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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                      July 31, 2002                           
|
| |  | |_| 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)



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| |  | 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. Yes |X| No |_|
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The number of shares outstanding of each of the issuers classes of common stock
as of August 31, 2002 was:                                                                                                                                                                                                                                                            

|                                      |  |  |            | 
|------------------------------------- |  |  | ---------- | 
|Class A Common Stock, $.01 par value  |  |  | 29,205,269 | 
|Class B Common Stock, $1.00 par value |  |  | 117.7      | 



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TABLE OF CONTENTS



|                                              |                                                                                                |                                                      |  |  |  |  |  | 
|--------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|Part I Financial Information:               
|                                              | Item 1  Financial Statements (Unaudited)                                                     
|                                              |                                                                                                | Condensed Consolidated Balance Sheets               
|                                              |                                                                                                | Condensed Consolidated Statements of Operations     
|                                              |                                                                                                | Condensed Consolidated Statements of Cash Flows     
|                                              |                                                                                                | Notes to Condensed Consolidated Financial Statements
|                                              |                                                                                                | Independent Accountants Review Report              
|                                              | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|Part II Other Information                   
|                                              | Item 1. Legal Proceedings .                                                                   
|                                              | Item 2. Changes in Securities and Use of Proceeds                                             
|                                              | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                                   
|EXHIBIT INDEX                                
|Ex-10.1 Employment Agreement w/ T. Moore     
|Ex-10.2 Stock Option Agreement               
|Ex-10.3 Employment Agreement w/ C. Rausch    
|Ex-10.4 Promissory Note                      
|Ex-10.5 Deferred Compensation Agreement      
|Ex-10.6 Agreement re: Loan                   
|Ex-10.7 Letter Agreement w/ Paul Looney      
|Ex-15 Acknowledgement of Ernst & Young LLP   
|Ex-99.1 Risk Factors                         
|Ex-99.2 Section 906 Certification - T. Moore 
|Ex-99.3 Section 906 Certification - F. Murphy



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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 July 31, 2002 and
October 31, 2001                                                                                          |    |       | 3   | 
|                               |                                                                                                | Condensed Consolidated Statements of Operations for the
quarters ended July 31, 2002 and July 31, 2001 and
for the nine months ended July 31, 2002 and July 31, 2001 |    |       | 4   | 
|                               |                                                                                                | Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 2002 and July 31, 2001                                                            |    |       | 5   | 
|                               |                                                                                                | Notes to Condensed Consolidated Financial Statements                                                                                                                 |    |       | 6-8 | 
|                               |                                                                                                | Independent Accountants Review Report                                                                                                                               |    |       | 9   | 
|                               | Item 2 - Managements Discussion and Analysis of
Financial Condition and Results of Operations |                                                                                                                                                                      |    | 10-15 |    
|Part II Other Information:    |                                                                                                |                                                                                                                                                                      |    |      
|                               | Item 1
- Legal Proceedings                                                                     |                                                                                                                                                                      |    | 16    |    
|                               | Item 2
- Changes in Securities and Use of Proceeds                                             |                                                                                                                                                                      |    | 16    |    
|                               | Item 6
- Exhibits and Reports on Form 8-K                                                      |                                                                                                                                                                      |    | 16    |    
|Signatures                     |                                                                                                |                                                                                                                                                                      | 17 |      
|Exhibit Index                  |                                                                                                |                                                                                                                                                                      | 18 |      



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

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FORM 10-Q
PART I
ITEM 1
PAGE 1




BIOPURE CORPORATION

Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)

|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |             |   |   |        | 
|------------------------------------- | ------------------------------ | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------ | - | -------- | ------ | ----------- | - | - | ------ | 
|                                      |                                |                                                                                       |                                                                                           |                                                  |   | July 31, |        | October 31,
|                                      |                                |                                                                                       |                                                                                           |                                                  |   | 2002     |        | 2001       
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|Assets:                               |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|Current assets:                       |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      | Cash and cash equivalents      |                                                                                       | $                                                                                         | 30,182                                           |   |          | $      | 36,089      |  
|                                      | Accounts receivable, net       |                                                                                       |                                                                                           | 139                                              |   |          |        | 724         |  
|                                      | Inventories, net               |                                                                                       |                                                                                           | 4,919                                            |   |          |        | 4,665       |  
|                                      | Other current assets           |                                                                                       |                                                                                           | 1,708                                            |   |          |        | 771         |  
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                |                                                                                       |                                                                                           | Total current assets                             |   |          | 36,948 |             |   |   | 42,249 | 
|Property, plant and equipment, net    |                                |                                                                                       | 38,089                                                                                    |                                                  |   |          | 30,162 |            
|Other assets                          |                                |                                                                                       | 11,674                                                                                    |                                                  |   |          | 11,776 |            
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                |                                                                                       |                                                                                           | Total assets                                     |   | $        | 86,711 |             |   | $ | 84,187 | 
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|Liabilities and stockholders equity: |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|Current liabilities:                  |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      | Accounts payable               |                                                                                       | $                                                                                         | 891                                              |   |          | $      | 1,348       |  
|                                      | Accrued expenses               |                                                                                       |                                                                                           | 6,728                                            |   |          |        | 4,949       |  
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                |                                                                                       |                                                                                           | Total current liabilities                        |   |          | 7,619  |             |   |   | 6,297  | 
|Long-term debt                        |                                |                                                                                       | 9,762                                                                                     |                                                  |   |          | 5,205  |            
|Deferred compensation                 |                                |                                                                                       | 184                                                                                       |                                                  |   |          | 1,792  |            
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                |                                                                                       |                                                                                           | Total long-term liabilities                      |   |          | 9,946  |             |   |   | 6,997  | 
|Stockholders equity:                 |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                | Preferred stock, $0.01 par value, 30,000,000 shares
authorized, no shares outstanding |                                                                                           |                                                  |  |          |        |             |  |  
|                                      | Common stock:                  |                                                                                       |                                                                                           |                                                  |   |          |        |             |  
|                                      |                                |                                                                                       | Class A, $0.01 par value, 100,000,000 shares
authorized, 29,205,269 shares outstanding at |                                                  |   |          |        |             |   |   |       
|                                      |                                |                                                                                       |                                                                                           | July 31, 2002 and 25,225,083 at October 31, 2001 |   |          | 292    |             |   |   | 252    | 
|                                      |                                |                                                                                       | Class B, $1.00 par value, 179 shares authorized,
117.7 shares outstanding                 |                                                  |   |         |        |             |   |  |       
|                                      | Capital in excess of par value |                                                                                       |                                                                                           | 415,395                                          |   |          |        | 383,570     |  
|                                      | Contributed capital            |                                                                                       |                                                                                           | 24,574                                           |   |          |        | 24,574      |  
|                                      | Notes receivable               |                                                                                       |                                                                                           | (255                                             | ) |          |        | (1,655      | )
|                                      | Accumulated deficit            |                                                                                       |                                                                                           | (370,860                                         | ) |          |        | (335,848    | )
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|Total stockholders equity            |                                |                                                                                       | 69,146                                                                                    |                                                  |   |          | 70,893 |            
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            
|                                      |                                |                                                                                       |                                                                                           | Total liabilities and stockholders equity       |   | $        | 86,711 |             |   | $ | 84,187 | 
|                                      |                                |                                                                                       |                                                                                           |                                                  |   |          |        |            

Note: The balance sheet at October 31, 2001 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.

See accompanying notes.

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FORM 10-Q
PART I
ITEM 1
PAGE 2

BIOPURE CORPORATION

Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)

|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |        |        | 
|-------------------- | ------------------------------------------------------------------------- | ------------------------ | ------- | ------------------ | ------ | ----------------- | ------- | -------- | ------ | -------- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                     |                                                                           |                          |         | Three Months Ended |        | Nine Months Ended
|                     |                                                                           |                          |         |                    |        |                  
|                     |                                                                           |                          |         | July 31,           |        | July 31,          |         | July 31, |        | July 31,
|                     |                                                                           |                          |         | 2002               |        | 2001              |         | 2002     |        | 2001    
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |         
|Revenues:            |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     | Oxyglobin                                                                 |                          | $       | 259                |        |                   | $       | 945      |        |          | $       | 1,915  |        |   | $       | 2,513  |       
|                     | Other                                                                     |                          |         | 1                  |        |                   |         | 1        |        |          |         | 1      |        |   |         | 6      |       
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     |                                                                           | Total revenues           |         |                    | 260    |                   |         |          | 946    |          |         |        | 1,916  |   |         |        | 2,519  | 
|Cost of revenues     |                                                                           |                          | 2,559   |                    |        |                   | 903     |          |        |          | 4,305   |        |        |   | 2,587   |       
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|Gross profit (loss)  |                                                                           |                          | (2,299  | )                  |        |                   | 43      |          |        |          | (2,389  | )      |        |   | (68     | )     
|Operating expenses:  |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     | Research and development                                                  |                          |         | 7,063              |        |                   |         | 10,297   |        |          |         | 22,188 |        |   |         | 27,486 |       
|                     | Sales and marketing                                                       |                          |         | 875                |        |                   |         | 784      |        |          |         | 1,953  |        |   |         | 2,070  |       
|                     | General and administrative                                                |                          |         | 2,569              |        |                   |         | 1,538    |        |          |         | 9,303  |        |   |         | 13,364 |       
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     |                                                                           | Total operating expenses |         |                    | 10,507 |                   |         |          | 12,619 |          |         |        | 33,444 |   |         |        | 42,920 | 
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|Loss from operations |                                                                           |                          | (12,806 | )                  |        |                   | (12,576 | )        |        |          | (35,833 | )      |        |   | (42,988 | )     
|Other income, net    |                                                                           |                          | 210     |                    |        |                   | 654     |          |        |          | 821     |        |        |   | 2,960   |       
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|Net loss             |                                                                           | $                        | (12,596 | )                  |        | $                 | (11,922 | )        |        | $        | (35,012 | )      |        | $ | (40,028 | )     
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|Per share data:      |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     | Basic net loss per common share                                           |                          | $       | (0.43              | )      |                   | $       | (0.47    | )      |          | $       | (1.30  | )      |   | $       | (1.60  | )     
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       
|                     | Weighted-average shares used in computing
basic net loss per common share |                          |         | 29,141             |        |                   |         | 25,134   |        |          |         | 26,854 |        |   |         | 25,018 |       
|                     |                                                                           |                          |         |                    |        |                   |         |          |        |          |         |        |        |   |         |       

See accompanying notes.

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FORM 10-Q
PART I
ITEM 1
PAGE 3

BIOPURE CORPORATION

Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |          |       |       |         |  
|------------------------------------------------ | ---------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------- | ----------------------------------------- | ------ | ----------------- | ------- | -------- | ----- | ----- | ------- | -
|                                                 |                                                      |                                                                                         |                                                    |                                           |        | Nine Months Ended
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                  
|                                                 |                                                      |                                                                                         |                                                    |                                           |        | July 31,          |         | July 31,
|                                                 |                                                      |                                                                                         |                                                    |                                           |        | 2002              |         | 2001    
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|Operating activities:                            |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 | Net loss                                             |                                                                                         | $                                                  | (35,012                                   | )      |                   | $       | (40,028  | )    
|                                                 |                                                      | Adjustments to reconcile net loss to net cash
used in operating activities:             |                                                    |                                           |        |                   |         |          |       |      
|                                                 |                                                      |                                                                                         | Depreciation and amortization                      |                                           |        | 3,231             |         |          |       | 2,955 |        
|                                                 |                                                      |                                                                                         | Equity compensation                                |                                           |        | (76               | )       |          |       | 6,924 |        
|                                                 |                                                      |                                                                                         | Deferred compensation                              |                                           |        | (54               | )       |          |       | (11   | )      
|                                                 |                                                      |                                                                                         | Accrued interest on stockholders notes receivable |                                           |        | (1                | )       |          |       | (71   | )      
|                                                 |                                                      |                                                                                         | Acquired research and development information      |                                           |        |                  |         |          |       | 1,511 |        
|                                                 |                                                      |                                                                                         | Changes in assets and liabilities:                 |                                           |        |                   |         |          |       |       |        
|                                                 |                                                      |                                                                                         |                                                    | Accounts receivable                       |        |                   | 585     |          |       |       | (166    | )
|                                                 |                                                      |                                                                                         |                                                    | Inventories                               |        |                   | (254    | )        |       |       | (2,029  | )
|                                                 |                                                      |                                                                                         |                                                    | Other current assets                      |        |                   | (937    | )        |       |       | 61      |  
|                                                 |                                                      |                                                                                         |                                                    | Accounts payable                          |        |                   | (457    | )        |       |       | (197    | )
|                                                 |                                                      |                                                                                         |                                                    | Accrued expenses                          |        |                   | 1,779   |          |       |       | 1,448   |  
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      |                                                                                         |                                                    | Net cash used in operating activities     |        |                   | (31,196 | )        |       |       | (29,603 | )
|Investing activities:                            |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 | Purchases of property, plant and equipment           |                                                                                         |                                                    | (6,340                                    | )      |                   |         | (2,254   | )    
|                                                 | Escrow for new facility                              |                                                                                         |                                                    |                                          |        |                   |         | (10,000  | )    
|                                                 | Long term debt                                       |                                                                                         |                                                    | (85                                       | )      |                   |         |         |      
|                                                 | Other assets                                         |                                                                                         |                                                    | 60                                        |        |                   |         | (63      | )    
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      |                                                                                         |                                                    | Net cash used in investing activities     |        |                   | (6,365  | )        |       |       | (12,317 | )
|Financing activities:                            |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 | Net proceeds from sale of common stock               |                                                                                         |                                                    | 31,766                                    |        |                   |         | (648     | )    
|                                                 | Payment of notes receivable from stockholders        |                                                                                         |                                                    | 80                                        |        |                   |         | 451      |      
|                                                 | Amendment of note receivable from stockholder        |                                                                                         |                                                    | (233                                      | )      |                   |         |         |      
|                                                 | Proceeds from exercise of options and warrants       |                                                                                         |                                                    | 41                                        |        |                   |         | 1,689    |      
|                                                 | Proceeds from exercise of non lapse restricted stock |                                                                                         |                                                    |                                          |        |                   |         | 132      |      
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      |                                                                                         |                                                    | Net cash provided by financing activities |        |                   | 31,654  |          |       |       | 1,624   |  
|Net decrease in cash and cash equivalents        |                                                      |                                                                                         | (5,907                                             | )                                         |        |                   | (40,296 | )       
|Cash and cash equivalents at beginning of period |                                                      |                                                                                         | 36,089                                             |                                           |        |                   | 88,828  |         
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|Cash and cash equivalents at end of period       |                                                      | $                                                                                       | 30,182                                             |                                           |        | $                 | 48,532  |         
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|Non-cash transactions:                           |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      | Land and license rights acquired upon conversion
of stock option                        |                                                    | $                                         | 139    |                   |         | $        | 1,005 |      
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      | New facility construction financed through capital
lease (classified as long-term debt) |                                                    | $                                         | 4,642  |                   |         | $        | 2,693 |      
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      | Settlement of deferred compensation and accrued interest                                |                                                    | $                                         | (1,601 | )                 |         | $        |      |      
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         
|                                                 |                                                      | Settlement of note receivable and accrued interest                                      |                                                    | $                                         | 1,601  |                   |         | $        |      |      
|                                                 |                                                      |                                                                                         |                                                    |                                           |        |                   |         |         

See accompanying notes.

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FORM 10-Q
PART I
ITEM 1
PAGE 4

BIOPURE CORPORATION

Notes to Condensed Consolidated Financial Statements
July 31, 2002
(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 and nine month periods ended
July 31, 2002 are not necessarily indicative of the results that may be
expected for the year ending October 31, 2002.                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | The Company has financed operations from inception primarily through sales
of equity securities, development and license agreement payments, interest
income and debt. The Company has not been profitable since inception and
had an accumulated deficit of $370,860,000 as of July 31, 2002. Management
expects that the Company will continue to generate losses from operations
for the next several years. The Company will explore opportunities to raise
capital through sales of securities and potential joint venture or
licensing agreements, or leasing arrangements.                                                                                                                               
|  
|   |  | At July 31, 2002, the Company had $30,182,000 in cash and cash equivalents.
Biopure raised $31,766,000 through the sales of equity in the first nine
months of fiscal 2002. Based on the Companys current operating plan,
Biopure requires approximately $13,000,000 for the last three months of
fiscal 2002 to support applications to the European regulatory authorities
for marketing approval of Hemopure, the ramp up of production of Hemopure
and Oxyglobin at the expanded Cambridge manufacturing facility, the
additional spending for the South Carolina manufacturing facility discussed
below, market development for Hemopure in South Africa and sales of
Oxyglobin.                          
|  
|   |  | The cash on hand on July 31, 2002 is expected to fund operations into the
second quarter of fiscal 2003 or possibly into the third quarter, depending
on the amount of Hemopure sales, if any, to South Africa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Our cash requirements and our forecast of the period of time through which
our financial resources would be adequate to support our operations may
vary significantly from current projections and actual results may vary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | For further information, refer to the consolidated financial statements and
footnotes thereto included in the Companys Annual Report on Form 10-K for
the year ended October 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|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 year, adjusted for the dilutive effect of
shares issuable upon the conversion of convertible stock outstanding and
the exercise of common stock options and warrants determined based upon the
average market price of common stock for the period. Since the Company has
a net loss for all periods presented, the effect of all potentially
dilutive securities is antidilutive. Accordingly, basic and diluted net
loss per share are the same.

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FORM 10-Q
PART I
ITEM 1
PAGE 5

BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 2002
(Unaudited)
(Continued)



|3. |  | Inventories                                                                                                                          
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Inventories are valued at the lower of cost (determined using the first-in,
first-out method) or market. Inventories were as follows:

|                         |  |          |       |             |  |   |       | 
|------------------------ |  | -------- | ----- | ----------- |  | - | ----- | 
|                         |  | July 31, |       | October 31,
|                         |  | 2002     |       | 2001       
|                         |  |          |       |            
|In thousands             |  |          |       |             |  |   |       | 
|Raw materials            |  | $        | 2,114 |             |  | $ | 771   | 
|Work-in-process          |  |          | 781   |             |  |   | 243   | 
|Finished goods-Oxyglobin |  |          | 913   |             |  |   | 1,886 | 
|Finished goods-Hemopure  |  |          | 1,111 |             |  |   | 1,765 | 
|                         |  |          |       |             |  |   |       | 
|                         |  | $        | 4,919 |             |  | $ | 4,665 | 
|                         |  |          |       |             |  |   |       | 



|4. |  | Accrued Expenses                            
|-- |  | --------------------------------------------
|  
|   |  | Accrued expenses consisted of the following:

|                                              |  |          |       |             |  |   |       | 
|--------------------------------------------- |  | -------- | ----- | ----------- |  | - | ----- | 
|                                              |  | July 31, |       | October 31,
|                                              |  | 2002     |       | 2001       
|                                              |  |          |       |            
|In thousands                                  |  |          |       |             |  |   |       | 
|Clinical trials                               |  | $        | 426   |             |  | $ | 662   | 
|Preparation of biologic license application   |  |          | 1,089 |             |  |   | 306   | 
|Capacity upgrade                              |  |          | 195   |             |  |   | 375   | 
|Accrued payroll and related employee expenses |  |          | 1,130 |             |  |   | 1,365 | 
|Accrued vacation                              |  |          | 562   |             |  |   | 398   | 
|Accrued legal expenses                        |  |          | 435   |             |  |   | 257   | 
|South Carolina facility engineering & design  |  |          | 684   |             |  |   |      | 
|Insurance premiums                            |  |          | 932   |             |  |   |      | 
|Other                                         |  |          | 1,275 |             |  |   | 1,586 | 
|                                              |  |          |       |             |  |   |       | 
|                                              |  | $        | 6,728 |             |  | $ | 4,949 | 
|                                              |  |          |       |             |  |   |       | 



|5. |  | Commitment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In December 2001, Sumter Realty Group, LLC signed an amended letter of
intent for the construction and financing of a new 500,000 unit Hemopure
plant in South Carolina. The new plant is expected to cost approximately
$120,000,000 and is expected to be financed through a capital lease. As
such, the financial statements include property, plant and equipment and
offsetting debt. As of July 31, 2002, $11,098,000 has been included in
property, plant and equipment and $9,762,000 in long term debt reflecting
expenditures made by Biopure for the engineering and design costs of the
facility. Of the $11,098,000, $10,000,000

7



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##### Table of Contents



FORM 10-Q
PART I
ITEM 1
PAGE 6

BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 2002
(Unaudited)
(Continued)



|   |  | has been recorded as a deposit in long-term assets, as this amount is
expected to be refunded upon receipt of approval of Hemopure by the United
States Food and Drug Administration (FDA) and if a formal lease agreement
has been executed. If FDA approval is not received or a lease is not
signed, the $10,000,000 deposit will not be returned to the Company and
will be treated as a capital expenditure, and as a capital expenditure will
be subject to an immediate impairment review pursuant to SFAS No. 121,
Accounting for Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of  (and SFAS No. 144, applicable in fiscal 2003). A lease for the South
Carolina facility has not yet been signed. Biopure anticipates investing an
additional $1,764,000 for detailed engineering work, including shop drawings
for major equipment and steel fabrication. In addition Biopure is committed
to pay a finders fee, of approximately 2% of the net amount financed, to a
consultant when financing for the South Carolina facility is completed.                                                                                                                                                              
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|6. |  | Financing Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | On May 9, 2002, the Company raised $4,895,000 in net proceeds from the sale
of 690,000 shares of its common stock in connection with the common stock
shelf registration statement filed with the SEC in March, 2002. The Company
issued 20,700 warrants to the placement agent for these shares with an
exercise price of $7.67 per share, resulting in an immaterial valuation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Biopure is a party to a $75,000,000 equity line stock purchase agreement
with Société Générale. Under this agreement, Biopure has the option of
drawing up to a balance (as of July 31, 2002) of $67,750,000 until June
2003, subject to certain limitations, in exchange for the issuance of
Biopure common stock. The primary limitation on use of the line is a
minimum trading price for our common stock of $13 per share. As of July 31,
2002, the Company had drawn $7,250,000, all in fiscal 2002, under this
agreement. The Company is currently unable to raise funds through this
agreement because its recent stock prices have been below the minimum price
specified in the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|7. |  | Transaction with Related Party                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | In August 1990, the Company awarded deferred compensation of $700,000 to
Carl Rausch, then Chairman and Chief Executive Officer. The deferred amount
with interest was to be paid on July 31, 2003. The Company also made a loan
of $700,000 to Mr. Rausch in August 1990, the proceeds of which were used
to purchase shares of the Companys class A common stock. On July 29, 2002,
Mr. Rausch settled the interest accrued on his deferred compensation and
the Company settled the interest due on the loan which were both $901,000.
Biopure accelerated the deferred compensation payment of $700,000 to Mr.
Rausch, of which $233,100 was withheld for taxes and the balance of
$466,900 was paid on the loan, leaving a principal loan balance of
$233,100. This remaining loan balance bears interest at prime rate (4.75%
at July 31, 2002) and is included in stockholders equity as notes
receivable in the accompanying consolidated financial statements. Interest
payments are made on a current basis and the principal on the loan is due
on July 31, 2007.                                                                                                                                                        
|  
|8. |  | Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | Biopure and its former Chairman and Chief Executive Officer were named as
defendants in a purported class action (resulting from the consolidation of
five actions, the first of which was filed on February 5, 2002) in the U.S.
District Court for the District of Massachusetts (the Court) by alleged
purchasers of Biopures common stock and subsequently amended (the
complaints). The complaints claimed that Biopure violated the federal
securities laws by publicly disseminating materially false and misleading
statements regarding the anticipated time of a biologic license application
Biopure expected to make to the U.S. Food and Drug Administration (the
FDA) and that Biopure failed to disclose materially adverse information
regarding the data Biopure gathered in the Phase III clinical trials in
support of its FDA application, resulting in the artificial inflation of
Biopures common stock price during the purported class period of May 8,
2001 through March 21, 2002. By Memorandum And Order dated September 4,
2002, the Court granted defendants motion to dismiss in its entirety,
dismissing all of plaintiffs claims with prejudice. The deadline to appeal
is October 7, 2002.

8



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##### Table of Contents






FORM 10-Q
PART I
ITEM 1
PAGE 7

BIOPURE CORPORATION

Independent Accountants Review Report

The Board of Directors
Biopure Corporation

We have reviewed the accompanying condensed consolidated balance sheet of
Biopure Corporation (the Company) as of July 31, 2002, and the related condensed
consolidated statements of operations for the three-month and nine-month periods
ended July 31, 2002 and 2001, and the condensed consolidated statements of cash
flows for the nine-month periods ended July 31, 2002 and 2001. These financial
statements are the responsibility of the Companys management.

We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States,
which will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with accounting principles generally
accepted in the United States.

We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of the Company as
of October 31, 2001, and the related consolidated statements of operations,
stockholders equity, and cash flows for the year then ended (not presented
herein) and in our report dated December 10, 2001 (except for Note 14, as to
which the date is January 22, 2002), we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying condensed consolidated balance sheet as of October 31,
2001, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.

/s/ Ernst & Young LLP

Boston, Massachusetts
September 10, 2002

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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 8




BIOPURE CORPORATION

Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002

Cautionary Statement Regarding Forward-Looking Information

The following discussion of our financial condition and results of operations
should be read in conjunction with the Condensed Consolidated Financial
Statements and the related Notes included elsewhere in this report. Except for
strictly historical information contained herein, matters discussed in this
report constitute forward-looking statements. When used herein, the words
expects, estimates, intends, plans, should, anticipates and similar
expressions are intended to identify such forward-looking statements. Actual
results could differ materially from those set forth in the forward-looking
statements. There can be no assurance that Biopure will be able to commercially
develop its oxygen therapeutic products, that necessary regulatory approvals
will be obtained, that anticipated milestones will be met in the expected
timetable, that any clinical trials will be successful, or that any approved
product will attain market acceptance and be sold in the quantities anticipated.
Actual results may differ from those projected in forward-looking statements due
to risks and uncertainties that exist in the Companys operations and business
environment. These risks include, without limitation, the Companys stage of
product development, history of operating losses, accumulating deficits, and
uncertainties and possible delays related to clinical trials, regulatory
approvals, possible healthcare reform, manufacturing capacity, market
acceptance, competition and the availability of sufficient financing to support
operations. 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 the Company that the objectives or
plans of the Company will be achieved. The Company undertakes no obligation to
release publicly the results of revisions to these forward-looking statements to
reflect events or circumstances after the date hereof. Reference is made in
particular to the risk factors set forth in Exhibit 99.1 to this report and the
discussions set forth below in this report under Managements Discussion and
Analysis of Financial Condition and Results of Operations.

Overview

We are a leading developer, manufacturer and supplier of a new class of
pharmaceuticals, called oxygen therapeutics. Our oxygen therapeutics are
administered intravenously into the circulatory system to increase oxygen
transport to the bodys tissues. We have developed and manufacture, using a
proprietary process and patented technology, two hemoglobin-based oxygen
carriers, Hemopure and Oxyglobin. Two Phase III clinical trials have been
completed for Hemopure, which are a major component of our application submitted
to the FDA on July 31, 2002 for marketing approval in the United States. The FDA
has 60 business days from the submission of a biologic license application (BLA)
to determine the applications acceptability for review, and it generally
determines the approvability of an accepted application within 12 to 16 months
of the submission date. In fiscal 2001, Hemopure was approved in South Africa
for the treatment of adult surgical patients who are acutely anemic and for the
purpose of eliminating, delaying or reducing the need for allogenic red blood
cells in these patients. Oxyglobin, for veterinary use, is the only
hemoglobin-based oxygen carrier approved by the FDA and the European Medicines
Evaluation Agency.

Since inception, we have devoted substantially all of our resources to our
research and development programs and manufacturing. We have been dependent upon
funding from debt and equity financings, strategic alliances and interest
income. We have not been profitable since inception and had an accumulated
deficit of $370,860,000 as of July 31, 2002. We expect to incur additional
operating losses over the next several years in connection with clinical trials,
preparation of a marketing application for Hemopure in Europe and other markets
and pre-marketing expenditures for Hemopure. We began generating revenue from
the sale of Oxyglobin in fiscal 1998.

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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 9

BIOPURE CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002
(continued)

We believe our cash and cash equivalents, as of July 31, 2002, are sufficient to
fund our current plan into the second quarter of fiscal 2003 or possibly into
the third quarter depending on the amount of Hemopure sales, if any, to South
Africa. Under this plan, our operations for the balance of fiscal 2002 will be
in support of our applications to the European regulatory authorities for
marketing approval of Hemopure, the ramp up of production of Hemopure and
Oxyglobin at our upgraded Cambridge, Massachusetts manufacturing facility,
market development for Hemopure in South Africa and the sales of Oxyglobin.
Expenditures, including additional personnel and other costs for research and
clinical development of additional indications for Hemopure and most
expenditures in preparation for marketing and sales of Hemopure in the United
States, will be deferred until sufficient funds, in addition to those on hand,
are available.

Critical Accounting Policies

SFAS 121 (and SFAS 144, applicable in fiscal 2003) require that long-lived
assets be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Our
investments in property and equipment, including construction in progress and
the new facility construction; real property license rights related to the
source of supply of our major raw material and a production process; and the
asset related to the initial new facility project costs are the principal
long-lived assets that could be subject to such a review. The events or changes
in circumstances, among others, that may result in an impairment of these assets
are a significant delay in expected regulatory approvals for our human product,
a change in the source of supply of the major raw material, the inability to
obtain a lease for the South Carolina facility, or lack of adequate demand for
our products.

Results of Operations

Three months ended July 31, 2002 compared to three months ended July 31, 2001

Total revenues were $260,000 for the third quarter of fiscal 2002 compared to
$946,000 for the corresponding period in fiscal 2001. This decrease in
veterinary sales of Oxyglobin® is due to low inventory resulting from
expansion and revalidation of Biopures manufacturing facilities. The Company is
allocating the limited product produced before the expansion to its largest
customers, and is accumulating back orders, which totaled approximately 5,900
units at August 31, 2002. Biopure expects to fill back orders during the first
quarter of fiscal 2003 following anticipated regulatory clearance to ship
product manufactured at the revalidated facilities.

Cost of revenues increased to $2,559,000 for the third quarter of fiscal 2002
compared to $903,000 for the corresponding period last year. When manufacturing
resumed in late May 2002, the allocation of unabsorbed costs to research and
development ended and all costs were charged to cost of revenues or inventory.
Cost of revenues for the third quarter of fiscal 2002 reflects manufacturing
inefficiencies during ramp-up of the expanded facilities; manufacturing costs
incurred during the ramp-up that exceeded selling price were charged to cost of
revenues and not to inventory.

11



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 10

BIOPURE CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002
(continued)

Research and development expenses include product and process development and
engineering, pre-clinical studies, clinical trials, clinical trial materials and
an allocation of unabsorbed fixed costs of manufacturing. Our research and
development efforts have been focused on developing and gaining regulatory
approval of Hemopure, our product for use in humans. The development and
approval of Oxyglobin, our veterinary product, was a result of the development
of Hemopure. Hemopure is approved for use in South Africa. During the third
quarter of fiscal 2002, research and development efforts consisted primarily of the preparation of
our BLA for Hemopure, which was filed with the FDA on July 31, 2002. Failure to
gain one or more additional regulatory approvals during the next several years
would make it difficult for the Company to continue its development efforts.

Research and development expenses decreased 31.4% to $7,063,000 for the third
quarter of fiscal 2002, compared to the third quarter of fiscal 2001. This
decrease is due to a one-time expense of $1,604,000 in the third quarter of
fiscal 2001, of which $1,511,000 was non-cash, related to the acquisition of
Reperfusion Systems, Inc., a $2,135,000 reduction in expenses for activities
associated with data organization and analyses for the Phase III orthopedic
surgery trial of Hemopure®, a $784,000 reduction in expenses for pre-clinical
studies, and a $782,000 reduction in the allocation of unabsorbed fixed
manufacturing costs, as these costs are now charged to cost of revenues or
inventory. The decrease in expenses was partially offset by an increase of
approximately $2,069,000 for preparing the BLA for Hemopure that was submitted
to the FDA on July 31, 2002.

Sales and marketing expenses increased 11.6% to $875,000 for the third quarter
of fiscal 2002. Oxyglobin sales and marketing related expenses decreased 41.7%
to $457,000 for the third quarter of fiscal 2002 in line with the decrease in
sales volume. This decrease is due primarily to reductions in veterinary
educational programs. Market development expenses for Hemopure were classified
as general and administrative expenses in previous quarters. Hemopure marketing
expenses of $418,000 are included in sales and marketing expenses for the third
quarter of fiscal 2002 since Hemopure is being produced for sale to South
Africa.

General and administrative expenses increased 67.0% to $2,569,000 for the third
quarter of fiscal 2002 compared to the same period in 2001. This increase is due
to increased consulting expenses and the absence in 2002 of a $793,000 credit
realized in 2001 for non-cash compensation for stock options and warrants
previously issued to non-employees; the 2001 credit was largely for stock
options and warrants that fully vested in fiscal 2001 and require no further
adjustments. The increase in expenses was partially offset by a decrease in
market development expenses for Hemopure.

Other income was $210,000 in the third quarter of fiscal 2002, compared to
$654,000 in the third quarter of fiscal 2001. This decrease reflects the
Companys reduced cash balance and lower interest rates.

Nine months ended July 31,
2002 compared to nine months ended July 31, 2001

Total revenues, consisting entirely of Oxyglobin sales, decreased 23.9% to
$1,916,000 for the first nine months of fiscal 2002, compared with the
corresponding period in 2001. Oxyglobin sales in Europe were $200,000 for the
first nine months of fiscal 2002 compared to $104,000 in fiscal 2001. Oxyglobin
was first sold into Europe in April of 2001. The decrease in domestic sales is
due to low inventory resulting from expansion and revalidation of Biopures
manufacturing facilities. The Company is allocating its limited inventory of
product produced before the expansion to its largest customers, and expects to
fill backorders during the first quarter of fiscal 2003 following anticipated
regulatory clearance to ship product manufactured at the revalidated facilities.

12



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 11

BIOPURE CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002
(continued)

Cost of revenues was $4,305,000 for first nine months of fiscal 2002 compared to
$2,587,000 for the corresponding period last year. When manufacturing resumed in
late May 2002, the allocation of unabsorbed costs to research and development
ended and all costs were charged to cost of revenues or inventory. Cost of
revenues for the third quarter of fiscal 2002 reflects manufacturing
inefficiencies during ramp-up of the expanded facilities; manufacturing costs
incurred during the ramp-up that exceeded selling price were charged to cost of
revenues and not to inventory. The allocations in May between cost of revenues
and research and development were based on current and expected production
levels and annual production capacities and required the judgment of Biopures
management.

Research and development expenses decreased 19.3% to $22,188,000 for the first
nine months of fiscal 2002 compared to the corresponding period last year. The
decrease is due to a $6,063,000 reduction in expenses for the U.S. Phase
III clinical trial of Hemopure and a one-time expense of $1,604,000 in 2001, of
which $1,511,000 was non-cash, related to the acquisition of Reperfusion
Systems, Inc. In the first nine months of fiscal 2002, expenses for other
clinical trials and pre-clinical work for additional Hemopure applications also
decreased by $1,435,000. This decrease in spending was partially offset by
increased expenses of $3,386,000 in preparation of the BLA, filed with the FDA
on July 31, 2002 and the allocation of unabsorbed fixed manufacturing costs of
$421,000, incurred prior to June during the Cambridge facility expansion,
allocated to research and development.

Sales and marketing expenses decreased 5.7% to $1,953,000 for the first nine
months of fiscal 2002. Oxyglobin sales and marketing related expenses decreased
25.8% to $1,535,000 for the third quarter of fiscal 2002 in line with the
decrease in sales volume. This decrease is primarily due to reductions in
veterinary educational programs. Market development expenses for Hemopure were
classified as general and administrative expenses for the first and second
quarters. Hemopure marketing expenses of $418,000 are included in sales and
marketing expenses for the third quarter of fiscal 2002 since Hemopure is being
produced for sale to South Africa.

General and administrative expenses were $9,303,000 for the first nine months of
fiscal 2002, a reduction of 30.4% compared to the same period last year. This
decrease is due largely to non-cash charges for stock options and warrants
issued to non-employees that vested fully in fiscal 2001 and require no further
adjustments. The first nine months of fiscal 2001 included an expense of
$6,924,000 compared to a credit of $77,000 for the corresponding period in
fiscal 2002. Before the non-cash compensation charges, expenses for the first
nine months of fiscal 2002 increased by $2,940,000 primarily due to an expense
of $1,252,000 for product shipped to South Africa for use in a pre-launch
medical education program, and increased information technology and consulting
expenses compared to last year.

Other income was $821,000 in the first nine months of fiscal 2002, compared to
$2,960,000 in the first nine months of fiscal 2001. This decrease reflects the
Companys reduced cash balance and lower interest rates. Included in other
income for the first nine months of 2002 is $238,000 received as a contingent
payment for a 1998 intellectual property transfer not related to Hemopure or
Oxyglobin.

Liquidity and Capital Resources

At July 31, 2002, we had $30,182,000 in cash and cash equivalents. We have
raised $31,766,000 through the sales of equity in the first nine months of
fiscal 2002. Based on our current operating plan, we require approximately
$13,000,000 for the last three months of fiscal 2002 to support our applications
to European regulatory authorities for marketing approval of Hemopure, the ramp
up of production of Hemopure and Oxyglobin at our expanded Cambridge
manufacturing facility, the additional spending for the South Carolina
manufacturing facility discussed below, market development for Hemopure in South
Africa and sales of Oxyglobin.

13



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 12

BIOPURE CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002
(continued)

The cash on hand on July 31, 2002 is expected to fund operations into the second
quarter of fiscal 2003 or possibly into the third quarter, depending on the
amount of Hemopure sales, if any, to South Africa.

Expenditures, including additional personnel and other costs for research and
clinical development of additional indications for Hemopure and most
expenditures in preparation for marketing and sales of Hemopure in the United
States, will be deferred until sufficient funds, in addition to those on hand,
are available. Should managements plans not develop as anticipated, the Company
will restrict certain of its planned activities and operations, as necessary, to
sustain operations and conserve cash resources. Our cash requirements and our
forecast of the period of time through which our financial resources would be
adequate to support our operations may vary significantly from current
projections and actual results may vary.

In December 2001, the Company signed an amended letter of intent for the
construction and financing of a 500,000 unit Hemopure plant in South Carolina
expected to cost $120,000,000. During fiscal 2001, we paid $10,000,000,
Biopures contribution to the cost of the facility, into an escrow account to
fund certain initial expenditures related to the construction of the new
facility. Under the proposed agreement for the construction and financing of the
new plant, the $10,000,000 in project cost funded by Biopure is expected to be
refunded upon receipt of FDA approval for Hemopure and if a formal lease
agreement has been executed. The $10,000,000 has been accounted for as a deposit
in long-term assets. If FDA approval is not received, the $10,000,000 deposit
will not be returned to the Company and will be treated as a capital
expenditure, and as a capital expenditure will be subject to immediate
impairment review pursuant to SFAS No. 121 (and SFAS No. 144, when applicable).
As of July 31, 2002, $11,098,000 has been included in property, plant and
equipment and $9,762,000 in long term debt reflecting expenses to date for the
engineering and design costs of the planned manufacturing facility in Sumter,
S.C. As of July 31, 2002, the Company had spent an
additional $1,336,000 for detailed
engineering work, including shop drawings for major equipment and steel
fabrication, to maintain the timeline for a validated, FDA-approved plant and
profitability in fiscal 2005. Biopure anticipates investing an
additional $1,764,000 on these items. In addition Biopure will have to pay a finders
fee, of approximately 2% of the net amount financed, to a consultant when
financing for the South Carolina facility is completed. Sumter Realty Group, LLC
has recently accepted a letter of commitment from a potential investor for the
full $120,000,000 required to finance construction of a new manufacturing
facility in South Carolina, which is designed to produce 500,000 Hemopure units
per year. Certain due diligence activities are being conducted and draft
documents are being prepared. If the final proposal is acceptable, closing could
occur in November 2002.

Biopure is a party to a $75,000,000 equity line stock purchase agreement with
Societe Generale. Under this agreement, Biopure would have the option of drawing
up to a remaining balance of $67,750,000 until June 2003, if conditions under
the agreement were met, in exchange for the issuance of Biopure common stock. As
of August 31, 2002, the Company had drawn $7,250,000, all in fiscal 2002, under
this agreement. The Company is currently unable to raise funds through this
agreement because its recent stock prices have been below the minimum price of
$13 per share specified in the agreement.

We plan to spend approximately $1,000,000 in the balance of fiscal 2002 and
approximately $2,500,000 in fiscal 2003 on capital projects for our existing
facilities. These fiscal 2002 planned expenditures are included in the cash
requirements for the remainder of fiscal 2002 identified above.

We expect to continue financing our operations, until we are profitable, through
sales of securities and joint venture, leasing or licensing arrangements. On
March 11, 2002, we filed a $30,000,000 common stock shelf registration statement
with the SEC to facilitate future financings. On April 23, 2002, the Company
raised net proceeds of $19,689,000 from an offering of these registered

14



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 13

BIOPURE CORPORATION
Managements Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 2002
(continued)

shares. We realized an additional $4,895,000 in net proceeds from another
offering of these registered shares on May 9, 2002. The Company may sell
additional shares under this shelf registration. We will also explore licensing
and partnering arrangements where appropriate. We have not been profitable since
inception and had an accumulated deficit of $370,860,000 as of July 31, 2002. We
will continue to generate losses for the next several years.

As of October 31, 2001, we had net operating loss carryforwards of approximately
$195,100,000 to offset future federal and state taxable income through 2021. Due
to the degree of uncertainty related to the ultimate realization of such prior
losses, no benefit has been recognized in our financial statements as of July
31, 2002. Utilization of such losses in future years may be limited under the
change of stock ownership rules of the Internal Revenue Service.

15



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 14




BIOPURE CORPORATION
Part II Other Information
July 31, 2002




Item 1. Legal Proceedings

As described in Item 3, Legal Proceedings, in the Companys Annual Report on
Form 10-K for the year ended October 31, 2001, in 1995 the Opposition Division
of the European Patent Office, revoked a process patent that had been granted to
the Company. In response, the Company narrowed the patent claims and appealed
the decision of the Opposition Division. The patent was reinstated during the
appeal. On July 16, 2002, the patent was maintained in a decision in favor of
Biopure.

Biopure and its former Chairman and Chief Executive Officer were named as
defendants in a purported class action (resulting from the consolidation of five
actions, the first of which was filed on February 5, 2002) in the U.S. District
Court for the District of Massachusetts (the Court) by alleged purchasers of
Biopures common stock and subsequently amended (the complaints). The
complaints claimed that Biopure violated the federal securities laws by publicly
disseminating materially false and misleading statements regarding the
anticipated time of a biologic license application Biopure expected to make to
the U.S. Food and Drug Administration (the FDA) and that Biopure failed to
disclose materially adverse information regarding the data Biopure gathered in
the Phase III clinical trials in support of its FDA application, resulting in
the artificial inflation of Biopures common stock price during the purported
class period of May 8, 2001 through March 21, 2002. By Memorandum And Order
dated September 4, 2002, the Court granted defendants motion to dismiss in its
entirety, dismissing all of plaintiffs claims with prejudice. The deadline to
appeal is October 7, 2002.




Item 2. Changes in Securities
and Use of Proceeds

On May 9, 2002 the Company issued warrants to purchase 20,700 shares of class A
common stock to DP Securities, Inc. The warrants were issued in consideration of
services rendered in the public sale by the Company of 690,000 shares of class A
common stock. The warrants are exercisable for three years beginning on the
first anniversary if their issuance. The Company relied on the exemption from
registration in Section 4(2) of the Securities Act of 1933 (the Act).

On June 25, 2002 the Company issued an option to Thomas A. Moore to purchase up
to 300,000 shares of class A common stock. Neither the option nor the underlying
shares were registered under the Act. The Company relied on the exemption from
registration in Section 4(2) of the Act.




Item 6. Exhibits and Reports
on Form 8-K



|(a)  |  | Exhibits                                                                                                                                   
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|    
|10.1 |  | Employment Agreement dated as of June 25, 2002, between the
Company and Thomas A. Moore                                                    
|    
|10.2 |  | Option dated as of June 25, 2002, in favor of Thomas A. Moore                                                                              
|    
|10.3 |  | Employment Agreement dated as of July 29, 2002, between the
Company and Carl W. Rausch                                                     
|    
|10.4 |  | Promissory note dated July 29, 2002 from Carl W. Rausch                                                                                    
|    
|10.5 |  | Deferred Compensation Agreement dated July 29, 2002 between the
Company and Carl W. Rausch                                                 
|    
|10.6 |  | Agreement re Loan dated July 29, 2002 between the Company and Carl
W. Rausch                                                               
|    
|10.7 |  | Agreement dated June 25, 2002, between the Company and Paul A.
Looney                                                                      
|    
|15   |  | Acknowledgement Letter of Ernst & Young LLP                                                                                                
|    
|99.1 |  | Risk Factors                                                                                                                               
|    
|99.2 |  | Certification of Thomas A. Moore pursuant to 18 U.S.C. Section
1350                                                                        
|    
|99.3 |  | Certification of Francis H. Murphy pursuant to 18 U.S.C Section
1350                                                                       
|    
|(b)  |  | A report on Form 8-K was filed on June 26, 2002, reporting elections
of a Chairman of the Board and a President and Chief Executive Officer

16



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##### Table of Contents



FORM 10-Q
PART I
ITEM 2
PAGE 15




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: September 16, 2002 |  | By: |  | /s/ Francis H. MurphyFrancis H. Murphy
Duly authorized officer of the Registrant and
Chief Financial Officer

CERTIFICATIONS

I, Thomas A. Moore, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Biopure Corporation;                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.                   

Date: September 13, 2002

/s/ Thomas A. Moore

Thomas A. Moore
Chief Executive Officer

CERTIFICATIONS

I, Francis H. Murphy, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Biopure Corporation;                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report.                   

Date: September 13, 2002

/s/ Francis H. Murphy

Francis H. Murphy
Chief Financial Officer

17



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##### Table of Contents






EXHIBIT INDEX

|       |  |                                                                                           
|------ |  | ------------------------------------------------------------------------------------------
|Number |  | Description                                                                               
|       |  |                                                                                           
|10.1   |  | Employment Agreement dated as of June 25, 2002, between the Company and
Thomas A. Moore   
|10.2   |  | Option dated as of June 25, 2002, in favor of Thomas A. Moore                             
|10.3   |  | Employment Agreement dated as of July 29, 2002, between the Company and
Carl W. Rausch    
|10.4   |  | Promissory note dated July 29, 2002 from Carl W. Rausch                                   
|10.5   |  | Deferred Compensation Agreement dated July 29, 2002 between the Company
and Carl W. Rausch
|10.6   |  | Agreement re Loan dated July 29, 2002 between the Company and Carl W.
Rausch              
|10.7   |  | Agreement dated June 25, 2002, between the Company and Paul A. Looney                     
|15     |  | Acknowledgement Letter of Ernst & Young LLP                                               
|99.1   |  | Risk Factors                                                                              
|99.2   |  | Certification of Thomas A. Moore pursuant to 18 U.S.C. Section 1350                       
|99.3   |  | Certification of Francis H. Murphy pursuant to 18 U.S.C. Section 1350