MEMO TO: Carl Rausch, President & CEO, Biopure Corporation.

From: Boroon Mahanta Dated: 5th February, 1998 It is my recommendation that Oxyglobin be launched immediately, rather than wait for Hemopure to be approved for market release by the FDA. We have analyzed the blood substitute market in both the veterinary and human markets, and have concluded that the immediate release of Oxyglobin will help Biopure in a number of ways, financially and otherwise. A significant benefit from releasing Oxyglobin immediately is the brand value it can build with the first to market image of such a product that Biopure can gain through the marketing of Oxyglobin. This will also help in the IPO release that the company is planning shortly. Looking at the potential market for Oxyglobin, the following factors are to be noted: 1. The size of the veterinary market 2. The number of blood transfusions that take place in the market 3. The price of current blood transfusions 4. The price customers are willing to pay for alternatives.
Exhibit 1 Size of Veterinary Market Total Practices Average Patients Total Patients Blood Transfusion Potential Market (30%) Oxyglobin Price Total Potential Revenue

$ $

15,000 800 12,000,000 3,600,000 150 540,000,000

Since most veterinary practices do not track the cost of blood donations from animals, and rely on the blood banks who charge anything between $80 and $120 for primary care, and anything between $130 and $170 for emergency care, per unit, pricing Oxyglobin at $150 per unit as planned, will be acceptable to the market. The costs of marketing and distributing Oxyglobin should be low due to the following reasons:

Blood transfusions in animals were concentrated to a few practices 15% of the total practices handled 65% of the surgeries 10% of the total practices handled 55% of the trauma cases These tended to be the larger practices and emergency care practices In 1995, an emergency care practices transfused on an average 150 units while the primary care practices transfused only 17 on an average.

Considering the above facts, the marketing and distribution activities should be concentrated to a few practices as against the total 15,000. This will help bring costs down significantly, as against having to target the whole market. Not all pet owners may want to pay this premium. But considering that only 2.5% of the cases received a transfusion, while the requirement was 30%, even if we say a safe 50% of the required transfusions was made possible by the availability of Oxyglobin in the market, as well as pet owners accepting the product and price point, the safe revenue estimation can be at 50% of the total market potential of $540,000,000, which amounts to over $200 million. That recovers the initial investments for developing Hemopure within one year of releasing Oxyglobin, and since the FDA approval for Hemopure was at least two years away, by the time it was released, Biopure would actually be a profitable venture just basis Oxyglobins market success. Another byproduct of launching Oxyglobin first would be that Biopure will be able to gain significant knowledge on the go to market strategies for such products, and be well prepared for the launch of Hemopure, once it is approved by FDA in two years time. By that time, their distribution channels, market mix strategies and pricing strategies would have been clearly developed. In conclusion, we recommend that Oxyglobin be introduced to market immediately by Biopure, at a market price of $150, while they await the FDA approvals for their next product Hemopure. This will generate income and the company can go profitable in two years time, before Hemopure is released, and provide an understanding of the market for Biopure to be better prepared for the release of Hemopure in two years.