##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended January 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission File Number 001-15167
 BIOPURE CORPORATION
  Delaware
    
    04-2836871(State of Incorporation)
    
    (IRS Employer Identification Number)11 Hurley Street, Cambridge, Massachusetts
    
    02141(Address of principal executive offices)
    
    (Zip Code)
 (617) 234-6500
 þ o
  o o þ
 o þ
  Class A Common Stock, $.01 par value
    
    77,715,124Class B Common Stock, $1.00 par value
    
    117.7




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##### 



BIOPURE CORPORATION
 INDEX TO FORM 10-Q
 PagePart I  Financial Information:Item 1  Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at January 31, 2007 and October 31, 2006
    

    3Condensed Consolidated Statements of Operations for the three months ended January 31, 2007 and January 31, 2006
    

4Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 2007 and January 31, 2006

    
5Notes to Condensed Consolidated Financial Statements
    

6Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations

    
11Item 3  Quantitative and Qualitative Disclosure of Market Risk
    

17Item 4  Controls and Procedures

    
17Part II  Other Information:Item 1  Legal Proceedings
    

18Item 1A  Risk Factors

    
18Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    

27Item 3  Defaults Upon Senior Securities
    

28Item 4  Submission of Matters to a Vote of Security Holders
    

28Item 5  Other Information

    
28Item 6  Exhibits
    

29Signatures
    

30Exhibit Index
    
31Ex-10 Bonus PlanEx-31.1 Section 302 Certification of Zafiris G. ZafirelisEx-31.2 Section 302 Certification of Francis H. MurphyEx-32.1 Section 906 Certification of Zafiris G. ZafirelisEx-32.2 Section 906 Certification of Francis H. Murphy
  ® ® ®




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##### Table of Contents



Item 1
  
 
 January 31, 2007
    
    
    October 31, 2006Assets:Current assets:Cash and cash equivalents
    
    $
    17,596
    
    
    $
    6,576Accounts receivable, net
    
    
    94
    
    
    
    80Inventories
    
    
    2,352
    
    
    
    2,850Other current assets
    
    
    1,061
    
    
    
    1,346Total current assets
    
    
    21,103
    
    
    
    10,852Property, plant and equipment, net
    
    
    21,361
    
    
    
    22,175Other assets
    
    
    791
    
    
    
    805Total assets
    
    $
    43,255
    
    
    $
    33,832Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    621
    
    
    $
    569Accrued expenses
    
    
    2,732
    
    
    
    3,250Current portion of deferred revenue
    
    
    242
    
    
    
    190Current portion of restructuring charges
    
    
    205
    
    
    
    207Total current liabilities
    
    
    3,800
    
    
    
    4,216Deferred revenue, net of current portion
    
    
    1,115
    
    
    
    987Restructuring charges, net of current portion
    
    
    
    
    
    
    46Other long-term liabilities
    
    
    41
    
    
    
    41Total long-term liabilities
    
    
    1,156
    
    
    
    1,074Commitments and contingencies, Notes 8 & 9Stockholders equity:Preferred stock, $0.01 par value, 30,000,000 shares
authorized, no shares outstanding
    
    
    
    
    
    
    Common stock:Class A, $0.01 par value, 200,000,000 shares authorized,
77,715,124 shares outstanding at January 31, 2007 and
49,365,125 at October 31, 2006
    
    
    777
    
    
    
    494Class B, $1.00 par value, 179 shares authorized, 117.7
shares outstanding
    
    
    
    
    
    
    Capital in excess of par value
    
    
    545,574
    
    
    
    529,172Contributed capital
    
    
    24,574
    
    
    
    24,574Notes receivable
    
    
    (235
    )
    
    
    (235
    )Accumulated deficit
    
    
    (532,391
    )
    
    
    (525,463
    )Total stockholders equity
    
    
    38,299
    
    
    
    28,542Total liabilities and stockholders equity
    
    $
    43,255
    
    
    $
    33,832
  3




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##### Table of Contents



Three Months EndedJanuary 31, 2007
    
    
    January 31, 2006Revenues:Product revenue
    
    $
    460
    
    
    $
    345Research and development revenue
    
    
    134
    
    
    
    132Total revenues
    
    
    594
    
    
    
    477Cost of product revenues
    
    
    3,162
    
    
    
    3,074Gross loss
    
    
    (2,568
    )
    
    
    (2,597
    )Operating expenses:Research and development
    
    
    1,915
    
    
    
    1,474Sales and marketing
    
    
    392
    
    
    
    172General and administrative
    
    
    2,231
    
    
    
    2,300Total operating expenses
    
    
    4,538
    
    
    
    3,946Loss from operations
    
    
    (7,106
    )
    
    
    (6,543
    )Other income, net
    
    
    178
    
    
    
    103Net loss
    
    $
    (6,928
    )
    
    $
    (6,440
    )Per share data:Basic and diluted net loss per common share
    
    $
    (0.11
    )
    
    $
    (0.22
    )Weighted-average shares used in computing
basic and diluted net loss per common
share
    
    
    64,773
    
    
    
    28,989
  4




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##### Table of Contents



Three Months EndedJanuary 31, 2007
    
    
    January 31, 2006Operating activities:Net loss
    
    $
    (6,928
    )
    
    $
    (6,440
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    862
    
    
    
    979Stock compensation expense
    
    
    210
    
    
    
    284Deferred revenue
    
    
    180
    
    
    
    Accretion of restructuring charge
    
    
    2
    
    
    
    10Inventory writedowns
    
    
    236
    
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (14
    )
    
    
    (4
    )Inventories
    
    
    262
    
    
    
    234Other current assets
    
    
    279
    
    
    
    231Accounts payable
    
    
    52
    
    
    
    (35
    )Accrued expenses
    
    
    (518
    )
    
    
    258Restructuring charges
    
    
    (50
    )
    
    
    (57
    )Net cash used in operating activities
    
    
    (5,427
    )
    
    
    (4,540
    )Investing activities:Purchases of property, plant and equipment
    
    
    (28
    )
    
    
    Net cash used in investing activities
    
    
    (28
    )
    
    
    Financing activities:Net proceeds from sale of common stock and warrants
    
    
    16,475
    
    
    
    9,149Net cash provided by financing activities
    
    
    16,475
    
    
    
    9,149Net increase/(decrease) in cash and cash equivalents
    
    
    11,020
    
    
    
    4,609Cash and cash equivalents at beginning of period
    
    
    6,576
    
    
    
    10,542Cash and cash equivalents at end of period
    
    $
    17,596
    
    
    $
    15,151Supplemental disclosure of cash flow information:Fair value of warrants issued in conjunction with sales of common stock
    
    $
    7,264
    
    
    $
    3,863
  5




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1.
    
    Basis of PresentationThe accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim
financial information and pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included. Operating results
for the three month period ended January 31, 2007 are not necessarily indicative of the results
that may be expected for the year ending October 31, 2007; however, the Company expects to incur
a substantial loss for the year ending October 31, 2007.The accompanying consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Biopure Netherlands, BV, Biopure South Africa, Pty, Ltd., Reperfusion
Systems Incorporated, DeNovo Technologies Corporation and Biopure Overseas Holding Company, and
NeuroBlok Incorporated, a 60% owned subsidiary. All intercompany accounts and transactions have
been eliminated in consolidation.These financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal
year ended October 31, 2006, filed with the SEC on January 29, 2007.The Company has financed operations from inception primarily through sales of equity securities
and development and license agreement payments. The Company has not been profitable since
inception and had an accumulated deficit of $532,391,000 at January 31, 2007. As of January 31,
2007, the Company had $17,596,000 in cash and cash equivalents. The Company expects this funding
to be sufficient to fund operations through August 2007 under the current operating plan. The
Company will require significant additional funding to remain a going concern and to fund
operations until such time, if ever, as it becomes profitable. The Company intends to seek
additional capital through sales of equity securities and, if appropriate, to consider strategic
collaborations for sharing development and commercialization costs. However, there can be no
assurance that adequate additional financing will be available to the Company on terms that it
deems acceptable, if at all.In the accompanying condensed consolidated balance sheet as of October 31, 2006, $231,000 has
been reclassified from property, plant and equipment, net, to other current assets to conform to
the current periods presentation. See Note 7 for additional information.Comprehensive loss approximated net loss for all periods presented.2.
    
    Net Loss per ShareBasic net loss per common share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed based upon
the weighted-average number of common shares outstanding during the period, adjusted for the
dilutive effect of the Companys common stock equivalents, including the maximum number of shares issuable upon the conversion of class B common stock outstanding and the exercise of
common stock options and warrants. The dilutive effect of stock options and warrants is
determined based on the treasury stock method using the average market price of the class A
common stock for the period. However, basic and diluted net loss per common share are presented
as the same for all periods presented, as the Company had losses for all periods presented and,
consequently, the effect of class B common stock, options and warrants is anti-dilutive.
Consequently, dilutive weighted average shares outstanding do not include 59,160,555 potential
common-equivalent shares for the three months ended January 31, 2007 and 22,484,957
common-equivalent shares for the three months ended January 31, 2006, as their effect would have
been anti-dilutive.
 6




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3.
    
    Stock Based CompensationAs of January 31, 2007, the Company had one share-based compensation plan, the Biopure
Corporation Omnibus Securities and Incentive Plan (the Plan). The Plan, which is
shareholder-approved, permits the grant of share options to the Companys employees, consultants
and directors for up to 4.37 million shares of common stock. Option awards are generally granted
with an exercise price equal to the market price of the Companys stock at the date of grant.
Options vest at the times specified in the option grants. Options generally vest over periods
of up to four years. Most options granted have a 10-year term and expire if not exercised
within ten years of the date of grant. Shares issued upon exercise of options are generally
issued from new shares of the Company.The Company adopted the provisions of Statement of Financial Accounting Standards 123(R),
Share-Based Payment (SFAS 123(R)), beginning November 1, 2005, using the modified prospective
transition method. Under the modified prospective transition method, financial statements for
periods prior to the adoption date are not retrospectively adjusted. However, compensation
expense is recognized, based on the requirements of SFAS 123(R), for (a) all share-based
payments granted after the effective date and (b) all awards granted to employees prior to the
effective date that remain unvested as of the effective date.Prior to adopting SFAS 123(R), the Company used the intrinsic value method to account for
stock-based compensation under Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. Historically the fair value of options granted was calculated using the
Black-Scholes Option pricing model. The Company has elected to continue to use this model. SFAS
123(R) also requires companies to utilize an estimated forfeiture rate when calculating the
expense for the period, while SFAS 123, Accounting for Stock-Based Compensation, permitted
companies to record actual forfeitures as they occurred, which was the Companys historical
policy. In determining the expense recorded in the Companys consolidated statement of
operations, the Company has applied an estimated forfeiture rate to remaining unvested awards
based on historical experience. This estimate is evaluated quarterly and the forfeiture rate is
adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will
only be for those shares that vest. The Company has elected to recognize compensation cost for
awards with incremental vesting using the straight-line method.The fair value of each stock option is estimated on the date of grant using the Black-Scholes
Option Pricing Model with the assumptions noted in the following table. The weighted average
risk-free interest rate is based on a treasury instrument, the term of which is consistent with
the expected life of the stock options. Expected volatility is based exclusively on historical
volatility data of the Companys common stock. The Company estimates stock option forfeitures
based on historical experience. The Company was unable to use historical information to estimate
the expected term due to a lack of historical exercise activity and therefore used the
simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107.
 Three Months EndedJanuary 31, 2007
    
    January 31, 2006Weighted average risk-free interest rate
    
    
    4.58
    %
    
    
    4.31
    %Expected volatility
    
    
    85
    %
    
    
    85
    %Expected lives (years)
    
    
    5.42
    
    
    
    5.42Expected dividend yield
    
    
    
    
    
    
    
   7




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4.
    
    InventoriesInventories are valued at the lower of cost (determined using the first-in, first-out method) or
market. Inventories were as follows at the following dates:
 In thousands
    
    January 31, 2007
    
    
    October 31, 2006Raw materials
    
    $
    682
    
    
    $
    535Work-in-process
    
    
    165
    
    
    
    343Finished goods-Oxyglobin
    
    
    1,025
    
    
    
    1,160Finished goods-Hemopure
    
    
    480
    
    
    
    812$
    2,352
    
    
    $
    2,850
  5.
    
    Accrued ExpensesAccrued expenses were as follows at the following dates:
 In thousands
    
    January 31, 2007
    
    
    October 31, 2006Accrued payroll and related employee expenses
    
    $
    631
    
    
    $
    198Financing fees
    
    
    537
    
    
    
    537Accrued severance
    
    
    487
    
    
    
    568Accrued legal and audit fees
    
    
    286
    
    
    
    1,054Accrued vacation
    
    
    199
    
    
    
    300Other
    
    
    592
    
    
    
    593$
    2,732
    
    
    $
    3,250
  6.
    
    RestructuringDuring the first quarter of fiscal 2005, the Company vacated leased office space and sublet it
for a period of 38 months. The Company accounted for the transaction in accordance with FAS 146,
Accounting for Costs Associated with Exit or Disposal Activities. These costs were included in
general and administrative expense in the consolidated statement of operations during fiscal
2005, and the remaining obligation is accrued in the current portion of restructuring charges on
the condensed consolidated balance sheet at January 31, 2007.The following table shows the restructuring activity and liability balances (in thousands):
 8




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Balance at October 31, 2006
    
    $
    253Payments
    
    
    (50
    )Accretion of liability
    
    
    2Balance at January 31, 2007
    
    $
    205
 7.
    
    Other Current AssetsDuring fiscal 2006, management identified certain manufacturing equipment that the Company was
not using, and did not expect to be able to use in the future, resulting in a commitment of
management to sell this equipment. The Company believes that the manufacturing equipment will
be sold no later than the end of the first quarter of fiscal 2008. As of January 31, 2007, the
Company determined that the plan of sale criteria in FASB Statement No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets, had been met. Accordingly, the carrying value of
the manufacturing equipment of $225,000 has been recorded separately within other current assets
on the Companys condensed consolidated balance sheets as of January 31, 2007. The carrying
amount was determined based on quoted market prices for similar assets, less
continuing depreciation expense through the date that plan of sale criteria were met, as
discussed above.  The Company reclassified the value of this equipment as of October 31, 2006 of
$231,000 to other current assets within the Companys condensed consolidated balance sheets for
comparative purposes in accordance with FAS 144. The Company has not recognized any gains or
losses during the quarter ended January 31, 2007 related to this asset.8.
    
    Commitments and ContingenciesResearch Agreement(1)In 2003, the Company entered into a Cooperative Research and Development Agreement (CRADA) with
the NMRC. Under the CRADA, as amended, the NMRC has primary responsibility for designing,
seeking U.S. Food and Drug Administration (FDA) acceptance of, and conducting a planned Phase 2/3 clinical
trial of Hemopure in trauma patients with severe hemorrhagic shock (acute blood loss) in the
out-of-hospital setting. The Company believes that all or most of its costs could be covered by
government funding. To date, the U.S. Congress has appropriated a total of $22.5 million to the
Department of Defense ($16 million to the Navy, $6.5 million to the Army) for the development of
Hemopure in potential civilian and military trauma applications(2) of which,
approximately $1.6 million has been reverted due to the delay in initiating the RESUS clinical
trial. The funding is being used for the Navys proposed RESUS clinical trial and has supported
preclinical studies of the product in animal models of hemorrhagic shock (acute blood loss),
including those that mimic military trauma scenarios.As part of the CRADA the NMRC paid approximately $1.2 million for future inventory purchases,
recorded in the accompanying consolidated balance sheet as deferred revenue and deferred
revenue, net of current portion.
If the NMRC were to decide not to continue to pursue the RESUS project described in the CRADA,
the Company could be required to return the $1.2 million.
 
 (1)
    
    The content of this document does not necessarily reflect the position or the policy of the
U.S. Government or the Department of Defense, and no official endorsement should be inferred.
of the Navy  Biopure collaborativeclinical development program for Hemopure in trauma is
contingent upon funding.(2)
    
    $5,102,306 is from Grant DAMD17-02-1-0697. The U.S. Army Medical Research Acquisition
Activity, 820 Chandler Street, Fort Detrick MD 21702-5014 is the awarding and administering
acquisition office. 9




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9.
    
    LitigationBiopure, two outside directors (one a former director), its former chief executive officer,
former chief technology officer, former chief financial officer and former senior vice president
Regulatory Affairs were named as defendants in a number of purported class action complaints,
filed between December 30, 2003 and January 28, 2004, in the United States District Court for
the District of Massachusetts (the District Court) by alleged purchasers of the Companys
common stock. Those complaints were consolidated in a single action, in regards to Biopure
Corporation Securities Litigation. The consolidated complaint claims that the Company violated
the federal securities laws based on disclosures concerning Biopures clinical development. The
complaint does not specify the amount of alleged damages plaintiffs seek to recover. On February
14, 2007, the Company signed an agreement in principle to settle the action. Under the
settlement, all claims against the Company and the individual defendants would be dismissed with
prejudice. The settlement would have no financial effect on the Company or any of the
individual defendants. The settlement is subject to agreeing upon a formal stipulation of
settlement and court approval.The seven members of the Companys Board of Directors during the period March through December
2003 and certain officers during that period were named as defendants in two stockholder
derivative actions filed on January 26, 2004 and January 29, 2004 in the District Court. A
consolidated, amended complaint was filed, in regard to Biopure Corporation Derivative
Litigation. Another request to amend again to copy the SECs civil injunctive complaint was also
filed and granted. The Company filed a motion to dismiss, which was denied. Biopure is named as
a defendant, even though in a derivative action any award is for the benefit of the Company, not
individual stockholders. The consolidated, amended complaint alleges that the individual
directors and officers breached fiduciary duties in connection with the same disclosures
referenced in the purported securities class action. The complaint does not specify an amount of
alleged damages. The Company appointed two disinterested directors as a special litigation
committee to determine whether or not the Company should pursue this action. The special
litigation committee conducted its investigation and determined the Company should not pursue
the action. A different stockholder also made demand on the Companys directors on June 30, 2004
that they pursue similar claims on behalf of Biopure, and a similar derivative case was filed in
the Trial Court of Massachusetts, Middlesex County, on September 25, 2005. The court stayed the
case in Middlesex County pending the outcome of the case in the District Court. No amounts have
been accrued to date with regard to the outcome of these actions. The Company believes these
cases are without merit.
 10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement Regarding Forward-Looking Information
    Overview
   11




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Ischemia
  
    
    A 60-patient Phase 2 clinical trial to assess the safety and feasibility of Hemopure in
reducing heart damage and enhancing tissue preservation in patients undergoing multi-vessel
coronary artery bypass graft (CABG) surgery. The trial has enrolled a total of 23 patients
to date.
    
    A 100-patient Phase 2 clinical trial to assess the safety and feasibility of Hemopure
in increasing the incidence of complete wound healing and reducing the incidence of
subsequent amputations in patients with severe peripheral vascular disease who are
undergoing limb amputation below or through the knee joint. This trial has enrolled 11
patients to date.
    
    A trial design, for a study in patients with multi-vessel coronary artery disease who
are undergoing percutaneous coronary intervention, has received governmental and hospital
approvals to proceed.
  Trauma
  12




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Surgical Anemia Marketing Application
  Significant Estimates and Assumptions
   Critical Accounting Policies
  Inventories
  13




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Stock-Based Compensation
  Long-Lived Assets
   Revenue Recognition
  14




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Results of Operations
  Three Months EndedJanuary 31, 2007
    
    
    January 31, 2006Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total Costs
    
    
    Amount
    
    
    Total CostsOxyglobin Product Sales
    
    $
    444
    
    
    
    
    
    
    $
    341Hemopure Product Sales
    
    
    16
    
    
    
    
    
    
    
    4Research and Development Revenues
    
    
    134
    
    
    
    
    
    
    
    129Other Revenues
    
    
    
    
    
    
    
    
    
    
    3Total Revenues
    
    
    594
    
    
    
    
    
    
    
    477Cost of RevenuesOxyglobin
    
    
    819
    
    
    
    11
    %
    
    
    698
    
    
    
    10
    %Hemopure
    
    
    2,343
    
    
    
    30
    
    
    
    2,376
    
    
    
    34Total Cost of Revenues
    
    
    3,162
    
    
    
    41
    
    
    
    3,074
    
    
    
    44Research and Development
    
    
    1,915
    
    
    
    25
    
    
    
    1,474
    
    
    
    21Sales and MarketingOxyglobin
    
    
    19
    
    
    
    0
    
    
    
    18
    
    
    
    0Hemopure
    
    
    373
    
    
    
    5
    
    
    
    154
    
    
    
    2Total Sales and Marketing
    
    
    392
    
    
    
    5
    
    
    
    172
    
    
    
    2General and Administrative
    
    
    2,231
    
    
    
    29
    
    
    
    2,300
    
    
    
    33Total Costs
    
    $
    7,700
    
    
    
    100
    %
    
    $
    7,020
    
    
    
    100
    %
 Three months ended January 31, 2007 compared to three months ended January 31, 2006
    Three Months EndedJanuary 31, 2007
    
    January 31, 2006Percent of
    
    
    
    
    
    Percent ofIn thousands
    
    Amount
    
    Total R&D Costs
    
    Amount
    
    Total R&D CostsIschemia Program
    
    $
    441
    
    
    
    23
    %
    
    $
    375
    
    
    
    25
    %Trauma Program
    
    
    655
    
    
    
    34
    
    
    
    198
    
    
    
    13
 15




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Liquidity and Capital Resources
   16




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Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
     17




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Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Company Risks
 We have a history of losses and expect future losses.
  We require significant funding in order to continue to operate.
    We could fail in financing efforts if we fail to receive stockholder approval when needed.
  18




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Failure to raise sufficient additional funds will significantly impair or possibly cause us to
cease the development, manufacture and sale of our products and our ability to operate.
  If we fail to obtain FDA approval to market Hemopure, the Company will be highly adversely
affected.
      If we fail to obtain regulatory approvals in foreign jurisdictions, we will not be able to market
Hemopure abroad.
  19




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Clinical trials are extremely costly and subject to numerous risks and uncertainties.
   If we do not have the financial resources to fund trials required to develop Hemopure for multiple
potential indications, our success as a Company will be adversely affected.
  If the Navy were to abandon its attempt to develop Hemopure for a trauma indication, it would have
a serious adverse effect on the Companys prospects.
  If we cannot retain the personnel we need, our costs will rise significantly. If we cannot hire or
retain highly qualified people, our operations will suffer.
 20




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Any litigation matters with which we become involved, may harm our business and financial
condition if they result in substantial judgments or settlements that exceed the amount of
coverage under our insurance policies, or if such judgments or settlements are not covered by our
insurance policies.
  If we cannot generate adequate, profitable sales of Hemopure, we will not be successful.
  If we cannot find appropriate marketing partners, we may not be able to market and distribute
Hemopure effectively.
  
    
    might not be successful in marketing Hemopure;
    
    might, at its discretion, limit the amount and timing of resources it devotes to marketing Hemopure; and/or
    
    might terminate its agreement with us and abandon our products at any time whether or not
permitted by the applicable agreement.
  If we cannot obtain market acceptance of Hemopure, we will not be able to generate adequate,
profitable sales.
  
    
    whether and how quickly physicians and third party payors accept Hemopure as a
cost-effective therapeutic;
    
    whether medical care providers or the public accept the use of a bovine-derived protein
as a therapeutic in ischemia or any other indication, particularly in light of public
perceptions in the U.S., Europe and elsewhere about the risk of mad cow disease; and
 21




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
    
    product price, which we believe has been an important factor in South Africa and may be
elsewhere.
 If we fail to comply with good manufacturing practices, we may not be able to sell our products.
  The manufacturing process for Hemopure is complicated and time-consuming, and we may experience
problems that would limit our ability to manufacture and sell Hemopure.
  If we were unable to use our manufacturing facilities in Massachusetts or Pennsylvania, we would
not be able to manufacture for an extended period of time.
  If Hemopure receives regulatory approval in a major market, we will be required to expand our
manufacturing capacity to develop our business, which will require substantial third-party
financing. Failure to increase our manufacturing capacity and to lower our manufacturing cost per
unit may impair market acceptance of Hemopure and prevent us from achieving profitability.
   22




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Our lack of operating history makes evaluating our business difficult.
  If we are not able to protect our intellectual property, competition could force us to lower our
prices, which might reduce profitability.
   Failure to avoid infringement of others intellectual property rights could impair our ability to
manufacture and market our products.
   Our operating results will be adversely affected if we incur product liability claims in excess of
our insurance coverage.
  Replacing our sole- source suppliers for key materials could result in unexpected delays and
expenses.
  23




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Changes in the securities laws and regulations are likely to increase our costs.
   Provisions of our restated certificate of incorporation and by-laws could impair or delay
stockholders ability to replace or remove our management and could discourage takeover
transactions that a stockholder might consider to be in its best interest.
  
    
    Our restated certificate of incorporation does not permit stockholders to take action by
written consent and provides for a classified board of directors, and our by-laws provide
that stockholders who wish to bring business before an annual meeting of stockholders or to
nominate candidates for election of directors at an annual meeting of stockholders must
deliver advance notice of their proposals to us before the meeting. These provisions could
make it more difficult for a party to replace our board of directors by requiring two annual
stockholder meetings to replace a majority of the directors, making it impossible to remove
or elect directors by written consent in lieu of a meeting and making it more difficult to
introduce business at meetings.
    
    Our stockholder rights plan may have the effect of discouraging any person or group that
wishes to acquire more than 20% of our Class A common stock from doing so without obtaining
our agreement to redeem the rights. If our agreement to redeem the rights is not obtained,
the acquiring person or group would suffer substantial dilution.
 24




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Industry Risks
 Intense competition could harm our financial performance.
   
    
    are conducting clinical trials of their products;
    
    have or may be able to access substantially greater resources than we have and 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.
 Stringent, ongoing government regulation and inspection of our products could lead to delays in
the manufacture, marketing and sale of our products.
  Health care reform and controls on health care spending may limit the price we can charge for
Hemopure and the amount we can sell.
  25




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Uncertainty of third-party reimbursement could affect our profitability.
  Investment Risks
 The Nasdaq Global Market may cease to list
our Class A common stock which may cause
the value of an investment in our Company to substantially decrease.
   As we sell additional shares, our stock price may decline as a result of the dilution which will
occur to existing stockholders.
    26




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Shares eligible for future sale may cause the market price for our common stock to drop
significantly, even if our business is doing well.
  Our stock price has been and may continue to be highly volatile, which may adversely affect
holders of our stock and our ability to raise capital.
  
    
    failure to identify and hire key personnel or the loss of key personnel;
    
    an inability to obtain or the perception that we will be unable to obtain adequate
financing to fund our operations;
    
    FDA action or delays in FDA action on Hemopure or competitors products;
    
    publicity regarding actual, perceived or potential medical issues relating to products
under development by us or our competitors;
    
    actual or potential preclinical or clinical trial results relating to products under
development by us or our competitors;
    
    delays in our testing and development schedules;
    
    announcements of technological innovations or new products by our competitors;
    
    developments or disputes concerning patents or proprietary rights;
    
    regulatory developments in the U.S. and foreign countries;
    
    economic and other factors, as well as period-to-period fluctuations in our financial results;
    
    market conditions for pharmaceutical and biotechnology stocks; and
    
    additional, future communications from the Nasdaq Stock Market concerning delisting or
potential delisting.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 None
 27




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Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information.
 Retirement of Director
  Revised ownership table
  Class A Common StockPercent of Class AName of Beneficial Owner
    
    Beneficial Ownership
    
    Common StockDavid N. Judelson (1)
    
    
    522,992
    
    
    
    *Daniel P. Harrington (2)
    
    
    360,544
    
    
    
    *C. Everett Koop, M.D. (3)
    
    
    71,169
    
    
    
    *Guido Neels (4)
    
    
    50,000
    
    
    
    *Charles A. Sanders, M.D. (5)
    
    
    121,552
    
    
    
    *Jay B. Pieper (6)
    
    
    44,667
    
    
    
    *Zafiris Zafirelis (7)
    
    
    238,332
    
    
    
    *Jane Kober (8)
    
    
    67,994
    
    
    
    *Francis H. Murphy (9)
    
    
    60,492
    
    
    
    *Barry L. Scott (10)
    
    
    33,209
    
    
    
    *Geoffrey J. Filbey (11)
    
    
    51,483
    
    
    
    *All Officers and Directors as a Group (12)
    
    
    1,604,996
    
    
    
    2.03
 
 *
    
    Less than one percent.(1)
    
    Mr. Judelsons shares consist of 430,128 shares and include exercisable warrants to
purchase 2,860 shares and options to purchase 90,004 shares, exercisable 60 days from January
26, 2007. Mr. Judelsons shares do not include 17,633 shares and exercisable warrants to
purchase 3,443 shares owned by his wife, as to which he disclaims beneficial ownership.(2)
    
    Mr. Harringtons shares include 283,071 shares and exercisable warrants to purchase 6,304
shares owned by HTV Industries, Inc. and 432 shares owned by a family investment group, for
which he shares voting and investment power, and options exercisable 60 days from January 26,
2007 to purchase 70,002 shares.(3)
    
    Dr. Koops shares consist of exercisable warrants to purchase 1,167 shares and options
exercisable 60 days from January 26, 2007 to purchase 70,002 shares.(4)
    
    Mr. Neels shares include 12,000 shares and options exercisable 60 days from January 26, 2007
to purchase 38,000 shares.(5)
    
    Dr. Sanders shares include options exercisable 60 days from January 26, 2007 to purchase
94,722 shares and exercisable warrants to purchase 1,167 shares. 28




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(6)
    
    Mr. Piepers shares include options exercisable 60 days from January 26, 2007 to purchase
41,667 shares.(7)
    
    Mr. Zafirelis shares include options exercisable 60 days from January 26, 2007 to purchase
228,332 shares.(8)
    
    Ms. Kobers shares include options exercisable within 60 days of January 26, 2007 to purchase
65,779 shares and 1,667 restricted shares for which she has sole power to vote.(9)
    
    Mr. Murphys shares include options exercisable 60 days from January 26, 2007 to purchase
47,826 shares and 1,333 restricted shares for which Mr. Murphy has sole power to vote.(10)
    
    Mr. Scotts shares include options exercisable 60 days from January 26, 2007 to purchase
31,042 shares and 1,167 restricted shares for which Mr. Scott has sole power to vote.(11)
    
    Mr. Filbeys shares include options exercisable 60 days from January 26, 2007 to purchase
33,538 shares and 1,167 restricted shares for which Mr. Filbey has sole power to vote.(12)
    
    Includes options exercisable 60 days from January 26, 2007 to purchase 790,914 shares,
exercisable warrants to purchase 11,498 shares and 5,333 restricted shares. 
 Item 6. Exhibits
  29




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SIGNATURES
  BIOPURE CORPORATIONDate: March 19, 2007
    By:
    /s/ Francis H MurphyFrancis H. MurphyChief Financial Officer 30




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EXHIBIT INDEX
 Exhibits
    
    Description
    
    Location3 (i)
    
    Restated Certificate of Incorporation of Biopure, as amended
    
    
    (1
    )3 (ii)
    
    By-laws of Biopure, as amended
    
    
    (2
    )4.1
    
    Form of Selling Agent Warrants, dated April 23, 2002
    
    
    (3
    )4.2
    
    Form of Underwriter Warrant, dated March 2003
    
    
    (4
    )4.3
    
    Form of Investor Warrant, dated April 2003
    
    
    (4
    )4.4
    
    Form of Underwriter Warrant, dated April 2003
    
    
    (4
    )4.5
    
    Underwriter Warrant dated, April 16, 2003
    
    
    (5
    )4.6
    
    Form of Investor Warrant, dated May 2, 2003
    
    
    (4
    )4.7
    
    Form of Investor Warrant, dated May 6, 2003
    
    
    (4
    )4.8
    
    Form of Investor Warrant, dated October 17, 2003
    
    
    (5
    )4.9
    
    Form of Investor Warrant, dated February 19, 2004
    
    
    (5
    )4.10
    
    Form of Investor Warrant, dated September 2004
    
    
    (6
    )4.11
    
    Form of Underwriter Warrant, dated September 2004
    
    
    (6
    )4.12
    
    Form of Investor Warrant, dated December 14, 2004
    
    
    (7
    )4.13
    
    Form of Underwriter Warrant, dated December 14, 2004
    
    
    (7
    )4.14
    
    Form of Underwriter Warrants, dated January 10, 2005
    
    
    (8
    )4.15
    
    Form of Consultant Warrant, dated July 29, 2005
    
    
    (5
    )4.16
    
    Form of Underwriter Warrant, dated December 2005
    
    
    (9
    )4.17
    
    Amended Form of Investor Warrant, dated December 27, 2005
    
    
    (10
    )4.18
    
    Amended Form of Underwriter Investor Warrant, dated December 27, 2005
    
    
    (5
    )4.19
    
    Form of Investor Warrant, dated January 2006
    
    
    (5
    )4.20
    
    Form of Underwriter Warrant, dated January 2006
    
    
    (5
    )4.21
    
    Form of Underwriter Investor Warrant, dated January 17, 2006
    
    
    (10
    )4.22
    
    Form of Investor Warrant, dated August 23, 2006
    
    
    (11
    )4.23
    
    Form of Underwriter Warrant, dated August 23, 2006
    
    
    (11
    )4.24
    
    Form of Underwriter Investor Warrant, dated August 23, 2006
    
    
    (10
    )4.25
    
    Form of Investor Warrant, dated December 2006
    
    
    (12
    )4.26
    
    Form of Underwriters Investor Warrant, dated December 13, 2006
    
    
    (12
    )4.27
    
    Form of Underwriters Warrant, dated December 13, 2006
    
    
    (12
    )10
    
    Bonus Plan31.1
    
    Certification of Zafiris G. Zafirelis pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Francis H. Murphy pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Zafiris G. Zafirelis pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Francis H. Murphy pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 (1)
    
    Previously filed as an exhibit to the Companys report on Form 10-Q for the quarter ended April
30, 2005, filed June 9, 2005 and incorporated herein by reference thereto.(2)
    
    Previously filed as an exhibit to the Companys registration statement on Form S-1/A (File No.
333-78829) and incorporated herein by reference thereto.(3)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated April 26, 2002 and
incorporated herein by reference thereto.(4)
    
    Previously filed as an exhibit to the Companys quarterly report on Form 10-Q for the quarter
ended April 30, 2003, filed June 16, 2003 and incorporated herein by reference thereto.(5)
    
    Previously filed as an exhibit to the Companys report on Form 10-K for the year ended October
31, 2005, filed January 17, 2006 and incorporated herein by reference thereto.(6)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated September 10, 2004 and
incorporated herein by reference thereto. 31




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(7)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated December 9, 2004 and
incorporated herein by reference thereto.(8)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated January 5, 2005 and
incorporated herein by reference thereto.(9)
    
    Previously filed as an exhibit to the Companys report on Form 8-K filed December 21, 2005 and
incorporated herein by reference thereto.(10)
    
    Previously filed as an exhibit to the Companys report on Form 10-Q for the quarter ended July
31, 2006, filed September 11, 2006 and incorporated herein by reference thereto.(11)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated August 23, 2006 and
incorporated herein by reference thereto.(12)
    
    Previously filed as an exhibit to the Companys registration statement on Form S-1/A (File No.
333-138049) and incorporated herein by reference thereto. 32