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TABLE OF CONTENTS
TABLE OF CONTENTS 2

Filed Pursuant to Rule 424(b)(1)
Registration Nos. 333-144941 and 333-162247

50,000,000 Shares

GRAPHIC

COMMON STOCK



Talecris Biotherapeutics Holdings Corp. is offering 28,947,368 shares of common stock. The selling stockholder identified in this prospectus is offering an additional 21,052,632 shares. This is our initial public offering, and no public market currently exists for our common stock. The initial public offering price will be $19.00 per share. We will not receive any proceeds from sales by the selling stockholder.



Our common stock has been approved for quotation on The Nasdaq Global Select Market under the symbol "TLCR."



Investing in our common stock involves risks. See "Risk Factors" beginning on page 13.



Price $19.00 Per Share



 
 
Price to
Public
 
Underwriting
Discounts and
Commissions
 
Proceeds to
Talecris
 
Proceeds to
Selling
Stockholder
 

Per Share

  $ 19.00   $ 1.045   $ 17.955   $ 17.955  

Total

  $ 950,000,000   $ 52,250,000   $ 519,749,992   $ 378,000,008  

The selling stockholder has granted to the underwriters the option to purchase up to an additional 6,000,000 shares of common stock at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock to purchasers on or about October 6, 2009.



Morgan Stanley   Goldman, Sachs & Co.   Citi   J.P.Morgan

Wells Fargo Securities   Barclays Capital   UBS Investment Bank

September 30, 2009



TABLE OF CONTENTS

 
  Page  

Prospectus Summary

    1  

The Offering

    9  

Risk Factors

    13  

Special Note Regarding Forward-Looking Statements

    43  

Use of Proceeds

    44  

Dividend Policy

    45  

Capitalization

    46  

Dilution

    48  

Selected Historical Consolidated and Combined Financial Data

    50  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    53  

Quantitative and Qualitative Disclosures About Market Risk

    109  

Industry

    111  

Business

    118  

Management

    151  

Certain Relationships and Related Person Transactions

    199  

Principal and Selling Stockholders

    205  

Description of Certain Indebtedness

    208  

Description of Capital Stock

    212  

Shares Eligible for Future Sale

    216  

Underwriters

    218  

Validity of Common Stock

    224  

Experts

    224  

Where You Can Find More Information

    224  

Index to Financial Statements

    F-1  


        No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

        Through and including October 25, 2009 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

        This prospectus includes segment share and industry data and forecasts that we have obtained from market research, consultant surveys, publicly available information and industry publications and surveys as well as our internal data. Except where otherwise indicated, information regarding the plasma-derived protein industry is derived from Market Research Bureau's (MRB) reports (1) The Marketing Research Bureau Inc., The Worldwide Plasma Fractions Market 2007 interim dataset (the "MRB Worldwide Book"); (2) The Marketing Research Bureau Inc., The Plasma Fractions Market in The United States 2008 (the "MRB U.S. Book"); (3) The Marketing Research Bureau Inc., International Directory of Plasma Fractionators 2005; (4) The Marketing Research Bureau, Inc., A Market Profile and Forecast of the Albumin Demand in the United States Through The Year 2012, dated May 2007; (5) The Marketing Research Bureau, Inc., The Worldwide Alpha-1 Antitrypsin Market Present Situation and Future Prospects 2005-2015, dated November 2005; and (6) The Marketing Research Bureau Inc., The Worldwide Plasma Fractions Market 1984 to 2000 (the "MRB Worldwide Book 1984-2000"). Data for the IGIV category includes both intravenous and subcutaneous administration. Market research, consultant surveys, and industry publications and surveys generally indicate that the information contained therein was obtained from sources believed to be reliable, but do not guarantee the accuracy or completeness of such information. Although we believe that the publications and reports are reliable, neither we nor the

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underwriters have independently verified the data. Our internal data, estimates and forecasts are based upon information obtained from our investors, partners, trade and business organizations and other contacts in the industry in which we operate and our management's understanding of industry conditions. Although we believe that such information is reliable, we have not had such information verified by any independent sources.

        We have a number of registered marks, including Gamunex®, Prolastin®, Plasbumin®, Plasmanate®, Koate®, Thrombate III®, GamaStan®, HyperHepB®, HyperRho®, HyperRab®, HyperTet®, Gamimune®, Talecris Direct®, and Prolastin Direct®. This prospectus also contains additional trade names, trademarks and service marks belonging to us and to other companies. All trademarks and trade names appearing in this prospectus are the property of their respective holders.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. This summary may not contain all of the information that is important to you. Before investing in our common stock, you should read this prospectus carefully in its entirety, especially the risks of investing in our common stock that we discuss in the "Risk Factors" section of this prospectus and our consolidated financial statements and related footnotes beginning on page F-1.

        In this prospectus, unless otherwise stated or the context otherwise requires, references to "Talecris," "we," "us," "our" and similar references refer to Talecris Biotherapeutics Holdings Corp. for the period subsequent to our formation, and refer to Bayer Plasma Products Business Group (Bayer Plasma), an operating unit of the Biological Products division of Bayer Healthcare LLC, which is a subsidiary of Bayer AG, for the period prior to our formation. Unless otherwise stated or the context requires otherwise, "Bayer" means Bayer AG, or any of its directly or indirectly wholly-owned subsidiaries.

        We refer to EBITDA and adjusted EBITDA in various places in this prospectus. The definitions of EBITDA and adjusted EBITDA and a reconciliation of EBITDA and adjusted EBITDA to Net Income is provided under the heading "Non-GAAP Financial Measure" in "Management's Discussion and Analysis of Financial Condition and Results of Operations."

        A seven-for-one share dividend on our common stock was paid on September 10, 2009. All share and per-share amounts have been retroactively adjusted for all periods to reflect the share dividend.

Talecris Biotherapeutics Holdings Corp.

Overview

        We are a biopharmaceutical company that is one of the largest producers and marketers of plasma-derived protein therapies in the world. We develop, produce, market and distribute therapies that extend and enhance the lives of people suffering from chronic and acute, often life-threatening, conditions, such as chronic inflammatory demyelinating polyneuropathy (CIDP), primary immune deficiencies (PI), alpha-1 antitrypsin deficiency, bleeding disorders, infectious diseases and severe trauma. In 2007, we had a 24% share in North America of plasma-derived proteins (based on product sales and contract manufacturing combined) and a 12% share worldwide (based on product sales), according to MRB data. During the year ended December 31, 2008, we generated net revenue and net income of $1.4 billion and $65.8 million, respectively. During the six months ended June 30, 2009, we generated net revenue of $747.4 million, representing an increase of 20.1% over the comparable 2008 period, and net income of $116.7 million (including a $75 million merger termination fee).

        Our largest product, Gamunex, Immune Globulin Intravenous (Human), 10% Caprylate/Chromatography Purified, is one of the leading products in the intravenous immune globulin (IGIV) segment, with a reputation as a premium product. Gamunex has demonstrated efficacy, safety, and patient outcomes in more FDA approved indications than any other liquid IGIV (PI, Idiopathic Thrombocytopenic Purpura (ITP), and CIDP). Gamunex is the only IGIV approved for the treatment of CIDP, a neurological indication, in the U.S., Europe and Canada. The Gamunex IGIV share of sales in 2007 was 27% in North America and 16% globally based on MRB data. Our second largest product, Prolastin Alpha 1 Proteinase Inhibitor (Human) had a 67% share of sales in the United States in 2008 and a 76% share of sales worldwide in 2007 and has a high degree of brand recognition within the alpha-1 proteinase inhibitor, or A1PI, category. In addition to Gamunex and Prolastin, which together represented 72.3% of our net revenue in 2008, we also produce and sell albumin, Koate DVI Factor VIII, hyperimmunes, Thrombate III Antithrombin III, PPF Powder and other products.

        We established our leading industry positions through a history of innovation, including developing the first ready-to-use 10% liquid IGIV product in North America, the only IGIV product approved for use in neurology in North America, and the first A1PI product globally. Our primary products have orphan

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drug designation to serve populations with rare, chronic diseases. We continue to develop products to address unmet medical needs and, as of August 31, 2009, employ 279 scientists and support staff to develop new products, expand the uses of our existing products, and enhance our process technologies. Our business is supported by an integrated infrastructure, including, as of August 31, 2009, 69 plasma collection centers, one of the world's largest integrated fractionation and purification facilities, a distribution network, and sales and marketing organizations in the U.S., Canada, Germany and other international regions. Our heritage of patient care innovations in therapeutic proteins dates back to Cutter Laboratories, which began to produce plasma-derived products in the early 1940s, and its successor companies, including Miles Inc., Bayer Corporation and Bayer Healthcare LLC.

The Plasma Products Industry

        Industry Dynamics.    The human plasma-derived products industry has demonstrated revenue growth at a compound annual rate of approximately 8% globally over the past 21 years with worldwide sales of approximately $9.7 billion in 2007 based on MRB data. U.S. sales have grown at a compound annual rate of approximately 10% over the past 18 years with sales of $4.0 billion in 2008, representing a 13.5% increase over 2007, according to the MRB U.S. Book.

        We believe worldwide unit volume demand for plasma-derived products will grow over the long term at a compound annual rate of approximately 6% to 8%, driven principally by the following factors:

    population growth;

    discovery and approval of new applications and indications for plasma-based products;

    growth of diagnosed cases;

    increased treatment of untreated but diagnosed patients;

    increased patient compliance and appropriate dosing levels for diagnosed, treated patients; and

    geographic expansion.

        There are significant barriers to entry into the plasma derivatives manufacturing business, including the operationally complex nature of the business; a high level of capital expenditures to develop, equip and maintain the necessary storage, fractionation and purification facilities; the need to secure an adequate supply of U.S. sourced plasma in order to be licensed to sell plasma-based products in the U.S.; significant intellectual property; the need to develop recognized and trusted brands as well as sales, marketing and distribution infrastructures and relationships; and the ability to comply with extensive regulation by the FDA and comparable authorities worldwide. Additionally, unlike small molecule pharmaceutical products, which are often subject to patent expirations on a defined date, plasma-derived protein therapies are usually protected through intellectual property relating to process, including trade secrets, which may not have a scheduled expiration. However, it is possible that entrants could develop and market competing products by subcontracting portions of the manufacturing process, such as fractionation or purification, from existing plasma derivative manufacturers or by developing alternative therapies based on different technologies. Also, existing fractionators with operations in one region may have lower barriers to entering other regional areas.

        Product Overview.    Plasma contains many therapeutic proteins which the body uses to, among other things, fight infection, regulate body function, and control bleeding and clotting. These proteins are extracted from plasma through a process known as fractionation, which separates the therapeutic proteins contained in the plasma into constituent fractions. These fractions are then further processed and purified to create different product classes addressing a range of therapeutic needs. Our products are primarily

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prescribed by specialty physicians, including neurologists, immunologists, pulmonologists, and hematologists. Our six largest product categories and their indications are given in the table below:

 
Category and Talecris Key Products
  Our Indications
  Talecris Share of Sales
  Historic Growth Rate CAGR
  Talecris Net Revenue 2008 (in millions)
 

IGIV
    
Gamunex IGIV

  U.S., Canada and EU—PI, ITP, CIDP.
Canada and EU—Post Bone Marrow Transplant, Pediatric HIV Infection.
EU only—Kawasaki Disease, Guillain Barre Syndrome, Chronic Lymphocytic Leukemia, Multiple Myeloma
  21%—U.S.(1)


16%—Worldwide(2)
  16%—U.S.(3)


13%—Worldwide(4)
  $479.5—U.S.


$703.2(8)—Worldwide
 

A1PI
Prolastin A1PI

  A1PI Deficiency related emphysema   67%—U.S.(1)
76%—Worldwide(2)
  17%—U.S.(3)
15%—Worldwide(4)
  $202.7—U.S.
$316.5—Worldwide
 

Fraction V (Albumin and PPF)
Plasbumin-5 (Human) 5% USP Plasbumin-20 (Human) 25% USP Plasmanate, Plasma Protein Fraction 5% USP

  Plasma expanders, severe trauma, acute liver and kidney failures   9%—U.S.(1)


7%—Worldwide(2)
  20%—U.S.(5)


11%—Worldwide(10)
  $38.7—U.S.


$72.6(8)—Worldwide
 

Factor VIII
Koate DVI

  Hemophilia A   4%—U.S.(1)
3%—Worldwide(2)
  6%—U.S.(3)
3%—Worldwide(4)
  $8.6—U.S.
$40.2—Worldwide
 

Antithrombin III
Thrombate III
Antithrombin III

  Anticoagulant   100%—U.S.(1)
5%—Worldwide(2)
  29%—U.S.(9)
3%—Worldwide(4)
  $21.3—U.S.
$21.3—Worldwide
 

Hyperimmunes
GamaStan, HyperHepB,
HyperRho,
HyperRab,
HyperTet

  Hepatitis A, Hepatitis B, Rabies, RH Sensitization, Tetanus   22%—U.S.(1)
10%—Worldwide(2)
  2%—U.S.(5)
5%—Worldwide(4)
  $60.7—U.S.

$78.2—Worldwide
 
(1)
For the 2008 calendar year, according to MRB.

(2)
For the 2007 calendar year, according to MRB.

(3)
Represents the compound annual growth rate (CAGR) from 1998 to 2008, calculated based on data from MRB.

(4)
Represents the CAGR from 1996 to 2007, calculated based on data from MRB.

(5)
Represents the CAGR from 2003 to 2008, calculated based on data from MRB.

(6)
Represents the CAGR from 1986 to 2007, calculated based on data from MRB.

(7)
Represents the CAGR from 1986 to 2008, calculated based on data from MRB.

(8)
Includes tolling revenues from the Canadian blood system.

(9)
Represents the CAGR from 2004 to 2008, calculated based on internal data.

(10)
Represents the CAGR from 2003 to 2007, calculated based on data from MRB.

Competitive Strengths

        We believe that the following strengths position us to compete effectively in the plasma products industry:

    Premium Global Liquid 10% IGIV Product.    Our product, Gamunex IGIV, which was launched in North America in 2003 as a premium ready-to-use liquid IGIV product, is one of the leading products in the IGIV segment, with a 21% share of U.S. sales in 2008 according to the MRB U.S. Book. We estimate that Gamunex unit volume share in the U.S. increased to 23% for the six months ended June 30, 2009, which is up from 19% for the same period in 2008. Gamunex uses a patented caprylate process that preserves more of the fragile IgG proteins compared to prior generation IGIV products. In 2008, Gamunex IGIV became the only IGIV approved for CIDP in the U.S., Canada and Europe. Our CIDP indication approval makes us the only IGIV approved for use in a neurological indication in North America. We believe CIDP is the largest IGIV segment in the U.S., representing 29% of total unit volume, doubling our market access for licensed indications to

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      61% of total U.S. IGIV unit volume. Further, the FDA granted Gamunex IGIV orphan drug status, which provides marketing exclusivity for the CIDP indication in the U.S. through September 2015.

    Leading Producer of A1PI with Strong Brand Recognition.    We are the world's largest producer of A1PI, which is used for the treatment of A1PI deficiency-related emphysema. In 2008, Prolastin A1PI had a 67% share of sales in the United States and an over 90% share of sales in the European Union. We believe Prolastin is differentiated in the United States by its unique direct-to-patient distribution and service model, Prolastin Direct, which provides easy enrollment, home infusion, access to insurance experts and patient-centered health management. Prolastin Direct health management provides better patient outcomes by reducing the frequency of respiratory exacerbations. We are currently developing Prolastin Alpha-1 MP, our next generation Prolastin A1PI therapy, which has improved yields and higher concentration. We have submitted a supplemental Biologics License Application (sBLA) to the FDA and a supplemental New Drug Submission (sNDS) to Health Canada for the approval of Alpha-1 MP. We expect a post-approval clinical trial will be required as a condition for approval.

    Vertically Integrated Global Platform.    We have an integrated platform that allows us to appropriately control our plasma supply and production process.

    TPR Plasma Platform:    Until 2006, we purchased all of our plasma, which is our primary raw material, from third parties. Since then, we have successfully designed and executed our vertical plasma supply integration strategy and, as of August 31, 2009, we operated 69 plasma collection centers with approximately 2,400 employees and IBR operated two additional centers on our behalf for a total of 71 centers. Over the past two years, we have aggressively expanded our plasma platform through our own collection centers under Talecris Plasma Resources Inc. (TPR) and through our strategic relationship with International BioResources L.L.C. and affiliated entities (IBR). This gives us access to future supply of plasma that we believe will meet product demand and enable us to increase margins as we lower our collection cost per liter. These centers collectively represent substantially all of our currently planned collection center network for the next three years. We expect that this network, once it matures, will provide approximately 90% of our current plasma requirements. Additionally, in August 2008 we entered into a five-year plasma supply agreement with CSL Plasma Inc., which will further alleviate the risk of any future plasma supply shortfalls.

    Integrated Facilities:    Our Clayton, North Carolina site is one of the world's largest integrated protein manufacturing sites, including fractionation, purification and aseptic filling and finishing of plasma-derived proteins. Together with our facility in Melville, New York, we have a combined fractionation capacity of approximately 4.2 million liters of plasma per year. Our facilities at Clayton have benefited from roughly $580 million of capital investment since 1995, including compliance enhancements, general site infrastructure upgrades, capacity expansions, and new facilities, such as our chromatographic purification facility and our high-capacity sterile filling facility. Our capital expenditures over the next five years will be substantially higher than in the past as a result of planned upgrades to our facility.

    Leader and Innovator in the Global Plasma Products Industry.    We have a successful history of product innovation and commercialization, and we possess specific expertise and core competencies in the development, purification, large-scale manufacture and sale of protein therapeutics.

    Process and Product Innovation: We are the developer of the first ready-to-use 10% liquid IGIV product in North America and the first A1PI product in the world. We have applied new

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        developments in protein purification, including caprylate and chromatography technologies, and are now producing and selling a third generation IGIV product.

      R&D Pipeline: Our current research and development consists of a range of programs that aim to develop new products, obtain new therapeutic indications for existing products, enhance product delivery, improve concentrations and safety, and increase product yields. Our Phase I/II candidate, Plasmin, represents an opportunity to expand into a new segment addressing the dissolution of blood clots including acute peripheral arterial occlusion (aPAO) and ischemic stroke. We have also successfully completed pivotal clinical trials and submitted regulatory filings for licensures of Alpha-1 MP A1PI and Gamunex for subcutaneous administration for the treatment of PI.

    Favorable Distribution Arrangements.    Our size, history and reputation in the industry have enabled us to establish direct and indirect channels for the distribution of our products, and have provided us with experience in dealing with our key regulators, doctors, patient advocacy groups and plasma protein policy makers. We have three specialty sales teams (Immunology/Neurology, Pulmonary and Hematology/Specialty) that have a combination of extensive commercial and healthcare-related experience calling on a variety of touch points including specialty physicians, pharmacists, and homecare companies. In Canada, we are the primary supplier of plasma- derived protein therapies to the Canadian blood system under contracts with the two national Canadian blood system operators, Canadian Blood Services and Hema Quebec. A majority of our North American IGIV sales are made under long term distribution contracts.

    Experienced, Proven Management Team.    Our business is led by an experienced management team, with our executive officers possessing an average of nearly 11 years of experience in the plasma/protein therapeutics business and an average of over 15 years of experience in healthcare-related businesses. We have the complex technical knowledge required in the protein therapeutic products industry, proven competency in commercializing protein therapeutic products and the expertise to manage an operationally complex business efficiently.

Business Strategy

        Our goal is to be the recognized global leader in developing and delivering premium protein therapies to extend and enhance the lives of individuals suffering from chronic, acute and life-threatening conditions. The key elements of our strategy for achieving this goal are as follows:

    Capitalize on Favorable Industry Dynamics.    We anticipate continued growth in unit volume demand for plasma-derived products. We believe that many therapeutic conditions treated by plasma-derived products, such as PI, CIDP, A1PI deficiency and hemophilia, are underdeveloped with an opportunity for growth with increased diagnosis, patient compliance and geographic expansion. We believe that we are well positioned to take advantage of these opportunities due to our premier products, approved indications and integrated plasma supply chain.

    Achieve Cost Efficiencies in our Plasma Collection Platform.    In 2006, we made the strategic decision to vertically integrate our plasma supply chain in order to enhance the predictability, sustainability and profitability of our plasma supply. As of August 31, 2009, TPR and our strategic partner, IBR, operated 71 centers. These centers collectively represent substantially all of our currently planned collection center network for the next three years. We expect that this network, once it matures, will provide approximately 90% of our current plasma requirements. As newly opened plasma centers mature and approach anticipated normalized collection volumes, and as a larger proportion of our collection centers reach efficient collection volumes, our collection cost per liter of plasma should decrease due to lower levels of unabsorbed TPR infrastructure costs, reduced center development and start-up expenses, and economies of scale.

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    Realize Operating Leverage.    We seek to improve our profitability by capitalizing on the operating leverage in our business model. A significant portion of our cost structure, other than raw materials, is relatively fixed and therefore incremental volume contributes significant additional profit. Moreover, our capital expenditure plan is designed, in part, to facilitate the production of an increasing volume of existing products from each liter of plasma. These products would have a high marginal profit contribution. As such, we plan to devote substantial resources to increase our production capacity both generally and of these additional products in order to capture operating leverage.

    Expand Internationally. Last year, approximately 80% of our sales were generated in North America, but North America represented only approximately 40% of global plasma products sales in 2007, according to the MRB Worldwide Book. We intend to leverage our products, brands and distribution networks to expand internationally.

    Manage Product Life Cycles and Invest in Protein Therapies.    We continually evaluate new therapeutic indications, new methods of administration, and new formulations to maintain or increase our products' sales potential, extend their commercial life and capture production efficiencies or yield enhancements. Our Gamunex IGIV, as a result of its approval for CIDP, is the first, and currently the only, IGIV approved for a neurological indication in North America. In 2009, we submitted an sBLA to the FDA for subcutaneous route of administration for Gamunex for the treatment of PI. Prolastin Alpha-1 MP, our next generation A1PI offering, will be a higher-yielding version of our current leading product with higher concentration. In addition, pre-clinical and Phase I studies indicate that plasma-derived Plasmin may result in a safer and faster treatment for restoring blood flow through arteries and veins obstructed by blood clots. We have also been approved in Canada to conduct a stroke Proof of Concept (POC) trial with plasma-derived Plasmin.

    Continue Investing in New Products:    We continue to pursue growth through our internal development capabilities and in-licensing of new products. We are currently developing a commercial process to produce a recombinant Plasmin to treat ischemic stroke and conducting pre-clinical development of recombinant A1PI and Factor VIII proteins utilizing an advanced protein manufacturing technology. The successful development of recombinant products, while not crucial to our competitiveness, would allow us to compete long-term with new products in this higher margin segment of the biotherapeutics industry. We will continue to evaluate both early and late-stage in-licensing opportunities that could complement our core therapeutic areas.

Formation, Initial Financing and Ownership

        We began operations as an independent company on April 1, 2005, upon the completion of our acquisition of substantially all of the assets and the assumption of specified liabilities of Bayer's worldwide plasma derived products business (Bayer Plasma), an operating unit of the Biological Products division of Bayer Healthcare LLC, which is a subsidiary of Bayer AG, in a transaction which was effected by Talecris Holdings, LLC. As part of our overall formation activities, we also acquired 100% of the outstanding common stock of Precision Pharma Services, Inc. (Precision) on April 12, 2005 from Ampersand Ventures. Precision was subsequently merged into our subsidiary, Talecris Biotherapeutics, Inc.

        We are a majority owned subsidiary of Talecris Holdings, LLC. Talecris Holdings, LLC is owned by (i) Cerberus-Plasma Holdings LLC, the managing member of which is Cerberus Partners, L.P., which we refer to collectively as Cerberus, and (ii) limited partnerships affiliated with Ampersand Ventures, which we refer to collectively as Ampersand. Substantially all rights of management and control of Talecris Holdings, LLC are held by Cerberus-Plasma Holdings LLC. Prior to this offering, Talecris Holdings, LLC held 1,000,000 shares of our series A preferred stock and 192,310 shares of our series B preferred stock, which were converted into 85,846,320 shares of our common stock in connection with this offering. In addition, $45.3 million of earned and unpaid dividends related to our preferred stock were converted into

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2,381,548 shares of our common stock in connection with this offering. Talecris Holdings, LLC is the selling stockholder in this offering. Upon the consummation of this offering, Talecris Holdings, LLC will own approximately 56.1% of the outstanding shares our common stock (or 51.1% if the underwriters exercise their option to purchase additional shares in full).

December 2006 Debt Recapitalization

        On December 6, 2006, we completed a recapitalization and entered into new credit facilities aggregating $1.355 billion in total borrowing availability, as defined. The new facilities consisted of:

    a $700.0 million First Lien Term Loan Credit Agreement with Morgan Stanley Senior Funding, Inc. due December 6, 2013;

    a $330.0 million Second Lien Term Loan Credit Agreement with Morgan Stanley Senior Funding, Inc. due December 6, 2014; and

    a $325.0 million Revolving Credit Agreement with Wachovia Bank N.A. due December 6, 2011.

        We used proceeds from the recapitalization to repay and retire $203.0 million of debt outstanding under a then existing credit facility; fund a cash dividend to Talecris Holdings, LLC of $760.0 million; pay a cash award of $34.2 million to certain employees and members of our board of directors; fund an irrevocable trust in the amount of $23.0 million for future cash payments under the cash award; repay principal and interest of $29.5 million owed to Cerberus and Ampersand under our 12% Second Lien Notes, which included $1.1 million of prepayment penalties; pay accrued interest of $23.4 million owed to Talecris Holdings, LLC under the terms of our then existing 14% Junior Secured Convertible Notes, following which, at the election of Talecris Holdings, LLC, the notes were converted into 900,000 shares of our Series A preferred stock; pay debt issuance costs of $25.2 million, which have been capitalized as deferred financing costs; and provide for general corporate purposes.

Definitive Merger Agreement with CSL Limited (CSL)

        On August 12, 2008, we entered into a definitive merger agreement with CSL, under which CSL agreed to acquire us for cash consideration of $3.1 billion, less net debt, as defined. Concurrently with the merger agreement, we entered into a five-year plasma supply agreement with CSL Plasma Inc., a subsidiary of CSL. The closing of the merger was subject to the receipt of certain regulatory approvals as well as other customary conditions. In May 2009, the U.S. Federal Trade Commission filed an administrative complaint before the Commission challenging the merger and a complaint in Federal district court seeking to enjoin the merger during the administrative process. On June 8, 2009, the parties agreed to terminate the definitive merger agreement. CSL paid us a merger termination fee of $75 million, which is included in non-operating income in our consolidated income statement for the six months ended June 30, 2009. The CSL plasma supply agreement remains in effect. The Federal Trade Commission's complaints were both subsequently dismissed.

Certain Risk Factors

        Our business is subject to numerous risks, including without limitation the following:

    Healthcare reform measures could substantially change the market for medical care or healthcare coverage in the United States.

    Government or third-party payors may decrease or otherwise limit the price, scope or other eligibility requirements for reimbursement for the purchasers of our products.

    Our planned level of capital spending would exceed our current capital expenditure covenants under our credit facilities, and we may need to curtail our level of planned investment if we cannot refinance these credit facilities or amend these covenants.

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    Our business relies heavily upon the sales of two products, which together represented 72.3% of our net revenue during 2008, and any adverse market event with respect to either product could have a material adverse effect on us.

    Our manufacturing processes, plasma supply and products may be susceptible to contamination or production interruptions.

    Our plasma collection and manufacturing processes are subject to government regulation, oversight and inspection, which in the event of non-compliance could adversely impact operations.

    We may be unable to obtain adequate quantities of FDA-approved plasma due to industry-wide shortages, problems with third-party suppliers or difficulties with our own collection centers.

    The recent favorable pricing environment for our products may not continue.

    The regulatory requirements for product approval may not be explicit, may evolve over time and may diverge by jurisdiction and adverse events or post-approval clinical trials may impact our ability to sell currently licensed products.

    We have suspended sales to certain countries while we investigate potential Foreign Corrupt Practices Act violations.

    We are dependent on third parties to provide crucial supplies (including plasma), to service our equipment, to support our systems and to sell, distribute and deliver our products.

These and other risks are more fully described in the section entitled "Risk Factors." We urge you to carefully consider all the information presented in the section entitled "Risk Factors" beginning on page 13.

Our Corporate Information

        We were incorporated under the laws of the State of Delaware on March 11, 2005 and commenced operations on April 1, 2005, upon completion of our acquisition on March 31, 2005 of substantially all of the assets and the assumption of specified liabilities of the Bayer Plasma Products Business Group, a unit of the Biological Products division of Bayer Healthcare LLC, which is a subsidiary of Bayer AG. Our principal executive offices are located at 4101 Research Commons, 79 T.W. Alexander Drive, Research Triangle Park, North Carolina 27709 and our telephone number is (919) 316-6300. Our website address is http://www.talecris.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

8



THE OFFERING

Common stock we are offering

  28,947,368 shares

Common stock being offered by the selling stockholder

  21,052,632 shares

Common stock to be outstanding after this offering

  119,783,652 shares

Use of proceeds

  We estimate that the net proceeds to us from this offering will be approximately $514.8 million, after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We intend to use $386.1 million and $128.7 million of the net proceeds to us from this offering to repay amounts owed under our First and Second Lien Term Loans, respectively. We will not receive any proceeds from the sale of shares by the selling stockholder. See "Use of Proceeds."

Risk factors

  You should read the "Risk Factors" section of this prospectus for a discussion of the factors to consider carefully before deciding to purchase any shares of our common stock.

The Nasdaq Global Select Market symbol

  TLCR

        The number of shares of our common stock to be outstanding immediately after this offering is based on 2,608,416 shares of common stock outstanding, including 924,400 unvested shares outstanding at September 30, 2009, the 28,947,368 shares we are offering and an additional 88,227,868 shares of common stock which were issued upon the conversion of all of the outstanding shares of our preferred stock and related earned and unpaid dividends in connection with this offering. The number of shares of common stock to be outstanding after this offering excludes:

    13,934,816 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2009 at a weighted average exercise price of $7.04 per share and options to purchase 597,713 shares of our common stock with an exercise price equal to the initial public offering price per share in this offering (IPO Price), which we granted in connection with this offering;

    482,975 shares reserved for issuance under restricted stock units, which we granted in connection with this offering; and

    an aggregate of approximately 6,119,312 shares of common stock reserved for future issuance under our 2009 Long-Term Incentive Plan.

        Unless otherwise noted, all information in this prospectus assumes:

    no exercise of the outstanding options described above; and

    no exercise by the underwriters of their option to purchase up to an aggregate of 6,000,000 additional shares of common stock from the selling stockholder.

9



SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

        The following is a summary of our historical consolidated financial data for the periods ended and at the dates indicated below. You should read this information together with our consolidated financial statements and the related footnotes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        We derived the audited historical consolidated financial data for the years ended December 31, 2008, 2007 and 2006 and as of December 31, 2008 and 2007 from our audited consolidated financial statements, which are included elsewhere in this prospectus. We derived the audited historical consolidated financial data as of December 31, 2006 from our audited consolidated financial statements, which are not included in this prospectus.

        The unaudited interim consolidated financial data for the six months ended June 30, 2009 and 2008 and as of June 30, 2009 have been derived from our unaudited interim consolidated financial statements, which are included elsewhere in this prospectus. The unaudited interim consolidated financial data as of June 30, 2008 has been derived from our unaudited interim consolidated financial statements, which are not included in this prospectus. In our opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as our annual audited consolidated financial statements and contain all material adjustments (consisting of normal recurring accruals and adjustments) necessary for a fair presentation of our financial position and results of operations. Operating results for the six months ended June 30, 2009 are not necessarily indicative of results that may be expected for the year ending December 31, 2009.

        We believe that the comparability of our financial results between periods presented in the Summary Financial Data table below is significantly impacted by the following items, which are more fully described under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Matters Affecting Comparability".

    Costs and non-operating income associated with our terminated merger with CSL;

    Costs associated with the development and vertical integration of our plasma collection platform;

    Inventory impairment provisions, and subsequent recoveries, related to a plasma collection center current Good Manufacturing Practices (cGMP) issue;

    Inventory impairment provisions, and subsequent recoveries, related to a customer dispute settlement regarding intermediate material;

    Costs associated with transition-related activities to establish an independent company apart from Bayer;

    Costs associated with unplanned plant maintenance;

    Impairment and subsequent recovery related to a Gamunex IGIV production incident that occurred just prior to the closing of our transaction with Bayer;

    Management fees payable to related parties, which fees will cease upon consummation of this offering;

    Capital structure changes;

    Costs associated with share-based compensation awards and special recognition bonuses;

    Non-operating income and fees related to a litigation settlement with Baxter;

    Tax benefit due to the release of our deferred tax asset valuation allowance;

    Acquisition of Bayer Plasma net assets and related purchase accounting; and

    Distribution and transition services agreements with Bayer affiliates.

10



Summary Financial Data

 
  Years Ended December 31,   Six Months Ended
June 30,
 
 
  2006   2007   2008   2008   2009  
 
  (in thousands)
 

Consolidated Income Statement Data:

                               

Net revenue:

                               
 

Product net revenue

  $ 1,114,489   $ 1,196,686   $ 1,334,550   $ 603,645   $ 734,979  
 

Other

    14,230     21,823     39,742     18,743     12,386  
                       

Total net revenue

    1,128,719     1,218,509     1,374,292     622,388     747,365  

Cost of goods sold

    684,750     788,152     882,157     416,505     433,209  
                       

Gross profit

    443,969     430,357     492,135     205,883     314,156  

Operating expenses:

                               
 

SG&A

    241,448     189,387     227,524     95,529     134,425  
 

R&D

    66,801     61,336     66,006     30,083     35,561  
                       

Total operating expenses

    308,249     250,723     293,530     125,612     169,986  
                       

Income from operations

    135,720     179,634     198,605     80,271     144,170  

Other non-operating (expense) income:

                               
 

Interest expense, net

    (40,867 )   (110,236 )   (97,040 )   (48,645 )   (41,858 )
 

Merger termination fee

                    75,000  
 

Equity in earnings of affiliate

    684     436     426     150     184  
 

Loss on extinguishment of debt

    (8,924 )                
 

Litigation settlement

        12,937              
 

Other

            400     400      
                       

Income before income taxes and extraordinary items

    86,613     82,771     102,391     32,176     177,496  

(Provision) benefit for income taxes

    (2,222 )   40,794     (36,594 )   (13,137 )   (60,789 )
                       

Income before extraordinary items

    84,391     123,565     65,797     19,039     116,707  

Extraordinary items

    2,994                  
                       

Net income

  $ 87,385   $ 123,565   $ 65,797   $ 19,039   $ 116,707  
                       

Other Financial Data and Ratios (unaudited):

                               

Liters of plasma processed

    2,983     2,650     3,240     1,376     1,740  

Gross profit margin

    39.3 %   35.3 %   35.8 %   33.1 %   42.0 %

 

 
   
   
   
   
   
  Pro Forma
as Adjusted
June 30,
2009
 
 
  December 31,   June 30,  
 
  2006   2007   2008   2008   2009  

Consolidated Balance Sheet Data:

                                     

Cash and cash equivalents

 
$

11,042
 
$

73,467
 
$

16,979
 
$

20,221
 
$

11,829
 
$

11,829
 

Total assets

  $ 903,474   $ 1,142,322   $ 1,307,399   $ 1,189,868   $ 1,336,742   $ 1,336,742  

Long-term debt

  $ 1,102,920   $ 1,129,037   $ 1,188,941   $ 1,159,933   $ 1,098,738   $ 583,988  

Redeemable preferred stock

  $ 110,535   $ 110,535   $ 110,535   $ 110,535   $ 110,535      

Total stockholders' (deficit) equity

  $ (528,980 ) $ (390,757 ) $ (316,725 ) $ (356,618 ) $ (180,268 ) $ 477,035  

11


        We also use EBITDA and adjusted EBITDA as operating performance measures. Our EBITDA and adjusted EBITDA were $219.7 million and $287.8 million, respectively, for the year ended December 31, 2008, $89.4 million and $133.8 million, respectively, for the six months ended June 30, 2008, and $233.3 million and $267.9 million, respectively, for the six months ended June 30, 2009. Our adjusted EBITDA for the six months ended June 30, 2009 includes a $75.0 million termination fee received from CSL as a result of the termination of the definitive merger agreement. In addition, we incurred legal and other costs associated with the regulatory review process of our terminated merger agreement with CSL of $8.3 million for the year ended December 31, 2008 and $6.0 million and $0.8 million for the six months ended June 30, 2009 and 2008, respectively. This termination fee and these expenses are not permitted as adjustments to our adjusted EBITDA as defined in our credit facilities. The definitions of EBITDA and adjusted EBITDA and a reconciliation of EBITDA and adjusted EBITDA to Net Income are provided under the heading "Non-GAAP Financial Measure" in "Management's Discussion and Analysis of Financial Condition and Results of Operations."

12



RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus, including the consolidated financial statements and related footnotes appearing at the end of this prospectus, before deciding to invest in our common stock. If any of the following risks actually occur, they may materially harm our business, prospects, financial condition and results of operations. In this event, the market price of our common stock could decline and you could lose part or all of your investment.

Risks Related to Healthcare Reform and Reimbursement

We could be adversely affected if healthcare reform measures substantially change the market for medical care or healthcare coverage in the United States.

        Substantial changes could be made to the current system for paying for healthcare in the U.S., including changes made in order to extend medical benefits to those who currently lack insurance coverage. Approximately 47 million Americans currently lack health insurance of any kind. Extending coverage to such a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, drugs and devices. These structural changes could entail modifications to the existing system of private payors and government programs (Medicare, Medicaid and State Children's Health Insurance Program), creation of a government-sponsored healthcare insurance source, or some combination of both, as well as other changes. Restructuring the coverage of medical care in the U.S. could impact the reimbursement for prescribed drugs and biopharmaceuticals, such as those produced and marketed by us. If reimbursement for these products is substantially reduced in the future, or rebate obligations associated with them are substantially increased (discussed in more detail below), our business could be materially impacted.

        Extending medical benefits to those who currently lack coverage will likely result in substantial cost to the federal government, which may force significant changes to the U.S. healthcare system. Much of the funding for expanded healthcare coverage may be sought through cost savings. While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care. Cost of care could be reduced by reducing the level of reimbursement for medical services or products (including those biopharmaceuticals produced and marketed by us), or by restricting coverage (and, thereby, utilization) of medical services or products. In either case, a reduction in the utilization of, or reimbursement for, our products could have a materially adverse impact on our financial performance.

        More specific changes to the current system of coverage and reimbursement could also be significant. For instance, Talecris and other pharmaceutical and biopharmaceutical companies currently pay rebates to states for outpatient drugs provided under Medicaid programs. These rebates comprise a fixed percentage of sales plus an adjustment for inflation tied to the date a particular drug was introduced to the market (inflationary penalty). Should the Medicaid rebate percentage or the inflationary penalty be increased, our business could be materially impacted. Moreover, if the Medicaid rebate is extended to drugs paid for under Medicaid Managed Care plans, there could be an additional adverse impact on our business. Similarly, if the Medicaid rebate requirements are extended to the Medicare Part D program, there could be a materially adverse impact on our business. Currently the "340B program" in the U.S. extends Public Health Service pricing to hospitals serving some disadvantaged populations. If eligibility for the 340B program is expanded to additional types of hospitals, or if the program is expanded to apply to the inpatient purchases of participating hospitals, our business could be materially adversely impacted.

        There is substantial uncertainty regarding the exact provisions of healthcare reform that may be enacted, if at all. All of the changes discussed above, and others, are under consideration by Congress. This

13



uncertainty limits our ability to forecast changes that may occur in the future and to manage our business accordingly.

We could be adversely affected if government or private third-party payors decrease or otherwise limit the amount, price, scope or other eligibility requirements for reimbursement for the purchasers of our products.

        Independent of healthcare reform initiatives, we have experienced and expect to experience pricing pressures on our current products and pipeline products from initiatives aimed at reducing healthcare costs by governmental and private third-party payors, the increasing influence of health maintenance organizations, and regulatory proposals, both in the United States and in foreign markets. Healthcare reform in the United States is likely to increase the pressure, which may include the effect of such proposed changes as the possible introduction of a biosimilar pathway and the possible redefinition of the term "single source" products which plays a key role in determining reimbursements under the Medicare Part B program. In addition, prices in many European countries are subject to local regulation. If payors reduce the amount of reimbursement for a product, it may cause groups or individuals dispensing the product to discontinue administration of the product, to administer lower doses, to substitute lower cost products or to seek additional price related concessions. These actions could have a negative effect on our financial results, particularly in cases where we have a product that commands a premium price in the market place, or where changes in reimbursement induce a shift in the site of treatment. For example, beginning in 2005, the Medicare drug reimbursement methodology for physician and hospital outpatient payment schedules changed to Average Sales Price (ASP) +6%. This payment was based on a volume-weighted average of all brands under a common billing code. Medicare payments to physicians between the fourth quarter of 2004 and the first quarter of 2005 dropped 14% for both the powder and liquid forms of IGIV. Medicare payments to hospitals fell 45% for powder IGIV and 30% for liquid IGIV between the fourth quarter of 2005 and the first quarter of 2006. The Medicare reimbursement changes resulted in the shift of a significant number of Medicare IGIV patients to hospitals from physicians' offices beginning in 2005 as many physicians could no longer recover their costs of obtaining and administering IGIV in their offices and clinics. After 2006, some hospitals reportedly began to refuse providing IGIV to Medicare patients due to reimbursement rates that were below their acquisition costs. While subsequent changes have improved some of these Medicare reimbursement issues, on January 1, 2008, the Centers for Medicare & Medicaid Services (CMS) reduced the reimbursement for separately covered drugs and biologicals, including IGIV, in the hospital outpatient setting from ASP +6% to ASP +5% using 2006 Medicare claims data as a reference for this reduction. In addition, CMS reduced a hospital add-on payment from $75 to $38 per infusion. Beginning January 1, 2009, CMS further reduced the hospital outpatient reimbursement for separately covered outpatient drugs, including IGIV, to ASP +4%, and eliminated the add-on payment.

        Additionally, physicians frequently prescribe legally available therapies for uses that are not described in the product's labeling and that differ from those tested in clinical studies and approved by the FDA or similar regulatory authorities in other countries. These unapproved, or "off-label," uses are common across medical specialties, and physicians may believe such off-label uses constitute the preferred treatment or treatment of last resort for many patients in varied circumstances. We believe that a significant portion of our IGIV volume may be used to fill physician prescriptions for indications not approved by the FDA or similar regulatory authorities. If reimbursement for off-label uses of our products, including IGIV, is reduced or eliminated by Medicare or other third-party payors, including those in the United States or the European Union, we could be adversely affected.

        For example, CMS could initiate an administrative procedure known as a National Coverage Determination (NCD) by which the agency determines which uses of a therapeutic product would be reimbursable under Medicare and which uses would not. This determination process can be lengthy, thereby creating a long period during which the future reimbursement for a particular product may be uncertain. High levels of spending on IGIV products, along with increases in IGIV prices, increased IGIV

14



utilization and the high proportion of off-label uses, may increase the risk of regulation of IGIV reimbursement by CMS. On the state level, similar limits could be proposed for therapeutic products covered under Medicaid. Moreover, the Deficit Reduction Act of 2005 incentivizes states to take innovative steps to control healthcare costs, which could include attempts to negotiate limits to, or reductions of, drug prices.

        The U.S. economic stimulus legislation enacted in February 2009 provided significant funding for the federal government to conduct Comparative Effectiveness Research (CER). While the stated intent of CER is to develop information to guide providers to the most efficacious therapies, outcomes of CER could influence the reimbursement or coverage for therapies that are determined to be less cost-effective than others. Should any of our products be determined to be less cost-effective than alternative therapies, the levels of reimbursement for these products, or the willingness to reimburse at all, could be impacted, which could materially impact our financial results.

        Additionally, the settlement of class action litigation against First DataBank and others will result in the downward revision and possible eventual elimination of the published Average Wholesale Prices (AWPs) which are an important basis for reimbursement used by many third-party payors for our products. Under the settlement, the revision will become effective in September 2009. First DataBank and other pricing compendia have stated that they will or may discontinue publishing AWP within two years. Consequently, given the nature of our Prolastin Direct Model in the U.S., we anticipate a decrease in Prolastin AWPs resulting in a decrease in our net price subsequent to the settlement. We currently estimate the annual impact of the First DataBank settlement to be a reduction in the net revenue between $3 million and $6 million.

Risks Related to Our Business

Our business is highly concentrated on our two largest products, Gamunex IGIV and Prolastin A1PI, and our largest geographic region, the U.S.  Any adverse market event with respect to either product or the U.S. region would have a material adverse effect on us.

        We rely heavily upon the sales of two of our products: Gamunex IGIV and Prolastin A1PI. Sales of Gamunex IGIV and Prolastin A1PI together comprised approximately 72.3% and 75.0% of our total net revenue for the year ended December 31, 2008 and the six months ended June 30, 2009, respectively. Sales of Gamunex IGIV comprised approximately half of our total net revenue in each of these periods. If either Gamunex IGIV or Prolastin A1PI lost significant sales, or were substantially or completely displaced in the market, we would lose a significant and material source of our net revenue. Similarly, if either Gamunex IGIV or Prolastin A1PI were to become the subject of litigation and/or an adverse governmental ruling requiring us to cease sales of either product, our business would be adversely affected.

        We rely heavily upon sales from the U.S. region, which comprised 66.0% and 66.5% of our net revenue for the year ended December 31, 2008 and the six months ended June 30, 2009, respectively. If our U.S. sales were significantly impacted by either material changes to government or private payor reimbursement, by other regulatory developments, or by competition, then our business would be adversely affected.

Our manufacturing processes are complex and involve biological intermediates that are susceptible to contamination.

        Plasma is a raw material that is susceptible to damage and contamination and may contain human pathogens, any of which would render the plasma unsuitable as raw material for further manufacturing. For instance, improper storage of plasma, by us or third-party suppliers, may require us to destroy some of our raw material. If unsuitable plasma is not identified and discarded prior to the release of the plasma to our manufacturing process, it may be necessary to discard intermediate or finished product made from that plasma or to recall any finished product released to the market, resulting in a charge to cost of goods sold.

15


        The manufacture of our plasma products is an extremely complex process of fractionation, purification, filling and finishing. Although we attempt to maintain high standards for product testing, manufacturing, process controls and quality assurance, our products can become non-releasable or otherwise fail to meet our stringent specifications through a failure of one or more of these processes. Extensive testing is performed throughout the process to ensure the safety and effectiveness of our products. We may, however, detect instances in which an unreleased product was produced without adherence to our manufacturing procedures or plasma used in our production process was not collected or stored in a compliant manner consistent with our current Good Manufacturing Practices (cGMP) or other regulations. Such an event of noncompliance would likely result in our determination that the implicated products should not be released and therefore should be destroyed. For example, a malfunction of the Gamunex IGIV chromatography system just prior to our formation transaction in 2005 resulted in the processing of IGIV products containing elevated levels of antibodies for over one month. Our total cost related to this incident, including the costs of product loss, investigation, testing, disposal, and other remedial actions, was approximately $41.6 million. We subsequently recovered from Bayer $10.7 million through our 2005 working capital adjustment and $9.0 million in the first quarter of 2007 through a settlement.

        Once we have manufactured our plasma derivative products, they must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third parties that supply, ship or distribute our products, to properly care for our products may require that those products be destroyed.

        While we expect to write off small amounts of work-in-progress in the ordinary course of business due to the complex nature of plasma, our processes and our products, unanticipated events may lead to write-offs and other costs materially in excess of our expectations and the reserves we have established for these purposes. We have in the past had issues with product quality and purity that have caused us to write off the value of the product. Such write-offs and other costs could cause material fluctuations in our profitability. Furthermore, contamination of our products could cause investors, consumers, or other third parties with whom we conduct business to lose confidence in the reliability of our manufacturing procedures, which could adversely affect our sales and profits. In addition, faulty or contaminated products that are unknowingly distributed could result in patient harm, threaten the reputation of our products and expose us to product liability damages and claims from companies for whom we do contract manufacturing.

Our ability to continue manufacturing and distributing our products depends on our and our suppliers' continued adherence to cGMP regulations.

        The manufacturing processes for our products are governed by detailed written procedures and federal regulations that set forth cGMP requirements for blood and blood products. Our Quality Operations unit monitors compliance with these procedures and regulations, and the conformance of materials, manufacturing intermediates, and final products to their specifications. Failure to adhere to established procedures or regulations, or to meet a specification, could require that a product or material be rejected and destroyed. There are relatively few opportunities for us to rework, reprocess or salvage nonconforming materials or products.

        Our adherence to cGMP regulations and the effectiveness of our quality systems are periodically assessed through inspections of our facilities by the FDA in the U.S. and analogous regulatory authorities in other countries. While we believe that our manufacturing facilities are currently in substantial compliance with cGMP regulations, we cannot assure you that we will not be cited for deficiencies in the future. If deficiencies are noted during an inspection, we must take action to correct those deficiencies and to demonstrate to the regulatory authorities that our corrections have been effective. If serious deficiencies are noted or if we are unable to prevent recurrences, we may have to recall product or suspend operations until appropriate measures can be implemented. We are required to report some deviations from procedures to the FDA. Even if we determine that the deviations were not material, the FDA could

16



require us to take similar measures. Since cGMP reflects ever evolving standards, we regularly need to update our manufacturing processes and procedures to comply with cGMP. These changes may cause us to incur costs without improving our profitability or the safety of our products. For example, more sensitive testing assays may be required (if and when they become available) or existing procedures or processes may require revalidation, all of which may be costly and time-consuming and could delay or prevent the manufacturing of a product or launch of a new product.

        We intend to undertake several large capital projects to maintain cGMP and expand capacity. Capital projects of this magnitude involve technology and project management risks. Technologies that have worked well in a laboratory or in a pilot plant may cost more or not perform as well, or at all, in full scale operations. Projects may run over budget or be delayed. We cannot be certain that these projects will be completed in a timely manner or that we will maintain our compliance with cGMP, and we may need to spend additional amounts to achieve compliance. Additionally, by the time these multi-year projects are completed, market conditions may differ significantly from our assumptions regarding the number of competitors, customer demand, alternative therapies, reimbursement and public policy, and as a result capital returns might not be realized.

        Changes in manufacturing processes, including a change in the location where the product is manufactured or a change of a third-party manufacturer, may require prior FDA review and approval or revalidation of the manufacturing process and procedures in accordance with cGMP. There may be comparable foreign requirements. For example, we are currently in the process of transferring the manufacture of our antithrombin III product from Bayer's Berkeley, California, biologics manufacturing facility to our Clayton manufacturing facility. To validate our manufacturing processes and procedures following completion of upgraded facilities, we must demonstrate that the processes and procedures at the upgraded facilities are comparable to those currently in place at our facilities. In order to provide such a comparative analysis, both the existing processes and the processes that we expect to be implemented at our upgraded facilities must comply with the regulatory standards prevailing at the time that our expected upgrade is completed. In addition, regulatory requirements, including cGMP regulations, continually evolve. Failure to adjust our operations to conform to new standards as established and interpreted by applicable regulatory authorities would create a compliance risk that could impair our ability to sustain normal operations.

        Our antithrombin III product is currently being produced for us at Bayer's Berkeley, California biologics manufacturing facility. The failure of Bayer or of our other suppliers to comply with cGMP standards or disagreements between us and Bayer as to requirements could result in our product being rejected, production being slowed down or halted, or product releases being delayed.

        A number of inspections by the FDA and foreign control authorities, including the German Health Authority (GHA), have been conducted or are expected at our plasma collection centers in 2009. Some of these inspections are of licensed centers to assess ongoing compliance with cGMP, while others are of our currently unlicensed centers as a prerequisite to final approval of the centers' license applications. If the FDA (or other authorities) finds these centers not to be in compliance, our ongoing operations and/or plans to expand plasma collections would be adversely affected.

We must continually monitor the performance of our products once approved and marketed for signs that their use may elicit serious and unexpected side effects, which could jeopardize our ability to continue marketing the products. We may also be required to conduct post-approval clinical trials as a condition to licensing a product.

        As for all pharmaceutical products, the use of our products sometimes produces undesirable side effects or adverse reactions or events (referred to cumulatively as "adverse events"). For the most part, these adverse events are known, are expected to occur at some frequency and are described in the products' labeling. When adverse events are reported to us, we investigate each event and circumstances surrounding it to determine whether it was caused by our product and whether it implies a previously

17



unrecognized safety issue exists. Periodically, we report summaries of these events to the applicable regulatory authorities.

        In addition, the use of our products may be associated with serious and unexpected adverse events, or with less serious reactions at a greater than expected frequency. This may be especially true when our products are used in critically ill patient populations. When these unexpected events are reported to us, we must make a thorough investigation to determine causality and implications for product safety. These events must also be specifically reported to the applicable regulatory authorities. If our evaluation concludes, or regulatory authorities perceive, that there is an unreasonable risk associated with the product, we would be obligated to withdraw the implicated lot(s) of that product. Furthermore, an unexpected adverse event of a new product could be recognized only after extensive use of the product, which could expose us to product liability risks, enforcement action by regulatory authorities and damage to our reputation and public image.

        We have received reports that some Gamunex patients have experienced transient hemolysis and/or hemolytic anemia, which are known potential side effects for this class of drugs. Since 2005, a disproportionate number of these reports have been received from Canada, where our product accounted for 80% of all IGIV distributed in 2008. The Canadian product labeling was updated in 2005 after these hemolysis events were first reported to Health Canada. Subsequently, Talecris provided annual updates on these events to Health Canada from 2006 to 2008, but no further action was recommended by the Canadian regulators. A serious adverse finding concerning the risk of hemolysis by any regulatory authority for intravenous immune globulin products in general, or Gamunex in particular, could adversely affect our business and financial results.

        Once we produce a product, we rely on physicians to prescribe and administer them as we have directed and for the indications described on the labeling. It is not, however, unusual for physicians to prescribe our products for "off-label" uses or in a manner that is inconsistent with our directions. For example, a physician may prescribe an infusion rate for our Gamunex IGIV product that is greater than our directed infusion rate, which in turn may reduce its efficacy or result in some other adverse affect upon the patient. Similarly, a physician may prescribe a higher or lower dosage than the dosage we have indicated, which may also reduce our product's efficacy or result in some other adverse affect upon the patient. To the extent such off-label uses and departures from our administration directions become pervasive and produce results such as reduced efficacy or other adverse effects, the reputation of our products in the market place may suffer.

        When a new product is approved, the FDA or other regulatory authorities may require post-approval clinical trials, sometimes called Phase IV clinical trials. For example, such trials are expected to be required by the FDA and European authorities for Alpha-1 MP A1PI. If the results of such a trial were unfavorable, this could result in the loss of the license to market the product, with a resulting loss of sales.

Our products face increased competition.

        Recently, certain of our products have experienced increased competition.

        Until 2004, we were one of two North American suppliers with an approved liquid IGIV product. In 2004, Grifols launched Flebogamma® 5% liquid IGIV and Octapharma launched Octagam® 5% liquid IGIV. In 2005, Baxter's Gammaguard® 10% liquid IGIV was launched. In 2007 CSL Behring received approval for Privigen® 10% liquid IGIV. Privigen® was launched in the U.S. in 2008. Omrix and Biotest are both seeking approval for liquid IGIV products in the U.S., which, if approved, will further increase competition among liquid IGIV products. If third-party payors, group purchasing organizations and physicians, or others demand the lower-priced products of some of our competitors, we may lose sales or be forced to lower our prices.

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        In addition, in Canada where we have been the "supplier of record" since the 1980s, one of the Canadian blood system operators, Canadian Blood Services, has elected to pursue a dual source strategy, with our share being reduced to 65% of Canadian Blood Services' plasma in 2009. Overall in 2009, we expect to fractionate 70% of the plasma collected in Canada. The Canadian blood system operators are seeking to diversify their suppliers, which we expect to result in a further decline in our share of sales in Canada.

Our financial performance will suffer if we do not improve the cost efficiency of our plasma collection platform.

        We believe our current cost per liter of plasma may exceed that of our larger competitors. The opening of new plasma centers, which take up to several years to reach efficient production capacity, and the creation of a corporate infrastructure to support our vertical integration strategy have significantly increased our per liter cost of plasma. We charge excess unabsorbed overhead costs directly to cost of goods sold until our plasma collection centers reach normal operating capacities.

        In the event that our plasma collection centers do not reach efficient operating capacities, or there are delays in the ability of our plasma collection centers to reach efficient operating capacities, we will continue to charge unabsorbed overhead costs directly to cost of goods sold, which will result in higher costs of operations, lower margins and lower cash flow than our competitors. If by attempting to reduce these costs, we adversely affect compliance with cGMP, we may be required to write-off plasma and any intermediates and products manufactured with non-compliant plasma and we may face shortages of plasma needed to manufacture our products.

We would become supply-constrained and our financial performance would suffer if we could not obtain adequate quantities of FDA-approved source plasma.

        In order for plasma to be used in the manufacturing of our products, the individual centers at which the plasma is collected must be licensed by the FDA, and approved by the regulatory authorities, such as the GHA, of those countries in which we sell our products. When a new plasma center is opened, and on an ongoing basis after licensure, it must be inspected by the FDA and GHA for compliance with cGMP and other regulatory requirements. An unsatisfactory inspection could prevent a new center from being licensed or risk the suspension or revocation of an existing license.

        In order to maintain a plasma center's license, its operations must continue to conform to cGMP and other regulatory requirements. In the event that we determine that plasma was not collected in compliance with cGMP, we may be unable to use and may ultimately destroy plasma collected from that center, which would be recorded as a charge to cost of goods. Additionally, if non-compliance in the plasma collection process is identified after the impacted plasma has been pooled with compliant plasma from other sources, entire plasma pools, in-process intermediate materials and final products could be impacted. Consequently, we could experience significant inventory impairment provisions and write-offs which could adversely affect our business and financial results. During 2008, we experienced such an event at one of our plasma collection centers, which resulted in a charge to cost of goods sold of $23.3 million, for which we subsequently recovered $18.2 million through June 30, 2009. In this particular instance, a portion of the impacted plasma had been released to manufacturing prior to our detection of the issue.

        We plan to increase our supplies of plasma for use in our manufacturing processes through increased collections at our plasma collection centers and through selective acquisitions or remodeling and relocations of existing centers. This strategy is dependent upon our ability to successfully integrate new centers, to obtain FDA and GHA approval for the remaining unlicensed plasma centers, to maintain a cGMP compliant environment in all plasma centers while changing our standard operating procedures, or SOPs, and to expand production and attract donors to our centers.

        There is no assurance that the FDA will inspect and license our unlicensed plasma collection centers in a timely manner consistent with our production plans. If we misjudge the readiness of a center for an

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FDA inspection, we may lose credibility with the FDA and cause the FDA to more closely examine all of our operations. Such additional scrutiny could materially hamper our operations and our ability to increase plasma collections. Some of our past efforts to license centers have not been successful, and consequently we have closed centers. As of August 31, 2009, one unlicensed center is temporarily closed for remediation and we have permanently closed six other unlicensed centers. If we are unable to receive FDA licenses for our unlicensed centers, this may lead to the closure of centers, which would negatively impact our plasma supply and could result in additional unplanned charges to cost of goods sold.

        Our ability to maintain a cGMP compliant environment in all plasma centers may be challenged when we roll-out a comprehensive set of new Standard Operating Procedures (SOPs) which we have submitted to the FDA. Implementing the revised SOPs will be a substantial project, which will temporarily increase cost and reduce plasma collection volumes. We expect to complete this project in 2010. The change in SOPs, although intended to improve quality, compliance and efficiency, could temporarily lead to an increase in issues and audit findings by us, the FDA, the GHA or other regulatory agencies.

        Our ability to expand production and increase our plasma collection centers to more efficient production levels may be affected by changes in the economic environment and population in selected regions where TPR operates plasma centers, by the entry of competitive plasma centers into regions where TPR operates, by misjudging the demographic potential of individual regions where TPR expects to expand production and attract new donors, by unexpected facility related challenges, or by unexpected management challenges at selected plasma centers.

Our financial performance is dependent upon third-party suppliers of FDA-approved source plasma.

        In 2008, we obtained 25.8% of our plasma under a five-year supply arrangement with CSL Plasma Inc., a subsidiary of CSL, a major competitor. The agreement with CSL Plasma Inc. provides that our minimum purchase obligations are: (i) 500,000 liters of plasma for calendar year 2009; (ii) 550,000 liters for calendar year 2010; (iii) 300,000 liters of plasma for each of calendar years 2011 and 2012; and (iv) 200,000 liters of plasma for calendar year 2013. Each quarter, CSL Plasma Inc. is obligated to deliver at least 20% of our minimum purchase obligation for that year. Either we or CSL Plasma Inc. may terminate the agreement in the event of material nonperformance after a 30-day cure period. Another 8.5% was purchased from Interstate Blood Bank, Inc. (IBBI). The agreement with IBBI requires us to make a minimum purchase of 330,000 liters of plasma for each year beginning in 2009 during the term of the agreement. The agreement terminates at the end of 2016. We have a right of first refusal with respect to any material quantities of plasma that IBBI has available for sale in excess of this amount, as well as a right of first refusal with respect to the transfer of any asset, equity, or controlling interest of IBBI related to any of the centers which supply us. We also agreed to provide secured financing for additional centers approved by us and the relocation of IBBI's plasma centers in a maximum amount of $1,000,000 per center and $3,000,000 in the aggregate. Either we or IBBI may terminate the agreement in the event of material nonperformance after a 30 day cure period. Were any dispute to arise or were CSL Plasma Inc. or IBBI to experience any plasma collection difficulties, it could be difficult or impossible for us to replace the shortfall, which would materially adversely affect our business.

        Plasma volumes obtained under arrangements with independent third parties have not always met expectations. An inability of any of our suppliers to operate their business successfully and satisfy their obligations in a timely manner may cause a disruption in our plasma supply, which could materially adversely affect our business.

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Industry-wide disruptions could reduce the availability of FDA-approved source plasma and our financial performance would suffer.

        A number of other factors could disrupt our ability to increase source plasma collections, including but not limited to:

    A lack of alternative plasma supply sources.  In recent years, there has been consolidation in the industry as several plasma derivatives manufacturers have acquired plasma collectors and reduced capacity. As a result, it could be difficult or impossible to resolve any significant disruption in the supply of plasma or an increased demand for plasma with plasma from alternative sources.

    A reduction in the donor pool.  Regulators in most of the large markets for plasma derivative products, including the United States, restrict the use of plasma collected from specific countries and regions in the manufacture of plasma derivative products. For example, the appearance of the variant Creutzfeldt-Jakob disease, commonly referred to as "mad cow" disease (which resulted in the suspension of the use of plasma collected from U.K. residents), and concern over the safety of blood products (which has led to increased domestic and foreign regulatory control over the collection and testing of plasma and the disqualification of certain segments of the population from the donor pool), have significantly reduced the potential donor pool.

Our products have historically been subject to supply-driven price fluctuations.

        Our products, particularly IGIV, have historically been subject to price fluctuations as a result of changes in the production capacity available in the industry, the availability and pricing of plasma, development of competing products and the availability of alternative therapies. Higher prices for plasma-derived products have traditionally spurred increases in plasma production and collection capacity, resulting over time in increased product supply and lower prices. As demand continues to grow, if plasma supply and manufacturing capacity do not commensurately expand, prices tend to increase.

        Since 2005 the industry has experienced a favorable pricing environment for plasma products. The robust demand, particularly for IGIV, over the last few years has resulted in efforts on the part of companies, including ourselves, to increase manufacturing capacity and open new plasma collection centers to increase the availability of source plasma. Some of our competitors have announced plans to grow product supply at a rate above expected demand growth. The growth in demand for IGIV has been outpaced by the recent supply growth, as evidenced by increased supply in the distribution channel. We, or our competitors, may misjudge demand growth and over-invest in expanding plasma collection or manufacturing capacity, which ultimately may result in lower prices for, or inability to sell, our products.

        While we have recently submitted a sBLA in the U.S. for FDA licensure of Gamunex subcutaneous administration for the treatment of PI, we currently do not have, and may never receive, FDA approval, which could be a competitive disadvantage. Furthermore, we believe that our competitors are developing several new products and technologies potentially offering an improved route of administration and even for indications beyond PI. If these development efforts are successful and our effort fails, then we could be at a competitive disadvantage which may impact our Gamunex sales.

        Until December 2002, our A1PI product, Prolastin A1PI, was the only plasma product licensed and marketed for therapy of congenital A1PI deficiency-related emphysema in the U.S. Accordingly, until that time, Prolastin A1PI had virtually 100% market share in its category. In December 2002 and July 2003, Baxter and CSL Behring received licenses for Aralast and Zemaira, respectively, which were launched in the U.S. in 2003, and Grifols received marketing authorization for Trypsone in Spain in 2003. The competing products were introduced at significantly higher prices than Prolastin A1PI. Due in part to our inability to fully meet demand for A1PI product, as well as patient losses due to the nature of the disease, our share of sales has dropped to approximately 67% in the U.S. and 76% globally. These and other future competitors may increase their sales, lower their prices or change their distribution model which may harm

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our product sales and financial condition. Also, if the attrition rate of our existing Prolastin patient base accelerates faster than we have forecast, we would have fewer patients and lower sales volume. In addition, Kamada Ltd. has completed clinical trials for licensure in the U.S. and submitted a BLA for their A1PI product. In Europe we have a 90% share of A1PI sales and have the only licensed A1PI product, other than Grifols, which has marketing authorization for Trypsone A1PI in Spain and LFB which sells Alfalastin in France. Our competitors are currently pursuing licensing trials in Europe. Should our competitors receive approvals in the EU sooner than expected, this will impact our unit volumes and share of sales.

        New products may reduce demand for plasma derived A1PI. A recombinant form of A1PI (recA1PI) could gain market share through the elimination of the risk of plasma-borne pathogens, or through a reduced price permitted by significantly decreased costs (since the recA1PI would not be sourced from plasma). Arriva and GTC Biotherapeutics are in the early stages of development for a recombinant form of recA1PI. Although we are not aware of any active clinical trials for a recA1PI product, a successful recA1PI, prior to our developing a similar product, could gain first mover advantage and result in a loss of our A1PI market share. Similarly, if a new formulation of A1PI is developed that has a significantly improved rate of administration, such as aerosol inhalation, prior to our developing a similar product, the market share of Prolastin A1PI could be negatively impacted. Similarly, several companies are attempting to develop products which would be substitution threats in the A1PI sector, including retinoic acid, oral synthetic elastase inhibitors and gene therapy. While these products are all in early stages of development, the potential for successful product development and launch cannot be ruled out.

        In addition, our plasma therapeutics face competition from non-plasma products and other courses of treatments. For example, two RhD hyperimmune globulins for intravenous administration, Cangene's WinRho® SDF and CSL Behring's Rhophylac®, are now approved for use to treat ITP, and GSK and Amgen launched thrombopoietin inhibitors targeting ITP patients in 2008 that may reduce the demand for IGIV to treat this immune disorder. There is also a risk that indications for which our products are now used will be susceptible to new treatments, such as small molecules, monoclonal or recombinant products. Recombinant Factor VIII product competes with our own plasma-derived product in the treatment of Hemophilia A and is perceived by many to have lower risks of disease transmission. Additional recombinant products or the use of monoclonal antibodies, small molecules, or stem cell transplantations could compete with our products and reduce the demand for our products. Crucell and Sanofi Pasteur have completed Phase II clinical trials for a monoclonal rabies product to compete with our rabies hyperimmune product. If successful, we estimate that the monoclonal product could take a significant portion of the rabies market in years subsequent to its introduction. Also, in February 2009, GTC Biotherapeutics obtained FDA approval of a competitive ATIII product for the treatment of hereditary antithrombin deficiency, which is derived from the milk of transgenic goats. This product now directly competes with our product, Thrombate III Antithrombin III (Human), which had been the only FDA approved product.

        We do not currently sell any recombinant products. Although we are attempting to develop recombinant versions of Plasmin, A1PI and Factor VIII, we cannot be certain that they will ever be approved or commercialized. As a result, our product offerings may remain plasma-derived, even if our competitors offer competing recombinant products.

        See "Business—Competition" for an additional discussion of the competitive environment for our products.

Developments in the economy may adversely impact our business.

        The recessionary economic environment may adversely affect demand for our products. Prolastin A1PI is sold directly to patients in the U.S. As a result of loss of jobs, patients may lose medical insurance and be unable to purchase supply or may be unable to pay their share of deductibles or co-payments. Gamunex IGIV is primarily sold to hospitals and specialty pharmacies. Hospitals adversely affected by the

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economy may steer patients to less costly therapies, resulting in a reduction in demand, or demand may shift to public health hospitals, which purchase at a lower government price. While to date we cannot directly trace any material reduction in demand to the recession, if economic conditions do not improve, the impact may become material.

We are investigating potential Foreign Corrupt Practices Act violations.

        We are conducting an internal investigation into potential violations of the Foreign Corrupt Practices Act (FCPA) that we became aware of during the conduct of an unrelated review. The FCPA investigation is being conducted by outside counsel under the direction of a special committee of the Board of Directors. The investigation primarily involves sales to certain Eastern European and Middle Eastern countries. Our sales in such countries represented approximately 2.3% and 4.2% of our total sales in 2008 and the first half of 2009, respectively. Our investigation will also review our sales practices in other countries.

        In July 2009, we voluntarily contacted the U.S. Department of Justice (DOJ) to advise them of the investigation and to offer our cooperation in any investigation that they want to conduct or they want us to conduct. The DOJ has not indicated what action it may take, if any, against us or any individual, or the extent to which it may conduct its own investigation. The DOJ or other federal agencies may seek to impose sanctions on us that may include, among other things, injunctive relief, disgorgement, fines, penalties, appointment of a monitor, appointment of new control staff, or enhancement of existing compliance and training programs. Other countries in which we do business may initiate their own investigations and impose similar penalties. As a result of this investigation, we have suspended shipments to some of these countries while we put additional safeguards in place. We have also terminated one consultant and suspended relations with other distributors and consultants in countries under investigation while we gather further facts and implement safeguards. We expect that these actions will result in a short-term decline in revenue from these countries. To the extent that we conclude, or the DOJ concludes, that we cannot implement adequate safeguards or otherwise need to change our business practices, distributors, or consultants in affected countries or other countries, this may result in a permanent loss of business. These sanctions or the permanent loss of business, if any, could have a material adverse effect on us or our results of operations.

Our ability to export products to Iran requires annual export licenses.

        In 2008, we had sales of $18.2 million, or approximately 1.3% of our net revenue, to customers located in Iran pursuant to an export license which must be renewed annually. There can be no assurance that we will be able to renew our license. In particular, should political tensions between the U.S. and Iran escalate, the export license might be revoked or not renewed, resulting in the loss of these sales.

Our ability to continue to produce safe and effective products depends on the safety of our plasma supply against transmittable diseases.

        Despite overlapping safeguards including the screening of donors and other steps to remove or inactivate viruses and other infectious disease causing agents, the risk of transmissible disease through blood plasma products cannot be entirely eliminated. For example, since plasma-derived therapeutics involve the use and purification of human plasma, there has been concern raised about the risk of transmitting HIV, prions, West Nile virus, H1N1 virus or "swine flu" and other blood-borne pathogens through plasma-derived products. There are also concerns about the future transmission of H5N1 virus, or "bird flu." In the 1980s, thousands of hemophiliacs worldwide were infected with HIV through the use of contaminated Factor VIII. Bayer and other producers of Factor VIII, though not us, are defendants in numerous lawsuits resulting from these infections.

        New infectious diseases emerge in the human population from time to time. If a new infectious disease has a period during which time the causative agent is present in the bloodstream but symptoms are

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not present, it is possible that plasma donations could be contaminated by that infectious agent. Typically, early in an outbreak of a new disease, tests for the causative agent do not exist. During this early phase, we must rely on screening of donors (e.g., for behavioral risk factors or physical symptoms) to reduce the risk of plasma contamination. Screening methods are generally less sensitive and specific than a direct test as a means of identifying potentially contaminated plasma units.

        During the early phase of an outbreak of a new infectious disease, our ability to manufacture safe products would depend on the manufacturing process' capacity to inactivate or remove the infectious agent. To the extent that a product's manufacturing process is inadequate to inactivate or remove an infectious agent, our ability to manufacture and distribute that product would be impaired.

        If a new infectious disease were to emerge in the human population, the regulatory and public health authorities could impose precautions to limit the transmission of the disease that would impair our ability to procure plasma, manufacture our products or both. Such precautionary measures could be taken before there is conclusive medical or scientific evidence that a disease poses a risk for plasma-derived products.

        In recent years, new testing and viral inactivation methods have been developed that more effectively detect and inactivate infectious viruses in collected plasma. There can be no assurance, however, that such new testing and inactivation methods will adequately screen for, and inactivate, infectious agents in the plasma used in the production of our products.

If our Clayton facility or other major facilities, or the facilities of our third-party suppliers, were to suffer a crippling accident, or a force majeure event materially affected our ability to operate and produce saleable products, a substantial part of our manufacturing capacity could be shut down for an extended period.

        Substantially all of our revenues are derived from products manufactured, and services performed, at our plant located in Clayton, North Carolina. In addition, a substantial portion of our plasma supply is stored at facilities in Benson, North Carolina, and our Clayton facility. Although we believe we have adopted and maintain safety precautions, including separate areas for different manufacturing processes, if any of these facilities were to be impacted by an accident or a force majeure event such as an earthquake, major fire or explosion, major equipment failure or power failure lasting beyond the capabilities of our backup generators our revenues would be materially adversely affected. In this situation, our manufacturing capacity could be shut down for an extended period and we could experience a loss of raw materials, work in process or finished goods inventory. Other force majeure events such as terrorist acts, influenza pandemic or similar events could also impede our ability to operate our business. In addition, in any such event, the reconstruction of our Clayton fractionation plant or our plasma storage facilities, the regulatory approval of the new facilities, and the replenishment of raw material plasma could be time-consuming. During this period, we would be unable to manufacture our products at other plants due to the need for FDA and foreign regulatory authority inspection and certification of such facilities and processes. While we maintain property damage and business interruption insurance with limits of $1 billion, these amounts may still be insufficient to mitigate the losses from any such event. We may also be unable to recover the value of the lost plasma or work-in-progress, as well as the sales opportunities from the products we would be unable to produce.

        A significant number of our plasma collection centers are in Texas and in 2008 approximately 20% of our internally sourced plasma came from collection centers located on the United States border with Mexico. Donations at these centers could be impacted by changes in U.S. visa rules. In addition, we have a number of plasma centers in regions of the southeast which could be affected by natural disasters such as hurricanes. A disruption in our source of plasma due to events arising in a geographic region where many of our collection centers are located would limit our ability to maintain our current production levels of plasma-derived products.

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If we experience equipment difficulties or if the suppliers of our equipment or disposable goods fail to deliver key product components or supplies in a timely manner, our manufacturing ability would be impaired and our product sales could suffer.

        We depend on a limited group of companies that supply and maintain our equipment and provide supplies such as chromatography resins, filter media, glass and stoppers used in the manufacture of our products. In some cases we have only one qualified supplier. If our equipment should malfunction, the repair or replacement of the machinery may require substantial time and cost, which could disrupt our production and other operations. Our plasma collection centers rely on disposable goods supplied by Haemonetics Corporation and information technology systems hosted by a subsidiary of Haemonetics Corporation. Our plasma centers cannot operate without an uninterrupted supply of these disposable goods and the operation of these systems. We have experienced periodic outages of these systems, but a material outage would affect our ability to operate our collection centers. Alternative sources for key component parts or disposable goods may not be immediately available. Any new equipment or change in supplied materials may require revalidation by us and/or review and approval by the FDA, or foreign regulatory authorities, including the German Health Authority, which may be time-consuming and require additional capital and other resources. We may not be able to find an adequate alternative supplier in a reasonable time period, or on commercially acceptable terms, if at all. As a result, shipments of affected products may be limited or delayed. Our inability to obtain our key source supplies for the manufacture of our products may require us to delay shipments of products, harm customer relationships and force us to curtail operations.

We purchase nearly all of our specialty plasma used for the production of hyperimmunes from a limited number of companies under short-term contracts.

        We currently rely on three companies—Biotest Pharmaceuticals Corporation, Octapharma AG, and Advanced Bioservices, LLC (ABS), a subsidiary of Kedrion SpA, all of which are our direct competitors—to supply nearly all of our specialty plasma required for the production of our hyperimmunes, which represented $78.2 million, or 5.7%, of our net revenue in 2008. Specialty plasma is plasma that contains antibodies to specific diseases, usually because the donor has been vaccinated. Our contracts with suppliers of specialty plasma are usually on a short term basis. Our contracts with Octapharma and ABS are set to expire on December 31, 2010 and our agreement with Biotest expires at year-end 2011. We are negotiating with Octapharma and ABS to extend these agreements. Depending upon these competitors' production plans, it may be difficult to increase the amounts of plasma we purchase from them or to renew our contracts in the future. Our inability to replace the volumes provided by these suppliers through our own plasma collection efforts or through increased specialty plasma deliveries from other third parties would materially adversely affect our business. To the extent that we develop a supply of specialty plasma from our own collection centers, such specialty plasma may come at the expense of the plasma we use for our other products. It would also take significant time to obtain the necessary regulatory approvals and develop a sufficient donor base.

We rely in large part on third parties for the sale, distribution and delivery of our products.

        In the U.S., we regularly enter into distribution, supply and fulfillment contracts with group purchasing organizations, home care companies, alternate infusion sites, hospital groups, and others. We are highly dependent on these contracts for the successful sale, distribution and delivery of our products. For example, we rely principally on group purchasing organizations and on our distributors to sell our IGIV product and on Centric Health Resources to fulfill prescriptions for Prolastin A1PI. If the parties with which we contract breach, terminate, or otherwise fail to perform under the agreements, our ability to effectively distribute our products will be impaired and our business may be materially and adversely affected. In addition, through circumstances outside of our control, such as general economic decline, market saturation, or increased competition, we may be unable to successfully renegotiate our contracts or

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secure terms which are as favorable to us. In addition, we rely on distributors for sales of our products outside the U.S. Disagreements or difficulties with our distributors supporting our export business could result in a loss of sales.

Product liability lawsuits against us could cause us to incur substantial liabilities, limit sales of our existing products and limit commercialization of any products that we may develop.

        Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, distribution, and sale of plasma-derived therapeutic protein products. We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and an even greater risk when we commercially sell any products. If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

    decreased demand for our products and any product candidates that we may develop;

    injury to our reputation;

    withdrawal of clinical trial participants;

    costs to defend the related litigation;

    substantial monetary awards to trial participants or patients;

    loss of revenue; and

    the inability to commercialize any products that we may develop.

        Bayer is the defendant in continuing litigation alleging that use of products manufactured at our Clayton site in the 1980s, prior to our formation transaction and carve-out from Bayer, resulted in the transmission of Hepatitis C virus and HIV to patients. Bayer is also a defendant in litigation alleging that thimerosal, a preservative that was added to some intra muscular (hyperimmune) immune globulin products until 1996 (at which time its use was discontinued), was the cause of autism and other disorders in children who received these products. While we are not a party to any of these actions, and Bayer has agreed to fully indemnify us from any claims or losses arising out of these actions, we cannot assure you that our products or any of their constituents or additives may not someday give rise to similar product liability claims that we will be forced to defend and which may have a material adverse affect on our business.

        We have a global insurance policy with limits of $100 million with a per claim deductible of $5 million and an aggregate deductible of $10 million. This amount of insurance may not be adequate to cover all liabilities that we may incur. We intend to expand our insurance coverage as our sales grow. Insurance coverage is, however, increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost and we may not be able to obtain insurance coverage that will be adequate to satisfy any liability that may arise.

Our products and manufacturing processes are subject to regulatory requirements and authority, including over our manufacturing practices and any product recalls.

        Our products, and our advertising and promotional activities for such products, are subject to regulatory requirements, ongoing review, and periodic inspections by the FDA, the Office of the Inspector General of the Department of Health and Human Services and other regulatory bodies. In addition, the manufacture and packaging of plasma products are regulated by the FDA and comparable regulatory bodies in Canada, Europe and elsewhere and must be conducted in accordance with the FDA's cGMP regulations and comparable requirements of foreign regulatory bodies, including the GHA.

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        Later discovery of previously unknown problems with our products or failure by us or any third-party manufacturers, including Bayer, to comply with cGMP regulations, or failure to comply with regulatory requirements, may result in, among other things:

    restrictions on such products or manufacturing processes;

    withdrawal of products from the market;

    voluntary or mandatory recall;

    suspension or withdrawal of regulatory approvals and licenses;

    cessation of our manufacturing activities, which may be for an extended or indefinite period of time;

    product seizure; and

    injunctions or the imposition of civil or criminal penalties.

        We could also be required to add warnings to our packaging or labeling that could negatively differentiate our product in the view of customers or patients.

        For example, we settled a dispute with a customer in September 2007 regarding intermediate material manufactured by us, which is used by this customer in their manufacturing process. We recorded a charge to cost of goods sold of $7.9 million during the year ended December 31, 2007 for inventory impairment related to this material, which we recovered in its entirety during 2008 as the related material was determined to be saleable, converted into final product, and sold to other customers. Similarly, during 2008, we recorded an additional inventory impairment provision of $2.6 million related to this dispute for products held in Europe, for which we recovered $0.8 million and $1.8 million during the six months ended June 30, 2009 and the year ended December 31, 2008, respectively, as the impacted material was determined to be saleable, converted into final product, and sold to other customers.

        Separately, our plans to transition from Prolastin to our next generation therapy could be affected by the approval timing of regulatory authorities. Our current plan calls for a simultaneous transition in the U.S. and Canada over several quarters. We expect the launch in Europe will be delayed beyond the launch in North America. Additionally, we could face further delays with respect to launches in specific European countries. To the extent regulatory authorities do not act within the same time-frame, we will need to operate both new and old manufacturing processes in parallel with overlapping crews, higher costs, and lower yields.

Certain of our other business practices are subject to scrutiny by regulatory authorities.

        The laws governing our conduct are enforceable by criminal, civil and administrative penalties. Violations of laws such as the Federal Food, Drug and Cosmetic Act, the False Claims Act and the Anti-Kickback Law, and any regulations promulgated under their authority, may result in jail sentences, fines, or exclusion from federal and state programs, as may be determined by Medicare, Medicaid and the Department of Defense and other regulatory authorities. Certain business practices, such as entertainment and gifts for healthcare providers, sponsorship of educational or research grants, charitable donations, and support for continuing medical education programs, must be conducted within narrowly prescribed and controlled limits to avoid any possibility of influencing healthcare providers to prescribe particular products. Additional and stricter prohibitions could be implemented by federal and state authorities. Where such practices have been found to be improper incentives to use such products, government investigations and assessments of penalties against manufacturers have resulted. Many manufacturers have been required to enter into consent decrees or orders that prescribe allowable corporate conduct. We have developed and implemented a comprehensive Healthcare Compliance Program and provide an initial and annual refresher training for all employees whose activities may be subject to these requirements. There can be no assurance, however, that our marketing activities will not come under the scrutiny of regulators

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and other government authorities or that our practices will not be found to violate applicable laws rules and regulations.

        In addition, while regulatory authorities generally do not regulate physicians' discretion in their choice of treatments for their patients, they do restrict communications by manufacturers on unapproved uses of approved drugs or on the potential safety and efficacy of unapproved products in development. Companies in the U.S., Canada and European Union cannot promote approved products for other indications that are not specifically approved by the competent regulatory authorities (e.g., FDA in the U.S.), nor can companies promote unapproved products. In limited circumstances companies may disseminate to physicians information regarding unapproved uses of approved products or results of studies involving investigational products. If such activities fail to comply with applicable regulations and guidelines of the various regulatory authorities, we may be subject to warnings from, or enforcement action by, these authorities. Furthermore, if such activities are prohibited, it may harm demand for our products.

        Promotion of unapproved drugs or unapproved indications for a drug is a violation of the Federal Food, Drug and Cosmetic Act and subjects us to civil and criminal sanctions. Furthermore, sanctions under the Federal False Claims Act have recently been brought against companies accused of promoting off-label uses of drugs, because such promotion induces the use, and subsequent claims for reimbursement under Medicare and other federal programs. Similar actions for off-label promotion have been initiated by several states for Medicaid fraud. Violations or allegations of violation of the foregoing restrictions could materially and adversely affect our business.

        To market and sell our products outside of the U.S., we must obtain and maintain regulatory approvals and comply with regulatory requirements in such jurisdictions. The approval procedures vary among countries in complexity and timing. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all, which would preclude us from commercializing our products in those markets. For example, while we completed a Mutual Recognition Procedure in the European Union, facilitating our ability to sell Prolastin A1PI into an additional ten selected countries in the European Union we are in the process of negotiating reimbursement on a country-by-country basis, which must be concluded before we can expect to significantly increase sales in these countries. We have not been successful in receiving reimbursements to date and there can be no assurance when, if ever, we will receive reimbursement within those countries for Prolastin A1PI.

        In addition, some countries, particularly the countries of the European Union, regulate the pricing of prescription pharmaceuticals. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. Such trials may be time-consuming, expensive and may not show an advantage in efficacy for our products. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, in either the United States or the European Union, we could be adversely affected.

        Our business involves the controlled use of hazardous materials, various biological compounds and chemicals. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by state and federal regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of biohazardous materials and chemicals. Although we maintain workers' compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us. Additional federal, state, and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

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        In addition, we export our products to a variety of countries whose legal regimes and business customs and practices differ significantly from those in the United States. A failure to comply with laws and regulations applicable to our international operations or export sales could expose us to significant penalties. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, anti-money laundering, import and trade restrictions, export requirements, including those of the U.S. Office of Foreign Assets Control, U.S. laws such as the Foreign Corrupt Practices Act, and local laws which also prohibit corrupt payments to governmental officials. While we require our employees to comply with applicable laws and we monitor legal compliance, we cannot be certain that our employees or agents will comply in all instances or that we will promptly identify violations. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could result in prohibitions on our ability to offer our products in one or more countries, and could also materially damage our reputation, our products' reputations, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.

We are required to provide accurate pricing information to the U.S. government for the purpose of calculating reimbursement levels by the Centers for Medicare and Medicaid Services (CMS) and for calculating certain federal prices and federal rebate obligations.

        We are required to report detailed pricing information, net of included discounts, rebates and other concessions, to CMS for the purpose of calculating national reimbursement levels, certain federal prices, and certain federal rebate obligations. We have established a system for collecting and reporting this data accurately to CMS and have instituted a compliance program to assure that the information we collect is complete in all respects. If we report pricing information that is not accurate to the federal government, we could be subject to fines and other sanctions that could adversely affect our business. In addition, the government could change its calculation of reimbursement, federal prices, or federal rebate obligations which could negatively impact us.

We seek to obtain and maintain protection for the intellectual property relating to our technology and products.

        Our success depends in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products, especially intellectual property related to our purification processes. The patent situation in the field of biotechnology and pharmaceuticals generally is highly uncertain and involves complex legal and scientific questions. We may not be able to obtain additional issued patents relating to our technology or products. Even if issued, patents issued to us or our licensors may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Additionally, most of our patents relate to the processes we use to produce our products, not the products themselves. In many cases, the plasma-derived products we produce or develop in the future will not, in and of themselves, be patentable. Since our patents relate to processes, if a competitor is able to design and utilize a process that does not rely on our protected intellectual property, that competitor could sell a plasma-derived product similar to one we developed or sell. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. In addition, we are a party to a number of license agreements which may impose various obligations on us, including milestone and royalty payments. If we fail to comply with these obligations, the licensor may terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.

        Our patents also may not afford us protection against competitors with similar technology. Because patent applications in the United States and many other jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in the scientific

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literature often lag behind actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications. If a third party has also filed a U.S. patent application covering our product candidates or a similar invention, we may have to participate in an adversarial proceeding, known as an interference, declared by the U.S. Patent Office to determine priority of invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts could be unsuccessful, resulting in a loss of our anticipated U.S. patent position.

        We also rely on unpatented technology, trade secrets, know-how and confidentiality agreements with our employees, consultants and third parties to protect our unpatented proprietary technology, processes and know-how. We require our officers, employees, consultants and advisors to execute proprietary information and invention and assignment agreements upon commencement of their relationships with us. There can be no assurance, however, that these agreements will provide meaningful protection for our inventions, trade secrets or other proprietary information in the event of unauthorized use or disclosure of such information. These agreements may be breached and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. If any trade secret, know-how or other technology not protected by a patent were to be disclosed to or independently developed by a competitor to develop alternative products, we could face increased competition and lose a competitive advantage.

        We, like other companies in the pharmaceutical industry, may become aware of counterfeit versions of our products becoming available domestically and abroad. Counterfeit products may use different and possibly contaminated sources of plasma and other raw materials, and the purification process involved in the manufacture of counterfeit products may raise additional safety concerns, over which we have no control. Any reported adverse events involving counterfeit products that purport to be our products could harm our reputation and the sale of our products, in particular, and consumer willingness to use plasma-derived therapeutics generally.

We may infringe or be alleged to infringe intellectual property rights of third parties.

        Our products or product candidates may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may be subsequently issued and to which we do not hold a license or other rights. Third parties may own or control these patents or patent applications in the United States and abroad. These third parties could bring claims against us or our collaborators that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us or our collaborators, we or they could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.

        On May 21, 2008, Baxter Healthcare Corporation (Baxter) and National Genetics Institute (NGI), a wholly-owned subsidiary of Laboratory Corporation of America, filed a complaint in the U.S. District Court for the Eastern District of North Carolina alleging that we infringed U.S. Patent Nos. 5,780,222, 6,063,563, and 6,566,052. The patents deal primarily with a method of screening large numbers of biological samples utilizing various pooling and matrix array strategies, and the complaint alleges that the patents are owned by Baxter and exclusively licensed to NGI.

        If we are found to infringe the patent rights of a third party, or in order to avoid potential claims, we or our collaborators may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our collaborators were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of

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actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms.

        There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries. In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our products. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other proceedings may also absorb significant management time.

        Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We try to ensure that our employees do not use the proprietary information or know-how of others in their work for us. We may, however, be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets or other proprietary information of any such employee's former employer. Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management. If we fail to defend any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel.

We may not be able to commercialize products in development.

        Before obtaining regulatory approval for the sale of our product candidates or for marketing of existing products for new indicated uses, we must conduct, at our own expense, extensive preclinical tests to demonstrate the safety of our product candidates in animals and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Preclinical and clinical testing is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our product candidates, including:

    regulators or institutional review boards may not authorize us to commence a clinical trial or conduct a clinical trial at a prospective trial site;

    the regulatory requirements for product approval may not be explicit, may evolve over time and may diverge by jurisdiction;

    our preclinical tests or clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical testing or clinical trials or we may abandon projects that we had expected to be promising;

    the number of patients required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we currently anticipate, or participants may drop out of our clinical trials at a higher rate than we anticipate, any of which would result in significant delays;

    our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;

    we might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks or if any participant experiences an unexpected serious adverse event;

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    regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements;

    undetected or concealed fraudulent activity by a clinical researcher, if discovered, could preclude the submission of clinical data prepared by that researcher, lead to the suspension or substantive scientific review of one or more of our marketing applications by regulatory agencies, and result in the recall of any approved product distributed pursuant to data determined to be fraudulent;

    the cost of our clinical trials may be greater than we anticipate;

    the supply or quality of our product candidates or other materials necessary to conduct our clinical trials may be insufficient or inadequate because we do not currently have any agreements with third-party manufacturers for the long-term commercial supply of any of our product candidates;

    an audit of preclinical or clinical studies by the FDA may reveal non-compliance with applicable regulations, which could lead to disqualification of the results and the need to perform additional studies; and

    the effects of our product candidates may not be the desired effects or may include undesirable side effects or the product candidates may have other unexpected characteristics.

        If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

    be delayed in obtaining marketing approval for our product candidates;

    not be able to obtain marketing approval;

    not be able to obtain reimbursement for our products in some countries;

    obtain approval for indications that are not as broad as intended; or

    have the product removed from the market after obtaining marketing approval.

        Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates.

        Even if preclinical trials are successful, we may still be unable to commercialize the product due to difficulties in obtaining regulatory approval for the process or problems in scaling the engineering process to commercial production. Additionally, if produced, the product may not achieve an adequate level of market acceptance by physicians, patients, healthcare payors and others in the medical community to be profitable. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control, including:

    the prevalence and severity of any side effects;

    the efficacy and potential advantages over alternative treatments;

    the ability to offer our product candidates for sale at competitive prices;

    relative convenience and ease of administration;

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    the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; the strength of marketing and distribution support; and

    sufficient third-party coverage or reimbursement.

        Therefore, we cannot guarantee that any products which we may seek to develop will ever be successfully commercialized, and to the extent they are not, such products could be a significant expense with no reward.

If we experienced material weaknesses or fail to otherwise maintain effective internal control over financial reporting, there is more than a remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected by our internal controls.

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. We have identified and remediated material weaknesses in internal control over financial reporting in the past.

        Under the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, we will be required to include a report by our management on the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2010. This report must contain an assessment by management of the effectiveness of our internal control over financial reporting as of the end of our fiscal year and a statement as to whether or not our internal control over financial reporting is effective. Our annual report for the fiscal year ending December 31, 2010 must also contain a statement that our independent registered public accountants have issued an attestation report on the effectiveness of our internal control over financial reporting. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accountants are unable to attest to the effectiveness of our internal control over financial reporting, the market's perception of our financial condition and the trading price of our stock may be adversely affected. Our inability to conclude that our internal control over financial reporting is effective would also adversely affect the results of the periodic management evaluations of our disclosure controls and procedures and internal control over financial reporting that will be required under the Sarbanes-Oxley Act of 2002.

Our future success depends on our ability to retain members of our senior management and to attract, retain and motivate qualified personnel.

        We are highly dependent on the principal members of our executive and scientific teams. The loss of the services of any of these persons might impede the achievement of our research, development, operational and commercialization objectives. In particular, we believe the loss of the services of Lawrence D. Stern, John M. Hanson, Mary J. Kuhn, Thomas J. Lynch, John R. Perkins, Joel E. Abelson, Stephen R. Petteway, John F. Gaither, Kari D. Heerdt, Daniel L. Menichella, James R. Engle and Bruce Nogales would significantly and negatively impact our business. We do not maintain "key person" insurance on any of our executive officers. We have employment contracts only with Messrs. Stern (through March 31, 2012), Hanson (through October 10, 2010) and Gaither (through September 5, 2010) and Ms. Heerdt (through April 1, 2010) and these expire on the dates indicated unless renewed. Our risk of key employee turnover may increase after the vesting of options in April 2010.

        Recruiting and retaining qualified operations, finance and accounting, scientific, clinical and sales and marketing personnel will be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and clinical

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personnel from universities and research institutions. In addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting or advisory contracts with other entities that may limit their availability to us.

        Federal cGMP regulations also require that the personnel we employ and hold responsible for the collection, processing, testing, storage or distribution of blood or blood components be adequate in number, educational background, training and experience, including professional training as necessary, or combination thereof, and have capabilities commensurate with their assigned functions, a thorough understanding of the procedures or control operations they perform, the necessary training or experience, and adequate information concerning the application of relevant cGMP requirements for their individual responsibilities. Our failure to attract, retain, and motivate qualified personnel may result in a regulatory violation, affect product quality, require recall or market withdrawal of affected product, or a suspension or termination of our license to market our products, or any combination thereof.

A substantial portion of our revenue is derived from a small number of customers, and the loss of one or more of these customers could have a material adverse effect on us.

        Three customers accounted for approximately 37% and 35% of our net revenues for the six months ended June 30, 2009 and the year ended December 31, 2008, respectively. Similarly, our accounts receivable balances have also been concentrated with a small number of customers. Three customers accounted for approximately 30% and 34% of our accounts receivable, net, as of June 30, 2009 and December 31, 2008, respectively. In the event that any of these customers were to suffer an adverse downturn in their business or a downturn in their supply needs, our business could be materially adversely affected. We cannot guarantee that these customers will continue purchasing our products at past volumes, or, in the event that any of them were to cease doing business with us, that we could replace such customer on substantially similar terms or at all. Therefore, the loss of one or more of these customers could have a material adverse effect on our net sales, gross profit and financial condition. Under certain market conditions, our customers' liquidity may worsen and they may demand longer payment terms, higher early payment discounts, volume rebates and other concessions which would have adverse financial consequences on us.

        Since the late 1980s we have been the "supplier of record" for the Canadian blood system. Under existing contracts, we are the largest supplier of plasma-derived products to the Canadian blood system operators, Canadian Blood Services and Hema Quebec. We transport plasma from Canadian Blood Services and Hema Quebec collection centers to our manufacturing facility in Clayton, North Carolina for manufacture, and return the finished product, along with commercial product, for sale to Canadian Blood Services and Hema Quebec. Pricing for our products and services is set at the beginning of the contract period, subject to adjustment for inflation. The U.S. dollar based contracts are terminable upon default, or the occurrence of certain events, including a third party obtaining Canadian regulatory approval to introduce a significantly superior product or fractionation service, our products or services becoming obsolete, or if we make certain nonrelated improvements and Canadian Blood Services or Hema Quebec do not accept the associated price increase. We were awarded new five year contracts in December 2007, which became effective April 1, 2008. The contracts may be extended for two one-year terms upon agreement of the parties. Under these contracts, we fractionate 100% of the Canadian plasma initially and a majority of the Canadian plasma throughout the contract period and supply a majority of the Canadian requirements for IGIV during the contract term as well. With respect to the fractionation of Canadian plasma, Canadian Blood Services has elected to pursue a dual-source strategy, with our share being reduced to 65% of Canadian Blood Services' plasma in 2009. Hema Quebec continues to pursue a sole-source strategy with us as the only fractionator of plasma collected by Hema Quebec. Overall in 2009, we expect to fractionate 70% of the plasma collected in Canada. We derive significant revenue and profits

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under these contracts, and a failure to maintain contracts with the Canadian blood system operators or any diminution in the volume or price under future contracts could have a material adverse effect on our financial results.

Potential business combinations could require significant management attention and prove difficult to integrate with our business.

        If we become aware of potential business combination candidates that are complementary to our business, including plasma suppliers, we may decide to combine with such businesses or acquire their equity or assets. We have acquired businesses or product lines in the past. For example, in April 2005, we acquired Precision Pharma Services, Inc., a contract fractionator located in Melville, New York, and in November 2006 and June 2007 we acquired groups of plasma collection centers in varying stages of development and assumed certain liabilities from IBR, a supplier of source plasma. We have since acquired additional plasma collection centers on a case by case basis and have the option to acquire additional collection centers from IBR. Business combinations generally may involve a number of difficulties and risks to our business, including:

    failure to integrate management information systems, personnel, research and development, marketing, operations, sales and support;

    potential loss of key current employees or employees of the acquired company;

    disruption of our ongoing business and diversion of management's attention from other business concerns;

    potential loss of the acquired company's customers;

    failure to develop further the other company's technology successfully;

    unanticipated costs and liabilities; and

    other accounting and operational consequences.

        In addition, we may not realize the anticipated benefits from any business combination we may undertake in the future and any benefits we do realize may not justify the acquisition price. Any integration process would require significant time and resources, and we may not be able to manage the process successfully. If our customers are uncertain about our ability to operate on a combined basis, they could delay or cancel orders for our products. We may not successfully evaluate or utilize the acquired technology or accurately forecast the financial impact of a combination, including accounting charges or volatility in the stock price of the combined entity. If we fail to successfully integrate other companies with which we may combine in the future, our business and financial results could be harmed.

Risks Related to Our Financial Position

We are substantially leveraged, which could result in the need for refinancing or new capital.

        As a result of our December 2006 debt recapitalization, we have in place credit facilities aggregating $1.355 billion in total borrowing availability. The credit facilities consist of:

    a $700.0 million First Lien Term Loan Credit Agreement with Morgan Stanley Senior Funding, Inc. (First Lien Term Loan) due December 6, 2013;

    a $330.0 million Second Lien Term Loan Credit Agreement with Morgan Stanley Senior Funding, Inc. (Second Lien Term Loan) due December 6, 2014; and

    a $325.0 million Revolving Credit Agreement with Wachovia Bank N.A. (Revolving Credit Agreement) due December 6, 2011.

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        As a result of our entry into these credit facilities, we are highly leveraged and have significant outstanding indebtedness and debt service requirements, both in absolute terms and in relation to stockholders' deficit. At June 30, 2009, we had total outstanding indebtedness of approximately $1.1 billion and stockholders' deficit of approximately $180.3 million. Although we intend to use all of the net proceeds to us from this offering to repay debt outstanding under our First and Second Lien Term Loans, we will continue to be significantly leveraged after this offering with indebtedness of approximately $575 million.

        The proceeds from the First and Second Lien Term Loans, in conjunction with a $67.3 million draw under our Revolving Credit Agreement were used to repay and retire all outstanding principal and interest amounts owed under our then existing $440.0 million asset-based credit facility, as amended, to repay and retire all outstanding principal and interest amounts owed to Cerberus and Ampersand under our then existing 12% Second Lien Notes, and to pay accrued interest of $23.4 million to Talecris Holdings, LLC under the terms of our then existing 14% Junior Secured Convertible Notes, which was converted into 900,000 shares of Series A convertible preferred stock at the holder's election. Further, we used the proceeds from our First and Second Lien Term Loans and our Revolving Credit Agreement to pay a cash dividend of $760.0 million to Talecris Holdings, LLC, pay a special recognition bonus of $34.2 million to eligible employees and Board of Director members, and fund an irrevocable trust for $23.0 million for future payments under this special recognition bonus.

        Our ability to make payments on our indebtedness and to fund planned capital expenditures, will depend on our ability to generate cash in the future. Our ability to generate cash in the future will be subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

        There can be no assurance that our business will generate sufficient cash flows from operations or that we will have future borrowings available under our Revolving Credit Agreement in amounts sufficient to enable us to pay our indebtedness or to fund other liquidity needs. We may need to raise additional funds through the sale of additional equity securities, the refinancing of all or part of our indebtedness on or before the maturity thereof, or the sale of assets. Each of these alternatives is dependent upon financial, business and other general economic factors affecting the equity and credit markets generally or our business in particular, many of which are beyond our control, and we can make no assurances that any such alternatives would be available to us, if at all, on satisfactory terms. While we believe that consolidated cash flow generated by our operations will provide adequate sources of long-term liquidity, a significant drop in operating cash flow resulting from economic conditions, competition or other uncertainties beyond our control could increase the need for refinancing or new capital.

As a result of our high leverage, we are subject to operating and financial restrictions that could adversely impact our activities and operations.

        Our leveraged position may limit our ability to obtain additional financing in the future on terms and subject to conditions deemed acceptable by our management, and the agreements governing our debt impose significant operating and financial restrictions on us. The most significant restrictions relate to our capital expenditures, debt incurrence, investments, sales of assets and cash distributions. The failure to comply with any of these restrictions could result in an event of default under the various operative documents, giving our lenders the ability to accelerate the repayment of our obligations.

        As a result, our leveraged position could have important consequences to our stockholders. For example, it could:

    increase our vulnerability to general adverse economic and industry conditions;

    subject us to covenants that limit our ability to fund future working capital, capital expenditures, research and development costs and other general corporate requirements;

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    require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;

    limit our ability to obtain additional financing to fund future acquisitions of key assets;

    limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

    impede our ability to obtain the necessary approvals to operate our business in compliance with the numerous laws and regulations to which we are subject;

    place us at a competitive disadvantage relative to our competitors that have less debt outstanding; and

    limit our ability to borrow additional funds, among other things, under the financial and other restrictive covenants in our indebtedness.

        These credit facilities require compliance with financial covenants. As of the date of this prospectus, we believe we are currently in compliance with all covenants or other requirements set forth in our credit facilities. Our failure to generate sufficient adjusted EBITDA or cash flow could result in potential non-compliance with these covenants and adverse financial consequences.

Our business requires substantial capital and operating expenditures to operate and grow.

        We plan on spending substantial sums in capital and operating expense over the next five years to obtain FDA approval for new indications for existing products, to enhance the facilities in which and processes by which we manufacture existing products, to develop new product delivery mechanisms for existing products, to strengthen our plasma collection system and to develop innovative product additions. We face a number of obstacles to successfully converting these efforts into profitable products including but not limited to the successful development of a experimental product for use in clinical trials, the design of clinical study protocols acceptable to FDA, the successful outcome of clinical trials, our ability to scale our manufacturing processes to produce commercial quantities or successfully transition technology, FDA approval of our product or process and our ability to successfully market an approved product with our new process or new indication.

        Our planned capital expenditures are significant over the next five years, which we estimate to be $750 million on a cumulative basis. We estimate that our planned annual capital expenditures during any year after 2009 may exceed the capital expenditures covenant for that year under our current credit facilities. As an example, our planned capital spending in 2011 may reach $220 million, while the applicable covenant under our credit facilities would only permit $49 million of capital expenditures, plus certain unspent amounts, if any, carried over from the prior year. The amount of capital spending is dependent upon timing of spending related to the design and construction of a new fractionation facility, which we currently estimate will cost $280 million, a new Plasmin and Koate processing facility estimated to cost $120 million, additional albumin capacity estimated to cost $40 million and to maintain compliance with cGMP. Consequently, we will need to amend our capital expenditure covenants, refinance or curtail our level of planned investment.

        To finance these various activities, we may need to incur future debt or issue additional equity if our cash flows and capital resources are insufficient, and we may not be able to structure our debt obligations on favorable economic terms. A failure to fund these activities may harm our competitive position, quality compliance and financial condition.

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Risks Related to Our Common Stock and This Offering

Talecris Holdings, LLC and its affiliated entities will continue to have control over us after this offering and could delay or prevent a change in corporate control.

        We are a majority owned subsidiary of Talecris Holdings, LLC. Talecris Holdings, LLC is owned by (i) Cerberus-Plasma Holdings LLC, the managing member of which is Cerberus Partners, L.P., and (ii) limited partnerships affiliated with Ampersand Ventures. Substantially all rights of management and control of Talecris Holdings, LLC are held by Cerberus-Plasma Holdings LLC. Upon the consummation of this offering, Talecris Holdings, LLC will own approximately 56.1% of the outstanding shares of our common stock (or 51.1% if the underwriters exercise their option to purchase additional shares in full). As long as Talecris Holdings, LLC owns or controls at least a majority of our outstanding voting power, it has the ability to delay or prevent a change in control of us that may be favored by other stockholders and may otherwise exercise substantial control over all corporate actions requiring stockholder approval, irrespective of how our other stockholders may vote, including:

    the election and removal of directors and the size of our board;

    any amendment of our certificate of incorporation or bylaws;

    the approval of mergers and other significant corporate transactions, including a sale of substantially all of our assets; or

    the defeat of any non-negotiated takeover attempt that might otherwise benefit our other stockholders.

        These approvals can generally occur without a meeting, without notice and without a vote.

A majority of our board of directors will not be considered "independent" under the rules of The Nasdaq Global Select Market.

        Talecris Holdings, LLC will own a majority of our common stock following the completion of this offering. As a result, we will certify that we are a "Controlled Company" under Nasdaq's rules and we intend to rely on the "Controlled Company" exception to the board of directors and committee composition requirements under Nasdaq's rules. Under this exception, we will be exempt from the rule that requires that (i) our board of directors be comprised of a majority of "independent directors"; (ii) our compensation committee be comprised solely of "independent directors"; and (iii) our nominating committee be comprised solely of "independent directors," as these terms are defined under Nasdaq's rules. Immediately following this offering, we expect that three of our directors will be "independent."

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.

        Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any

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attempt by our stockholders to replace current members of our management team. Among others, these provisions:

    establish a classified board of directors such that not all members of the board are elected at one time;

    upon such date that Talecris Holdings, LLC, its Affiliates (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), or any person who is an express assignee or designee of Talecris Holdings, LLC's rights under our Certificate of Incorporation (and such assignee's or designee's Affiliates) (of these entities, the entity that is the beneficial owner of the largest number of shares is referred to as the Designated Controlling Stockholder) ceases to own 50% of the outstanding shares of our common stock, which we refer to as the 50% Trigger Date, allow the authorized number of our directors to be changed only by the affirmative vote of two-thirds of our shares of capital stock or by resolution of our board of directors;

    upon the 50% Trigger Date, limit the manner in which stockholders can remove directors from the board;

    upon such date that Talecris Holdings, LLC, its Affiliates, or any express assignee or designee of Talecris Holdings, LLC, and such assignees or designee's Affiliates cease to own, in the aggregate, 30% of the outstanding shares of our common stock, which we refer to as the 30% Trigger Date, establish advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors;

    upon the 30% Trigger Date, require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions by our stockholders by written consent;

    impose a "fair price" requirement that prohibits an acquiror attempting to effect a takeover of our company from utilizing a two tier price structure as part of a two stage acquisition of our outstanding stock;

    limit who may call stockholder meetings;

    require any stockholder (or group of stockholders acting in concert) who seek to transact business at a meeting or nominate directors for election to submit a list of derivative interests in any company securities, including any short interests and synthetic equity interests held by such proposing stockholder;

    require any stockholder (or group of stockholders acting in concert) who seek to nominate directors for election to submit a list of "related party transactions" with the proposed nominee(s) (as if such nominating person were a registrant pursuant to Item 404 of Regulation S-K, and the proposed nominee was an executive officer or director of the "registrant"); and

    authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a "poison pill" that would work to dilute the stock ownership of a potential hostile acquiror, effectively preventing acquisitions that have not been approved by our board of directors.

        For example, our certificate of incorporation authorizes the board of directors to issue up to 40,000,010 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined by our board of directors at the time of issuance or fixed by resolution without further action by the stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion rights, redemption rights, and sinking fund provisions. The issuance of preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of our common stock. In addition, specific rights granted to holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our board of directors to

39


issue preferred stock could make it more difficult, delay, discourage, prevent, or make it more costly to acquire or effect a change in control, thereby preserving the current stockholders' control.

        Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. The restrictions contained in Section 203 are not applicable to any of our existing stock holders that will own 15% or more of our outstanding voting stock upon the closing of this offering.

If you purchase shares of common stock in this offering, you will suffer immediate dilution of your investment.

        The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. To the extent stock options are exercised or shares underlying restricted stock units are delivered, you will incur further dilution. Based on the initial public offering price of $19.00 per share, you will experience immediate dilution of $16.41 per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the initial public offering price. In addition, purchasers of common stock in this offering will have contributed 75.7% of the aggregate price paid by all purchasers of our stock but will own only approximately 24.2% of our common stock outstanding after this offering. See "Dilution" for more detail.

We cannot guarantee that an active trading market for our common stock will develop, which may limit your ability to sell shares.

        Prior to this offering, there was no public market for our common stock. Although our common stock has been approved for quotation on The Nasdaq Global Select Market under the symbol "TLCR," an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price may not be indicative of the market price of our common stock after the offering. A public trading market having the desirable characteristics of depth, liquidity, and orderliness depends upon the existence of willing buyers and sellers at any given time, the presence of which is dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. Accordingly, we cannot guarantee that an active and liquid trading market for our common stock will develop or that, if developed, it will continue. The failure of an active and liquid trading market to develop would likely have a material adverse effect on the value of our common stock.

Our quarterly results of operations may fluctuate and this fluctuation may cause our stock price to decline, resulting in losses to our investors.

        Our quarterly operating results are likely to fluctuate in the future as a publicly traded company. A number of factors, many of which are not within our control, could cause our operating results and stock price to fluctuate, including, but not limited to:

    contamination of products or material that does not meet specifications in production or final product which could result in recalls, write-offs and other costs;

    costs of procuring plasma, which constitutes approximately half of our cost of goods sold;

    our development and FDA and regulatory approvals of plasma centers;

    changes or anticipated changes in government and private payor reimbursement rates applicable to our products;

40


    introduction of competing products or the announcement by our competitors of their plans to do so;

    variations in product demand or price;

    regulatory developments in the United States and elsewhere;

    the departure of key personnel;

    the results of ongoing and planned clinical trials of our pipeline products;

    interest rate fluctuations impacting our floating rate debt instruments and foreign currency exchange rate fluctuations in the international markets in which we operate;

    the results of regulatory reviews relating to the approval of our pipeline products; and

    general and industry-specific economic conditions that may affect our research and development expenditures or otherwise affect our operations.

        If our quarterly operating results fail to meet the expectations of stock market analysts and investors, the price of our common stock may rapidly decline, resulting in losses to our investors.

If our stock price is volatile, purchasers of our common stock could incur substantial losses.

        Our stock price is likely to be volatile. The stock market has at times experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including, but not limited to:

    disruptions in, or shortages of, our plasma supply;

    disruption of product supply, product availability, or product recalls;

    results of clinical trials of our product candidates or those of our competitors;

    new therapeutic technologies that may replace plasma-derived proteins;

    regulatory or legal developments in the United States and other countries;

    variations in our financial results or those of companies that are perceived to be similar to us;

    healthcare reform legislation or other changes in the structure of healthcare payment systems;

    pricing fluctuations due to changing market conditions in the pharmaceutical and biotechnology sectors and issuance of new or changed securities analysts' reports or recommendations;

    general economic, industry and market conditions; and

    other factors described in this "Risk Factors" section.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

        Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have outstanding 119,783,652 shares of common stock based on the number of shares outstanding as of September 30, 2009. This includes 28,947,368 shares that we are selling in this offering, as well as the 21,052,632 shares that the selling stockholder is selling, which may be resold in the public market immediately. The selling stockholder received 88,227,868 shares of common stock upon the conversion of

41



all of the outstanding shares of our preferred stock and related earned and unpaid dividends in connection with this offering. Of the remaining shares, substantially all will be subject to a 180-day lock-up period provided under agreements executed in connection with this offering. These shares will, however, be able to be resold after the expiration of the lock-up agreement as described in the "Shares Eligible for Future Sale" section of this prospectus. Moreover, after this offering, holders of an aggregate of 67,175,236 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in the "Underwriters" section of this prospectus. We expect to have outstanding options to purchase 14,532,529 shares of our common stock, 2,608,416 restricted shares of our common stock (which includes 1,684,016 vested shares) and 482,975 shares reserved for issuance under restricted stock units granted in connection with this offering. Of the amount of restricted shares not subject to registration as discussed above we expect 1,919,392 shares may be eligible for resale pursuant to Rule 144 under the Securities Act within 180 days of the expiration of the lock-up agreement (subject to compliance with applicable volume restrictions and limitations on manner of sale).

We do not anticipate paying dividends in the foreseeable future.

        Although we declared a $73.2 million dividend to our stockholders on December 30, 2005 and a $760.0 million dividend to our stockholders on December 6, 2006, we currently anticipate that we will retain all funds for use in the operation of our business, and we do not anticipate paying any further cash dividends on our common stock for the foreseeable future. Therefore, any return on investment in our common stock is solely dependent upon the appreciation of the price of our common stock on the open market. We cannot guarantee that our common stock will appreciate in value. See the discussion contained elsewhere in this prospectus under the heading "Dividend Policy."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus, regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "would," "expects," "intends," "believes," "anticipates," "plans," "predicts," "estimates," "projects," "targets," "forecasts," "seeks," or the negative of such terms or other variations on such terms or comparable terminology. The forward-looking statements that we make are based upon assumptions about many important risk factors, many of which are beyond our control. Among the factors that could cause actual results to differ materially are the following:

    possible U.S. legislation or regulatory action affecting, among other things, the U.S. healthcare system, pharmaceutical pricing and reimbursement, including Medicaid and Medicare;

    our ability to procure adequate quantities of plasma and other materials which are acceptable for use in our manufacturing processes from our own plasma collection centers or from third-party vendors;

    our ability to maintain compliance with government regulations and licenses, including those related to plasma collection, production and marketing;

    our ability to identify growth opportunities for existing products and our ability to identify and develop new product candidates through our research and development activities;

    the timing of, and our ability to, obtain and/or maintain regulatory approvals for new product candidates, the rate and degree of market acceptance, and the clinical utility of our products;

    unexpected shut-downs of our manufacturing and storage facilities or delays in opening new planned facilities;

    our and our suppliers' ability to adhere to cGMP;

    our ability to manufacture at appropriate scale to meet the market's demand for our products;

    legislation or regulations in markets outside of the U.S. affecting product pricing, reimbursement, access, or distribution channels;

    our ability to resume sales to countries affected by our Foreign Corrupt Practices Act investigation;

    availability and cost of financing opportunities and our ability to amend our capital expenditure covenants;

    the impact of geographic and product mix on our sales and gross profit;

    the impact of competitive products and pricing;

    fluctuations in the balance between supply and demand with respect to the market for plasma-derived products;

    interest rate fluctuations impacting our floating rate debt instruments and foreign currency exchange rate fluctuations in the international markets in which we operate; and

    other factors identified elsewhere in this prospectus.

        No assurances can be provided as to any future financial results. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. Unless legally required, we do not undertake to update or revise any forward-looking statements, even if events make it clear that any projected results, expressed or implied, will not be realized.

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USE OF PROCEEDS

        We estimate that the net proceeds to us from our issuance and sale of 28,947,368 shares of common stock in this offering will be approximately $514.8 million, based on the initial public offering price of $19.00 per share, and after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholder, including if the underwriters exercise their option to purchase additional shares.

        We intend to use $386.1 million and $128.7 million of the net proceeds to us from this offering to pay amounts owed under our First and Second Lien Term Loans, respectively.

        This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. Our management will retain broad discretion over the allocation of any net proceeds used for general corporate purposes.

        The proceeds from the First and Second Lien Term Loans, in conjunction with a $67.3 million draw under our Revolving Credit Agreement, all entered into on December 6, 2006, were used to repay and retire all outstanding principal and interest amounts owed under our then existing $440.0 million asset-based credit facility, as amended, repay and retire all outstanding principal and interest amounts owed to Cerberus and Ampersand under our then existing 12% Second Lien Notes, and pay accrued interest of $23.4 million to Talecris Holdings, LLC under the terms of our then existing 14% Junior Secured Convertible Notes, which was converted into 900,000 shares of Series A convertible preferred stock at the holder's election. Further, we used the proceeds from our First and Second Lien Term Loans and our Revolving Credit Agreement to pay a cash dividend of $760.0 million to Talecris Holdings, LLC, pay a special recognition bonus of $34.2 million to eligible employees and board of director members, and fund an irrevocable trust for $23.0 million for future payments under this special recognition bonus.

        The First and Second Lien Term loans bear interest based upon either the Alternate Base Rate (ABR) or London Interbank Offered Rate (LIBOR), at our option, plus applicable margins. The ABR represents the greater of the Federal Funds Effective Rate plus 0.50% or the Prime Rate. The First Lien Term Loan accrues interest at ABR plus 2.25% or LIBOR plus 3.50% and matures on December 6, 2013 and the Second Lien Term Loan accrues interest at ABR plus 5.25% or LIBOR plus 6.50% and matures on December 6, 2014. For the six months ended June 30, 2009, the weighted average interest rates on borrowings under our First and Second Lien Term Loans were 4.94% and 7.98%, respectively. At June 30, 2009, the interest rates on borrowings under our First and Second Lien Term Loans were 4.42% and 7.42%, respectively.

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DIVIDEND POLICY

        The payment of dividends is within the discretion of our board of directors and will depend upon our earnings, capital requirements and operating and financial position, among other factors. We declared a $73.2 million dividend to our stockholders on December 30, 2005 and a $760.0 million dividend to our stockholders on December 6, 2006. We expect to retain all of our earnings to finance the expansion and development of our business, and we currently have no plans to pay cash dividends to our stockholders after this offering. Our senior credit facility limits, and our future debt agreements may restrict, our ability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Sources of Credit and Contractual and Commercial Commitments" and "Description of Certain Indebtedness."

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CAPITALIZATION

        The following table sets forth our capitalization as of June 30, 2009:

    on an actual basis;

    on a pro forma basis to give effect to the conversion of all of the outstanding shares of our preferred stock and related earned and unpaid dividends of $41.2 million at June 30, 2009 into an aggregate of 88,016,725 shares of common stock in connection with this offering (actual shares were 88,227,868 based upon $45.3 million of earned and unpaid dividends), and the cancellation of the embedded put/call feature on issued and outstanding common stock; and

    on a pro forma as adjusted basis to give further effect to (i) our issuance and sale of 28,947,368 shares of common stock in this offering at an initial public offering price of $19.00 per share, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, and (ii) the use of proceeds from this offering to repay $386.1 million and $128.7 million of amounts owed under our First and Second Lien Term Loans, respectively.

        You should read the following table together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related footnotes appearing at the end of this prospectus.

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  As of June 30, 2009  
 
  Actual   Pro Forma   Pro Forma As
Adjusted
 
 
  (in thousands, except shares)
 

Short-term debt:

                   
 

Current portion of long-term debt and capital lease obligations

  $ 7,627   $ 7,627   $ 7,627  

Long-term debt:

                   
 

First Lien Term Loan

    675,500     675,500     289,437  
 

Second Lien Term Loan

    330,000     330,000     201,313  
 

Revolving Credit Facility

    93,238     93,238     93,238  
 

Capital lease obligations

    9,221     9,221     9,221  
               

Total debt and capital lease obligations

    1,115,586     1,115,586     600,836  
               

Redeemable series A and B senior convertible preferred stock, par value $0.01 per share; 40,000,010 shares authorized; 1,192,310 shares issued and outstanding on an actual basis

    110,535          

Obligations under common stock put/call option

    32,018          

Stockholders' (deficit) equity:

                   

Common stock; par value $0.01 per share; 400,000,000 shares authorized; 2,636,048 shares issued and outstanding on an actual basis, 90,652,773 shares on a pro forma basis and 119,600,141 shares on a pro forma as adjusted basis

        907     1,196  

Additional paid-in capital

    61,589     203,235     717,696  

Accumulated other comprehensive loss

    (18,229 )   (18,229 )   (18,229 )

Accumulated deficit

    (223,628 )   (223,628 )   (223,628 )
               

Total stockholders' (deficit) equity

    (180,268 )   (37,715 )   477,035  
               

Total capitalization

  $ 1,077,871   $ 1,077,871   $ 1,077,871  
               

        The table above does not include:

    14,287,808 shares of common stock issuable upon exercise of options outstanding as of June 30, 2009 at a weighted average exercise price of $6.97 per share;

    options to purchase 597,713 shares of our common stock, with an exercise price equal to the IPO price, which we granted in connection with this offering under our 2009 Long-Term Incentive Plan;

    482,975 shares reserved for issuance under restricted stock units, which we granted in connection with this offering under our 2009 Long-Term Incentive Plan; and

    an aggregate of 6,119,312 shares of common stock reserved for future issuance under our 2009 Long-Term Incentive Plan.

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DILUTION

        If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after this offering.

        The historical net tangible book value of our common stock as of June 30, 2009 was approximately $(347.4) million or $(488.83) per share, based on 710,732 shares of common stock outstanding as of June 30, 2009. Historical net tangible book value per share represents the amount of our total tangible assets less total liabilities, preferred stock, and obligations under common stock put/call option, divided by the number of shares of common stock issued and outstanding as adjusted for cancellation of the put/call option.

        Our pro forma net tangible book value as of June 30, 2009 was approximately $(204.9) million, or $(2.26) per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the pro forma number of shares of common stock outstanding after giving effect to the conversion of all outstanding shares of our preferred stock into an aggregate of 85,846,320 shares of common stock in connection with this offering and the issuance of 2,170,405 shares of common stock in connection with this offering to settle earned and unpaid dividends of approximately $41.2 million at June 30, 2009 (actual shares were 2,381,548 based upon $45.3 million of earned and unpaid dividends) upon the conversion of our preferred stock.

        After giving effect to our issuance and sale of 28,947,368 shares of common stock in this offering at an initial public offering price of $19.00 per share, less the estimated underwriting discounts and commissions and offering expenses payable by us, our pro forma net tangible book value as of June 30, 2009 would have been approximately $309.9 million or $2.59 per share. This represents an immediate increase in pro forma net tangible book value of $4.85 per share to our existing stockholders and immediate dilution in pro forma net tangible book value of $16.41 per share to new investors purchasing common stock in this offering at the initial public offering price. Dilution per share to new investors is determined by subtracting pro forma net tangible book value per share after this offering from the initial public offering price per share paid by a new investor. Sales of shares by our selling stockholder in this offering do not affect our net tangible book value. The following table illustrates this dilution on a per share basis:

Initial public offering price per share:

        $ 19.00  
 

Historical net tangible book value per share as of June 30, 2009

  $ (488.83 )      
 

Increase attributable to the conversion of outstanding preferred stock and related earned and unpaid dividends settled with common stock

    486.57        
             
 

Pro forma net tangible book value per share as of June 30, 2009

  $ (2.26 )      
 

Increase per share attributable to new investors

  $ 4.85        
             

Pro forma net tangible book value per share after this offering

        $ 2.59  
             

Dilution per share to new investors

        $ 16.41  
             

        The following table summarizes as of June 30, 2009 the number of shares purchased from us after giving effect to the conversion of all outstanding shares of our preferred stock into an aggregate of 85,846,320 shares of common stock in connection with this offering, the issuance of 2,170,405 shares of common stock in connection with this offering to settle earned and unpaid dividends of approximately $41.2 million at June 30, 2009 (actual shares were 2,381,548 based on $45.3 million of earned and unpaid dividends) upon the conversion of our preferred stock, the total consideration paid and the average price per share paid, or to be paid, to us by existing stockholders and by new investors in this offering at an initial

48



public offering price of $19.00 per share, before deducting estimated underwriting discounts and commissions and offering expenses payable by us.

 
  Shares Purchased   Total Consideration    
 
 
  Average Price
per Share
 
 
  Number   Percentage   Amount   Percentage  

Existing stockholders

    90,652,773     75.8 % $ 176.4     24.3 % $ 1.95  

New investors

    28,947,368     24.2 % $ 550.0     75.7 % $ 19.00  
                         
 

Total

    119,600,141     100 % $ 726.4     100 % $ 6.07  
                         

        The table above is based on 90,652,773 shares of common stock outstanding as of June 30, 2009, including 938,224 unvested shares outstanding at June 30, 2009, an additional 85,846,320 shares of common stock issuable upon the conversion of all of the outstanding shares of our preferred stock in connection with this offering, and the issuance of 2,170,405 shares of common stock in connection with this offering to settle earned and unpaid dividends of approximately $41.2 million as of June 30, 2009 upon the conversion of our preferred stock (actual shares were 2,381,548 based on $45.3 million of earned and unpaid dividends), and excludes:

    14,287,808 shares of common stock issuable upon exercise of stock options outstanding as of June 30, 2009 at a weighted average exercise price of $6.97 per share and options to purchase 597,713 shares of our common stock with an exercise price equal to the IPO price, which we granted in connection with this offering;

    482,975 shares reserved for issuance under restricted stock units, which we granted in connection with this offering; and

    an aggregate of 6,119,312 shares of common stock reserved for future issuance under our 2009 Long-Term Incentive Plan.

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SELECTED HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL DATA

        The following is a summary of our historical consolidated financial data and the combined financial data for Bayer Plasma, our business predecessor, for the periods ended and at the dates indicated below. You should read this information together with our consolidated financial statements and the related footnotes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus.

        We derived the historical consolidated financial data for the years ended December 31, 2008, 2007 and 2006 and as of December 31, 2008 and 2007 from our audited consolidated financial statements, which are included elsewhere in this prospectus. The historical consolidated financial data for the period from inception through December 31, 2005 and as of December 31, 2006 and 2005 were derived from our audited consolidated financial statements, which are not included in this prospectus. The historical combined financial data of our Predecessor for the year ended December 31, 2004 and for the three months ended March 31, 2005 and as of December 31, 2004 and March 31, 2005 were derived from our Predecessor's audited historical combined financial statements, which are not included in this prospectus.

        The unaudited interim consolidated financial data for the six months ended June 30, 2009 and 2008 and as of June 30, 2009 have been derived from our unaudited interim consolidated financial statements, which are included elsewhere in this prospectus. The unaudited interim consolidated financial data as of June 30, 2008 has been derived from our unaudited interim consolidated financial statements, which are not included in this prospectus. In our opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as our annual audited consolidated financial statements and contain all material adjustments (consisting of normal recurring accruals and adjustments) necessary for a fair presentation of our financial position and results of operations. Operating results for the six months ended June 30, 2009 are not necessarily indicative of results that may be expected for the year ending December 31, 2009.

        The combined financial statements of Bayer Plasma are presented on a carve-out basis from the historical financial statements of Bayer AG and its affiliates. As Predecessor, we participated in Bayer's centralized cash management system and our net cash funding requirements were met by Bayer. We were not allocated interest costs from Bayer for use of these funds. The Predecessor's combined results of operations include all net revenue and costs directly attributable to our operations as Bayer Plasma, including all costs for supporting functions and services used by us at shared sites and performed by centralized Bayer organizations, presented on a carve-out basis, prior to our March 31, 2005 formation transaction. In Predecessor periods, the expenses for these services were charged to us based on a determination of the services provided primarily using activity-based allocation methods based primarily on revenue, headcount, or square footage. In Predecessor periods, Bayer also provided certain manufacturing services to us for the production of certain products at established transfer prices, which have been included in cost of goods sold.

        We believe that the comparability of our financial results between periods presented in the Selected Financial Data table below is significantly impacted by the following items, which are more fully described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Matters Affecting Comparability".

    Costs and non-operating income associated with our terminated merger with CSL;

    Costs associated with the development and vertical integration of our plasma collection platform;

    Inventory impairment provisions, and subsequent recoveries, related to a plasma collection center cGMP issue;

    Inventory impairment provisions, and subsequent recoveries, related to a customer dispute settlement regarding intermediate material;

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    Costs associated with transition-related activities to establish an independent company apart from Bayer;

    Costs associated with unplanned plant maintenance;

    Impairment and subsequent recovery related to a Gamunex IGIV production incident that occured just prior to the closing of our transaction with Bayer;

    Management fees payable to related parties, which fees will cease upon consummation of this offering;

    Capital structure changes;

    Costs associated with share-based compensation awards and special recognition bonuses;

    Non-operating income and fees related to a litigation settlement with Baxter;

    Tax benefit due to the release of our deferred tax asset valuation allowance;

    Acquisition of Bayer Plasma net assets and related purchase accounting; and

    Distribution and transition services agreements with Bayer affiliates.

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Selected Financial Data

 
  Predecessor   Successor  
 
   
   
   
   
   
   
  Six
Months
Ended
June 30,
 
 
   
  Three
Months
Ended
March 31,
2005
   
  Years Ended
December 31,
 
 
   
  Inception
Through
December 31,
2005
 
 
  Year Ended
December 31,
2004
 
 
  2006   2007   2008   2008   2009  
 
  (in thousands, except per share amounts)
 

Income (Loss) Statement Data:

                                                 

Net revenue:

                                                 
 

Product net revenue

  $ 846,500   $ 245,500   $ 654,939   $ 1,114,489   $ 1,196,686   $ 1,334,550   $ 603,645   $ 734,979  
 

Other

            13,039     14,230     21,823     39,742     18,743     12,386  
                                   

Total net revenue

    846,500     245,500     667,978     1,128,719     1,218,509     1,374,292     622,388     747,365  

Cost of goods sold

    661,500     209,700     561,111     684,750     788,152     882,157     416,505     433,209  
                                   

Gross profit

    185,000     35,800     106,867     443,969     430,357     492,135     205,883     314,156  

Operating expenses:

                                                 
 

SG&A

    102,200     27,500     89,205     241,448     189,387     227,524     95,529     134,425  
 

R&D

    59,000     14,800     37,149     66,801     61,336     66,006     30,083     35,561  
                                   

Total operating expenses

    161,200     42,300     126,354     308,249     250,723     293,530     125,612     169,986  
                                   

Income (loss) from operations

    23,800     (6,500 )   (19,487 )   135,720     179,634     198,605     80,271     144,170  

Other non-operating (expense) income:

                                                 
 

Interest expense, net

            (21,224 )   (40,867 )   (110,236 )   (97,040 )   (48,645 )   (41,858 )
 

Merger termination fee

                                75,000  
 

Equity in earnings of affiliate

            197     684     436     426     150     184  
 

Loss on extinguishment of debt

                (8,924 )                
 

Litigation settlement

                    12,937              
 

Other

                        400     400      
                                   

Income (loss) before income taxes and extraordinary items

    23,800     (6,500 )   (40,514 )   86,613     82,771     102,391     32,176     177,496  

(Provision) benefit for income taxes

    (18,500 )   (5,100 )   (2,251 )   (2,222 )   40,794     (36,594 )   (13,137 )   (60,789 )
                                   

Income (loss) before extraordinary items

    5,300     (11,600 )   (42,765 )   84,391     123,565     65,797     19,039     116,707  

Extraordinary items:

                                                 
 

Gain (loss) from unallocated negative goodwill

            252,303     (306 )                
 

Gain from settlement of contingent consideration due Bayer

            13,200     3,300                  
                                   

Net income (loss)

  $ 5,300   $ (11,600 ) $ 222,738   $ 87,385   $ 123,565   $ 65,797   $ 19,039   $ 116,707  
                                   

Income (loss) before extraordinary items per common share:

                                                 
 

Basic

  $ 0.66   $ (1.45 ) $ (15.09 ) $ (119.83 ) $ 65.58   $ 39.01   $ 9.01   $ 76.29  
 

Diluted

  $ 0.66   $ (1.45 ) $ (15.09 ) $ (119.83 ) $ 1.36   $ 0.71   $ 0.21   $ 1.24  
 

Pro forma basic(1)

                      $ 0.75   $ 0.21   $ 1.34  

Cash dividends declared per common share:

                                                 
 

Basic

          $ 8.37   $ 133.82                  
 

Diluted

          $ 8.37   $ 8.61                  

Balance Sheet Data (at period end):

                                                 

Cash and cash equivalents

          $ 10,887   $ 11,042   $ 73,467   $ 16,979   $ 20,221   $ 11,829  

Total assets

  $ 1,115,200   $ 1,040,800   $ 705,249   $ 903,474   $ 1,142,322   $ 1,307,399   $ 1,189,868   $ 1,336,742  

Long-term debt

          $ 250,366   $ 1,102,920   $ 1,129,037   $ 1,188,941   $ 1,159,933   $ 1,098,738  

Redeemable preferred stock

          $ 20,631   $ 110,535   $ 110,535   $ 110,535   $ 110,535   $ 110,535  

Total stockholders' equity (deficit)/parent's net investment

  $ 987,000   $ 943,600   $ 152,835   $ (528,980 ) $ (390,757 ) $ (316,725 ) $ (356,618 ) $ (180,268 )

Other Financial Data and Ratios (unaudited):

                                                 

Liters of plasma processed

    3,016     905     2,493     2,983     2,650     3,240     1,376     1,740  

Gross profit margin

    21.9 %   14.6 %   16.0 %   39.3 %   35.3 %   35.8 %   33.1 %   42.0 %

(1)
Pro forma basic income before extraordinary items per common share reflects the adjustment to the numerator to add back preferred dividends and adjustment to the denominator for the assumed weighted average effect of conversion of preferred stock into 85,846,320 common shares for the latest fiscal year and interim period and the corresponding prior year interim period. The pro forma diluted earnings per share for the latest fiscal year and interim period and the corresponding prior year interim period are equal to the diluted earnings per share amounts for the respective periods.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        You are encouraged to read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related footnotes appearing at the end of this prospectus. This discussion and analysis contains forward looking statements that involve risks and uncertainties. See "Risk Factors" included elsewhere in this prospectus for a discussion of some of the important factors that could cause actual results to differ materially from those described or implied by the forward looking statements contained in the following discussion and analysis. See "Special Note Regarding Forward-Looking Statements" included elsewhere in this prospectus.

        All tabular disclosures of dollar amounts are presented in thousands. Percentages and amounts presented herein may not calculate or sum precisely due to rounding.

        Unless otherwise stated or the context otherwise requires, references to "Talecris," "we," "us," "our" and similar references refer to Talecris Biotherapeutics Holdings Corp. and its wholly owned subsidiaries.

        A seven-for-one share dividend on our common stock was paid on September 10, 2009. All share and per-share amounts have been retroactively adjusted for all periods to reflect the share dividend.

Business Overview

        We are a biopharmaceutical company that develops, produces, markets and distributes protein-based therapies that extend and enhance the lives of people suffering from chronic and acute, often life-threatening, conditions, such as primary immune deficiencies (PI), chronic inflammatory demyelinating polyneuropathy (CIDP), alpha-1 antitrypsin deficiency, bleeding disorders, infectious diseases, and severe trauma. Our primary products have orphan drug designation to serve populations with rare, chronic diseases. We are one of the largest producers and marketers in our industry. Our products are derived from human plasma, the liquid component of blood, which is sourced from our plasma collection centers, or purchased from third parties, located in the United States. Plasma contains many therapeutic proteins, which we extract through a process known as fractionation at our Clayton, North Carolina and Melville, New York facilities. The fractionated intermediates are then purified, formulated into a final bulk, and aseptically filled into vials for distribution. We also sell the fractionated intermediate materials. Our manufacturing facilities currently have the capacity to fractionate approximately 4.2 million liters of human plasma per year. Purification, filling and finishing capacities are dependent on fraction mix.

        We operate in an industry that has experienced volume demand growth for plasma-derived therapies, both in the United States and worldwide, for more than twenty years, as well as industry consolidation. We believe worldwide unit volume demand for plasma-derived products will grow over the long-term at a compound annual rate of approximately 6% to 8%.

        As more fully discussed under "Business—Talecris Plasma Resources," we have devoted significant resources to the internal development of our plasma collection center platform, which has included organic growth, the acquisition of additional plasma collection centers from International BioResources, L.L.C. and affiliated entities (IBR), and third-party center development agreements, primarily with IBR, under which we provide financing for the development of plasma collection centers that are dedicated to our plasma collection, and which we have the option to purchase under certain circumstances. As of August 31, 2009, our plasma collection center platform, including those operated for us by IBR, consisted of 71 operating centers, of which 66 centers were licensed. These centers collected approximately 68% of our plasma during the six months ended June 30, 2009 and our plan is for our plasma collection center

53



network, once it matures, to provide approximately 90% of our current plasma requirements. The table below summarizes the status of our centers as of August 31, 2009:

Center Type
  Licensed   Unlicensed   Total  

Talecris Plasma Resources, Inc. (TPR)

    64     5     69  

IBR

    2         2  
               

Total

    66     5     71  
               

        The successful completion of our plasma collection center network depends on a number of factors, including our ability to obtain center licensure by the FDA and foreign regulatory authorities, which is required before we release collected plasma into our manufacturing process.

        We have experienced higher costs of production as a result of higher costs of raw materials, particularly plasma, due to limited third-party supply and the development and remediation of our internal plasma collection platform. The development of TPR has also resulted in excess period costs charged directly to cost of goods. These excess period costs reflect the under-absorption resulting from lower plasma collections at newly opened centers as they scale operations and the larger TPR infrastructure necessary to support the development of our plasma collection platform. We have reduced and plan to continue to reduce both the collection cost per liter and the amount of excess period costs charged directly to cost of goods sold as TPR matures. Decreasing collection costs of our raw plasma and the planned reduction of excess period costs combined with leveraging our manufacturing facilities as a result of higher volumes have contributed and will continue, over the long term, to contribute to improving gross profit margins.

        Our success with the development of our plasma collection platform and our new plasma supply agreement with CSL Plasma, Inc., a subsidiary of CSL Limited (CSL), a major competitor, have provided increasing levels of liters fractionated which has yielded additional volume of plasma-derived therapies as well as operational efficiencies. Although in the near term we plan to continue to increase the volume of liters fractionated and the production of our plasma-derived therapies, particularly Gamunex IGIV, we will continue to encounter manufacturing capacity constraints for certain products. Consequently, as we increase our production of Gamunex IGIV, we expect to be less efficient in the utilization of each incremental liter fractionated which will negatively impact gross profit margins. Our planned capital program for new plasma fractionation capacity as well as projects to increase capacities will result in higher project expense and, ultimately, higher depreciation costs, that will also increase our cost of goods sold. We currently have purification capacity constraints related to the production of plasma-derived Factor VIII as well as albumin. Additionally, we anticipate that our plasma fractionation will reach capacity in approximately 2011. Our planned capital program includes projects to increase these capacities, although capital expenditures under our program would exceed the applicable covenant under our credit facility. Consequently, we will need to amend our capital expenditure covenants, refinance our credit facilities or curtail our level of planned investment. In the meantime, we plan to build our Gamunex inventories in anticipation of these capacity constraints, which would increase our working capital requirements.

        As a result of our past and ongoing investment in research and development, we believe that we are positioned to continue as an industry leader in the plasma-derived therapies business. Near term, our focus is on life cycle management initiatives to extend the commercial life of our products and brands. Prolastin Alpha-1 MP, our next generation A1PI offering, will be a higher-yielding version of our current industry-leading product, with higher concentration. Our revenue will not benefit from the yield improvement in the near-term until such time as our efforts to identify new patients and grow share allows for the utilization of additional capacity.

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Subsequent Events

        In July 2009, we permanently closed two unlicensed plasma collection centers due to facility and quality related issues specific to these locations, which did not result in material charges to our cost of goods sold. As of August 31, 2009, one unlicensed center is temporarily closed and we have permanently closed six unlicensed centers.

        We have a Management Agreement, as amended, with Cerberus-Plasma Holdings LLC and an affiliate of Ampersand Ventures under which we are charged a management fee for advisory services related to a number of topics. During August 2009, the Management Agreement was further amended to waive an initial public offering fee (IPO Fee), which we were obligated to pay Cerberus-Plasma Holdings LLC and an affiliate of Ampersand Ventures upon the termination of the Management Agreement, as amended, which occurred in connection with this offering.

        During July 2009, we experienced an unplanned shutdown at our manufacturing facility located in Melville, New York. We recognized a charge to cost of goods sold of $0.8 million as a result of this unplanned shutdown, as well as inventory impairment charges related to impacted product of $1.3 million, during the third quarter of 2009.

        On August 7, 2009, our board of directors adopted the 2009 Long-Term Incentive Plan (2009 Plan) which became effective in connection with this offering, replacing prior plans. Following the initial awards under the 2009 Plan, we intend to make annual awards approximately each April under the 2009 Plan. The 2009 Plan as designed should initially result in annual share-based compensation expense of approximately $20 million. We granted 597,713 stock options and 482,975 restricted stock units in connection with this offering.

        We entered into an amended and restated employment agreement with our Chairman and Chief Executive Officer which included accelerating the vesting of options to purchase 1,008,000 shares of our common stock at an exercise price of $21.25 per common share to August 19, 2009. The acceleration of these options will result in the recognition of non-cash charges of approximately $11.8 million of compensation expense in the third quarter of 2009. Options to purchase these shares were previously scheduled to vest in April of 2010 (504,000 options) and April of 2011 (504,000 options).

        A seven-for-one share dividend on our common stock was paid on September 10, 2009. All share and per-share amounts have been retroactively adjusted for all periods to reflect this share dividend.

        All outstanding shares of our preferred stock and related earned and unpaid dividends of $45.3 million were converted into 88,227,868 shares of our common stock in connection with this offering.

Principal Products

        The majority of our sales are concentrated in the therapeutic areas of: Immunology/Neurology, primarily through our intravenous immune globulin (IGIV) product for the treatment of primary immune deficiency and autoimmune diseases, as well as CIDP, and Pulmonology, through our alpha-1 proteinase inhibitor (A1PI) product for the treatment of alpha-1 antitrypsin deficiency-related emphysema. These therapeutic areas are served by our branded products, Gamunex brand IGIV (Gamunex or Gamunex IGIV) and Prolastin brand A1PI (Prolastin or Prolastin A1PI), respectively. Sales of Gamunex and Prolastin together comprised 75.0% and 72.3% of our net revenue for the six months ended June 30, 2009 and the year ended December 31, 2008, respectively. We also have a line of hyperimmune therapies that provide treatment for tetanus, rabies, hepatitis B and Rh factor control during pregnancy and at birth. In addition, we provide plasma-derived therapies for critical care, including the treatment of hemophilia, an anti-coagulation factor, as well as albumin to expand blood volume. Although we sell our products worldwide, the majority of our sales were concentrated in the United States and Canada during the periods presented.

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        Our Gamunex IGIV is produced with a viral inactivation process that uses a patented caprylate process that preserves more of the fragile IgG proteins compared to prior generation IGIV products. We believe this technology differentiates our IGIV product from our competitors. Our Gamunex IGIV was launched in 2003 as the next generation therapy to our Gamimune brand IGIV (Gamimune or Gamimune IGIV) which utilized a solvent detergent process for viral inactivation. We discontinued manufacturing and selling Gamimune IGIV in 2006.

        Our Prolastin A1PI was the first A1PI product licensed and, consequently, has benefited from a first-mover advantage in the industry. In 2003, two competitors launched competing A1PI products in the U.S., the primary geographic area for such therapies. This has resulted in a loss of share and has increased competition for new patients. In addition, we experience A1PI patient losses due to the nature of the disease. New A1PI patient identification, as well as reimbursement approval in Europe, are important elements in growing our Prolastin A1PI franchise. We have filed a supplemental Biologics License Application (sBLA) with the FDA and a supplemental New Drug Submission (sNDS) with Health Canada related to our next generation Prolastin Alpha-1 MP A1PI product, which has demonstrated improved yield and higher concentration. We expect a post-approval clinical trial will be required as a condition for approval.

        Our products are subject to competition from plasma-derived and recombinant entrants as well as from products developed with other technologies. A transgenic form of anti-thrombate, launched in May 2009, competes with our plasma-derived Thrombate III Antithrombin III (human), which accounted for $21.3 million and $12.0 million of our net revenue for the year ended December 31, 2008 and the six months ended June 30, 2009, respectively.

Research and Development Expenses

        Research and development expenses (R&D) include the costs directly attributable to the conduct of research and development programs for new products and extensions or improvements of existing products and the related manufacturing processes. Such costs include salaries and related employee benefit costs, payroll taxes, materials (including the material required for clinical trials), supplies, depreciation on and maintenance of research and development equipment, services provided by outside contractors for clinical development and clinical trials, regulatory services, and fees. R&D also includes the allocable portion of facility costs such as rent, depreciation, utilities, insurance, and general support services. All costs associated with R&D are expensed as incurred. At August 31, 2009, we had 279 scientists and support staff engaged in research and development activities and for the six months ended June 30, 2009, our research and development expense totaled $35.6 million.

        Before obtaining regulatory approval for the sale of our product candidates, we must conduct extensive preclinical testing to demonstrate the safety of our product candidates in animals and clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Similar trials are required prior to marketing existing products for new indicated uses. Preclinical and clinical testing are expensive, difficult to design and implement, can take many years to complete and are uncertain as to the outcome. A failure of one or more of our clinical trials can occur in any stage of testing. We may experience events during, or as a result of, preclinical testing and the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialization of our product candidates or cause higher than expected expenses, many of which are beyond our control. There are many factors that could delay or prevent regulatory approval or commercialization of our product candidates. We have included these risk factors elsewhere in this prospectus in the section titled "Risk Factors—Risks Related to Our Business—We may not be able to commercialize products in development."

        Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Significant preclinical or clinical trial delays also could shorten the patent protection period during which we may have the exclusive right to commercialize

56



our product candidates or allow our competitors to bring products to market before we do and impair our ability to commercialize our products or product candidates.

        Even if clinical trials are successful, we may still be unable to commercialize the product due to difficulties in obtaining regulatory approval for the process or problems in scaling to commercial production. Additionally, if produced, the product may not achieve an adequate level of acceptance by physicians, patients, healthcare payors and others in the medical community to be profitable. The degree of acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, some of which are beyond our control. Additionally, even once approved, we may need to conduct post-marketing clinical trials, the failure of which may result in loss of acceptance.

        Our overall R&D activities encompass (a) core R&D spending for compliance and regulatory support of our products, product licensing in territories we sell or wish to sell our products, scientific communications, and overall R&D administration; (b) life cycle management of our existing products primarily focused on new product administration options or qualifying existing products for applications related to a new indication; and (c) development of new therapeutic proteins or existing proteins for new applications. We expect overall R&D spending to increase in subsequent periods due to life cycle management, new product projects and licensure of technology or products. Our major R&D life cycle management projects include Prolastin Alpha-1 MP (higher-yielding and more concentrated successor product of Prolastin) and Prolastin Alpha-1 aerosol (new device/formulation for the direct application of Prolastin to the lung). Our primary new projects are related to plasma-derived and recombinant forms of Plasmin. The following table summarizes expenditures related to these major projects:

 
  Six
Months
Ended
June 30,
  Years Ended December 31,  
 
  2009   2008   2008   2007   2006  

Gamunex IGIV CIDP (approved)

  $ 100   $ 400   $ 600   $ 1,100   $ 3,000  

Prolastin Alpha-1MP (sBLA and sNDS submitted)

  $ 1,500   $ 2,600   $ 3,900   $ 6,500   $ 9,600  

Prolastin Alpha-1 Aerosol

  $ 4,900   $ 1,600   $ 6,100   $ 5,700   $ 3,000  

IGIV subcutaneous administration (sBLA submitted)

  $ 500   $ 2,000   $ 3,300   $ 5,700   $ 3,800  

Plasmin and recombinant Plasmin

  $ 10,400   $ 9,900   $ 18,500   $ 13,200   $ 11,100  

        We have submitted our sBLA and sNDS to the FDA and Health Canada, for approval of Prolastin Alpha-1 MP in the U.S. and Canada, respectively. Plasma-derived Plasmin is in Phase I/II clinical trials. In 2009, we submitted a sBLA to the FDA for subcutaneous route of administration for Gamunex for the treatment of primary immune deficiency. We have also been approved in Canada to conduct a stroke Proof of Concept (POC) trial with plasma-derived Plasmin. The risks and uncertainties associated with failing to complete development on schedule and the consequences to operations, financial position and liquidity if a project is not completed timely are not expected to be material. We may reallocate our spending between product life cycle development and new product development as opportunities are assessed. We are unable to estimate the nature, timing or costs to complete, if ever, of our projects due to the numerous risks and uncertainties associated with developing therapeutic protein products. These risks and uncertainties include those discussed in the "Risk Factors" of this prospectus and in the paragraphs above.

Subsidiaries

        In April 2006, Talecris Biotherapeutics, Ltd. (Talecris, Ltd.) commenced operations in Canada and in December 2006, Talecris Biotherapeutics GmbH (Talecris, GmbH) commenced operations in Germany, to support our international sales and marketing activities; replacing certain functions which were previously provided to us by Bayer affiliates under various transition and distribution services agreements.

        In September 2006, we formed TPR to create a platform to vertically integrate our plasma supply chain in order to ensure a predictable and sustainable supply of plasma. In November 2006, we acquired

57



plasma collection centers in various stages of development from IBR through an asset purchase agreement as the first step of our plasma supply chain vertical integration plans. We have since devoted significant resources on the internal development of our plasma collection center platform, which has included organic growth, acquisition of additional plasma collection centers, and third party center development agreements, primarily with IBR.

Basis of Presentation

        Our consolidated financial statements include the accounts of Talecris Biotherapeutics Holdings Corp. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. The effects of business acquisitions have been included in our consolidated financial statements from their respective date of acquisition.

        The comparability of our financial results is impacted by significant events and transactions during the periods presented as discussed in the section titled, "—Matters Affecting Comparability."

Critical Accounting Policies and Estimates

        The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent assets and liabilities. A detailed description of our significant accounting policies, estimates and assumptions is included in the footnotes to our consolidated financial statements appearing at the end of this prospectus. Our significant accounting policies, estimates and assumptions have not changed materially since the date of the consolidated financial statements.

        We believe that certain of our accounting policies are critical because they are the most important to the preparation of our consolidated financial statements. These policies require our most subjective and complex judgments, often requiring the use of estimates about the effects of matters that are inherently uncertain. We periodically review our critical accounting policies and estimates with the audit committee of our board of directors. The following is a summary of accounting policies that we consider critical to our consolidated financial statements.

Revenue Recognition

        Revenues from product sales and the related cost of goods sold are generally recognized when title and risk of loss are transferred to customers. Product revenue is generally recognized at the time of delivery. Recognition of revenue also requires reasonable assurance of collection of sales proceeds, a fixed and determinable price, persuasive evidence that an arrangement exists, and completion of all other performance obligations in accordance with the Securities and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," as amended by SAB No. 104, "Revenue Recognition."

        Allowances against revenues for estimated discounts, rebates, administrative fees, chargebacks, and shelf-stock adjustments are established by us concurrently with the recognition of revenue. The standard terms and conditions under which products are shipped to our customers generally do not allow a right of return. In the rare instances in which we grant a right of return, revenue is reduced at the time of sale to reflect expected returns and deferred until all conditions of revenue recognition are met. We generally do not offer incentives to customers.

        We have supply agreements with our major distributors, which require them to purchase minimum quantities of our products. We regularly review the supply levels of our products on hand at major distributors, primarily by analyzing inventory reports supplied by these distributors, available data regarding the sell through of our products, our internal data, and other available information. When we believe distributor inventory levels have increased relative to underlying demand, we evaluate the need for

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sales return allowances. Factors that influence the allowance include historical sales return activity, levels of inventory in the distribution network, inventory turnover, demand history, demand projections, estimated product shelf-life, pricing, and competition. Sales returns have not been material during the periods presented.

        Under the terms of certain of our international distribution agreements, we have agreed to reimburse these distributors for their selling, general, and administrative expenses (SG&A). We have reflected these charges as a reduction of net revenue.

        Revenue from milestone payments for which we have no continuing performance obligations is recognized upon achievement of the related milestone. When we have continuing performance obligations, the milestone payments are deferred and recognized as revenue over the term of the arrangement as we complete our performance obligations.

        We evaluate revenue from agreements that have multiple elements to determine whether the components of the arrangement represent separate units of accounting. To recognize a delivered item in a multiple element arrangement, Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables," requires that the delivered items have value to the customer on a standalone basis, that there is objective and reliable evidence of fair value of the undelivered items and that delivery or performance is probable and within our control for any delivered items that have a right of return.

Gross-to-Net Revenue Adjustments

        We offer rebates to managed healthcare organizations. We account for these rebates by establishing an accrual at the time the sale is recorded in an amount equal to our estimate of managed health care rebates attributable to each sale. We determine our estimate of the managed health care rebates primarily based on historical experience and current contract arrangements. We consider the sales performance of products subject to managed health care rebates and the levels of inventory in the distribution channel and adjust the accrual periodically to reflect actual experience. For the portion of these rebates that is settled as part of the product sale, there is no lag in the recognition of the rebate. The portion which is accrued upon sale is settled upon resale by our distributors. Due to the overall low levels of inventory in the distribution channel, adjustments for actual experience have not been material.

        We participate in state government-managed Medicaid programs. We account for Medicaid rebates by establishing an accrual at the time the sale is recorded in an amount equal to our estimate of the Medicaid rebate claims attributable to such sale. We determine our estimate of the Medicaid rebates accrual primarily based on historical experience regarding Medicaid rebates, legal interpretations of the applicable laws related to the Medicaid program and any new information regarding changes in the Medicaid programs' regulations and guidelines that would impact the amount of the rebates. We consider outstanding Medicaid claims, Medicaid payments, and levels of inventory in the distribution channel and adjust the accrual periodically to reflect actual experience. While these rebate payments to the states generally occur on a one to two quarter lag, any adjustments for actual experience has not been material as Medicaid rebates on our product sales under the state Medicaid programs represents only one half of one percent of gross product revenues.

        As of June 30, 2009, our allowance for managed health care and Medicaid rebates was $19.2 million. A hypothetical 10% change in payments made for managed health care and Medicaid rebates for the six months ended June 30, 2009 would not have a material impact to our consolidated results of operations.

        We enter into agreements with certain customers to establish contract pricing for our products, which these entities purchase from the authorized wholesaler or distributor (collectively, wholesalers) of their choice. Consequently, when our products are purchased from wholesalers by these entities at the contract price which is less than the price charged by us to the wholesaler, we provide the wholesaler with a credit referred to as a chargeback. We record the chargeback accrual at the time of the sale. The allowance for

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chargebacks is based on our estimate of the wholesaler inventory levels, and the expected sell-through of our products by the wholesalers at the contract price based on historical chargeback experience and other factors. We periodically monitor the factors that influence our provision for chargebacks, and make adjustments when we believe that actual chargebacks may differ from established allowances. These adjustments occur in a relatively short period of time. As these chargebacks are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

        As of June 30, 2009, our allowance for chargebacks was $4.0 million. A hypothetical 10% change in credits issued for chargebacks for the six months ended June 30, 2009 would not have a material impact to our consolidated results of operations.

        Our sales terms generally provide for up to 2% prompt pay discount on domestic and international sales. We believe that our sales allowance accruals are reasonably determinable and are based on the information available at the time to arrive at our best estimate of the accruals at the time of the sale. Actual sales allowances incurred are dependent upon future events. We periodically monitor the factors that influence sales allowances and make adjustments to these provisions when we believe that the actual sales allowances may differ from prior estimates. If conditions in future periods change, revisions to previous estimates may be required, potentially in significant amounts. As these prompt pay discounts are typically settled within 30 to 45 days of the sale, adjustments for actual experience have not been material.

        As of June 30, 2009, our allowance for cash discounts was $1.6 million. A hypothetical 10% change in credits issued for cash discounts for the six months ended June 30, 2009 would not have a material impact to our consolidated results of operations.

        Shelf-stock adjustments are credits issued to customers to reflect decreases in the selling prices of products. Agreements to provide this form of price protection are customary in our industry and are intended to reduce a customer's inventory cost to better reflect current prices. Shelf-stock adjustments are based upon the amount of product that customers have remaining in their inventories at the time of a price reduction. The extent of any price reduction would be discretionary. Any amounts recorded for estimated price adjustments would be based upon the specific terms with customers, estimated declines in price, and estimates of inventory held by the customer. We have not experienced material shelf-stock adjustments during the periods presented as a result of the demand for plasma-derived products outpacing the supply due to constraints in our industry. As product supply and demand become more balanced, we could experience material shelf-stock adjustments in the future.

        We utilize information from external sources to estimate our significant gross-to-net revenue adjustments. Our estimates of inventory at wholesalers and distributors are based on written and oral information obtained from certain wholesalers and distributors with respect to their inventory levels and sell-through to customers. The inventory information received from wholesalers and distributors is a product of their record-keeping process. Our estimates are subject to inherent limitations of estimates that rely on third-party information, as certain third-party information was itself in the form of estimates, and reflect other limitations, including lags between the date as of which the third-party information is generated and the date on which we receive third-party information. We believe, based on our experience, that the information obtained from external sources provides a reasonable basis for our estimate.

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        The following table summarizes our gross-to-net revenue presentation expressed in dollars and percentages:

 
  Six Months
Ended June 30,
  Years Ended
December 31,
 
 
  2009   2008   2008   2007   2006  

Gross product revenue

  $ 776,004   $ 627,712   $ 1,389,542   $ 1,251,879   $ 1,175,200  
 

Chargebacks

    (10,679 )   (6,140 )   (13,927 )   (13,268 )   (13,611 )
 

Cash discounts

    (9,100 )   (6,333 )   (15,147 )   (12,918 )   (11,539 )
 

Rebates and other

    (21,089 )   (10,899 )   (24,008 )   (26,719 )   (18,568 )
 

SG&A reimbursements

    (157 )   (695 )   (1,910 )   (2,288 )   (16,993 )
                       

Product net revenue

  $ 734,979   $ 603,645   $ 1,334,550   $ 1,196,686   $ 1,114,489  
                       

 

 
  Six Months
Ended June 30,
  Years Ended
December 31,
 
 
  2009   2008   2008   2007   2006  

Gross product revenue

    100.0 %   100.0 %   100.0 %   100.0 %   100.0 %
 

Chargebacks

    (1.4 )%   (1.0 )%   (1.0 )%   (1.1 )%   (1.2 )%
 

Cash discounts

    (1.2 )%   (1.0 )%   (1.1 )%   (1.0 )%   (1.0 )%
 

Rebates and other

    (2.7 )%   (1.7 )%   (1.7 )%   (2.1 )%   (1.6 )%
 

SG&A reimbursements

        (0.1 )%   (0.1 )%   (0.2 )%   (1.4 )%
                       

Product net revenue

    94.7 %   96.2 %   96.1 %   95.6 %   94.8 %
                       

        The following table provides a summary of activity with respect to our allowances:

 
  Chargebacks   Cash
Discounts
  Rebates
and
Other
  Total  

Balance at December 31, 2005

  $ 3,108   $ 934   $ 9,549   $ 13,591  
 

Provision

    13,611     11,539     18,568     43,718  
 

Credits issued

    (14,848 )   (11,503 )   (21,186 )   (47,537 )
                   

Balance at December 31, 2006

    1,871     970     6,931     9,772  
 

Provision

    13,268     12,918     26,719     52,905  
 

Credits issued

    (12,451 )   (12,814 )   (22,218 )   (47,483 )
                   

Balance at December 31, 2007

    2,688     1,074     11,432     15,194  
 

Provision

    13,927     15,147     24,008     53,082  
 

Credits issued

    (12,752 )   (14,727 )   (23,029 )   (50,508 )
                   

Balance at December 31, 2008

    3,863     1,494     12,411     17,768  
 

Provision

    10,679     9,100     21,089     40,868  
 

Credits issued

    (10,590 )   (8,994 )   (14,310 )   (33,894 )
                   

Balance at June 30, 2009

  $ 3,952   $ 1,600   $ 19,190   $ 24,742  
                   

Concentration of Credit Risk

        Our accounts receivable, net, include amounts due from pharmaceutical distributors and wholesalers, buying groups, physicians' offices, patients, and others. A loss of any one of these customers, or deterioration in their ability to make payments timely, could have a significant adverse affect on our

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operating results and our liquidity. The following table summarizes our accounts receivable, net, concentrations with customers that represented more than 10% of our accounts receivable, net:

 
   
  December 31,  
 
  June 30,
2009
 
 
  2008   2007  

Customer A

    12.4 %   15.0 %   15.5 %

Customer B

    11.8 %   14.0 %   14.4 %

        The following table summarizes our concentrations with customers that represented more than 10% of our total net revenue:

 
  Six Months
Ended June 30,
  Years Ended
December 31,
 
 
  2009   2008   2008   2007   2006  

Customer A

    14.2 %   12.6 %   12.8 %   18.2 %   17.4 %

Customer B

    13.1 %   11.5 %   12.0 %   14.9 %   12.5 %

Customer C

            10.6 %   10.5 %    

Customer D

        11.4 %           11.0 %

Customer E

                    16.4 %

Income Taxes

        We record a valuation allowance, when appropriate, to reduce our deferred income tax assets to the amount that is more likely than not to be realized in accordance with FASB Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." In assessing the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with future taxable income, and ongoing prudent and feasible tax planning strategies.

        In accordance with FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes—An Interpretation of Financial Accounting Standards Board (FASB) Statement No. 109," we establish reserves for uncertain income tax positions, based on the technical support for the positions, our past audit experience with similar situations, and potential interest and penalties related to the matters. Our recorded reserves represent our best estimate of the amount, if any, that we will ultimately be required to pay to settle such matters. The resolution of our uncertain income tax positions is dependent on uncontrollable factors such as law changes, new case law and the willingness of the income tax authorities to settle, including the timing thereof and other factors.

        The Internal Revenue Service (IRS) recently completed the fieldwork related to the audit of our 2005, 2006, and 2007 consolidated Federal income tax returns. The audit will likely be finalized following review by the Joint Committee on Taxation. We do not believe that the outcome of this examination will have a material adverse impact on our consolidated financial condition or results of operations.

        Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives.

Share-Based Compensation

        We account for share-based compensation under the provisions of SFAS No. 123R, "Share-Based Payment." We are required to value share-based compensation at the grant date using a fair value model and recognize this value as expense over the employees' requisite service period, typically the period over which the share-based compensation vests.

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        The following is a summary of equity awards granted on the dates presented:

Grant Date
  Equity Award   Number of
Options or
Shares Granted
  Exercise
Price
  Fair Value
per
Common
Share
 

December 6, 2006

  Restricted stock     2,066,792   $   $ 11.00  

December 6, 2006

  Unrestricted stock     360,000   $   $ 11.00  

December 6, 2006

  Stock options     1,425,600   $ 11.00   $ 11.00  

December 15, 2006

  Stock options     22,568   $ 11.00   $ 11.00  

February 13, 2007

  Stock options     9,600   $ 11.00   $ 11.00  

July 9, 2007

  Stock options     452,200   $ 21.25   $ 21.25 (1)

July 25, 2007

  Stock options     2,016,000   $ 21.25   $ 21.25 (2)

July 25, 2007

  Restricted stock     746,400   $   $ 21.25  

August 10, 2007

  Stock options     44,200   $ 21.25   $ 21.25 (1)

September 11, 2007

  Stock options     8,576   $ 21.25   $ 21.25 (1)

October 4, 2007

  Stock options     58,000   $ 21.25   $ 21.25 (1)

October 10, 2007

  Stock options     8,576   $ 21.25   $ 21.25 (1)

October 29, 2007

  Stock options     40,000   $ 21.25   $ 21.25 (1)

October 29, 2007

  Restricted stock     16,000   $   $ 21.25  

April 1, 2008

  Stock options     2,240,840   $ 11.00   $ 9.88  

April 1, 2008

  Restricted stock     18,400   $   $ 9.88  

April 21, 2008

  Stock options     50,464   $ 9.88   $ 9.88  

April 21, 2008

  Restricted stock     24,320   $   $ 9.88  

March 27, 2009

  Restricted stock     14,464   $   $ 16.63  

March 27, 2009

  Stock options     31,392   $ 16.63   $ 16.63  

(1)
Effective April 2008, the compensation committee of our board of directors amended the exercise price of these stock options, excluding forfeited options. See "Matters Affecting Comparability—Share-Based Compensation Awards" for details on the amendment of the exercise price.

(2)
We entered into an amended and restated employment agreement with our Chairman and Chief Executive Officer which included accelerating the vesting of options to purchase 1,008,000 shares of our common stock at an exercise price of $21.25 per common share to August 19, 2009. The acceleration of these options will result in the recognition of non-cash charges of approximately $11.8 million of compensation expense in the third quarter of 2009. Options to purchase these shares were previously scheduled to vest in April of 2010 (504,000 options) and April of 2011 (504,000 options).

        We determined the fair value per common share contemporaneously with each equity award.

        The fair value of our common stock on the grant date is a significant factor in determining the fair value of share-based compensation awards and the ultimate non-cash compensation cost that we will be required to record over the requisite service period. Given the absence of an active trading market for our common stock on the grant dates, the board of directors, or special dividend committee or compensation committee designated by our board of directors, estimated the fair value of our common stock on each grant date using several factors. Numerous objective and subjective factors were used to determine the value of our common stock on each grant date, including: (i) our stage of development, our efforts to become independent from Bayer, and revenue growth; (ii) the timing of the anticipated launch of new products and new indications; (iii) business conditions and business challenges at the time; (iv) available market data, including observable market transactions, and valuations for comparable companies; (v) the illiquid nature of our stock options and stock grants; and (vi) the likelihood of achieving a liquidity event for the shares of common stock underlying the options, such as an initial public offering or sale of our company, given prevailing market conditions at the grant date.

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        In making the assessment of common stock fair value on each award date, our board of directors or designated committee of the board of directors committee considered the guidance in American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. This assessment included a valuation of the company (or enterprise) at each grant date in support of equity compensation awards on or near those dates, as well as an evaluation of all information that was available at the time the grants occurred. The valuations were completed utilizing the market and/or an income approach and then the enterprise value was allocated using the "Probability-Weighted Expected Return Method." The valuation allocation method used provides different probability weights of various likely scenarios (distressed; remain private; private sale; IPO), and develops valuations by determining the present value of the future expected common stock value under each of these scenarios. Each scenario is then probability weighted in order to estimate the fair value of the common stock. Key drivers in the value of the enterprise and the resulting common stock values are the market multiples of other public companies, probability weighting as well as our historical and projected earnings. Our board of directors or designated committee of the board of directors concluded that the common stock per share fair value at December 2006 was $11.00, at July 2007 was $21.25, at April 2008 was $9.88, and at April 2009 was $16.63.

December 2006 and February 2007 Grants

        For stock options and restricted shares granted in December 2006, our special dividend committee determined our common stock per share fair value to be $11.00. The December 2006 stock option exercise price of $11.00 was deemed to be set at or above the common stock per share fair value. An additional option award in February 2007, as well as the setting of performance objectives in February 2007 related to our 2007 performance stock options were based on the same $11.00 common stock per share fair value as our compensation committee concluded there had been no material change in our business to suggest a different per share common stock value.

        The enterprise value was estimated at the time of the December 2006 grants using both a market approach and an income approach. The current market value of the enterprise was determined using trading multiples of comparable companies in the plasma proteins therapeutics industry estimated for the latest twelve months, current fiscal year and next fiscal year. In addition, a range of enterprise values was determined using a discounted cash flow approach or income approach utilizing our long range plan and present value discount factors of between 23.5% and 25.5%. The discount rates selected were based on the rates of return for alternative investments, including but not limited to the returns on the comparable companies, and our risk profile at the time of the grants.

        The probability weighted expected return method was selected to allocate the enterprise value between the common and preferred stock assuming various probability weighted scenarios. The future value of the enterprise was estimated and allocated to the long-term debt, preferred and common stock holders based on the greater of the liquidation value of the preferred or the "as converted value" (in each case other than the distressed scenario, the as converted value provided the greater value). The net present value of the common stock and preferred stock were determined under each scenario. These amounts were then probability weighted to arrive at an $11.00 per share value for the common stock.

July Through October 2007 Grants

        Additional grants of stock options and restricted share awards were made to employees during July 2007 through October 2007, with a fair value as determined by our board of directors or compensation committee of $21.25 per common share.

        The enterprise value was estimated at the time of the July 2007 grants using a market approach. The market approach was selected to estimate the enterprise value because management had completed the majority of the steps it believed necessary to file an IPO registration statement and the probability of doing so was high at this time. The current market value of the enterprise was estimated using market multiples

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which were derived from trading multiples of comparable companies in the plasma proteins therapeutics industry estimated for the latest twelve months and current fiscal year.

        The probability weighted expected return method was selected to allocate the enterprise value between the common and preferred stock assuming various probability weighted scenarios. The future value of the enterprise was estimated and allocated to the long-term debt, preferred and common stock holders based on the greater of the liquidation value of the preferred or the as converted value (in each case the as converted value provided the greater value). The net present values of the common stock and preferred stock were determined under each scenario. These amounts were then probability weighted to arrive at a $21.25 per share value for the common stock.

        The additional grants issued in August 2007 through October 2007 were based on the same $21.25 per share common stock value as the board of directors or compensation committee concluded there had been no material change in Talecris's business to suggest a materially different common stock value.

April 2008 Grants

        Additional grants of stock options and restricted share awards in April 2008 as well as vesting of certain restricted share awards in April 2008 were based on a per share common stock value of $9.88 as determined by our board of directors and compensation committee. The April 2008 stock option exercise prices were deemed to be set at or above the common stock per share fair value of $9.88, as our board of directors and compensation committee concluded that there had been no material change in our business since a February 2008 valuation to suggest a different per share common stock value. Effective April 2008, the compensation committee of our board of directors amended the exercise price of the stock options awarded with an exercise price of $21.25 to reset the exercise price to $9.88, except those stock options issued to our Chief Executive Officer. See "Matters Affecting Comparability-Share-Based Compensation Awards" for details on the amendment of the exercise price.

        The reduction in the fair value per common share from October 2007 to December 2007 resulted from changes in our business due primarily to the timing anticipated to successfully establish our TPR plasma collection platform, significant incremental costs associated with the plasma platform development, and a reduction in product sales volumes due to our plasma supply constraints. In December 2007, we determined that proceeding with an IPO was not feasible at the time due to uncertainties regarding future plasma supplies. Given the uncertainties of our ongoing roll-out of our plasma collection platform, we were unable to reasonably predict future collectibility of licensed plasma to support our manufacture and distribution of our therapies.

        This $9.88 per common share valuation utilized in April 2008 reflects a significant change relative to the $21.25 per common share value utilized for equity awards from June to October 2007. As the 2008 budget preparations during the fourth quarter of 2007 occurred, a number of concerns were identified relative to our 2008 budget primarily regarding our plasma business. The operating concerns indicated we would be further challenged trying to open plasma centers and obtain plasma center licensures considering possible FDA inspection constraints, and there would be higher than expected under-absorption charges in 2008 relative to plasma center openings. As a result of 2008 budget discussions with our lenders during February 2008, we reported to our lenders that we could encounter challenges meeting our debt covenants during 2008. Concerns with meeting debt covenants during 2008 required that we obtain commitment letters from our sponsors in April 2008. All of the above factors contributed to an anticipated lower 2008 performance as compared to 2007 and contributed to the $9.88 per common share valuation utilized in April 2008.

        The current market value of the enterprise was estimated using market multiples which were derived from trading multiples of comparable companies in the plasma proteins therapeutics industry estimated for the current fiscal year and next fiscal year. In addition, a range of values was determined using a discounted cash flow approach or income approach utilizing management's long range plan and present value discount factors of between 23% and 25%. The discount rates selected were based on the rates of

65



return for alternative investments, including but not limited to the returns on the comparable companies, and our risk profile at the time of the grants.

        The probability weighted expected return method was selected to allocate the enterprise value between the common and preferred stock assuming various probability weighted scenarios. The future value of the enterprise was estimated and allocated to the long-term debt, preferred and common stock holders based on the greater of the liquidation value of the preferred or the as converted value (in each case the as converted value provided the greater value). The net present values of the common stock and preferred stock were determined under each scenario. These amounts were then probability weighted to arrive at a $9.88 per share value for the common stock.

March 2009 Grants

        The vesting of restricted share awards in March 2009 was based on a per share common stock value of $16.63 as determined by our compensation committee. The increase in the fair value per common share from December 2007 to December 2008 resulted from positive changes in our business, including favorable 2008 operating results compared to plan, the successful achievement of various strategic objectives related to our plasma collection center platform, our long range operating plan, as well as changes to the probability of achieving various liquidation events. Additional grants of stock options and restricted share awards in March 2009 were based on the same per share common stock value of $16.63 as determined by our compensation committee.

        On August 12, 2008, we signed a definitive merger agreement with CSL, an Australian-based biopharmaceutical company that engages in the research, development, production, marketing and distribution of plasma-based therapies among other businesses. As of the March 2009 grant date, we and CSL were in the process of obtaining regulatory approval from the Federal Trade Commission ("FTC") though we were uncertain as to whether or not the FTC would approve the merger.

        The current market value of the enterprise was estimated first using market multiples which were derived from trading multiples of comparable companies in the plasma proteins therapeutics industry estimated for the latest twelve months and current fiscal year.

        The estimated purchase price offer from CSL was present valued to indicate a range of values using a discounted cash flow approach or income approach. In addition, a range of values was determined using a discounted cash flow approach or income approach utilizing management's long range plan and present value discount factors of between 13% and 17%. The discount rates selected were based on the rates of return for alternative investments, including but not limited to the returns on the comparable companies, and our risk profile at the time of the grants.

        The probability weighted expected return method was selected to allocate the enterprise value between the common and preferred stock assuming various probability weighted scenarios. The future value of the enterprise was estimated and allocated to the long-term debt, preferred and common stock holders based on the greater of the liquidation value of the preferred or the as converted value (in each case the as converted value provided the greater value). The net present values of the common stock and preferred stock were determined under each scenario. These amounts were then probability weighted to arrive at a $16.63 per share value for the common stock for the March 2009 grants.

        While no equity awards were granted between April 2008 and March 27, 2009, there were several factors of note contributing to the increased per common share value from $9.88 to $16.63 utilized in March 2009. During the second half of 2008, we were able to successfully resolve the issues related to our plasma collection center development which provided greater predictability of plasma supplies. Although we incurred total inventory impairment charges of approximately $23 million during the first six months of 2008 related to the plasma center quality issue noted above, we were able to address most regulatory concerns regarding this matter and recover most of the impacted inventories. Also, during August 2008, we signed a new five year agreement with CSL Plasma Inc. to sell us significant quantities of plasma, which

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further reduced uncertainties regarding future plasma supplies. This agreement was not dependent on consummation of the merger with CSL.

        The increase from the March 2009 per common share value of $16.63 compared to our initial public offering price of $19.00 per share reflects both our improved operating performance in 2009 as well as consideration of a marketability discount previously inherent in our March 2009 per common share value which preceded the June 2009 termination of the CSL merger agreement. Our results for the first half of 2009 reflect significantly improved financial performance as compared to the first half of 2008 as a result of, among other things, the mitigation of our plasma supply constraints.

        On August 7, 2009, our board of directors adopted the 2009 Long-Term Incentive Plan (2009 Plan) which became effective in connection with this offering, replacing prior plans. Following the initial awards under the 2009 Plan, we intend to make annual awards approximately each April under the 2009 Plan. The 2009 Plan as designed should initially result in annual share-based compensation expense of approximately $20 million.

        We entered into an amended and restated employment agreement with our Chairman and Chief Executive Officer which included accelerating the vesting of options to purchase 1,008,000 shares of our common stock at an exercise price of $21.25 per common share to August 19, 2009. The acceleration of these options will result in the recognition of non-cash charges of approximately $11.8 million of compensation expense in the third quarter of 2009. Options to purchase these shares were previously scheduled to vest in April of 2010 (504,000 options) and April of 2011 (504,000 options).

        We estimate the fair value of stock options using a Black-Scholes pricing model, which requires the use of a number of assumptions related to the risk-free interest rate, average life of options (expected term), expected volatility, and dividend yield. There was no trading market for our common stock or stock options on the grant dates; therefore, our application of the Black-Scholes pricing model incorporated historical volatility measures of similar public companies in accordance with SAB No. 107, "Share-Based Payment." A forfeiture rate based upon historical attrition rates of award holders is used in estimating the granted awards not expected to vest. If actual forfeitures differ from the expected rate, we may be required to make additional adjustments to compensation expense in future periods. Our valuation utilized a dividend yield of zero. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options on their grant dates. Estimates of the values of these grants are not intended to predict actual future events or the value ultimately realized by employees who receive such awards.

        The stock options that we granted to employees typically have service-based and performance-based components. Stock option grants to non-employee directors and restricted stock awards are service-based only. Service-based awards vest annually in equal amounts over the vesting period. The performance-based component of the stock options vests annually upon the achievement of corporate performance objectives which are established by our board of directors. We make assessments as to whether the performance conditions related to the performance-based stock options will be achieved. We record compensation cost for awards with performance conditions based on the probable outcome of the performance conditions.

        If we had made different assumptions and estimates than those described above, the amount of our recognized and to be recognized stock-based compensation expense, net income and net income per share amounts could have been materially different. We believe that we have used reasonable methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, to determine the fair value of our common stock.

        At June 30, 2009, 14,287,808 stock options were outstanding, of which 10,376,672 stock options were vested and 3,407,136 and 504,000 stock options are expected to vest in 2010 and 2011, respectively, and 2,636,048 shares of common stock were outstanding, of which 1,697,824 shares were vested and 8,000, 743,624, and 186,600 shares of common stock are expected to vest in 2009, 2010, and 2011, respectively. We

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granted 597,713 stock options and 482,975 restricted stock units under the 2009 Plan in connection with this offering.

Accounts Receivable, net

        Accounts receivable, net, consists of amounts owed to us by our customers on credit sales with terms generally ranging from 30 to 90 days from date of invoice and are presented net of an allowance for doubtful accounts receivable on our consolidated balance sheets.

        We maintain an allowance for doubtful accounts receivable for estimated losses resulting from our inability to collect from customers. In extending credit, we assess our customers' creditworthiness by, among other factors, evaluating the customers' financial condition, credit history, and the amount involved, both initially and on an ongoing basis. Collateral is generally not required. In evaluating the adequacy of our allowance for doubtful accounts receivable, we primarily analyze accounts receivable balances, the percentage of accounts receivable by aging category, and historical bad debts. We also consider, among other things, customer concentrations and changes in customer payment terms or payment patterns.

        If the financial conditions of our customers were to deteriorate, resulting in an impairment of their ability to make payments or our ability to collect, an increase to the allowance may be required. Also, should actual collections of accounts receivable be different than our estimates included in determining the allowance, the allowance would be adjusted through charges or credits to SG&A in our consolidated income statements in the period in which such changes in collection become known. If conditions change in future periods, additional allowances or reversals may be required. Such allowances or reversals could be significant. While our credit losses have historically been within our expectations and the allowance established, we may not continue to experience the same credit loss rates that we have in the past. At June 30, 2009, our allowance for doubtful accounts receivable was $3.3 million.

Inventories

        Inventories consist primarily of raw material, work-in-process, and finished goods held for sale and are stated at the lower of cost or market, computed at actual cost on a first-in, first-out basis and market being determined as the lower of replacement cost or estimated net realizable value. We establish inventory reserves through inventory impairment provision charges to cost of goods sold when conditions indicate that the selling price could be less than cost. These inventory impairment provisions establish a lower cost basis for the inventory.

        Our raw materials, particularly plasma, are susceptible to damage and contamination and may contain human pathogens, any of which would render the plasma unsuitable as raw material for further manufacturing. For instance, improper storage of plasma, by us or third-party suppliers, may require us to destroy some of our raw material. If the damaged plasma is not identified and discarded prior to the release of the plasma to our manufacturing process, it may be necessary to discard intermediate or finished products that are made from that plasma, resulting in a charge to cost of goods sold. In the event that we determine that plasma was not collected in a current Good Manufacturing Practices (cGMP) compliant fashion or that the collection center is unable to obtain FDA licensure, we may be unable to use and may ultimately destroy plasma collected from that center, which would be recorded as a charge to cost of goods sold during the period the plasma is determined to be unrealizable. From time to time, we have experienced significant impairment charges to cost of goods sold related to raw plasma that was collected or stored in a manner not consistent with our standard operating procedures or cGMP, such as the $23.3 million charge we recorded during the first half of 2008 as discussed further in the section titled, "—Matters Affecting Comparability—Plasma Center cGMP Issue."

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        The manufacture of our plasma products is an extremely complex process of fractionation, purification, filling, and finishing. Although we attempt to maintain high standards for product testing, manufacturing, process controls, and quality assurance, our products can become non-releasable, or otherwise fail to meet our stringent specifications through a failure of one or more of these processes. Extensive testing is performed throughout the process to ensure the safety and effectiveness of our products. We may, however, detect instances in which an unreleased product was produced without adherence to our manufacturing procedures. Such an event of noncompliance would likely result in our determination that the product should not be released and therefore would be destroyed, resulting in a charge to cost of goods sold. While we expect to write off small amounts of work-in-process inventory in the ordinary course of business due to the complex nature of plasma, our processes, and our products, unanticipated events may lead to write-offs and other costs materially in excess of our expectations. Such write-offs and other costs could cause material fluctuations in our profitability.

        Once we have manufactured our plasma-derived products, they must be handled carefully and kept at appropriate temperatures. Our failure, or the failure of third parties that supply, ship, or distribute our products, to properly care for our products may require those products be destroyed, resulting in a charge to cost of goods sold. Our finished goods are also subject to physical deterioration, obsolescence, reductions in estimated future demand, and reductions in selling prices. We generally record an inventory impairment provision for finished goods inventory six months prior to its expiry date when we do not reasonably expect to sell the product prior to expiration.

        We capitalize the cost of unlicensed plasma when, based on our judgment, future economic benefit is probable. While unlicensed plasma cannot be sold to third parties or used in our manufacturing processes to make finished product until all regulatory approvals have been obtained, we have determined that it is probable that our plasma inventories are realizable. As part of the FDA licensing process for plasma collection centers, we are initially permitted to collect plasma utilizing the procedures and Quality Systems implemented and approved under our existing Biologics License Application (BLA) until such time as the FDA inspectors have conducted a pre-license inspection of the site and approved the site for inclusion in the BLA. At the conclusion of this process, we are permitted to sell or utilize previously collected plasma in the manufacturing of final product. We believe that our cumulative knowledge of the industry, standard industry practices, experience working with the FDA, established Quality Systems, and consistency with achieving licensure support our capitalization of unlicensed plasma. Total unlicensed plasma and related testing costs included in our raw material inventories was $4.6 million at June 30, 2009.

Recent Accounting Pronouncements Applicable to Our Company

        In June 2009, the FASB issued SFAS No. 168, "The FASB Accounting Standards Codification and Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162." SFAS No. 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009, establishes the FASB Standards Accounting Codification (Codification) as the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied to nongovernmental entities and rules and interpretive releases of the SEC as authoritative GAAP for SEC registrants. The Codification will supersede all existing non-SEC accounting and reporting standards upon its effective date and, subsequently, the FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts. SFAS No. 168 also replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles," given that, once in effect, the Codification will carry the same level of authority. We do not anticipate that the adoption of this statement will have a material impact on our consolidated financial statements or related disclosures.

        In June 2009, the SEC staff issued SAB No. 112, which amends or rescinds portions of the SEC staff's interpretative guidance included in the Staff Accounting Bulletin Series in order to make the relevant interpretive guidance consistent with SFAS No. 141R and SFAS No. 160. We do not anticipate that the adoption of this SAB will have an impact on our consolidated financial statements.

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        In May 2009, the FASB issued SFAS No. 165, "Subsequent Events." SFAS No. 165 is intended to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No. 165 did not have a material effect on our consolidated financial statement disclosures.

        In April 2009, the FASB issued FASB Staff Position (FSP) No. 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, "Interim Disclosures about Fair Value of Financial Instruments." This FSP amends SFAS No. 107 to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28 to require disclosures in summarized financial information at interim reporting periods. FSP No. 107-1 and APB 28-1 are effective for interim reporting periods ending after June 15, 2009. The adoption of FSP 107-1 and APB 28-1 did not have a material effect on our consolidated financial statements.

        In April 2009, the FASB issued FSP No. 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies." FSP No. 141(R)-1 addresses application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. FSP No. 141(R)-1 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of FSP No. 141(R)-1 did not have a material impact on our consolidated financial statements, although the future impact of this standard will be largely dependent on the size and nature of business combinations completed after the effective date.

        In October 2008, the FASB issued FSP No. 157-3, "Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active." FSP No. 157-3 clarifies the application of SFAS No. 157, which we adopted on January 1, 2008, in cases where a market is not active. The adoption of FSP No. 157-3 did not have an impact on our consolidated financial statements.

        In February 2008, the FASB issued FSP No. 157-2, "Effective Date of FASB Statement No. 157," to partially defer SFAS No. 157. FSP No. 157-2 defers the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. The adoption of FSP No. 157-2 did not have an impact on our consolidated financial statements.

        In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133." SFAS No. 161 requires enhanced disclosures regarding an entity's derivative and hedging activities. These enhanced disclosures include information regarding how and why an entity uses derivative instruments; how derivative instruments and related hedge items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and its related interpretations; and, how derivative instruments and related hedge items affect an entity's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. SFAS No. 161 did not materially impact our financial statement disclosures.

        In December 2007, the FASB issued SFAS No. 141R, "Business Combinations." This new standard represents the outcome of the FASB's joint project with the International Accounting Standards Board and is intended to improve, simplify, and converge internationally the accounting for business combinations in consolidated financial statements. SFAS No. 141R replaces SFAS No. 141. However, it retains the

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fundamental requirements of the former standard that the acquisition method of accounting (previously referred to as the purchase method) be used for all business combinations and for an acquirer to be identified for each business. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS No. 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141R did not have a material impact on our consolidated financial statements, although the future impact of this statement will be largely dependent on the size and nature of business combinations completed after the effective date.

        In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51," which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interest of the noncontrolling owners. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS No. 160 did not have a material impact on our consolidated financial statements based on our current ownership interests.

Matters Affecting Comparability

        We believe that the comparability of our financial results between the periods presented is significantly impacted by the following items:

Definitive Merger Agreement with CSL Limited (CSL)

        On August 12, 2008, we entered into a definitive merger agreement with CSL, under which CSL agreed to acquire us for cash consideration of $3.1 billion, less net debt, as defined. The closing of the transaction was subject to the receipt of certain regulatory approvals as well as other customary conditions. The U.S. Federal Trade Commission filed an administrative complaint before the Commission challenging the merger and a complaint in Federal district court seeking to enjoin the merger during the administrative process. On June 8, 2009, the merger parties agreed to terminate the definitive merger agreement. CSL paid us a merger termination fee of $75.0 million, which is included in non-operating income in our consolidated income statement for the six months ended June 30, 2009. The Federal Trade Commission's complaints were subsequently dismissed.

        In conjunction with the definitive merger agreement with CSL, our board of directors approved a retention program in August 2008 for an amount up to $20.0 million, of which approximately $13.8 million has been specifically allocated to certain employees as of June 30, 2009. We recorded retention expense of $6.1 million, excluding fringe benefit, during the six months ended June 30, 2009 and $5.1 million during the year ended December 31, 2008 related to the retention of certain employees under this program. At June 30, 2009, the remaining unrecognized expense related to the retention program totaled $2.6 million, which we will recognize through December 31, 2009.

        We incurred legal and other costs associated with the regulatory review process of $8.3 million for the year ended December 31, 2008 and $6.0 million and $0.8 million for the six months ended June 30, 2009 and 2008, respectively, which are recorded in SG&A in our consolidated income statements.

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Vertical Integration of Plasma Collection

        In September 2006, we formed TPR to create a platform to vertically integrate our plasma supply chain. In November 2006, we acquired plasma collection centers in various stages of development from IBR as the first step of our plasma supply chain vertical integration plans. We have devoted significant resources on the internal development of our plasma collection center platform, which has included organic growth, the acquisition of additional plasma collection centers from IBR, and third party plasma center development agreements, primarily with IBR, under which we provide financing for the development of plasma collection centers that are dedicated to our plasma collection, for which we have the option to purchase under certain circumstances. Our financial position, results of operations, and cash flows reflect the acquired IBR plasma collection centers from their respective date of acquisition and the results of TPR from the date of formation.

        Our cost of goods sold reflects $98.5 million, $70.1 million, and $0.4 million for the years ended December 31, 2008, 2007, and 2006, respectively, and $25.4 million and $51.9 million for the six months ended June 30, 2009 and 2008, respectively, related to the unabsorbed TPR infrastructure and start-up costs associated with the development of our plasma collection center platform. Until our plasma collection centers reach normal operating capacity, we charge unabsorbed overhead costs directly to cost of goods sold.

Plasma Center cGMP Issue

        During the first and second quarters of 2008, we incurred charges to cost of goods sold of $16.3 million and $7.0 million, respectively, due to deviations from our standard operating procedures and cGMP at one of our plasma collection centers. Our preliminary investigations concluded that the deviations from our standard operating procedures and cGMP resulted in impairments to the related raw material and work-in-process inventories as we concluded there was no probable future economic benefit related to the impacted inventories. Subsequently, due to further investigations and new facts and circumstances, we determined that certain impacted materials were saleable. We record recoveries directly to cost of goods sold after the impacted material is converted to final products and sold to third parties. During the year ended December 31, 2008, we recorded recoveries of $17.5 million of which $2.7 million, $11.4 million, and $3.4 million were recorded during the second, third, and fourth quarters of 2008, respectively. For 2008, recoveries totaled $17.5 million, resulting in a net provision of $5.8 million as of December 31, 2008. During the six months ended June 30, 2009, we recorded recoveries of $0.7 million. We do not expect to recognize significant further recoveries of the impacted materials.

Customer Settlement

        We settled a dispute with a customer in September 2007 regarding intermediate material manufactured by us, which is used by this customer in their manufacturing process. We recorded a charge to cost of goods sold of $7.9 million during the year ended December 31, 2007 for inventory impairment related to this material, which we recovered in its entirety during 2008 as the related material was determined to be saleable, converted into final product, and sold to other customers. During 2008, we recorded an additional inventory impairment provision of $2.6 million related to this dispute for products held in Europe, for which we recovered $0.8 million and $1.8 million during the six months ended June 30, 2009 and the year ended December 31, 2008, respectively, as the impacted material was determined to be saleable, converted into final product, and sold to other customers. As a result of this customer settlement, we increased production of PPF powder and experienced a change in product sales mix from albumin to PPF powder during 2008.

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Transition-Related Activities

        We incurred costs associated with the development of our internal capabilities to operate as a standalone company apart from Bayer, which we refer to as transition and other non-recurring costs, which was completed in 2007. These costs related primarily to consulting services associated with the development of an internal infrastructure to assume international sales and marketing, customer service, contract administration and government price reporting, human resources, finance, information technology, regulatory, and compliance functions. We incurred transition and other non-recurring costs of $15.3 million and $73.2 million for the years ended December 31, 2007 and 2006, respectively.

Unplanned Plant Maintenance

        During November 2007, we shut down portions of our Clayton, North Carolina facility for approximately two weeks consistent with our cGMP operating practices for unplanned maintenance. As a result of the unplanned maintenance, we recorded a charge to cost of goods sold of $10.0 million during the year ended December 31, 2007, primarily related to unabsorbed production costs, which would have otherwise been capitalized to inventories. There was no impact on the carrying value of inventories.

Gamunex IGIV Production Incident

        In March 2005, prior to our formation as Talecris, a production incident occurred at our Clayton, North Carolina facility, which resulted in a write-off of Gamunex IGIV that had elevated levels of IgM antibodies. We recorded an impairment charge of $11.5 million to cost of goods sold for the nine months ended December 31, 2005 as a result of this incident for quantities of Gamunex IGIV which were processed post-acquisition. During March 2007, we reached an agreement with Bayer under which we recovered $9.0 million related to this production incident which we recorded as a reduction of cost of goods sold during the year ended December 31, 2007.

Management Fee

        We have a Management Agreement, as amended, with Cerberus-Plasma Holdings LLC and an affiliate of Ampersand Ventures. Under the terms of this agreement, we are charged a management fee equal to 0.5% of net sales for advisory services related to a number of topics, including strategy, acquisition, financing and operational matters. We incurred management fees related to this agreement of $6.9 million, $6.1 million, and $5.6 million for the years ended December 31, 2008, 2007, and 2006, respectively, and $3.8 million and $3.1 million for the six months ended June 30, 2009 and 2008, respectively, which are included in SG&A. These costs are non-recurring and will be eliminated upon termination of the Management Agreement, as amended, which occurred in connection with this offering. The Management Agreement had been amended to waive an IPO Fee related to the termination of this agreement.

Capital Structure

        We established an independent capital structure upon our formation on March 31, 2005, which consisted of a $400.0 million five-year asset-based credit facility, $27.8 million of 12% Second Lien Notes, and $90.0 million of 14% Junior Secured Convertible Notes. On March 30, 2006, we entered into a Fourth Amendment to our $400.0 million asset-based credit facility, which provided for an additional $40.0 million term loan.

        On December 6, 2006, we completed a debt recapitalization transaction in which we repaid and retired all outstanding principal and interest amounts owed under our then existing $440.0 million asset-based credit facility, as amended, with new facilities aggregating $1.355 billion in total borrowing availability. In connection with the recapitalization, we also repaid and retired all outstanding principal and interest amounts owed to Cerberus and Ampersand under our then existing 12% Second Lien Notes.

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Further, on December 6, 2006, we paid accrued interest of $23.4 million owed to Talecris Holdings, LLC under the terms of our then existing 14% Junior Secured Convertible Notes and, at the election of Talecris Holdings, LLC, converted them into 900,000 shares of Redeemable Series A Senior Convertible Preferred Stock (series A preferred stock). As a result of the recapitalization transaction, our interest expense has significantly increased in periods subsequent to December 6, 2006.

Share-Based Compensation Awards

        We have granted options, restricted share awards, and unrestricted share awards of our common stock to certain officers, employees, and members of our board of directors, pursuant to the 2005 Stock Option and Incentive Plan and the 2006 Restricted Stock Plan, both of which were terminated and replaced by the 2009 Long-Term Incentive Plan in connection with this offering. The 2006 restricted and unrestricted share awards were granted in lieu of cash as part of our special recognition bonuses discussed below. The following tables summarize expenses associated with our share-based compensation programs:

 
  Six Months Ended
June 30,
  Years Ended December 31,  
Stock Options
  2009   2008   2008   2007   2006  

SG&A

  $ 11,745   $ 11,000   $ 24,237   $ 12,103   $ 1,894  

R&D

    912     761     1,826     860     194  
                       

Total operating expenses

    12,657     11,761     26,063     12,963     2,088  

Cost of goods sold

    2,052     615     1,829     948     156  
                       

Total expense

  $ 14,709   $ 12,376   $ 27,892   $ 13,911   $ 2,244  
                       

Stock options outstanding at end of period

    14,287,808     14,431,968     14,278,416     12,932,344     10,454,424  

 

 
  Six Months Ended
June 30,
  Years Ended December 31,  
Restricted and Unrestricted Share Awards
  2009   2008   2008   2007   2006  

SG&A

  $ 4,705   $ 4,716   $ 9,543   $ 6,509   $ 4,350  

R&D

    267     267     535     536     45  
                       

Total operating expenses

    4,972     4,983     10,078     7,045     4,395  

Cost of goods sold

    490     308     737     285      
                       

Total expense

  $ 5,462   $ 5,291   $ 10,815   $ 7,330   $ 4,395  
                       

Restricted and unrestricted share awards outstanding at end of period

    2,636,048     2,863,384     2,856,288     3,171,000     2,426,792  

        The stock options granted to employees typically have service-based and performance-based components. Stock options granted to non-employee directors and restricted share awards are service-based only. The service-based component vests (and we record compensation cost) in equal amounts over the vesting period. The performance-based component of the stock options vests annually upon the achievement of corporate performance objectives, which are established by our board of directors. We make assessments as to whether the performance conditions related to the performance-based stock options will be achieved and recognize compensation cost based upon this probability assessment.

        In accordance SFAS No. 123R, we initially value share-based compensation at the stock option grant date using a fair value model and subsequently recognize this amount as expense over the employees' requisite service periods. Under SFAS No. 123R, we are required to calculate the fair value of the performance-based component whenever our board of directors approves or modifies the factors that influence the vesting of the performance-based component (e.g., approve annual corporate performance objectives).

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        In addition to incremental share-based compensation cost associated with stock option and restricted share awards granted during the periods presented, the following actions by the compensation committee of our board of directors have impacted the comparability of our share-based compensation cost throughout the periods presented:

    During the second quarter of 2008, the compensation committee amended the exercise price of 570,400 stock options outstanding to certain employees from $21.25 per share to $11.00 per share and during the second quarter of 2008, the compensation committee also amended the exercise price of 17,152 stock options outstanding to certain members of our board of directors from $21.25 per share to $11.00 per share. The stock options that were re-priced were granted during 2007.

    During the first quarter of 2008, the board of directors revised the 2008 corporate objectives related to the performance-based component of stock options scheduled to vest on April 1, 2009. In addition, during the second quarter of 2008, we began recognizing compensation cost related to the performance-based component of stock options scheduled to vest on April 1, 2010 based on our probability assessment of achieving the related performance objectives.

    During the third quarter of 2007, the compensation committee approved an amendment to the 2005 Stock Option and Incentive Plan in which the percentage of options vesting based on performance targets was changed from 65% to 35% and the percentage of options vesting based on service was changed from 35% to 65% for options scheduled to vest on April 1 of 2009 and 2010.

    During the third quarter of 2007, the compensation committee approved the 2008 and 2009 corporate objectives related to the performance-based component of stock options scheduled to vest on April 1 of 2009 and 2010. The objectives related to the performance-based component of the stock options scheduled to vest on April 1, 2009 were subsequently modified during the first quarter of 2008 as indicated above.

    During the first quarter of 2007, the compensation committee approved the 2007 corporate objectives related to the performance-based component of stock options scheduled to vest on April 1, 2008.

        At June 30, 2009, the remaining estimated unrecognized compensation cost related to unvested stock options was approximately $23.7 million, which we expect to recognize over a weighted average period of approximately 1.14 years, and the remaining estimated unrecognized compensation cost related to our restricted stock awards was approximately $12.4 million, which we expect to recognize over a weighted average period of approximately 0.80 years. The amount of share-based compensation expense that we will ultimately be required to record could change in the future as a result of additional grants, changes in the fair value of shares for performance-based options, differences between our anticipated forfeiture rate and the actual forfeiture rate, the probability of achieving targets established for performance share vesting, and other actions by our compensation committee of our board of directors (e.g., establishment of future period's corporate performance objectives).

        Additional information regarding our share-based compensation plans is included in the section above titled, "—Critical Accounting Policies and Estimates—Share-Based Compensation," and the footnotes to our consolidated financial statements appearing at the end of this prospectus.

Special Recognition Bonuses

        In October 2006, the compensation committee of our board of directors approved a special recognition bonus program which granted awards totaling $7.3 million to eligible employee and board of director stockholders related to the $73.2 million dividend declared in December 2005, payable in five installments (adjusted for forfeitures), which we have funded and will continue to fund through operations. In December 2006, the compensation committee of our board of directors approved a cash recognition award of $57.2 million to eligible employee and board of director stockholders, payable in four installments

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(adjusted for forfeitures), concurrently with a cash dividend of $760.0 million paid to Talecris Holdings, LLC, our principal stockholder. The December 2006 cash recognition award and the dividend to Talecris Holdings, LLC were funded by our December 6, 2006 debt recapitalization transaction. We funded an irrevocable trust for $23.0 million related to the December 2006 award, which has been and will continue to be used to fund the annual payments under this award through 2010. The following table summarizes expenses associated with these bonuses:

 
  Six Months Ended
June 30,
  Years Ended
December 31,
 
 
  2009   2008   2008   2007   2006  

SG&A

  $ 2,432   $ 2,606   $ 4,948   $ 6,431   $ 29,849  

R&D

    320     330     615     796     3,395  
                       

Total operating expenses

    2,752     2,936     5,563     7,227     33,244  

Cost of goods sold

    611     467     1,059     940     4,647  
                       

Total expense

  $ 3,363   $ 3,403   $ 6,622   $ 8,167   $ 37,891  
                       

        At June 30, 2009, the remaining unrecognized compensation cost associated with these bonuses was $4.7 million, which we expect to recognize through March 2010.

        During the six months ended June 30, 2009 and the years ended December 31, 2008, 2007, and 2006, we made special recognition bonus payments related to the October 2006 bonus award totaling approximately $0.9 million, $1.2 million, $1.2 million, and $2.5 million, respectively. The balance of the award, totaling approximately $0.9 million, will be paid in March 2010, adjusted for employee forfeitures. During the six months ended June 30, 2009 and the years ended December 31, 2008 and 2006, we made special recognition bonus payments related to the December 2006 award totaling approximately $6.0 million, $7.4 million, and $34.2 million, respectively. The balance of the award, totaling approximately $6.0 million, will be paid in March 2010, adjusted for employee forfeitures, from the irrevocable trust. No similar cash recognition awards are currently contemplated.

        Additional information regarding our special recognition bonus awards is included in the footnotes to our consolidated financial statements included elsewhere in this prospectus.

Litigation Settlement

        We were a co-plaintiff along with Bayer Healthcare (Bayer) in patent litigation in the United States District Court for the District of Delaware against Baxter International Inc. and Baxter Healthcare Corporation (collectively, Baxter). In this case, filed in 2005, we, as exclusive licensee of Bayer's U.S. Patent No. 6,686,191 (the '191 patent), alleged that Baxter by its manufacture and importation of its liquid IGIV product, Gammagard Liquid, had infringed the '191 patent. We entered into a Settlement Agreement with Baxter on August 10, 2007. Under the terms of the settlement (i) Baxter paid us $11.0 million, (ii) Baxter will pay us for a period of four years from the settlement date an amount comprising 1.2% of Baxter's net sales in the United States of Gammagard Liquid and any other product sold by Baxter or an affiliate in the United States under a different brand name that is a liquid intravenous immunoglobulin, (iii) Baxter provided approximately 2,000 kilograms of Fraction IV-I paste with specifications as per the settlement agreement (fair value of $1.8 million determined by reference to similar raw material purchases we have made in the past as well as current market conditions), and (iv) we will grant Baxter certain sublicense rights in the '191 patent and its foreign counterparts.

        We incurred legal fees related to this litigation of $5.7 million and $5.2 million during the years ended December 31, 2007 and 2006, respectively, which were recorded within SG&A in our consolidated income statements. During the year ended December 31, 2007, we recorded $12.9 million related to the settlement as other non-operating income in our consolidated income statement. We recorded $8.7 million and

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$1.7 million of fees during the years ended December 31, 2008 and 2007, respectively, and $5.4 million and $4.1 million of fees for the six months ended June 30, 2009 and 2008, respectively, from Baxter within other net revenue in our consolidated income statements.

Income Taxes

        We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized in accordance with SFAS No. 109. In assessing the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies. As a result of our analysis, during the third quarter of 2007 we concluded that it was more likely than not that our deferred tax assets would be realized. The release of the remaining valuation allowance related to our deferred tax assets resulted in a $48.2 million non-cash tax benefit during the year ended December 31, 2007. During the year ended December 31, 2006 and the first three quarters of 2007, we also realized a portion of our deferred tax assets equal to the amount of our current Federal income tax provision.

Acquisition of Bayer Plasma Net Assets and Related Purchase Accounting

        We acquired certain net assets from Bayer Plasma on March 31, 2005 in connection with our overall formation activities. In connection with our application of purchase accounting to the transaction, we recorded property, plant, equipment, and all other intangible assets at zero value because of the negative goodwill that resulted from the transaction. Consequently, we have experienced higher depreciation and amortization expense in each period subsequent to our formation as we have increased the net book value of our property, plant, equipment, and all other intangibles from zero value at March 31, 2005 to $237.8 million at June 30, 2009 through capital expenditures and business acquisitions. Our results of operations include depreciation and amortization expense of $20.3 million, $10.7 million, and $5.0 million for the years ended December 31, 2008, 2007, and 2006, respectively, and $13.9 million and $8.5 million for the six months ended June 30, 2009 and 2008, respectively. Depreciation and amortization expense for all periods presented is recorded primarily within cost of goods sold.

Distribution and Transition Services Agreements with Bayer Affiliates

        We entered into a number of transition services and international distribution agreements with Bayer affiliates in conjunction with our overall formation activities. Under these agreements, Bayer affiliates provided a number of services related to operational support, information technology, and product packaging, labeling, testing, and distribution. We have since terminated these agreements as we have developed and implemented capabilities to provide these activities ourselves, or in certain cases, contracted with third parties.

        Under the terms of our transition services agreements with Bayer, which were primarily general and administrative in nature, Bayer affiliates provided us with various services related to operational support for finance, human resources, information technology, sales and customer support, regulatory, research and development, clinical, procurement, and logistics functions. Total fees under transition services agreements were $23.5 million for the year ended December 31, 2006, which have been charged to the appropriate categories in our consolidated income statement based upon the nature of the services provided. During the year ended December 31, 2006, we provided Bayer with services related to operations such as collections, facilities use, pre-clinical, pathogen safety, and clinical support, for which we recognized fees totaling $1.2 million within other net revenue in our consolidated income statement.

        Under the terms of certain international distribution agreements with Bayer, we agreed to reimburse Bayer affiliates for their SG&A. These reimbursements totaled $0.9 million and $17.0 million for the years ended December 31, 2007 and 2006, respectively, which we recorded as a reduction of net revenue in our

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consolidated income statements. We currently have agreements with other non-Bayer international distributors in which we reimburse them for certain SG&A. Reimbursements under these agreements have not been material.

        Under the terms of certain international distribution agreements with Bayer affiliates, we were obligated to repurchase inventories from Bayer affiliates upon termination of such agreements, if Bayer so elected. During the year ended December 31, 2006, we repurchased inventories with a value of $6.2 million and $15.8 million from Bayer affiliates in Canada and Germany, respectively, and during the year ended December 31, 2007, we repurchased inventories with a value of $81.9 million from a Bayer affiliate in Germany. We repurchased the remaining inventories with a value of approximately $28.6 million from a Bayer affiliate in Germany during 2008.

Results of Operations

        We have included information regarding our results of operations in the following table. The subsequent discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations. You are encouraged to read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related footnotes appearing at the end of this prospectus. Additional information regarding significant matters affecting the comparability of our results of operations is included in the section titled, "—Matters Affecting Comparability."

 
  Six Months Ended
June 30,
  Years Ended December 31,  
 
  2009   2008   2008   2007   2006  

Net revenue:

                               
 

Product net revenue

  $ 734,979   $ 603,645   $ 1,334,550   $ 1,196,686   $ 1,114,489  
 

Other

    12,386     18,743     39,742     21,823     14,230  
                       

Total net revenue

    747,365     622,388     1,374,292     1,218,509     1,128,719  
 

Cost of goods sold

    433,209     416,505     882,157     788,152     684,750  
                       

Gross profit

    314,156     205,883     492,135     430,357     443,969  

Operating expenses:

                               
 

SG&A

    134,425     95,529     227,524     189,387     241,448  
 

R&D

    35,561     30,083     66,006     61,336     66,801  
                       

Total operating expenses

    169,986     125,612     293,530     250,723     308,249  
                       

Income from operations

    144,170     80,271     198,605     179,634     135,720  

Other non-operating (expense) income:

                               
 

Interest expense, net

    (41,858 )   (48,645 )   (97,040 )   (110,236 )   (40,867 )
 

Merger termination fee

    75,000                  
 

Equity in earnings of affiliate

    184     150     426     436     684  
 

Litigation settlement

                12,937      
 

Loss on extinguishment of debt

                    (8,924 )
 

Other

        400     400          
                       

Total other non-operating income (expense), net

    33,326     (48,095 )   (96,214 )   (96,863 )   (49,107 )
                       

Income before income taxes and extraordinary items

    177,496     32,176     102,391     82,771     86,613  

(Provision) benefit for income taxes

    (60,789 )   (13,137 )   (36,594 )   40,794     (2,222 )
                       

Income before extraordinary items

    116,707     19,039     65,797     123,565     84,391  

Extraordinary items

                    2,994  
                       

Net income

  $ 116,707   $ 19,039   $ 65,797   $ 123,565   $ 87,385  
                       

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Primary Revenue and Expense Components

        The following is a description of the primary components of our revenue and expenses:

    Product net revenue—Our product net revenue is presented net of allowances for estimated discounts, rebates, administrative fees, chargebacks and sales allowances. Our product net revenue is also presented net of SG&A reimbursements to certain international distributors.

    Other net revenue—Our other net revenue primarily consists of royalties under our collaborative agreements, fees related to our settlement with Baxter, milestone revenues, and revenue associated with other third party contract manufacturing agreements.

    Cost of goods sold—Our cost of goods sold includes material costs for the products we sell, which primarily consists of plasma and other costs associated with the manufacturing process, such as personnel costs, utilities, consumables, and overhead. In addition, our cost of goods sold includes packaging costs and distribution expenses. The most significant component of our cost of goods sold is plasma, which is the common raw material for our primary products, and represents approximately half of our cost of goods sold for the periods presented. Due to our long manufacturing cycle times, which range from 100 days to in excess of 400 days, the cost of plasma is not expensed through cost of goods sold until a significant period of time subsequent to its acquisition. Specialty plasmas, due to their nature, can often have cycle times in excess of one year.

    Gross profit—Our gross profit is impacted by the volume, pricing and mix of product net revenue, including the geographic location of sales, as well as the related cost of goods sold. Our profitability is significantly impacted by the efficiency of our utilization of plasma including, but not limited to, the production yields we obtain, the product reject rates that we experience, and the product through-put that we achieve.

    SG&A—Our SG&A consists primarily of salaries and related employee benefit costs for personnel in executive, sales and marketing, finance, information technology, human resources, and other administrative functions, as well as fees for professional services, facilities costs, and other general and administrative costs.

    R&D—Our R&D includes the costs directly attributable to the conduct of research and development programs for new products and life cycle management. Such costs include salaries and related employee benefit costs; materials (including the material required for clinical trials); supplies; depreciation on and maintenance of R&D equipment; various services provided by outside contractors related to clinical development, trials and regulatory services; and the allocable portion of facility costs such as rent, depreciation, utilities, insurance and general support services. R&D expenses are influenced by the number and timing of in-process projects and the nature of expenses associated with these projects.

    Interest expense, net—Interest expense, net, consists of interest expense incurred on outstanding debt and derivative financial instruments and amortization of debt issuance costs, offset by interest income and capitalized interest associated with the construction of plant and equipment. The amount of interest expense, net, that we incur is predominantly driven by our outstanding debt levels, derivative financial instruments, and associated interest rates.

    Income tax (provision) benefit—Our income tax (provision) benefit includes United States Federal, state, local and foreign income taxes, and is based on reported pre-tax income.

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Six Months Ended June 30, 2009 as Compared to Six Months Ended June 30, 2008

        The following table contains information regarding our results of operations for the six months ended June 30, 2009 as compared to the six months ended June 30, 2008:

 
  Six Months Ended
June 30,
  Percent of Total
Net Revenue
 
 
  2009   2008   2009   2008  

Net revenue:

                         
 

Product net revenue

  $ 734,979   $ 603,645     98.3 %   97.0 %
 

Other

    12,386     18,743     1.7 %   3.0 %
                   

Total net revenue

    747,365     622,388     100.0 %   100.0 %

Cost of goods sold

    433,209     416,505     58.0 %   66.9 %
                   

Gross profit

    314,156     205,883     42.0 %   33.1 %

Operating expenses:

                         
 

SG&A

    134,425     95,529     18.0 %   15.3 %
 

R&D

    35,561     30,083     4.7 %   4.8 %
                   

Total operating expenses

    169,986     125,612     22.7 %   20.1 %
                   

Income from operations

    144,170     80,271     19.3 %   13.0 %

Other non-operating (expense) income:

                         
 

Interest expense, net

    (41,858 )   (48,645 )   (5.6 )%   (7.8 )%
 

Merger termination fee

    75,000         10.0 %    
 

Equity in earnings of affiliate

    184     150          
 

Other

        400          
                   

Total other non-operating income (expense), net

    33,326     (48,095 )   4.4 %   (7.8 )%
                   

Income before income taxes

    177,496     32,176     23.7 %   5.2 %

Provision for income taxes

    (60,789 )   (13,137 )   (8.1 )%   (2.1 )%
                   

Net income

  $ 116,707   $ 19,039     15.6 %   3.1 %
                   

Net Revenue

        The following table contains information regarding our net revenue:

 
  Six Months Ended
June 30,
  Percent of Total
Net Revenue
 
 
  2009   2008   2009   2008  

Product net revenue:

                         
 

Gamunex IGIV

  $ 411,458   $ 290,446     55.1 %   46.7 %
 

Prolastin A1PI

    149,380     157,713     20.0 %   25.3 %
 

Albumin

    38,429     26,034     5.1 %   4.2 %
 

Other

    135,712     129,452     18.1 %   20.8 %
                   

Total product net revenue

    734,979     603,645     98.3 %   97.0 %
 

Other net revenue

    12,386     18,743     1.7 %   3.0 %
                   

Total net revenue

  $ 747,365   $ 622,388     100.0 %   100.0 %
                   

United States

  $ 497,089   $ 403,425     66.5 %   64.8 %

International

    250,276     218,963     33.5 %   35.2 %
                   

Total net revenue

  $ 747,365   $ 622,388     100.0 %   100.0 %
                   

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        Our product net revenue was $735.0 million for the six months ended June 30, 2009 as compared to $603.6 million for the six months ended June 30, 2008, representing an increase of $131.4 million, or 21.8%. The increase consisted of higher volumes of $103.3 million and improved pricing of $28.1 million, net of foreign exchange losses of $9.9 million. Our other net revenue, which consists of royalties and licensing fees, milestones, and other third party contract manufacturing revenue, decreased $6.4 million. This decrease was primarily driven by the recognition of $1.9 million of previously deferred revenue during the first half of 2008 as a result of the termination of a licensed technology agreement with an unaffiliated third party, as well as lower royalties and contract manufacturing revenue as compared to the 2008 period.

        The $121.0 million increase in our Gamunex IGIV product net revenue consisted of higher volumes of $96.9 million and improved pricing of $24.1 million, net of foreign exchange losses of $2.2 million. We experienced higher Gamunex IGIV volumes of $100.9 million, in the U.S., Europe, and other international regions, which were partially offset by lower volumes of $4.0 million in Canada. We experienced improved Gamunex IGIV pricing of $26.0 million, in the U.S., Canada, and other international regions. We experienced lower pricing of $1.9 million in Europe primarily due to $2.2 million of foreign exchange loss. We continue to experience strong demand for Gamunex IGIV globally. However, the $96.9 million increase in Gamunex IGIV volumes also reflects pent up demand due to our supply constraints in prior periods. The impact of this pent up demand is not likely to continue, which could impact our comparative profitability and margins in future periods. The industry supply of plasma has increased, resulting in a more balanced level of IGIV supply and demand. As a result, the supply of IGIV inventory has been increasing throughout the distribution channel from the previous low levels.

        The $8.3 million decrease in our Prolastin A1PI product net revenue consisted of lower pricing of $7.1 million and lower volumes of $1.2 million. The decrease in Prolastin A1PI pricing was primarily driven by foreign exchange loss of $7.6 million in Europe and pricing adjustments of $2.6 million in Canada related to a pricing dispute. The decrease in Prolastin A1PI volumes was primarily driven by lower volumes largely as a result of patient attrition. Prolastin A1PI volumes are largely a function of our ability to identify and enroll new patients compared to the number of patients lost due to attrition and competition. Our European growth will also depend upon our ability to obtain appropriate reimbursement on a country by country basis.

        The $12.4 million increase in our albumin product net revenue consisted of higher volumes of $10.2 million and improved pricing of $2.2 million. During 2008, our albumin volumes were negatively impacted by a change in production mix to PPF powder from albumin as a result of the settlement of a customer dispute as discussed further in the section titled, "—Matters Affecting Comparability—Customer Settlement." This change in production mix resulted in lower quantities of albumin available for sale during 2008.

        Our other product net revenue increased $6.3 million during the six months ended June 30, 2009 as compared to the prior year. Our other product net revenue consists primarily of revenue related to the Canadian blood system, where in addition to commercial sales of Gamunex IGIV, we have toll manufacturing contracts with the two national Canadian blood system operators, Canadian Blood Services and Hema Quebec, as well as sales of Koate DVI Factor VIII (human), hyperimmunes, intermediate products, Thrombate III Antithrombin III (human), and PPF powder.

        Our other product net revenue was favorably impacted by improved volume and pricing of $7.5 million and $1.5 million, respectively, related to intermediate products, such as cryoprecipitate. Our other product net revenue was also favorably impacted by increased sales of Koate DVI Factor VIII (human) of $4.1 million, primarily as a result of higher pricing in the U.S. and other international regions (excluding Canada and Europe). Our other product net revenue was negatively impacted by lower PPF powder sales of $7.5 million during the first half of 2009 as compared to the same prior year period. During 2008, we experienced higher PPF powder sales as a result of the settlement of a customer dispute as discussed further in the section titled, "—Matters Affecting Comparability—Customer Settlement."

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        We increased prices for several of our products in most of our geographic regions as a result of higher costs and generally increasing demand. Our product net revenue was negatively impacted by $9.9 million, or 1.3%, as a result of unfavorable foreign exchange rate fluctuations in relation to the U.S. dollar during the six months ended June 30, 2009 as compared to the six months ended June 30, 2008.

        As a result of our internal investigations related to potential Foreign Corrupt Practices Act violations, we have suspended shipments to affected countries while we put additional safeguards in place. We have also terminated one consultant and suspended relations with other distributors and consultants in countries under investigation while we gather further facts and implement safeguards. As a result, we expect that our revenues from affected regions will decline in the short term while we either revise our business relationships or establish new distribution channels in the impacted markets or expand our sales in other international regions.

Cost of Goods Sold and Gross Profit

        Our gross profit was $314.2 million for the six months ended June 30, 2009 as compared to $205.9 million for the six months ended June 30, 2008, representing gross margins of 42.0% and 33.1%, respectively. Our gross profit is impacted by the volume, pricing, and mix of our product net revenue as discussed above, as well as the related cost of goods sold as discussed below. The net impact of these items resulted in substantially higher gross margins during the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. In general, our gross margins and cost of goods sold are impacted by the volume and pricing of our finished product, our raw material costs, production mix, and cycle times, as well as our production capacities and normal production shut-downs, and the timing and amount of release of finished product.

        Our cost of goods sold was $433.2 million, or 58.0% of net revenues, for the six months ended June 30, 2009 as compared to $416.5 million, or 66.9% of net revenues, for the six months ended June 30, 2008. The decrease in cost of goods sold as a percent of net revenues during the 2009 period was attributable primarily to lower inventory impairment provisions of $19.1 million, lower TPR unabsorbed infrastructure and start-up costs of $26.5 million, and the relatively fixed nature of factory overhead and certain other production costs, resulting in operating leverage as revenues increased in the 2009 period.

        Unabsorbed TPR infrastructure and start-up costs amounted to $25.4 million and $51.9 million for the six months ended June 30, 2009 and 2008, respectively, representing approximately 3.4% and 8.3%, respectively, of our net revenue. Until our plasma collection centers reach normal operating capacity, we charge unabsorbed overhead costs directly to cost of goods sold. Our cost of goods sold for the six months ended June 30, 2009 benefited from lower unabsorbed TPR infrastructure and start-up costs, which resulted from higher plasma volumes collected at our plasma collection centers and improved center labor efficiencies as well as lower support costs. Unabsorbed TPR infrastructure and start-up costs during the six months ended June 30, 2008 were negatively impacted by costs associated with the expansion of our plasma collection center platform and the costs associated with remediation efforts in certain plasma collection centers. We anticipate that we will continue to experience improving levels of under-absorbed TPR infrastructure and start-up costs with the maturation of our plasma collection center platform.

        Our inventory impairment provisions, net of recoveries, were $16.1 million and $35.0 million for the six months ended June 30, 2009 and 2008, respectively, representing a decrease of $18.9 million. During the six months ended June 30, 2008, we recorded an inventory impairment charge of $23.3 million due to deviations from our standard operating procedures and cGMP at one of our plasma collection centers, for which we recovered $2.7 million during the second quarter of 2008, as discussed further in the section titled, "—Matters Affecting Comparability—Plasma Center cGMP Issue."

        The beneficial effects of the foregoing were partially offset by higher costs of production and costs associated with the increase in production volumes, which aggregated $62.3 million, net of foreign exchange benefit of $7.7 million. In addition, our acquisition cost of plasma per liter, excluding the impact of TPR unabsorbed infrastructure and start-up costs, increased 2.4% during the six months ended June 30, 2009 as compared to the six months ended June 30, 2008. Due to our long manufacturing cycle times, which range from 100 days to in excess of 400 days, the cost of plasma is not expensed through cost of goods sold until a significant period of time subsequent to its acquisition.

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Operating Expenses

        Our SG&A was $134.4 million for the six months ended June 30, 2009 as compared to $95.5 million for the six months ended June 30, 2008, representing an increase of $38.9 million, or 40.7%. As a percentage of net revenue, SG&A was 18.0% and 15.3% for the six months ended June 30, 2009 and 2008, respectively. Our SG&A during the 2009 period was negatively impacted by higher sales and marketing expenses of $12.4 million, primarily driven by costs associated with the launch of our Gamunex CIDP indication, as well as support costs for other products and higher donations of $3.2 million to patient support groups. Our SG&A was also adversely affected by higher costs associated with our terminated merger agreement with CSL of $8.8 million, of which $5.2 million were incremental costs associated with the regulatory review process and $3.6 million were retention expenses. Further, our SG&A was negatively impacted by severance expenses of $2.3 million during the six months ended June 30, 2009. Our SG&A was also negatively impacted by higher bad debt provisions of $2.1 million during the six months ended June 30, 2009 for certain international customers. During the six months ended June 30, 2008, our SG&A benefited by $5.4 million as a result of favorable euro/dollar exchange rates as compared to a benefit of $0.3 million during the six months ended June 30, 2009. In order to pursue our strategy of expanding market share and growing revenues, we began a material increase of the size of our U.S. sales force in the third quarter of 2009. We expect the sales force increase to result in a material increase in our sales and marketing expense. We entered into an amended and restated employment agreement with our Chairman and Chief Executive Officer which included accelerating the vesting of options to purchase 1,008,000 shares of our common stock at an exercise price of $21.25 per common share to August 19, 2009. The acceleration of these options will result in the recognition of non-cash charges of approximately $11.8 million of compensation expense in the third quarter of 2009.

        We have suspended relationships with certain international distributors and agents as a result of our internal investigations related to potential Foreign Corrupt Practices Act violations. As of August 31, 2009, we have approximately $11.6 million of accounts receivable, net, outstanding with customers related to this matter. If we determine that we may be unable to collect some, or all, of these receivables, we would record a provision for doubtful accounts receivable within SG&A in the period in which we determine that collection was unlikely or that the amounts that may be collected would be less than the amounts due.

        Our R&D was $35.6 million for the six months ended June 30, 2009 as compared to $30.1 million for the six months ended June 30, 2008, representing an increase of $5.5 million, or, 18.3%. As a percentage of net revenue, R&D was 4.7% and 4.8% for the six months ended June 30, 2009 and 2008, respectively. Research and development expenses are influenced by the timing of in-process projects and the nature and extent of expenses associated with these projects. Our current research and development consists of a range of programs that aim to obtain new therapeutic indications for existing products, enhance product delivery, improve concentration and safety, and increase product yields. Our current R&D activities continue to support, among other things, the development of Gamunex IGIV for subcutaneous administration, Prolastin Alpha-1 aerosol studies, and Plasmin studies for aPAO and ischemic stroke. We anticipate that R&D expenses will increase in subsequent periods as we increase process development for plasma-derived and recombinant proteins and as we increase clinical trial activities. These activities include the launch of Phase IV post-marketing Prolastin Alpha-1 MP clinical trials which we expect to cost approximately $18 million during the next three years.

Non-Operating Income (Expense), Net

        Our non-operating income (expense), net, includes interest expense, net, which amounted to $41.9 million and $48.6 million for the six months ended June 30, 2009 and 2008, respectively. Our weighted average interest rates on our outstanding debt were 5.5% and 7.9% for the six months ended June 30, 2009 and 2008, respectively, which resulted in a lower cost of borrowing during the first half of 2009 as compared to the first half of 2008, despite higher average debt levels during 2009. The benefit of the lower cost of borrowing during 2009 was partially mitigated by higher interest expense of $4.1 million

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under our interest rate swaps as compared to 2008, as a result of falling three-month LIBOR rates as compared to our fixed swap rates. At June 30, 2009, our interest rate swaps and caps hedged approximately 55.6% of our total borrowings. Our non-operating income, net, for the six months ended June 30, 2009 also includes $75.0 million related to the merger termination fee discussed previously.

        We intend to use the net proceeds to us from this initial public offering of our common stock to repay amounts owed under our First and Second Lien Term Loans in the aggregate amount of $514.8 million. As a result of these principal prepayments, we will be required to write off a portion of our unamortized debt issuance costs associated with our First and Second Lien Term Loans, which we estimate will be approximately $6.2 million. Any unamortized amounts written off will be recorded within non-operating expense, net, in our consolidated income statement.

Income Taxes

        Our income tax expense was $60.8 million and $13.1 million for the six months ended June 30, 2009 and 2008, respectively, resulting in effective income tax rates of 34.2% and 40.8%, respectively.

        For the six months ended June 30, 2009, our effective income tax rate is slightly lower than the U.S. statutory Federal income tax rate, primarily due to credits for Federal Research and Experimentation and orphan drug clinical testing expenditures and the deduction of previously capitalized transaction costs related to our terminated merger agreement with CSL. These factors offset the effect of state taxes.

        For the six months ended June 30, 2008, our effective income tax rate is higher than the U.S. statutory Federal income tax rate due to state tax expense, net of Federal benefit.

        At June 30, 2009, our total gross unrecognized tax benefits were approximately $12.9 million, of which approximately $9.4 million would reduce our effective income tax rate if recognized.

        We have not provided for U.S. Federal income and foreign withholding taxes on our non-U.S. subsidiaries' cumulative undistributed earnings of approximately $9.0 million as of June 30, 2009 as such earnings are intended to be reinvested outside of the U.S. indefinitely. It is not practical to estimate the amount of tax that might be payable if some or all of such earnings were to be remitted, and foreign tax credits would be available to reduce or eliminate the resulting U.S. income tax liability.

Net Income

        Our net income was $116.7 million (including the merger termination fee of $75.0 million) and $19.0 million for the six months ended June 30, 2009 and 2008, respectively. The significant factors and events contributing to the change in our net income are discussed above.

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Year Ended December 31, 2008 as Compared to Year Ended December 31, 2007

        The following table contains information regarding our results of operations for the year ended December 31, 2008 as compared to the year ended December 31, 2007:

 
  Years Ended
December 31,
  Percent of Total
Net Revenue
 
 
  2008   2007   2008   2007  

Net revenue:

                         
 

Product net revenue

  $ 1,334,550   $ 1,196,686     97.1 %   98.2 %
 

Other

    39,742     21,823     2.9 %   1.8 %
                   

Total net revenue

    1,374,292     1,218,509     100.0 %   100.0 %

Cost of goods sold

    882,157     788,152     64.2 %   64.7 %
                   

Gross profit

    492,135     430,357     35.8 %   35.3 %

Operating expenses:

                         
 

SG&A

    227,524     189,387     16.6 %   15.5 %
 

R&D

    66,006     61,336     4.8 %   5.0 %
                   

Total operating expenses

    293,530     250,723     21.4 %   20.5 %
                   

Income from operations

    198,605     179,634     14.4 %   14.8 %

Other non-operating (expense) income:

                         
 

Interest expense, net

    (97,040 )   (110,236 )   (7.1 )%   (9.1 )%
 

Equity in earnings of affiliate

    426     436          
 

Litigation settlement

        12,937         1.1 %
 

Other

    400              
                   

Total other non-operating expense, net

    (96,214 )   (96,863 )   (7.1 )%   (8.0 )%
                   

Income before income taxes

    102,391     82,771     7.3 %   6.8 %

(Provision) benefit for income taxes

    (36,594 )   40,794     (2.7 )%   3.3 %
                   

Net income

  $ 65,797   $ 123,565     4.6 %   10.1 %
                   

        The following table contains information regarding our net revenue:

 
  Years Ended
December 31,
  Percent of Total
Net Revenue
 
 
  2008   2007   2008   2007  

Product net revenue:

                         
 

Gamunex IGIV

  $ 677,737   $ 646,779     49.4 %   53.1 %
 

Prolastin brand A1PI

    316,495     276,538     23.0 %   22.7 %
 

Albumin

    61,075     68,780     4.4 %   5.6 %
 

Other

    279,243     204,589     20.3 %   16.8 %
                   

Total product net revenue

    1,334,550     1,196,686     97.1 %   98.2 %
 

Other net revenue

    39,742     21,823     2.9 %   1.8 %
                   

Total net revenue

  $ 1,374,292   $ 1,218,509     100.0 %   100.0 %
                   

United States

  $ 906,376   $ 817,276     66.0 %   67.1 %

International

    467,916     401,233     34.0 %   32.9 %
                   

Total net revenue

  $ 1,374,292   $ 1,218,509     100.0 %   100.0 %
                   

        Our product net revenue was $1,334.6 million for the year ended December 31, 2008 as compared to $1,196.7 million for the year ended December 31, 2007, representing an increase of $137.9 million, or

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11.5%. The increase consisted of improved pricing of $122.3 million, including foreign exchange benefit of $9.7 million, as well as volume increases of $15.6 million. Our other net revenue increased $17.9 million primarily due to increased royalties and licensing fees under collaborative agreements, milestones, and other third party contract manufacturing agreements.

        The $31.0 million increase in our Gamunex IGIV product net revenue consisted of improved pricing of $55.0 million, including foreign exchange benefit of $1.8 million, partially offset by volume decreases of $24.0 million. The higher Gamunex IGIV pricing primarily related to U.S. and Canadian subsidiaries. We experienced lower Gamunex IGIV volumes of $35.4 million and $7.7 million in the U.S. and Europe, respectively, which were partially offset by higher Gamunex IGIV volumes of $13.0 million and $6.1 million in Canada and other international regions, respectively. We continue to experience strong demand for Gamunex IGIV globally. Our ability to meet this demand is dependent upon our ability to secure adequate quantities of plasma and our ability to release finished product into our distribution channels.

        The $40.0 million increase in our Prolastin A1PI product net revenue consisted of improved pricing of $19.0 million, including foreign exchange benefit of $7.6 million, and higher volumes of $21.0 million. The improved Prolastin A1PI pricing was largely in Europe and the U.S., which increased $10.5 million and $7.6 million, respectively. Prolastin A1PI volumes improved $12.8 million and $8.2 million in the U.S. and Europe, respectively. Increases in Prolastin A1PI volumes are largely a function of our ability to identify and enroll new patients compared to the number of patients lost due to attrition and competition. Our European growth will also depend upon our ability to obtain appropriate reimbursement on a country by country basis.

        The $7.7 million decrease in our albumin product net revenue consisted of volume decreases of $17.0 million, partially offset by improved pricing of $9.3 million. The albumin pricing increase was predominantly driven by sales in the U.S., which contributed $7.7 million to the overall pricing improvement. Albumin volumes were negatively impacted by a change in production mix during 2008 to PPF powder from albumin as a result of the settlement of a customer dispute as discussed further in the section titled, "—Matters Affecting Comparability—Customer Settlement." This change in production mix resulted in lower available quantities of albumin for sale during 2008.

        Our other product net revenue increased $74.6 million, or 36.5%, during the year ended December 31, 2008 as compared to the prior year. Our other product net revenue consists primarily of revenue related to the Canadian blood system, where, in addition to commercial sales of Gamunex IGIV, we have toll manufacturing contracts with the two national Canadian blood system operators, Canadian Blood Services and Hema Quebec, as well as sales of Koate DVI Factor VIII (human), hyperimmunes, intermediate products, Thrombate III antithrombin III (human), and PPF powder, less SG&A reimbursements to certain international distributors.

        Our other product net revenue includes $26.3 million higher revenues during the year ended December 31, 2008 as compared to the prior year as a result of higher volumes of PPF powder in order to comply with contractual commitments associated with the settlement of a customer dispute in 2007 as discussed previously. In addition, we experienced improved pricing and volume of $7.8 million and $14.9 million, respectively, related to intermediate products, such as cryoprecipitate. Our other product net revenue was also favorably impacted by increased Koate sales of $6.5 million, resulting primarily from improved pricing, and increased sales of Thrombate III Antithrombin III (human) of $5.5 million. Finally, our other product net revenue benefited from higher hyperimmune pricing of $16.4 million, partially offset by lower hyperimmune volumes of $7.0 million. The increase in hyperimmune pricing was primarily generated in the U.S. where we increased pricing during the second quarter of 2008.

        We increased prices for substantially all of our products in most of our geographic regions as a result of higher costs and demand. Our product net revenue was positively impacted by $9.7 million, or 0.8%, as a result of favorable foreign exchange rate fluctuations in relation to the U.S. dollar during the year ended

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December 31, 2008 as compared to the prior year. Prices in Canada are determined by contracts with Canadian Blood Services and Hema Quebec. New five year contracts with increased pricing for contract fractionation services and our commercial products, including Gamunex IGIV, Plasbumin, and certain hyperimmune products took effect on April 1, 2008. Through the life of the Canadian contracts, prices escalate annually by CPI.

Cost of Goods Sold and Gross Profit

        Our gross profit was $492.1 million for the year ended December 31, 2008 as compared to $430.4 million for the year ended December 31, 2007, representing gross margins of 35.8% and 35.3%, respectively. Our gross profit is impacted by the volume, pricing, and mix of our product net revenue as discussed above, as well as the related cost of goods sold as discussed below. The net impact of these items resulted in slightly higher gross margins during the year ended December 31, 2008 as compared to the year ended December 31, 2007.

        Our cost of goods sold was $882.2 million for the year ended December 31, 2008 as compared to $788.2 million for the year ended December 31, 2007, representing an increase of $94.0 million, or 11.9%. The increase in our cost of goods sold was driven primarily by higher unabsorbed TPR infrastructure and start-up costs of $28.4 million. Unabsorbed TPR infrastructure and start-up costs amounted to $98.5 million and $70.1 million for the years ended December 31, 2008 and 2007, respectively, representing approximately 7.2% and 5.8%, respectively, of total net revenue. The higher unabsorbed TPR costs during 2008 resulted from the continued expansion of our plasma collection center platform and the costs associated with our remediation efforts in certain centers acquired from IBR as well as certain new centers opened by us. Until our plasma collection centers reach normal operating capacity, we charge unabsorbed overhead costs directly to cost of goods sold.

        Our cost of goods sold for the year ended December 31, 2008 includes higher costs of production of $57.0 million, including foreign exchange impact of $7.5 million, and higher costs associated with an increase in volumes of $9.7 million. Our cost of production was negatively impacted by higher costs of plasma. Our acquisition cost of plasma per liter of third party plasma increased 13.6% during the year ended December 31, 2008 as compared to the year ended December 31, 2007. Due to our long manufacturing cycle times, which range from 100 days to in excess of 400 days, the cost of plasma is not expensed through cost of goods sold until a significant period of time subsequent to its acquisition.

        Our inventory impairment provisions, net, increased $2.0 million during the year ended December 31, 2008 as compared to the prior year. Several of the more significant provisions and recoveries impacting various quarters of 2008 and 2007 are discussed further in the paragraphs that follow, as well as in the section titled, "—Matters Affecting Comparability."

        During the first and second quarters of 2008, we incurred charges to cost of goods sold of $16.3 million and $7.0 million, respectively, due to deviations from our standard operating procedures and cGMP at one of our plasma collection centers. As a result of further investigations and new facts and circumstances, we subsequently determined that certain impacted materials were saleable. We recorded recoveries of $17.5 million in 2008 directly to cost of goods sold as the impacted material was converted to finished goods and sold to third parties. We do not expect to recognize significant further recoveries of the impacted material.

        We settled a dispute with a customer in September 2007 regarding intermediate material manufactured by us, which is used by this customer in its manufacturing process. We recorded a charge to cost of good sold of $7.9 million during the year ended December 31, 2007, which we recovered in its entirety during 2008 as the related materials were determined to be saleable, converted into finished product, and sold to other customers. During the first half of 2008, we recorded an additional inventory impairment provision of $2.6 million for products held in Europe related to this dispute, for which we

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subsequently recovered $1.8 million during 2008 as the impacted material was determined to be saleable, converted into finished product, and sold to other customers.

        Our inventory impairment provisions, net, for the year ended December 31, 2007 were favorably impacted by a $9.0 million recovery from Bayer related to the Gamunex production incident, which we recorded as a reduction of cost of goods sold during the year ended December 31, 2007. The Gamunex production incident is discussed further in the section titled, "—Matters Affecting Comparability." Other production issues during the year ended December 31, 2008 resulted in higher inventory impairment provisions of $3.0 million as compared to the year ended December 31, 2007.

        During the year ended December 31, 2008, we recorded an impairment charge of $3.6 million primarily within cost of goods sold related to capital lease assets and leasehold improvements at certain of our plasma collection centers which were closed or were under development and we no longer plan to open. During the year ended December 31, 2008, we also recorded a loss of $3.4 million within cost of goods sold related to two lease commitments associated with properties that we no longer plan to operate as plasma collection centers. During the year ended December 31, 2007, we recorded an impairment charge within cost of goods sold related to equipment of $2.8 million as a result of the discontinuation of a project.

        During November 2007, we shut down portions of our Clayton, North Carolina facility consistent with our cGMP operating practices for unplanned maintenance for approximately two weeks. As a result of the unplanned plant maintenance, we recorded $10.0 million directly to cost of goods sold during the year ended December 31, 2007, which would normally have been capitalized to inventories.

        Additionally, our cost of goods sold for the year ended December 31, 2008 reflects higher costs of production due to the higher cost of raw materials, production volume variances, and manufacturing mix and product yield variances, among other items. Our cost of goods sold is impacted by our raw material costs, production mix, cycle times, production capacities and normal production shut-downs, and the release of finished product.

Operating Expense

        Our SG&A was $227.5 million for the year ended December 31, 2008 as compared to $189.4 million for the year ended December 31, 2007, representing an increase of $38.1 million, or 20.1%. As a percentage of net revenue, SG&A was 16.6% and 15.5% for the years ended December 31, 2008 and 2007, respectively. Our SG&A increased period over period as a result of higher share-based compensation expense of $15.2 million, costs of $8.3 million associated with the regulatory review process of our terminated merger with CSL, which are unlikely to recur, merger related retention expense (including fringe benefits) of $3.3 million, unfavorable foreign exchange impact of $6.7 million resulting from a strengthening U.S. dollar as compared to the euro pertaining primarily to euro-denominated receivables, bad debt expense of $4.2 million related to outstanding notes receivables and advances to PCA due to uncertainty regarding collection, and higher sales and marketing, information solutions, finance, human resources, and business development expenses. These items were partially offset by lower special recognition bonus expense of $1.5 million, the absence of legal fees of $5.7 million associated with our litigation with Baxter which was settled in 2007, and the absence of $15.3 million of transition and non-recurring expenses incurred in 2007 associated with the development of our internal capabilities to operate as a standalone company apart from Bayer. Additional information regarding the significant aforementioned items impacting comparability between the periods presented is included in the section titled "—Matters Affecting Comparability."

        Our R&D was $66.0 million for the year ended December 31, 2008 as compared to $61.3 million for the year ended December 31, 2007, representing an increase of $4.7 million, or 7.7%. As a percentage of net revenue, R&D was 4.8% and 5.0% for the years ended December 31, 2008 and 2007, respectively. Research and development expenses are influenced by the timing of in-process projects and the nature of

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expenses associated with these projects. Our current research and development consists of a range of programs that aim to obtain new therapeutic indications for existing products, enhance product delivery, improve concentration and safety, and increase product yields. Our R&D increased period over period primarily as a result of $4.0 million in milestone payments made to Crucell under the terms of two exclusive commercial license agreements entered into during 2008. Our R&D expense was negatively impacted by higher share-based compensation expense of $1.0 million and merger related retention expense (including fringe benefits) of $0.6 million during 2008 as compared to the prior year. Our current R&D activities continue to support Plasmin studies for aPAO and ischemic stroke, Prolastin Alpha-1 aerosol studies, and the development of Gamunex IGIV for subcutaneous administration.

Non-Operating Expense, net

        The primary component of our non-operating expense, net, is interest expense, net, which amounted to $97.0 million and $110.2 million for the years ended December 31, 2008 and 2007, respectively. Our weighted average interest rates on our outstanding debt were 7.12% and 9.87% for the years ended December 31, 2008 and 2007, respectively, which resulted in a lower cost of borrowing during the year ended December 31, 2008 as compared to the year ended December 31, 2007, despite higher average debt levels during 2008. The benefit of the lower cost of borrowing during 2008 was partially mitigated by higher interest expense related to our interest rate swaps of $12.0 million as compared to 2007, as a result of falling three-month LIBOR rates as compared to our fixed swap rates. At December 31, 2008, our interest rate swaps and caps hedged approximately 56.4% of our total borrowings.

        As discussed further in the section titled, "—Matters Affecting Comparability," we recorded other income of $12.9 million during the year ended December 31, 2007 related to a litigation settlement with Baxter.

Income Taxes

        Our income tax expense was $36.6 million for the year ended December 31, 2008 as compared to an income tax benefit of $40.8 million for the year ended December 31, 2007, resulting in effective income tax rates of 35.7% and (49.3)%, respectively. Our effective income tax rates were different than the U.S. statutory Federal income tax rate of 35% during each period due to the items discussed in the following paragraphs.

        We recognized a tax benefit of $4.1 million and $10.0 million related to research and development tax credits and $2.0 million and $2.2 million related to qualified production activities during the years ended December 31, 2008 and 2007, respectively, and we recognized a tax benefit of $3.2 million during the year ended December 31, 2007 related to the final settlement of Bayer contingent consideration. These items were partially offset by state income taxes (net of Federal benefit) of $4.1 million and $3.2 million for the years ended December 31, 2008 and 2007, respectively.

        We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized in accordance with SFAS No. 109. In assessing the need for a valuation allowance, we consider all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with future taxable income, and ongoing prudent and feasible tax planning strategies. As a result of our analysis of all available evidence, which included ten consecutive quarters of cumulative pre-tax profits and our expectations that we can generate sustainable consolidated taxable income for the foreseeable future, we concluded during the third quarter of 2007 that it was more likely than not that our deferred tax assets would be realized, and consequently, we released the remaining valuation allowance related to our deferred tax assets resulting in a $48.2 million non-cash tax benefit. During the year ended December 31, 2007, we also released a portion of our deferred tax assets equal to the amount of the current Federal income tax provision.

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        At December 31, 2008, our gross unrecognized tax benefits were approximately $10.0 million, of which approximately $7.1 million would reduce our effective income tax rate if recognized.

Net Income

        Our net income was $65.8 million and $123.6 million for the years ended December 31, 2008 and 2007, respectively. The significant factors and events contributing to the change in our net income are discussed above.

Year Ended December 31, 2007 as Compared to Year Ended December 31, 2006

        The following table contains information regarding our results of operations for the year ended December 31, 2007 as compared to the year ended December 31, 2006:

 
  Years Ended
December 31,
  Percent of Total
Net Revenue
 
 
  2007   2006   2007   2006  

Net revenue:

                         
 

Product net revenue

  $ 1,196,686   $ 1,114,489     98.2 %   98.7 %
 

Other

    21,823     14,230     1.8 %   1.3 %
                   

Total net revenue

    1,218,509     1,128,719     100.0 %   100.0 %

Cost of goods sold

    788,152     684,750     64.7 %   60.7 %
                   

Gross profit

    430,357     443,969     35.3 %   39.3 %

Operating expenses:

                         
 

SG&A

    189,387     241,448     15.5 %   21.4 %
 

R&D

    61,336     66,801     5.0 %   5.9 %
                   

Total operating expenses

    250,723     308,249     20.5 %   27.3 %
                   

Income from operations

    179,634     135,720     14.8 %   12.0 %

Other non-operating (expense) income:

                         
 

Interest expense, net

    (110,236 )   (40,867 )   (9.1 )%   (3.7 )%
 

Equity in earnings of affiliate

    436     684         0.1 %
 

Litigation settlement

    12,937         1.1 %    
 

Loss on extinguishment of debt

        (8,924 )       (0.8 )%
                   

Total other non-operating expense, net

    (96,863 )   (49,107 )   (8.0 )%   (4.4 )%
                   

Income before income taxes and extraordinary items

    82,771     86,613     6.8 %   7.6 %

Benefit (provision) for income taxes

    40,794     (2,222 )   3.3 %   (0.2 )%
                   

Income before extraordinary items

    123,565     84,391     10.1 %   7.4 %

Extraordinary items

        2,994         0.3 %
                   

Net income

  $ 123,565   $ 87,385     10.1 %   7.7 %
                   

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Net Revenue

        The following table contains information regarding our net revenue:

 
  Years Ended
December 31,
  Percent of Total
Net Revenue
 
 
  2007   2006   2007   2006  

Product net revenue:

                         
 

IGIV (Gamunex and Gamimune)

  $ 646,779   $ 617,939     53.1 %   54.7 %
 

Prolastin brand A1PI

    276,538     225,986     22.7 %   20.0 %
 

Albumin

    68,780     62,692     5.6 %   5.6 %
 

Other

    204,589     207,872     16.8 %   18.4 %
                   

Total product net revenue

    1,196,686     1,114,489     98.2 %   98.7 %
 

Other net revenue

    21,823     14,230     1.8 %   1.3 %
                   

Total net revenue

  $ 1,218,509   $ 1,128,719     100.0 %   100.0 %
                   

United States

  $ 817,276   $ 770,270     67.1 %   68.2 %

International

    401,233     358,449     32.9 %   31.8 %
                   

Total net revenue

  $ 1,218,509   $ 1,128,719     100.0 %   100.0 %
                   

        Our product net revenue was $1,196.7 million for year ended December 31, 2007 as compared to $1,114.5 million for the year ended December 31, 2006, representing an increase of $82.2 million, or 7.4%. The increase consisted of improved pricing of $118.0 million, including foreign exchange benefit of $11.2 million, offset by volume decreases of $35.8 million. The volume decreases resulted from our plasma supply constraints. Our other net revenue associated with licensing fees, milestones, and other service agreements increased $7.6 million.

        The growth in our Gamunex IGIV product net revenue consisted of improved pricing of $43.7 million, including foreign exchange benefit of $3.0 million, partially offset by volume decreases of $14.8 million. We experienced higher Gamunex IGIV pricing of $24.5 million, $9.7 million, and $9.5 million in the U.S., Canada, and Europe, respectively, and higher Gamunex IGIV volumes of $20.2 million in Canada, partially offset primarily by lower Gamunex IGIV volumes of $8.5 million in the U.S. The overall lower volume of IGIV was also impacted by a reduction in sales of Gamimune IGIV of $25.4 million related to the termination of a customer contract in Japan, which was not replaced. The higher volume of Gamunex IGIV in Canada was due to the launch of our sales and marketing office in April 2006, as well as the timing of shipments to satisfy the customer requirements under our contracts with the Canadian blood systems operators.

        The increase in our Prolastin A1PI product net revenue consisted of improved pricing of $39.1 million, including foreign exchange of $7.9 million, and higher volumes of $11.4 million. The Prolastin A1PI pricing improvement was mainly from $17.7 million and $19.9 million increases in the U.S., and Europe, respectively, and Prolastin A1PI volumes improved $6.4 million and $4.9 million in the U.S. and Europe, respectively. Increases in Prolastin A1PI volumes are largely a function of our ability to identify and enroll new patients compared to the number of patients lost due to attrition and competition.

        Increases in albumin prices contributed $19.2 million to our net revenue growth during the year ended December 31, 2007 as compared to the year ended December 31, 2006. The benefit of the price increase was partially offset by lower albumin volumes of $13.1 million during the year ended December 31, 2007. The lower volumes of albumin resulted primarily from the termination of a distribution agreement with a Bayer affiliate in Japan, which was not replaced, as well as the settlement of a customer dispute as discussed further in the section titled, "—Matters Affecting Comparability."

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        Our other product net revenue was $204.6 million for the year ended December 31, 2007 and $207.9 million for the year ended December 31, 2006, representing a decrease of $3.3 million, or 1.6%. Our other product net revenue consists primarily of revenue related to the Canadian blood systems, where, in addition to commercial sales of Gamunex IGIV, we have toll manufacturing contracts with the two national Canadian blood system operators, Canadian Blood Services and Hema Quebec, as well as sales of Koate DVI Factor VIII (human), hyperimmunes, cryoprecipitate, Thrombate III Antithrombin (human), and PPF powder, less SG&A reimbursements to certain international distributors under various distribution agreements.

        Our other product net revenue was negatively impacted by $12.3 million during the year ended December 31, 2007 as compared to the year ended December 31, 2006 as a result of lower volumes of PPF powder due to the settlement of a customer dispute. This settlement changed our product mix during 2008, which resulted in a decline in albumin sales with an increase in sales of PPF powder. Our other product net revenue was also negatively impacted by $7.2 million related to Koate DVI Factor VIII (human) sales primarily due to lower volumes as a result of manufacturing issues. Further, our other product net revenue was also negatively impacted by $5.7 million related to our tolling contract with Canadian Blood Services. Sales we made to Canadian Blood Services in the prior year reflect the customer's required shipment of our Gamunex IGIV under our tolling contract, due to the depletion of their Gamunex on hand that was supplied under a previous contract with Bayer.

        Our other product net revenue was favorably impacted by higher volumes associated with our hyperimmunes totaling $8.7 million. We rely primarily on third-party plasma collection centers for specialty plasma used in the production of our hyperimmune products. Our other product net revenue was also positively impacted by the absence of $14.7 million of SG&A reimbursements to certain international distributors under various international distribution agreements.

        We increased prices for substantially all of our products in most of our geographic regions as a result of higher costs and demand. Our product net revenue was positively impacted by approximately $11.2 million, or 1.0%, as a result of favorable foreign currency exchange rate fluctuations in relation to the U.S. dollar during the year ended December 31, 2007.

        Although we sell our products worldwide, the majority of our sales were concentrated in the U.S. and Canada for the periods presented. During the year ended December 31, 2006, a significant portion of our international revenue was generated through various distribution contracts with Bayer affiliates, which have subsequently been terminated as we have either developed our own internal distribution capabilities, or contracted with other distributors. In April 2006, Talecris Biotherapeutics, Ltd. commenced operations to support our sales and marketing activities in Canada, and in December 2006, Talecris Biotherapeutics, GmbH commenced operations in Germany to support our sales and marketing activities in Germany and, ultimately, for the rest of Europe. Our international revenue growth was partially offset by the termination of our distribution arrangement with a Bayer affiliate in Japan, which was not replaced.

        In July 2007, the Centers for Medicare and Medicaid Services (CMS) published a final rule regarding metrics under the Medicaid Drug Rebate Program, which became effective October 1, 2007. This rule did not have a significant impact to our consolidated financial statements for the year ended December 31, 2007 and is not expected to significantly impact future periods.

Cost of Goods Sold and Gross Profit

        Our gross profit was $430.4 million for the year ended December 31, 2007 and $444.0 million for the year ended December 31, 2006, resulting in gross margins of 35.3% and 39.3%, respectively. Our gross profit is impacted by the volume, pricing, and mix of our product net revenue as discussed above, as well as related cost of goods sold as discussed below. The net impact of these items resulted in lower gross margins during the year ended December 31, 2007 as compared to the year ended December 31, 2006.

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        Our cost of goods sold was $788.2 million for the year ended December 31, 2007 as compared to $684.8 million for the year ended December 31, 2006, representing an increase of $103.4 million, or 15.1%. The increase in our cost of goods sold was primarily driven by unabsorbed TPR infrastructure and start-up costs of $70.1 million, or 5.8% of net revenues, associated with the development of our plasma collection center platform, for which there were minimal comparable costs during the year ended December 31, 2006. Until our plasma collection centers reach normal operating capacity, we charge unabsorbed overhead costs directly to cost of goods sold.

        Our cost of goods sold for the year ended December 31, 2007 includes a reduction of costs of $29.6 million associated with lower volumes, offset by higher costs of production of $32.2 million, including a foreign exchange impact of $6.7 million. Our cost of production benefited from approximately $9.9 million related to Prolastin as a result of lower cost materials used during the 2007 period, which were acquired in prior periods. Our acquisition cost of plasma per liter of third-party plasma increased 5.2% during the year ended December 31, 2007 as compared to the year ended December 31, 2006. Due to our long manufacturing cycle times, which range from 100 days to in excess of 400 days, the cost of plasma is not expensed through cost of goods sold until a significant period of time subsequent to its acquisition.

        Our inventory impairment provisions, net, increased $15.5 million during the year ended December 31, 2007, to $34.0 million, as compared to $18.5 million for the year ended December 31, 2006. The higher inventory impairment provision was due primarily to $10.7 million of provisions related to unlicensed inventory collected at our plasma collection centers and related testing costs, an impairment charge of $7.9 million related to intermediate manufactured material associated with the settlement of a customer dispute for which there were no comparable provisions in the prior year period, and an increase of $5.9 million related to other manufacturing issues. Our inventory impairment provision, net, for the year ended December 31, 2007 was favorably impacted by a $9.0 million recovery from Bayer related to the Gamunex IGIV production incident, which we recorded as a reduction of cost of goods sold during the first quarter of 2007.

        During the year ended December 31, 2006, our cost of goods sold was favorably impacted by a non-cash benefit of $3.5 million related to the release of purchase accounting adjustments associated with hyperimmune inventories that we acquired from Bayer during our formation transaction, which were subsequently sold to third parties during 2006. Our cost of goods sold for the year ended December 31, 2007 reflect non-cash charges of $1.5 million related to the release of these adjustments for inventories that were sold to third parties during 2007.

        During November 2007, we shut down portions of our Clayton, North Carolina facility consistent with our cGMP operating practices for unplanned maintenance for approximately two weeks. As a result of the unplanned plant maintenance, we recorded $10.0 million directly to cost of goods sold during the year ended December 31, 2007, which normally would have been capitalized to inventories. During the fourth quarter of 2007, we also wrote-off equipment with a net book value of $2.8 million as a result of the discontinuation of a project. No comparable amounts were recorded in the prior year.

        Additionally, our cost of goods sold for the year ended December 31, 2007 reflects higher costs of production due to the increasing cost of raw materials, production volume variances, and manufacturing mix and product yield variances, among other items. Our cost of goods sold is impacted by our raw material costs, production mix and cycle times, as well as our production capacities and normal production shut-downs, and the release of finished product. Our cost of goods sold for the year ended December 31, 2007 benefited from a $3.7 million reduction of costs associated with our special recognition bonus programs, offset by a $1.1 million increase in share-based compensation expense, as compared to the prior year.

        Additional information regarding the comparability of our operating results is included in the section titled, "—Matters Affecting Comparability."

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Operating Expenses

        Our SG&A was $189.4 million for the year ended December 31, 2007 as compared to $241.4 million for the year ended December 31, 2006, representing a decrease of $52.0 million, or 21.6%. As a percentage of net revenue, SG&A was 15.5% and 21.4% for the years ended December 31, 2007 and 2006, respectively.

        Our 2007 SG&A benefited from a $57.9 million reduction of transition and other non-recurring expenses associated with our development of internal capabilities to operate apart from Bayer. During the year ended December 31, 2007, our SG&A benefited from foreign currency exchange gains of $5.7 million, as compared to $0.3 million during the prior year. During 2007, our foreign currency exchange gains resulted from a weakening of the U.S. dollar as compared to the euro pertaining primarily to euro-denominated receivables. During the year ended December 31, 2007, we recognized $6.4 million of SG&A related to our special recognition bonus programs, as compared to $29.8 million during the year ended December 31, 2006, representing a decrease of $23.4 million. The benefit of these items was partially offset by incremental expenses associated with our share-based compensation programs totaling $12.4 million, which were primarily due to new grants made in July 2007 to our President and Chief Executive Officer.

        R&D was $61.3 million for the year ended December 31, 2007 and $66.8 million for the year ended December 31, 2006, representing a decrease of $5.5 million, or 8.2%. As a percentage of net revenue, R&D was 5.0% and 5.9% for the years ended December 31, 2007 and 2006, respectively. Research and development expenses are influenced by the timing of in-process projects and the extent of expenses associated with these projects. The decrease in R&D was primarily driven by the conclusion of several trials related to life-cycle management and new product development.

        During the year ended December 31, 2007, we recorded $0.8 million of expenses related to our special recognition bonus programs, as compared to $3.4 million during the prior year, representing a decrease of $2.6 million. This decrease in special recognition bonus expense was partially offset by higher share-based compensation cost of $1.2 million during the year ended December 31, 2007.

        Our operating expenses for the year ended December 31, 2007 benefited from a $21.2 million reduction of expenses related to services that Bayer affiliates provided to us under various transition services agreements, which have been subsequently terminated or reduced in scope, as compared to the prior year. We added personnel, contracted with third parties, or a combination of both, to replace such services previously provided by Bayer.