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SECURITIES AND EXCHANGE COMMISSION

Form 10-K

Commission File Number 001-15167

Registrant’s telephone number, including area code: (617) 234-6500

Securities registered pursuant to Section 12(g) of the Act:

     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  þ          No  o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes  þ          No     o

          Based on assumptions relating to the privately held non-voting Class B Common Stock, the aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant on April 30, 2004 was $170,866,290.

          The number of shares outstanding of the registrant’s Class A Common Stock was 140,459,946 on January 12, 2005; the number of shares of the Class B Common Stock as of such date was 117.7.

Documents Incorporated By Reference

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1

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

      This annual report and information incorporated herein by reference include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these provisions. These forward-looking statements include, without limitation, statements about our market opportunity, strategies, competition, expected activities, expected profitability and investments as we pursue our business plan, and the adequacy of our available cash resources. These forward-looking statements are usually accompanied by words such as “believe,” “anticipate,” “plan,” “seek,” “expect,” “intend” and similar expressions. The forward-looking information is based on various factors and was derived using numerous assumptions.

      These forward-looking statements involve risk and uncertainties. Forward-looking statements include those that imply that we will be able to commercially develop Hemopure, that in pursuing the cardiovascular and trauma indications we will be able to address the safety and other questions of the U.S. Food and Drug Administration arising out of our previously submitted biologics license application for an orthopedic surgery indication, that our expectations regarding the role of the U.S. Naval Medical Research Center in assuming and carrying out primary responsibility for conducting a two-stage Phase 2/3 clinical trial in the out-of-hospital setting will be met, that we will be able to obtain regulatory approvals required for the marketing and sale of Hemopure or any other product in a major market, that anticipated milestones will be met in the expected timetable, that any pre-clinical or clinical trials will be successful, that Hemopure, if it receives regulatory approval, will attain market acceptance and be manufactured and sold in the quantities anticipated, that we will be able to successfully increase our manufacturing capacity for Hemopure if it receives regulatory approval, that we will be able to manage our expenses effectively and raise the funds needed to operate our business, or that we will be able to stabilize and enhance our financial position. Actual results may differ materially from those set forth in the forward-looking statements due to risks and uncertainties that exist in our operations and business environment. These risks include, without limitation, the availability of sufficient financing to continue operations, changes in our cash needs, our stage of product development, history of operating losses and accumulated deficit, uncertainties and possible delays related to clinical trials and regulatory approvals, possible healthcare reform, our limited manufacturing capability, our lack of marketing experience, market acceptance and competition and the other factors identified under “Risk Factors” in this report. All forward-looking statements included or incorporated by reference in this report are based on information available to us on the date such statements were made. In light of the substantial risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this report should not be regarded as representations by us that our objectives or plans will be achieved. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in our Form 10-Q, 8-K and 10-K reports to the SEC.

      The content of this document does not necessarily reflect the position or the policy of the U.S. Government or the Department of Defense, and no official endorsement should be inferred.

PART I

Developments

      We develop and manufacture oxygen therapeutics, a new class of pharmaceuticals that are administered intravenously into the circulatory system to increase oxygen transport to the body’s tissues. Using our patented and proprietary technology, we have developed and manufacture two products: Hemopure® [hemoglobin glutamer — 250 (bovine)], or HBOC-201, for human use, and Oxyglobin® [hemoglobin glutamer — 200 (bovine)], or HBOC-301, for veterinary use.

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      Hemopure is approved in South Africa for eliminating, reducing or delaying the need for allogenic red blood cell transfusion in adult surgical patients who are acutely anemic. Hemopure is currently being developed for the management of patients with cardiovascular ischemia and patients with acute anemia resulting from traumatic injury, including as an early intervention to provide immediate oxygen-carrying support in the out-of-hospital setting.

      Oxyglobin is approved by the United States Food and Drug Administration, or FDA, and the European Commission, for the treatment of anemia in dogs.

      In June we identified as our strategic focus (i) the clinical development of Hemopure as an oxygen therapeutic for potential applications in ischemia, including ischemia associated with acute coronary syndrome, and (ii) continuing, in collaboration with the U.S. Naval Medical Research Center (NMRC), to develop Hemopure as a therapeutic agent for trauma using Congressionally appropriated funds. Under our agreement with the NMRC, the NMRC has primary responsibility for designing and seeking FDA acceptance of a two-stage Phase 2/3 clinical trial protocol for trauma in the out-of-hospital setting and for conducting the trial.

      In February 2004 we announced that our president and chief executive officer had resigned and that Francis H. Murphy, our then senior vice president of engineering and technology and former chief financial officer, had been appointed interim chief executive officer.

      In June 2004 we announced that our board of directors had appointed a new president and chief executive officer, Zafiris G. Zafirelis, and that Francis H. Murphy, our then interim chief executive officer, again became our chief financial officer. Mr. Zafirelis was previously CEO of MedQuest Products, Inc., a developer of implantable ventricular assist devices. Mr. Zafirelis formed an interim operating team that includes consultants expert in clinical and regulatory matters.

      In October 2004 Jay B. Pieper became a member of our board of directors and chair of our audit committee. Since 1995, Mr. Pieper has been vice president for Corporate Development and Treasury Affairs of Partners HealthCare Systems, Inc., the parent company of several healthcare-related entities including Brigham and Women’s Hospital and Massachusetts General Hospital in Boston, Massachusetts. At the same time, Martin B. Leon, M.D., a member of the Medical Advisory Board described below, became our chief medical director on a consulting basis.

      In June we announced that, in keeping with our new focus in cardiology, the company had established a Medical Advisory Board comprised of six authorities in the fields of cardiovascular research, interventional cardiology and cardiac care, under the chairmanship of Dr. Martin Leon. The Medical Advisory Board now includes the following seven members:

	•	Howard A. Cohen, M.D., professor of medicine, director of clinical services and associate director of the Cardiovascular Institute, University of Pittsburgh, Pittsburgh, PA
	•	David R. Holmes, M.D., professor of medicine, director of interventional cardiology, Mayo Clinic, Rochester, MN
	•	Spencer B. King, III, M.D., Fuqua chair of interventional cardiology, Fuqua Heart Center, clinical professor of medicine, Emory University, Atlanta, GA
	•	Martin B. Leon, M.D., chairman, Cardiovascular Research Foundation, associate director, Center for Interventional Cardiovascular Research, and professor of medicine, New York Presbyterian Hospital/ Columbia University Medical Center, New York, NY

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	•	William D. O’Neill, M.D., corporate chief of cardiology, co-director, Beaumont Heart Center, William Beaumont Hospital, Royal Oak, MI
	•	Steven Schulman, M.D., director of Cardiac Care Unit, Johns Hopkins Medical Center, Baltimore, MD
	•	Kenneth Ouriel, professor of surgery at the Cleveland Clinic Lerner College of Medicine of Case Western Reserve University and chair of the division of surgery and the department of vascular surgery at The Cleveland Clinic, Cleveland, OH.

	•	Cardiovascular Ischemia Indication. In December 2003, Biopure initiated in Europe a Phase 2 clinical trial of Hemopure as supportive therapy in patients with coronary artery disease undergoing angioplasty and stent procedures or percutaneous coronary intervention. This trial has reached 31 of a planned total of 45 patients. The trial is described below in this Item 1, under “Products — Hemopure — Ischemia.”

We have engaged in telephone conversations with the FDA in which we discussed the agency’s requirements for us to file an investigational new drug application, or IND, to clinically develop Hemopure in the United States for the treatment of patients who are experiencing a heart attack, or acute myocardial infarction (AMI). Prior to these discussions we prepared and submitted to the FDA a proposed clinical trial plan, addressed certain previous FDA questions relevant to an AMI indication and raised by the agency in its response to the biologics license application (BLA) previously submitted to the FDA for a proposed orthopedic surgery indication, and provided the interim independent Data Safety Monitoring Board reports from our Phase 2 coronary angioplasty trial in Europe. In addition, we agreed, as part of the support needed for an IND, to conduct a new animal study expanding upon experiments that are underway in large animal models of AMI.

	•	Addressing FDA Issues. In pursuing both the cardiovascular and the trauma indications, and as a prerequisite to further Biopure-sponsored clinical trials in the United States, we will continue to address, and will seek to respond as soon as practicable to, relevant safety and other questions posed by the FDA arising out of our previously submitted BLA to market Hemopure in the United States for an orthopedic surgery indication. We have responded to chemistry, manufacturing and controls, or CMC, questions from the FDA arising out of our previously submitted BLA, and we have furnished new tables of clinical data in formats requested by the FDA in connection with its BLA review. We will need to resolve the FDA’s safety issues to the agency’s satisfaction before the FDA will allow us to conduct a clinical trial of Hemopure in AMI subjects.
	•	Animal Studies. In January 2004, the FDA asked us to conduct three preclinical studies of Hemopure for its further evaluation of our previously submitted BLA and as a condition to our initiating any new clinical trials in the United States. We have submitted to the FDA the final report on one of the animal studies and a summary of all three studies. The other two studies have been completed, and the final reports are being compiled by the study investigators. These three studies were designed to assess the product’s effect on tissue perfusion, tissue oxygenation and volume expansion (colloidal effect) in swine. We understand that the investigators plan to submit the results to peer-reviewed scientific journals for potential publication. Subsequent to the January meeting, the FDA requested a fourth preclinical study which is required only if the Company pursues an indication in medical procedures, in a hospital setting, with a high risk of uncontrolled hemorrhage. This fourth study, which we are not conducting at this time, is separate from the ongoing animal AMI study mentioned above under “Cardiovascular Ischemia Indication.”
	•	Trauma Indication. Under a research agreement with us, the NMRC is preparing to file an IND application to conduct a proposed two-stage randomized, standard-therapy-controlled Phase 2/3 clinical trial of Hemopure in patients with severe hemorrhagic shock (acute blood loss) in the out-of-

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		’hospital setting. As part of these preparations, the NMRC is conducting an FDA-requested preclinical study of Hemopure in uncontrolled hemorrhage with traumatic brain injury.

	In July 2004 we initiated a Phase 2 clinical trial at Johannesburg Hospital Trauma Unit, a teaching hospital and Level 1 trauma center in South Africa. This single-center trial is a randomized, single-blind, parallel-group, standard-therapy controlled study. The primary objective is to assess the safety and tolerability of Hemopure, in a hospital setting, for emergency treatment of unstable patients who have significant blood loss as a result of blunt or penetrating trauma. The trial is under the direction of the principal investigators: Dr. Kenneth D. Boffard, Professor and Clinical Head, Department of Surgery, and Dr. Jacques Goosen, Head, Trauma Unit, Johannesburg General Hospital. Approximately 50 trauma patients are expected to be assigned randomly to receive either standard therapy resuscitation fluids (crystalloids, colloids and/or blood) or up to 10 bags of Hemopure plus standard therapy.
	The study is our first clinical trial of Hemopure specifically for the management of unstable trauma patients. At our recommendation the hospital interrupted enrollment in the trial late in calendar year 2004 to address site procedures, not product related issues. We expect the trial to resume enrollment soon.

      Cost-Cutting. In continuing efforts to reduce expenses and conserve cash we reduced staff in October 2003 and in April 2004 and June 2004. We adjusted our operating plans to reduce our manufacturing to minimal capacity while keeping our facilities open and functioning and eliminated or postponed other expenditures.

      Funding. During the 2004 fiscal year and in December 2004 and January 2005 we raised an aggregate of $36,257,000 in gross proceeds and $32,896,000 in net proceeds through sales of our class A common stock and warrants. We also received, since December 1, 2004, $2,707,000 from investors exercising warrants. We have sufficient cash to fund operations, under our current operating plan, through January 2006. Therefore, the audit opinion for our fiscal 2004 financial statement does not include a going concern modification.

      On August 5, 2004, President Bush signed the FY2005 Defense Appropriations Bill, which includes $7.0 million in Congressional funding for the U.S. Navy to continue research and development of Hemopure for potential use in military and civilian trauma applications.

      On June 17, 2004 we received notice from The Nasdaq Stock Market that the Company’s daily minimum bid price fell, and remained, below $1.00 for 30 consecutive business days. As a result, Biopure was out of compliance with Nasdaq’s $1.00 minimum bid price requirements. The company had 180 calendar days to regain compliance. We did not do so and on December 15, 2004 were notified that, as we met Nasdaq’s initial listing criteria other than the bid price we would have an additional 180 calendar days, or until June 13, 2005, to regain compliance or become delisted.

      Biopure was incorporated in Delaware in 1984. Biopure maintains a website at the following Internet address: www.biopure.com. Through a link to a third-party content provider, this corporate website provides free access to Biopure’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronic filing with the Securities and Exchange Commission.

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

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Scientific Overview

      Oxygen is indispensable to the life of all of the body’s tissues. Hemoglobin, a protein normally contained within red blood cells, is the molecule responsible for carrying and releasing oxygen to the body’s tissues. Hemoglobin’s protein structure is similar in many different animal species, including humans. Under normal conditions, hemoglobin contained within red blood cells carries approximately 98 percent of the body’s oxygen and the remaining two percent is dissolved in the plasma, the fluid part of blood.

      As the heart pumps blood, hemoglobin within red blood cells takes up oxygen in the lungs and carries it to various parts of the body. Blood travels through progressively smaller blood vessels to the capillaries, some of which are so narrow that red blood cells can only pass through in single file. Most of the oxygen release occurs in the capillaries. Blood then returns to the lungs to reload the red blood cells with oxygen. Adequate blood pressure and red blood cell counts are crucial to this process. Oxygen deprivation, even for several minutes, can result in cell damage, organ dysfunction and, if prolonged, death.

      The causes of inadequate tissue oxygenation generally can be classified into three categories:

	•	anemia — insufficient hemoglobin, reducing the oxygen-carrying capacity of the blood. Blood loss from injury, surgery or disorders that affect red blood cell production or maintenance, such as bone marrow disease, can cause anemia;
	•	ischemia — localized, inadequate red blood cell flow. Obstructed or constricted blood vessels can result in ischemia. Ischemia can lead to stroke, heart attack or other organ or tissue dysfunction; and
	•	cardiopulmonary failure — impaired function of the heart or lungs. The heart’s inability to pump sufficient quantities of blood to meet the needs of the tissues or the failure of the lungs to oxygenate blood adequately can cause tissue damage.

      A red blood cell transfusion is the standard therapy for anemia resulting from blood loss. Sources of red blood cells for transfusions include stored supplies of donated blood or of the recipient’s own pre-donated blood. Health care professionals also may use medications that stimulate red blood cell production if anemia is anticipated, for example, as a result of planned surgery.

      Red blood cell transfusions have certain limitations. Red blood cell transfusions generally are not effective for ischemic conditions caused by blockage or constriction of blood vessels. In such situations, an obstructed or constricted blood vessel that is too narrow to permit the normal passage of red blood cells can prevent oxygen from reaching the body’s tissues. Similarly, red blood cell transfusions are generally not effective in overcoming poor oxygenation due to impaired heart or lung function.

      Blood typing and handling requirements, particularly refrigeration, limit the feasibility of using red blood cell transfusions in pre-hospital emergency treatment. Shortages of certain types of blood can occur due to seasonal factors or disasters. Donated red blood cells are available for use in transfusions for only 42 days after collection, and this limitation affects the ability to stockpile red blood cell supplies. Although freezing can extend the life of red blood cells, the freezing and thawing processes require chemical treatment of the red blood cells and reduce the immediate availability and efficacy of those red blood cells.

      In trauma situations, victims may experience massive bleeding resulting in rapid loss of blood volume and oxygen-carrying capacity. Existing alternatives to red blood cell transfusions are limited. In an effort to stabilize trauma patients, emergency caregivers typically administer commonly used intravenous fluids, such as Ringer’s lactate or saline. Ringer’s lactate consists of water and electrolytes and generally is administered to patients who have lost substantial amounts of bodily fluids as a result of bleeding, vomiting or diarrhea. Both Ringer’s lactate and saline restore blood volume, but do not carry oxygen.

Biopure’s Oxygenation Technology

      Biopure has two proprietary oxygen therapeutic products that are similar except for their molecular size distributions. Biopure defines its products as therapeutics because they are expected to remediate oxygen deprived tissues. One administers these products intravenously. Biopure’s products are made from hemoglobin

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      The average Hemopure molecule is less than 1/1000th the size of a red blood cell. Once infused into a patient, the Hemopure molecules disperse throughout the plasma (the fluid part of blood) and are in continuous contact with the blood vessel wall where oxygen transport to tissues takes place.

      Upon infusion into the bloodstream, Hemopure immediately turns the plasma into an oxygen-delivering substance. Plasma flows everywhere that blood ordinarily flows and can also bypass partial blockages or pass through constricted vessels that impede the normal passage of red blood cells.

      In addition, introducing Hemopure into the bloodstream may enable red blood cells to offload more oxygen to the tissues than they otherwise would.

      Hemopure molecules hold the same amount of oxygen as the hemoglobin molecules in red blood cells on a gram-for-gram basis. Hemopure molecules, however, are chemically modified to have less affinity for oxygen than red blood cells, enabling Hemopure to take up oxygen from the lungs and release it to tissues more efficiently than red blood cells.

      Hemoglobin molecules in different species have demonstrated low antigenicity, which means that they do not readily elicit an immune or allergic response. Biopure has confirmed Hemopure’s low antigenicity, as indicated by the absence of certain effects, through laboratory studies, or assays, studies in living animals and human clinical trials.

      The following chart lists Hemopure’s characteristics in comparison to transfused red blood cells:

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      Most of our efforts since Biopure was formed have been on developing Hemopure for use as an alternative to red blood cell transfusions in surgery. However, human clinical testing and preclinical animal studies suggest that Hemopure also could be a readily available therapeutic for other potential applications. These applications may include the treatment of trauma and ischemic conditions, such as heart attack.

      Hemopure has a 36-month shelf life without refrigeration (2 degrees to 30 degrees centigrade), is universally compatible and can be stocked well in advance of anticipated use.

      Consequently, when blood is not available, Hemopure could be used to maintain a patient until the needed type and quantity of red blood cells arrive, until the patient can be transported to a hospital or until a patient’s body replenishes its own red blood cells. Also, as described above, Hemopure’s molecular size permits it to oxygenate through the plasma and thereby potentially to be an effective therapeutic in conditions of ischemia, where red blood cell transfusions are not. These factors have led to our focus on cardiovascular ischemia and out-of-hospital use in trauma.

      Hemopure has certain disadvantages when compared to red blood cells used in surgery. Transfused red blood cells have a longer duration of action and can persist in the body for an estimated 60 to 90 days. Hemopure, on the other hand, has a half-life of up to one day and, depending on the degree of anemia of the patient, may require repeat administration. In addition, it is anticipated that Hemopure will be more expensive than transfused red blood cells when compared on a unit-to-unit basis. In addition, the doses of Hemopure used in our clinical trials to date are insufficient to sustain a patient experiencing uncontrolled massive blood loss. Thus, some patients who are administered Hemopure may still require red blood cell transfusions in addition to Hemopure.

Biopure’s Products

      Our two products, Hemopure and Oxyglobin, are oxygen-carrying biological drugs called “oxygen therapeutics.” Hemopure is our product for human use. In fiscal year 2002, we filed an application with the FDA seeking regulatory approval to market Hemopure in the United States for the treatment of the signs and symptoms of acute anemia in adult patients undergoing orthopedic surgery, and for the purpose of eliminating or reducing the need for red blood cells in these patients. The FDA responded to our application with extensive requests for additional information and later by requiring several preclinical studies. Oxyglobin, our veterinary product, is approved for sale in both the United States and the European Union for use in the treatment of anemia in dogs, regardless of the cause of the anemia. Oxyglobin is marketed and sold to veterinary hospitals, and commercial sales of Oxyglobin have resulted in thousands of administrations in animals. We have conducted 22 clinical trials of Hemopure involving 1,467 humans, of whom 806 were administered Hemopure. We are currently conducting two ongoing clinical trials that are designed to enroll a total of 95 human subjects, approximately 55 of whom are expected to receive Hemopure. On a “compassionate use” basis, Hemopure has been administered as an Oxygen Bridge^TM to 33 human patients in the United States with life threatening anemia when compatible red blood cells were unavailable or unacceptable. Our research and development expenditures during the fiscal years 2002 through 2004 were $25,982,000, $10,504,000 and $9,746,000, respectively. In South Africa, where Hemopure has marketing approval for use in acutely anemic surgery patients but has not yet been offered for sale, it has been administered to more than 330 patients. Hemopure and Oxyglobin have been tested in over 200 completed preclinical studies.

Hemopure

      We believe Hemopure can be developed for several indications. In South Africa, the product is approved for the treatment of surgery patients with acute anemia and for the elimination, delay or reduction of donated red blood cell transfusions in these patients. We believe that preclinical animal studies and observations from our human clinical trials support the clinical investigation of other potential product indications, including trauma and ischemic conditions, such as stroke, wound healing and heart attack, and oxygenation of malignant hypoxic tumors. During 2004 we considered our alternatives and concluded that we would shift our priorities to developing a cardiovascular ischemia indication and to continue developing an out-of-hospital trauma indication.

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      We have an ongoing pilot safety trial of Hemopure in Europe as a supportive therapy in patients with coronary artery disease who are undergoing elective angioplasty and stent procedure, or percutaneous coronary intervention. We have also begun a safety trial in South Africa to treat acute blood loss in trauma patients in the hospital setting. The U.S. Department of Defense has awarded substantial funding to support trauma development for Hemopure in the out-of-hospital setting. Our efforts to develop Hemopure for various clinical indications are described in further detail below.

      Hemopure serves as an alternative to red blood cell transfusions by providing a temporary Oxygen Bridge^TM until suitable red blood cells become available or are produced by the body. We do not expect Hemopure to replace all red blood cell transfusions. However, Hemopure’s oxygen-carrying properties, storage and infusion advantages address many of the limitations associated with red blood cell transfusions.

      We believe that Biopure’s clinical trials have demonstrated Hemopure’s efficacy as an alternative to red blood cell transfusions in patients undergoing elective orthopedic surgery as measured by the avoidance of red blood cell transfusions in these patients, although the FDA has raised efficacy as an issue. In all of Biopure’s advanced clinical trials, Hemopure’s efficacy as an oxygen therapeutic was evaluated by determining, within the context of a written set of guidelines known as a protocol, the percentage of patients given Hemopure who did not require a subsequent transfusion of red blood cells. In these trials, Hemopure was administered only to patients who needed a red blood cell transfusion. Trial design limited the amount of Hemopure that could be infused and the number of post-operative days during which it could be infused. In the Company’s opinion, Hemopure’s clinical trials that have been completed and analyzed demonstrate clinically significant elimination of red blood cell transfusions. Under the applicable protocol designs, elimination was deemed to occur if the patient did not require a subsequent red blood cell transfusion. Elimination was deemed not to occur if the patient was administered a red blood cell transfusion for any reason.

      The following chart summarizes the advanced clinical trials that Biopure has completed for Hemopure as an alternative to red blood cell transfusions.

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      U.S. Phase 3 Orthopedic Surgery Trial. Biopure’s application to the FDA for approval to market Hemopure includes a U.S. Phase 3 trial and a Non-U.S. Phase 3 trial. The U.S. Phase 3 trial was in elective orthopedic surgery. Elective orthopedic surgery includes non-emergency surgery involving bones and joints, including spinal surgery and the repair of orthopedic fractures in stabilized trauma patients. The primary efficacy objective of this trial was the avoidance of red blood cell transfusions for six weeks after orthopedic surgery. The safety objective of the U.S. Phase 3 trial is that patients treated with Hemopure have outcomes no worse than patients treated with red blood cells per the statistical methodology defined in the study analysis plan. Biopure designed this randomized, red blood cell controlled, multi-center study to enroll a total of 640 patients in the United States, Europe, Canada and South Africa, of whom approximately one-half would be in the Hemopure treatment group and the other half would receive red blood cells. The final enrollment of treated patients was 688; 350 randomized to the Hemopure treatment group and 338 to the red blood cell treatment group. Up to 300 grams of hemoglobin, or ten units of Hemopure, could be infused before, during or after surgery for a total of up to six treatment days. The primary efficacy objective of this trial, the elimination of red blood cell transfusions in at least 35 percent of the patients who received Hemopure, was achieved.

      Non-U.S. Phase 3 Non-cardiac Surgery Trial. Biopure completed a Phase 3 trial in Europe and South Africa in 1998 in non-cardiac surgery. Non-cardiac surgery refers to surgery that does not involve the heart and can include surgery of the digestive or urinary tract as well as orthopedic surgery. The primary objective of this trial was the avoidance of red blood cell transfusions for 28 days after non-cardiac surgery. This randomized, red blood cell controlled, multi-center study enrolled 160 patients, of which 83 were randomized to the Hemopure treatment group and 77 to the red blood cell treatment group. Up to 210 grams of hemoglobin, or seven units of Hemopure, were permitted during a six-day treatment period. The trial resulted in the clinically significant elimination of red blood cell transfusions in 43 percent of the patients who received Hemopure in the intent-to-treat population.

      U.S. Phase 2 Post-Cardiopulmonary Bypass Surgery Trial. A randomized, double-blind, red blood cell controlled, multi-center study in post-cardiopulmonary bypass surgery patients was completed in 1997. During cardiopulmonary bypass surgery, patients are connected to a heart and lung machine that replaces functions of the heart and lungs during surgery. The primary objective of this trial was the avoidance of red blood cell transfusions for 28 days after surgery. The study treated 98 patients, 50 of whom were infused with Hemopure and 48 of whom were treated with red blood cells. Up to 120 grams of hemoglobin, or four units of Hemopure, were administered over a three-day treatment period following surgery. The trial resulted in the clinically significant elimination of red blood cell transfusions in 34 percent of the patients that received Hemopure. In this study, 100 percent of the patients who received Hemopure did not require any red blood cells during the day of surgery.

      Additionally, we observed that the hematocrit, which is a measure of the packed red blood cell volume as a percentage of total blood volume, of the patients treated with Hemopure was similar to that of the red blood cell treated patients at both six and 28 days post-surgery. This trial was reported in the Journal of Thoracic and Cardiovascular Surgery, July 2002.

      U.S. Phase 2 Aortic Aneurysm Reconstruction Surgery Trial. In 1998, Biopure completed a randomized, red blood cell controlled, multi-center trial in abdominal aortic aneurysm reconstruction surgery. Aortic aneurysm reconstruction surgery involves repairing a damaged segment of the aorta, the body’s principal artery. This study treated 72 patients, of which 48 were randomized to the Hemopure treatment group and 24 to the red blood cell treatment group. The maximum dosage was 150 grams of hemoglobin, 30 grams more than the post cardiopulmonary bypass trial. Usually aortic aneurysm reconstruction surgery involves much more blood loss than post cardiopulmonary bypass surgery. In this trial, Hemopure was used during the surgery in contrast to the post cardiopulmonary bypass trial, where use began after surgery. The trial resulted in the clinically significant elimination of red blood cell transfusions in 27 percent of the patients that received Hemopure. The trial was reported in the Journal of Vascular Surgery, February 2000.

      Safety Summary. In 21 completed clinical trials, 797 patients received Hemopure and 661 control group patients received allogenic red blood cells and/or colloidal or crystalloid fluids. Some patients in the Hemopure-treated group also received allogenic red blood cells and/or other fluids per the trial design.

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      Based on the integrated safety database in our orthopedic surgery BLA, which combines data from 21 clinical trials, 93% of the patients in the Hemopure group and 88% of the control group patients experienced at least one adverse event (AE), and 23% of the Hemopure patients and 18% of the control group patients experienced at least one serious adverse event (SAE). As expected, the incidence of AEs and serious AE’s (SAEs) increased in both groups as patients’ transfusion needs increased. Many of these events are commonly experienced by surgery patients.

      AEs that occurred in the Hemopure group at greater than or equal to 5% increased incidence compared with the control group included transient yellow skin discoloration (not associated with liver dysfunction), nausea, mild to moderate increase in blood pressure (10 to 20 mm/Hg), vomiting, low urine output, difficulty swallowing, flatulence, and low red blood cell count. These AEs were generally transient and manageable.

      SAEs that occurred statistically significantly more often (p is less than or equal to 0.1) in the Hemopure group were postoperative bleeding (0.9% vs. 0%, p=0.018) and stroke (1.0% vs. 0.2%, p=0.046), none of which were reported by the treating investigator as associated with Hemopure. The increased incidence of reported postoperative bleeding in the Hemopure group may be attributable to wound seepage of plasma that has a pinkish discoloration due to the presence of Hemopure. When stroke is combined with other clinically relevant syndromes (transient ischemic attack and other reversible ischemic neurological events) the incidence is comparable (not statistically significantly different) between the two groups (1% vs. 0.5%, p=0.363). The incidence of heart attack (1.1% Hemopure vs. 0.5% control, p=0.244), acute renal failure (0.6% vs. 0.5%, p=0.735) and death (3.1% vs. 2.1%, p=0.257) was also comparable between patient groups. The SAE of intestinal infection occurred statistically significantly more often in the control group (0% Hemopure vs. 0.5% control, p=0.093). The p-value is a measure of statistical significance, stating the probability of the observations happening by chance. The difference in the incidence of SAEs between the treatment groups is deemed statistically significant when “p” is less than or equal to 0.1.

      The FDA has expressed concerns about the current Hemopure marketing application, or BLA, based on safety and efficacy questions arising from the Phase 3 orthopedic surgery trial. Because of these concerns it has required us to conduct the animal studies described on page 4.

      If the safety and effectiveness of Hemopure in trauma patients experiencing acute loss in the out-of-hospital setting can be demonstrated to the FDA’s satisfaction, we believe that the product’s multi-year room temperature stability, universal compatibility and other properties could allow it to be stockpiled, positioned abroad, and carried or stored in remote locations. These attributes may make it well suited for use on the battlefield, in ambulances, and in the Strategic National Stockpile.

      In March 2003, the U.S. Naval Medical Research Center (NMRC) signed a collaborative research and development agreement (CRADA) with Biopure to help fund and conduct a two-stage randomized, standard therapy controlled trial of Hemopure in out-of-hospital resuscitation of patients with severe hemorrhagic shock. Entitled “Restore Effective Survival in Shock” (RESUS), the trial is intended to support an indication for out-of-hospital military and civilian trauma applications.

      Before the RESUS trial of Hemopure can move forward, the NMRC, which has primary responsibility for the trial under the CRADA (after an amendment in fiscal 2004), must submit the results of an FDA-requested preclinical study for the agency’s evaluation. Because the RESUS protocol involves waiver of patient informed consent (WIC), regulations require that the NMRC submit a separate investigational new drug application (IND). Once a new IND is assigned and the final RESUS protocol is agreed upon between the NMRC and the FDA, the participating hospitals’ internal review boards must approve the protocol. This process may require obtaining separate approvals at each trial site for the WIC community notification program, which begins prior to patient enrollment, and for the actual initiation of patient enrollment.

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      To date, approximately $18.5 million in Congressional funding has been appropriated, granted or otherwise earmarked to support the trauma development program for Hemopure.(2) In South Africa, we are conducting a single-center Phase 2 clinical trial of Hemopure in trauma patients in the hospital setting to collect safety data. This ongoing trial in South Africa is not required as a predicate to the RESUS trial or any other pivotal trial for out-of-hospital use in trauma.

      The NMRC has met with the FDA concerning the out-of-hospital RESUS protocol and is preparing to file an IND, following completion of a requested animal study.

      The NMRC had previously tested Hemopure in preclinical experiments in swine models of hemorrhagic shock that mimic military trauma scenarios. At the annual scientific meeting of the Eastern Association for the Surgery of Trauma (EAST) in January 2004, investigators from the NMRC, Walter Reed Army Medical Center, Biopure and Yale University presented the results of an experiment comparing a low-volume resuscitative fluid [Hetastarch (6%)] to Hemopure in a swine model of uncontrolled hemorrhagic shock incorporating liver injury and delayed evacuation. The results showed that, despite mild blood vessel constriction, Hemopure more effectively stabilized hemodynamics, urine output and tissue oxygenation, decreased fluid requirement and blood loss, and increased survival compared with the material used in the control animals. This study was also reported in the Journal of Trauma, Injury, Infection, and Critical Care, October 2004.

      In the October 2003 issue of the Journal of Trauma, Injury, Infection, and Critical Care, medical researchers from Wilford Hall Medical Center (WHMC) at Lackland Air Force Base reported results of preclinical studies designed to evaluate the effectiveness of Hemopure compared with other low-volume resuscitation fluids in a swine model of controlled hemorrhagic shock. The study results suggest that Hemopure may be an effective primary resuscitation fluid for military or rural trauma settings where logistical constraints and prolonged transport times are common.

      The ability of Hemopure molecules to circumvent partial occlusions could potentially benefit patients suffering from ischemic conditions by supplying oxygen to tissues that are receiving inadequate numbers of red blood cells. Inadequate tissue oxygenation due to partial vessel blockage or constriction can cause heart attack, angina and transient ischemic attack, which is a precursor to stroke. In these situations, treatment with red blood cell transfusions would not be effective because red blood cells are too large to pass through or around blockages. Biopure has completed preclinical studies with results supporting these potential indications. At the annual meeting of the American Society of Anesthesiologists (ASA) in October 1999, medical researchers from University Hospital Eppendorf in Hamburg, Germany, presented data from a preclinical canine study demonstrating that Hemopure sustained heart tissue oxygenation and heart function during 90 percent constriction of a coronary artery [Anesthesiology. 1999;91(3A):A697. Abstract].

      In December 2003, Biopure began a multi-center European Phase 2 clinical trial as a pilot safety study of Hemopure in the setting of elective angioplasty and stent procedures in percutaneous coronary intervention (PCI). This pilot trial will assess the safety of the product in adult patients with coronary artery disease. Approximately 45 patients will be evenly randomized to intravenously receive placebo or 15 or 30 grams of hemoglobin in the form of Hemopure before undergoing PCI. Patients will be monitored until discharged from the hospital and at 30 days post-infusion. The trial is being conducted in the cardiac catheterization laboratories at academic hospitals in The Netherlands, Belgium and Germany.

      As described above under “Developments,” we have begun to discuss with the FDA the possible application for an IND for therapeutic use in patients who have heart attacks.

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Oxyglobin

      Our veterinary product, Oxyglobin, is similar to Hemopure except for its molecular size distribution. The FDA Center for Veterinary Medicine approved Oxyglobin in 1998 and the European Commission approved Oxyglobin in 1999, in both cases for the treatment of canine anemia, regardless of the cause of the anemia. Anemia in dogs often results from blood loss, disease or ineffective red blood cell production. Oxyglobin sales were $2.4 million in fiscal 2004, $4.0 million in fiscal 2003 and $2.0 million in fiscal 2002. The decline in fiscal 2004 sales is attributable to our decision to curtail the manufacture and marketing of Oxyglobin in order to reduce our operating costs until such time, if ever, that we can realize manufacturing economies of scale. Although some of our customers account for more than 10% of Oxyglobin sales, we are not dependent upon a single customer or group of customers, the loss of which would have a material adverse effect on our Oxyglobin business.

      As of December 31, 2004 and December 31, 2003, we had no backorders for Oxyglobin. As of December 31, 2002 we had $1.3 million in backorders, attributed to a plant shutdown during expansion. All of the backlog was filled in fiscal year 2003.

Manufacturing

      We use proprietary and patented purification and polymerization processes in the manufacture of our oxygen therapeutic products. Biopure’s scientific and engineering team has designed and built much of its large-scale critical equipment. Proprietary computer logic controls operate and monitor most aspects of this process. Biopure has produced both Hemopure and Oxyglobin since 1991.

      Investments in long-lived assets include property and equipment, as well as construction in progress and new facility construction; real property license rights related to the source, supply and initial processing of our major raw material; and the asset related to expenditures for a planned manufacturing facility in South Carolina.

      Our products consist of bovine hemoglobin that has been purified, chemically modified and cross-linked for stability. Controlled herds of U.S. cattle raised for beef provide the raw material, bovine hemoglobin, used in our products. Cattle must meet the requirements of a herd management program we have in place to assure the origin, health, feed and quality of the cattle to be used as a raw material source. Suppliers to Biopure contract to maintain traceable records on animal origin, health, feed and care to assure the use of known, healthy animals. These safety standards and the fact that Biopure’s pharmaceutical manufacturing process is validated to remove potential pathogens, if present, provide controls that currently are not and cannot be established for donated human blood.

      We collect bovine whole blood into individual presanitized containers at an abattoir. We then transport the containers to a separation facility. Prior to collection, the animals undergo live inspection. Then, following blood collection, the animal carcass undergoes USDA inspection for use as beef for human consumption. If an animal carcass is retained for further inspection for final disposition by the USDA veterinarian, we reject the corresponding container of whole blood.

      We have validated and scientifically tested our patented purification and manufacturing process to remove potential pathogens, if present in our raw material. Pathogens include bacteria, viruses such as those leading to hepatitis and AIDS, and the transmissible spongiform encephalopathies (TSE) that cause rare neurological disorders such as “mad cow disease” and its human equivalent. The validation of a process means that we have tested and documented it to ensure that it does what it is supposed to. Health and regulatory authorities have given guidance directed at three factors to control these diseases: source of animals, nature of tissue used and manufacturing process. We comply with, and believe we exceed, all current guidelines regarding such risks for human pharmaceutical products. In addition, the European Directorate for the

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      A cell washing filtration process removes plasma proteins in the bovine blood. Washed cells are next placed in a centrifuge that separates the red blood cells from other, remaining blood components. The hemoglobin is extracted from the red blood cells and is then diafiltered to remove red blood cell wall debris and other contaminants. The resulting material is a cell-free hemoglobin intermediate. A semi-continuous purification process involving a high performance liquid chromatography process purifies the hemoglobin intermediate. Next, the purified hemoglobin is polymerized, or linked, by the addition of a cross-linking agent. Polymerized and stabilized material is placed into a physiologic solution, then fractionated if required, and concentrated. The final product is filtered into sterilized batch holding tanks, and then it is filled into bags.

Marketing

      Biopure expects to market Hemopure to hospitals initially. Biopure recognizes that it is crucial to establish a core understanding among opinion leaders that Hemopure fills an important medical need and that systematic development of opinion leader advocacy is necessary for capturing and maintaining a leadership position. Biopure expects to use publications and educational forums, such as seminars and presentations at meetings of medical specialists. Biopure has trained approximately 400 doctors and nurses in South Africa in the use of the product. Biopure also made 2,000 units available for use in South Africa without charge. Biopure engaged a distributor in South Africa in 2000 and terminated the distribution agreement in 2003. Biopure is attempting to formalize the termination of the agreement and is considering alternative arrangements.

      Biopure will explore various means of selling Hemopure elsewhere. Among other options, the Company may seek to enter into licensing or co-marketing agreements for parts or all of the world. Alternatively, it could engage “contract” sales organizations from vendors, contract pharmaceutical companies that supply sales services or recruit and train its own marketing and sales force.

      Biopure estimates that there are at least 15,000 small animal veterinary practices in the United States, another 4,000 mixed animal practices treating small and large animals in the United States and approximately 22,000 small animal practices in Europe. Biopure believes that the average veterinary practice treats only a small percentage of canine anemia cases with a red blood cell transfusion. The remaining animals receive either cage rest or treatment such as fluid administration, iron supplements, nutritional supplements or inspired oxygen.

      Biopure sells Oxyglobin direct to veterinarians in the United States. As part of our decision to curtail Oxyglobin sales and selling expenses in fiscal 2004 we terminated all of the U.S. distribution arrangements we had in place for Oxyglobin and are selling directly to a limited number of customers. Foreign revenues, consisting of revenues from our distributor in the United Kingdom, were $331,000 in fiscal 2004.

Competition

      Hemopure will compete with traditional therapies and with other oxygen delivery pharmaceuticals. Comparisons with traditional therapies, including red blood cell transfusions, are described under “— Scientific Overview,” “— Biopure’s Oxygenation Technology” and “— Biopure’s Products.” In addition, cost may be a competitive factor in traditional therapies.

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      Oxygen therapeutics under development fall into two categories:

	•	hemoglobin-based oxygen carriers, including Hemopure and Oxyglobin, consist of natural hemoglobin from an animal or human or genetically engineered source that has been modified to improve stability, efficacy and safety; and
	•	perfluorocarbon emulsions are chemicals administered intravenously. Perfluorocarbon emulsions are effective principally under conditions of high oxygen partial pressure to assist in oxygen delivery by forcing dissolved oxygen into the plasma space.

      We believe that the competitive factors for our oxygen therapeutics will be efficacy, safety, ease of use and cost. We believe that we have significant advantages as compared to our competitors’ pharmaceuticals, including:

	•	patents covering our processes, our products and their uses;
	•	long-term room temperature stability;
	•	operational manufacturing facility;
	•	ample, controlled raw material source;
	•	marketing approval in South Africa;
	•	Marketing application filed with the FDA; and
	•	FDA and European Commission approvals of Oxyglobin and the facilities that produce it and usage by veterinarians.

      Some of our competitors and potential competitors may have greater financial and other resources to develop, manufacture and market their products. Existing competitors of which we are aware in the development of hemoglobin-based oxygen therapeutics, Northfield Laboratories Inc. and Hemosol Inc., use hemoglobin extracted from human red blood cells as their raw material. The Northfield product is currently in a pivotal, U.S. Phase 3 clinical trial, and a Phase 3 clinical trial for the Hemosol product was stopped by Hemosol. Hemosol has stated to the public that, as part of its revised business model, it is discontinuing development of its current hemoglobin-based oxygen carrier and may pursue the development of other potential formulations. We believe that two privately held companies are conducting clinical trials of hemoglobin based oxygen carriers in Europe: one a Phase 3 clinical trial and one a Phase 2. We are not aware of any competitor that has completed a pivotal, U.S. Phase 3 clinical trial of a product as an alternative to red blood cell transfusions in surgery. Biopure believes that its use of bovine red blood cells is an advantage over products made from outdated donated human red blood cells because of the availability, abundance, ability to control source, cost and relative safety of bovine red blood cells. However, the use of bovine derived blood products may encounter resistance from physicians and patients. Among other things, public perceptions about the risk of “mad cow disease” may affect market acceptance of Hemopure. We also believe that competitors may find it difficult to make or offer a hemoglobin-based oxygen carrier product having the product characteristics of Hemopure without infringing on one or more of our patents.

      Biopure knows of no companies developing oxygen therapeutic products intended to compete with Oxyglobin in the veterinary market.

      In the cardiovascular ischemia area we can expect to encounter competition from medical devices and drugs on the market or currently under development. Competitive factors in this area could include cost, ease of use and efficacy as well as financial ability to market the device or therapy.

Intellectual Property

      Patents, trademarks, trade secrets, technological know-how and other proprietary rights are important to Biopure’s business. We actively seek patent protection both in the United States and abroad. We filed our initial patent in 1986 in the United States. Five U.S. patents have been issued from this filing. These patents describe and claim ultra-pure semi-synthetic blood substitutes and methods for their preparation.

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      In total, we have 25 U.S. patents granted and 9 applications pending relating to our oxygen therapeutics. Our granted U.S. patents include:

	•	three patents covering an ultra-purification process for hemoglobin solutions, regardless of the source of hemoglobin, two of which expire in 2006 and one of which expires in 2014; two patents covering the ultra-pure oxygen therapeutic solutions produced by this process expiring in 2009; one patent covering the chromatography purification of the hemoglobin solution, expiring in 2015; and one patent expiring in 2021 that covers the use of defibrinated bovine blood;
	•	three patents regarding compositions having improved stability, of which two expire in 2015 and the third expires in 2016, and one patent covering processes for producing these compositions which expires in 2016;
	•	four patents, all of which expire in 2015, covering improvements in preservation of such hemoglobin solutions;
	•	two patents, which expire in 2015 and 2016, covering improved methods for separating polymerized from unpolymerized hemoglobin;
	•	two patents, which expire in 2015, covering methods of oxygenating tissue affected by inadequate red blood cell flow;
	•	one patent, which expires in 2023, covering a method for improving oxygen transport by stored red blood cells;
	•	one patent, which expires in 2016, covering the removal of pathogens, if present, from Biopure’s source material;
	•	three patents, which expire in 2011, 2014 and 2015, covering methods for treating tumors; and
	•	one patent, which expires in 2010, covering a sample valve for sterile processing.

      We believe that it is not economically practicable to determine in advance whether our products, product components, manufacturing processes or the uses of our products infringe the patent rights of others. It is likely that, from time to time, we will receive notices from others of claims or potential claims of intellectual property infringement or we may be called upon to

Employees

      As of December 31, 2004, we employed 69 persons.

Government Regulation

                  New Drug or Biologic Approval for Human Use

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

      In the United States, Hemopure is regulated as a human biologic. The steps required before approval of a biologic for marketing in the United States generally include:

	•	preclinical laboratory tests and animal tests;

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	•	the submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing, which must become effective before human clinical trials may lawfully commence;
	•	adequate and well-controlled human clinical trials to establish the safety and efficacy of the product;
	•	the submission to the FDA of a biologic license application;
	•	FDA review of the biologic license application; and
	•	satisfactory completion of an FDA inspection of the manufacturing facilities at which the product is made to assess compliance with current good manufacturing practices, which include elaborate testing, control, documentation and other quality assurance procedures.

      The testing and approval process requires substantial time, effort and financial resources. After approval is obtained, a supplemental approval generally is required for each proposed new indication, often accompanied by data similar to that submitted with the original biologic license application.

      Preclinical studies include laboratory evaluation of the product and animal studies to assess the safety and potential efficacy of the product. The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of the IND. The IND automatically becomes effective in 30 days unless the FDA, before that time, raises concerns or questions and imposes a “clinical hold.” In such a case, the IND sponsor, in our case Biopure, and the FDA must resolve any outstanding concerns before the trial can proceed. Once trials have commenced, the FDA may stop the trials, or particular types of trials, by imposing a clinical hold because of concerns about, for example, the safety of the product being tested or the trial design.

      Clinical trials involve the administration of investigational products to healthy volunteers or patients under the supervision of a qualified principal investigator consistent with an informed consent. An independent institutional review board, or IRB, or ethics committee must review and approve each clinical trial at each institution at which the study will be conducted. The IRB or ethics committee will consider, among other things, ethical factors, the safety of human subjects and the possible liability of the institution.

      Clinical trials typically are conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the drug into human subjects, the drug is usually tested for safety or adverse effects, dosage tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics. Phase 2 clinical trials usually involve studies in a limited patient population to evaluate the efficacy of the drug for specific, targeted indications, determine dosage tolerance and optimal dosage and identify possible adverse effects and safety risks. Phase 3 clinical trials generally further evaluate clinical efficacy and test further for safety within an expanded patient population and at multiple clinical sites. Phase 4 clinical trials are conducted after approval to gain additional experience from the treatment of patients in the intended therapeutic indication. If the FDA approves a product, additional clinical trials may be necessary. A company may be able to use the data from these clinical trials to meet all or part of any Phase 4 clinical trial requirement.

      The results of the preclinical studies and clinical trials, together with detailed information on the manufacture and composition of the product, are submitted to the FDA in the application requesting approval to market the product. Before approving a biologic license application, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facility is in compliance with current good manufacturing practices. The FDA may delay or deny approval of a biologic license application if applicable regulatory criteria are not satisfied or may require additional testing or information, and/or require postmarketing testing and surveillance to monitor safety, purity or potency of a product. It may also limit the indicated uses for which an approval is given.

      New Drug Approval for Veterinary Use

      New drugs for companion animals must receive New Animal Drug Application, or NADA, approval prior to being marketed in the United States. The requirements for approval are similar to those for new human drugs. Obtaining NADA approval requires preclinical studies and clinical field trials and the

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      Pervasive and Continuing Regulation

      Any product approvals that are granted remain subject to continual FDA review, and newly discovered or developed safety or efficacy data may result in withdrawal of products from the market. Moreover, if and when FDA approval is obtained, the manufacture and marketing of our products remain subject to extensive regulatory requirements administered by the FDA and other regulatory bodies, including continuing compliance with current good manufacturing practices, adverse event reporting requirements and the FDA’s general prohibitions against promoting products for unapproved or “off-label” uses. We are subject to inspection and market surveillance by the FDA for compliance with these requirements. Failure to comply with the requirements can, among other things, result in warning letters, product seizures, recalls, fines, injunctions, suspensions or withdrawals of regulatory approvals, operating restrictions and criminal prosecutions. Any such enforcement action could have a material adverse effect on us. Unanticipated changes in existing regulations or the adoption of new requirements also could have a material adverse effect on us.

      We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and hazardous substance disposal.

      Foreign Regulation

      We will be subject to a variety of regulations governing clinical trials and sales of our products outside the United States and are currently subject to requirements of law in South Africa. Prior to the commencement of product marketing in a country, we must obtain approval of our products by the comparable non-U.S. regulatory authorities whether or not we have obtained FDA approval. The approval process varies from country to country and the time needed to secure approval may be longer or shorter than that required for FDA approval. These applications require the completion of extensive preclinical and clinical studies and manufacturing and controls information.

      Reimbursement

      Biopure’s ability to commercialize its human product successfully will depend in significant part on the extent to which reimbursement of the cost of such product and related treatment will be available from government health administration authorities, private health insurers and other organizations.