##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period
from                  to
 Commission File Number 001-15167
 BIOPURE CORPORATION
  Delaware
    
    04-2836871(State of Incorporation)
    
    (IRS Employer Identification Number)11 Hurley Street, Cambridge, Massachusetts
    
    02141(Address of principal executive offices)
    
    (Zip Code)
 (617) 234-6500
   þ o
  o o þ
 o þ
  Class A Common Stock, $.01 par value
    
    77,955,124Class B Common Stock, $1.00 par value
    
    117.7




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##### 



BIOPURE CORPORATION
 INDEX TO FORM 10-Q
 PagePart I  Financial Information:Item 1  Financial Statements (Unaudited)Condensed Consolidated Balance Sheets at April 30, 2007 and October 31, 2006
    
    
    3Condensed Consolidated Statements of Operations for the three and six months ended
April 30, 2007 and April 30, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended April 30,
2007 and April 30, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3  Quantitative and Qualitative Disclosure of Market Risk
    
    
    18Item 4  Controls and Procedures
    
    
    18Part II  Other Information:Item 1  Legal Proceedings
    
    
    19Item 1A  Risk Factors
    
    
    19Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3  Defaults Upon Senior Securities
    
    
    28Item 4  Submission of Matters to a Vote of Security Holders
    
    
    28Item 5  Other Information
    
    
    29Item 6  Exhibits
    
    
    29Signatures
    
    
    30Exhibit Index
    
    
    31EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
  ® ® ®




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##### Table of Contents



April 30, 2007
    
    
    October 31, 2006Assets:Current assets:Cash and cash equivalents
    
    $
    11,463
    
    
    $
    6,576Accounts receivable, net
    
    
    61
    
    
    
    80Inventories
    
    
    2,636
    
    
    
    2,850Other current assets
    
    
    1,336
    
    
    
    1,346Total current assets
    
    
    15,496
    
    
    
    10,852Property, plant and equipment, net
    
    
    20,637
    
    
    
    22,175Other assets
    
    
    777
    
    
    
    805Total assets
    
    $
    36,910
    
    
    $
    33,832Liabilities and stockholders equity:Current liabilities:Accounts payable
    
    $
    693
    
    
    $
    569Accrued expenses
    
    
    2,203
    
    
    
    3,250Current portion of deferred revenue
    
    
    130
    
    
    
    190Current portion of restructuring charges
    
    
    163
    
    
    
    207Total current liabilities
    
    
    3,189
    
    
    
    4,216Deferred revenue, net of current portion
    
    
    1,115
    
    
    
    987Restructuring charges, net of current portion
    
    
    
    
    
    
    46Other long-term liabilities
    
    
    41
    
    
    
    41Total long-term liabilities
    
    
    1,156
    
    
    
    1,074Commitments and contingencies, Notes 10 & 12Stockholders equity:Preferred stock, $0.01 par value,
30,000,000 shares authorized, no shares
outstanding
    
    
    
    
    
    
    Common stock:Class A, $0.01 par value,
200,000,000 shares authorized,
77,955,124 shares outstanding at
April 30, 2007 and 49,365,125 at
October 31, 2006
    
    
    780
    
    
    
    494Class B, $1.00 par value, 179
shares authorized, 117.7 shares
outstanding
    
    
    
    
    
    
    Capital in excess of par value
    
    
    545,822
    
    
    
    529,172Contributed capital
    
    
    24,574
    
    
    
    24,574Notes receivable, net of reserve
    
    
    
    
    
    
    (235
    )Accumulated deficit
    
    
    (538,611
    )
    
    
    (525,463
    )Total stockholders equity
    
    
    32,565
    
    
    
    28,542Total liabilities and stockholders equity
    
    $
    36,910
    
    
    $
    33,832
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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedApril 30, 2007
    
    
    April 30, 2006
    
    
    April 30, 2007
    
    
    April 30, 2006Revenues:Product revenue
    
    $
    506
    
    
    $
    330
    
    
    $
    966
    
    
    $
    675Research and development revenue
    
    
    113
    
    
    
    81
    
    
    
    247
    
    
    
    213Total revenues
    
    
    619
    
    
    
    411
    
    
    
    1,213
    
    
    
    888Cost of product revenues
    
    
    2,775
    
    
    
    3,338
    
    
    
    5,937
    
    
    
    6,412Gross loss
    
    
    (2,156
    )
    
    
    (2,927
    )
    
    
    (4,724
    )
    
    
    (5,524
    )Operating expenses:Research and development
    
    
    1,864
    
    
    
    1,866
    
    
    
    3,779
    
    
    
    3,340Sales and marketing
    
    
    366
    
    
    
    155
    
    
    
    758
    
    
    
    327General and administrative
    
    
    2,027
    
    
    
    2,287
    
    
    
    4,258
    
    
    
    4,587Total operating expenses
    
    
    4,257
    
    
    
    4,308
    
    
    
    8,795
    
    
    
    8,254Loss from operations
    
    
    (6,413
    )
    
    
    (7,235
    )
    
    
    (13,519
    )
    
    
    (13,778
    )Other income, net
    
    
    193
    
    
    
    126
    
    
    
    371
    
    
    
    229Net loss
    
    $
    (6,220
    )
    
    $
    (7,109
    )
    
    $
    (13,148
    )
    
    $
    (13,549
    )Per share data:Basic and diluted net loss per
common share
    
    $
    (0.08
    )
    
    $
    (0.18
    )
    
    $
    (0.18
    )
    
    $
    (0.40
    )Weighted-average shares used in
computing basic and diluted net
loss per common share
    
    
    77,810
    
    
    
    39,574
    
    
    
    71,184
    
    
    
    34,194
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Six Months EndedApril 30, 2007
    
    
    April 30, 2006Operating activities:Net loss
    
    $
    (13,148
    )
    
    $
    (13,549
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    1,666
    
    
    
    1,901Stock-based compensation expense
    
    
    548
    
    
    
    514Note receivable reserve
    
    
    235
    
    
    
    Accretion of restructuring charge
    
    
    4
    
    
    
    18Loss on disposal of fixed asset
    
    
    
    
    
    
    43Inventory writedowns
    
    
    236
    
    
    
    721Changes in assets and liabilities:Accounts receivable
    
    
    19
    
    
    
    (2
    )Inventories
    
    
    (22
    )
    
    
    (242
    )Other current assets
    
    
    4
    
    
    
    371Accounts payable
    
    
    124
    
    
    
    (131
    )Accrued expenses
    
    
    (1,047
    )
    
    
    232Deferred revenue
    
    
    68
    
    
    
    Restructuring charges
    
    
    (94
    )
    
    
    (107
    )Net cash used in operating activities
    
    
    (11,407
    )
    
    
    (10,231
    )Investing activities:Purchases of property, plant and equipment
    
    
    (114
    )
    
    
    (106
    )Disposals of equipment
    
    
    20
    
    
    
    Net cash used in investing activities
    
    
    (94
    )
    
    
    (106
    )Financing activities:Net proceeds from sale of common stock and warrants
    
    
    16,388
    
    
    
    9,116Proceeds from the exercise of warrants
    
    
    
    
    
    
    2,120Net cash provided by financing activities
    
    
    16,388
    
    
    
    11,236Net increase in cash and cash equivalents
    
    
    4,887
    
    
    
    899Cash and cash equivalents at beginning of period
    
    
    6,576
    
    
    
    10,542Cash and cash equivalents at end of period
    
    $
    11,463
    
    
    $
    11,441Supplemental disclosure of cash flow information:Fair value of warrants issued in conjunction with sales of common
stock
    
    $
    7,264
    
    
    $
    8,263
 
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1.
    
    Basis of PresentationThe accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States for interim
financial information and pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included. Operating results
for the three and six month periods ended April 30, 2007 are not necessarily indicative of the
results that may be expected for the year ending October 31, 2007; however, the Company expects
to incur a substantial loss for the year ending October 31, 2007.The accompanying consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries, Biopure Netherlands, BV, Biopure South Africa, Pty, Ltd., Reperfusion
Systems Incorporated, DeNovo Technologies Corporation and Biopure Overseas Holding Company, and
NeuroBlok Incorporated, a 60% owned subsidiary. All intercompany accounts and transactions have
been eliminated in consolidation.These financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal
year ended October 31, 2006, filed with the SEC on January 29, 2007.The Company has financed operations from inception primarily through sales of equity securities
and development and license agreement payments. The Company has not been profitable since
inception and had an accumulated deficit of $538.6 million at April 30, 2007. As of April 30,
2007, the Company had $11.5 million in cash and cash equivalents. The Company expects this
funding to be sufficient to fund operations into October 2007 under the current operating plan.
The Company will require significant additional funding to remain a going concern and to fund
operations until such time, if ever, as it becomes profitable. The Company intends to seek
additional capital through sales of equity securities and, if appropriate, to consider strategic
collaborations for sharing development and commercialization costs. However, there can be no
assurance that adequate additional financing will be available to the Company on terms that it
deems acceptable, if at all. Furthermore, the Company may not continue to qualify for continued
listing on the Nasdaq Capital Market. If that occurs, the Companys ability to raise funds will
be adversely affected.In the accompanying condensed consolidated balance sheet as of October 31, 2006, $231,000 has
been reclassified from property, plant and equipment, net, to other current assets to conform to
the current periods presentation. See Note 9 for additional information.Comprehensive loss approximated net loss for all periods presented.2.
    
    Net Loss per ShareBasic net loss per common share is computed based on the
weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed based upon
the weighted-average number of common shares outstanding during the period, adjusted for the
dilutive effect of the Companys common stock equivalents,
including the maximum number of shares issuable upon the conversion of class B common stock outstanding and the exercise of
common stock options and warrants. The dilutive effect of stock options and warrants is
determined based on the treasury stock method using the average market price of the class A
common stock for the period. However, basic and diluted net loss per common share are presented
as the same for all periods presented, as the Company had losses for all periods presented, so
the effect of class B common stock, options and warrants is anti-dilutive. Consequently,
dilutive weighted average shares outstanding do not include 60,205,738 potential
common-equivalent shares for the three and six months ended April 30, 2007 and 20,125,594
potential common-equivalent shares for the three and six months ended April 30, 2006, as their
effect would have been anti-dilutive.
 
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3.
    
    Capital StockDuring the six months ended April 30, 2007 the Company issued 240,000 shares of class A common
stock to a consultant. Accordingly, the Company recorded a one-time, non-cash expense of
$139,000, included in general and administrative expense in the attached condensed consolidated
statement of operations, representing the grant date fair value of the shares.4.
    
    Stock Based CompensationAs of April 30, 2007, the Company had one share-based compensation plan, the Biopure Corporation
2002 Omnibus Securities and Incentive Plan (the Plan). The Plan is shareholder approved and
permits the grant of stock or stock options to the Companys employees, consultants and
directors. The Plan has 4.37 million shares of common stock authorized. Employee option awards
are generally granted with an exercise price equal to the market price of the Companys stock at
the date of grant. Options vest at the times specified in the option grants, generally over
periods of up to four years. Most options granted have a 10-year term and expire if not
exercised within ten years of the date of grant. Shares issued upon exercise of options are
generally issued from new shares of the Company.The Company adopted the provisions of Statement of Financial Accounting Standards 123(R),
Share-Based Payment (SFAS 123(R)), beginning November 1, 2005, using the modified prospective
transition method. Under the modified prospective transition method, financial statements for
periods prior to the adoption date are not retrospectively adjusted. However, compensation
expense is recognized, based on the requirements of SFAS 123(R), for (a) all share-based
payments granted after the effective date and (b) all awards granted to employees prior to the
effective date that remain unvested as of the effective date.Prior to adopting SFAS 123(R), the Company used the intrinsic value method to account for
stock-based compensation under Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. Historically the fair value of options granted was calculated using the
Black-Scholes option pricing model. The Company has elected to continue to use this model. SFAS
123(R) also requires companies to utilize an estimated forfeiture rate when calculating the
expense for the period, while SFAS 123, Accounting for Stock-Based Compensation, permitted
companies to record actual forfeitures as they occurred, which was the Companys historical
policy. In determining the expense recorded in the Companys consolidated statement of
operations, the Company has applied an estimated forfeiture rate to remaining unvested awards
based on historical experience. This estimate is evaluated quarterly and the forfeiture rate is
adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will
only be for those shares that vest. The Company has elected to recognize compensation cost for
awards with incremental vesting using the straight-line method.The fair value of each stock option is estimated on the date of grant using the Black-Scholes
option pricing model with the assumptions noted in the following table. The weighted average
risk-free interest rate is based on a treasury instrument, the term of which is consistent with
the expected life of the stock options. Expected volatility is based exclusively on historical
volatility data of the Companys common stock. The Company estimates stock option forfeitures
based on historical experience. The Company was unable to use historical information to estimate
the expected term due to a lack of historical exercise activity and therefore used the
simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107.
 Three Months Ended
    
    

Six
Months EndedApril 30,
    
    
    April 30,
    
    
    April 30,
    
    
    April 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Weighted average risk-free interest rate
    
    
    4.58
    %
    
    
    4.78
    %
    
    
    4.58
    %
    
    
    4.70
    %Expected volatility
    
    
    85
    %
    
    
    85
    %
    
    
    85
    %
    
    
    85
    %Expected lives (years)
    
    
    5.42
    
    
    
    5.42
    
    
    
    5.42
    
    
    
    5.42Expected dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 During the first six months of fiscal 2007 and 2006, approximately 1.3 million and 152,000
options, respectively, were
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granted with a weighted average grant-date fair value of $0.39 and $0.93 per share,
respectively.As of April 30, 2007, there was $1.4 million 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 2.57 years.During the first six months of fiscal 2007 and 2006, there were no options exercised. The total
fair value of shares vested during fiscal 2007 and 2006 were $68,000 and $126,000, respectively.5.
    
    InventoriesInventories are valued at the lower of cost (determined using the first-in, first-out method) or
market. Inventories were as follows at the following dates:
 In thousands
    
    April 30, 2007
    
    
    October 31, 2006Raw materials
    
    $
    660
    
    
    $
    535Work-in-process
    
    
    263
    
    
    
    343Finished goods-Oxyglobin
    
    
    1,256
    
    
    
    1,160Finished goods-Hemopure
    
    
    457
    
    
    
    812$
    2,636
    
    
    $
    2,850
 The inventory of Hemopure [hemoglobin glutamer  250 (bovine)] finished goods represents those
units the Company expects to sell in South Africa or those 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 a $721,000 write-down of inventory in the second fiscal quarter of 2006 and no such
write off during the second fiscal quarter of 2007. If the Company continues to experience a
lack of or 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 ExpensesAccrued expenses were as follows at the following dates:
 In thousands
    
    April 30, 2007
    
    
    October 31, 2006Accrued payroll and related employee expenses
    
    $
    613
    
    
    $
    198Financing fees
    
    
    537
    
    
    
    537Accrued severance
    
    
    
    
    
    
    568Accrued legal and audit fees
    
    
    156
    
    
    
    1,054Accrued vacation
    
    
    269
    
    
    
    300Other
    
    
    628
    
    
    
    593$
    2,203
    
    
    $
    3,250
 Accrued severance at October 31, 2006 included costs related to the resignation, in fiscal 2005,
of the Companys Chief Technology Officer. At October 31, 2006, the Company had an accrual of
$568,000, representing the amount owed to him in accordance with his employment agreement.
During the first six months of fiscal 2007, the Company paid $175,000 of this amount. Because
the Company is no longer obligated to pay the remaining $393,000 due to a breach of agreement,
it has removed this amount from accrued expenses in the accompanying condensed consolidated
balance sheet.7.
    
    Note Receivable from ShareholderDuring the second quarter of fiscal 2007 the Company reserved for a $235,000 note receivable
from its former Chief Technology Officer. The principal on this note, included in stockholders
equity as note receivable in the accompanying condensed consolidated financial statements, is
due on July 31, 2007. The Company intends to
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pursue payment of this note. However, during the quarter the Company determined that collecting
payment on this note can not reasonably be assured and that a reserve is appropriate. The
Company charged general and administrative expense by $235,000 and established the reserve,
which is offsetting the note receivable within stockholders equity in the accompanying
condensed consolidated financial statements.8.
    
    RestructuringDuring 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, to be paid monthly through February
2008, is accrued in the current portion of restructuring charges on the condensed consolidated
balance sheet at April 30, 2007.The following table shows the restructuring activity and liability balances (in thousands):
 Balance at October 31, 2006
    
    $
    253Payments
    
    
    (94
    )Accretion of liability
    
    
    4Balance at April 30, 2007
    
    $
    163
 9.
    
    Other Current AssetsDuring fiscal 2006, management identified certain manufacturing equipment that the Company was
not using and did not expect to be able to use in the future, resulting in a decision by
management to pursue 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 early 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 April 30, 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, as discussed above. The Company reclassified the value
of this equipment, $231,000 as of October 31, 2006, to other current assets within the Companys
condensed consolidated balance sheets for comparative purposes in accordance with FAS 144. The
Company has not recognized any gains or losses during the quarter ended April 30, 2007 related
to this asset.10.
    
    Commitments and ContingenciesResearch Agreement(1)In 2003, the Company entered into a Cooperative Research and Development Agreement (CRADA) with
the NMRC. Under the CRADA, as amended, the NMRC has primary responsibility for designing,
seeking U.S. Food and Drug Administration (FDA) acceptance of, and conducting a planned Phase
2/3 clinical trial of Hemopure in trauma patients with severe hemorrhagic shock (acute blood
loss) in the out-of-hospital setting. The clinical development plan is being changed so that
there is expected to be a separate Phase 2 trial. The
 
 (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. 
 9




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Company believes that all or most of its costs for developing a trauma indication could be
covered by government funding. To date, the U.S. Congress has appropriated a total of $22.5
million to the Department of Defense ($16 million to the Navy, $6.5 million to the Army) for the
development of Hemopure in potential civilian and military trauma applications,(2)of
which approximately $1.6 million has been reverted due to delays in initiating the RESUS
clinical trial. The funding is being 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. If there are additional delays in
the start of the proposed clinical trial, additional funds could be reverted in the future. As
part of the CRADA the NMRC paid approximately $1.2 million for future inventory purchases,
recorded in the accompanying consolidated balance sheet as deferred revenue. 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.11.
    
    Recently Issued Accounting StandardsIn February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS 159). SFAS 159
permits entities to choose to measure many financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has been elected are
reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007,
or fiscal 2009 for the Company. The Company is currently assessing the impact of SFAS 159 on its
consolidated financial statements.12.
    
    LitigationBiopure, two outside directors (one a former director), its former chief executive officer,
former chief technology officer, former chief financial officer and former senior vice president
of regulatory affairs were named as defendants in a number of purported class action complaints,
filed between December 30, 2003 and January 28, 2004, in the United States District Court for
the District of Massachusetts (the District Court) by alleged purchasers of the Companys
common stock. Those complaints were consolidated in a single action, in regards to Biopure
Corporation Securities Litigation. The consolidated matter has since been settled and the
District Court entered an Order of Preliminary Approval of the settlement on May 23, 2007. A
fairness hearing is scheduled for September 24, 2007 for final approval. Under the terms of the
settlement , all claims are to be dismissed with prejudice and there is no financial effect on
the Company or any of the individual defendants.The seven members of the Companys Board of Directors during the period March through December
2003 and certain officers during that period were named as defendants in two stockholder
derivative actions filed on January 26, 2004 and January 29, 2004 in the District Court. A
consolidated, amended complaint was filed in regard to Biopure Corporation Derivative
Litigation. 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. No amounts have been accrued to date with regard to this litigation and a similar
claim in the Trial Court of Middlesex County. The Company believes these cases are without
merit.
 
 (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. 10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement Regarding Forward-Looking Information
    Overview
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Ischemia
  
    
    A 60-patient Phase 2 clinical trial to assess the safety and feasibility of Hemopure in
reducing heart damage and enhancing tissue preservation in patients undergoing multi-vessel
coronary artery bypass graft (CABG) surgery. The trial has enrolled a total of 28 patients
to date.
    
    A 100-patient Phase 2 clinical trial to assess the safety and feasibility of Hemopure
in increasing the incidence of complete wound healing and reducing the incidence of
subsequent amputations in patients with severe peripheral vascular disease who are
undergoing limb amputation below or through the knee joint. This trial has enrolled 13
patients to date.
    
    A trial design, for an 8-patient study in patients with multi-vessel coronary artery
disease who are undergoing percutaneous coronary intervention, has enrolled two patients.
The protocol for this trial is being amended. The Company has stopped enrollment pending
receipt of hospital approval for the amendment.
  Trauma
  12




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




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##### Table of Contents



Stock-Based Compensation
  Long-Lived Assets
   Revenue Recognition
  14




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    Six Months EndedApril 30, 2007
    
    
    April 30, 2006
    
    
    April 30, 2007
    
    
    April 30, 2006Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Percent of
    
    
    
    
    
    
    Percent ofAmount
    
    
    Total Costs
    
    
    Amount
    
    
    Total Costs
    
    
    Amount
    
    
    Total Costs
    
    
    Amount
    
    
    Total CostsOxyglobin Product Sales
    
    $
    500
    
    
    
    
    
    
    $
    327
    
    
    
    
    
    
    $
    944
    
    
    
    
    
    
    $
    668Hemopure Product Sales
    
    
    6
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    22
    
    
    
    
    
    
    
    7Research and Development
Revenues
    
    
    113
    
    
    
    
    
    
    
    81
    
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    210Other Revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Total Revenues
    
    
    619
    
    
    
    
    
    
    
    411
    
    
    
    
    
    
    
    1,213
    
    
    
    
    
    
    
    888Cost of RevenuesOxyglobin
    
    
    643
    
    
    
    9
    %
    
    
    717
    
    
    
    9
    %
    
    
    1,462
    
    
    
    10
    %
    
    
    1,415
    
    
    
    10
    %Hemopure
    
    
    2,132
    
    
    
    30
    %
    
    
    2,621
    
    
    
    35
    %
    
    
    4,475
    
    
    
    30
    %
    
    
    4,997
    
    
    
    34
    %Total Cost of Revenues
    
    
    2,775
    
    
    
    39
    %
    
    
    3,338
    
    
    
    44
    %
    
    
    5,937
    
    
    
    40
    %
    
    
    6,412
    
    
    
    44
    %Research and Development
    
    
    1,864
    
    
    
    27
    %
    
    
    1,866
    
    
    
    24
    %
    
    
    3,779
    
    
    
    26
    %
    
    
    3,340
    
    
    
    23
    %Sales and Marketing
Oxyglobin
    
    
    21
    
    
    
    0
    %
    
    
    23
    
    
    
    0
    %
    
    
    40
    
    
    
    0
    %
    
    
    41
    
    
    
    0
    %Hemopure
    
    
    345
    
    
    
    5
    %
    
    
    132
    
    
    
    2
    %
    
    
    718
    
    
    
    5
    %
    
    
    286
    
    
    
    2
    %Total Sales and Marketing
    
    
    366
    
    
    
    5
    %
    
    
    155
    
    
    
    2
    %

    
    
    758
    
    
    
    5
    %
    
    
    327
    
    
    
    2
    %General and Administrative
    
    
    2,027
    
    
    
    29
    %
    
    
    2,287
    
    
    
    30
    %
    
    
    4,258
    
    
    
    29
    %
    
    
    4,587
    
    
    
    31
    %Total Costs
    
    $
    7,032
    
    
    
    100
    %
    
    $
    7,646
    
    
    
    100
    %
    
    $
    14,732
    
    
    
    100
    %
    
    $
    14,666
    
    
    
    100
    %
 Three months ended April 30, 2007 compared to three months ended April 30, 2006
    Three Months EndedApril 30, 2007
    
    April 30, 2006Percent of
    
    
    
    
    
    Percent ofAmount
    
    Total R&D Costs
    
    Amount
    
    Total R&D CostsIschemia Program
    
    $
    798
    
    
    
    43
    %
    
    $
    537
    
    
    
    29
    %Trauma Program
    
    
    489
    
    
    
    26
    
    
    
    223
    
    
    
    12
 15




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Six months ended April 30, 2007 compared to six months ended April 30, 2006
    16




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##### Table of Contents



Six Months EndedApril 30, 2007
    
    April 30, 2006Percent of
    
    
    
    
    
    Percent ofAmount
    
    Total R&D Costs
    
    Amount
    
    Total R&D CostsIschemia Program
    
    $
    1,239
    
    
    
    33
    %
    
    $
    912
    
    
    
    27
    %Trauma Program
    
    
    1,144
    
    
    
    30
    
    
    
    421
    
    
    
    13
    Liquidity and Capital Resources
    17




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Item 4. Controls and Procedures
     18




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##### Table of Contents



Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Company Risks
 We have a history of losses and expect future losses.
  We could fail to remain a going concern.
    We could fail in financing efforts if we fail to receive stockholder approval when needed.
  19




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##### Table of Contents



Failure to raise sufficient additional funds will significantly impair or possibly cause us to
cease the development, manufacture and sale of our products and our ability to operate.
  If we fail to obtain FDA approval to market Hemopure, the Company will be highly adversely
affected.
      If we fail to obtain regulatory approvals in foreign jurisdictions, we will not be able to market
Hemopure abroad.
 20




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##### Table of Contents



Clinical trials are extremely costly and subject to numerous risks and uncertainties.
   If we do not have the financial resources to fund trials required to develop Hemopure for multiple
potential indications, our success as a Company will be adversely affected.
  If the Navy were to abandon its attempt to develop Hemopure for a trauma indication, it would have
a serious adverse effect on the Companys prospects.
  If we cannot retain the personnel we need, our costs will rise significantly. If we cannot hire or
retain highly qualified people, our operations will suffer.
 21




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##### Table of Contents



If we cannot generate adequate, profitable sales of Hemopure, we will not be successful.
  If we cannot find appropriate marketing partners, we may not be able to market and distribute
Hemopure effectively.
  
    
    might not be successful in marketing Hemopure;
    
    might, at its discretion, limit the amount and timing of resources it devotes to
marketing Hemopure; and/or
    
    might terminate its agreement with us and abandon our products at any time whether or
not permitted by the applicable agreement.
  If we cannot obtain market acceptance of Hemopure, we will not be able to generate adequate,
profitable sales.
  
    
    whether and how quickly physicians and third party payors accept Hemopure as a
cost-effective therapeutic;
    
    whether medical care providers or the public accept the use of a bovine-derived protein
as a therapeutic in ischemia or any other indication, particularly in light of public
perceptions in the U.S., Europe and elsewhere about the risk of mad cow disease; and
    
    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.
  22




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##### Table of Contents



The manufacturing process for Hemopure is complicated and time-consuming, and we may experience
problems that would limit our ability to manufacture and sell Hemopure.
  If we were unable to use our manufacturing facilities in Massachusetts or Pennsylvania, we would
not be able to manufacture for an extended period of time.
  If Hemopure receives regulatory approval in a major market, we will be required to expand our
manufacturing capacity to develop our business, which will require substantial third-party
financing. Failure to increase our manufacturing capacity and to lower our manufacturing cost per
unit may impair market acceptance of Hemopure and prevent us from achieving profitability.
   Our lack of operating history makes evaluating our business difficult.
  If we are not able to protect our intellectual property, competition could force us to lower our
prices, which might reduce profitability.
 23




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##### Table of Contents



Failure to avoid infringement of others intellectual property rights could impair our ability to
manufacture and market our products.
   Our operating results will be adversely affected if we incur product liability claims in excess of
our insurance coverage.
  Replacing our sole- source suppliers for key materials could result in unexpected delays and
expenses.
   Changes in the securities laws and regulations are likely to increase our costs.
 24




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##### Table of Contents



Provisions of our restated certificate of incorporation and by-laws could impair or delay
stockholders ability to replace or remove our management and could discourage takeover
transactions that a stockholder might consider to be in its best interest.
  
    
    Our restated certificate of incorporation does not permit stockholders to take action
by written consent and provides for a classified board of directors, and our by-laws
provide that stockholders who wish to bring business before an annual meeting of
stockholders or to nominate candidates for election of directors at an annual meeting of
stockholders must deliver advance notice of their proposals to us before the meeting. These
provisions could make it more difficult for a party to replace our board of directors by
requiring two annual stockholder meetings to replace a majority of the directors, making it
impossible to remove or elect directors by written consent in lieu of a meeting and making
it more difficult to introduce business at meetings.
    
    Our stockholder rights plan may have the effect of discouraging any person or group
that wishes to acquire more than 20% of our Class A common stock from doing so without
obtaining our agreement to redeem the rights. If our agreement to redeem the rights is not
obtained, the acquiring person or group would suffer substantial dilution.
 Industry Risks
 Intense competition could harm our financial performance.
  25




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##### Table of Contents




    
    are conducting clinical trials of their products;
    
    have or may be able to access substantially greater resources than we have and be
better equipped to develop, manufacture and market their products;
    
    may have their products approved for marketing prior to Hemopure; and
    
    may develop superior technologies or products rendering our technology and products
non-competitive or obsolete.
 Stringent, ongoing government regulation and inspection of our products could lead to delays in
the manufacture, marketing and sale of our products.
  Health care reform and controls on health care spending may limit the price we can charge for
Hemopure and the amount we can sell.
  Uncertainty of third-party reimbursement could affect our profitability.
  Investment Risks
 The Nasdaq Capital Market may cease to list our Class A common stock which may cause the value of
an
 26




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##### Table of Contents



investment in our Company to substantially decrease.
   As we sell additional shares, our stock price may decline as a result of the dilution which will
occur to existing stockholders.
    Shares eligible for future sale may cause the market price for our common stock to drop
significantly, even if our business is doing well.
  Our stock price has been and may continue to be highly volatile, which may adversely affect
holders of our stock and our ability to raise capital.
  
    
    failure to identify and hire key personnel or the loss of key personnel;
 27




---



##### Table of Contents




    
    an inability to obtain or the perception that we will be unable to obtain adequate
financing to fund our operations;
    
    FDA action or delays in FDA action on Hemopure or competitors products;
    
    publicity regarding actual, perceived or potential medical issues relating to products
under development by us or our competitors;
    
    actual or potential preclinical or clinical trial results relating to products under
development by us or our competitors;
    
    delays in our testing and development schedules;
    
    announcements of technological innovations or new products by our competitors;
    
    developments or disputes concerning patents or proprietary rights;
    
    regulatory developments in the U.S. and foreign countries;
    
    economic and other factors, as well as period-to-period fluctuations in our financial results;
    
    market conditions for pharmaceutical and biotechnology stocks; and
    
    additional, future communications from the Nasdaq Stock Market concerning delisting or
potential delisting.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
 (a)
    
    The Company held its 2007 annual meeting of stockholders on April 4, 2007.(b)
    
    The meeting involved the election of directors; see item (c) below.(c)
    
    Each matter voted upon at the meeting and the votes, were as follows:(i)
    
    Daniel P. Harrington and Jay B. Pieper were elected as directors at the meeting. The other
directors whose terms of office continued after the meeting are Zafiris G. Zafirelis, David N.
Judelson, Guido J. Neels and C. Everett Koop, M.D. The shares voted for the election of
directors were as follows:
 For
    
    WithheldDaniel P. Harrington
    
    
    61,851,290
    
    
    
    1,113,698Jay B. Pieper
    
    
    61,966,368
    
    
    
    998,620
 28




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##### Table of Contents



(ii)
    
    Ratification of the selection by the audit committee of Ernst & Young LLP as the Companys
independent registered public accounting firm was approved and the shares voted were as
follows:
 For
    
    Against
    
    Abstain62,198,880
    
    
    623,186
    
    
    
    142,922
  
 Item 5. Other Information.
  
 Item 6. Exhibits
  29




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##### Table of Contents



SIGNATURES
  BIOPURE CORPORATIONDate: June 14, 2007
    By:
    /s/ Francis H MurphyFrancis H. MurphyChief Financial Officer 30




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##### Table of Contents



EXHIBIT INDEX
 Exhibits
    
    Description
    
    Location3 (i)
    
    Restated Certificate of Incorporation of Biopure, as amended
    
    
    (1
    )3 (ii)
    
    By-laws of Biopure, as amended
    
    
    (2
    )4.1
    
    Form of Selling Agent Warrants, dated April 23, 2002
    
    
    (3
    )4.2
    
    Form of Underwriter Warrant, dated March 2003
    
    
    (4
    )4.3
    
    Form of Investor Warrant, dated April 2003
    
    
    (4
    )4.4
    
    Form of Underwriter Warrant, dated April 2003
    
    
    (4
    )4.5
    
    Underwriter Warrant dated, April 16, 2003
    
    
    (5
    )4.6
    
    Form of Investor Warrant, dated May 2, 2003
    
    
    (4
    )4.7
    
    Form of Investor Warrant, dated May 6, 2003
    
    
    (4
    )4.8
    
    Form of Investor Warrant, dated October 17, 2003
    
    
    (5
    )4.9
    
    Form of Investor Warrant, dated February 19, 2004
    
    
    (5
    )4.10
    
    Form of Investor Warrant, dated September 2004
    
    
    (6
    )4.11
    
    Form of Underwriter Warrant, dated September 2004
    
    
    (6
    )4.12
    
    Form of Investor Warrant, dated December 14, 2004
    
    
    (7
    )4.13
    
    Form of Underwriter Warrant, dated December 14, 2004
    
    
    (7
    )4.14
    
    Form of Underwriter Warrants, dated January 10, 2005
    
    
    (8
    )4.15
    
    Form of Consultant Warrant, dated July 29, 2005
    
    
    (5
    )4.16
    
    Form of Underwriter Warrant, dated December 2005
    
    
    (9
    )4.17
    
    Amended Form of Investor Warrant, dated December 27, 2005
    
    
    (10
    )4.18
    
    Amended Form of Underwriter Investor Warrant, dated December 27, 2005
    
    
    (5
    )4.19
    
    Form of Investor Warrant, dated January 2006
    
    
    (5
    )4.20
    
    Form of Underwriter Warrant, dated January 2006
    
    
    (5
    )4.21
    
    Form of Underwriter Investor Warrant, dated January 17, 2006
    
    
    (10
    )4.22
    
    Form of Investor Warrant, dated August 23, 2006
    
    
    (11
    )4.23
    
    Form of Underwriter Warrant, dated August 23, 2006
    
    
    (11
    )4.24
    
    Form of Underwriter Investor Warrant, dated August 23, 2006
    
    
    (10
    )4.25
    
    Form of Investor Warrant, dated December 2006
    
    
    (12
    )4.26
    
    Form of Underwriters Investor Warrant, dated December 13, 2006
    
    
    (12
    )4.27
    
    Form of Underwriters Warrant, dated December 13, 2006
    
    
    (12
    )31.1
    
    Certification of Zafiris G. Zafirelis pursuant to Section 302 of the
Sarbanes-Oxley Act of 200231.2
    
    Certification of Francis H. Murphy pursuant to Section 302 of the
Sarbanes-Oxley Act of 200232.1
    
    Certification of Zafiris G. Zafirelis pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 200232.2
    
    Certification of Francis H. Murphy pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
 31




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##### Table of Contents



(1)
    
    Previously filed as an exhibit to the Companys report on Form 10-Q for the quarter ended
April 30, 2005, filed June 9, 2005 and incorporated herein by reference thereto.(2)
    
    Previously filed as an exhibit to the Companys registration statement on Form S-1/A (File
No. 333-78829) and incorporated herein by reference thereto.(3)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated April 26, 2002 and
incorporated herein by reference thereto.(4)
    
    Previously filed as an exhibit to the Companys quarterly report on Form 10-Q for the quarter
ended April 30, 2003, filed June 16, 2003 and incorporated herein by reference thereto.(5)
    
    Previously filed as an exhibit to the Companys report on Form 10-K for the year ended
October 31, 2005, filed January 17, 2006 and incorporated herein by reference thereto.(6)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated September 10, 2004
and incorporated herein by reference thereto.(7)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated December 9, 2004 and
incorporated herein by reference thereto.(8)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated January 5, 2005 and
incorporated herein by reference thereto.(9)
    
    Previously filed as an exhibit to the Companys report on Form 8-K filed December 21, 2005
and incorporated herein by reference thereto.(10)
    
    Previously filed as an exhibit to the Companys report on Form 10-Q for the quarter ended
July 31, 2006, filed September 11, 2006 and incorporated herein by reference thereto.(11)
    
    Previously filed as an exhibit to the Companys report on Form 8-K dated August 23, 2006 and
incorporated herein by reference thereto.(12)
    
    Previously filed as an exhibit to the Companys registration statement on Form S-1/A (File No.
333-138049) and incorporated herein by reference thereto. 32