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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549





FORM 10-Q







|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended January 31, 2008



| ̈ | 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

(Exact name of registrant as specified in its charter)







|                                           |  |                                     
|------------------------------------------ |  | ------------------------------------
|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

(Registrants telephone number)





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated
filer   ̈    Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ̈  Yes    x  No

The number of shares outstanding of each of the issuers classes of common stock as of March 13, 2008 was:



|                                      |  |           
|------------------------------------- |  | ----------
|Class A Common Stock, $.01 par value  |  | 34,971,087
|Class B Common Stock, $1.00 par value |  | 117.7     









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##### Table of Contents

BIOPURE CORPORATION

INDEX TO FORM 10-Q



|                                                                                                                 |  |     
|---------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                 |  | Page
|Part IFinancial Information:                                                                                    |  |     
|Item 1Financial Statements (Unaudited)                                                                          |  |     
|Condensed Consolidated Balance Sheets at January 31, 2008 and October 31, 2007                                   |  | 3   
|Condensed Consolidated Statements of Operations for the three months ended January 31, 2008 and January 31, 2007 |  | 4   
|Condensed Consolidated Statements of Cash Flows for the three months ended January 31, 2008 and January 31, 2007 |  | 5   
|Notes to Condensed Consolidated Financial Statements                                                             |  | 6   
|Item 2Managements Discussion and Analysis of Financial Condition and Results of Operations                     |  | 12  
|Item 3Quantitative and Qualitative Disclosure of Market Risk                                                    |  | 18  
|Item 4Controls and Procedures                                                                                   |  | 18  
|Part IIOther Information:                                                                                       |  |     
|Item 1Legal Proceedings                                                                                         |  | 18  
|Item 1ARisk Factors                                                                                             |  | 18  
|Item 2Unregistered Sales of Equity Securities and Use of Proceeds                                               |  | 28  
|Item 3Defaults Upon Senior Securities                                                                           |  | 28  
|Item 4Submission of Matters to a Vote of Security Holders                                                       |  | 28  
|Item 5Other Information                                                                                         |  | 28  
|Item 6Exhibits                                                                                                  |  | 28  
|Signatures                                                                                                       |  | 29  
|Exhibit Index                                                                                                    |  | 30  

Biopure®, Hemopure®, and Oxyglobin® are registered trademarks of Biopure Corporation.



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##### Table of Contents

Part I

Item 1

BIOPURE CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)



|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | - | --------------- | - | -------- | -
|                                                                                                                                              |  | January 31,2008 |          |   | October 31,2007 |  
|Assets:                                                                                                                                       |  |                 |          |   |                 |   |          |  
|Current assets:                                                                                                                               |  |                 |          |   |                 |   |          |  
|Cash and cash equivalents                                                                                                                     |  | $               | 11,178   |   |                 | $ | 1,910    |  
|Accounts receivable, net                                                                                                                      |  |                 | 150      |   |                 |   | 59       |  
|Inventories                                                                                                                                   |  |                 | 2,082    |   |                 |   | 2,119    |  
|Other current assets                                                                                                                          |  |                 | 1,033    |   |                 |   | 1,165    |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total current assets                                                                                                                          |  |                 | 14,443   |   |                 |   | 5,253    |  
|Property, plant and equipment, net                                                                                                            |  |                 | 8,007    |   |                 |   | 8,398    |  
|Other assets                                                                                                                                  |  |                 | 585      |   |                 |   | 599      |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total assets                                                                                                                                  |  | $               | 23,035   |   |                 | $ | 14,250   |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Liabilities and stockholders equity:                                                                                                         |  |                 |          |   |                 |   |          |  
|Current liabilities:                                                                                                                          |  |                 |          |   |                 |   |          |  
|Accounts payable                                                                                                                              |  | $               | 788      |   |                 | $ | 777      |  
|Accrued expenses                                                                                                                              |  |                 | 2,067    |   |                 |   | 2,512    |  
|Current portion of deferred revenue                                                                                                           |  |                 | 35       |   |                 |   | 35       |  
|Current portion of restructuring charges                                                                                                      |  |                 |         |   |                 |   | 44       |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total current liabilities                                                                                                                     |  |                 | 2,890    |   |                 |   | 3,368    |  
|Deferred revenue, net of current portion                                                                                                      |  |                 | 1,177    |   |                 |   | 1,177    |  
|Other long-term liabilities                                                                                                                   |  |                 | 41       |   |                 |   | 41       |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total long-term liabilities                                                                                                                   |  |                 | 1,218    |   |                 |   | 1,218    |  
|Commitments and contingencies, Note 9                                                                                                         |  |                 |          |   |                 |   |          |  
|Stockholders 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, 34,971,087 shares outstanding at January 31, 2008 and 15,593,587 at
October 31, 2007 |  |                 | 350      |   |                 |   | 156      |  
|Class B, $1.00 par value, 179 shares authorized, 117.7 shares outstanding                                                                     |  |                 |         |   |                 |   |         |  
|Capital in excess of par value                                                                                                                |  |                 | 561,702  |   |                 |   | 546,800  |  
|Contributed capital                                                                                                                           |  |                 | 24,574   |   |                 |   | 24,574   |  
|Unrealized loss on currency translation                                                                                                       |  |                 | (148     | ) |                 |   | (121     | )
|Accumulated deficit                                                                                                                           |  |                 | (567,551 | ) |                 |   | (561,745 | )
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total stockholders equity                                                                                                                    |  |                 | 18,927   |   |                 |   | 9,664    |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  
|Total liabilities and stockholders equity                                                                                                    |  | $               | 23,035   |   |                 | $ | 14,250   |  
|                                                                                                                                              |  |                 |          |   |                 |   |          |  

See accompanying notes



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BIOPURE CORPORATION

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



|                                                                                      |  |                    |        |   |                  |   |        |  
|------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | -
|                                                                                      |  | Three Months Ended |       
|                                                                                      |  | January 31, 2008   |        |   | January 31, 2007 |  
|Revenues:                                                                             |  |                    |        |   |                  |   |        |  
|Product revenue                                                                       |  | $                  | 477    |   |                  | $ | 460    |  
|Research and development revenue                                                      |  |                    | 96     |   |                  |   | 134    |  
|                                                                                      |  |                    |        |   |                  |   |        |  
|Total revenues                                                                        |  |                    | 573    |   |                  |   | 594    |  
|Cost of product revenues                                                              |  |                    | 2,788  |   |                  |   | 3,162  |  
|                                                                                      |  |                    |        |   |                  |   |        |  
|Gross loss                                                                            |  |                    | (2,215 | ) |                  |   | (2,568 | )
|Operating expenses:                                                                   |  |                    |        |   |                  |   |        |  
|Research and development                                                              |  |                    | 1,487  |   |                  |   | 1,915  |  
|Sales and marketing                                                                   |  |                    | 280    |   |                  |   | 392    |  
|General and administrative                                                            |  |                    | 1,996  |   |                  |   | 2,231  |  
|                                                                                      |  |                    |        |   |                  |   |        |  
|Total operating expenses                                                              |  |                    | 3,763  |   |                  |   | 4,538  |  
|                                                                                      |  |                    |        |   |                  |   |        |  
|Loss from operations                                                                  |  |                    | (5,978 | ) |                  |   | (7,106 | )
|Other income, net                                                                     |  |                    | 176    |   |                  |   | 178    |  
|                                                                                      |  |                    |        |   |                  |   |        |  
|Net loss                                                                              |  | $                  | (5,802 | ) |                  | $ | (6,928 | )
|                                                                                      |  |                    |        |   |                  |   |        |  
|Per share data:                                                                       |  |                    |        |   |                  |   |        |  
|Basic and diluted net loss per common share                                           |  | $                  | (0.17  | ) |                  | $ | (0.53  | )
|                                                                                      |  |                    |        |   |                  |   |        |  
|Weighted-average shares used in computing basic and diluted net loss per common share |  |                    | 33,918 |   |                  |   | 12,955 |  
|                                                                                      |  |                    |        |   |                  |   |        |  

See accompanying notes



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BIOPURE CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                            |  |                    |        |   |                  |   |        |  
|--------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------ | -
|                                                                            |  | Three Months Ended |       
|                                                                            |  | January 31, 2008   |        |   | January 31, 2007 |  
|Operating activities:                                                       |  |                    |        |   |                  |   |        |  
|Net loss                                                                    |  | $                  | (5,802 | ) |                  | $ | (6,928 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                    |        |   |                  |   |        |  
|Depreciation and amortization                                               |  |                    | 456    |   |                  |   | 862    |  
|Stock compensation expense                                                  |  |                    | 159    |   |                  |   | 210    |  
|Deferred revenue                                                            |  |                    |       |   |                  |   | 180    |  
|Accretion of restructuring charge                                           |  |                    | 1      |   |                  |   | 2      |  
|Inventory writedowns                                                        |  |                    |       |   |                  |   | 236    |  
|Changes in assets and liabilities:                                          |  |                    |        |   |                  |   |        |  
|Accounts receivable                                                         |  |                    | (91    | ) |                  |   | (14    | )
|Inventories                                                                 |  |                    | 37     |   |                  |   | 262    |  
|Other current assets                                                        |  |                    | 132    |   |                  |   | 279    |  
|Accounts payable                                                            |  |                    | 11     |   |                  |   | 52     |  
|Accrued expenses                                                            |  |                    | (449   | ) |                  |   | (518   | )
|Restructuring charges                                                       |  |                    | (45    | ) |                  |   | (50    | )
|                                                                            |  |                    |        |   |                  |   |        |  
|Net cash used in operating activities                                       |  |                    | (5,591 | ) |                  |   | (5,427 | )
|Investing activities:                                                       |  |                    |        |   |                  |   |        |  
|Purchases of property, plant and equipment                                  |  |                    | (51    | ) |                  |   | (28    | )
|                                                                            |  |                    |        |   |                  |   |        |  
|Net cash used in investing activities                                       |  |                    | (51    | ) |                  |   | (28    | )
|Financing activities:                                                       |  |                    |        |   |                  |   |        |  
|Net proceeds from sale of common stock and warrants                         |  |                    | 14,937 |   |                  |   | 16,475 |  
|                                                                            |  |                    |        |   |                  |   |        |  
|Net cash provided by financing activities                                   |  |                    | 14,937 |   |                  |   | 16,475 |  
|Net increase/(decrease) in cash and cash equivalents                        |  |                    | 9,295  |   |                  |   | 11,020 |  
|Effect of exchange rate changes on cash and cash equivalents                |  |                    | (27    | ) |                  |   |       |  
|Cash and cash equivalents at beginning of period                            |  |                    | 1,910  |   |                  |   | 6,576  |  
|                                                                            |  |                    |        |   |                  |   |        |  
|Cash and cash equivalents at end of period                                  |  | $                  | 11,178 |   |                  | $ | 17,596 |  
|                                                                            |  |                    |        |   |                  |   |        |  
|Supplemental disclosure of cash flow information:                           |  |                    |        |   |                  |   |        |  
|Fair value of warrants issued in conjunction with sales of common stock     |  | $                  | 9,270  |   |                  | $ | 7,264  |  
|                                                                            |  |                    |        |   |                  |   |        |  

See accompanying notes



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)



|1. | Basis of Presentation
|-- | ---------------------

The 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, 2008 are not necessarily indicative of the results that may
be expected for the year ending October 31, 2008; however, the Company expects to incur a substantial loss for the year ending October 31, 2008.

Effective October 2, 2007, the Companys outstanding and reserved class A common shares, stock options and warrants reverse split at a five to one ratio, with post split shares retaining a par value of $.01
per share. All references to shares, options and warrants have been adjusted to reflect the reverse split for all periods presented.

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, 2007, filed with the SEC on January 29, 2008.

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 $567.6 million at January 31, 2008. As of January 31, 2008, the Company had
$11.2 million in cash and cash equivalents. The Company expects this funding to be sufficient to fund operations into July 2008 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 and other 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. Furthermore, the Company may not continue to qualify for continued listing
on the Nasdaq Capital Market. To maintain its listing, the Company is required, among other things, to maintain a daily closing bid price per share of $1.00. The Company is out of compliance with the $1.00 minimum bid price requirement for continued
inclusion of its Class A common stock in the Nasdaq Stock Market. Under Nasdaq rules, the Company has until June 11, 2008 to regain compliance by having the bid price of our common stock close at $1.00 per share or more for at least 10
consecutive business days. If the Company does not regain compliance by June 11, 2008, Nasdaq will determine whether we meet the initial listing criteria set forth in Marketplace Rule 4310(c), except for the bid price requirement. If we meet
the initial listing criteria, we expect to be granted an additional 180 calendar day compliance period. If we do not demonstrate compliance within the compliance period, we will be issued a delisting letter. If we are deemed not eligible on
June 11, 2008 for an additional compliance period, Nasdaq will provide written notification that the securities will be delisted. If that occurs, the Companys ability to raise funds will be adversely affected. These conditions raise
substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern.



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)

(continued)



Comprehensive loss approximated net loss for all periods presented.



|2. | Net Loss per Share
|-- | ------------------

Basic 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 class A 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, so the effect of class B common stock and options and warrants for class A common stock is anti-dilutive. Consequently, dilutive weighted average shares outstanding do not
include 32,227,646 potential common-equivalent shares for the three months ended January 31, 2008 and 11,832,111 potential common-equivalent shares for the three months ended January 31, 2007, as their effect would have been anti-dilutive.



|3. | Stock Based Compensation
|-- | ------------------------

As of January 31, 2008, the
Company had one share-based compensation plan, the 2002 Biopure Corporation Omnibus Securities and Incentive Plan (the 2002 Plan). The Plan as amended, which is shareholder-approved, permits the grant of share options to the
Companys employees, consultants and directors for up to 943,328 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. Typically,
granted options vest in increments over four years and may be exercised within ten years of the date of grant. Options to the non-employee members of the board of directors vest monthly. 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 remained unvested on 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. As a result of the adoption of SFAS 123(R), the Company is amortizing the unamortized
stock-based compensation expense related to unvested option grants issued prior to the adoption of SFAS 123(R). 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 use an estimated forfeiture rate when calculating the expense for the period, while SFAS 123 permitted companies to record forfeitures based on actual forfeitures, which
was the Companys historical policy. The Company has applied an estimated forfeiture rate to remaining unvested awards based on historical experience in determining the expense recorded in the Companys consolidated statement of
operations. 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 pro-rata vesting using the straight-line method.



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)

(continued)



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 (SAB) No. 107 for grants prior to December 31, 2007. On December 21, 2007 the SEC issued
SAB No. 110 which states the staff will continue to accept, under certain circumstances, the use of the simplified method beyond December 31, 2007. The Company expects to continue to use the simplified method.



|                                         |  |                    |  |                  |  
|---------------------------------------- |  | ------------------ |  | ---------------- | -
|                                         |  | Three Months Ended | 
|                                         |  | January 31, 2008   |  | January 31, 2007 |  
|Weighted average risk-free interest rate |  |                   |  | 4.58             | %
|Expected volatility                      |  |                   |  | 85               | %
|Expected lives (years)                   |  |                   |  | 5.42             |  
|Expected dividend yield                  |  |                   |  |                 |  

No options were granted during the first fiscal quarter of 2008. During the first fiscal quarter of
fiscal 2007 5,000 options were granted with a grant-date fair value of $2.55 per share.

As of January 31, 2008, there was
approximately $893,000 of unrecognized compensation expense, net of forfeitures, related to non-vested market-based share awards, which is expected to be recognized over a weighted-average period of 2.16 years.

No options were exercised during the first three months of fiscal 2008 or fiscal 2007. The total fair values of shares vested during fiscal 2008 and 2007
were $72,013 and $48,200 respectively.



|4. | Capital Transaction
|-- | -------------------

On November 6, 2007, Biopure
completed a public offering of its common stock and warrants that raised $16.5 million, for net proceeds to the Company of $14.9 million. The Company sold 19,377,500 new shares of its class A common stock at $0.85 per share to
institutional and individual investors and issued these investors warrants to purchase 19,377,500 shares of its common stock at an exercise price of $1.0625 per share. These warrants have a five-year term and are callable by Biopure after six
months provided that the weighted average price of Biopures common stock for ten consecutive days is over $1.59. The Company also issued to the underwriters warrants to acquire 842,500 shares of its class A common stock at an
exercise price of $1.0625. These warrants become exercisable one year from their date of issuance and expire on the fifth anniversary of their date of issuance. The Company accounts for warrants to unrelated parties in accordance with EITF 00-19:
Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Companys Own Stock. In accordance with the EITF, the Company classified the fair value of these warrants, calculated on the date of grant using
the Black -Sholes Option pricing model, as a component of permanent equity within additional paid in capital.



|5. | Inventories
|-- | -----------

Inventories 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:



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)

(continued)



|                         |  |                  |       |                  |   |      
|------------------------ |  | ---------------- | ----- | ---------------- | - | -----
|In thousands             |  | January 31, 2008 |       | October 31, 2007
|Raw materials            |  | $                | 721   |                  | $ | 641  
|Work-in-process          |  |                  | 146   |                  |   | 468  
|Finished goods-Oxyglobin |  |                  | 812   |                  |   | 732  
|Finished goods-Hemopure  |  |                  | 403   |                  |   | 278  
|                         |  | $                | 2,082 |                  | $ | 2,119
|                         |  |                  |       |                  |   |      

Hemopure [hemoglobin glutamer  250 (bovine)] finished goods represents units the Company
expects to sell in South Africa and units to be used in preclinical or clinical trials conducted by or on behalf of the U.S. Naval Medical Research Center (NMRC), for which the Company is reimbursed. Each quarter the Company reviews the inventory of
Hemopure finished goods and, if necessary, writes off any units beyond those forecast for these purposes. There was no write-down of inventory in the first fiscal quarter of 2008. If the Company continues to experience extremely limited sales in
South Africa or further delays in the use of Hemopure by the NMRC, it expects to write off additional units in the future.



|6. | Accrued Expenses
|-- | ----------------

Accrued expenses were as follows at the
following dates:



|                                              |  |                  |       |                  |   |      
|--------------------------------------------- |  | ---------------- | ----- | ---------------- | - | -----
|In thousands                                  |  | January 31, 2008 |       | October 31, 2007
|Accrued payroll and related employee expenses |  | $                | 174   |                  | $ | 373  
|Financing fees                                |  |                  | 537   |                  |   | 537  
|Accrued severance                             |  |                  | 29    |                  |   |     
|Accrued legal and audit fees                  |  |                  | 153   |                  |   | 347  
|Accrued vacation                              |  |                  | 261   |                  |   | 291  
|Accrued utilities                             |  |                  | 198   |                  |   | 164  
|Clinical trials                               |  |                  | 278   |                  |   | 199  
|Other                                         |  |                  | 437   |                  |   | 601  
|                                              |  |                  |       |                  |   |      
|                                              |  | $                | 2,067 |                  | $ | 2,512
|                                              |  |                  |       |                  |   |      

Accrued severance at January 31, 2008 includes costs related to the resignation of the
Companys Vice President-Operations and Acting Chief Financial Officer. In the first fiscal quarter of 2008 the Company recorded an accrual of approximately $47,000 related to his resignation. During the first three months of fiscal 2008, the
Company paid $18,000 of this amount. The remaining accrual of $29,000 is to be paid over the next 2 months.



|7. | Restructuring
|-- | -------------

During the first quarter of fiscal 2005,
the Company vacated leased office space and sublet it for a period of 38 months, ending in February 2008. The Company accounted for the transaction in accordance with FAS 146, Accounting for Costs Associated with Exit or Disposal
Activities. These costs of $697,000 were included in general and administrative expense in the consolidated statement of operations during fiscal 2005, and the remaining obligation has been paid.

The following table shows the restructuring activity and liability balances (in thousands):



|                            |  |   |     |  
|--------------------------- |  | - | --- | -
|Balance at October 31, 2007 |  | $ | 44  |  
|Payments                    |  |   | (45 | )
|Accretion of liability      |  |   | 1   |  
|                            |  |   |     |  
|Balance at January 31, 2008 |  |   |    |  
|                            |  |   |     |  



|8. | Other Current Assets
|-- | --------------------

During 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 decision by management to pursue



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)

(continued)



selling this equipment. Early in fiscal 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 and the Company believes that the equipment will be sold no later than mid fiscal 2008. 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, 2008 and at October 31, 2007. The carrying amount was determined based on quoted market prices for similar assets, less
continuing depreciation expense through the date that the plan of sale criteria were met. The Company did not recognize any gains or losses during the quarter ended January 31, 2008 related to this asset.



|9. | Commitments and Contingencies
|-- | -----------------------------

Research 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 clinical trial of Hemopure in trauma patients with severe hemorrhagic shock (acute blood loss) in the out-of-hospital
setting. To date, the U.S. Congress has appropriated a total of $22.5 million to the Department of Defense for the development of Hemopure in potential civilian and military trauma applications,(2) of which approximately $1.6 million has been
reverted due to delays in initiating the RESUS clinical trial. If there are additional delays in the start of the proposed clinical trial, additional funds could be reverted in the future. The funding is to be used for the Navys proposed
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. The funding has also been used to reimburse company expenses of
supporting the trauma program. In addition, the NMRC paid approximately $1.2 million for inventory purchases to be delivered in the future, recorded in the accompanying consolidated balance sheet as deferred revenue. 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.



|10. | Litigation
|--- | ----------

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 U.S. District Court for
the district of Massachusetts. A consolidated, amended complaint was filed in regard to Biopure Corporation Derivative Litigation. 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 disclosures concerning regulatory and clinical events. 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. The special litigation committee accordingly filed a motion to dismiss the action. No amounts have been accrued to date with regard to this litigation and a similar claim in the Trial Court of
Middlesex County in Massachusetts. The Company believes this case is without merit.



|(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 collaborative clinical 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements

January 31, 2008

(Unaudited)

(continued)



|11. | Income Taxes
|--- | ------------

On November 1, 2007, the Company
adopted Financial Accounting Standard Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, which clarifies the accounting for
uncertainty in income taxes recognized in an enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement criteria for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition
and defines the criteria that must be met for the benefits of a tax position to be recognized. As a result of its adoption of FIN 48, the Company has recorded the cumulative effect of the change in accounting principle of $278,000 as a decrease to
deferred tax assets, which is offset by a decrease in the valuation allowance.

The Companys total unrecognized tax benefit is
$278,000 as of October 31, 2007. Of this amount, $278,000 represents the amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate prior to the adjustment for the Companys valuation allowance. As a
result of the implementation of FIN 48, the Company did not recognize an increase in tax liability for the unrecognized tax benefits because the Company has recorded a tax net operating loss carryforward that would offset any liability. The use of
net operating losses may be subject to limitations. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months.

Utilization of the net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under
Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and
development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. There also could be additional ownership changes in the future which may result in additional limitations in the utilization of the
carryforward net operating losses and credits.

The Companys policy is to recognize interest and penalties related to unrecognized tax
benefits and income tax liabilities, when applicable, as part of income tax expense in its consolidated statement of operations. Since a full valuation allowance was recorded against the Companys net deferred tax assets and the unrecognized
tax benefits determined under FIN 48 would not result in a tax liability, the Company has not accrued for any interest and penalties relating to these unrecognized tax benefits.

The Company and its subsidiaries are subject to United States federal income tax, as well as income tax of multiple state income and foreign
jurisdictions. Tax years ended October 31, 2004, 2005 and 2006 remain subject to examination by major tax jurisdictions, which are Federal and the Commonwealth of Massachusetts. However, since the Company has net operating loss and tax credit
carryforwards which may be utilized in future years to offset taxable income, those years may also be subject to review by relevant taxing authorities if utilized.



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BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Cautionary Statement Regarding Forward-Looking Information

The following discussion of the Companys financial
condition and results of operations includes forward-looking statements. These forward-looking statements include, without limitation, statements about the clinical development program, market opportunity, strategies, expected activities as the
Company pursues its business plan, and the adequacy of its available cash resources. Forward-looking statements include those that imply that the Company will be able to manage its expenses effectively and raise the funds needed to continue its
business, that the Company will be able to stabilize and enhance its financial position, that the Company will be able to commercially develop Hemopure, that in pursuing anemia, cardiovascular and trauma indications the Company will be able to
address safety and efficacy questions of regulatory agencies, that the U.S. Naval Medical Research Center (NMRC) may conduct a clinical trial in trauma patients, that anticipated milestones will be met in the expected timetable or at all, that
any preclinical or clinical trials will be successful, that Hemopure, if it receives regulatory approval, will attain market acceptance and be manufactured and sold in amounts to attain profitability and that the Company will be able to successfully
increase its manufacturing capacity for Hemopure if it receives regulatory approval. Forward-looking statements are usually accompanied by words such as believe, anticipate, plan, seek,
expect, intend and similar expressions. The forward-looking information is based on various factors and was derived using numerous assumptions and judgments.

Actual results may differ materially from those set forth in the forward-looking statements due to risks and uncertainties that exist in the Companys operations and business environment. These risks include the
factors identified under Risk Factors in this report. All forward-looking statements included or incorporated by reference in this report are based on information available to the Company on the date such statements were made. In light
of the substantial risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as representations by us that the Companys objectives or plans will be achieved.
The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures the Company makes in its
reports to the SEC on Forms 10-Q, 8-K and 10-K.

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.

Overview

Since its founding in 1984, Biopure has been primarily a research and development company focused on developing Hemopure, the Companys oxygen therapeutic for human
use, and obtaining regulatory approval in the United States and other markets. The Companys research and development expenses have been devoted to basic research, product development, process development, preclinical studies, clinical trials
and regulatory activity. In addition, the Companys development expenses in the past included the design, construction, validation and maintenance of a large-scale pilot manufacturing plant in Cambridge, Massachusetts.

A manufacturing facility is a necessary part of developing a product like Hemopure. The FDA classifies Hemopure as a biologic because it is derived from animal-source
material. Unlike drugs that are chemical compounds, biologics are defined by their manufacturing process and composition. Under FDA regulations, any change in the manufacturing process could be considered to produce an altered, possibly different
product. Therefore, it is necessary to demonstrate manufacturing capability at greater than laboratory scale for an application for regulatory approval of a biologic to be accepted for review. This requirement has resulted in high manufacturing
research and development costs in the development of our products relative to other types of drugs.

Prior to 1998, the Company manufactured product solely
for use in preclinical and clinical trials, and production costs were charged wholly to research and development. As an offshoot of the research and development for Hemopure, Oxyglobin, a similar product, gained marketing approval for veterinary use
in the U.S. in 1998 and in the European Union in 1999. Following the U.S. approval, Oxyglobin was produced for sale in the pilot manufacturing



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BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008

(continued)



plant that was built and maintained primarily for the development of Hemopure. Because of this marketing approval, costs of production of Oxyglobin for sale
and an allocation of manufacturing overhead based on capacity used for Oxyglobin are charged to inventory and to cost of revenues. Since marketing approval of Hemopure for human use was granted in South Africa in 2001, costs of production of
Hemopure for sale and an allocation of manufacturing overhead based on capacity used for Hemopure have been charged to inventory and to cost of revenues.

Thus, as shown by the selected information in the table below under the caption Results of Operations, a substantial majority of our costs comprise research and development and cost of revenues. The revenues from products we now
market defray some of the manufacturing costs we must incur to keep our plant operational as we manufacture Hemopure for clinical trials and maintain readiness for greater volume manufacturing. We also receive governmental reimbursements of research
and development costs for development of Hemopure for use in trauma.

Our research and development activities in 2007 and 2008 include the clinical trials
described below.

Ischemia

Biopure is
conducting Phase 2 clinical trials of Hemopure in Europe and South Africa to assess the products potential safety and feasibility in ischemia applications, such as cardiac surgery and acute coronary ischemia (e.g., heart attack). The primary
goal of these trials is to provide preliminary data to support advanced trials in heart attack patients. In contrast to trials where Hemopure was administered as a red blood cell replacement, in these ischemia trials, Hemopure is being administered
as an oxygen-carrying drug. The trials are:



| |  |  | A 60-patient Phase 2 clinical trial in patients undergoing multi-vessel coronary artery bypass graft (CABG) surgery. The trial continues to enroll patients in South
Africa, Greece and the U.K. and has enrolled 54 patients as of February 25, 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the Netherlands, a Phase 2 safety and feasibility study in patients with multi-vessel coronary artery disease who are undergoing percutaneous coronary
intervention (PCI). Enrollment was stopped after five patients, even though the protocol had allowed for an enrollment of up to ten, because the investigator concluded that the results from five patients were sufficient to show a trend toward
demonstrating the principle being tested.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Trauma

The Company has been working under a cooperative research and development agreement (CRADA) with the NMRC to develop Hemopure for use in trauma patients in out-of-hospital settings (for example, at accident scenes, in
ambulances or on the battlefield). In June 2005, the NMRC submitted an IND application to the FDA for a clinical trial called RESUS (Restore Effective Survival in Shock). The application which has been on clinical hold at the FDA since July 2005,
proposes a government-funded, NMRC sponsored clinical trial to assess the safety and efficacy of out-of-hospital administration of Hemopure in reducing morbidity and mortality in severely injured patients experiencing hemorrhagic shock (acute blood
loss).

Following an all-day hearing in December 2006, FDAs Blood Products Advisory Committee (BPAC) voted 11 to 8, with one abstention, to recommend
against proceeding with the trial as then designed, despite all trauma surgeons on the BPAC voting in favor of and recommending the carrying out of the trial. However, in view of the products potential benefit in this patient population,
committee members suggested, among other things, that RESUS be modified as a smaller, pre-hospital Phase 2 trial designed to provide safety and efficacy data in a few hundred patients. The Navy revised the protocol accordingly, but during the fourth
quarter of 2007, the FDA maintained and continues to maintain its clinical hold.

In order for RESUS to proceed, the FDA must lift the clinical hold, and
the Department of Defense and the internal review boards of participating hospitals in the communities where the study would take place must provide final authorization.



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BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008

(continued)



The Company is sponsoring a separate Phase 2, 50-patient clinical trial at the Johannesburg Hospital Trauma unit in
South Africa that is designed to assess the safety and tolerability of Hemopure in the hospital emergency room setting for treatment of unstable trauma patients who have significant blood loss and low blood pressure. Enrollment of this trial has
been slow and intermittent, with 32 of 50 planned patients enrolled to date as of February 25, 2008.

Surgical Anemia Marketing Application

In July 2006, we submitted a marketing authorization application (MAA) to the United Kingdoms Medicines and Healthcare products Regulatory
Agency (MHRA). The application sought authorization to market Hemopure in the U.K. for the treatment of acutely anemic adult orthopedic surgery patients less than 80 years of age.

In December 2006, we received a provisional opinion letter from the United Kingdom Commission on Human Medicines containing comments and questions based on the MHRAs review of our MAA. We met with the MHRA
during 2007 and responded in full to its letter in early November 2007, requesting market authorization for the treatment of acutely anemic adult orthopedic surgery patients less than 80 years of age when blood is not readily available or not
an option.

The time period for the MHRAs final decision on the response is not prescribed by law or regulation and can vary. A time period of four
to six months is typical.

If a marketing authorization is granted in the U.K., we would have the option to seek registration of Hemopure for the same
indication in other member states in the European Economic Area through the Mutual Recognition Procedure.

Our application in the U.K. is our first
marketing application for Hemopure in Europe. Like the biologics license application (BLA) we submitted to the FDA in 2002, the MAA contains preclinical and clinical study reports and an integrated database of all of our completed clinical trials of
Hemopure. This information includes data for approximately 1,500 total subjects, of which more than 800 were administered Hemopure. The MAA also contains information not in the BLA, including new, post hoc analyses of existing data from a
688-patient Phase 3 orthopedic surgery trial conducted in the U.S., South Africa, Europe and Canada and a description of the post-approval clinical experience with Hemopure in South Africa.

Compassionate Use

Hemopure has been administered to
21 patients since January 2007 in the U.S. on a compassionate use basis for the treatment of life-threatening anemia when blood transfusion was not an option. The FDA granted a single patient IND in each of these emergency
situations and approved treatment for an additional 16 patients where the product was not administered. Prior to these cases, there had been no compassionate use of the product since 2000.

Significant Estimates and Assumptions

The preparation of financial
statements in conformity with accounting principles generally accepted in the United States requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions by management affect accrued expenses, stock-based compensation, long-lived
assets and inventory valuation.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates.
Changes in estimates are recorded in the period in which they occur. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.



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BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008

(continued)



Critical Accounting Policies

The Companys significant accounting policies are described in the Notes to the Consolidated Financial Statements contained in its Annual Report on Form 10-K for the fiscal year ended October 31, 2007. The
application of the Companys critical accounting policies is particularly important to the accurate portrayal of its financial position and results of operations. These critical accounting policies require the Company to make subjective
judgments in determining estimates about the effect of matters that are inherently uncertain. The following critical accounting policies are considered most significant:

Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method) or market.
Inventories consist of raw material, work-in-process and finished Hemopure and Oxyglobin. Inventories are reviewed periodically to identify expired units and units with a remaining life too short to be commercially viable based on projected sales
activity, including sales of Hemopure for use in the proposed RESUS clinical trial. Inventories are also subject to internal quality compliance investigations. Inventory that is not expected to be utilized based on projected demand or fails quality
assessment is written off. The inventory of Hemopure finished goods represents the units the Company expects to sell in South Africa or use in preclinical and clinical studies where payment is received for the trial material. The Company has been
and expects to continue to be paid for the units to be used in a proposed trauma trial to be conducted by or on behalf of the NMRC and in preclinical studies. Any units expected to be consumed by the Company in its own preclinical or clinical trials
are expensed to research and development when manufactured.

Stock-Based Compensation

The Company adopted the provisions of Statement of Financial Accounting Standards 123R, Share-Based Payment (SFAS 123R), beginning November 1, 2005, using the modified prospective
transition method. SFAS 123R requires the Company to measure the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and to recognize cost over the requisite service period. Option
valuation models require the input of subjective assumptions, including stock price volatility and expected term of options.

Revenue Recognition

The Company recognizes revenue from sales of Hemopure and Oxyglobin in accordance with Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition, whereby sales are recorded upon shipment, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, title has passed, collectibility is probable and the price is fixed
or determinable. Hemopure sales in South Africa are primarily to hospitals in both the private and government sectors. The Company sells Oxyglobin directly to veterinarians in the United States and to a distributor in the United Kingdom for resale
in the European Union. Collectibility is reasonably assured once pricing arrangements are established, as these agreements establish the distributors intent to pay. The Company monitors creditworthiness on a regular basis and believes
collectibility of product revenues is reasonably assured at the time of sale. The Company recognizes revenue from the U.S. military upon invoicing for reimbursable expenses in connection with developing Hemopure for a trauma indication. Amounts
received for future inventory purchases, recorded as deferred revenue, will be recognized as sales upon shipment in accordance with the provisions discussed above.



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##### Table of Contents

BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008

(continued)



Results of Operations

As the Company generates net losses, the key drivers of the losses are cost of revenues, research and development and general and administrative expenses. Inflation and changing prices have not had a significant impact on the revenues or
loss from operations in the periods presented below. For the three month periods ended January 31, 2008 and 2007, these items were as follows (dollars in thousands):



|                                  |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|--------------------------------- |  | ------------------ | ----- | --------------------- | ---------------- | - | ------ | - | --------------------- |  | --- | -
|                                  |  | Three Months Ended |      
|                                  |  | January 31, 2008   |       |                       | January 31, 2007 |  
|                                  |  | Amount             |       | Percent ofTotal Costs |                  |   | Amount |   | Percent ofTotal Costs | 
|Oxyglobin Product Sales           |  | $                  | 419   |                       |                  |   |        | $ | 444                   |  |     |  
|Hemopure Product Sales            |  |                    | 58    |                       |                  |   |        |   | 16                    |  |     |  
|Research and Development Revenues |  |                    | 96    |                       |                  |   |        |   | 134                   |  |     |  
|Total Revenues                    |  |                    | 573   |                       |                  |   |        |   | 594                   |  |     |  
|Cost of Revenues                  |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|Oxyglobin                         |  |                    | 569   |                       | 9                | % |        |   | 819                   |  | 11  | %
|Hemopure                          |  |                    | 2,219 |                       | 34               |   |        |   | 2,343                 |  | 30  |  
|                                  |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|Total Cost of Revenues            |  |                    | 2,788 |                       | 43               |   |        |   | 3,162                 |  | 41  |  
|Research and Development          |  |                    | 1,487 |                       | 23               |   |        |   | 1,915                 |  | 25  |  
|Sales and Marketing               |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|Oxyglobin                         |  |                    | 25    |                       | 0                |   |        |   | 19                    |  | 0   |  
|Hemopure                          |  |                    | 255   |                       | 4                |   |        |   | 373                   |  | 5   |  
|                                  |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|Total Sales and Marketing         |  |                    | 280   |                       | 4                |   |        |   | 392                   |  | 5   |  
|General and Administrative        |  |                    | 1,996 |                       | 30               |   |        |   | 2,231                 |  | 29  |  
|                                  |  |                    |       |                       |                  |   |        |   |                       |  |     |  
|Total Costs                       |  | $                  | 6,551 |                       | 100              | % |        | $ | 7,700                 |  | 100 | %

Three months ended January 31, 2008 compared to three months ended January 31, 2007

Total revenues for the first quarter of 2008 were $573,000, including $419,000 from sales of Oxyglobin, $58,000 from sales of Hemopure in South
Africa and $96,000 from funds received from the U.S. Government. Total revenues for the same period in 2007 were $594,000, including $444,000 from Oxyglobin sales, $16,000 from sales of Hemopure and $134,000 from the U.S. Government. The increase in
Hemopure sales reflects the Companys marketing efforts and increasing use of the product. Oxyglobin revenues decreased during the first fiscal quarter of 2008 compared to 2007 because of a change in the arrangement between the Company and its
European distributor. During the first quarter of fiscal 2007, the Company accounted for European sales on a consignment basis. Now the distributor buys product for its inventory, and the Company bills the distributor upon shipment. The distributor
did not purchase any inventory during the first fiscal quarter of 2008. This decrease was nearly offset by higher revenues in the U.S. due to higher average selling prices.

Cost of revenues includes costs of both Oxyglobin and Hemopure. Cost of revenues was $2.8 million for the first quarter of fiscal 2008, compared to $3.2 million for the same period in 2007. This decrease is primarily
due to the absence of inventory purchases by our distributor in Europe and to lower depreciation expense in fiscal 2008., Higher salaries expense in 2008 compared to the same period last year, resulting from higher headcount, partially offset the
decrease.

The Companys major research and development programs and related expenses are as follows (dollars in thousands):



|                 |  |                    |     |                           |                  |   |        |   |                           |  |    |  
|---------------- |  | ------------------ | --- | ------------------------- | ---------------- | - | ------ | - | ------------------------- |  | -- | -
|                 |  | Three Months Ended |    
|                 |  | January 31, 2008   |     |                           | January 31, 2007 |  
|                 |  | Amount             |     | Percent ofTotal R&D Costs |                  |   | Amount |   | Percent ofTotal R&D Costs | 
|Ischemia Program |  | $                  | 631 |                           | 42               | % |        | $ | 441                       |  | 25 | %
|Trauma Program   |  |                    | 192 |                           | 13               |   |        |   | 655                       |  | 13 |  



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##### Table of Contents

BIOPURE CORPORATION

Managements Discussion and Analysis of

Financial Condition and Results of Operations

January 31, 2008

(continued)



Historically, virtually all research and development expenses related to an anticipated surgical anemia indication
where Hemopure would be used to eliminate or reduce the need for red blood cell transfusion. Biopure is seeking U.K. approval, but is not currently seeking FDA approval, for this indication.

The Companys primary operating focus is now the development of Hemopure for ischemia and trauma indications, discussed below.

Both the ischemia and the trauma projects are in early stages (i.e., safety clinical trials and preclinical animal studies). Cumulative ischemia project expenditures of
$7.2 million as of January 31, 2008 consist primarily of the costs of preparing and carrying out Phase 2 clinical trials in Europe. Cumulative trauma expenditures of $5.6 million as of January 31, 2008 consist of costs to conduct
preclinical studies and preparation costs primarily associated with protocol design and preparation of the IND application for the proposed NMRC sponsored out-of-hospital trauma trial. Of these trauma expenses, $3.0 million has been reimbursed to
date by payments administered by the U.S. Army from funds described in Note 9 to the condensed consolidated financial statements.

Regulatory agency
requirements for additional clinical trials and any further preclinical studies that might be necessary for either an ischemia indication or for use in trauma patients cannot be estimated at this time. The risks and uncertainties associated with the
early stage of planning and execution of the ischemia and trauma clinical development programs include, among other things, uncertainties about results that at any time could require us to abandon or greatly modify either project. Accordingly, the
Company cannot estimate the period in which material net cash inflows for either of these two projects might commence, if ever, and it does not expect to obtain marketing approval of a potential ischemia indication or trauma indication for several
years.

Research and development expenses were $1.5 million for the first quarter of fiscal 2008 compared to $1.9 million for the same period in 2007. This
decrease is primarily due to a $469,000 reduction in spending on preclinical trials.

Sales and marketing expenses decreased to $280,000 for the first
quarter of fiscal 2008, from $392,000 for the same period in 2007. During the first fiscal quarter of 2007 the company recorded a $157,000 charge for Hemopure units donated to public hospitals in South Africa to encourage product usage and generate
treatment data. There is no comparable charge during the first three months of fiscal 2008.

General and administrative expenses were $2.0 million for the
first quarter of 2008 compared to $2.2 million for the corresponding period in fiscal 2007. This decrease is due mostly to lower consulting and compensation expenses and lower insurance premiums.

Liquidity and Capital Resources

At January 31, 2008, the
Company had $11.2 million in cash and cash equivalents. The Company believes this amount will be sufficient to fund operations into July 2008. 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 will continue to explore opportunities to raise capital, through sales of equity and other securities and, if appropriate, to consider strategic collaborations for sharing development
and commercialization costs. However, there can be no assurance that adequate additional financing or another transaction will be available to the Company on terms that it deems acceptable, if at all. If additional financing or another transaction
is not available when needed or is not available on acceptable terms, we may be unable to successfully develop or commercialize Hemopure or to continue to operate.

Net cash used in operating activities increased $191,000 in the first three months of fiscal 2008 compared to the corresponding period in fiscal 2007. Cash used in operating activities was $5.6 million for the first three months of fiscal
2008, which included a net loss of $5.8 million, decreased by non-cash charges for depreciation and amortization and by compensation expense related to the issuance of stock options. Accrued expenses consumed $449,000 during the first three months
of fiscal 2008 largely due to the payment, in fiscal 2008, of services accrued for in fiscal 2007.

Cash provided by financing activities includes
approximately $14.9 million in net proceeds raised during the first three months of fiscal 2008 through sales of common stock and warrants.



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##### Table of Contents

BIOPURE CORPORATION

Part IIOther Information

January 31, 2008



|Item 3. | Quantitative and Qualitative Disclosure About Market Risk
|------- | ---------------------------------------------------------

We
currently do not have any foreign currency exchange risks, with the exception of minimal exchange fluctuations associated with expenses for clinical trial, regulatory and sales and marketing activities outside of the United States and minimal sales
in South Africa. We sell Oxyglobin in Europe in U.S. dollars. The customers bear the risk of foreign currency exchange fluctuation. We sell Hemopure in South Africa in local currency. Fluctuations in revenues in South Africa are offset by
fluctuations in our local expenses. Dramatic fluctuations in exchange rates could result in either increases or decreases in unit sales, as the effective unit price to the customer would vary. We invest our cash and cash equivalents in money market
funds. These investments are subject to interest rate risk. However, due to the nature of our short-term investments, we believe that the interest rate risk exposure is not material.



|Item 4. | Controls and Procedures
|------- | -----------------------



|(a) | Evaluation of Disclosure Controls and Procedures.
|--- | -------------------------------------------------

Under the supervision
and with the participation of the Companys management, including its Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Companys disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in its Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.



|(b) | Changes in Internal Control Over Financial Reporting.
|--- | -----------------------------------------------------

There have been no
changes in the Companys internal control over financial reporting (as defined under Rules 13a-15(f) or 15d-15(f) of the Exchange Act) during its most recently completed fiscal quarter that have materially affected, or are reasonably likely to
materially affect, its internal control over financial reporting.



|Item 1. | Legal Proceedings
|------- | -----------------



|The | information in Note 10 to the Condensed Consolidated Financial Statements is incorporated herein by reference.
|--- | --------------------------------------------------------------------------------------------------------------



|Item 1A. | Risk Factors
|-------- | ------------

Company Risks

We have a history of losses and expect future losses.

We have had annual losses from operations since our inception. In the fiscal years ended October 31, 2005, 2006 and 2007, we had losses from operations of $29.1 million, $26.9 million and
$36.9 million, respectively. We had an accumulated deficit of $567.6 million as of January 31, 2008. We anticipate that we will continue to generate losses for the next several years. Even if Hemopure were to be approved by the FDA or
we obtain marketing authorization in another major market, we might not be able to achieve profitable operations.

We could fail to
remain a going concern.

We expect that our cash on hand and forecasted sales will fund operations into July 2008. Additional funds
may not be available to us thereafter or on terms that we deem acceptable, if they are available at all. Our independent registered public accounting firm has modified their report for our fiscal year ended October 31, 2007 with respect to our
ability to continue as a going concern.



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This type of modification typically would indicate that our recurring losses from operations and
current lack of sufficient funds to sustain operations through the end of the following fiscal year raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements have been prepared on the basis of a
going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. If we became unable to continue as a going concern, we would have to liquidate our assets and we might receive
significantly less than the values at which they are carried on our consolidated financial statements. Any shortfall in the proceeds from the liquidation of our assets would directly reduce the amounts, if any, that holders of our common stock could
receive in liquidation.

To remain a going concern, we require significant funding. The inclusion of a going concern modification in
Ernst & Young LLPs audit opinion for fiscal 2007 may materially and adversely affect our stock price and our ability to raise new capital.

We could fail in financing efforts if we fail to receive stockholder approval when needed.

We
are required under the Nasdaq Marketplace Rules to obtain stockholder approval for any issuance of additional equity securities that would comprise more than 20% of our total shares of common stock outstanding before the issuance of the securities
at a discount to the greater of book or market value in an offering that is not deemed to be a public offering by Nasdaq. If we remain listed on Nasdaq, funding of our operations in the future may require stockholder approval for
purposes of complying with the Nasdaq Marketplace Rules. We could require such approval to raise additional funds, but might not be successful in obtaining any such required stockholder approval. If we remain listed on Nasdaq and we fail to obtain
approval prior to a financing for which the Nasdaq believes we need stockholder approval, we may be delisted.

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.

The development and regulatory processes for seeking and obtaining regulatory approval to market Hemopure have been and will continue to be costly. We
will require substantial working capital to develop, manufacture and sell Hemopure and to finance our operations until such time, if ever, as we can generate positive cash flow. If Hemopure is approved for sale in the U.S. or the European
Union, we expect that we will need to increase our manufacturing capacity, for which we will require significant additional funding. If additional financing is not available when needed or is not available on acceptable terms, we may be unable to
successfully develop or commercialize Hemopure or to continue to operate. A sustained period in which financing is not available could force us to go out of business. If the U.S. Navy does not continue its development of Hemopure for a trauma
indication, we will likely cease development of Hemopure for that indication because of limited resources.

If we fail to obtain FDA
approval to market Hemopure, we will be highly adversely affected.

We will not be able to market Hemopure in the U.S. unless
and until we receive FDA approval. In pursuing both the ischemia and anemia indications for Hemopure, as a prerequisite to further clinical trials for Hemopure in the U.S., we must address ongoing FDA questions. We have been delayed, and could be
further delayed, in responding, either by outside contractors failure or inability to complete their tasks in a timely manner, our own staff limitations or by other unanticipated delays or difficulties and lack of resources. The FDA to date
has found inadequate the responses of the U.S. Naval Medical Research Center (NMRC) to questions raised in connection with its proposal to conduct a trial of Hemopure in trauma patients in the out-of-hospital setting. If the FDA finds future
responses made by us or the NMRC to be inadequate, we would be unable to pursue indefinitely development of Hemopure in the U.S., a very large, key market.

Moreover, even if we adequately address the FDAs questions, we will need to obtain FDA acceptance of the protocols for, and to complete, human clinical trials before applying for FDA authorization to market
Hemopure for an ischemia or an anemia indication. We cannot predict whether or when we will submit an Investigational New Drug application (IND) for an ischemia indication. Consequently, we do not know whether or when we will be able to commence a
U.S. clinical trial of Hemopure for an ischemia or an anemia indication or that we will be able to conduct or satisfactorily conclude additional clinical trials required to obtain FDA marketing approval for this indication.



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In the case of the trauma indication, the NMRC has primary responsibility for designing, seeking FDA
acceptance of and conducting a clinical trial of Hemopure for out-of-hospital treatment of trauma patients in hemorrhagic shock. In 2005, it proposed a two-stage Phase 2b/3 clinical trial, which was placed on an FDA clinical hold. The FDAs
Blood Products Advisory Committee in December 2006 recommended that the trial be redesigned as a Phase 2 trial. The NMRC submitted a Phase 2 protocol, which continues to be on clinical hold. The FDA may not approve the redesigned Phase 2 trial. If
the FDA ultimately lifts the clinical hold and the RESUS trial, as it may be redesigned, is commenced and concluded, the trial results may not lead to FDA marketing approval for the proposed trauma indication because of poor outcome or need for
additional trials. Usually a Phase 2 trial is not adequate for market approval.

In addition, future or existing governmental action or
changes in FDA policies or precedents may result in delays or rejection of an application for marketing authorization. The FDA has considerable discretion in determining whether to grant marketing authorization for a drug and may delay or deny
authorization even in circumstances where the applicants clinical trials have proceeded in compliance with FDA procedures and regulations and have met the established end points of the trials. Despite all of our efforts, the FDA could refuse
to grant marketing authorization for Hemopure for any indication.

Challenges to FDA determinations are generally time consuming and
costly, and rarely succeed. We can give no assurance that we will obtain FDA marketing authorization for Hemopure for any indication. The failure to obtain any authorization would have severe adverse consequences.

If we fail to obtain regulatory approvals in foreign jurisdictions, we will not be able to market Hemopure abroad.

We are seeking marketing authorization in the U.K. and we intend to seek to market Hemopure in other international markets, including other European Union
countries. Whether or not FDA marketing authorization has been obtained, we must obtain separate regulatory authorizations in order to market our products in the European Union and many other foreign jurisdictions. The regulatory processes differ
among these jurisdictions, and the time needed to secure marketing authorization may be even longer than that required for FDA authorization. Marketing authorization in any one jurisdiction does not ensure authorization in a different jurisdiction.
As a result, obtaining foreign authorizations will require additional expenditures and significant amounts of time. We can give no assurance that we will obtain marketing authorization for Hemopure in any foreign jurisdiction other than that already
obtained in South Africa.

Clinical trials are extremely costly and subject to numerous risks and uncertainties.

To gain authorization from the FDA and European regulatory authorities for the commercial sale of any product, including Hemopure,
we must demonstrate in clinical trials, and thereby satisfy the regulatory authorities as to, the safety and efficacy of the product. Clinical trials are expensive and time-consuming. Clinical trials are also subject to numerous risks and
uncertainties not within our control. For example, data we obtain from preclinical and clinical studies are susceptible to varying interpretations that can impede regulatory approval.

In addition, many factors could delay or result in termination of ongoing or future clinical trials. Results from ongoing or completed preclinical or
clinical studies or analyses could raise concerns, real or perceived, over the safety or efficacy of an investigational pharmaceutical. We cannot assure investors that the FDA will not delay the development of Hemopure by further continuing its
current hold or placing other clinical trials we sponsor or others may sponsor on hold in the future. A clinical trial may also be delayed by slow patient enrollment. There may be limited availability of patients who meet the criteria for certain
clinical trials. Delays in planned patient enrollment can result in increased development costs and delays in regulatory approvals. Further, we rely on investigating physicians and the hospital trial sites to enroll patients. In addition, patients
may experience adverse medical events or side effects resulting in delays, whether or not the events or the side effects relate to our product.



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If we do not have the financial resources to fund trials required to develop Hemopure for
multiple potential indications, our success will be adversely affected.

In general, we cannot sell Hemopure for any indication
unless we receive regulatory approval for that indication. Regulatory authorities generally require a separate marketing authorization for each proposed indication for the use of a drug. In order to market Hemopure for more than one indication, we
will have to design additional clinical trials, submit the trial designs to applicable regulatory authorities for review and complete those trials successfully. If any regulatory authority approves Hemopure for an indication, it may require a label
cautioning against the products use for indications or classes of patients for which it has not been approved. We may not have funds available to try to exploit Hemopure for all of its potential indications. Our potential revenues will be
impaired by limitations on the marketing of Hemopure.

If the Navy were to abandon its attempt to develop Hemopure for a trauma
indication, it would have a serious adverse effect on our prospects.

Our current clinical development activities involve the
pursuit of two indications: ischemia and trauma, and we are beginning to develop a possible anemia indication not involving the replacement of red blood cells. We are pursuing trauma in the U.S. because the NMRC has agreed to be responsible for
virtually all aspects of an advanced trauma trial. The FDA has prevented the start of the proposed NMRC trial since June 2005. If the Navy were to decide not to continue to pursue this project, we would not have the benefit of this alliance and
would be required to delay indefinitely work on this indication.

If we cannot retain the personnel we need or if we cannot hire or
retain highly qualified people, our operations will suffer.

We may experience the loss of personnel, including executives and other
employees, as a result of attrition, which we have previously experienced. We expect that in the future we will need to recruit and retain personnel for important positions. We may be unable to do so, in particular if we are unable to improve our
financial position.

If we cannot generate adequate, profitable sales of Hemopure, we will not be successful.

To succeed, we must develop Hemopure commercially and sell adequate quantities of Hemopure at a profit. We may not accomplish either of these objectives.
To date, we have focused our efforts on developing Hemopure . Uncertainty exists regarding the potential size of any geographic market for Hemopure and the price that we can charge for it. In addition to population, the size of the market will be
affected by the indication(s) for which Hemopure is approved and will be greatly reduced if reimbursement for the cost of Hemopure is not available from health insurance companies or government programs.

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 in major markets. We have no experience in the sale or
marketing of medical products for humans in a major market. In the event that we obtain FDA authorization or European marketing authorization for Hemopure, we may choose initially to market Hemopure using an independent distributor. Any such
distributor:



| |  |  | 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



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We may instead seek an alternative arrangement, such as an alliance with a pharmaceutical company, or
may be required to recruit, train and retain a marketing staff and sales force of our own. We may not be successful in obtaining satisfactory distributorship agreements or entering into alternative arrangements.

If we cannot obtain market acceptance of Hemopure, we will not be able to generate adequate, profitable sales.

Even if we succeed in obtaining marketing authorization for Hemopure in one or more major markets, a number of factors may affect future sales of our
product. These factors include:



| |  |  | whether and how quickly physicians and third party payers 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, particularly in light of public perceptions in the U.S.,
Europe and elsewhere about the risk of mad cow disease; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.

To obtain the authorization of the FDA and European regulatory authorities to sell Hemopure, we must demonstrate to them that we can manufacture Hemopure
in compliance with applicable good manufacturing practices, commonly known as GMPs. GMPs are stringent requirements that apply to all aspects of the manufacturing process. We are subject to inspections by the FDA and European regulatory authorities
at any time to determine whether we are in compliance with GMP requirements. If we fail to manufacture in compliance with GMPs, these regulatory authorities may refuse to authorize the marketing of Hemopure or revoke the authorizations to market
Oxyglobin or may take other enforcement actions with respect to Hemopure or Oxyglobin.

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.

Our
products are biologic drugs and require product manufacturing steps that are more complicated, time consuming and costly than those required for most chemical drugs. Minor deviations in our manufacturing processes or other problems could result in
unacceptable changes in the products that result in lot failures, increased production scrap, shipment delays, regulatory problems, product recalls or product liability, all of which could negatively affect our results of operations.

If we were unable to use our manufacturing facilities in Massachusetts or Pennsylvania, we would be unable to manufacture for an extended period of
time.

We manufacture at a single location in Massachusetts with raw material sourcing and initial processing in Pennsylvania.
Damage to either of these manufacturing facilities due to fire, contamination, natural disaster, power loss or other events could cause us to cease manufacturing. For example, if our Massachusetts manufacturing facility were destroyed, it would take
approximately two years or more to rebuild and qualify it. In the reconstruction period, we would not be able to manufacture product and thus would have no supply of Hemopure for research and development, clinical trials or sales after we used up
all finished goods in our inventory. A new manufacturing facility would take longer to construct.

If Hemopure receives marketing
authorization 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.

If we are permitted to market
Hemopure for indications with high demand in one or more markets, we will need to construct new manufacturing capacity to develop our business. The increase in our manufacturing capacity is dependent upon our obtaining substantial financing from
third parties. Third parties can be expected to be unwilling



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to commit to finance a new manufacturing facility so long as we do not have marketing authorization in a major market. We cannot assure that sufficient
financing for new manufacturing capacity will be available or, if available, will be on terms that are acceptable to us. After the required significant financing was in place, it would take at least 30 to 36 months from groundbreaking to build
a large Hemopure manufacturing facility and to qualify and obtain facility approval from the FDA or European regulatory authorities.

If
Hemopure is approved for marketing in a major market and receives market acceptance, we could experience difficulty manufacturing enough of the product to meet demand. The manufacturing processes we currently employ to produce small quantities of
material for research and development activities and clinical trials may not be successfully scaled up for production of commercial quantities at a reasonable cost or at all. We will face risks in the scale-up of our processes in the construction of
any new manufacturing facility, and in turn could encounter delays, higher than usual rejects, additional reviews and tests of units produced and other costs attendant to an inability to manufacture saleable product. Furthermore, scale-up might not
succeed in lowering our product cost, which also could negatively affect our results of operations. If we cannot manufacture sufficient quantities of Hemopure, we may not be able to build our business or operate profitably. In addition, if we cannot
fill orders for Hemopure, customers might turn to alternative products and may choose not to use Hemopure even after we have addressed any capacity shortage.

Our lack of operating history makes evaluating our business difficult.

Proceeds from the
sales of equity securities, payments to fund our research and development activities, licensing fees, and interest income have provided almost all of our funding to date. We have no operating history of selling Hemopure upon which to base an
evaluation of our business and prospects.

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 knowledge, are important to our success. Accordingly, the success of our business will depend, in part, upon our ability to defend our intellectual property against infringement by third parties. We cannot guarantee that
our intellectual property rights will protect us adequately from competition from similar products. Some of our important patents have relatively short remaining terms. Nor can we guarantee that additional products or processes we discover or seek
to commercialize will receive adequate intellectual property protection.

In addition, third parties may successfully challenge our
intellectual property. We have not filed patent applications in every country. In certain countries, obtaining patents for our products, processes and uses may be difficult or impossible. Patents issued in regions other than the U.S. and Europe
may be harder to enforce than, and may not provide the same protection as, patents obtained in the U.S. and Europe.

Failure to
avoid infringement of others intellectual property rights could impair our ability to manufacture and market our products.

We
cannot guarantee that our products and manufacturing process will be free of claims by third parties alleging that we have infringed their intellectual property rights. Several third parties hold patents with claims to compositions comprising
polymerized hemoglobin and their methods of manufacture and use. One or more of these third parties may assert that our activities infringe claims under an existing patent. Any such claim could be expensive and time-consuming to defend, and an
adverse litigation result or a settlement of litigation could require us to pay damages, obtain a license from the complaining party or a third party, develop non-infringing alternatives or cease using the challenged intellectual property. Any such
result could be expensive or result in a protracted plant shutdown, in turn adversely affecting our ability to operate profitably.

There
can be no assurance that we would prevail in any intellectual property infringement action, or be able to obtain a license to any third-party intellectual property on commercially reasonable terms, to successfully develop non-infringing alternatives
on a timely basis, or to license alternative non-infringing intellectual property, if any exists, on commercially reasonable terms. Any significant intellectual property impediment to our ability to develop and commercialize Hemopure would seriously
harm our business and prospects.



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Our operating results will be adversely affected if we incur product liability claims in excess
of our insurance coverage.

The testing and marketing of medical products, even after regulatory approval, have an inherent risk of
product liability. We maintain limited product liability insurance coverage. Our profitability would be adversely affected by a successful product liability claim in excess of our insurance coverage. We cannot guarantee that product liability
insurance in adequate coverage amounts will be available in the future or be available on terms we could afford to pay.

Replacing
our sole- source suppliers for key materials could result in unexpected delays and expenses.

We obtain some key materials,
including membranes and chemicals, and services from sole-source suppliers. All of these materials are commercially available elsewhere. If such materials were no longer available at a reasonable cost from our existing suppliers, we would need to
purchase substitute materials from new suppliers. If we needed to locate a new supplier, the substitute or replacement materials or facilities would need to be tested for equivalency. Such equivalency tests could significantly delay product
development, or delay or limit commercial sales of approved products and cause us to incur additional expense.

We obtain bovine hemoglobin
from one abattoir, from animals raised in several states of the U.S. We cannot predict the future effect, if any, on us of the spread of bovine spongiform encephalopathy (mad cow disease) in the U.S. Any quarantine affecting
herds that supply us or a shutdown of the abattoir that we use could have a material adverse effect on us, as we would have to find, validate and obtain regulatory approval of new sources of supply or new facilities.

Changes in the securities laws and regulations are likely to increase our costs.

The Sarbanes-Oxley Act of 2002, which became law in July 2002, has required changes in some of our corporate governance, securities disclosure and
compliance practices. In response to the requirements of that Act, the SEC and the Nasdaq Stock Market promulgated new rules and listing standards covering a variety of subjects. Compliance with these new rules and listing standards has increased
our general and administrative costs, and we expect to continue to experience increased costs. These developments also could make it more difficult and more expensive for us to obtain director and officer liability insurance. Likewise, these
developments may make it more difficult for us to attract and retain qualified members of our board of directors, particularly independent directors, or qualified executive officers.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report of management on
a companys internal controls over financial reporting in their annual reports on Form 10-K that contains an assessment by management of the effectiveness of the companys internal controls over financial reporting. In addition, the
independent registered public accounting firm auditing a companys financial statements must attest to and report on the effectiveness of the companys internal controls over financial reporting. We have determined that we are not an
accelerated filer and consequently Section 404 requirements did not apply to us for our 2007 annual report on Form 10-K. Nevertheless, if our independent registered public accounting firm does not provide us with an unqualified
report as to the effectiveness of our internal controls over financial reporting for one or more future year-ends, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our
securities.

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.

Provisions of our restated certificate of incorporation and by-laws, as well as our stockholder rights plan, could impede attempts by stockholders to remove or replace our management or 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. In particular:



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| |  |  | 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. Consequently, the possible acquirer would likely not complete a
transaction that stockholders might consider to be in their best interest.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, or alternatives to, Hemopure for trauma or ischemia indications. We are aware that one public company competitor, Northfield Laboratories Inc., has completed a pivotal trial of a hemoglobin-based oxygen carrier produced from human blood
that has passed its expiration date for human transfusion, and has stated its intention to file a BLA in 2008. We are also aware that other companies are conducting preclinical studies and clinical trials of hemoglobin-based or perfluorocarbon
oxygen carriers. The products being developed by these companies are intended for use in humans and as such could compete, if authorized for marketing by regulatory authorities, with Hemopure. We may also encounter competition in ischemia
indications from medical devices and drugs on the market or currently under development.

Competition could diminish our ability to become
profitable or affect our profitability in the future. Our existing and potential competitors:



| |  |  | 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 authorized 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 facilities could lead to delays in the manufacture, marketing and sale of our
products.

The FDA and foreign regulatory authorities continue to regulate products even after they receive marketing authorization.
Even if Hemopure is being marketed, the manufacture and marketing of Hemopure will be subject to ongoing regulation, including compliance with current good manufacturing practices, adverse event reporting requirements and general prohibitions
against promoting products for unapproved or off-label uses. We would also be subject to inspection and market surveillance by the FDA and foreign regulatory authorities for compliance with these and other requirements. We are subject to
such regulation, inspection and surveillance in South Africa. Any enforcement action resulting from failure, even by inadvertence, to comply with these requirements could affect



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the manufacture and marketing of Hemopure. In addition, the FDA or foreign regulatory authorities could withdraw a previously approved product from the
applicable market(s) upon receipt of newly discovered information. Furthermore, the FDA or foreign regulatory authorities could require us to conduct additional, and potentially expensive, studies in areas outside our approved indications. Moreover,
unanticipated changes in existing regulations or the adoption of new regulations could affect and make more expensive the continued manufacturing and marketing 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.

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 U.S. 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. European governments generally control expenditures on medicines through price control and other
restrictive practices. Assuming we succeed in bringing Hemopure to market, uncertainties regarding future health care reform and private market practices would affect our ability to sell Hemopure in large quantities at profitable pricing in the
U.S. and abroad.

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. Even if Hemopure marketing is authorized, there is no guarantee that governmental health care programs or private health insurers would reimburse for purchases of Hemopure, or reimburse a sufficient amount to permit us to sell Hemopure at
high enough prices to generate a profit. Hemopure sales in South Africa have been adversely affected by a lack of third-party reimbursement.

Investment
Risks

The Nasdaq Capital Market may cease to list our Class A common stock, and delisting may cause the value of an
investment in our Company to substantially decrease.

We may be unable to meet the listing requirements of the Nasdaq Capital Market
in the future. To maintain our listing, we are required, among other things, to maintain a daily closing bid price per share of $1.00. On December 14, 2007, we received notice from the Nasdaq Stock Market that the closing bid price of our
Class A common stock had fallen below and remained below $1.00 for 30 consecutive business days. As a result, we are out of compliance with the $1.00 minimum bid price requirement for continued inclusion of our Class A common stock in the
Nasdaq Capital Market. Under Nasdaq rules, we have two periods of 180 days each to regain compliance by having the bid price of our Class A common stock close at $1.00 per share or more for at least 10 consecutive business days. If we do
not regain compliance with the minimum bid price rule by December 2008, Nasdaq will provide written notification that our Class A common stock will be delisted.

Delisting would adversely affect the trading price and limit the liquidity of our common stock and therefore could cause the value of an investment in our Company to decrease.

As we sell additional shares, our stock price may decline as a result of the dilution which will occur to existing stockholders.

Until we are profitable, we will need significant additional funds to develop our business and sustain our operations. Any
additional sales of shares of our common stock are likely to have a dilutive effect on some or all of our then existing stockholders. Resales of newly issued shares in the open market could also have the effect of lowering our stock price, thereby
increasing the number of shares we may need to issue in the future to raise the same dollar amount and consequently further diluting our outstanding shares.



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January 31, 2008



The perceived risk associated with the possible sale of a large number of shares could cause some of
our stockholders to sell their stock, thus causing the price of our stock to decline. In addition, actual or anticipated downward pressure on our stock price due to actual or anticipated sales of stock could cause some institutions or individuals to
engage in short sales of our common stock, which may itself cause the price of our stock to decline.

If our stock price declines, we may
be unable to raise additional capital. A sustained inability to raise capital could force us to go out of business. Significant declines in the price of our common stock could also impair our ability to attract and retain qualified employees, reduce
the liquidity of our common stock and result in the delisting of our common stock from the Nasdaq Stock Market.

Shares eligible for
future sale may cause the market price for our common stock to drop significantly, even if our business is doing well.

We cannot
predict the effect, if any, of future sales of our common stock or the availability of shares for future sale will have on the market price of our common stock from time to time. Shares of our common stock issued in the future, including shares
issued upon exercise of outstanding options and warrants, may become available for resale in the public market from time to time, and the market price of shares of our common stock could drop significantly if the holders of these shares sell them or
are perceived by the market as intending to sell them.

Our stock price has been and may continue to be highly volatile; volatility
may adversely affect holders of our stock and our ability to raise capital.

The trading price of our common stock has been and is
likely to continue to be extremely volatile. During the period from November 1, 2004 to January 31, 2008, the trading price of our stock ranged from a low of $0.31 per share (on January 9, 2008) to a high of $23.10 per share (on
January 4, 2005). Our stock price and trading volume could be subject to wide fluctuations in response to a variety of factors including, but not limited to, the following:



| |  |  | 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.
| | - |  | -----------------------------------------------------------------------------------------------------------



27



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##### Table of Contents

BIOPURE CORPORATION

Part IIOther Information

January 31, 2008



External factors may also adversely affect the market price for our common stock. The price and
liquidity of our common stock may be significantly affected by the overall trading activity and market factors affecting small capitalization biotechnology stocks generally.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

None



|Item 5. | Other Information.
|------- | ------------------

None



|Item 6. | Exhibits
|------- | --------

The exhibits are listed in the accompanying Exhibit
Index.



28



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |                     |  |                                
|-------------------- |  | ------------------- |  | -------------------------------
|                     |  | BIOPURE CORPORATION
|                     |  |                    
|Date: March 17, 2008 |  | By:                 |  | /s/ David A. Butler            
|                     |  |                     |  | David A. Butler                
|                     |  |                     |  | Interim Chief Financial Officer



29



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##### Table of Contents

EXHIBIT INDEX



|         |  |                                                                                                                                                |  |         
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|Exhibits |  | Description                                                                                                                                    |  | Location
|3  (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)    
|         |  |                                                                                                                                               
|4.28     |  | Form of Investor Warrant, dated November 6, 2007                                                                                               |  | (13)    
|         |  |                                                                                                                                               
|4.29     |  | Form of Underwriters Investor Warrant, dated November 6, 2007                                                                                 |  | (13)    
|         |  |                                                                                                                                               
|4.30     |  | Form of Underwriters Warrant, dated November 6, 2007                                                                                          |  | (13)    
|         |  |                                                                                                                                               
|31.1     |  | Certification of Zafiris G. Zafirelis pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                |  |         
|         |  |                                                                                                                                               
|31.2     |  | Certification of David A. Butler pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |  |         
|         |  |                                                                                                                                               
|32.1     |  | 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 2002 |  |         
|         |  |                                                                                                                                               
|32.2     |  | Certification of David A. Butler pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002      |  |         



30



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##### Table of Contents

|     |  |                                                                                                                                                                                      
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  |  | Previously filed as an exhibit to the Companys report on Form 8-K dated October 2, 2007 and incorporated herein by reference thereto.                                               
|(2)  |  | Previously filed as an exhibit to the Companys report on Form 8-K dated December 14, 2007 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.                                            
|(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.                             
|(13) |  | Previously filed as an exhibit to the Companys registration statement on Form S-1/A (File No. 333-146013) and incorporated herein by reference thereto.                             



31