Talecris Biotherapeutics first-quarter net income increases 35.6% to $45.3 million

Talecris Biotherapeutics Holdings Corp. ("Talecris") (Nasdaq: TLCR) today announced its financial results for the three months ended March 31, 2010, and filed its first quarter 2010 Form 10-Q with the U.S. Securities and Exchange Commission (SEC).

First quarter 2010 net revenue increased by $9.2 million or 2.5% to $381.0 million compared to $371.8 million in the first quarter of 2009.  Higher revenues from Talecris' principal products Gamunex^® (Immune Globulin Intravenous [Human], 10% Caprylate/Chromatography Purified) (IGIV), PROLASTIN^® (Alpha-1 Proteinase Inhibitor [Human]) (A1PI) as well as albumin in the first quarter of 2010 were partially offset by lower contract manufacturing for Canadian Blood Services and lower sales of Koate^® DVI Factor VIII (Human) compared to the first quarter of 2009.  First quarter 2010 net income increased to $45.3 million compared to $33.4 million in the first quarter of 2009, a 35.6% improvement period over period.  Diluted earnings per share were $0.35 in the first quarter of 2010 (128.2 million diluted shares outstanding) compared to diluted earnings per share of $0.36 (93.4 million diluted shares outstanding), or $0.28 on a pro forma basis, for the first quarter of 2009.    

"We are pleased to see continued growth in end user demand for both Gamunex, our brand of IGIV, as well as PROLASTIN, our brand of alpha-1 proteinase inhibitor for the treatment of genetic emphysema, as compared to the first quarter of 2009 ," said Lawrence D. Stern, Talecris' chairman and chief executive officer. "The growth of both products was attributed in part to our expanded sales and marketing efforts in the U.S. and abroad.  As a result of these efforts, we are on track to deliver our growth targets for the full year 2010."

"The first quarter also witnessed the launch of PROLASTIN-C^® in the United States.  PROLASTIN-C is a more concentrated version of our PROLASTIN A1PI therapy.  Our strategy is to convert all existing PROLASTIN patients in the U.S. to PROLASTIN-C, which we believe we will achieve by the end of the 2010 second quarter.  Promotion started in early March 2010, and, by the end of the quarter, we had already converted 44 percent of patients to the new product," continued Stern.

Talecris' Form 10-Q is available on the SEC's Web site at www.sec.gov and on Talecris' Web site at http://ir.talecris.com

Discussion of First Quarter Financial and Operating Results

Net revenue for the 2010 first quarter was $381.0 million compared to $371.8 million in the first quarter of 2009, an increase of $9.2 million or 2.5%.  Gamunex IGIV revenue increased $5.5 million or 2.6%, which consisted of $8.6 million in higher volumes, partially offset by $3.1 million in lower pricing.  Gamunex experienced higher volumes of $15.5 million in the U.S. and Europe, which were partially offset by lower volumes of $6.9 million in Canada due to Canadian Blood Services IGIV multi-source strategy and other international regions due to timing of shipments as well as impacts from our internal FCPA investigation.  The lower pricing is primarily attributable to higher Medicaid rebates in the U.S. as a result of the recently enacted healthcare reform legislation, which increased the size of the Medicaid rebates paid by drug manufacturers from 15.1% to 23.1%, as well as higher Medicaid utilization.  PROLASTIN A1PI revenues increased $7.6 million or 10.5%, which consisted of $1.2 million in higher volumes and $6.4 million in favorable pricing, including $2.0 million of favorable foreign exchange.  Albumin revenue increased by $3.3 million or 18.7%. These increases were offset primarily by reduced contract manufacturing volume for Canadian Blood Services due to the multi-source strategy and lower sales of Koate DVI Factor VIII and Hyperimmunes.

Gross profit increased to $163.6 million for the 2010 first quarter compared to $162.6 million in the first quarter 2009.  This increase was primarily due to lower unabsorbed infrastructure and start-up costs related to Talecris Plasma Resources, Inc. (TPR), which is Talecris' plasma collection platform, and higher Gamunex IGIV and PROLASTIN A1PI revenue.  Unabsorbed TPR infrastructure and start-up costs declined by $12.4 million, or 86.1%, to $2.0 million for the first quarter 2010 compared to $14.4 million for the first quarter 2009.  This improvement was partially offset by $7.7 million in higher inventory impairment provisions as compared to the first quarter of 2009, which included $4.4 million in recoveries, as well as a $5.6 million increase in non-capitalizable project expenses principally related to construction of the new fractionation facility in the first quarter 2010, which contributed to gross margin of 42.9% during the first quarter of 2010 compared to 43.7% for the 2009 first quarter.

Operating expenses for the first quarter 2010 of $83.9 million represented a decrease of $5.1 million or 5.7% versus $89.0 million incurred during the prior year period.  The decrease was largely due to $4.8 million in lower selling, general and administrative expenses due to the absence of $7.9 million in expenses related to the company's terminated merger agreement with CSL.  We also experienced lower charitable donations of $4.7 million during the three months ended March 31, 2010 as compared to the prior year period.  These decreases were partially offset by a $6.1 million increase in sales and marketing primarily due to the sales force expansion implemented in the second half of 2009.

Operating income was $79.7 million during the first quarter of 2010, which represents an 8.3% increase over the $73.6 million reported during the first quarter of 2009.  Operating margin was 20.9% in the 2010 first quarter compared to 19.8% in the 2009 fourth quarter, an increase of 112 basis points.

Net interest expense was $11.3 million in the 2010 first quarter compared to $21.3 million in the prior year period, a decrease of $10.1 million primarily due to lower debt levels.  Income tax expense during the first quarter of 2010 was $23.3 million at a 33.9% effective tax rate compared to $18.9 million for the first quarter 2009 at a 36.2% effective tax rate.

Net income was $45.3 million for the 2010 first quarter compared to $33.4 million in the first quarter of 2009, representing an increase of $11.9 million or 35.6%.

Diluted EPS for the 2010 first quarter was $0.35 compared to $0.36 (pro forma $0.28) for the 2009 first quarter. Total diluted shares outstanding were 128,183,189 for the 2010 first quarter and 93,357,568 for the 2009 first quarter.      

The 2010 first quarter EBITDA was $87.9 million compared with $80.5 million in the 2009 first quarter. Adjusted EBITDA was $96.7 million in the 2010 first quarter compared to adjusted EBITDA of $98.7 million in the 2009 first quarter.

Full Year 2010 Outlook

Based on current business trends, Talecris reaffirms the full year guidance provided with the year end 2009 earnings release.  Talecris expects full year 2010 revenues to be in the range of $1.62 billion to $1.65 billion. Gross margin is anticipated to be in the range of 42.3% to 42.8% representing an increase of 110 to 160 basis points compared to full year 2009.  Operating margin is anticipated to increase in the range of 300 basis points compared to full year 2009.  Earnings per diluted share are estimated to be in the range of $1.42 to $1.50 based on a weighted average diluted share count of 130.0 million. The 2010 effective tax rate is expected to be 33.8%. Additionally, 2010 capital expenditures are estimated to be in the range of $180 million to $190 million driven primarily by new fractionation construction.

Recent Events

Talecris achieved a number of financial and commercial milestones in the first quarter of 2010 and since the conclusion of the first quarter.  These include:

• On April 12, 2010, Talecris announced results of a new survey showing that Gamunex is the preferred IGIV among neurologists who indicated a brand preference.  In the survey, conducted online by Harris Interactive^® on behalf of Talecris, neurologists selected Gamunex over four times more often than all other available liquid IGIV therapies, with a statistically significant margin (p<0.05).
• In March 2010, Talecris began construction of its new fractionation facility located in Clayton, North Carolina.  The new facility, which is expected to be operational in 2015, will have the capacity to fractionate six million liters of human plasma annually.  
• In March 2010, Talecris launched its next generation A1PI product, PROLASTIN-C, in the United States.  By the end of March, 44 percent of patients were converted to PROLASTIN-C from PROLASTIN.  The company anticipates converting all U.S. PROLASTIN patients to PROLASTIN-C by the end of the second quarter of 2010.  
• Talecris is investigating its Direct Acting Thrombolytic (DAT) Plasmin to assess its safety and efficacy in the treatment of aPAO, a condition in which arterial blood flow to the extremities, usually the legs, is blocked by a clot. Talecris completed its Phase I clinical trial in the first quarter and is finalizing the design of its Phase II trial which will initiate in the latter half of 2010.
• Talecris has received approval to proceed with the proof of concept trial for plasma-derived Plasmin to treat ischemic stroke in six countries outside the U.S.