You are encouraged to read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related footnotes, which are included in our prospectus filed pursuant to Rule 424(b) under the Securities and Exchange Act, as amended (Securities Act), with the Securities and Exchange Commission (SEC) on October 1, 2009 (our prospectus). This discussion and analysis contains forward-looking statements that involve risks and uncertainties. See "Risk Factors" included in our 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 Quarterly Report.

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, reference 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.

FINANCIAL HIGHLIGHTS

The following are highlights of our results for the three and nine months ended September 30, 2009:

† Total net revenue increased 12.9% to $395.7 million for the three months ended September 30, 2009 and 17.5% to $1.14 billion for the nine months ended September 30, 2009, over the comparable prior year periods.

† Gross margins improved 210 basis points to 41.7% for the three months ended September 30, 2009 and 650 basis points to 41.9% for the nine months ended September 30, 2009, over the comparable prior year periods.

† Net income improved to $35.8 million, an increase of 74.2%, for the three months ended September 30, 2009 as compared to the prior year period, and to $152.5 million for the nine months ended September 30, 2009, inclusive of the $48.8 million after-tax income from the CSL merger termination fee, as compared to $39.6 million for the nine months ended September 30, 2008.

† Diluted earnings per share were $0.38 for the three months ended September 30, 2009 and $1.62 for the nine months ended September 30, 2009, inclusive of the CSL merger termination fee.

† Operating cash flows were $198.7 million for the nine months ended September 30, 2009, reflecting an improvement of $201.2 million over the prior year period, inclusive of the CSL merger termination fee.

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, 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/or 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%.

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 provided financing for the development of plasma collection centers that are dedicated to our plasma collection. As of October 31, 2009, our plasma collection center platform consisted of 71 operating centers, of which 66 were licensed and 5 were unlicensed. These centers collected approximately 61% of our plasma during the nine months ended September 30, 2009 and our plan is for our plasma collection center network, once it matures, to provide approximately 90% of our current plasma requirements.

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 Talecris Plasma Resources, Inc. (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 cost of goods sold includes $8.7 million and $25.7 million for the three months ended September 30, 2009 and 2008, respectively, and $34.1 million and $77.7 million for the nine months ended September 30, 2009 and 2008, respectively, related to excess period costs associated with TPR.

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 72.8% and 73.9% of our net revenue for the three months ended September 30, 2009 and 2008, respectively, and 74.3% and 72.7% of our net revenue for the nine months ended September 30, 2009 and 2008, respectively. We have contracted commitments from our customers for a substantial portion of our U.S. IGIV volume over the next three to five years. We are also the primary supplier of Canadian IGIV under our contracts with the Canadian Blood Services and Hema Quebec. 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 for the periods presented.

SUBSEQUENT EVENTS

Initial Public Offering

On October 6, 2009, we completed our IPO of 56,000,000 shares of our common stock, par value $0.01 per share, at an offering price of $19.00 per share. Our IPO included 28,947,368 shares newly issued and sold by us and 27,052,632 shares sold by the selling stockholder, Talecris Holdings, LLC, including 6,000,000 shares sold by the selling stockholder pursuant to the underwriters' option to purchase additional shares. After deducting the payment of underwriters' discounts and commissions, the net primary proceeds to us from the sale of shares in our IPO were approximately $519.7 million. We used the net primary proceeds to repay principal of $389.8 million and $129.9 million under our First and Second Lien Term Loans, respectively. We did not receive any proceeds from the sale of shares by the selling stockholder. In addition, on September 30, 2009, 2,381,548 shares of our common stock were issued upon the settlement of $45.3 million of earned and unpaid dividends on our Series A and B preferred stock in connection with our IPO.

Revolving Credit Facility Amendment

On October 15, 2009, we entered into an amendment of certain provisions of our Revolving Credit Facility dated as of October 12, 2009. The Revolving Credit Facility, as amended, permits the 7.75% Notes, described below, to be issued as long as the First and Second Lien Credit Agreements are terminated in connection with the offering of the 7.75% Notes. The amendment also (i) increases the covenant baskets for permitted acquisitions to $250 million, (ii) permits the payment of cash dividends commencing with

the first fiscal quarter of 2010, and (iii) increases our capital expenditure baskets so that we will be permitted to make capital expenditures of up to $225 million in each of 2010 and 2011. Moreover, pursuant to the amendments, we are not subject to any limitation on our capital expenditures in any fiscal year if our leverage ratio, as defined, as of the end of the fiscal year most recently ended was less than or equal to 2.00 to 1.00. Minimum availability tests under the Revolving Credit Facility were also increased from $32.5 million to $48.75 million in connection with the amendment.

Issuance of 7.75% Unsecured Senior Notes, due 2016

On October 21, 2009, we completed the issuance of $600.0 million, 7.75% Senior Notes, due 2016 (7.75% Notes) at a price of 99.321% of par in a private placement to certain qualified institutional buyers. The 7.75% Notes yield 7.875% to maturity and pay interest semi-annually on May 15 and November 15 to holders of record on May 1 and November 1, respectively. The 7.75% Notes are guaranteed on an unsecured senior basis by our existing and future domestic subsidiaries.

We used the net proceeds to us of $583.9 million, after deducting transaction fees, discounts, and commissions, to repay the remaining principal and interest amounts under our First and Second Lien Term Loans of $295.5 million and $204.1 million, respectively, which were subsequently terminated, $55.6 million to repay principal under our amended Revolving Credit Facility, and $28.7 million to settle and terminate certain interest rate swap contracts with a notional amount of $390 million.

Additional information regarding the issuance of the 7.75% Notes is included Note 15 to our consolidated financial statements, "Subsequent Events," included elsewhere in this Quarterly Report.

Financial Impact of IPO and Refinancing Transactions



The following table illustrates the impact to our long-term debt from the
application of the net proceeds to us from our IPO and refinancing transactions
discussed above:



                             September 30,    October 6,     October 21,
                                 2009            2009           2009        Pro Forma
                                Actual            IPO        Refinancing     Adjusted
Revolving Credit Facility   $        67,844   $         -   $     (55,593 ) $   12,251
First Lien Term Loan                680,750      (389,812 )      (290,938 )          -
Second Lien Term Loan               330,000      (129,937 )      (200,063 )          -
7.75% Notes                               -             -         600,000      600,000
Discount on 7.75% Notes                   -             -          (4,074 )     (4,074 )
Capital Leases                        9,698             -               -        9,698
Total long-term debt        $     1,088,292   $  (519,749 ) $      49,332   $  617,875

In addition to the debt principal repayments in the preceding table, we used $28.7 million of the net proceeds to us from the issuance of the 7.75% Notes to settle and terminate certain interest rate swap contracts and $8.6 million to pay accrued interest associated with our First and Second Lien Term Loans. In addition to approximately $4.1 million of discounts on the 7.75% Notes disclosed in the table above, approximately $12.0 million of commissions were deducted from the gross issuance proceeds. As a result of the changes to our debt structure, we anticipate that our weighted average interest rate will be approximately 8% during the next twelve months without considering potential new interest rate swaps and amortization of debt issuance costs.

As a result of the IPO and refinancing transactions, we expect to recognize a charge during the fourth quarter of 2009 of approximately $42.9 million to write-off deferred debt issuance costs related to our First and Second Lien Term Loans as well as costs associated with the termination of our interest rate swap contracts. In addition, we expect to capitalize a currently estimated $17.5 million of debt issuance costs primarily associated with the 7.75% Notes, which will be amortized over the terms of the facilities.

The following table summarizes changes in deferred debt issuance costs and unwinding interest rate swaps, as well as newly capitalized debt issuance costs, as a result of our refinancing transactions:

                                                  Fourth
                                                  Quarter
                            September 30,      Amortization                                                    Estimated
                                2009           of Previously                                                   Adjusted
                               Actual           Capitalized        Charges for        Newly Capitalized          Total
                            Debt Issuance      Debt Issuance           Debt             Debt Issuance        Debt Issuance
                                Costs              Costs          Extinguishment            Costs                Costs
Revolving Credit
Facility                   $         2,268    $           (82 )  $              -    $             1,500    $         3,686
First Lien Term Loan                 8,164               (110 )            (8,054 )                    -                  -
Second Lien Term Loan                4,133                (46 )            (4,087 )                    -                  -
7.75% Notes                              -                  -                   -                 16,000             16,000
Interest rate swap
termination costs                        -                  -             (30,800 )                    -                  -
Total                      $        14,565    $          (238 )  $        (42,941 )  $            17,500    $        19,686

Approval of Prolastin-C

On October 19, 2009, we received approval from the U.S. Food and Drug Administration for Prolastin-C, a more concentrated version of our Prolastin A1PI product. Prolastin-C delivers twice the active protein per milliliter as Prolastin, cutting infusion volume and time in half when given at the recommended rate. The manufacturing process for Prolastin-C incorporates technological advances such as nanofiltration, a virus exclusion technology, and cation exchange chromatography, an additional purification step. We anticipate the launch of Prolastin-C in the first half of 2010. We have filed a supplemental New Drug Submission (sNDS) with Health Canada related to Prolastin-C. We expect a post-approval clinical trial will be required as a condition for approval.

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 other non-operating income in our consolidated income statement for the nine months ended September 30, 2009. The Federal Trade Commission's complaints were subsequently dismissed.

In consideration of 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 $13.5 million has been specifically allocated to certain employees as of September 30, 2009, as adjusted for forfeitures. We recorded retention expense of $1.4 million and $7.5 million, excluding fringe benefit, during the three and nine months ended September 30, 2009, respectively. During the three months ended September 30, 2008, we recorded retention expense of $1.6 million, excluding fringe benefit. At September 30, 2009, the remaining unrecognized expense related to this retention program totaled $0.9 million, which we will recognize through December 2009. During the second quarter of 2009, we made the first two payments under this retention program totaling $6.8 million and the remaining balance will be paid in December 2009, adjusted for forfeitures.

We incurred legal and other costs associated with the regulatory review process of $6.0 million during the nine months ended September 30, 2009 and $0.7 million and $1.5 million during the three and nine months ended September 30, 2008, respectively, which are included in SG&A in our consolidated income statements.

Unabsorbed TPR Infrastructure and Start-Up Costs

Our cost of goods sold includes costs related to 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. The reduction of unabsorbed TPR infrastructure and start-up costs resulted from higher plasma volumes collected at our plasma collection centers and improved center labor efficiencies as well as lower support costs during 2009. We anticipate that we will continue to experience improving levels of unabsorbed TPR infrastructure and start-up

costs with the maturation of our plasma collection center platform.

Plasma Center cGMP Issue

During the nine months ended September 30, 2008, we incurred charges to cost of goods sold of $23.3 million 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. For the three and nine months ended September 30, 2009, we recorded recoveries of $0.4 million and $1.1 million, respectively, and for the three and nine months ended September 30, 2008, we recorded recoveries of $11.4 million and $14.1 million, respectively. Recoveries for 2008 totaled $17.5 million.

Foreign Corrupt Practices Act

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 our board of directors. Additional information regarding our investigation into potential violations of the FCPA is included in Note 10 to our consolidated financial statements, "Commitments and Contingencies," included elsewhere in this Quarterly Report, and in the "Risk Factors" section of our prospectus.

As of October 31, 2009, we have approximately $2.6 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.

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 Talecris Biotherapeutics Holdings Corp. 2005 Stock Option and Incentive Plan, as amended (Stock Option Plan), and the 2006 Restricted Stock Plan. We ceased making grants under these plans in connection with our IPO.

The following table summarizes our share-based compensation expense:

                             Three Months Ended       Nine Months Ended
                               September 30,            September 30,
                              2009         2008        2009        2008
     Stock Options
SG&A                       $    15,581    $ 6,618   $   27,326   $ 17,618
R&D                                379        533        1,291      1,294
Total operating expenses        15,960      7,151       28,617     18,912
Cost of goods sold                 817        515        2,869      1,130
Total expense              $    16,777    $ 7,666   $   31,486   $ 20,042




                             Three Months Ended       Nine Months Ended
                               September 30,            September 30,
                              2009         2008        2009        2008
Restricted Stock Awards
SG&A                       $    2,348    $  2,414   $    7,053    $ 7,130
R&D                               134         134          401        401
Total operating expenses        2,482       2,548        7,454      7,531
Cost of goods sold                195         217          685        525
Total expense              $    2,677    $  2,765   $    8,139    $ 8,056

Our share-based compensation expense increased $9.0 million and $11.5 million for the three and nine months ended September 30, 2009, respectively, as compared to the same prior year periods. During the third quarter of 2009, 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 resulted in the recognition of a non-cash charge of $11.8 million of compensation expense during 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).

In connection with our IPO, we granted 597,713 stock options with an exercise price per share equal to our IPO price per share of $19.00 under our newly effective 2009 Long-Term Incentive Plan (2009 Plan). These stock options will vest one-third on each of April 1 of 2011, 2012, and 2013, subject to the option holder being employed on the vesting date. The fair value of each option was determined to be $9.57, resulting in aggregate future expense of approximately $5.2 million, which we expect to recognize ratably through April of 2013. At September 30, 2009, the remaining total estimated unrecognized compensation cost related to unvested stock options, including the IPO awards, was approximately $15.0 million, which we expect to recognize over a weighted average period of approximately 2.2 years. In connection with our IPO, we also granted 483,100 restricted stock units (RSU's). These RSU's will vest one-third on each of April 1 of 2011, 2012, and 2013, subject to the award holder being employed on the vesting date. The aggregate grant date fair value of the RSU's was approximately $8.4 million, which we expect to recognize ratably through 2013. At September 30, 2009, the remaining unrecognized compensation cost related to our restricted stock awards was approximately $9.7 million, which we expect to recognize over a weighted average period of approximately 0.6 years.

RESULTS OF OPERATIONS

The following 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 elsewhere in this Quarterly Report, as well as information contained in our prospectus. Additional information regarding significant matters affecting the comparability of our results of operations is included in the section titled, "-Matters Affecting Comparability."

Three Months Ended September 30, 2009 as Compared to Three Months Ended September 30, 2008

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

                                       Three Months Ended                Percent of Total
                                          September 30,                     Net Revenue
                                      2009             2008            2009               2008
Net revenue:
Product net revenue               $     387,898    $    339,245            98.0 %              96.8 %
. . .