate of 4.71% and principal and
interest are due July 31, 2003. The principal and interest on the remaining loan
amounts are due to be paid in full on July 31, 2000. The interest rate on these
remaining loans is set with reference to the "base rate" announced by Fleet Bank
of Massachusetts, N.A. At January 31, 2000, this interest rate was 8.50%. As of
January 31, 2000, the amount of indebtedness due under these loans with a
balance of $60,000 or more was as follows:

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

Edward E. Jacobs, Jr., M.D., Senior Vice President, owed us $377,713. Dr. Jacobs
subsequently paid his loan in full on February 8, 2000.

Bing L. Wong, Senior Vice President, International, owed us $101,899; and

Geoffrey J. Filbey, Vice President, Engineering, owed us $68,746.

43
<PAGE> 42

PRINCIPAL STOCKHOLDERS

The following table summarizes certain information as of February 1, 2000, with
respect to the beneficial ownership of shares of our class A common stock.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Beneficial ownership generally includes
voting or investment power with respect to securities. A person is deemed to be
the beneficial owner of shares that he or she can acquire within 60 days of
February 1, 2000, upon the exercise of options or warrants. Biopure has
determined each beneficial owner's percentage ownership by assuming that options
or warrants held by such person which are exercisable within 60 days from
February 1, 2000, 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 shown as beneficially
owned by them.

Prior to February 1, 2000, Mr. Rausch had sole voting and investment power with
respect to 2,693,905 shares owned by Biopure Associates Limited Partnership, a
partnership originally formed to hold shares owned primarily by our officers,
employees and consultants. This partnership distributed all of its shares to its
partners on February 1, 2000. Mr. Rausch received 554,930 shares representing
his interest in the partnership, and his beneficial ownership was reduced by the
balance of the partnership's shares, which were distributed to others.

<TABLE>
<CAPTION>
---------------------
CLASS A
COMMON STOCK
---------------------
SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS ---------- -------
<S> <C> <C>
Carl W. Rausch(1)........................................... 2,506,325 11.1%
11 Hurley Street
Cambridge, MA 02141
Biopure Associates Limited Partnership II(2)................ 1,528,000 6.7
c/o Biopure Corporation
11 Hurley Street
Cambridge, MA 02141
OCM Principal Opportunities Fund, L.P.(3)................... 3,212,750 14.2
c/o Oaktree Capital Management
333 S. Grand Avenue
Los Angeles, CA 90071
HTV Industries, Inc. (4).................................... 1,502,729 6.6
Pavilion Office Building
24100 Chagrin Boulevard
Suite 340
Beachwood, OH 44122
Aspen Venture Partners, L.P.(5)............................. 1,301,973 5.7
222 Berkeley Street
Boston, MA 02116
Daniel P. Harrington(6)..................................... 1,511,895 6.7
David N. Judelson(7)........................................ 2,151,915 9.5
Stephen A. Kaplan(8)........................................ 3,217,750 14.2
C. Everett Koop, M.D.(9).................................... 11,667 *
Paul A. Looney.............................................. -- --
Charles A. Sanders, M.D.(10)................................ 23,649 *
Edward E. Jacobs, Jr., M.D.(11)............................. 528,226 2.3
Maria S. Gawryl, Ph.D.(12).................................. 37,000 *
William D. Hoffman, M.D.(13)................................ 2,667 *
Jane Kober(14).............................................. 12,333 *
All Officers and Directors as a Group(15)................... 10,361,641 45.7
</TABLE>

- ---------------
* Less than one percent.

(1) Mr. Rausch's shares of class A common stock consist of: sole power to vote
and dispose of 1,528,000 shares owned by Biopure Associates Limited Partnership
II; sole power to vote and dispose of 936,657 shares owned directly by Mr.
Rausch, his family and family trusts; and options exercisable 60 days from
February 1, 2000 to purchase 41,667 shares.

44
<PAGE> 43

(2) Biopure Associates Limited Partnership II 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. The underlying shares of class A
common stock in the partnerships owned indirectly by directors and persons named
in the compensation table are as follows: Mr. Rausch 841,667 shares; Dr. Koop
33,333 shares; and Dr. Gawryl 36,667 shares.

(3) Includes warrants to purchase 180,140 shares and does not include options
to purchase 5,000 shares held by Mr. Kaplan for the benefit of the Fund.

(4) Includes warrants to purchase 11,111 shares.

(5) Includes warrants to purchase 29,979 shares.

(6) Mr. Harrington's shares include 1,502,729 shares owned by HTV Industries,
Inc., for which he shares voting and investment power.

(7) Mr. Judelson's shares consist of sole power to vote and dispose of
2,110,248 shares, include options exercisable 60 days from February 1, 2000 to
purchase 41,667 shares and include 333,333 shares owned of record by Biopure
Associates Limited Partnership II as of February 1, 2000 but distributed to him
prior to the date of this prospectus.

(8) Mr. Kaplan's shares consist of 3,032,610 shares and warrants to purchase
180,140 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 February 1, 2000 to purchase 5,000 shares, the economic interest in
which is owned by OCM Principal Opportunities Fund, L.P.

(9) Dr. Koop's shares include options exercisable 60 days from February 1, 2000
to purchase 5,000 shares and do not include his 33,333 shares referenced above
in note 2.

(10) Dr. Sanders' shares include options exercisable 60 days from February 1,
2000 to purchase 5,000 shares and warrants to purchase 667 shares.

(11) Dr. Jacobs' shares include options exercisable 60 days from February 1,
2000 to purchase 5,000 shares.

(12) Dr. Gawryl's shares consist of options exercisable 60 days from February 1,
2000 to purchase 37,000 shares and do not include her 36,667 shares referenced
above in note 2.

(13) Dr. Hoffman's shares consist of options exercisable 60 days from February
1, 2000.

(14) Ms. Kober's share's include options exercisable 60 days from February 1,
2000 to purchase 8,333 shares.

(15) Includes options exercisable 60 days from February 1, 2000 to purchase
197,333 shares and warrants to purchase 191,918 shares.

45
<PAGE> 44

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, our authorized capital stock will consist of
100,000,179 shares of common stock, consisting of 100,000,000 shares of class A
common stock, par value $.01 per share, 179 shares of class B common stock, par
value $1.00 per share, and 30,000,000 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 submitted to our stockholders. The holders of our class A common
stock 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 the 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 do not have preemptive rights or cumulative
voting rights.

CLASS B COMMON STOCK

Except as required by law, the holders of class B common stock have no voting
rights and have no right to receive dividends on their class B common stock.

The shares of class B common stock are convertible into class A common stock
after the receipt of FDA approval for the commercial sale of Hemopure for use as
an oxygen transport material in humans. The conversion ratio is based on a
valuation of Biopure at the time of conversion which cannot exceed $3.0 billion.
The maximum number of shares of class A common stock issuable upon conversion of
the class B common stock is 1,272,119 and the minimum is 646,667. We will not
issue any additional shares of class B common stock.

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

ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW, BIOPURE'S RESTATED
CERTIFICATE OF INCORPORATION AND BY-LAWS AND A STOCKHOLDERS RIGHTS PLAN

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
Our board of directors is currently divided into three classes of directors
serving staggered three-year terms. As a result, approximately one-third of the
board of directors are 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.

Dr. Koop and Mr. Looney are Class I directors, whose terms expire in 2000; Mr.
Harrington and Mr. Kaplan are Class II directors, whose terms expire in 2001;
and Mr. Rausch, Mr. Judelson and Dr. Sanders are Class III directors, whose
terms expire in 2002.

46
<PAGE> 45

Supermajority Voting Requirement for Mergers and Business Combinations
Our restated certificate of incorporation requires that two-thirds, rather than
a majority, of the voting power of our outstanding capital stock approve any
merger, consolidation or sale of "all or substantially all" of our assets. This
two-thirds vote will be necessary until July 31, 2003, after which a majority of
the voting power of Biopure will be able to approve these transactions. By
requiring a two-thirds rather than a majority vote, it is more difficult for an
outside entity to successfully acquire our company.

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.

Stockholders Rights Plan
Biopure's board of directors has adopted a stockholders rights plan which became
effective following the completion of the initial public offering. This
stockholders rights plan has an anti-takeover effect. Under this plan, a
preferred stock purchase right will be distributed to each holder of class A
common stock. The plan is likely to discourage any person or group that wishes
to acquire more than 20% of our class A common stock from acquiring this stock
prior to obtaining Biopure's agreement to redeem the rights. If the rights are
not redeemed, the exercise of the preferred stock purchase rights following an
acquisition will cause substantial dilution to the acquiring person or group.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the class A common stock is American Stock
Transfer & Trust Company. The transfer agent's address is 40 Wall Street, New
York, New York 10005 and its telephone number is (212) 936-5100.

47
<PAGE> 46

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., Salomon Smith Barney Inc., Robert W. Baird & Co.
Incorporated and Adams, Harkness & Hill, Inc. 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.................................. 900,000
Salomon Smith Barney Inc. .................................. 900,000
Robert W. Baird & Co. Incorporated.......................... 384,000
Adams, Harkness & Hill, Inc................................. 216,000
KBC Securities NV........................................... 50,000
Dain Rauscher Wessels....................................... 25,000
Jackson Securities Incorporated............................. 25,000
-----------
Total............................................. 2,500,000
===========
</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 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 $1.26 per share from the public offering price. Any such securities
dealers may resell shares to certain other brokers or dealers at a discount of
up to $0.10 per share from the public offering price. After this 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 375,000
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.............................................. $ 2.10 $ 2.10
---------- ----------
Total............................................. $5,250,000 $6,037,500
========== ==========
</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 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 $620,000.

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

48
<PAGE> 47

Biopure and our directors, executive officers and some of 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 90 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.

Our class A common stock is listed on The Nasdaq National Market under the
symbol "BPUR".

The underwriters expect to deliver the shares of class A common stock to
investors on or about March 17, 2000.

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

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, 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, 1999 and 1998, and for each of the three years in the
period ended October 31, 1999, 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 are subject to the reporting requirements of the Securities Exchange Act of
1934. 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. In addition, we
file reports, proxy statements and other information with the commission. You
may read or copy any document we file 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. Please call the
Commission at 1-800-SEC-0330 for more information. 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.

49
<PAGE> 48

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

Consolidated Balance Sheets at October 31, 1999 and October
31, 1998.................................................. F-3

Consolidated Statements of Operations for the Years Ended
October 31, 1999, 1998 and 1997........................... F-4

Consolidated Statements of Stockholders' Equity for the
Years Ended October 31, 1999, 1998 and 1997............... F-5

Consolidated Statements of Cash Flows for the Years Ended
October 31, 1999, 1998 and 1997........................... F-6

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

F-1
<PAGE> 49

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors and Stockholders
Biopure Corporation

We have audited the accompanying consolidated balance sheets of Biopure
Corporation (the Company) as of October 31, 1999 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, 1999. 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 auditing standards generally accepted
in the United States. 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, 1999 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, 1999, in conformity with accounting principles generally accepted in
the United States.

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 1999 consolidated financial statements do not include
any adjustment that might result from the outcome of this uncertainty.

ERNST & YOUNG LLP

Boston, Massachusetts
December 10, 1999

F-2
<PAGE> 50

BIOPURE CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
----------------------
OCTOBER 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
In thousands, except share and per share data
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 30,778 $ 6,063
Accounts receivable, less allowance of $65 and $28 at
October 31, 1999 and 1998, respectively................. 321 346
Inventory, net............................................ 3,182 3,072
Current portion of restricted cash........................ 3,508 3,508
Other current assets...................................... 488 186
--------- ---------
Total current assets............................... 38,277 13,175
Property and equipment:
Equipment................................................. 24,699 23,021
Leasehold improvements.................................... 13,567 13,330
Furniture and fixtures.................................... 1,100 1,078
Construction in progress.................................. 4,979 5,144
--------- ---------
44,345 42,573
Accumulated depreciation and amortization................. (16,898) (12,967)
--------- ---------
Net property and equipment.................................. 27,447 29,606
Investment in affiliate..................................... 101 131
Other assets................................................ 405 1,936
--------- ---------
Total assets....................................... $ 66,230 $ 44,848
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 741 $ 1,523
Accrued expenses.......................................... 9,664 7,666
Current portion of long-term debt......................... -- 2,000
--------- ---------
Total current liabilities.......................... 10,405 11,189
Long-term debt.............................................. -- 4,000
Deferred compensation....................................... 1,788 1,910
Commitments and contingencies............................... -- --
Common stock to be repurchased (No shares of Class A common
stock at October 31, 1999 and 2,013,956 shares at 1998)... -- 6,300
Stockholders' equity:
Preferred stock, $0.01 par value, 30,000, 000 shares
authorized at October 31, 1999 and 5,900,000 at 1998
Series A, 346,663 shares designated, issued and
outstanding at October 31, 1998........................ -- 3
Series B, 2,358,490 shares designated; 2,127,251 shares
issued and outstanding at October 31, 1998............. -- 22
Series C, 2,830,188 shares designated, issued and
outstanding at October 31, 1998........................ -- 28
Common stock:
Class A, $0.01 par value, 100,000,000 shares authorized
at October 31, 1999 and 35,000,000 at 1998, 22,280,867
and 10,742,503 shares issued, 22,280,867 and 10,539,225
shares outstanding at October 31, 1999 and 1998,
respectively........................................... 223 107
Class B, $1.00 par value, 179 shares authorized, 117.7
shares issued and outstanding.......................... -- --
Capital in excess of par value............................ 282,054 197,495
Contributed capital....................................... 24,574 24,574
Notes receivable.......................................... (2,463) (2,291)
Treasury stock, at cost (No shares of Class A common stock
at October 31, 1999 and 203,278 shares at 1998)......... -- (1,583)
Accumulated deficit....................................... (250,351) (196,906)
--------- ---------
Total stockholders' equity......................... 54,037 21,449
--------- ---------
Total liabilities and stockholders' equity......... $ 66,230 $ 44,848
========= =========
</TABLE>

See accompanying notes.

F-3
<PAGE> 51

BIOPURE CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
-----------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
In thousands, except share and per share data
Revenues:
Oxyglobin................................................. $ 2,749 $ 942 $ --
Other..................................................... 117 189 --
----------- ----------- -----------
Total revenues.............................................. 2,866 1,131 --
Cost of revenues............................................ 6,814 1,543 --
----------- ----------- -----------
Gross profit (loss)......................................... (3,948) (412) --
Operating expenses:
Research and development.................................. 24,166 22,950 23,494
Sales and marketing....................................... 2,922 2,444 694
General and administration................................ 5,266 4,660 2,920
----------- ----------- -----------
Total operating expenses.......................... 32,354 30,054 27,108
----------- ----------- -----------
Income (loss) from operations............................... (36,302) (30,466) (27,108)
Other income (expense):
Interest income........................................... 1,041 1,417 705
Interest expense.......................................... (469) (799) (1,015)
Other..................................................... 200 (199) --
----------- ----------- -----------
Total other income (expense)...................... 772 419 (310)
----------- ----------- -----------
Net income (loss)........................................... (35,530) (30,047) (27,418)
Stock dividends on preferred stock.......................... (17,915) -- --
----------- ----------- -----------
Net loss applicable to common stockholders.................. $ (53,445) $ (30,047) $ (27,418)
=========== =========== ===========
Historical:
Basic net income (loss) per common share.................. $ (3.61) $ (2.41) $ (2.23)
=========== =========== ===========
Weighted-average shares used in computing basic net income
(loss) per common share................................ 14,813,045 12,460,070 12,299,716
=========== =========== ===========
Pro forma (unaudited):
Pro forma basic net income (loss) per common share........ $ (2.62) $ (1.65)
=========== ===========
Weighted-average shares used in computing pro forma basic
net income (loss) per common share..................... 20,368,860 18,236,894
=========== ===========
</TABLE>

See accompanying notes.

F-4
<PAGE> 52

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
and per share data
Balance at October 31, 1996....... 346,663 $ 3 12,432,609 $ 124 114.5 $ -- $145,015 $ 24,245
Exercise of stock options....... 50,434 1 45
Sale of preferred stock......... 2,127,251 22 21,715
Sale of common stock............ 130,208 1 3.2 5,574
Common stock to be
repurchased................... (2,013,956) (20) (6,280)
Services contributed by
stockholder................... 329
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1997....... 2,473,914 25 10,599,295 106 117.7 -- 166,069 24,574
Exercise of stock options....... 27,783 68
Sale of preferred stock......... 2,830,188 28 28,181
Sale of common stock............ 92,592 1 2,463
Common stock issued in exchange
for release of debt
obligation.................... 22,833 438
Equity compensation............. 276
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1998....... 5,304,102 53 10,742,503 107 117.7 -- 197,495 24,574
Exercise of stock options....... 17,117 88
Sale of preferred stock......... 2,610,264 26 30,099
Sale of common stock............ 3,500,000 35 37,667
Conversion of preferred stock to
common stock.................. (7,914,366) (79) 8,224,525 82 17,912
Stock repurchase adjustment..... 300
Retirement of treasury stock.... (203,278) (1) (1,582)
Equity compensation............. 75
Accrued interest................
Net loss........................
---------- ------ ---------- ------ ----- ------ -------- -----------
Balance at October 31, 1999....... -- $ -- 22,280,867 $ 223 117.7 $ -- $282,054 $ 24,574
========== ====== ========== ====== ===== ====== ======== ===========

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

TOTAL
NOTES TREASURY ACCUMULATED STOCKHOLDERS'
RECEIVABLE STOCK DEFICIT EQUITY
---------- -------- ----------- -------------
<S> <C> <C> <C> <C>
In thousands, except share
and per share data
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
Common stock to be
repurchased................... (6,300)
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) 20,222
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) 21,449
Exercise of stock options....... 88
Sale of preferred stock......... 30,125
Sale of common stock............ 37,702
Conversion of preferred stock to
common stock.................. 17,915
Stock repurchase adjustment..... 300
Retirement of treasury stock.... 1,583 --
Equity compensation............. 75
Accrued interest................ (172) (172)
Net loss........................ (53,445) (53,445)
---------- ------- --------- -------------
Balance at October 31, 1999....... $ (2,463) $ -- $(250,351) $ 54,037
========== ======= ========= =============
</TABLE>

See accompanying notes.

F-5
<PAGE> 53

BIOPURE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
--------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
In thousands
OPERATING ACTIVITIES:
Net income (loss)........................................... $(35,530) $(30,047) $(27,418)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation.............................................. 3,931 3,262 3,090
Equity compensation....................................... 75 276 --
Deferred compensation..................................... (122) 231 192
Accrued interest on stockholders' notes receivable........ (172) (181) (164)
Equity in affiliate's operations.......................... 30 35 59
Services contributed by stockholder....................... -- -- 329
Changes in assets and liabilities:
Inventories............................................ (110) (3,072) --
Accounts receivable.................................... 25 (346) --
Other receivable (affiliate)........................... -- -- 654
Other current assets................................... 302 89 (65)
Accounts payable....................................... (782) 441 (769)
Accrued expenses....................................... 1,394 682 2,354
-------- -------- --------
Net cash used in operating activities................ (30,959) (28,630) (21,738)
INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (1,772) (4,809) (1,350)
Other assets................................................ 1,531 (341) (78)
Restricted cash............................................. -- (2,425) (2,437)
-------- -------- --------
Net cash used in investing activities................ (241) (7,575) (3,865)
FINANCING ACTIVITIES:
Net proceeds from sale of common stock...................... 37,702 2,464 5,575
Net proceeds from sale of preferred stock................... 30,125 28,209 21,737
Payment of long-term debt................................... (6,000) (2,000) (1,000)
Repurchase of common stock.................................. (6,000) -- --
Proceeds from exercise of stock options..................... 88 68 46
-------- -------- --------
Net cash provided by financing activities............ 55,915 28,741 26,358
-------- -------- --------
Increase (decrease) in cash and cash equivalents............ 24,715 (7,464) 755
Cash and cash equivalents at beginning of period............ 6,063 13,527 12,772
-------- -------- --------
Cash and cash equivalents at end of period.................. $ 30,778 $ 6,063 $ 13,527
======== ======== ========
Interest paid............................................... $ 435 $ 693 $ 1,131
======== ======== ========
</TABLE>

See accompanying notes.

F-6
<PAGE> 54

BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND ORGANIZATION

Biopure Corporation (the Company) develops, manufactures and markets oxygen
therapeutics. Its products are Hemopure, for human use, and Oxyglobin, for
veterinary use. The Company is developing Hemopure as an alternative to red
blood cell transfusions as well as for use in the treatment of other critical
care conditions.

During 1998, the Company began selling 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 and production increase.

Additionally, during 1999, the Company continued human clinical trials of its
Hemopure 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.

On June 24, 1999, the Board of Directors approved a two for three reverse stock
split of common shares which was effected in the form of a reverse stock
dividend on July 21, 1999. All common share and per common share amounts
included in the accompanying consolidated financial statements and notes thereto
have been retroactively restated to give effect to this reverse stock split.

The 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. However, the Company may not be
able to continue its operations because it is experiencing operating losses,
which it expects to continue, and has limited sources of funding for continuing
operations. In order to continue as a going concern, the Company's plans at this
time are focused on obtaining new sources of equity financing, if possible, and
securing strategic alliance arrangements that will provide cash for operations.
However, there can be no assurance that any such additional financing will be
available to the Company on terms that it deems acceptable, if at all. The
financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.

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.

Inventories
Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market. Inventories are reviewed periodically during the
year for slow-moving, obsolete or off-grade status based on sales activity, both
projected and historical. Appropriate reserves are established for any inventory
that falls into these categories.

F-7
<PAGE> 55
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. Other
revenues consist primarily of royalties from the sale of an enzyme material
previously licensed to a pharmaceutical company and a Small Business Innovative
Research grant offset by associated costs. The Company recognizes revenue from
royalties when earned upon sale of the licensed products.

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.

Net Income (Loss) Per Share
Historical basic net income (loss) per share is computed based on the
weighted-average number of common shares outstanding during the period. Diluted
net income (loss) 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 net income (loss) 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 occurred upon completion of the initial public
offering.

F-8
<PAGE> 56
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Calculation of Net Loss Per Share

<TABLE>
<CAPTION>
--------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------
In thousands, except share 1999 1998 1997
and per share data ------------ ------------ ------------
<S> <C> <C> <C>
Historical:
Net income (loss)......................................... $ (35,530) $ (30,047) $ (27,418)
Stock dividends on preferred stock........................ (17,915) -- --
------------ ------------ ------------
Net income (loss) applicable to common stockholders.... (53,445) (30,047) (27,418)
============ ============ ============
Weighted-average number of common shares outstanding...... 14,813,045 12,460,070 12,299,716
============ ============ ============
Basic net income (loss) per common share.................... $ (3.61) $ (2.41) $ (2.23)
============ ============ ============
Pro forma (unaudited):
Weighted-average number of common shares:
Historical outstanding................................. 14,813,045 12,460,070
Issued upon assumed conversion of preferred stock...... 5,555,815 5,776,824
------------ ------------
Total weighted-average number of common shares
used in computing basic pro forma net income
(loss) per common share......................... 20,368,860 18,236,894
============ ============
Basic pro forma net income (loss)per common share......... $ (2.62) $ (1.65)
============ ============
</TABLE>

Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) 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. The Company believes it currently operates in one segment, its
Oxyglobin veterinary product, and consequently, adoption of SFAS No. 131 did not
result in any significant change in the presentation of the Company's
disclosures. As the Company develops new products and expands its operations,
the Company will re-evaluate these disclosures.

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.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which will be effective for the Company in
the first quarter of Fiscal 2001. The Company is currently evaluating the effect
that implementation of the new standard will have on its financial statements
but believes the effect will be immaterial.

3. TRANSACTIONS WITH RELATED PARTIES

At October 31, 1999, approximately 22% of the outstanding shares of Class A
Common Stock of Biopure were owned by two limited partnerships, Biopure
Associates Limited Partnership and Biopure Associates Limited Partnership 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 1999, 1998 and 1997, the Company made payments of approximately $270,000,
$344,000 and $301,000, respectively, to directors and consultants who have
ownership interests in the Company.

In August 1990, the Company made loans to certain directors and officers to
allow them to purchase Class A Common Stock. The principal and interest, for all
loans except the loan made to Mr. Rausch, is due on July 31, 2000. The principal
and
F-9
<PAGE> 57
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest on Mr. Rausch's loan is due on July 31, 2003. The notes receivable, for
all loans except the loan made to Mr. Rausch, bear interest at the prime rate
(8.25% at October 31, 1999) and are included in stockholders' equity in the
accompanying consolidated financial statements. The loan for Mr. Rausch bears
interest at a fixed 4.71% rate.

4. INVENTORIES

Inventories consisted of the following:

<TABLE>
<CAPTION>
----------------
OCTOBER 31,
----------------
1999 1998
In thousands ------ ------
<S> <C> <C>
Raw materials............................................... $ 690 $ 935
Work-in-process............................................. 134 542
Finished goods.............................................. 2,358 1,595
------ ------
$3,182 $3,072
====== ======
</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, 1999 and 1998, the Company's proportionate share of EHSA's net
equity was approximately $101,000 and $131,000, respectively.

6. ACCRUED EXPENSES

Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
----------------
OCTOBER 31,
----------------
1999 1998
In thousands ------ ------
<S> <C> <C>
Settlement.................................................. $3,508 $3,508
Phase III clinical trial.................................... 2,925 1,039
Initial public offering..................................... 619 --
Other....................................................... 2,612 3,119
------ ------
$9,664 $7,666
====== ======
</TABLE>

7. 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 8.0%. 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. As of October 31,
1999 the loan had been repaid in full from the proceeds of the initial public
offering.

8. DEFERRED COMPENSATION

The Company has a deferred compensation agreement with an officer/stockholder
requiring a base payment of $700,000 plus accrued interest of $716,000 at
October 31, 1999. In June 1999 the payment date was extended to July 31, 2003,
subject to certain conditions.

F-10
<PAGE> 58
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. No grants were made in
1999. Plan expenses were $160,000 and $130,000 in 1998 and 1997, respectively.

9. STOCKHOLDERS' EQUITY

On August 4, 1999 the Company completed the initial public offering (IPO) of
3,500,000 shares of Class A Common Stock. The Company received proceeds of
$39,060,000 before expenses of $1,358,000 and recorded an increase in
stockholders' equity of $37,702,000.

Convertible Preferred Stock
The Series A Convertible Preferred Stock was convertible into Class A Common
Stock on a three and one-third for one basis, adjusted for certain events. The
Series A shares automatically converted at the time of the IPO.

The Series B Convertible Preferred Stock was convertible into Class A Common
Stock on a two-thirds for one basis, adjusted for certain events. The Series B
shares automatically converted at the time of the IPO.

The Series C Convertible Preferred Stock was convertible into Class A Common
Stock on a two-thirds for one basis, adjusted for certain events. The Series C
shares automatically converted at the time of the IPO.

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
1/15th of a share of Class A Common Stock. In connection with the issuance of
the Series D shares, warrants were issued to the placement agents to purchase
30,667 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 1/15th 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 and the preferred stockholders have an exercise price of $18.00 per
share. Warrants issued to the placement agents and the preferred stockholders
expire three years and four years, respectively, from the date of the IPO. Net
cash proceeds, after deducting approximately $930,000 in commissions and
expenses associated with the offering, were $16,946,000. Subsequent to May 1,
1999, an additional 397,250 units of Series D Convertible Preferred Stock were
sold with aggregate net proceeds of $4,700,000.

Each share of Series D Convertible Preferred Stock was convertible into
two-thirds of a share of Class A Common Stock or such greater ratio so that
conversion resulted in a 35% annualized rate of return on the Series D original
offering price of $12 per share.

Upon closing of the IPO (see above), all shares of preferred stock converted
into shares of Class A Common Stock and reflected the two-for-three stock split.
In accordance with the provisions of EITF 98-5, for those units sold after May
20, 1999, the Company treated any shares of Class A Common Stock issued upon
conversion in excess of two-thirds of one share of Class A Common Stock for each
share of Series D Convertible Preferred Stock as a dividend for accounting
purposes. The Company recorded a dividend of $155,000 in the third quarter of
1999 for the 12,936 additional shares of Class A Common Stock issued. The
holders of the Series B Convertible Preferred Stock received an additional
280,000 shares in the aggregate upon conversion and the holders of the Series C
Convertible Preferred Stock received an additional 1,200,000 shares in the
aggregate upon conversion. The fair market value of such additional shares was,
for accounting purposes, treated as a dividend on such convertible preferred
stock in the quarter in which the offering and conversion occurred. The Company
recorded a dividend of $17,760,000 in the third quarter of 1999.

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.

Consistent with the P&U agreement, the number of shares of Class A Common Stock
to be issued in exchange for the Class B Common Stock will be determined based
upon an independent valuation of the Company, after FDA approval of the
Company's human oxygen therapeutic product, which valuation cannot exceed $3
billion. This valuation is then divided by 13,635,525

F-11
<PAGE> 59
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares to arrive at a fair value per share of Class A Common Stock. P&U's total
investment in the Company, $142.3 million, divided by such per share fair value
of Class A Common Stock, results in the number of shares of Class A Common Stock
P&U will receive, limited to a maximum of 1,272,119 shares.

Dividends
At this time, the Company does not intend to pay dividends.

Stock Accumulation Plan
In August 1990, the Company issued 1,606,000 shares of Class A Common Stock to
certain employees, officers, consultants and directors for $1.35 per share,
which was $4.05 per share less than the then fair market value, as determined by
the Company's Board of Directors, of $5.40 per share. This $4.05 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 $4.05 per share, adjusted for an annual interest factor.

Contributed Capital
In accordance with the P&U strategic alliance discussed in Note 9 below, the
Company recorded as contributed capital $329,000 of research and development
costs incurred by P&U on behalf of the Company in 1997. These costs are included
in research and development expenses in the accompanying consolidated statements
of operations and were either incurred by Biopure and reimbursed by P&U, or
incurred directly by P&U. All such costs incurred were clinical development
costs specifically identified and contractually agreed to by both parties. 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.

Stock Options and Warrants
The Company has two active stock option plans 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 these plans 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
1999, 1998 and 1997:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------
1999 1998 1997
-------------------------- ------------------------ ------------------------
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................................. 546,634 $18.54 133,217 $14.94 243,650 $12.02
Granted................................ 1,558,687 12.00 456,133 18.68 6,667 22.50
Exercised.............................. (17,117) 5.19 (27,783) 2.42 (50,433) 1.02
Expired................................ -- -- -- -- (18,667) 4.43
Forfeited.............................. (143,043) 12.48 (14,933) 20.58 (48,000) 19.89
--------- ------- -------
Options outstanding at end of year..... 1,945,161 $13.84 546,634 $18.54 133,217 $14.94
========= ======= =======
Options exercisable.................... 192,680 89,350 83,383
========= ======= =======
</TABLE>

During 1998, the Company granted 20,000 options with an exercise price of $5.40
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.

F-12
<PAGE> 60
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about stock options outstanding at
October 31, 1999:

<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>
$ 4.50-$ 5.40 21,667 3.0 $ 5.33 21,667 $ 5.33
$ 7.50-$13.50 1,436,240 9.8 12.01 10,200 12.72
$18.00-$22.50 487,254 7.8 19.62 160,813 20.08
--------- -------
1,945,161 9.0 $13.84 192,680 $18.03
========= =======
</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 98,293 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, 1999, there were 76,690 shares available for
future grants under stock option plans.

In June 1999, the Company established the 1999 Omnibus Securities and Incentive
Plan (the 1999 Plan), which provides for the granting of incentive stock
options, non-qualified 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. The maximum number of shares of Class A Common Stock
reserved for issuance under the 1999 Plan is 1,866,666. Upon the Company's
initial public offering, the Board of Directors approved the granting of options
under the 1999 Plan to officers, directors and employees for an aggregate of
1,492,020 shares, with an exercise price of $12.00.

One of the Company's vendors holds an option to acquire 26,667 shares of Class A
Common Stock. The exercise price of $37.50 per share is payable by the
contribution of certain property, equipment and facilities rights. The option
expires in September 2000. The option agreement is being renegotiated. The
Company expects to increase the number of optioned shares and extend the terms
of the option.

In connection with the sale of Series C Convertible Preferred Stock in November
1997, the Company issued to the placement agent warrants to purchase 66,667
shares of Common Stock at a price per share equal to $12.00, adjusted for
certain events. 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 and warrants granted was estimated at the date of grant
using the Black-Scholes option pricing model for 1999 and the minimum value
method for 1998 and 1997 with the following assumptions: risk-free interest
rates ranging from 5.49% to 6.32%; dividend yield of 0% and an expected life of
either two years or seven years. For 1999 a volatility factor of the expected
market price of the Company's Common Stock of .80 was used. If the compensation
cost for options and warrants granted had been determined based on the fair
value of the options and warrants at the date of grant, the Statement 123 pro
forma net loss applicable to common stockholders for 1999, 1998 and 1997 would
have been $55,854,000, $30,712,000 and $27,538,000, respectively. The Statement
123 pro forma net loss per share for 1999, 1998 and 1997 would have been
$(3.77), $(2.46) and $(2.24), respectively. Compensation expense under Statement
123 for 1999, 1998 and 1997 is not representative of future expense, as it
includes three, two and one 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 and warrant of options and warrants
granted during 1999, 1998 and 1997 was $6.50, $6.11 and $8.04, respectively.

Reserved Shares
At October 31, 1999, there were 4,299,928 shares of Class A Common Stock
reserved for issuance under the stock option plans, stock option agreements and
warrants and upon conversion of Class B Common Stock.

F-13
<PAGE> 61
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Rights Agreement
Effective September 24, 1999 each holder of Class A Common Stock received a
preferred stock purchase right for each share owned. The rights entitle the
holders to acquire preferred stock following an acquisition of more than 20% by
any person or group, if the board of directors does not redeem the rights. If
the rights are not redeemed, their exercise would cause substantial dilution to
the acquiring person or group.

10. 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.

11. 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 1999, 1998 and 1997, the Company contributed $211,000, $163,000
and $158,000, respectively, to the plan.

12. INCOME TAXES

At October 31, 1999, the Company had available for the reduction of future
years' federal taxable income and income taxes, net operating loss carryforwards
of approximately $161,000,000, expiring from the year ended October 31, 2004
through 2019, along with research and development and investment tax credits of
approximately $5,900,000, expiring from the year ended October 31, 2000 through
2014. Since the Company has incurred only losses since inception and due to the
degree of uncertainty with respect to future profitability, the Company believes
at this time that it is more likely than not that sufficient taxable income will
not be earned to allow for realization of the tax loss and credit carryforwards
and other deferred tax assets. Accordingly, 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.

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, 1999 and
1998 were as follows:

<TABLE>
<CAPTION>
----------------------
1999 1998
--------- ---------
<S> <C> <C>
In thousands
Deferred tax assets:
Net operating loss carryforward........................... $ 64,259 $ 56,138
Capitalized research and development...................... 23,508 17,287
Accruals and reserves..................................... 2,685 2,364
Tax credit carryforwards.................................. 5,897 3,388
--------- ---------
Total deferred tax assets................................... 96,349 79,177
Deferred tax liabilities:
Depreciation.............................................. 2,797 2,159
--------- ---------
Total deferred tax liabilities.............................. 2,797 2,159
--------- ---------
Net deferred tax assets..................................... 93,552 77,018
Valuation allowance for deferred tax assets................. (93,552) (77,018)
--------- ---------
Net deferred tax assets..................................... $ -- $ --
========= =========
</TABLE>

F-14
<PAGE> 62
BIOPURE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In 1999, the valuation allowance increased by $16,534,000 due primarily to the
increase in net operating losses, capitalized research and development costs,
and research and development tax credits.

13. COMMITMENTS

In 1997, the Company entered into an agreement with B. Braun Melsungen A.G.
(Braun) to repurchase 2,013,956 shares of the Company's common stock for
$6,300,000. The agreement required 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, if any, in a certain European region. The Company received Braun'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 (subsequently negotiated to
$6,000,000 as a result of accelerated repurchase) had to be funded by the year
2002. At any time, the stockholder could 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. At October 31, 1998, the Company had
$1,046,000 in escrow in connection with this agreement and included the
restricted cash in other assets. The accompanying consolidated balance sheet has
reclassified the Class A Common Stock to be repurchased from Braun from
stockholders' equity to temporary equity and included the unpaid purchase price
and related shares in Common Stock to be Repurchased. In December 1998, Braun
withdrew all funds from escrow to complete the repurchase of 319,683 shares of
Class A Common Stock. On August 5, 1999 the Company paid $4,000,000 in addition
to the existing balance of $1,000,000 in escrow and Braun withdrew all funds
from escrow to complete the repurchase of 1,694,273 shares of Class A Common
Stock.

The agreement also requires the Company to pay Braun 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 Braun'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, 1999 are as follows:

<TABLE>
<CAPTION>
----------
<S> <C>
2000........................................................ $ 991,000
2001........................................................ 681,000
2002........................................................ 259,000
2003........................................................ 279,000
2004........................................................ 283,000
Thereafter.................................................. 1,040,000
----------
$3,533,000
==========
</TABLE>

Rent expense was approximately $1,035,000, $803,000 and $643,000 in 1999, 1998
and 1997, respectively.

14. 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 2000. 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, 1999, the Company had
$3,508,000 in escrow in connection with this settlement and included this amount
in current portion of restricted cash. The settlement amount has been recorded
as a current obligation.

F-15
<PAGE> 63

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