10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 0-23155

TRIMERIS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	56-1808663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3500 PARAMOUNT PARKWAY

MORRISVILLE, NORTH CAROLINA 27560

(Address of principal executive offices, including zip code)

(919) 419-6050

Registrant’s telephone number, including area code:

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.001 par value	The NASDAQ Stock Market, LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ¨ No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ¨ No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨ Accelerated filer  x Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨ No  x

The aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 30, 2006 was approximately $170,661,000 (based on the last sale price of such stock as reported by The NASDAQ Stock Market, LLC, on its NASDAQ Global Market on June 30, 2006).

The number of shares of the registrant’s common stock outstanding as of March 12, 2007 was 22,142,527.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2007 Annual Meeting of Stockholders, and to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year are incorporated by reference in Part III of this Form 10-K.

TRIMERIS, INC.

FORM 10-K ANNUAL REPORT

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006

Table of Contents

Item Number		Page
	PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	17
Item 1B.	Unresolved Staff Comments	30
Item 2.	Properties	30
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
	PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	33
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	61
Item 8.	Financial Statements and Supplementary Data	61
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	61
Item 9A.	Controls and Procedures	61
Item 9B.	Other Information	62
	PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	63
Item 11.	Executive Compensation	63
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63
Item 13.	Certain Relationships and Related Transactions, and Director Independence	63
Item 14.	Principal Accountant Fees and Services	63
	PART IV.
Item 15.	Exhibits and Financial Statement Schedules	64
Signature Page		S-1
Exhibit Index		S-2

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PART I

ITEM 1.    BUSINESS

Statements in this Annual Report on Form 10-K that are not historical fact are forward-looking statements. These forward-looking statements include statements regarding Trimeris, Inc.’s (“Trimeris” or “Company”) expectations, hopes, beliefs, intentions or strategies regarding the future and are subject to a number of known and unknown risks and uncertainties, many of which are beyond our control. Such statements can be identified by the fact that they use words as “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning. While we believe these statements are accurate, our business is dependent on many factors, some of which are discussed in the “Risk Factors” and “Business” sections of this Annual Report on Form 10-K. Many of these factors are beyond our control, and any of these and other factors could cause actual clinical and financial results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials and our previous financial results are not necessarily indicative of our future financial results. Please read the “Risk Factors” section in this Annual Report on Form 10-K for further information regarding these factors. We undertake no obligation to release publicly the results of any revisions to the statements contained in this report to reflect events or circumstances that occur subsequent to the date of this Annual Report on Form 10-K.

Overview

We are a biopharmaceutical company primarily engaged in the discovery, development and commercialization of a new class of antiviral drug treatments called fusion inhibitors. Fusion inhibitors impair viral fusion, a complex process by which viruses attach to, penetrate and infect host cells. If a virus cannot enter a host cell, the virus cannot replicate. By inhibiting the fusion process of particular types of viruses, like the Human Immunodeficiency Virus (“HIV”), our first commercial product and our compounds under research offer a novel mechanism of action with the potential to treat a variety of medically important viral diseases.

Our organizational emphasis is on scientific research and development. Our strategy is to create value for patients, caregivers, employees and stockholders by discovering, developing, and commercializing novel medicines that save and improve lives. Our strengths include a leadership position in HIV viral entry, world-class peptide drug development and commercialization expertise, and a proven collaborative partner.

In late 2006, we shifted our strategic emphasis and announced that we would be reorganizing our corporate structure to focus on FUZEON’s profitability and our strength in research and early stage development.

With this new structure in place the Company intends to meet the following objectives:

• Continue activities that will help maintain the strength of the FUZEON franchise while relying more on Roche’s commercial and development capabilities. By eliminating redundancies and unnecessary projects, we will reduce our operational and infrastructure costs.

• Pursue development of TRI-1144 our lead Next Generation Fusion Inhibitor (“NGFI”) peptide.

• Leverage our expertise in drug discovery and development to further build and diversify our pipeline by evaluating opportunities within and outside the HIV arena.

FUZEON is our first-generation HIV fusion inhibitor, developed in collaboration with F. Hoffmann-La Roche Ltd, (“Roche”). FUZEON has been shown to inhibit HIV viral fusion with host cells by blocking the conformational rearrangement of an HIV protein called gp41. The Food and Drug Administration (“FDA”) approved the use of FUZEON in combination with other anti-HIV drugs for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing anti-HIV therapy. The FDA granted accelerated approval for the commercial sale of FUZEON in 2003, and commercial sales of FUZEON began in March that same year. Full approval was granted in October 2004. Roche also filed an application for European marketing approval of FUZEON in September 2002 and was granted marketing approval under exceptional circumstances by the European Agency for the Evaluation of Medicinal Products in May 2003.

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Roche is manufacturing FUZEON drug substance in its Boulder, Colorado facility. Roche uses this drug substance to produce FUZEON finished drug product at their manufacturing facility in Basel, Switzerland. FUZEON is distributed and sold by Roche through Roche’s sales and distribution network throughout the world in countries where regulatory approval has been received.

Commercial sales of FUZEON began in the United States in March 2003. Under our Development and License Agreement (defined below) with Roche, we share profits equally from the sale of FUZEON in the United States and Canada. During 2006, net sales of FUZEON in the United States and Canada grew 19% to $134.2 million from $112.7 million in 2005, and were $85.7 million in 2004. Net sales outside the United States and Canada grew 20% to $114.8 million in 2006 from $95.5 million in 2005 and were $49.5 million in 2004. Unit sales of FUZEON are expressed in kits shipped. A kit represents a one-month supply of FUZEON for a patient. During 2006, Roche sold and shipped approximately 80,000 kits to wholesalers in the United States and Canada.

In September 2006, we announced an amendment that extended and modified the terms of our Research Agreement (defined below) with Roche to discover, develop and commercialize the next generation of HIV gp41 peptide fusion inhibitors. As amended, the Research Agreement focuses on the discovery of new HIV gp41 peptide fusion inhibitors with enhanced efficacy and resistance profiles along with the investigation of improved formulation and delivery technologies to enable less frequent and more convenient administration of peptide fusion inhibitors.

In March 2007, the Company entered into an agreement with Roche that further amends the terms of the Research Agreement. Pursuant to this March 2007 agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides covered by the Research Agreement will be returned to Trimeris. In exchange, Trimeris has agreed to pay Roche a low single digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit.

In addition, Roche agreed to return the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche has retained an exclusive license to manufacture and sell FUZEON worldwide.

Commercial Products

FUZEON

FUZEON is our first marketed product for the treatment of HIV. The FDA has approved the use of FUZEON in combination with other anti-HIV drugs for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing anti-HIV therapy. The standard approach to treating HIV infection has been to lower viral loads by using a combination of drugs. There are twenty-nine FDA-approved drugs for the treatment of HIV.

FUZEON Mechanism of Action

FUZEON is a 36-amino acid synthetic peptide that binds to a key region of an HIV surface protein called gp41. FUZEON blocks HIV viral fusion by interfering with certain structural rearrangements within gp41 that are required for HIV to fuse to and enter a host cell.

In the HIV infection process, the gp120 surface protein is stripped away from the virus after gp120 binds to host cell receptors. Two specific regions in the gp41 protein are thus freed and can bind to one another and cause the viral membrane to fuse with the host cell membrane. If FUZEON is present in the bloodstream, it binds tightly to one of these regions within the gp41 protein and blocks the structural rearrangement necessary for the virus to fuse with the host cell. Since the virus cannot fuse with the host cell, it cannot penetrate and release its genetic material into the cell. As a result, HIV infection of the host cell is inhibited and HIV replication within that cell is prevented.

Commercial Results

Under our Development and License Agreement with Roche, Trimeris and Roche share profits from the sale of FUZEON in the United States and Canada. This amount is reported as collaboration income or loss, as a component of

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revenue, in the Statements of Operations. Collaboration income (loss) is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross margin. Gross margin is reduced by selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income (loss). For the year ended December 31, 2006, net sales of FUZEON in the United States and Canada totaled approximately $134.2 million compared to $112.7 million in 2005 and $85.7 million in 2004. During the year ended December 31, 2006, the gross profit from the sale of FUZEON exceeded sales, marketing and other expenses resulting in the Company’s share of operating income from the sale of FUZEON in the United States and Canada of $21.7 million compared to $8.6 million for 2005. During the year ended December 31, 2004, sales, marketing and other expenses exceeded the gross profit from the sale of FUZEON resulting in the Company’s share of operating loss of $16.1 million. Unit sales of FUZEON are expressed in kits shipped. A kit represents a one-month supply of FUZEON for a patient. For the year ended December 31, 2006, Roche sold and shipped approximately 80,000 kits compared to 72,000 kits in 2005 and 59,000 kits in 2004. The number of kits shipped and the resulting sales levels may not remain constant and may increase or decrease in the future.

FUZEON is widely available through retail and specialty pharmacies across the U.S. and Canada. Revenue from FUZEON sales is recognized when Roche ships the drug, and title and risk of loss passes to wholesalers. All sales are recorded by Roche.

Under our Development and License Agreement with Roche, we receive a royalty based on net sales of FUZEON, as recorded by Roche, outside the United States and Canada. For the year ended December 31, 2006, net sales of FUZEON, as recorded by Roche, outside the United States and Canada were $114.8 million compared to $95.5 million in 2005, and $49.5 million in 2004. FUZEON is commercially available in over fifty-three countries, including all the major countries in Europe.

Regulatory

In October 2004, the FDA granted full approval to FUZEON. The FDA had previously granted accelerated approval to FUZEON on the basis of 24-week data in March 2003.

In June 2004, the European Medicines Evaluation Agency, (“EMEA”) granted full approval to Roche to market FUZEON in the European Union. Outside the United States,, Roche has received approval and reimbursement for FUZEON in over fifty-three countries.

Manufacturing

Roche manufactures the bulk drug substance of FUZEON. Based on our progress and experience to date, we believe that Roche will be able to produce a supply of FUZEON sufficient to meet anticipated demand. If FUZEON sales levels do not meet Roche’s and our expectations, the resulting production volumes may not allow Roche to achieve their anticipated economies of scale for FUZEON. If Roche does not achieve these economies of scale, the costs of goods for FUZEON could increase.

Roche performs the fill-finish and all final product storage and packaging operations for FUZEON. Raw materials and supplies required for the production of FUZEON are generally available from various suppliers in quantities adequate to meet our needs. Each of our third-party service providers, suppliers and manufacturers are subject to continuing inspection by the FDA or comparable agencies in other jurisdictions. Any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products, including as a result of a failure of Roche’s or our third-party service provider’s facilities to pass any regulatory agency inspection, could significantly impair our ability to sell FUZEON.

We believe that Roche’s existing manufacturing facilities and outside sources will allow us to meet our near-term and long-term manufacturing needs for FUZEON. Roche’s manufacturing facilities operate under multiple licenses from the FDA, regulatory authorities in the EU and other regulatory authorities.

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2006 Results and Developments

Given the demonstrated efficacy, durability and safety of FUZEON-based therapies in treatment experienced patients, we, in concert with our partner Roche, have focused much of our promotional efforts on three primary objectives: expanding the adoption and initiation of therapy with FUZEON enhancing retention of patients on therapy, and ensuring full access for individuals that have been prescribed FUZEON. Following our corporate restructuring in late 2006, Trimeris intends to take a lesser role in the day-to-day activities involved in the commercial support of FUZEON in the marketplace. We expect Roche to continue with the current and planned major commercial initiatives with greater overall efficiency.

Trimeris and Roche have previously launched a nationwide, comprehensive nursing support program—FUZEON Nurse Connections (“Connections”). This program is designed to augment the existing dedicated patient treatment hotline known as the FUZEON Answer Center (“FAC”). Connections is a program staffed by experienced nurses, fully trained on the preparation and administration of FUZEON with other HIV therapies. Connections nurses travel to patients’ homes or physicians’ offices, providing supplemental assistance with the proper administration and use of FUZEON. All patients receiving FUZEON are eligible for Connections support.

The focus of our medical education and promotional campaigns in 2006 was directed towards communication of the “FUZEON effect,” or “FUZEON factor,” as referred to by some HIV investigators. The first indication that the combination of FUZEON with an active, boosted protease inhibitor leads to maximal viral suppression came from data from two Phase III clinical trials called TORO I and II. In these studies, FUZEON when combined with an active, boosted protease inhibitor, leads to maximal viral suppression (<400 copies of virus/ml³) in the majority (55%) of patients as compared to less than 25% of patients not receiving FUZEON—thus the “FUZEON factor”. Subsequent presentations of data from four other studies, involving two other active boosted protease inhibitors, RESIST I and II for Tipranavir (Boehringer-Ingelheim) and POWER I and II for TMC-114 (Tibotec, Inc.), have validated the “FUZEON factor” observed in the TORO trials. The data from these trials consistently demonstrate that undetectable viral load was achieved in the majority of patients when FUZEON was combined with these active antiretroviral drugs. The strength of this data led the Department of Health and Human Services, or DHHS, to revise its guidelines on the management of HIV/AIDS to state that viral re-suppression is the goal of therapy for treatment experienced patients. These guidelines specifically indicate that patients who receive more active drugs (e.g. an active ritonavir-boosted protease inhibitor and FUZEON), had a better and more prolonged virologic response. Throughout 2006, this information and the recommendations from the HIV treatment guidelines have been conveyed in both medical education and promotional initiatives. We anticipate that these guidelines will be increasingly applied in clinical practice as this information is more widely disseminated in 2007.

In October 2006, data was presented at the annual Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) indicating that nearly all treatment-experienced HIV patients who initiated therapy with FUZEON and the investigational integrase inhibitor MK-0518 in a clinical trial achieved undetectable levels of HIV (less than 400 copies per mL of blood). Such response rates of viral suppression greatly surpass the results of other clinical trials of HIV patients living with drug-resistant virus.

The ability to combine FUZEON with active, newly approved drugs, or drugs in late stages of clinical development, provides treatment-experienced patients with the opportunity to fully re-suppress HIV replication. In order to facilitate immediate access to FUZEON for treatment-experienced patients involved in studies of new, active agents, Trimeris and Roche continue to support the FUZEON Accelerated Simultaneous Access Program (“ASAP”). This program provides immediate access to FUZEON for patients who are starting treatment with FUZEON in combination with an investigational anti-HIV drug obtained through an expanded access program (“EAP”). FUZEON ASAP helps to facilitate simultaneous initiation of FUZEON with an active investigational agent, in a regimen deemed medically appropriate by a physician. For patients starting treatment with FUZEON in combination with an investigational drug in expanded access, FUZEON ASAP provides up to a 90-day supply of FUZEON at no cost to the patient. Upon request, patient support and adherence programs, including Connections nurse visits, are provided to help facilitate successful initiation and continuation of therapy. Trimeris and Roche cannot ensure access to FUZEON for all patients beyond the initial 90 days if reimbursement is not then established. However, reimbursement assistance is available to assist in securing coverage for continued FUZEON use.

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Our efforts to further enhance a patient’s ability to initiate and remain on FUZEON containing therapies continued in 2006, as we continued to explore the possibility of alternate delivery systems for FUZEON. Among these are the Becton Dickinson 31 gauge, thin-walled syringe/needle (“BD Ultrafine II”) and the Biojector 2000 (“B2000”) needle-free delivery system.

The BD Ultrafine II syringe is a shorter, insulin-type of needle that may afford more consistent subcutaneous injection dosing, as compared to the currently provided 27 gauge needle; this may lead to improvement in the incidence or severity of potential injection site reactions (“ISRs”) associated with FUZEON administration. The BD Ultrafine II was evaluated in the Phase IIIb/IV study known as T-20 Qualité. Initial results from the first 100 patients enrolled in this study indicated a low overall incidence of ISRs among patients using the BD Ultrafine II for FUZEON administration; a majority of patients had either no or only minor ISRs at the end of 12 weeks. Patients in the study also reported that quality of life parameters were improved with FUZEON over the 12-week period observed. Full data from this study are anticipated to be reported in 2007. Clinicians and patients considering or already using FUZEON as part of their HIV regimens can readily access the BD Ultrafine II needle and syringe through their preferred pharmacies.

The B2000 has been used to deliver millions of injections in a wide range of healthcare settings since receiving FDA approval in 1996. The B2000 needle-free injection works by forcing medication rapidly through a tiny orifice held against the skin, creating a fine stream of fluid that penetrates the skin and deposits medication in the subcutaneous tissue. Positive data from the T-20 405 bioequivalence study of the B2000 needle-free device (versus standard needle/syringe) formed the basis for a supplemental NDA application (“sNDA”) to the FDA in May 2005 to include use of the B2000 for administration in the FUZEON label.

In November 2005, the FDA issued an approvable letter regarding the B2000 sNDA. In its reply, the FDA indicated that the filing was approvable pending receipt of the final study report from the ongoing FUZEON WAND (With a Needle-Free Device; ENF-404) study, a randomized, open-label, two-way, cross-over study assessing the tolerability of the B2000 device for administration of FUZEON.

At the September, 2006 ICAAC meeting, the Company presented results from the WAND trial, showing that it achieved the primary endpoint of a 50% reduction in the incidence of painful ISR’s with use of the B2000 needle-free device compared to standard needle-syringes (36% for the device vs. 71% for needle-syringe, p<0.01). Following use of both administration systems, 84% of patients preferred the B2000 needle-free device versus 16% favoring standard needle/syringe administration.

In October 2006, the Company and Roche had discussions with the FDA regarding the submission of an amended sNDA for inclusion of the B2000 device as an administration option for FUZEON. The FDA acknowledged that, based on currently available evidence, administration with B2000 achieves similar blood levels of FUZEON compared to standard needle-syringe administration. However, the FDA indicated that a small number of certain adverse events related to administration of FUZEON with the B2000 device (hematomas and nerve pain) warrant review of additional information in order to better characterize the incidence of these events. Some of these events were associated with use of B2000 to deliver FUZEON either in close proximity to bone joints or into scar tissue. In the current product label, FUZEON is recommended for injection in the upper arm, upper leg and stomach. The FUZEON labeling also cautions against injecting into scar tissue.

Based on this information, the FDA requested additional safety information on the nature and occurrence of ISRs, including data from the FUZEON BOSS (Biojector Open Label Safety Study; ENF 407) trial, as well as from other data sources. Initiated in 2006, BOSS has completed enrollment of approximately 330 current or prior FUZEON patients at 43 trial sites in the U.S. and Puerto Rico in an eight-week study to assess the safety and patient acceptance of B2000 compared to standard needle-syringe administration for FUZEON. The Company expects to report data from this trial in 2007. Collectively, WAND and BOSS will provide data from two distinct patient cohorts–FUZEON naïve patients as well as those currently receiving FUZEON as part of their anti-HIV regimens. This will provide us a more complete assessment of the potential benefits of needle-free administration of FUZEON.

In advance of receiving additional B2000 safety data, the FDA has requested changes to the current FUZEON labeling (both Package Insert and Patient Injection Instructions) to add precautions regarding hematoma and nerve pain

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associated with B2000 administration, as well as precautions regarding the use of the B2000 device in patients with bleeding disorders. Submission of the additional B2000 safety data by Roche as part of an amended sNDA is likely to occur in 2007, when data from the BOSS trial and other information requested by the FDA become available. Following the Trimeris workforce reduction in November 2006, Roche has taken the primary role with respect to interacting with the FDA on the B2000 submission.

Current and Future FUZEON Clinical Trials

Following Trimeris’ workforce reduction in November 2006, Roche has taken the primary role in conducting our current and future FUZEON clinical trials. We expect Roche to continue the ongoing clinical trials as well as initiate new clinical trials with FUZEON during 2007. These trials will focus on the following primary needs for current and potential FUZEON patients: the evaluation of new delivery systems that may reduce needle-phobia and/or ameliorate the rate/severity of ISRs; the effect of FUZEON in patients with less treatment experience than in our TORO trials; and the potential for reducing other anti-HIV drug related toxicities and/or adverse events. The table below summarizes the current on-going, or recently completed, clinical trials.

Name	Description
T20 BOSS	An assessment of the use of the B2000 system in patients at risk of discontinuing FUZEON therapy due to injection related difficulties
T20 Intense	Comparative trial in earlier line patients assessing ongoing FUZEON use compared to an induction/ maintenance approach.
T20 SwitchTox	An assessment of the substitution of Anti-Retrovirals (“ARV’s”) associated with undesirable side-effects/toxicities in favor of FUZEON.
T20 BLQ	An assessment of FUZEON in combination with an investigational protease inhibitor.

The T20 BOSS trial involves the use of the currently approved Biojector 2000 needle-free injection device manufactured by Bioject Medical Technologies, Inc., described above.

Collaborations

Roche

In 1999, we entered into a worldwide agreement with Roche to develop and market FUZEON and T-1249, or a replacement compound (the “Development and License Agreement”). Our agreement with Roche grants them an exclusive, worldwide license for FUZEON and T-1249 and certain other peptide compounds in the field of HIV. Roche may terminate its license as a whole or for a particular country or countries in its sole discretion with advance notice. We will share development expenses and profits for FUZEON and T-1249, or a replacement compound, in the United States and Canada equally with Roche. Outside of the United States and Canada, Roche will fund all development costs and pay us royalties on net sales of FUZEON and T-1249, or a replacement compound, for a specified term. In addition, the agreement calls for Trimeris to receive up to $68.0 million in upfront and milestone payments, of which we have achieved $28.3 million as of December 31, 2006. In 2006, Roche and Trimeris amended the terms of the Development and License Agreement to, among other things, modify the payments upon achievement of future milestones. The amendment eliminates the concept of a Replacement Compound (as defined in the Development and License Agreement) and, as a result, Roche will only be responsible for one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve-month sales threshold for FUZEON in the United States and Canada.

Our collaboration with Roche is a contractual one and is not a separate legal entity. Consequently, we have no investment in any collaboration entity. All assets used in the manufacture of FUZEON by Roche are owned and operated by Roche.

Roche is responsible for the sales, marketing and distribution of FUZEON and all sales are made through their sales force. The results of our commercial operations are reported on our financial statements as “Collaboration income (loss)” which is calculated as follows: Total gross sales of FUZEON by Roche in the United States and Canada is

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reduced by estimates for discounts, rebates and returns resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross margin. Gross margin is reduced by selling and marketing expenses and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income (loss) is reported as collaboration income (loss). This information is disclosed below in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Critical Accounting Policies—Collaboration Income (Loss).”

Substantially all of the data used to calculate the collaboration income (loss) is derived from information provided by Roche. We compare sales amounts to data from third party services such as IMS for accuracy. Roche’s estimate of discounts, rebates and returns is first reviewed by Trimeris based on their knowledge of the payor mix and other factors. The collaboration has a North American Joint Marketing Committee, (“NAJMC”), that oversees the commercialization activities related to FUZEON. The NAJMC consists of representatives from Roche and Trimeris. The NAJMC reviews the budgets for the direct marketing costs and Roche sales force costs charged to FUZEON and the costs of departments at Roche that devote time to FUZEON-related issues, such as government affairs and reimbursement. The actual costs are reviewed by the Trimeris NAJMC members and compared to budgeted amounts prior to inclusion in collaboration income (loss). In the event that we are not satisfied after reviewing the actual costs, we will withhold payment until presented with satisfactory documentation or appropriate adjustments to the charges are made.

We recognize 50% of the total collaboration gross profit (loss), which includes estimates made by and recorded by Roche for reductions to gross sales for expected returns of expired products, government rebate programs, such as Medicaid reimbursements, and customer incentives, such as cash discounts for prompt payment. Estimates for government rebate programs and cash discounts are determined by Roche based on contractual terms, historical information from Roche’s anti-HIV drug portfolio and Roche’s expectations regarding future utilization rates for these programs. Estimates for product returns are based on an on-going analysis of industry return patterns and historical return patterns by Roche for its anti-HIV drug portfolio. This includes the purchase of third-party data by Roche to assist Roche and us in monitoring channel inventory levels and subsequent prescriptions for FUZEON. We also monitor the activities and clinical trials of our key competitors and assess the potential impact on future FUZEON sales and return expectations where necessary. Expected returns of FUZEON kits are generally low as FUZEON has a high Wholesale Acquisition Cost (“WAC”), compared to other anti-HIV drugs, and requires significantly more storage space than other anti-HIV drugs due to the size of a monthly kit because FUZEON requires twice daily injections. Consequently wholesalers tend to stock only the necessary volumes of FUZEON inventory. We believe that, on average, wholesalers hold about 1.5 to 2 weeks supply of FUZEON that has been sold by Roche to wholesalers, but not yet purchased by patients. For the past three years, we have observed some seasonality in wholesaler purchasing patterns with wholesalers tending to increase on hand supplies of FUZEON to roughly 4 weeks during the fourth quarter. The current shelf life of FUZEON is 36 months. Roche reviews the estimates discussed above on a quarterly basis and adjusts estimates as appropriate for changes in facts or circumstances. This estimate may reduce or increase our share of collaboration income (loss) under our Development and License Agreement.

In 2005, the Company entered into an amendment (“Manufacturing Amendment”) with Roche setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment amends and supplements the terms of the Development and License Agreement and addresses several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche will be responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche will therefore be financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the United States and Canada. In addition, Roche will be responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee will govern the schedule of converting supply chain materials that are in inventory as of that date into product.

The Manufacturing Amendment also sets forth the terms for which Roche-owned, FUZEON manufacturing equipment and facilities in Boulder may be used for the manufacture of other products. In addition, the Manufacturing Amendment provides for the Company’s payment of certain pre-launch inventory carrying costs related to the sale of FUZEON and Roche’s payment to the Company of an outstanding manufacturing milestone payment under the

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collaboration. The Manufacturing Amendment also outlines certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions. For further discussion of accounting matters related to the Manufacturing Amendment, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and Note 9—“Roche Collaboration” in the “Notes to the Financial Statements.”

We have also entered into a research agreement with Roche to discover, develop and commercialize additional anti-HIV gp41 fusion inhibitor peptides (the “Research Agreement”). Pursuant to the Research Agreement, Trimeris and Roche agreed to share the worldwide research, development and commercialization expenses and profits from the worldwide sales of anti-HIV gp41 fusion inhibitor peptides created after July 1, 1999.

In January 2006, Roche and Trimeris announced the selection of two next-generation fusion inhibitor peptides for co-development and progression into further pre-clinical studies. The peptides, TRI-1144 and TRI-999, first synthesized at Trimeris, are distinct compounds derived from HR2 sequences of HIV. These peptides have been developed with the specific goal of achieving durable suppression of HIV by increasing the potency of the molecules and raising their genetic barrier to the development of resistance. Also central to the development program is increased patient convenience via simpler, more patient-friendly administration, with a target of once-weekly dosing.

In September 2006, the Company entered into an agreement with Roche that amends the terms of the existing Research Agreement between the parties, as well as the terms of the Development and License Agreement (the “Third Amendment”). The Third Amendment extends the length of the Research Term (as defined in the Research Agreement) by an additional two years through December 31, 2008. The Third Amendment covers the research, development and commercialization of the companies’ NGFI peptides, namely TRI-999 and TRI-1144.

In addition, pursuant to the Third Amendment, Trimeris has the option to participate in the development and commercialization of any Penzberg Peptide (as defined in the Third Amendment) that is accepted for development by Roche. In order to exercise its option, the Company must pay Roche a one-time, lump sum payment of $4.5 million.

The Third Amendment also specifies that further development of T-1249 under the Development and License Agreement shall be limited to treating patients currently being administered T-1249. In addition, pursuant to the Third Amendment, the Development and License Agreement shall only govern the activities with regard to T-20, and the concept of a Replacement Compound is no longer applicable. As a result of the Third Amendment, Roche will only be responsible for one remaining $5.0 million milestone payment under the Development and License Agreement payable upon the achievement of a certain cumulative twelve-month sales threshold for FUZEON in the U.S. and Canada.

In March 2007, the Company entered into an agreement with Roche that further amends the terms of the Research Agreement. Pursuant to this March 2007 agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides covered by the Research Agreement will be returned to Trimeris. In exchange, Trimeris has agreed to pay Roche a low single digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit. In addition, Roche agreed to return to Trimeris the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche has retained an exclusive license to manufacture and sell FUZEON worldwide.

Trimeris now has the sole right to continue development of TRI-1144 and the Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared equally all costs related to the research and development of TRI-1144. Beginning in March 2007, any future costs related to TRI-1144 research and development that may be incurred will be borne solely by Trimeris.

Array Biopharma

In June 2004, we announced the renewal of an agreement with Array Biopharma Inc. (“Array”), to discover small molecule entry inhibitors directed against HIV. The terms of the agreement are substantially similar to those of the initial agreement, signed in August 2001. Over the course of the agreement, Array has received research funding and the right to receive milestone payments and royalties based on the success of this program. In connection with the agreement, as amended, Trimeris has screened a library of small molecule compounds created by Array against HIV

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entry inhibitor targets. We have completed screening of these compounds for activity in our assays and have completed the process of evaluating these compounds as possible clinical candidates. The research term of the agreement expired according to the terms of the agreement on December 31, 2005. As of December 31, 2006, there are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

Neokimia, Inc.

In 2002, we entered into an agreement with Neokimia Inc. (“Neokimia”), to discover and develop small molecule HIV fusion inhibitors. We have initially screened a library of small molecule compounds provided by Neokimia and Neokimia will use its proprietary drug discovery platform to optimize any lead compounds with the goal of identifying one or more preclinical drug candidates. Neokimia has provided the initial library of compounds on a nonexclusive basis but will work exclusively with us on the HIV gp41 fusion protein target during the term of the collaboration. In 2003, we exercised our option to select an additional target related to HIV fusion to add to the collaboration. The research performed under the collaboration has been performed pursuant to a research plan that has been mutually agreed upon by the parties. The term of this research plan has concluded. In December 2003, Neokimia merged with Tranzyme, Inc., (“Tranzyme”), and Tranzyme acquired Neokimia’s rights and obligations under the 2002 agreement. As of December 31, 2006, there are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

ChemBridge Research Laboratories, Inc.

In June 2005, we entered into a drug discovery and development agreement with ChemBridge Research Laboratories, Inc. (“CRL”). Under the terms of the agreement, Trimeris and CRL will work together to discover and develop small molecule inhibitors of HIV. Specifically, pursuant to the agreement, we are working with CRL to identify small molecule inhibitor compounds against two HIV entry targets. Trimeris and CRL will collaborate to identify orally active lead compounds and then optimize preclinical candidates. Trimeris will be responsible for preclinical and clinical development, manufacturing, regulatory and commercial activities on a worldwide basis for all compounds and products resulting from the collaboration. Trimeris will provide funding to CRL to support medicinal chemistry efforts, and CRL will work exclusively with us on these programs. CRL will be eligible to receive milestone payments based on the achievement of specific development and commercial events and may also be eligible to receive royalties on net product sales. As of December 31, 2006, there are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

Research

As part of our business strategy, we conduct research and development activities both internally and with our collaborative partners. Our research efforts focus primarily on treating viral diseases by identifying novel mechanisms for blocking viral entry. In total, our research and development (“R&D”) expenses were $18.3 million for each of 2006 and 2005, compared with $21.3 million for 2004.

Viral Fusion Inhibitors

Viruses utilize the intracellular machinery of a cell to make components that are necessary for viral replication. Viruses cause disease when their uncontrolled replication interferes with the basic function of the invaded cells. The attraction of a virus to the cell it infects is based upon a specific interaction between the receptors on the surface of the target cell and the virus.

Viral infection of cells occurs through a cyclical, multi-step process, consisting of viral entry, intracellular replication and release. Once the viral genetic material is inside the target cell, this material then directs the target cell to produce viral proteins and enzymes that are necessary to complete the replication cycle of the virus. When viral replication is completed, newly formed viruses are released from the cell. These newly formed viruses spread by infecting new cells. The cycle is repeated when the replicated virus infects the new cells.

Currently marketed antiviral therapies typically target specific enzymes that viruses use to replicate. Other compounds that are in clinical development, including ours, focus on the entry of the viruses into target cells. We have

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pioneered the discovery and development of a new class of anti-HIV compounds, called fusion inhibitors, that prevents one of the crucial steps in viral entry from occurring by blocking the conformational rearrangement of HIV required to allow HIV to fuse with a host cell. FUZEON is a first-generation fusion inhibitor that prevents HIV from entering and infecting cells. T-1249 is a rationally designed second-generation fusion inhibitor. Our next generation peptides are also rationally designed peptides with the goal of being long-acting and having an enhanced resistance profile as compared to FUZEON.

Next Generation HIV gp41 Peptide Fusion Inhibitors

With respect to our next generation peptide program, our intention has been to identify a NGFI candidate that has an optimized virological and pharmacokinetic profile as well as to identify a sustained-release formulation for that peptide that will allow significantly less frequent dosing.

In January 2006, Roche and Trimeris announced the selection of two NGFI peptides for co-development and progression into further pre-clinical studies. The peptides, TRI-1144 and TRI-999, first synthesized at Trimeris, are distinct compounds derived from HR2 sequences of HIV. In connection with the announcement of the selection of two NGFI peptides for co-development and progression into further pre-clinical studies, Trimeris received a payment from Roche of $2.5 million. In September 2006, Roche and Trimeris agreed that, based on the results of completed preclinical testing, TRI-1144 had met the criteria previously established by the companies for further development. As a result, TRI-1144 was advanced as the lead pre-clinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed.

TRI-1144 has been developed with the specific goal of achieving durable suppression of HIV by increasing the potency of the molecules and raising their genetic barrier to the development of resistance. Also, central to the development program is increased patient convenience via simpler, more patient-friendly administration with a target of once-weekly dosing. In 2006, data was presented at the Conference on Retroviruses and Opportunistic Infections (“CROI”) indicating that TRI-1144 possesses potent antiviral activity and durable control of HIV replication in vitro, with desirable pharmacokinetic properties in vivo.

More specifically, the studies presented at CROI included evaluations of TRI-1144 in three key areas:

• Potency against FUZEON -sensitive viruses: TRI-1144 demonstrated potent in vitro activity against a panel of 12 clinical isolates with varying degrees of sensitivity to FUZEON. Potency against this panel of FUZEON-sensitive viruses was up to seven times greater than that of FUZEON.

• Activity against FUZEON -resistant viruses and genetic barrier to resistance: TRI-1144 demonstrated substantial improvements in activity compared to FUZEON against viruses with FUZEON-related resistance. In addition, acquisition of resistance to TRI-1144 was very difficult to derive in vitro, as evidenced by prolonged and repeated exposure to the HIV virus in passaging studies. Together, these results suggest a substantially higher genetic barrier to development of resistance for TRI-1144.

• Phamacokinetic properties: TRI-1144 demonstrated slow, extended clearance properties in monkeys, which was four-fold greater than FUZEON, as well as subcutaneous bioavailability of greater than 80 percent.

In 2006, we initiated advanced formulation studies and preclinical toxicology studies with TRI-1144 as well as clinical scale manufacturing of TRI-1144 under current Good Manufacturing Practices (“cGMP”) conditions within our facility in Morrisville, North Carolina. The results of these studies will determine how rapidly TRI-1144 moves towards first time in man studies. Throughout 2006 and prior to March 2007, all research and development activities were performed under our Research Agreement with Roche.

In March 2007, the Company entered into an agreement with Roche whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared equally all costs related to the research and development of TRI-1144. Beginning in March 2007, any future costs related to TRI-1144 research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on the Company’s determination of the strategic direction of the NGFI program and is unknown at this time.

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Other Research Programs

Small Molecule HIV Entry Inhibitors.    In the past, we have established discovery programs that focused on orally available small molecule HIV entry inhibitors. The development of small molecule HIV entry inhibitors has not fallen within the scope of our collaboration with Roche. We have entered into separate agreements with Array, Neokimia and CRL to discover small molecule entry inhibitors of HIV. While the research phases of the collaborations with Array, Neokimia and CRL are currently dormant, the collaboration agreements remain in effect.

Sales, Marketing and Distribution

Trimeris does not exercise direct control over the sales, marketing or distribution of FUZEON. We currently rely on Roche for the sales, marketing and distribution of FUZEON and, if they are approved by the FDA, any other drug candidates covered by our collaboration with Roche, in accordance with the marketing terms contained in our Development and License agreement with Roche. Roche may terminate this agreement at any time with advance notice. If Roche fails to market FUZEON or our other drug candidates adequately, we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities. If Roche ceases to market FUZEON or our other drug candidates by terminating our agreement, and we were unable to reach agreement with one or more other marketing partners, we would be required to develop internal sales, marketing and distribution capabilities. We may not be able to establish cost-effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms on a timely basis, if at all. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Our agreement with Roche and any sales, marketing or distribution arrangements we establish with other parties gives Roche, and may give those parties, significant control over important aspects of the commercialization of FUZEON and our other drug candidates, including:

• market identification;

• marketing methods;

• pricing;

• drug positioning;

• composition and deployment of sales force; and

• promotional effort and activities.

We may not be able to control the amount or timing of resources that Roche or any third party may devote to our drug candidates.

FUZEON is currently widely available through retail and specialty pharmacies across the United States.

Patents, Proprietary Technology and Trade Secrets

Our success will depend, in part, on our ability, and the ability of our collaborators or licensors, to obtain protection for our products and technologies under United States and foreign patent laws, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties.

We own or have exclusive licenses to 41 issued United States patents, numerous pending United States patent applications, and certain corresponding foreign patents and patent applications. Most of our United States patents issued to date are currently set to expire between 2012 and 2022.

We also rely on trade secrets, know-how and other proprietary information, which we seek to protect, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized disclosure. Our employees, consultants or advisors could disclose our trade secrets or proprietary information to competitors, which would be detrimental to us.

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We have an exclusive, worldwide, royalty-bearing license from the New York Blood Center (“NYBC”) under certain U.S. and foreign patents and patent applications relating to certain HIV peptides. Under this license, the Company is required to pay the NYBC a royalty in the amount equal to one-half of one percent of Net Sales (as defined in the license) of FUZEON sold by Trimeris, or by a sublicensee, in any calendar year, until such time as $100 million of Net Sales is attained; after which the Company will pay the NYBC a royalty in an amount equal to one-quarter of one percent of Net Sales of FUZEON sold by Trimeris and any sublicensee in any calendar year in any Country where the NYBC has a pending, or issued, unexpired and valid claim contained in the licensed patents. The obligation to pay royalties to the NYBC under the Company’s exclusive license to the patents ends on August 22, 2012. We recognized expense of approximately $773,000, $717,000 and $575,000 during 2006, 2005, and 2004, respectively, for royalty payments due to the NYBC related to the sales of FUZEON. Trimeris and NYBC are currently in discussions regarding the correct interpretation of the license agreement as applied to the calculation of the royalty. We have taken into account various possible outcomes of these discussions in the course of our financial reporting and do not expect the results of these discussions to have a material impact on our financial position, results of operations and cash flows.

Competition

We are engaged in segments of the biopharmaceutical industry, including the treatment of HIV, that are intensely competitive and change rapidly. FUZEON and any other HIV fusion inhibitors we may develop will compete with numerous existing therapies. For example, there are 29 different drugs that are currently approved in the United States for the treatment of HIV. In addition, a number of companies are pursuing the development of novel pharmaceutical products that target HIV. Some companies, including several multi-national pharmaceutical companies, are simultaneously marketing several different drugs and may therefore be able to market their own combination drug therapies. We believe that a significant number of drugs are currently under development and will become available in the future for the treatment of HIV.

FUZEON is delivered via twice daily subcutaneous injections, each delivering 90 mg of FUZEON. The other approved anti-HIV drugs are delivered orally at various dosing intervals. We believe that this delivery method is one factor that may limit its uptake as compared to other competing drugs. In addition, the WAC of FUZEON is approximately $23,400 for one year of therapy. This price is significantly higher than any of the other approved anti-HIV drugs. FUZEON’s price relative to other approved anti-HIV drugs may also limit patient demand.

The standard of care for the treatment of HIV is to administer a regimen that combines drugs from each of the different classes of anti-HIV drugs. In the event drug candidates are approved that are effective against HIV virus that has become resistant to currently approved drugs, we believe that using these drugs in combination with FUZEON may provide patients with additional treatment options that do not currently exist. These drugs may be both competitive with FUZEON, in some cases, and synergistic with FUZEON in other cases. The need for drugs that have a novel mechanism of action has stimulated interest in the inhibition of HIV entry into the cell. We believe that several companies are developing or attempting to develop HIV drug candidates that inhibit entry of the virus by targeting one of the HIV co-receptors (i.e. either CCR5 or CXCR4). Several companies including, GlaxoSmithKline PLC, Pfizer Inc., and Schering Plough Corp are or have been developing CCR5 inhibitors that inhibit entry of the virus into the cell through a different mechanism. These compounds are in various stages of development and none are currently approved by the FDA.

Other companies, including Panacos, Gilead, and Merck, are developing new classes of drugs that target novel steps in the viral life cycle (e.g. maturation inhibitors and integrase inhibitors). Of these, the Merck compound, MRK-0518, is the most advanced and it is widely believed that Merck will submit an NDA application to the FDA for approval to market this integrase inhibitor sometime in the next 12 months.

We anticipate that we will face intense and increasing competition in the future as these and other new products enter the market and advanced technologies become available. Existing products or new products for the treatment of HIV developed by our competitors may be more effective, less expensive, or gain wider acceptance by patients and physicians than FUZEON or any other products eventually commercialized by us.

Many of our competitors have significantly greater financial, technical and human resources than we have and may be better able to develop, manufacture, sell, market and distribute products. Many of these competitors have

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products that have been approved or are in late-stage development. These competitors also operate large, well-funded research and development programs. In addition, smaller companies may prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore, academic institutions, governmental agencies and other public and private research organizations are becoming increasingly aware of the commercial value of their inventions for the treatment of HIV and are more actively seeking to commercialize the technology they have developed.

New developments in our areas of research and development are expected to continue at a rapid pace in both industry and academia. If our drug candidates are successfully developed and approved, we will face competition based on:

• the safety and effectiveness of the products;

• the convenience of the dosing regimen;

• the timing and scope of regulatory approvals;

• availability of manufacturing, sales, marketing and distribution capabilities;

• reimbursement coverage;

• price; and

• patent position.

While our experience to date is that new, active HIV drugs and those in clinical development have been used synergistically with FUZEON in order to achieve maximal viral suppression in treatment experienced patients, we cannot guarantee that this will translate into increased patient adoption. Our competitors may develop more effective or more affordable technology or products, or achieve earlier patent protection, product development or product commercialization than we can. Our competitors may succeed in commercializing products more rapidly or effectively than we can, which could have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Government Regulation

Human pharmaceutical products are subject to lengthy and rigorous preclinical testing and clinical trials and other extensive, costly and time-consuming procedures mandated by the FDA and foreign regulatory authorities. The regulatory approval process includes:

• the establishment of the safety and effectiveness of each product candidate; and

• confirmation by the FDA that good laboratory, clinical and manufacturing practices were maintained during testing and manufacturing.

This process typically takes a number of years, depending upon the type, complexity and novelty of the pharmaceutical product. This process is expensive and gives larger companies with greater financial resources a competitive advantage over us.

The steps required by the FDA before new drugs may be marketed in the United States include:

• preclinical studies;

• the submission to the FDA of a request for authorization to conduct clinical trials on an investigational new drug (“IND”);

• adequate and well-controlled clinical trials to establish the safety and efficacy of the drug for its intended use;

• adequate control of a reliable manufacturing process;

• submission to the FDA of a New Drug Application, (“NDA”); and

• review and approval of the NDA by the FDA before the drug may be shipped or sold commercially.

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In the United States, preclinical testing includes both culture and animal laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Certain laboratories involved in preclinical testing must comply with FDA regulations regarding good laboratory practices. Preclinical testing results are submitted to the FDA as part of the IND and, unless there is objection by the FDA, the IND will become effective 30 days following its receipt by the FDA. Submission of an IND does not guarantee that human clinical trials will ever commence.

Clinical trials involve the administration of the investigational drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. These clinical trials typically are conducted in three sequential phases, although the phases may overlap with one another.

Phase I clinical trials represent the initial administration of the investigational drug to a small group of healthy human subjects or, more rarely, to a group of selected patients with a targeted disease or disorder. The goal of Phase I clinical trials is typically to test for safety, dose tolerance, absorption, bio-distribution, metabolism, excretion and clinical pharmacology.

Phase II clinical trials involve a small sample of the actual intended patient population and seek to assess the effectiveness of the drug for the specific targeted indications, to determine dose tolerance and the optimal dose range and to gather additional information relating to safety and potential adverse effects.

Phase III clinical trials are initiated to establish further clinical safety and effectiveness of the investigational drug in a broader sample of the general patient population at geographically dispersed study sites in order to determine the overall risk-benefit ratio of the drug and to provide an adequate basis for all labeling for promotion and use. The results of the research and product development, manufacturing, preclinical testing, clinical trials and related information are submitted to the FDA in the form of an NDA for the approval of the marketing and shipment of the drug.

The FDA closely monitors the progress of each of the three phases of clinical trials and may, at its discretion, reevaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA’s assessment of the risk/benefit ratio to the patient. Once Phase III trials are completed, drug developers submit the results of preclinical studies, clinical trials and information on the manufacturing of the drug to the FDA in the form of an NDA for approval to commence commercial sales. Once submitted, the FDA is required to take action on an NDA within a specified period of time. FDA action may be any one of the following: approval to market the drug, request for additional information or denial of approval. FDA approvals may not be granted on a timely basis, or at all. Furthermore, the FDA may prevent a drug developer from marketing a product under a label for its desired indications, which may impair commercialization of the product. Similar regulatory procedures must be complied with in countries outside the United States.

Our potential drug candidates may not receive commercialization approval in any country on a timely basis, if at all, even after substantial time and expenditures. If we are unable to demonstrate the safety and effectiveness of our product candidates to the satisfaction of the FDA or foreign regulatory authorities, we will be unable to commercialize our drug candidates. This would have a material adverse effect on our business, financial condition, results of operations and market price of our stock. Even if regulatory approval of a drug candidate is obtained, the approval may limit the indicated uses for which the drug candidate may be marketed.

We, Roche and any existing or potential future collaborative partners are also subject to various federal, state and local laws and regulations relating to:

• safe working conditions;

• laboratory and manufacturing practices;

• the experimental use of animals; and

• the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents.

Compliance with these laws, regulations and requirements may be costly and time-consuming and the failure to maintain such compliance by us or our existing and potential future collaborative partners could have a material adverse effect on our business, financial condition and results of operations.

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Drugs are also subject to extensive regulation outside the U.S. In the European Union, there is a centralized approval procedure that authorizes marketing of a product in all countries in the European Union (which includes most of the major countries in Europe). If this procedure is not used, under a decentralized system an approval in one country of the European Union can be used to obtain approval in another country of the European Union under a simplified application process. After approval under the centralized procedure, pricing and reimbursement approvals are also required in most countries.

Even after FDA approval has been obtained, further clinical trials may be required to provide additional data on safety and effectiveness and are required to gain clearance for the use of a product as a treatment for indications other than those initially approved.

Regulatory authorities track information on side effects and adverse events reported during clinical studies and after marketing approval. Side effects or adverse events that are reported during clinical trials can delay, impede, or prevent marketing approval. Similarly, adverse events that are reported after marketing approval can result in additional limitations being placed on the product’s use and, potentially, withdrawal or suspension of the product from the market. Any adverse event, either before or after marketing approval, could result in product liability claims against us. Non-compliance with FDA safety reporting requirements may result in FDA regulatory action that may include civil action or criminal penalties.

If we seek to make certain changes to FUZEON or any other approved product, such as adding a new indication, making certain manufacturing changes, or changing manufacturers or suppliers of certain ingredients or components, we will need FDA review and approval before the change can be implemented.

The FDA, the FDA’s European counterpart, the EMEA and other regulatory agencies regulate and inspect equipment, facilities, and processes used in the manufacturing of pharmaceutical and biologic products prior to providing approval to market a product. If, after receiving clearance from regulatory agencies, a material change is made in manufacturing equipment, location, or process, additional regulatory review and approval may be required. Roche and the Company also must adhere to cGMP and product-specific regulations enforced by the FDA through its facilities inspection program. The FDA, the EMEA and other regulatory agencies also conduct regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval. If, as a result of these inspections, it is determined that the equipment, facilities, or processes used in the manufacture of FUZEON do not comply with applicable regulations and conditions of product approval, regulatory agencies may seek civil, criminal, or administrative sanctions and/or remedies against us, including the suspension of our manufacturing operations. In addition, the FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval. Companies must comply with all applicable FDA requirements. If they do not, they are subject to the full range of civil and criminal penalties available to the FDA.

We and Roche are also subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive, or pay any remuneration in exchange for, or to induce, the referral of business, including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Roche’s and our activities relating to the sale and marketing of FUZEON may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). If the government were to allege or convict us of violating these laws, our business could be harmed.

Third-Party Reimbursement and Healthcare Reform Measures

In the United States and elsewhere, sales of prescription drugs depend, in part, on the consumer’s ability to obtain reimbursement for the cost of the drugs from third-party payors, such as private and government insurance programs.

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Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. Because of the high cost of the treatment of HIV, many state legislatures are also reassessing reimbursement policies for these therapies. If third-party payor reimbursements for any drugs we commercialize are not available or are not available at a level that will allow us or our potential collaborative partners to sell these drugs on a competitive basis, our results of operations will be materially and adversely affected. In addition, an increasing emphasis in the United States on the reduction of the overall costs of health care through managed care has increased and will continue to increase the pressure to reduce the prices of pharmaceutical products. The announcement and/or adoption of these types of proposals or efforts could also materially and adversely affect our business, because the amount of revenues that we may potentially be able to generate in the future for any products we may commercialize could affect an investor’s decision to invest in us, the amount of funds we decide to spend now on our development and clinical trial efforts, and/or our decision to seek regulatory approval for certain drug candidates.

Recently, several major pharmaceutical companies have offered to sell their anti-HIV drugs at or below cost to certain countries in Africa, which could adversely affect the reimbursement climate, and the prices that may be charged, for HIV medications in the United States and the rest of the world. Third-party payors could exert pressure for price reductions in the United States and the rest of the world based on these offers to Africa. This price pressure could limit the amount that Roche would be able to charge for our drugs.

Furthermore, the indication approved by the FDA is for the use of FUZEON in combination with other anti-HIV drugs. Physicians may not readily prescribe FUZEON due to cost-benefit considerations when compared with other anti-HIV drug treatments. Higher prices could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

Roche has made significant progress in achieving reimbursement from the various payors in the United States. Currently FUZEON is covered by Medicaid in all 50 states, 46 of the state and territorial AIDS Drug Assistance Programs, (“ADAPs”), and a majority of private insurers. However, there are reimbursement challenges remaining. Some of the payors require patients to meet minimum medical requirements, such as CD4 cell levels, to receive reimbursement. Other payors limit the number of patients that can receive reimbursement for FUZEON under their plans, and other payors may require co-payments by the patient in order to receive reimbursement for FUZEON that are significantly higher than those required for other anti-HIV drugs. We understand that Roche will continue to actively address these issues during 2007. Outside the United States, Roche has negotiated for reimbursement in most of the major markets.

Environment

We seek to comply with all applicable statutory and administrative requirements concerning environmental quality. We have made, and will continue to make, expenditures for environmental compliance and protection. Expenditures for compliance with environmental laws have not had, and are not expected to have, a material effect on our capital expenditures, results of operations or competitive position.

Human Resources

As of March 12, 2007, we had 64 full-time employees, including a technical scientific staff of 39. None of our employees are covered by collective bargaining arrangements and management considers relations with our employees to be good.

Website

Our website address is www.trimeris.com. We make available free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our directors’ and officers’ Section 16 reports, and all amendments to these reports as soon as reasonably practicable after filing, by providing a hyperlink to the EDGAR website directly to our reports.

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ITEM 1A.     RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

Our business, financial condition or results of operations could be adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

If FUZEON does not maintain or increase its market acceptance, our business will be materially harmed.

We have invested a significant portion of our time and financial resources since our inception in the development of FUZEON. FUZEON is the only drug candidate for which we have obtained FDA approval. We anticipate that for the foreseeable future, our ability to generate revenues and profits, if any, will depend entirely on the successful commercialization of FUZEON. In light of our November 2006 restructuring, commercialization of FUZEON will rely primarily on the support of Roche, and Roche’s ability to manufacture commercial quantities of FUZEON on a cost-effective basis with the requisite quality, and Roche’s ability to successfully market FUZEON throughout the world.

FUZEON is delivered via a twice daily dosing by injection under the skin. All of the other currently approved drug treatments for HIV are delivered orally. Patients and physicians may not readily accept daily injections of an anti-HIV drug treatment, which would limit their acceptance in the market. This delivery method may limit the use of FUZEON compared to other competing drugs. Moreover, because peptides are expensive to manufacture, the price of FUZEON is higher than the prices of currently approved anti-HIV drug treatments. The WAC of one year’s supply of FUZEON in the United States is approximately $23,400. This price is significantly higher than any of the other approved anti-HIV drugs. Furthermore, the indication approved by the FDA is for the use of FUZEON in combination with other anti-HIV drugs, and is more restrictive than the indication for other approved anti-HIV drugs. Physicians may not readily prescribe FUZEON due to cost-benefit considerations when compared with other anti-HIV drug treatments. Higher prices could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

We rely on Roche to manufacture, market and distribute FUZEON throughout the world in countries where regulatory approval has been received. If Roche fails to market FUZEON adequately, we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities.

We may not be able to maintain profitability

With the exception of fiscal year 2006, we have had net operating losses since being founded in January 1993. As of December 31, 2006, our accumulated deficit was approximately $371.1 million. We had net income of $7.4 million in 2006 and net losses of approximately $8.1 million in 2005 and approximately $40.1 million in 2004. Since inception, we have spent our funds on our drug development efforts relating primarily to the development of FUZEON. If FUZEON sales levels do not remain at their current levels, or if expenses increase from their current levels we may experience losses in the future. These losses may increase as we continue our research and development, preclinical testing, clinical trial and regulatory approval efforts.

Roche has significant inventory of both finished product and raw materials on hand, if FUZEON sales do not increase we could face the risk of significant write-offs.

Commercial sales of FUZEON began in March 2003. In advance of the commercial launch, Roche manufactured large quantities of commercial drug product in order to satisfy an anticipated large pent-up demand for FUZEON. Since that time, sales levels have not matched the original demand forecasts resulting in larger than anticipated inventories of raw materials, bulk drug substance and finished drug. These raw materials, bulk drug substance and

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finished drug product lots cannot be used beyond a certain date due to shelf-life expiration. If drug product is not sold before expiration of the shelf-date or if raw materials are not consumed, then Roche may write off these inventories at a significant expense to us. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Any additional financing we obtain may result in dilution to our stockholders, restrictions on our operating flexibility or the transfer of particular rights to technologies or drug candidates.

If we raise funds by selling equity, equity-like instruments (including offering convertible preferred stock or convertible debt), we may dilute our stockholders’ percentage ownership interest in us. Any debt financings may contain restrictive terms that would limit our operating flexibility. Additionally, we may have to obtain funds through arrangements with collaborative partners. These partners may require us to relinquish rights to our technologies or drug candidates. Any of these forms of financing could materially and adversely affect our business, financial condition and results of operations.

Our business may require substantial additional capital, which we may not be able to obtain on commercially reasonable terms, we could be required to cut back or stop certain operations if we are unable to raise or obtain needed funding.

Our total cash, cash equivalents, and investment securities at December 31, 2006 were $48.6 million, up from $36.9 million at December 31, 2005. Our future capital requirements and level of expenses will depend upon numerous factors, including the costs associated with:

• our research and development activities including those relating to TRI-1144;

• our administrative activities including business development;

• our collaboration with Roche including marketing and sales efforts; and

• the consummation of possible future acquisitions of technologies, products or businesses.

Our ability to continue investing in future products will depend on our cash position. We have undertaken numerous measures to increase sales and increase operating efficiencies in order to slow our cash burn. 2006 was our first full year of profitability, however, we can give no assurance that we will in fact operate profitably in the future.

We have financed our activities primarily through public offerings and private placements of our common stock, and we expect to continue to rely primarily on sales of our equity securities if we are required to raise additional funds in the future. Our access to capital could be limited if we do not achieve continued progress in our research and development programs, preclinical testing and clinical trials, and regulatory approvals for our product candidates. If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have a material adverse effect on the market price of our common stock and restrict or eliminate our ability to raise additional funds by selling equity. We also could be limited by overall market conditions. The public capital markets in which our common stock trades have been extremely volatile. Our failure to raise additional funds or to generate sufficient revenues to support our operations would seriously harm our business.

In order to remain profitable we will need to maintain arrangements with third parties for the sale, marketing and distribution of our current and future drug candidates or expend significant resources to develop these capabilities.

We currently have insufficient internal resources to support and implement worldwide sales, marketing and distribution of pharmaceuticals. We currently rely on Roche for the sales, marketing and distribution of FUZEON and plan to rely on Roche for these activities in connection with any other potential drug candidates covered by our collaboration with Roche, in accordance with the marketing terms contained in our development and license agreement with Roche. Roche may terminate this agreement at any time with advance notice. If Roche fails to adequately market FUZEON or our future drug candidates, if approved, we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities. If Roche ceases to market FUZEON and

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we were unable to reach agreement with one or more other marketing partners, we would be required to develop internal sales, marketing and distribution capabilities. We may not be able to establish cost-effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms on a timely basis, if at all. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Our agreement with Roche as to sales, marketing and distribution gives Roche, and any sales, marketing or distribution arrangements we establish with other parties may give those parties, significant control over important aspects of the commercialization of our drugs, including:

• market identification;

• marketing methods;

• pricing;

• drug positioning;

• composition of sales force; and

• promotional activities.

We may not be able to control the amount or timing of resources that Roche or any third party may devote to our current and future drug candidates.

If sufficient amounts of FUZEON, or any other drugs we attempt to bring to market, cannot be manufactured on a cost-effective basis, our financial condition and results of operations will be materially and adversely affected.

Peptide-based therapeutics are made from long chains of molecular building blocks called amino acids. FUZEON is a large peptide composed of a precise 36-amino acid sequence. Large peptides are difficult and expensive to manufacture because the process of creating commercial quantities of a large peptide is lengthy and complicated. We and Roche have selected Roche’s facility in Boulder, Colorado to manufacture commercial quantities of the bulk drug substance of FUZEON. We and Roche have selected one of Roche’s manufacturing facilities to produce the finished drug product from such bulk drug substance through a process involving lyophilization, or freeze-drying. The process Roche is currently using to manufacture FUZEON bulk drug substance requires approximately five months to complete and is extremely complicated, requiring over 100 separate, precisely controlled chemical reactions. Roche is currently manufacturing FUZEON bulk drug substance on a commercial scale, and producing the finished drug product on a commercial scale. However, as a result of this complex manufacturing process, Roche may encounter unexpected difficulties or expense in manufacturing FUZEON in the future.

In addition, if sales of FUZEON do not increase, Roche could be forced to scale back manufacturing at the Boulder facility to levels that are less than optimal. Diminished sales of FUZEON will not allow us to achieve the economies of scale that keep our costs of goods low. Any increase in costs of goods would, in turn, decrease our gross margin and would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

We do not control the manufacturing and production schedule at Roche’s Boulder facility where FUZEON is manufactured and we cannot ensure that significant costs associated with scheduling decisions will not be incurred.

Roche manufactures FUZEON bulk drug substance at their facility in Boulder, Colorado. Roche coordinates the manufacture of FUZEON with the balance of its manufacturing efforts. We do not have input into the manufacturing and production schedule at Roche’s Boulder facility and Roche’s decisions in this area may result in significant additional cost and expense relating to the manufacture of FUZEON.

Since Roche discontinued development of TRI-1144, we may incur significant financial hardship.

We have entered into the Research Agreement with Roche to discover, develop and commercialize novel peptide fusion inhibitors, of which TRI-1144 is the lead candidate. According to the terms of the Research Agreement, Roche

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may choose not to participate in the further development of certain next-generation HIV fusion inhibitor peptides covered by the Research Agreement, including TRI-1144. In March 2007, the Company entered into an agreement amending the terms of the Research Agreement and providing that Roche will no longer be involved in the development of certain next-generation fusion inhibitor peptides, including TRI-1144.

Prior to the execution of this March 2007 agreement, Roche and Trimeris shared equally all costs related to the research and development of TRI-1144. Beginning in March 2007, the Company will now have the sole right to continue development of TRI-1144 and any future costs related to TRI-1144 research and development that may be incurred will be borne solely by Trimeris. These costs may be significant and we may not be able to raise additional funds or to generate sufficient revenues to support the costs of the research and development of TRI-1144. The increase in these costs borne by the Company or a failure to raise or generate sufficient funds to cover these costs could have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Our lead Next Generation Fusion Inhibitor peptide drug candidate is still in the early stages of development and remains subject to clinical testing and regulatory approval. If we are unable to successfully develop and test our lead drug candidate, our business will be materially harmed.

To date, our collaboration with Roche has led to the commercial launch of only a single product, FUZEON. The success of our business depends on FUZEON sales as well as our ability to develop and commercialize an NGFI peptide drug candidate successfully. Our most advanced NGFI peptide drug candidate is TRI-1144, which is currently in late-stage preclinical testing. TRI-1144 must satisfy rigorous standards of safety and efficacy before it can be approved for sale. To satisfy these standards, we must engage in expensive and lengthy testing and obtain regulatory approval of our drug candidates. Despite our efforts, TRI-1144 may not:

• offer therapeutic or other improvement over existing, comparable drugs;

• be proven safe and effective in clinical trials;

• meet applicable regulatory standards;

• be capable of being produced in commercial quantities at acceptable costs at the Roche Boulder facility or elsewhere; or

• be successfully commercialized.

Positive results in preclinical studies of a drug candidate may not be predictive of similar results in humans during clinical trials, and promising results from early clinical trials of a drug candidate may not be replicated in later clinical trials. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed preclinical studies and ongoing preclinical testing for TRI-1144 may not be predictive of the results we may obtain in later stage trials. We do not expect TRI-1144 to be commercially available for at least several years.

We face intense competition in our efforts to develop commercially successful drugs in the biopharmaceutical industry. If we are unable to compete successfully, our business will suffer.

We are engaged in sectors of the biopharmaceutical industry, including the treatment of HIV, that are intensely competitive and change rapidly. We expect that new developments by other companies and academic institutions in the areas in which we are conducting our research and development will continue at a rapid pace.

FUZEON and our other drug candidates that are successfully developed will compete with numerous existing therapies, as well as a significant number of drugs that are currently under development and will become available in the future for the treatment of HIV. For example:

• Approximately 29 anti-HIV drugs are currently approved in the United States for the treatment of HIV, including drugs produced by GlaxoSmithKline, Bristol-Myers Squibb, Gilead, Merck, Roche and Abbott Laboratories. Only one of these currently-approved drugs, FUZEON, is a viral fusion inhibitor.

• We believe that other companies may be currently engaged in research efforts to develop viral fusion inhibitors. To our knowledge, none of these potentially competing drug candidates have entered human clinical trials.

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• Several companies, including Panacos, Progenics Pharmaceuticals, Pfizer, Schering-Plough, Tanox, Inc., Gilead, Roche, Bristol-Myers Squibb and GlaxoSmithKline, are in early stage human clinical trials, and another, Merck, is in late stage trials, with anti-HIV drug candidates that target viral processes different from those targeted by currently approved anti-HIV drugs, and different from the viral fusion process that our drug candidates target.

We expect to face intense and increasing competition in the future as these new drugs enter the market and advanced technologies become available. We cannot assure you that existing or new drugs for the treatment of HIV developed by our competitors will not be more effective, less expensive or more effectively marketed and sold than FUZEON or any other drug treatment that we may develop.

We are investing additional resources in attempting to optimize FUZEON’s current product profile, ranging from improved drug delivery and administration systems to evaluation of once-daily dosing with the current formulation of FUZEON. We cannot assure you that any of these or other product optimization efforts, ranging from laboratory feasibility testing to clinical trials involving smaller gauge needles or needle-free delivery systems including the Biojector B2000 system will be successful. The current sNDA filing with FDA for approval of the B2000 system administration option for FUZEON may or may not be successful.

Many of our competitors have significantly greater financial, technical, human and other resources than we do. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore, academic institutions, governmental agencies and other public and private research organizations are becoming increasingly aware of the value of their inventions for the treatment of HIV and are more actively seeking to commercialize the technology they have developed.

We may not receive all necessary regulatory approvals for future drug candidates or approvals may be delayed.

Our research and development activities and the testing, development, manufacturing and commercialization of any future drug candidates is subject to regulation by numerous governmental authorities in the United States and, to the extent that we may be engaged in activities outside of the United States, in other countries. The Federal Food, Drug and Cosmetic Act, the Public Health Service Act and other domestic and foreign statutes and regulations govern or affect the testing, manufacture, safety, labeling, storage, record keeping, approval, advertising and promotion of substances such as our drug candidates, as well as safe working conditions and the experimental use of animals. If our future drug candidates receive the regulatory approvals necessary for commercialization, we will be subject to continuing regulatory obligations, such as the submission of safety reports and other post-market information. Noncompliance with any applicable regulatory requirements can result in refusal of the government to approve product license applications, criminal prosecution and fines, recall or seizure of drugs, total or partial suspension of production, prohibitions or limitations on the commercial sale of drugs or refusal to allow us to enter into supply contracts. The FDA also has the authority to revoke product licenses and establishment licenses that it has previously granted.

A number of reasons, including those set forth below, may delay regulatory submissions for our drug candidates, and cause us or our collaborators to cancel plans to submit proposed drug candidates for approval, or delay or prevent regulatory approval of proposed drug candidates:

• unanticipated preclinical testing or clinical trial results;

• changes in regulations, or the adoption of new regulations;

• unanticipated enforcement of existing regulations;

• the imposition of additional conditions on marketing or commercialization;

• limitations on the indicated uses for which our drug candidates may be marketed;

• unexpected technological developments;

• developments by our competitors; and

• delay in manufacturing validation or scale-up.

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The FDA may not accept our application to broaden the indication for FUZEON administration or may request additional studies, which could have an adverse effect on our stock price.

Currently our only significant source of revenue comes from the sale of FUZEON. We believe that the method of FUZEON injection is a limiting factor in the acceptance of FUZEON by patients and prescribing physicians. In order to address patient and prescriber concerns we are attempting to develop alternative administration options for FUZEON. One such effort involves the B2000 injection system, manufactured by Bioject Medical Technologies Inc. The B2000 system is a needle-free CO2-powered injector that disperses liquid medication through the skin.

In May 2005, Roche, with the Company’s support, filed a sNDA with the FDA for inclusion of B2000 information about the needle-free injection device in the FUZEON labeling. In November 2005, the FDA issued an approvable letter for the B2000, requiring the submission of additional data from the FUZEON WAND (With A Needle-Free Device; ENF-404) clinical trial.

In October 2006, the Company and Roche had discussions with the FDA regarding the submission of an amended sNDA for inclusion of the B2000 device as an administration option for FUZEON. The FDA acknowledged that, based on currently available evidence, administration with B2000 achieves similar blood levels of FUZEON compared to standard needle-syringe administration. However, the FDA indicated that the occurrence of a small number of certain adverse events related to administration of FUZEON with the B2000 device (hematomas and nerve pain) warranted review of additional information in order to better characterize the incidence of these events. Some of these events were associated with use of B2000 to deliver FUZEON either in close proximity to bone joints or into scar tissue. Based on this information, the FDA has requested additional safety information on the nature and occurrence of ISRs, including data from the FUZEON BOSS (Biojector Open Label Safety Study; ENF 407, an eight-week study to assess the safety and patient acceptance of B2000 compared to standard needle-syringe administration for FUZEON) trial, as well as from other data sources.

In advance of receiving additional B2000 safety data, the FDA has requested changes to the current FUZEON labeling (both package insert and patient injection instructions) to add precautions regarding hematoma and nerve pain associated with B2000 administration, as well as precautions regarding use of the B2000 device in patients with bleeding disorders. Submission of the additional B2000 safety data by Roche as part of an amended sNDA is likely to occur in 2007, when data from the BOSS trial and other information requested by the FDA become available. Following the Trimeris workforce reduction in November 2006, Roche has taken the primary role with respect to interacting with the FDA on the B2000 submission.

It is possible that we will not be able to obtain FDA approval to include information regarding the use of B2000 to the FUZEON product label. In connection with the data requested by the FDA in support of our request, we face risks that:

• the data regarding use of the B2000 device with FUZEON may not confirm the positive results from earlier preclinical studies or clinical trials with the B2000 and FUZEON;

• the data may show that use of the B2000 device with FUZEON is not as safe as a needle-syringe; and

• the data regarding the use of the B2000 device with FUZEON may not confirm the positive results with respect to ISRs from earlier preclinical studies or clinical trials with the B2000 and FUZEON.

The time required to complete clinical trials and for FDA processes is uncertain. Our analysis of data obtained from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay or prevent regulatory approval. We may also encounter unanticipated delays or increased costs due to government regulation from future legislation or administrative action or changes in FDA policy during the clinical trials period or during FDA regulatory review.

We cannot assure that the FDA will ever accept our data submission or that we will be successful in our attempts to broaden the FUZEON label to incorporate administration of FUZEON with the B2000 needle-free injector. The current sNDA filing for approval of the B2000 system administration option for FUZEON may or may not be successful. Any delay in obtaining or failure to obtain required approvals could materially adversely affect our ability

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to generate additional revenues from increased adoption or persistence of FUZEON use associated with administration via the B2000 needle-free system.

HIV is likely to develop resistance to FUZEON and any of our future drug candidates, which could adversely affect demand for those drug candidates and harm our competitive position.

HIV is prone to genetic mutations that can produce viral strains resistant to particular drug treatments. HIV has developed resistance, in varying degrees, to each of the currently approved anti-HIV drug treatments, including FUZEON. As a result, combination therapy, or the prescribed use of three or more anti-HIV drugs, has become the preferred method of treatment for HIV-infected patients, because in combination these drugs may prove effective against strains of HIV that have become resistant to one or more drugs in the combination. In the clinical trials we have conducted to date, HIV has demonstrated the ability to develop resistance to FUZEON, as it has with respect to all other currently-marketed anti-HIV drugs. If HIV, in a wide patient population, in a short time period, develops resistance to FUZEON or our other drug candidates when used in combination therapy, it would adversely affect demand for those drug candidates and harm our competitive position.

Our business is based on a novel technology called fusion inhibition, and unexpected side effects or other characteristics of this technology may delay or otherwise adversely affect the development, regulatory approval and/or commercialization of our drug candidates.

The technology platform underlying our drug development program is novel because it is designed to discover drug candidates that treat viral infection by preventing the virus from fusing to and entering host cells that viruses use to reproduce themselves. Historically, anti-HIV therapy has primarily involved the inhibition of specific viral enzymes that are necessary for HIV to replicate. We are not aware of any other approved anti-HIV pharmaceutical products that target the inhibition of viral fusion. As a result, existing preclinical and clinical data on the safety and efficacy of this technology are somewhat limited. Although the most common adverse side effect reported with respect to FUZEON to date has been mild to moderate local skin irritations at the site of injection, we may discover other unacceptable side effects of our drug candidates, including side effects that may only become apparent after long-term exposure. We may also encounter technological challenges relating to these technologies and applications in our research and development programs that we may not be able to resolve. Any such unexpected side effects or technological challenges may delay or otherwise adversely affect the development, regulatory approval and/or commercialization of our drug candidates.

We are dependent on the successful outcome of clinical trials for our drug candidates.

The FDA granted full approval for the commercial sale of FUZEON in October 2004. We do not have any other drug candidates that have received FDA or any other regulatory authority for approval of commercialization. In order to obtain the regulatory approvals necessary to sell a drug candidate commercially, we must demonstrate to the FDA and other applicable foreign regulatory authorities that the drug candidate is safe and effective for use in humans for each target indication. We attempt to demonstrate this through a lengthy and complex process of preclinical testing and clinical trials, which typically takes a number of years. We also plan to do post-approval clinical trials for FUZEON to provide additional clinical data to aid Roche and our marketing efforts. Our success will depend on the success of these clinical trials.

We cannot assure that the results of prior clinical trials will warrant further clinical trials or the submission of NDAs for any potential drug candidates. We may not be able to demonstrate that potential drug candidates that appeared promising in preclinical testing and early clinical trials will be safe or effective in advanced clinical trials that involve larger numbers of patients studied over longer durations. We may be required to redesign, delay or cancel our preclinical testing and clinical trials for some or all of the following reasons, any of which may adversely affect our results of operations:

• unanticipated adverse or ambiguous results from our preclinical testing or clinical trials;

• change in the focus of Roche;

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• the inability to achieve an acceptable commercial formulation;

• undesirable side effects that delay or extend the trials;

• our inability to locate, recruit and qualify a sufficient number of patients for our trials;

• difficulties in manufacturing sufficient quantities at the requisite quality of the particular drug candidate or any other components needed for our preclinical testing or clinical trials;

• regulatory delays or other regulatory actions;

• change in the focus of our development efforts; and

• re-evaluation of our clinical development strategy.

Given the uncertainty surrounding the clinical trial process, we may not be able to successfully develop, commercialize and market FUZEON or any of our other drug candidates, which would severely harm our business, impair our ability to generate revenues and adversely affect our stock price.

Obtaining regulatory approvals and maintaining compliance with government regulations will entail significant costs that could harm our ability to achieve profitability.

Due to uncertainties inherent in the clinical development and government regulatory approval process, we may underestimate the cost and/or length of time associated with the development and commercialization of our drug candidates. We will be required to expend significant resources to comply with regulations affecting research and development, testing, manufacturing, marketing and commercialization activities for our drug candidates. We do not separately track as an accounting item the amounts we spend to comply with regulatory requirements, but the majority of our activities and expenditures to date, including our preclinical and clinical trial activities and expenditures, have been undertaken directly or indirectly in order to comply with applicable governmental regulations. If compliance with these regulations proves more costly than anticipated, our financial condition and results of operations could be materially and adversely affected.

If we cannot maintain commercial manufacturing arrangements with third parties on acceptable terms, or if these third parties do not perform as agreed, the commercial development of our drug candidates could be delayed or otherwise materially and adversely affected.

We do not have any manufacturing experience, nor do we have any manufacturing facilities. We and Roche have selected Roche’s facility in Boulder, Colorado to manufacture commercial quantities of the bulk drug substance of FUZEON. We and Roche have selected one of Roche’s manufacturing facilities to produce the finished drug product from such bulk drug substance through a process involving lyophilization, or freeze-drying. The manufacture of pharmaceutical products requires significant expertise and capital investment. Moreover, under our agreement with Roche, we are required to reimburse a portion of the expenses incurred by Roche in connection with its manufacture of FUZEON. Third-party manufacturers of pharmaceutical products often encounter difficulties in scaling up production, including problems involving production yields, quality control and assurance, shortage of qualified personnel, compliance with FDA regulations, production costs, and development of advanced manufacturing techniques and process controls. Our third-party manufacturers, including Roche, may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce and market FUZEON and our other drug candidates. The number of third-party manufacturers with the expertise and facilities to manufacture bulk drug substance of FUZEON on a commercial scale is extremely limited. In addition, only a limited number of third party manufacturers have the capability to produce a finished drug product on a commercial scale through a process involving lyophilization.

Roche’s facility in Boulder, Colorado is the only facility manufacturing FUZEON bulk drug substance. In the event the intended manufacturing plan generates insufficient supplies of FUZEON, or the Boulder facility ceases operation for any reason, we do not have an alternate manufacturing plan in place at this time and it would take a significant amount of time to arrange for alternative manufacturers. We do not have insurance to cover any shortages or other problems in the manufacturing of FUZEON or our other drug candidates. If our third-party manufacturers,

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including Roche, fail to deliver the required commercial quantities of bulk drug substance or finished drug product on a timely basis and at commercially reasonable prices, and we fail to promptly find one or more replacement manufacturers or develop our own manufacturing capabilities at a substantially equivalent cost and on a timely basis, the commercial development of FUZEON or our other drug candidates could be delayed or otherwise materially and adversely affected. Dependence upon third parties for the manufacture of FUZEON or our other drug candidates may harm our ability to develop and deliver products on a timely and competitive basis.

If Roche or our manufacturing partners do not maintain good manufacturing practices, it could negatively impact our ability to obtain regulatory approvals and commercialize our drug candidates.

The FDA and other regulatory authorities must approve the facilities that will be used to manufacture commercial quantities of our drug candidates before commencement of commercial sales. In addition, these authorities require that our products be manufactured according to good manufacturing practice regulations. The failure by us, Roche or other third- party manufacturers to maintain current good manufacturing practices compliance and/or our failure to increase our manufacturing processes as needed to meet demand for our drugs could lead to refusal by the FDA to approve marketing applications. Failure in either respect could also be the basis for action by the FDA to withdraw approvals previously granted and for other regulatory action.

In addition, if we change the source or location of supply or modify the manufacturing process with respect to FUZEON or any of our other drug candidates, regulatory authorities will require us to demonstrate that the product produced by the new source or location or from the modified process is equivalent to the product used in any clinical trials we have conducted. If we are unable to demonstrate this equivalence, we will be unable to manufacture products from the new source or location of supply or use the modified process. As a result, we may incur substantial expenses in order to ensure equivalence, and our ability to generate revenues may be harmed.

Our internal research programs and our efforts to obtain rights to new products from third parties may not yield potential products for clinical development, which would adversely affect any future revenues.

Our long-term success depends in part on our ability to either identify through internal research programs, or to obtain through licenses from third parties, potential drug candidates that may be developed into new pharmaceutical products. A significant portion of the research that we have conducted and will conduct involves new and unproven technologies. Research programs to identify drug candidates require substantial technical, financial and human resources, whether or not such programs identify any drug candidates. Our research programs may fail to yield drug candidates for clinical development for a number of reasons, including:

• the research methodology used may not successfully identify potential drug candidates;

• potential drug candidates may on further study be shown to have unduly harmful side effects or characteristics that indicate they are unlikely to be effective drugs;

• we may be unable to develop larger scale manufacturing methods for particular drug candidates that are efficient, cost-effective and capable of meeting stringent regulatory standards; and

• others may hold intellectual property rights that prevent us from developing, making or selling certain products.

We may be unable to obtain suitable drug candidates or products from third parties for a number of reasons, including:

• we may be unable to purchase or license such compounds on terms that would allow us to obtain an appropriate return on our investment in the product;

• third parties may be unwilling to assign or license product rights to us if they believe such rights would allow us to compete with them;

• we may be unable to identify suitable products or drug candidates within our areas of expertise; or

• drug candidates that we acquire may not be approved by regulatory authorities due to problems with their safety or effectiveness.

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If we are unable to develop suitable potential drug candidates through internal research programs or by obtaining rights to new products from third parties, our future revenue growth will suffer.

We depend on patents and proprietary rights, which may offer only limited exclusive protection and do not protect against infringement. If we are unable to protect our patents and proprietary rights, our assets and business could be materially harmed.

Our success depends in part on our ability and the ability of our collaborators and licensors to obtain, maintain and enforce patents and other proprietary rights for our drugs and technologies. Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and involves a great deal of uncertainty.

Although we own or exclusively license more than 41 issued United States patents, and numerous pending United States patent applications, corresponding foreign patents and patent applications, including issued patents and patent applications relating to FUZEON, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure how much protection, if any, our patents will provide if we attempt to enforce them and/or if the patents are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. In addition, the cost of litigation to uphold the validity of patents can be substantial. If we are unsuccessful in such litigation, third parties may be able to use our patented technologies without paying licensing fees or royalties to us. Further, we cannot assure that our pending patent applications will result in issued patents. Because U.S. patent applications may be maintained in secrecy until a patent issues or is otherwise published, we cannot assure that others have not filed patent applications for technology covered by our pending applications. Moreover, we cannot assure that we were the first to invent the technology, which, under U.S. patent law, is a prerequisite to obtaining patent coverage. In the event that a third party has also filed a U.S. patent application on the technology, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention, i.e., which party was the first to invent. The costs of these proceedings can be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position.

Moreover, competitors may infringe our patents or successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to file infringement claims. Such proceedings are expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or enforceable or may refuse to stop the other party from using the technology at issue on the grounds that its technology is not covered by our patents. Policing unauthorized use of our intellectual property is difficult, and we cannot assure you that we will be able to prevent infringement or misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

Recently, several generic drug-makers in countries such as India have offered to sell HIV drugs currently protected under United States patents to patients in Africa at prices significantly below those offered by the drugs’ patent holders in other countries. There is a risk that these drugs produced by the generic drug-makers could be illegally made or imported into the United States and other countries at prices below those charged by the drugs’ patent holders. If any of these actions occur with respect to our drugs, it could limit the amount we could charge for our drugs.

In addition to our patented technology, we also rely on unpatented technology, trade secrets and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We require each of our employees, consultants and corporate partners to execute a confidentiality agreement at the commencement of an employment, consulting or collaborative relationship with us. However, these agreements may not provide effective protection of our technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

The occurrence of any of these risks could have a material adverse effect on our business, financial condition, results of operations and market price of our stock.

26

The intellectual property of our competitors or other third parties may prevent us from developing or commercializing our drug candidates.

Other companies, universities and research institutions conduct research and development efforts in market segments, including viral fusion inhibition and the treatment of HIV infection, where we and our collaborators focus research and development activities. While we are not aware of any patents held by these third parties that we believe will limit our ability to use, manufacture, market or sell FUZEON or our potential drug candidates, these third parties may have obtained or may obtain patents that do so. We cannot assure that third parties will not assert patent infringement or other intellectual property claims against us or our collaborators with respect to technologies used in FUZEON or our potential drug candidates. Any claims that might be brought against us relating to infringement of third party patents may cause us to incur significant expenses and, if successfully asserted against us, may cause us to pay substantial damages. Even if we were to prevail, any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our drug development efforts or other business operations. As a result of a patent infringement suit brought against us, we may have to cease or delay development activities, unless that party is willing to grant us rights to use its intellectual property. Thus we may have to obtain licenses from other parties before we could continue using, manufacturing, marketing or selling our potential drugs. Those licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to market our potential drugs at all or we may encounter significant delays in drug development while we redesign potentially infringing drugs or methods.

Uncertainties relating to third-party reimbursement and health care reform measures could limit the amount we will be able to charge for our drugs and adversely affect our results of operations.

In the United States and elsewhere, sales of prescription drugs depend, in part, on the consumer’s ability to obtain reimbursement for the cost of the drugs from third-party payors, such as private and government insurance programs. Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. Because of the high cost of the treatment of HIV, many state legislatures are also reassessing reimbursement policies for this therapy. If third-party payor reimbursements for FUZEON or any of our other drug candidates that we commercialize are not available or are not available at a level that will allow us or our current or future collaborative partners to sell these drugs on a competitive basis, our results of operations will be materially and adversely affected. In addition, emphasis in the United States on the reduction of the overall costs of health care through managed care has increased and will continue to increase the pressure to reduce the prices of pharmaceutical products. The announcement and/or adoption of these types of proposals or efforts could also materially and adversely affect our business, because the amount of revenue that we may potentially be able to generate in the future for FUZEON or any of our other drug candidates could affect an investor’s decision to invest in us, the amount of funds we decide to spend now on our development and clinical trial efforts, and/or our decision to seek regulatory approval for certain drug candidates.

The WAC of a one year’s supply of FUZEON in the United States is approximately $23,400. A high drug price could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

Roche has made significant progress in achieving reimbursement from the various payors in the United States. Currently FUZEON is covered by Medicaid in all 50 states, 46 of the state and territorial AIDS Drug Assistance Programs, or ADAPs, and a majority of private insurers. However there are reimbursement challenges remaining. Some of the payors require patients to meet minimum medical requirements, such as CD4 cell levels, to receive reimbursement. Other payors limit the number of patients that they will provide reimbursement for FUZEON, and other payors may require co-payments by the patient in order to receive reimbursement for FUZEON that are significantly higher than those required for other anti-HIV drugs.

Several major pharmaceutical companies have offered to sell their anti-HIV drugs at or below cost to certain countries in Africa, which could adversely affect the reimbursement climate, and the prices that may be charged, for

27

HIV medications in the United States and the rest of the world. Third-party payors could exert pressure for price reductions in the United States and the rest of the world based on these offers to Africa. This price pressure could limit the amount that we would be able to charge for our drugs.

If an accident or injury involving hazardous materials occurs, we could incur fines or liability, which could materially and adversely affect our business and our reputation.

In our drug development programs, we use hazardous materials that are subject to government regulations, including chemicals, radioactive compounds and infectious disease agents, such as viruses and HIV-infected blood. We believe that our handling and disposal of these materials comply with the standards prescribed by state and federal regulations, but we cannot completely eliminate the risk of contamination or injury from these materials. If we fail to comply with these regulations or if a contamination, injury or other accident occurs in connection with our development activities, we could be held liable for any damages or penalized with fines. Although our general liability insurance coverage may cover some of these liabilities, the amount of the liability and fines could exceed our resources. We currently maintain general liability insurance coverage in the amount of approximately $1 million per occurrence and $2 million in the aggregate. However, insurance coverage is becoming increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against potential liabilities.

If the testing or use of our drug candidates harms people, we could face costly and damaging product liability claims far in excess of our liability and indemnification coverage.

Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products, such as undesirable side effects or injury during clinical trials. In addition, the use in our clinical trials of drugs that we or our potential collaborators may develop and the subsequent sale of these drugs by us or our potential collaborators may expose us to liability risks relating to these drugs.

We have obtained an advanced medical technology policy which includes limited product liability insurance coverage for our clinical trials in the amount of $10.0 million per occurrence and $10.0 million in the aggregate. However, insurance coverage is becoming increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against potential liabilities. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for drug candidates in development, but we cannot assure you that we will be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or that such insurance will provide adequate coverage against our potential liabilities. Furthermore, our collaborators or licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have a net worth sufficient to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage or indemnification payments that may be obtained by us could have a material adverse effect on our financial condition.

Our quarterly operating results are subject to fluctuations. If our operating results for a particular period deviate from the levels expected by securities analysts and investors, it could adversely affect the market price of our common stock.

Our operating results are likely to fluctuate over time, due to a number of factors, many of which are outside of our control. Some of these factors include:

• the market acceptance and sales levels for FUZEON;

• the successful commercialization of FUZEON by Roche;

• the status and progress of our collaborative agreement with Roche;

• the status of our research and development activities;

• the development costs related to TRI-1144

• the progress of our drug candidates through preclinical testing and clinical trials;

28

• the timing of regulatory actions;

• our ability to establish manufacturing, sales, marketing and distribution capabilities, either internally or through relationships with third parties;

• technological and other changes in the competitive landscape;

• changes in our existing or future research and development relationships and strategic alliances; and

• the commercial viability of FUZEON or our other drug candidates.

As a result, we believe that comparing our results of operations for one period against another period is not necessarily meaningful, and you should not rely on our results of operations in prior periods as an indication of our future performance. If our results of operations for a period deviate from the levels expected by securities analysts and investors, it could adversely affect the market price of our common stock.

If we cannot attract and retain qualified management and scientific personnel on acceptable terms, the development of our drug candidates and our financial position may suffer.

Because our business is very science-oriented and relies considerably on individual skill and experience in the research, development and testing of our drug candidates, we depend heavily on members of our senior management and scientific staff. On March 15, 2007, we announced that each of Dani P. Bolognesi, our Chief Executive Officer and Chief Scientific Officer and Robert R. Bonczek, our Chief Financial Officer and General Counsel, would retire from their executive duties with the Company. In connection therewith, our Board of Directors appointed Mr. E. Lawrence Hill, Jr. of Hickey & Hill, Inc., a management services firm, as Acting President and Chief Operating Officer of the Company.

We may have to recruit new executive management and other key employees. Future recruitment and retention of management personnel and qualified scientific personnel is critical to our success. We cannot assure you that we will successfully attract and retain sufficient numbers of qualified personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced management personnel and scientists. If we cannot attract and retain a sufficient number of qualified personnel or if a significant number of our key employees depart, our drug development efforts and the timing and success of our clinical trials may be materially and adversely affected. Even if we do hire and retain a sufficient number of qualified employees, the expense necessary to compensate them may adversely affect our operating results. In addition, we rely on scientific advisors and other consultants to assist us in formulating our research and development strategy. These consultants are employed by other parties and may have commitments to, or advisory or consulting agreements with, other entities, which may limit their availability to us.

If we are unable to meet or maintain the standards for maintaining internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, our stock price could be materially harmed.

The Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 has required and will continue to require that we incur substantial accounting expense and expend significant management efforts. In future years our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls that we would be required to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the NASDAQ Stock Market LLC or other regulatory authorities which would require additional financial and management resources and could adversely affect the market price of our common stock.

29

We rely on our collaborative partner Roche to timely deliver important financial information relating to FUZEON sales and expenses. In the event that this information is inaccurate, incomplete or not timely we will not be able to meet our financial reporting obligations as required by the SEC.

We and Roche have entered into a collaboration for the development and commercialization of certain therapeutic peptides for the treatment of HIV. Through this collaboration, the companies have successfully developed and brought to market the first viral fusion inhibitor for the treatment of HIV, FUZEON. Under our Development and License Agreement, Roche has significant control over the sale and distribution of FUZEON to wholesalers. Roche sets the price of FUZEON to wholesalers, along with any rebates and incentives, and the terms of any returns. Roche records all sales of FUZEON.

As such, Roche has exclusive control over the flow of important information relating to the sale of FUZEON that we require in order to timely and accurately report in our SEC filings. In addition, pursuant to Section 404 of the Sarbanes-Oxley Act we are required to maintain effective internal controls over financial reporting and disclosure controls and procedures. Roche endeavors to provide us with timely and accurate financial data related to the sale of FUZEON so that we may meet our reporting requirements under federal securities laws. In the event that Roche fails to provide us with timely and accurate information, we may incur significant liability with respect to the federal securities laws, our disclosure controls and procedures under Sarbanes-Oxley and possibly be forced to restate our financial statements, any of which could adversely affect the market price of our common stock.

Our charter requires us to indemnify our officers and directors to the fullest extent permitted by law, which obligates us to make substantial payments and to incur significant insurance-related expenses.

Our charter requires that we indemnify our directors and officers to the fullest extent permitted by Delaware corporate law. This could require us, with some legally prescribed exceptions, to indemnify our directors and officers against any and all expenses, judgments, penalties, fines and amounts reasonably paid in defense or settlement of an action, suit or proceeding brought against any of them by reason of the fact that he or she is or was a director or officer of Trimeris. In addition, expenses incurred by a director or officer in defending any such action, suit or proceeding must be paid by us in advance of the final disposition of that action, suit or proceeding if we receive an undertaking by the director or officer to repay us if it is ultimately determined that he or she is not entitled to be indemnified. We have also entered into indemnification agreements with each of our directors and executive officers. In furtherance of these obligations, we maintain directors’ and officers’ insurance in the amount of $40 million. Our policies expire in October 2007. For future renewals, if we are able to retain coverage, we may be required to pay a higher premium for our directors’ and officers’ insurance than in the past and/or the amount of our insurance coverage may be decreased.

Available Information

We maintain a website on the World Wide Web at www.trimeris.com. We make available, free of charge, on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our reports filed with, or furnished to, the SEC are also available at the SEC’s website at www.sec.gov.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.    PROPERTIES

We lease approximately 61,000 square feet of laboratory and office space at 3500 Paramount Parkway, Morrisville, North Carolina. We lease this space under a sublease agreement that expires on January 23, 2015. We believe that there will be suitable facilities available should additional space be needed.

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ITEM 3.    LEGAL PROCEEDINGS

We are not a party to any material legal proceedings as of the date of this Annual Report on Form 10-K.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2006.

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PART II.

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has traded on the NASDAQ Global Market (formerly known as the Nasdaq National Market System) under the Nasdaq symbol “TRMS” since our initial public offering at $12.00 per share was consummated on October 7, 1997. We have not paid cash dividends in the past and none are expected to be paid in the foreseeable future. As of March 12, 2007, we had approximately 168 stockholders of record. The following table sets forth the high and low bid prices for our common stock for the period indicated as reported on the NASDAQ Global Market (formerly known as the Nasdaq National Market System). Prior to August 1, 2006, such quotations reflect inter-dealer prices without mark-up, mark-down or commissions and may not necessarily represent actual transactions.

	Year ended December 31,
	2006				2005
	High		Low		High		Low
1st Quarter	$	14.92	$	11.00	$	14.86	$	11.19
2nd Quarter	$	13.60	$	10.09	$	11.89	$	9.65
3rd Quarter	$	11.63	$	8.31	$	15.45	$	9.82
4th Quarter	$	13.10	$	7.21	$	15.79	$	10.90

Issuer Repurchases of Equity Securities

We did not repurchase any equity securities of the Company during the quarter ended December 31, 2006.

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ITEM 6.    SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

(in thousands, except per share data)

The selected financial data below is taken from the audited financial statements of the Company, which are included elsewhere in this Annual Report on Form 10-K, or from audited financial statements not included in this Annual Report on Form 10-K. Please read the financial statements and notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” while reading this selected financial data.

	For the Years Ended December 31,
	2006			2005			2004			2003			2002
Statements of Operations Data:
Revenue:
Milestone revenue	$	3,430		$	1,722		$	2,152		$	2,964		$	1,133
Royalty revenue		11,812			8,784			4,556			755			—
Collaboration income (loss)		21,738			8,553			(16,125	)		(25,515	)		—
Total revenue and collaboration income (loss)		36,980			19,059			(9,417	)		(21,796	)		1,133
Operating expenses:
Marketing expense		—			—			—			—			16,722
Research and development:
Non-cash compensation		2,254			418			159			(1	)		250
Other research and development expense		16,079			17,856			21,154			36,824			50,976
Total research and development expense		18,333			18,274			21,313			36,823			51,226
General and administrative:
Non-cash compensation		2,809			450			311			767			1,645
Other general and administrative expense		9,644			8,986			9,840			7,810			9,340
Total general and administrative expense		12,453			9,436			10,151			8,577			10,985
Total operating expenses		30,786			27,710			31,464			45,400			78,933
Operating income (loss)		6,194			(8,651	)		(40,881	)		(67,196	)		(77,800	)
Other income (expense):
Interest income		1,987			1,300			953			1,534			2,230
Gain (loss) on sale of equipment		7			(9	)		—			—			—
Interest expense		(781	)		(746	)		(160	)		(41	)		(108	)
Total other income		1,213			545			793			1,493			2,122
Income (loss) before taxes and cumulative effect of change in accounting principle		7,407			(8,106	)		(40,088	)		(65,703	)		(75,678	)
Income tax provision		275			—			—			—			—
Income (loss) before cumulative effect of change in accounting principle		7,132			(8,106	)		(40,088	)		(65,703	)		(75,678	)
Cumulative effect of change in accounting principle		252			—			—			—			—
Net income (loss)	$	7,384			(8,106	)		(40,088	)		(65,703	)		(75,678	)
Basic income (loss) per share before cumulative effect of accounting change	$	0.33		$	(0.37	)	$	(1.86	)	$	(3.06	)	$	(3.93	)
Accounting change		0.01			—			—			—			—
Basic net income (loss) per share(1)	$	0.34		$	(0.37	)	$	(1.86	)	$	(3.06	)	$	(3.93	)
Diluted net income (loss) per share before cumulative effect of accounting change	$	0.33		$	(0.37	)	$	(1.86	)	$	(3.06	)	$	(3.93	)
Accounting change		0.01			—			—			—			—
Diluted net income (loss) per share(1)	$	0.34		$	(0.37	)	$	(1.86	)	$	(3.06	)	$	(3.93	)
Weighted average shares used in basic per share computations		21,895			21,736			21,608			21,460			19,272
Weighted average shares used in dilutive per share computations		22,005			21,736			21,608			21,460			19,272
	As of December 31,
	2006			2005			2004			2003			2002
Balance Sheet Data:
Cash, cash equivalents and investment securities	$	48,639		$	36,889		$	48,402		$	92,198		$	149,182
Working capital		53,573			40,733			49,204			75,741			128,389
Total assets		74,903			60,142			64,820			98,600			154,539
Long-term notes payable and capital lease obligations, less current installments		—			—			—			—			321
Accumulated deficit		(371,086	)		(378,470	)		(370,364	)		(330,276	)		(264,573	)
Total stockholders’ equity		37,772			24,373			30,346			68,668			130,127

(1) Computed on the basis described in Note 1 to Financial Statements.

See accompanying notes to financial statements

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Selected Quarterly Financial Data

(in thousands, except per share data)

(unaudited)

	Q1 2006			Q2 2006			Q3 2006			Q4 2006
Statements of Operations Data:
Revenue:
Milestone revenue	$	1,056		$	1,055		$	789		$	530
Royalty revenue		2,580			2,408			3,391			3,433
Collaboration income		3,794			3,815			5,559			8,570
Total revenue and collaboration income		7,430			7,278			9,739			12,533
Operating expenses:
Research and development:
Non-cash compensation		713			712			492			337
Other research and development expense		4,467			4,249			3,348			4,015
Total research and development expense		5,180			4,961			3,840			4,352
General and administrative:
Non-cash compensation		820			844			679			466
Other general and administrative expense		2,336			2,083			1,979			3,246
Total general and administrative expense		3,156			2,927			2,658			3,712
Total operating expenses		8,336			7,888			6,498			8,064
Operating income (loss)		(906	)		(610	)		3,241			4,469
Other income (expense):
Interest income		418			470			519			580
Net gain on disposal of equipment		—			—			7			—
Interest expense		(192	)		(194	)		(196	)		(199	)
Total other income		226			276			330			381
Income (loss) before taxes and cumulative effect of change in accounting principle		(680	)		(334	)		3,571			4,850
Income tax provision		—			—			124			151
Income (loss) before cumulative effect of change in accounting principle		(680	)		(334	)		3,447			4,699
Cumulative effect of change in accounting principle		252			—			—			—
Net income (loss)	$	(428	)	$	(334	)	$	3,447		$	4,699
Basic net income (loss) per share before cumulative effect of accounting change	$	(0.03	)	$	(0.02	)	$	0.16		$	0.21
Accounting change		0.01			—			—			—
Basic net income (loss) per share(1)	$	(0.02	)	$	(0.02	)	$	0.16		$	0.21
Diluted net income (loss) per share before cumulative effect of accounting change	$	(0.03	)	$	(0.02	)	$	0.16		$	0.21
Accounting change		0.01			—			—			—
Diluted net income (loss) per share(1)	$	(0.02	)	$	(0.02	)	$	0.16		$	0.21
Weighted average shares used in basic per share computations(1)		21,858			21,896			21,911			21,913
Weighted average shares used in diluted per share computations(1)		21,858			21,896			22,037			22,018

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	Q1 2005			Q2 2005			Q3 2005			Q4 2005
Statements of Operations Data:
Revenue:
Milestone revenue	$	431		$	430		$	431		$	430
Royalty revenue		1,761			2,642			1,886			2,495
Collaboration income (loss)		(36	)		1,313			2,243			5,033
Total revenue and collaboration income (loss)		2,156			4,385			4,560			7,958
Operating expenses:
Research and development:
Non-cash compensation		109			99			111			99
Other research and development expense		5,347			5,050			5,323			2,136
Total research and development expense		5,456			5,149			5,434			2,235
General and administrative:
Non-cash compensation		111			112			113			114
Other general and administrative expense		2,200			2,317			2,442			2,027
Total general and administrative expense		2,311			2,429			2,555			2,141
Total operating expenses		7,767			7,578			7,989			4,376
Operating income (loss)		(5,611	)		(3,193	)		(3,429	)		3,582
Other income (expense):
Interest income		272			318			332			378
Net gain (loss) on disposal of equipment		—			6			(16	)		1
Interest expense		(183	)		(185	)		(188	)		(190	)
Total other income (expense)		89			139			128			189
Net income (loss)	$	(5,522	)	$	(3,054	)	$	(3,301	)	$	3,771
Basic net income (loss) per share(1)	$	(0.25	)	$	(0.14	)	$	(0.15	)	$	0.17
Diluted net income (loss) per share(1)	$	(0.25	)	$	(0.14	)	$	(0.15	)	$	0.17
Weighted average shares used in basic per share computations(1)		21,710			21,727			21,740			21,764
Weighted average shares used in diluted per share computations(1)		21,710			21,727			21,740			22,077

(1) Computed on the basis described in Note 1 to Financial Statements. The sum of quarterly net income (loss) per share amounts may not equal the net income (loss) per share for the year due to the effects of rounding.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion of our financial condition and results of operations should be read together with the financial statements and notes contained elsewhere in this Annual Report on Form 10-K. Certain statements in this section and other sections are forward-looking. While we believe these statements are accurate, our business is dependent on many factors, some of which are discussed in the “Risk Factors” and “Business” sections of this Annual Report on Form 10-K. Many of these factors are beyond our control and any of these and other factors could cause actual clinical and financial results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials. Please read the “Risk Factors” section in this Annual Report on Form 10-K. We undertake no obligation to release publicly the results of any revisions to the statements contained in this report to reflect events or circumstances that occur subsequent to the date of this Annual Report on Form 10-K.

OVERVIEW

Trimeris is a biopharmaceutical company engaged in the discovery, development and commercialization of novel therapeutic agents for the treatment of viral disease. The core technology platform of fusion inhibition is based on blocking viral entry into host cells. FUZEON, approved in the U.S., Canada and European Union, is the first in a class of anti-HIV drugs called fusion inhibitors. Trimeris is developing FUZEON and future generations of peptide fusion inhibitors in collaboration with Roche.

Overview of 2006

The Company recorded its first year of profitability resulting in positive cash flow from operations. This result was primarily driven by increased sales of FUZEON in all markets around the world and careful management of our expenses. During the last half of the year several notable events occurred:

• We announced a shift in strategic emphasis and reorganization to focus on FUZEON profitability and our strength in research and early stage development. With this shift in strategic emphasis we have reduced our workforce primarily in the marketing, clinical and medical education areas. Since many of these functions duplicated the efforts between us and Roche eliminating these functions is designed to increase and sustain earnings from FUZEON by reducing expenses.

• We, together with Roche, conducted development work covered under the Research Agreement (defined below) focused on two distinct peptides, TRI-999 and TRI-1144, as NGFI candidates. Based on completed preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and has been advanced as the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. The development of TRI-1144 continued to progress through 2006, as we began the chemical synthesis of TRI-1144 at our own facilities in order to provide adequate supplies to support pre-clinical GLP toxicology studies and first time in man studies.

• In accordance with our agreement with Roche, our royalty rate increased from 10% to 12%. This increase was in effect for the entire third quarter of 2006 and will remain at this level for the remainder of the collaboration.

Outlook for 2007

In March 2007, the Company entered into an agreement with Roche that further amends the terms of the Research Agreement. Pursuant to this March, 2007 agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides falling under the Research Agreement will be returned to Trimeris. In exchange, Trimeris has agreed to pay Roche a low single digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit. In addition, Roche has agreed to return to Trimeris the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche retains an exclusive license to manufacture and sell FUZEON worldwide.

As a result, Trimeris now has the sole right to continue development of TRI-1144 and the Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris

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shared costs related to the research and development equally. Beginning in March 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, results of operations and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program and is unknown at this time.

Also in March 2007, Dani P. Bolognesi, Chief Executive Officer and Chief Scientific Officer announced his retirement effective March 16, 2007. Dani will remain on the Board of Directors until the next annual meeting of Trimeris’ Stockholders. Robert R. Bonczek, Chief Financial Officer also announced his retirement effective April 30, 2007. In addition, we engaged Hickey & Hill, Inc. of Lafayette, California, a firm specializing in managing companies in transition, to assess our cost structure. In conjunction with this engagement, Mr. E. Lawrence Hill, Jr. of Hickey & Hill was appointed Acting President and Chief Operating Officer.

Overview of Roche Relationship

The Development and License Agreement

In July 1999, the Company entered into a worldwide agreement with Roche to develop and commercialize T-20, currently marketed as FUZEON, whose generic name is enfuvirtide, and T-1249, or a replacement compound. While the Company’s development agreement with Roche covers the commercialization of FUZEON, T-1249 or a replacement product, to date only FUZEON is commercially available.

This agreement with Roche grants them an exclusive, worldwide license for FUZEON and T-1249, and certain other compounds. Under this agreement with Roche, a joint management committee consisting of members from Trimeris and Roche oversees the strategy for the collaboration. Roche may terminate its license for a particular country in its sole discretion with advance notice. This agreement with Roche gives Roche significant control over important aspects of the commercialization of FUZEON and our other drug candidates, including but not limited to pricing, sales force activities, and promotional activities.

Upon signing of the Development and License Agreement, the Company granted Roche a warrant to purchase 362,000 shares of common stock at a purchase price of $20.72 per share. The warrant is exercisable prior to the tenth annual anniversary of the grant date and was not exercised as of December 31, 2006. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million up-front payment received from Roche. The Company deferred $4.6 million, the net of the $10.0 million up-front payment and the $5.4 million in warrants, over the research and development period. The value was calculated using the Black-Scholes option-pricing model using the following assumptions: estimated dividend yield of 0%; expected stock price volatility of 86.00%; risk-free interest rate of 5.20%; and expected option life of ten years.

Roche made a nonrefundable initial cash payment to the Company of $10.0 million during 1999, and a milestone payment of $2.0 million in 2000. The Company recorded an $8.0 million milestone payment in March 2003, a $5.0 million milestone payment in May 2003, a $2.5 million milestone payment in June 2003, and a $750,000 milestone payment in June 2004.

In September 2006, the Company entered into an agreement with Roche amending the Research Agreement between the parties as well as the terms of the Development and License Agreement (the “Third Amendment”). The Third Amendment also specifies that further development of T-1249 under the Development and License Agreement shall be limited to treating patients currently being administered T-1249. Currently there are no patients being treated with T-1249. In addition, the Development and License Agreement shall only govern the activities with regard to FUZEON, and the concept of a Replacement Compound (as defined in the Development and License Agreement) is no longer applicable. Further, as a result of the Third Amendment, Roche will only be responsible for one remaining $5.0 million milestone under the 1999 Development and License Agreement payable upon the achievement of a certain cumulative twelve month sales threshold for FUZEON in the U.S. and Canada.

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Collaboration Income and Loss

Currently, our only significant source of revenue is from the sale of FUZEON. Gross profit and royalty revenue from the sale of FUZEON exceeded the selling, marketing and other charges for the years ended December 31, 2006 and 2005, resulting in positive cash flow from the Development and License Agreement. Selling, marketing and other charges in the United States and Canada exceeded the gross profit and royalty revenue from the sale of FUZEON during the year ended December 31, 2004, resulting in negative cash flow from the Development and License Agreement.

Product sales of FUZEON began in the United States on March 27, 2003 and are recorded by Roche. Under the Development and License Agreement, the Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, which is reported as collaboration income (loss) in the statements of operations as a component of revenue. Collaboration income (loss) is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross profit. Gross profit is reduced by selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income (loss) is reported as collaboration income or loss as a component of revenue.

Roche previously had an exclusive distribution arrangement with Bioscrip, Inc. (“Bioscrip”), formerly known as Chronimed, Inc., to distribute FUZEON in the United States during 2003. This exclusive arrangement terminated on April 26, 2004. Effective April 26, 2004, FUZEON became available through retail and specialty pharmacies across the United States. Prior to April 26, 2004, revenue from product sales had been recognized when title and risk of loss had passed to Bioscrip, which was when Bioscrip allocated drug for shipment to a patient. Since April 26, 2004, revenue is recognized when Roche ships the drug and title and risk of loss passes to wholesalers.

We receive royalties on sales of FUZEON in countries outside of the United States and Canada. Roche is responsible for all activities related to FUZEON outside of the United States and Canada, including regulatory, manufacturing, sales and distribution. We receive a quarterly royalty report from Roche that summarizes these sales and the royalty amounts due to Trimeris.

It is important to recognize that Roche is responsible for the manufacture, sales, marketing and distribution of FUZEON. Roche is manufacturing bulk quantities of FUZEON drug substance in its Boulder, Colorado facility and is producing finished drug product from bulk drug substance at another Roche facility. The finished drug product is then shipped to another Roche facility for distribution. Roche’s sales force is responsible for selling FUZEON. Under our Development and License Agreement, we do not have the ability or rights to co-market this drug or field our own FUZEON sales force. All third party contracts for manufacturing, distribution, sale, and reimbursement are between Roche and the third party. We are not a party to any of the material contracts in these areas. Roche provides us with information on manufacturing, sales and distribution of FUZEON. Roche is responsible for estimating reductions to gross sales for expected returns of expired products, government rebate programs, such as Medicaid reimbursements, and customer incentives, such as cash discounts for prompt payment. We review these items for accuracy and reasonableness. We receive 50% of the product gross profits for the United States and Canada.

Selling and Marketing Expenses

For the years ended December 31, 2006 and 2005, Trimeris has recorded its share of selling and marketing expenses in accordance with terms and conditions of agreements we executed with Roche.

The Company and Roche agreed to limit the Company’s actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, the Company’s share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. The Company currently estimates this date to be in 2011. During the year ended December 31, 2004, the Company’s share of selling and marketing expenses exceeded $11.2 million. As a result, the Company included an additional charge under collaboration loss to reflect the repayment of this excess,

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according to the terms of the agreement with Roche. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company’s estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the agreement.

Manufacturing Amendment

In 2005, the Company entered into a Manufacturing Amendment with Roche setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment amends and supplements the terms of the Development and License Agreement and addresses several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche will be responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche will therefore be financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the U.S. and Canada. In addition, Roche will be responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee will determine the schedule for converting supply chain materials that are in inventory as of that date into product.

The Manufacturing Amendment also sets forth the terms for which Roche-owned, FUZEON manufacturing equipment and facilities in Boulder may be used for the manufacture of other products. In addition, the Manufacturing Amendment provides for Trimeris’ payment of certain pre-launch inventory carrying costs related to the sale of FUZEON and Roche’s payment to Trimeris of an outstanding manufacturing milestone payment under the collaboration. The Manufacturing Amendment also outlines certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions.

A schedule of Trimeris’ required contribution to the capital investment in Roche’s Boulder facility for FUZEON manufacturing is also set forth in the Manufacturing Amendment. The Company will pay Roche for Trimeris’ share of the capital invested in Roche’s manufacturing facility over a seven-year period. Trimeris’ anticipated share of this capital investment is approximately $14.0 million. As a result, we accrued an initial payment of $4.0 million at June 2004, and expect to pay approximately $500,000 per quarter through June 2009. As a result, Roche no longer includes the depreciation related to the manufacturing facility in the cost of goods sold. In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment.

These payments, net of the portion allocated to cost of goods sold, are recorded as an asset presented as “Advanced payment—Roche.” This asset will be amortized based on the units of FUZEON sold during the collaboration period, in order to properly allocate the capital investment to cost of goods sold in future periods. Assuming all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 10 years. In addition, other peptide drug candidates discovered under our collaboration with Roche could be manufactured using the same Roche facility. The carrying value of this asset will be evaluated annually for impairment or if a triggering event occurs.

Under the Manufacturing Amendment, the use of Roche owned facilities in Boulder for the manufacture of FUZEON will result in a credit to the collaboration if used to produce other products for Roche. During the period from July 2004 through June 2005 and January 2006 through September 2006, a key intermediate of another product was produced using these facilities that resulted in a credit to the collaboration. Our share of this credit is approximately $1.5 million and has been recorded on our balance sheet as a reduction to the “Advanced payment—Roche.” This credit offsets variances that would otherwise have been allocated to FUZEON if the facility had remained underutilized and will be recognized when the related FUZEON produced during this period is sold.

Development Expenses

Under the Development and License Agreement development costs are shared equally. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing

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commitments related to approved drugs. Both Roche and Trimeris incur development costs for FUZEON and T-1249. Quarterly, the companies reconcile the amounts expended and one party pays the other party on a 50/50 basis. Roche holds the IND and NDA for FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. Development expenses pertaining to the United States and Canada are included on our Statement of Operations in operating expenses under research and development.

The Research Agreement

In 1999, we entered into a Research Agreement with Roche to discover, develop and commercialize additional anti-HIV gp41 fusion inhibitor peptides. Pursuant to the Research Agreement, Trimeris and Roche agreed to share the worldwide research, development and commercialization expenses and profits from the worldwide sales of anti-HIV gp41 fusion inhibitor peptides created after July 1, 1999. The agreement governs the identification of compounds that may become clinical and the work by the parties is performed according to an agreed upon research plan.

In September 2006, the Company entered into an agreement with Roche that amends the terms of the existing Research Agreement between the parties as well as the terms of the 1999 Development and License Agreement (the “Third Amendment”). The Third Amendment extends the length of the Research Term (as defined in the Research Agreement) by an additional two years through December 31, 2008. The Third Amendment covers the research, development and commercialization of the companies’ NGFI peptides. Pursuant to the Third Amendment, research, development and commercialization costs for the NGFI program will be split equally, as will any profits from the worldwide sale of products covered under the Third Amendment. Although the Research Agreement itself does not require that a specific amount be spent on any annual research plan either party has the option, at their discretion, to supplement the budgeted research plan at their own additional expense. The development work covered under the Research Agreement has focused on two distinct peptide classes, exemplified by TRI-999 and TRI-1144 as NGFI candidates. Based on certain preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and has been advanced as the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. Throughout 2006 and prior to March 13, 2007, all research and development activities were performed under our Research Agreement with Roche.

In addition, pursuant to the Third Amendment, Trimeris has the option to participate in the development and commercialization of any Penzberg Peptide (as defined in the Third Amendment) that is accepted to development by Roche. In order to exercise its option, the Company must pay Roche a one-time, lump sum payment of $4.5 million.

The Third Amendment also specifies that further development of T-1249 under the Development and License Agreement shall be limited to treating patients currently being administered T-1249. Currently there are no patients being treated with T-1249. In addition, the Development and License Agreement shall only govern the activities with regard to T-20, and the concept of a Replacement Compound is no longer applicable. Primarily, as a result of the amendment, Roche will only be responsible for one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve month sales threshold for FUZEON in the U.S. and Canada.

In March 2007, the Company entered into an agreement whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing its strategic options regarding this program. Prior to the execution of this March 2007 agreement, Roche and Trimeris shared costs related to the research and development equally. Beginning in March 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program and is unknown at this time.

For 2006, the total reimbursement of research expense from Roche amounted to $3.0 million. In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for research that was performed outside the research plan during 2005. This payment did not become due until January

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2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this payment over the extended period (the period of our continuing involvement). For 2004, the total reimbursement of research expense from Roche amounted to $2.7 million.

Historical Information Necessary to Understand our Business

We began our operations in January 1993 and, prior to April 1, 2003, we were a development stage company. Accordingly, we have a limited operating history. Since our inception, substantially all of our resources have been dedicated to:

• the development, patenting, preclinical testing and clinical trials of our drug candidates, FUZEON and T-1249;

• the development of a manufacturing process for FUZEON and T-1249;

• production of drug material for future clinical trials of FUZEON and T-1249;

• preparation of materials for regulatory filings for FUZEON;

• pre-marketing and marketing activities for the commercial launch of FUZEON; and

• research and development and preclinical testing of other potential product candidates.

Development of current and future drug candidates will require additional, time-consuming and costly research and development, preclinical testing and extensive clinical trials prior to submission of any regulatory application for commercial use. We may incur losses in the future and these losses may increase if our research and development, preclinical testing, drug production and clinical trial efforts expand. The amount and timing of our operating expenses will depend on many factors, including:

• the sales levels and market acceptance achieved by FUZEON;

• the production levels for FUZEON, which affect the economies of scale in the production process and our cost of goods sold;

• the status of our research and development activities;

• product candidate discovery and development efforts, including preclinical testing and clinical trials;

• the timing of regulatory actions;

• the costs involved in preparing, filing, prosecuting, maintaining, protecting and enforcing patent claims and other proprietary rights;

• our ability to work with Roche to manufacture, develop, sell, market and distribute FUZEON;

• technological and other changes in the competitive landscape;

• changes in our existing or future research and development relationships and strategic alliances;

• development of any future research and development relationships or strategic alliances;

• evaluation of the commercial viability of potential product candidates; and

• other factors, many of which are outside of our control.

As a result, we believe that period-to-period comparisons of our financial results are not necessarily meaningful. The past results of operations and results of previous clinical trials should not be relied on as an indication of future performance. If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have

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a material adverse effect on the market price of our common stock. Our ability to maintain profitability will depend, in part, on our own or Roche’s ability to successfully develop and obtain and maintain regulatory approval for FUZEON or other drug candidates, and our ability to develop the capacity, either internally or through relationships with third parties, to manufacture, sell, market and distribute approved products, if any.

Research and Development

The following discussion highlights certain aspects of the on-going and planned research and development programs and commercialization efforts. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials.

FUZEON^®, enfuvirtide (formerly known as T-20)

FUZEON is our first-generation HIV fusion inhibitor, a new class of anti-HIV drugs. The FDA has approved the use of FUZEON in combination with other anti-HIV drugs for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing antiretroviral therapy. Anti-HIV drugs are referred to as antiretroviral agents. The standard approach to treating HIV infection has been to lower viral loads by using a combination of drugs other than fusion inhibitors that inhibit one of two of the viral enzymes that are necessary for the virus to replicate: reverse transcriptase and protease. There are currently three classes of drugs that inhibit these two enzymes: nucleoside reverse transcriptase inhibitors, (“NRTIs”), non-nucleoside reverse transcriptase inhibitors, (“NNRTIs”), and protease inhibitors, (“PIs”). We refer to NRTIs and NNRTIs collectively as RTIs. There are currently 29 different drugs available in the United States for the treatment of HIV.

In March 2003, the FDA granted accelerated approval for the commercial sale of FUZEON, and commercial sales of FUZEON began in March 2003. Roche received accelerated FDA approval of FUZEON based on 24-week clinical data from two Phase III pivotal trials for FUZEON. In October 2004, the FDA granted full approval based on results from Phase III clinical trials over 48 weeks.

Roche filed an application for European marketing approval in September 2002. Roche received marketing approval under exceptional circumstances from the EMEA for use of FUZEON in the European Union in May 2003. Roche submitted a full analysis of 48-week clinical data to the Committee for Human Medicinal Products (“CHMP”), in December 2003 seeking a label change for FUZEON. In April 2004, the CHMP recommended inclusion of the 48 week data in the label. This was followed by approval by the EMEA for this label change in June 2004. Outside the United States and the European Union, Roche has received approval and reimbursement for FUZEON in over fifty-three countries, and is in the process of negotiating reimbursement from additional countries in which they plan to market FUZEON.

The market for FUZEON^®, enfuvirtide

The patient population infected with HIV can be segmented into classes based on treatment experience (exposure to other anti-HIV drugs). FUZEON use is targeted to these treatment experienced patients, in other words, those patients that have been exposed to drugs from the three other classes mentioned above. These patients are also known as “three-class experienced patients.” This patient population comprises approximately 15% of those diagnosed with HIV in North America. The pivotal Phase III clinical trials supporting the product’s regulatory filings known as TORO I and II were comprised of treatment experienced patients who had received an average of 11 anti-HIV drugs over the course of an average of 7 years.

At present, a number of drug candidates with novel mechanisms of action are in development for the treatment of HIV/AIDS. In recent reports, we have noticed that these new agents combined with FUZEON results in enhanced viral suppression in excess of what is observed with either agent alone. Our experience to date is that new, active HIV drugs and those in clinical development have been used in combination with FUZEON in order to achieve maximal viral suppression in treatment experienced patients. Results seen in six different trials (TORO I/II, RESIST I/II and POWER I/II) of treatment experienced HIV patients involving FUZEON and three different, and at the time of the studies, new HIV drugs (Lopinavir/ritonavir, Tipranavir/ritonavir and Darunavir/ritonavir, respectively) validate this premise. The

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data from these trials consistently demonstrates that undetectable viral load was achieved in the majority of patients when FUZEON was combined with these active antiretroviral drugs. The strength of this data led the Department of Health and Human Services (“DHHS”) to revise its guidelines on the management of HIV to state that viral re-suppression is the goal of therapy for treatment experienced patients. These guidelines specifically indicate that patients who receive more active drugs (e.g. an active ritonavir-boosted Protease Inhibitor and FUZEON) had a better and more prolonged virologic response. We cannot ensure similar results will be seen with all future HIV drugs in development. However, the approach of using FUZEON with new, active HIV drugs presents a new standard of virologic and immunologic response by which other drugs in development may be measured.

In October 2006, data was presented at the annual ICAAC indicating that nearly all treatment-experienced HIV patients who initiated therapy with FUZEON and the investigational integrase inhibitor MK-0518 in a clinical trial achieved undetectable levels of HIV (less than 400 copies per mL of blood). Such response rates of viral suppression greatly surpass the results of other clinical trials of HIV patients living with drug-resistant virus. At this point, we cannot determine if MK-0518 will be prescribed in conjunction with FUZEON thus potentially increasing FUZEON’s market share or if MK-5018 will take market share from FUZEON.

Manufacturing

Roche manufactures the bulk drug substance of FUZEON. Based on our progress and experience to date, we believe that Roche will be able to produce supply of FUZEON sufficient to meet anticipated demand. If FUZEON sales levels do not meet Roche and our expectations, the resulting production volumes may not allow Roche to achieve their anticipated economies of scale for FUZEON. If Roche does not achieve these economies of scale, the costs of goods for FUZEON could be higher than our current expectations.

Distribution

On April 26, 2004, FUZEON became available through retail and specialty pharmacies across the U.S. This development enhanced and simplified access to FUZEON for patients and their healthcare providers. Physicians can write prescriptions for FUZEON from their own prescription pads and patients can get FUZEON from the pharmacy of their choice, including Bioscrip (formerly Chronimed, Inc.). Prior to April 26, 2004, FUZEON was only available in the U.S. through Bioscrip.

Alternative injection systems

A primary impediment to the broader adoption of FUZEON in clinical practice is related to the route of administration and the occurrence of ISRs. We have undertaken to ameliorate these issues by developing alternative administration options for FUZEON. One such effort involves the B2000 injection system, manufactured by Bioject Medical Technologies Inc. The B2000 system is a needle-free CO2-powered injector that disperses liquid medication through the skin. In May 2005, Roche, with the Company’s support, filed a sNDA with the FDA for inclusion of B2000 information about the needle-free injection device in the FUZEON labeling.

In November 2005, the FDA issued an approvable letter regarding the B2000 sNDA. In its reply, the FDA indicated that the filing was approvable pending receipt of the final study report from the ongoing FUZEON WAND (With a Needle-Free Device; ENF-404) study, a randomized, open-label, two-way, cross-over study assessing the tolerability of the B2000 device for administration of FUZEON.

At the September 2006 ICAAC meeting, the Company presented results from the WAND study, showing that it achieved the primary endpoint of a 50% reduction in the incidence of painful ISR’s with use of the B2000 needle-free device compared to standard needle-syringes (36% for the device vs. 71% for needle-syringe, p<0.01). Following use of both administration systems, 84% of patients preferred the B2000 needle-free device versus 16% favoring standard needle/syringe administration

On October 11, 2006, the Company and Roche provided an update on recent discussions with the FDA regarding the submission of an amended sNDA for inclusion of the B2000 device as an administration option for FUZEON. The

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FDA acknowledged that, based on currently available evidence, administration with B2000 achieves similar blood levels of FUZEON compared to standard needle-syringe administration. However, the FDA indicated that a small number of certain adverse events related to administration of FUZEON with the B2000 device (hematomas and nerve pain) warrant review of additional information in order to better characterize the incidence of these events. Some of these events were associated with use of B2000 to deliver FUZEON either in close proximity to bone joints or into scar tissue. In the current product label, FUZEON is recommended for injection in the upper arm, upper leg and stomach. The FUZEON labeling also cautions against injecting into scar tissue.

Based on this information, the FDA has requested additional safety information on the nature and occurrence of ISRs, including data from the FUZEON BOSS (Biojector Open Label Safety Study; ENF 407) trial, as well as from other data sources. Initiated earlier in 2006, BOSS has completed enrollment of approximately 330 current or prior FUZEON patients at 43 trial sites in the U.S. and Puerto Rico in an eight-week study to assess the safety and patient acceptance of B2000 compared to standard needle-syringe administration for FUZEON. The Company expects to report data from this trial in 2007. Collectively, WAND and BOSS will provide data from two distinct patient cohorts–FUZEON naïve patients as well as those currently receiving FUZEON as part of their anti-HIV regimens. This will provide us a more complete assessment of the potential benefits of needle-free administration of FUZEON.

In advance of receiving additional B2000 safety data, the FDA has requested changes to the current FUZEON labeling (both Package Insert and Patient Injection Instructions) to add precautions regarding hematoma and nerve pain associated with B2000 administration, as well as precautions regarding the use of the B2000 device in patients with bleeding disorders. Submission of the additional B2000 safety data by Roche as part of an amended sNDA is likely to occur in 2007, when data from the BOSS trial and other information requested by the FDA become available. Following the Trimeris workforce reduction in November 2006, Roche has taken the primary role with respect to interacting with the FDA on the B2000 submission.

T-1249

T-1249 is a second-generation HIV fusion inhibitor that has been investigated successfully in four separate clinical trials. Phase I/II trials of T-1249 demonstrated satisfactory efficacy and safety, including in patients who had previously failed on and had developed resistance to FUZEON. In January 2004, Roche and Trimeris announced that further clinical development of T-1249 was being put on hold due to technical challenges in achieving a formulation capable of delivering a once daily injection. The compound’s safety, efficacy and tolerability were not factors affecting the decision. The clinical trial, T1249-105, was ongoing when the decision was made to put the development of T-1249 on hold. In January 2005, we and Roche put further clinical development of T-1249 on hold indefinitely. Currently, there are no patients being treated with T-1249.

Next Generation Fusion Inhibitors

In March 2007, the Company entered into an agreement whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared costs related to the research and development equally. Beginning in March 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program and is unknown at this time.

For 2006, the total reimbursement of research expense from Roche amounted to $3.0 million. In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for research that was performed outside the research plan during 2005. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In February 2006, Trimeris received this payment. This payment was being recognized as milestone revenue over the term of the Research Agreement.

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During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this milestone over the extended period (the period of our continuing involvement). For 2004, the total reimbursement of research expense from Roche amounted to $2.7 million.

Other Research Programs

In June 2004, we announced the renewal of an agreement with Array to discover small molecule entry inhibitors directed against HIV. The terms of the agreement are substantially similar to those of the initial agreement, signed in August 2001. Over the course of the agreement, Array has received research funding and the right to receive milestone payments and royalties based on the success of this program. In connection with the agreement, as amended, Trimeris has screened a library of small molecule compounds created by Array against HIV entry inhibitor targets. We have completed screening of these compounds for activity in our assays and have completed the process of evaluating these compounds as possible clinical candidates. The research term of the agreement expired according to the terms of the agreement on December 31, 2005. There are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

In 2002, we entered into an agreement with Neokimia to discover and develop small molecule HIV fusion inhibitors. We have initially screened a library of small molecule compounds provided by Neokimia, and Neokimia will use its proprietary drug discovery platform to optimize any lead compounds with the goal of identifying one or more preclinical drug candidates. Neokimia has provided the initial library of compounds on a nonexclusive basis but will work exclusively with us on the HIV gp41 fusion protein target during the term of the collaboration. In 2003, we exercised our option to select an additional target related to HIV fusion to add to the collaboration. The research performed under the collaboration has been performed pursuant to a research plan that has been mutually agreed upon by the parties. The term of this research plan has concluded. In December 2003, Neokimia merged with Tranzyme and Tranzyme acquired Neokimia’s rights and obligations under the 2002 agreement. There are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

In June 2005, we entered into a drug discovery and development agreement with ChemBridge Research Laboratories, Inc. (“CRL”). Under the terms of the agreement, Trimeris and CRL will work together to discover and develop small molecule inhibitors of HIV. Specifically, pursuant to the agreement, we are working with CRL to identify small molecule inhibitor compounds against two HIV entry targets. Trimeris and CRL will collaborate to identify orally active lead compounds and then optimize preclinical candidates. Trimeris will be responsible for preclinical and clinical development, manufacturing, regulatory and commercial activities on a worldwide basis for all compounds and products resulting from the collaboration. Trimeris will provide funding to CRL to support medicinal chemistry efforts, and CRL will work exclusively with us on these programs. CRL will be eligible to receive milestone payments based on the achievement of specific development and commercial events, and may also be eligible to receive royalties on net product sales. As of December 31, 2006, there are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

The following table summarizes our research and development expenses since inception (in thousands):

Project	2006		2005		2004		1993-2003		Cumulative
Fuzeon	$	4,177	$	6,929	$	12,916	$	203,146	$	227,168
T-1249		176		518		2,039		28,429		31,162
Next Generation Fusion Inhibitors		4,899		5,252		3,933		7,095		21,179
Early stage research		3,011		2,267		—		—		5,278
Other (comprised mostly of management personnel and overhead allocation costs)		4,177		3,308		2,425		5,069		14,979
All projects		16,440		18,274		21,313		243,739		299,766
SFAS 123R expense		1,893		—		—		—		1,893
Total research and development	$	18,333	$	18,274	$	21,313	$	243,739	$	301,659

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LIQUIDITY AND CAPITAL RESOURCES

The table below presents our cash flows for the years ended December 31, 2006, 2005 and 2004.

	Years ended December 31,
	2006			2005			2004
	(in thousands)
Net cash provided (used) in operating activities	$	12,177		$	(10,032	)	$	(42,628	)
Net cash (used) provided by investing activities		(6,152	)		4,871			25,033
Net cash provided by financing activities		468			619			411
Net increase (decrease) in cash and cash equivalents		6,493			(4,542	)		(17,184	)
Cash and cash equivalents, beginning of period		23,559			28,101			45,285
Cash and cash equivalents, end of period	$	30,052		$	23,559		$	28,101

Operating Activities:    Since inception, we have financed our operations primarily through private placements and public offerings of common stock, equipment lease financing and payments received from Roche under our Development and License Agreement with Roche.

In 2006, the cash provided by operating activities primarily resulted from worldwide sales of FUZEON offset, in part, by cash used to fund research and development relating to FUZEON, and other product candidates, primarily TRI-1144, and marketing costs for the commercialization of FUZEON. In 2007, cash used in operating activities will depend on several factors including the sales, cost of sales and marketing expenses related to the sale of FUZEON (profitability of the collaboration with Roche) and the amount of money we deploy into developing our research pipeline and post marketing commitments for FUZEON (development expenses) and costs related to the development of TRI-1144, offset by any cash payments we receive from Roche related to the research of our next generation fusion inhibitors.

In 2005, the cash used by operating activities was used primarily to fund research and development relating to FUZEON, T-1249 and other product candidates, primarily TRI-1144, and marketing costs for the commercialization of FUZEON. The amount used decreased for the year ended December 31, 2005, compared to 2004, primarily due to increased collaboration income and royalty revenues and decreased operating expenses.

Investing Activities:    In 2006, cash used by investing activities was primarily due to net purchases of investment securities—available-for-sale of $5.3 million, purchases of property, furniture and equipment of $485,000 and patent costs of $421,000, offset in part by proceeds received from the sale of equipment of $14,000. In 2007, cash provided by investing activities will depend primarily on the net maturities of investments. We expect spending on the purchase of property, furniture and equipment and patent costs in 2007 to approximate the spending in 2006.

In 2005, cash provided by investing activities was due to net maturities of investment securities—available-for-sale of $7.0 million, offset in part by purchases of property, furniture and equipment of $1.3 million and patent costs of $805,000.

In 2004, cash provided by investing activities was due to net maturities of investment securities—available-for-sale of $26.6 million, offset in part by purchases of property, furniture and equipment of $1.2 million and patent costs of $406,000.

Financing Activities:    In 2006 and 2005, the cash provided by financing activities was due to the exercise of employee stock options and purchases of our stock under the employee stock purchase plan. In 2004, the cash provided was primarily due to the exercise of employee stock options and purchases of our stock under the employee stock purchase plan offset, in part, by payments under capital lease obligations.

Total Cash, Cash Equivalents and Investment securities—available-for-sale.    As of December 31, 2006, we had $48.6 million in cash and cash equivalents and investment securities—available-for-sale, compared to $36.9 million as of December 31, 2005. The increase is primarily a result of cash provided by operating activities during the year ended December 31, 2006.

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Future Capital Requirements.    Although we expect to share the future development costs for FUZEON with Roche, we have expended, and expect to continue to expend in the future, substantial funds to pursue our drug candidates including TRI-1144, and compound discovery and development efforts, including:

• expenditures for marketing activities related to FUZEON;

• research and development and preclinical testing of other product candidates, including TRI-1144;

• the development of our proprietary technology platform; and

• possible acquisitions and in licensing of research programs, clinical stage products and marketed products.

Under the current operating environment, excluding any extraordinary items, based on expected sales levels of FUZEON, we expect that our existing capital resources, together with the interest earned thereon, will be adequate to fund our current programs for at least the next 24 months. However, any reduction in FUZEON sales below currently expected levels or increase in expenditures beyond currently expected levels would increase our capital requirements substantially beyond our current expectations. If we require additional funds and such funds are not available through debt or equity financings, or collaboration arrangements, we will be required to delay, scale-back or eliminate certain preclinical testing, clinical trials and research and development programs, including our collaborative efforts with Roche. In the event Roche becomes unable or unwilling to share collaboration expenses, our capital requirements would increase substantially beyond our current expectations.

In March 2007, the Company entered into an agreement whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing it strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared costs related to the research and development equally. Beginning in March 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program and is unknown at this time.

Our future capital requirements and the adequacy of available funds will depend on many factors, including the level of market acceptance and sales levels achieved by FUZEON; expenses related to the sale of FUZEON; the condition of the capital markets; the progress and scope of our product development programs; the magnitude of these programs; the results of preclinical testing and clinical trials; the need for additional facilities based on the results of these clinical trials and other product development programs; changes in the focus and direction of our product development programs; the costs involved in preparing, filing, processing, maintaining, protecting and enforcing patent claims and other intellectual property rights; competitive factors and technological advances; the cost, timing and outcome of regulatory reviews; changes in the requirements of the FDA; administrative and legal expenses; evaluation of the commercial viability of potential product candidates and compounds; the establishment of capacity, either internally or through relationships with third parties, for manufacturing, sales, marketing and distribution functions; the results of our business development activities, including in-licensing and merger and acquisition opportunities; and other factors, many of which are outside of our control.

Since our initial public offering in 1997, we have obtained the majority of our funding through public or private offerings of our common stock. We expect to continue to obtain our funding through public or private offerings of our common stock or other equity like instruments, such as convertible preferred stock or convertible debt, until such time, as we are able to generate sufficient funds from operations to support our future growth plans.

We may have difficulty raising additional funds by selling equity. If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have a material adverse effect on the market price of our common stock and restrict or eliminate our ability to raise additional funds by selling equity. The public capital markets in which shares of our common stock are traded have been extremely volatile. Therefore, even if we do achieve positive clinical or financial results that meet or exceed the expectations of securities analysts and investors, the state of the public equity markets in general and particularly the public equity market for biotechnology companies may prohibit us from raising funds in the equity markets on acceptable terms or at all. Even if we are able to obtain additional funding through an equity financing, the terms of this financing could be highly dilutive to current stockholders.

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We may also attempt to obtain additional funding through debt and debt-like financings such as convertible debt and/or arrangements with new or existing collaborative partners. Any debt financings may contain restrictive terms that limit our operating flexibility. Arrangements with collaborative partners may require us to relinquish rights to our technologies or product candidates or to reduce our share of potential profits. This could have a material adverse effect on our business, financial condition or results of operations.

Contractual Obligations.    The following table summarizes our material contractual commitments at December 31, 2006.

Contractual Obligations****	2007		2008		2009		2010		2011		Thereafter		Total
	(in thousands)
Operating leases*	$	1,508	$	1,538	$	1,569	$	1,600	$	1,633	$	5,240	$	13,088
Other contractual obligations**		2,000		2,000		1,000		—		—		—		5,000
Other long-term liabilities reflected on the
Balance Sheet***		—		—		—		—		7,468		14,936		22,404
	$	3,508	$	3,538	$	2,569	$	1,600	$	9,101	$	20,176	$	40,492

* Includes payments due under a sublease signed during June 2004, that commenced on January 1, 2005, on an existing office and laboratory building.

** We are making advance payments to Roche for our share of the cost of the capital improvements made at Roche’s Boulder facility where FUZEON drug substance is produced. We reached an agreement with Roche whereby we will pay Roche for our share of the capital invested in Roche’s manufacturing facility over a seven-year period. Our share of this capital investment is approximately $14.0 million. At December 31, 2006, we have capitalized costs of $9.0 million, and expect to pay approximately $500,000 per quarter through June 2009. This amount, net of charges to cost of goods sold as the related inventory is sold, is recorded as an asset on our Balance Sheets under the caption “Advanced payment—Roche.” In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment.

*** Our actual cash contribution to the selling and marketing expenses for FUZEON in 2004 was limited to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of these additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. We currently estimate this date to be in 2011. During the year ended December 31, 2004, we reached the $11.2 million limitation for the year. We recorded a liability of approximately $15.6 million as part of collaboration loss during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk-free interest rate from the expected payment date based on achievement of the sales milestones in the agreement. We are increasing the liability over time to the expected payment amount. In 2006, 2005 and 2004, we increased this liability by $781,000, $746,000 and $154,000, respectively, for accretion of interest. The total liability of $17.3 million at December 31, 2006, is reflected on our balance sheet under the caption “Accrued marketing costs.”

**** The Company may have other contractual obligations to the following entities upon achievement of certain developmental, clinical and commercial milestones. At present there is no certainty of achievement of these milestones.

Array Biopharma, Inc.

The agreement contemplates that the Company could owe Array up to $9.7 million in milestone payments in the event a compound reaches certain developmental, clinical and commercialization milestones. During the years ended December 31, 2006, 2005 and 2004, we incurred costs, under this agreement, of $0, $5,000 and $15,000, respectively.

Neokimia, Inc.

The agreement contemplates that the Company could owe Neokimia up to $20 million in milestone payments in the event a compound reaches certain developmental, clinical and commercialization

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milestones. During the years ended December 31, 2006, and 2005 and 2004, we incurred no costs under this agreement.

New York Blood Center

The Company does not have milestone obligations under this license agreement, however, does make payments based on a contracted term.

ChemBridge Research Laboratories

The agreement contemplates that the Company could owe CRL up to $5.25 million in milestone payments in the event a compound reaches certain developmental, clinical and commercialization milestones with an additional $1.25 million in milestone payments due for each additional compound commercialized. During the years ended December 31, 2006, 2005 and 2004, we incurred costs of $383,000, $496,000 and $0, respectively under this agreement.

RESULTS OF OPERATIONS

Comparison of Years Ended December 31, 2006, 2005 and 2004

Revenues

The table below presents our revenue sources for the years ended December 31, 2006, 2005 and 2004.

	Years ended December 31,							2006 to 2005 Increase (Decrease)		2005 to 2004 Increase (Decrease)
	2006		2005		2004
Milestone revenue	$	3,430	$	1,722	$	2,152		$	1,708	$	(430	)
Royalty revenue		11,812		8,784		4,556			3,028		4,228
Collaboration income (loss)		21,738		8,553		(16,125	)		13,185		24,678
Total revenue and collaboration income (loss)	$	36,980	$	19,059		(9,417	)	$	17,921	$	28,476

Milestone revenue:    Total milestone revenue represents the amortization of achieved milestones under our collaboration with Roche.

The table below presents our achieved milestones from Roche as of December 31, 2006. We are recognizing these milestones on a straight-line basis.

	Milestone Total		Date Achieved	Total Revenue Recognized Through December 31, 2006		Revenue for the year ended December 31, 2006		End of Recognition Period
	$	4,600	* July 1999	$	3,709	$	148	December 2012
		2,000	October 2000		1,499		84	December 2012
		8,000	March 2003		3,808		700	December 2012
		5,000	May 2003		2,250		456	December 2012
		2,500	June 2003		890		251	June 2013
		750	June 2004		217		83	June 2013
		2,500	January 2006		1,708		1,708	December 2008
Total	$	25,350		$	14,081	$	3,430

* Roche made a nonrefundable initial cash payment to the Company of $10.0 million during 1999. In July 1999, the Company granted Roche a warrant to purchase 362,000 shares of common stock at a purchase price of $20.72 per share. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million up-front payment received from Roche. We have deferred $4.6 million, the net of the $10.0 million up-front payment and the $5.4 million in warrants, over the research and development period.

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In 2006, we recognized approximately $1.7 million more in milestone revenue when compared to 2005. In January 2006, Roche agreed to pay the Company $2.5 million for the results of research that was performed outside the research plan during 2005. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this milestone over the extended period (the period of our continuing involvement). As a result of this amendment to the Research Agreement, the Company recognized $792,000 less in milestone revenue during 2006.

During the first quarter of 2005, based on our current evaluation of our research and development programs, we and Roche placed further clinical development of T-1249 on hold indefinitely due to challenges in achieving an acceptable formulation. As a result, we are recognizing the development milestone payments over the development period of the next generation of fusion inhibitors. Taking into account the additional research that will be required, in 2005, we changed our estimate of the end of the research and development period from December 2010 to December 2012; as a result we recognized approximately $500,000 less revenue in 2005 compared to 2004.

Royalty revenue:    Royalty revenue represents the royalty payment earned from Roche based on total net sales of FUZEON outside the United States and Canada. Sales of FUZEON outside the United States and Canada began in June 2003. In accordance with our agreement with Roche, our royalty rate has increased from 10% to 12%. This increase was in effect for the entire third quarter of 2006 and will remain at this level for the remainder of the collaboration. To calculate the royalty revenue, an 8% distribution charge is deducted from Roche’s reported net sales, from which the Company received a 12% royalty. Prior to the third quarter of 2006, to calculate the royalty revenue an 8% distribution charge is deducted from Roche’s reported net sales, from which Trimeris received a 10% royalty. Royalty revenue has been primarily increasing period over period as a result of sales in new countries being initiated. In 2007, we expect modest increases in sales outside the U.S. and Canada.

The table below presents net sales outside the United States and Canada for the years ended December 31, 2006, 2005 and 2004. FUZEON was launched in June 2003 in the EU.

	Years ended December 31,						2006 to 2005 Increase (Decrease)		2005 to 2004 Increase (Decrease)
	2006		2005		2004
Total net sales outside the United States and Canada (as recorded by Roche)	$	114,790	$	95,477	$	49,523	$	19,313	$	45,954

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Collaboration Income (Loss):    The table below presents our collaboration income (loss) for the United States and Canada for the years ended December 31, 2006, 2005 and 2004. Collaboration income (loss) is reported on our statement of operations as a component of revenue. Under our Development and License Agreement with Roche, we share gross profits equally from the sale of FUZEON in the United States and Canada. FUZEON was launched in March 2003.

	(in thousands) Years Ended December 31,									2006 to 2005 Increase (Decrease)		2005 to 2004 Increase (Decrease)
	2006			2005			2004
	(in thousands)
Gross Fuzeon sales by Roche	$	152,166		$	132,609		$	99,908		19,557		$	32,701
Sales adjustments		(18,005	)		(19,875	)		(14,215	)	1,870			(5,660	)
Sales adjustments as a % of Gross Sales		12	%		15	%		14	%
Net sales		134,161			112,734			85,693		21,427			27,041
Cost of goods sold		(44,295	)		(45,854	)		(51,766	)	1,559			5,912
Cost of goods sold as a % of Net Sales		33	%		41	%		60	%
Gross profit		89,866			66,880			33,927		22,986			32,953
Gross profit as a % of Net Sales		67	%		59	%		40	%
Selling and marketing expenses		(45,809	)		(44,755	)		(22,311	)	(1,054	)		(22,444	)
Other costs		(3,434	)		(7,854	)		(11,504	)	4,420			3,650
Total shared profit and loss		40,623			14,271			112		26,352			14,159
Trimeris share*		22,511			9,270			56		13,241			9,214
Costs exclusive to Trimeris, Inc.		(773	)		(717	)		(16,181	)	(56	)		15,464
Collaboration income (loss)	$	21,738		$	8,553		$	(16,125	)	13,185		$	24,678

* For the years ended December 31, 2006 and 2005, Trimeris and Roche did not share “Total shared profits & loss” equally. Trimeris has recorded its share of selling and marketing expenses for this period in accordance with terms and conditions of agreements that we reached with Roche. Pursuant to these agreements, Roche and Trimeris did not share selling and marketing expenses for FUZEON equally in 2006 and 2005, but all other expenses were essentially shared equally. For the years ended December 31, 2004, Trimeris and Roche shared “Total shared profits & loss” equally. Under a separate agreement with Roche for 2004, our selling and marketing expenses were limited to approximately $11.2 million which we reached in the second quarter of 2004. We have recorded the net present value of the Company’s estimated share of certain marketing expenses in excess of this limit in the line “Costs exclusive to Trimeris, Inc.”

Gross FUZEON sales by Roche:    Gross FUZEON sales are recorded by Roche. Prior to April 26, 2004, Roche had an exclusive distribution arrangement with Bioscrip (formerly known as Chronimed) to distribute FUZEON in the United States during the initial commercial launch in 2003, which terminated on April 26, 2004. Effective April 26, 2004, FUZEON became available through retail and specialty pharmacies across the U.S. Prior to April 26, 2004, revenue from product sales was recognized when title and risk of loss had passed to Bioscrip, which was when Bioscrip allocated drug for shipment to a patient. Beginning April 26, 2004, revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers.

The table below presents the number of kits sold and shipped to wholesalers in the U.S. and Canada during 2006, 2005, and 2004.

Kits Shipped	2006	2005	2004
Q1	17,100	15,000	11,000
Q2	19,800	16,900	16,200
Q3	19,900	18,500	14,600
Q4	22,900	21,600	17,200
Total	79,700	72,000	59,000

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Sales of FUZEON have been increasing period over period, we believe, as a result of the following factors:

• 2003 was the launch year and commercial sales began mid-year;

• growth in the acceptance and adoption of FUZEON as part of a new standard of care for treatment experienced patients;

• continued expansion and synergy with FUZEON for newly approved drugs and drugs in clinical trials;

• expansion in nursing and peer support programs for patients;

• investment in marketing and promotion of FUZEON, and

• clinical assessment and development of administration alternatives including the Becton-Dickenson Ultrafine II small gauge needle and the Biojector B2000 needle-free delivery system.

We expect that these factors will continue to have a positive effect on FUZEON sales in 2007.

Sales adjustments:    Sales adjustments are recorded by Roche based on their experience with selling FUZEON. Roche adjusted some of its reserves at the end of 2006 resulting in an overall lower sales adjustment compared to 2005. There were no material revisions to Roche’s recorded estimates of sales adjustments for the years ended December 31, 2005 and 2004. We expect sales adjustments to range between 15% to 16.5% of gross sales in 2007.

Cost of goods sold:    Cost of goods sold as a percentage of net sales decreased for the year ended December 31, 2006 compared to the year ended December 31, 2005 as Roche is now selling FUZEON inventory manufactured at lower costs due to manufacturing efficiencies and the lower gross to net adjustment in 2006 compared to 2005. We expect that cost of goods sold as a percentage of sales for 2007 will approximate the levels seen in the year ended December 31, 2006.

Cost of goods sold as a percentage of net sales decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004 as the cost of goods sold for the year ended December 31, 2004 includes approximately $6.8 million relating to unabsorbed costs that were the result of unexpectedly low initial manufacturing volumes when FUZEON was launched and various costs associated with the development of the FUZEON manufacturing process.

These costs were disclosed to us during the second quarter of 2004 by Roche. Previously, we inquired about manufacturing variances and were provided amounts by Roche which we previously recorded. After a series of discussions and negotiations with Roche and notwithstanding our contractual agreement, we formalized an amendment to our Development and License Agreement with respect to the variance calculation. Also during 2004, the inventory sold was manufactured during a period of higher costs and as such increased our cost of goods sold as a percentage of net sales.

Selling and marketing expenses:    Selling and marketing expenses for the year ended December 31, 2006, were comparable to the year ended December 31, 2005. We believe that our selling and marketing expense in 2007 will be lower than the level for 2006 mainly as a result of efficiencies identified with Roche. Under the Development and License Agreement Roche cannot adopt a budget for the marketing of FUZEON above certain limits without the agreement of Trimeris.

Selling and marketing expenses increased for the year ended December 31, 2005 compared to the year ended December 31, 2004, due to the fact that our actual cash contribution to certain selling and marketing expenses for FUZEON, was limited to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date (see discussion below related to the recording of the expense related to this agreement “Costs exclusive to Trimeris”).

Other costs:    Other costs decreased for the year ended December 31, 2006 compared to the year ended December 31, 2005 as a result of lower inventory write-offs. Other costs primarily comprise net inventory write offs

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and charges for the Boulder manufacturing facility. Also included in other costs are general and administrative and distribution charges. Trimeris is responsible for 50% of these costs under the Development and License Agreement. We believe that other costs for 2007 will approximate the levels seen in 2006.

Other costs decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004 as a result of lower inventory write-offs.

Costs exclusive to Trimeris:    Costs exclusive to Trimeris for the years ended December 31, 2006 and 2005 comprise license fees for certain technology paid to a third party. Depending on the level of FUZEON sales in certain markets, we believe that other costs for 2007 will approximate the levels seen in 2006.

Costs exclusive to Trimeris decreased for the year ended December 31, 2005, compared to the year ended December 31, 2004, as 2004 included the net present value of the Company’s estimated share of certain marketing expenses in excess of approximately $11.2 million, based on expected timing and terms of payment under our agreement with Roche. Also included in the costs exclusive to Trimeris for the year ended December 31, 2004 is approximately $575,000, related to license fees for certain technology paid to a third party.

Research and Development Expenses

The table below presents our research and development expense for the years ended December 31, 2006, 2005, and 2004.

	Years ended December 31,						2006 to 2005 Increase (Decrease)			2005 to 2004 Increase (Decrease)
	2006		2005		2004
Non-cash compensation	$	2,254	$	418	$	159	$	1,836		$	259
Other research and development expense		16,079		17,856		21,154		(1,777	)		(3,298	)
Total research and development expense	$	18,333	$	18,274	$	21,313	$	59		$	(3,039	)

Total research and development expense includes:

• development expenses for FUZEON and T-1249, which we share equally with Roche; and

• research expenses for the preclinical development of the NGFIs, which we shared equally with Roche in 2006 but did not share equally with Roche in 2005. The Company also conducts non-partnered research outside of the agreements with Roche.

Non-cash compensation:    Effective January 1, 2006, the Company adopted SFAS No. 123 (revised) “Share-Based Payment” which requires that the cost resulting from all share-based payment transactions with employees be recognized as a charge in the statements of operations. For the year ended December 31, 2006, the Company recognized an additional $1.9 million in employee stock compensation expenses when compared to the year ended December 31, 2005. Also included in non-cash compensation expense for the years ended December 31, 2006 and 2005 is the expense for restricted stock issued to employees in June 2004 and expense for stock options granted to non-employees. The restricted stock grants vest 100% after the third year of service and are being amortized on a straight-line basis over the three-year period. We believe that non-cash compensation will decrease for 2007 as compared to 2006 as a result of employee stock options with higher fair values becoming fully vested and the full vesting of the restricted stock granted in 2004.

Non-cash compensation expense for the year ended December 31, 2004, is primarily comprised of expense for restricted stock issued to employees in June 2004. Non-cash compensation expense in 2004 also includes expense for stock options granted to non-employees.

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Other research and development expense:    Other research and development expense decreased for the year ended December 31, 2006, compared to the year ended December 31, 2005, as a result of:

• decreased costs associated with ongoing clinical trials for FUZEON and T-1249;

• decreased facilities costs as a result of combining our facilities into one location; and

• offset, in part, by the reduction in force that we implemented in November of 2006 for which we recorded an expense of $1.5 million in 2006.

Other research and development expense decreased for the year ended December 31, 2005, compared to the year ended December 31, 2004, as a result of:

• decreased costs associated with ongoing clinical trials for FUZEON; and

• decreased costs associated with our clinical trials for T-1249, whose further clinical development was put on hold in January 2004; and

• offset, in part, by increases in salary costs and costs associated with the research of new drugs.

Total research personnel were 46, 57 and 64 at December 31, 2006, 2005 and 2004, respectively. We expect research and development expenses, net of the reimbursements for FUZEON and next generation development costs from Roche, to be lower in 2007, as compared to 2006, partially as a result of the reduction in force that we implemented in November of 2006, and reduced costs related to post marketing commitments with the FDA, offset, in part, by increased costs related to the development of the next generation peptides.

In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for research that was performed outside the research plan during 2005. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In February 2006, Trimeris received this payment. This payment was being recognized as milestone revenue over the term of the Research Agreement. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this milestone over the extended period (the period of our continuing involvement).

On September 7, 2006, we announced that our Research Agreement with Roche to co-develop a novel, NGFI with the goal of durable HIV suppression and once weekly dosing was extended through December 31, 2008. The development work covered under the Research Agreement has focused on two distinct peptide classes, exemplified by TRI-999 and TRI-1144 as NGFI candidates. Based on completed preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and is being advanced as the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. Throughout 2006 and prior to March 2007, all research and development activities were performed under our Research Agreement with Roche. In March 2007, the Company entered into an agreement whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing it strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared costs related to the research and development equally. Beginning in March 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program and is unknown at this time.

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General and Administrative Expenses

The table below presents our general and administrative expense for the years ended December 31, 2006, 2005 and 2004.

	Years ended December 31,						2006 to 2005 Increase (Decrease)		2005 to 2004 Increase (Decrease)
	2006		2005		2004
Non-cash compensation	$	2,809	$	450	$	311	$	2,359	$	139
Other general and administrative expense		9,644		8,986		9,840		658		(854	)
Total general and administrative expense	$	12,453	$	9,436	$	10,151	$	3,017	$	(715	)

Non-cash compensation:    Effective January 1, 2006, the Company adopted SFAS No. 123 (revised) “Share-Based Payment” which requires that the cost resulting from all share-based payment transactions with employees be recognized as a charge in the statements of operations. For the year ended December 31, 2006, the Company recognized an additional $2.5 million in employee stock compensation expenses when compared to the year ended December 31, 2005. Also included in non-cash compensation expense for the years ended December 31, 2006 and 2005, is the expense for restricted stock issued to employees in June 2004. The restricted stock grants vest 100% after the third year of service and are being amortized on a straight-line basis over the three-year period. We believe that non-cash compensation will decrease for 2007 as compared to 2006 as a result of employee stock options with higher fair values becoming fully vested and the full vesting of the restricted stock granted in 2004.

Non-cash compensation expense for the year ended December 31, 2004, is primarily comprised of expense for restricted stock issued to employees in June 2004. This restricted stock grant vests 100% after the third year of service and is being amortized on a straight-line basis over the three-year period.

Other general and administrative expense:    Other general and administrative expense increased for the year ended December 31, 2006 compared to the year ended December 31, 2005 as a result of:

• the reduction in force that we implemented in December of 2006 for which we recorded an expense of $1.7 million in 2006;

• offset, in part, by decreased premiums for directors and officers’ insurance, and;

• decreased facilities costs as a result of combining our facilities into one location.

Other general and administrative expense decreased for the year ended December 31, 2005 compared to the year ended December 31, 2004 as a result of:

• decreased salary costs as the expenses associated with individuals whose roles changed are now reflected in research and development expenses;

• decreased premiums for directors and officers’ insurance, and;

• decreased recruitment costs.

Total general and administrative employees were 26, 34 and 33 at December 31, 2006, 2005 and 2004, respectively. We expect other general and administrative expenses to decrease in 2007, when compared to 2006, as a result of the reduction in force that we implemented in December of 2006.

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Other Income (Expense)

The table below presents our other income (expense) for the years ended December 31, 2006, 2005, and 2004.

	Years ended December 31,									2006 to 2005 Increase (Decrease)			2005 to 2004 Increase (Decrease)
	2006			2005			2004
Interest income	$	1,987		$	1,300		$	953		$	687		$	347
Gain (loss) on disposal of equipment		7			(9	)		—			16			(9	)
Interest expense		(781	)		(746	)		(160	)		(35	)		(586	)
Total other income	$	1,213		$	545		$	793		$	668		$	(248	)

Other income (expense) consists of interest income, interest expense, accretion of interest and gain (loss) on disposal of equipment. Interest income increased for the year ended December 31, 2006, compared to the year ended December 31, 2005, as our average cash balance during 2006 was higher than 2005. Interest income increased for the year ended December 31, 2005, compared to the year ended December 31, 2004, as 2005 was a period of increasing interest rates. Depending on interest rates, we expect that interest income will increase in 2007 compared to 2006 as we expect our cash balance to increase during 2007.

Interest expense across all periods is primarily a result of accreting the marketing expenses recorded on the balance sheets as “Accrued marketing costs.” Our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. During the year ended December 31, 2004, we reached our $11.2 million limitation for the year. We recorded an expense, and associated liability, of approximately $15.6 million as part of collaboration loss during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk free interest rate from the expected payment date based on achievement of the sales milestones in the agreement. We are increasing the liability over time to the expected payment amount. In 2006, 2005 and 2004 we increased this liability by $781,000, $746,000 and $154,000, respectively, for accretion of interest. The total liability of $17.3 million at December 31, 2006 is reflected on our balance sheet under the caption “Accrued marketing costs.”

Income Tax Provision

During the year ended December 31, 2006, the Company recorded an income tax provision of $275,000, of which $115,000 was payable on December 31, 2006 and included in accrued expenses on the balance sheet. The expense was due primarily to the current tax expense caused by the Alternative Minimum Tax (“AMT”). A full valuation allowance was recognized related to the benefit of the AMT credit.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases for our properties. In the past we have entered into derivative transactions that represented call options sold on our stock to a third party financial institution and were entered into in order to generate cash from the option premiums and provide us with the opportunity to raise capital at prices significantly in excess of the market price at the time of the transaction. All of these options have expired unexercised. In the event these options were exercised, we expect they would have been settled by issuing shares of our stock. We may enter into similar transactions in the future, subject to market conditions. We enter into these transactions as a potential method to raise capital and not to speculate on the future market price of our stock. We have no subsidiaries or other unconsolidated limited purpose entities, and we have not guaranteed or otherwise supported the obligations of any other entity.

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Critical Accounting Policies

We believe the following accounting policies are the most critical to our financial statements. We believe they are important to the presentation of our financial condition and results from operations, and require the highest degree of management judgment to make the estimates necessary to ensure their fair presentation. Actual results could differ from those estimates.

Revenue Recognition under Staff Accounting Bulletin No. 104

Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” summarizes the SEC’s views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 104 establishes the SEC’s view that it is not appropriate to recognize revenue until all of the following criteria are met: persuasive evidence that an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. Further, SAB No. 104 requires that both title and the risks and rewards of ownership be transferred to the buyer before revenue can be recognized. We believe that our revenue recognition policies as described below are in compliance with SAB No. 104.

Milestone Revenue and Deferred Revenue—Roche

SAB No. 104 provides guidance that it is appropriate to recognize revenue related to license and milestone payments over the research and development term of a collaboration agreement. The primary estimates we make in connection with the application of this policy are the length of the period of the research and development under our Development and License Agreement with Roche and the estimated commercial life of FUZEON. In the event our judgment of the length of these terms changes, the milestone revenue to be recognized under our collaboration with Roche would change. If either term were expected to be longer, the amount of revenue recognized would be less per quarter than currently being recognized. If either term were expected to be shorter, the amount of revenue recognized would be more per quarter than currently being recognized.

Through December 31, 2006, the Company has received a $10.0 million license fee, research milestone payments of $15.0 million and $3.3 million in manufacturing milestones related to Roche achieving certain production levels. The license fee and research milestones were recorded as deferred revenue and are being recognized ratably over the research and development period. The manufacturing milestones were also recorded as deferred revenue and are being recognized ratably through June 2013, which is the current expected commercial life of FUZEON. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for the results of research that was performed outside the research plan during 2005. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this payment over the extended period (the period of our continuing involvement).

On March 13, 2007, the Company entered into an agreement with Roche that amends the terms of the Research Agreement whereby all rights and joint patents and other intellectual property rights to the next generation fusion inhibitor peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, will revert to Trimeris. The impact of regaining full control over the TRI-1144 development program on the amount of revenue to be recognized in future periods is currently being assessed.

Collaboration Income (Loss)

Product sales of FUZEON began in the United States on March 27, 2003 and are recorded by Roche. Under the Development and License Agreement with Roche, the Company shares profits equally from the sale of FUZEON in the United States and Canada with Roche, which is reported as collaboration income (loss) in the statements of operations as a component of revenue. Collaboration income (loss) is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any estimated discounts, rebates or returns resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross margin. Gross profit is reduced by selling and marketing expenses and other costs related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income or loss as a component of revenue. Roche previously had

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an exclusive distribution arrangement with Bioscrip to distribute FUZEON in the United States. This exclusive arrangement terminated on April 26, 2004. Effective April 26, 2004, FUZEON became available through retail and specialty pharmacies across the U.S. Prior to April 26, 2004, revenue from product sales was recognized when title and risk of loss passed to Bioscrip, which is when Bioscrip allocates drug for shipment to a patient. We do not believe there were any shipments that were as a result of incentives and/or in excess of the wholesaler’s ordinary course of business inventory level. Beginning on April 26, 2004, revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers. Roche prepares its estimates for sales returns and allowances, discounts and rebates based primarily on their historical experience with FUZEON and other anti-HIV drugs and their estimates of the payor mix for FUZEON, updated for changes in facts and circumstances on a quarterly basis. If actual results differ from these estimates, these estimates will be adjusted which could have an effect on results from operations in the period of adjustment.

We recognize 50% of the total collaboration gross profit/loss which includes estimates made by and recorded by Roche for reductions to gross sales for expected returns of expired products, government rebate programs, such as Medicaid reimbursements, and customer incentives, such as cash discounts for prompt payment. Estimates for government rebate programs and cash discounts are determined by Roche based on contractual terms, historical information from Roche’s anti-HIV drug portfolio, and Roche’s expectations regarding future utilization rates for these programs. Estimates for product returns are based on an on-going analysis of industry return patterns and historical return patterns by Roche for its anti-HIV drug portfolio. This includes the purchase of third-party data by Roche to assist Roche and us in monitoring channel inventory levels and subsequent prescriptions for FUZEON. We also monitor the activities and clinical trials of our key competitors and assess the potential impact on future FUZEON sales and return expectations where necessary. Expected returns for FUZEON are generally low as FUZEON has a high WAC compared to other anti-HIV drugs, and requires significantly more storage space than other anti-HIV drugs due to the size of a monthly kit because FUZEON requires twice daily injections. Consequently wholesalers tend to stock only the necessary volumes of FUZEON inventory. We believe that wholesalers hold 1.5 to 2 weeks of FUZEON inventory on average. The current shelf life of FUZEON is 36 months. Roche reviews the estimates discussed above on a quarterly basis and revises estimates as appropriate for changes in facts or circumstances. These estimates reduce our share of collaboration income or loss under our Development and License Agreement.

Calculation of Compensation Costs for Stock Options Granted to Employees

In December 2004, SFAS No. 123 (revised), “Share-Based Payment,” was issued. SFAS No. 123 (revised) requires that the cost resulting from all share-based payment transactions be recognized as a charge in the financial statements. This statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. The primary estimate we make in connection with the calculation of this expense is the forfeiture rate of those options granted. The future volatility of our stock price and the term of those options granted are estimates used in calculating the value of the stock options in the Black-Scholes option-pricing model. We first segment the optionee population into like pools. For each pool we then estimate the future volatility by weighting the historical volatilities and the implied future volatility for call options in our stock quoted on the Chicago Board Options Exchange. A higher volatility would result in greater compensation costs, and a lower volatility would result in lower compensation costs for these stock options. For each pool we also estimate the forfeiture rate based on historical forfeiture rates. A higher forfeiture rate would result in less compensation costs, and a lower forfeiture rate would result in higher compensation costs. Additional, for each pool we estimate the term of the options. A longer term would result in greater compensation costs, and a shorter term would result in lower compensation costs for these stock options.

Calculation of Compensation Costs for Stock Options Granted to Non-Employees

Compensation costs for stock options granted to non-employees are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised) and Emerging Issues Task Force (“EITF”) Issue No. 96-18, which require that such compensation costs be measured at the end of each reporting period to account for changes in the fair value of the Company’s common stock until the options are vested. These costs are non-cash charges resulting from stock option grants to non-employees. The primary estimate we make in connection with the

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calculation of this expense is the future volatility of our stock price used to calculate the value of the stock options in the Black-Scholes option-pricing model. At December 31, 2006, we estimated the future volatility at 50% based on a blend of historical volatility along with implied volatility for traded options on the Company’s stock. A higher volatility would result in greater compensation costs, and a lower volatility would result in lower compensation costs for these stock options.

In addition, the closing market price per share of our stock at the end of each reporting period has a significant effect on the value of the stock options calculated using the Black-Scholes option-pricing model. A higher market price per share of our stock would result in greater compensation costs, and a lower market price per share of our stock would result in lower compensation costs for these stock options, all other factors being equal. At December 31, 2006, there were options to purchase approximately 27,000 shares of common stock granted to non-employees outstanding that were not fully vested that could result in additional changes in compensation costs under EITF 96-18.

Capitalization of Patent Costs

The costs of patents are capitalized and are amortized using the straight-line method over the estimated remaining lives of the patents, either 17 years from the date the patent is granted or 20 years from the initial filing of the patent, depending on the patent. These costs are primarily legal fees and filing fees related to the prosecution of patent filings. We perform a continuous evaluation of the carrying value and remaining amortization periods of these costs. The primary estimate we make is the expected cash flows to be derived from the patents. In the event future expected benefit to be derived from any patents are less than their carrying value, the related costs would be expensed at that time.

Accrued Marketing Costs

In 2004, we reached an agreement with Roche whereby our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. We currently estimate this date to be in 2011. During the year ended December 31, 2004, we reached our $11.2 million limitation for the year. We recorded an expense, and associated liability, of approximately $15.6 million as part of collaboration loss during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk free interest rate from the expected payment date based on achievement of the sales milestones in the agreement. We are increasing the liability over time to the expected payment amount. In 2006, 2005 and 2004 we increased this liability by $781,000, $746,000 and $154,000, respectively, for accretion of interest. The total liability of $17.3 million at December 31, 2006 is reflected on our balance sheet under the caption “Accrued marketing costs.”

Advanced Payment—Roche

We are making advance payments to Roche for our share of the cost of the capital improvements made at Roche’s Boulder facility where FUZEON drug substance is produced. Our anticipated share of this capital investment is approximately $14.0 million. At December 31, 2006, we have paid $8.5 million and accrued $500,000 and expect to pay approximately $500,000 per quarter through June 2009. This amount, net of charges to cost of goods sold as the related inventory is sold, is recorded as an asset on our balance sheet under the caption “Advanced payment—Roche.” This asset will be amortized to cost of goods sold based on the units of FUZEON sold during the collaboration period. We estimate that as of December 31, 2006, this asset has a remaining useful life of approximately 10 years. In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment. In addition, other peptide drug candidates discovered under our collaboration with Roche can be manufactured using this same Roche facility. The carrying value of this asset will be evaluated annually for impairment or if a triggering event occurs.

Pursuant to the Manufacturing Amendment, the use of Roche owned facilities in Boulder for the manufacture of FUZEON will result in a credit to the collaboration if used to produce other products. During the period from July 2004

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through December 2006, another product was produced using these facilities that resulted in a credit to the collaboration. Our share of this credit is approximately $1.5 million and has been recorded on our balance sheet as a reduction to the “Advanced payment – Roche.” This credit offsets variances that would otherwise have been allocated to FUZEON if the facility had remained under- utilized and will be recognized when the related FUZEON produced during this period is sold.

Accounting and Other Matters

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109 (“FIN No. 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. We are currently assessing the impact of FIN No. 48 on our financial statements.

In September 2006, the FASB issued FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(revised) (“SFAS 158”). SFAS 158 requires plan sponsors of defined benefit pension and other postretirement benefit plans (collectively, “postretirement benefit plans”) to recognize the funded status of their postretirement benefit plans on the balance sheet, measure the fair value of plan assets and benefit obligations as of the date of the fiscal year-end balance sheet and provide additional disclosures. On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. The effect of adopting SFAS 158 on the Company’s financial condition at December 31, 2006 has been included in the accompanying financial statements. SFAS 158 did not have an effect on the Company’s financial condition at December 31, 2005 or 2004. SFAS 158’s provisions regarding the change in measurement date of postretirement benefit plans are not applicable as the Company already uses a measurement date of December 31 for its post-retirement health insurance continuation plan. See Note 8 “Employee Benefit Plans” for further discussion of the effect of adopting SFAS 158 on the Company’s financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”), which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 is effective for annual financial statements of the first fiscal year ending after November 15, 2006. SAB 108 did not have an effect on the Company’s financial statements for the year ended December 31, 2006.

The FASB also issues exposure drafts for proposed statements of financial accounting standards. Such exposure drafts are subject to comment from the public, to revisions by the FASB and to final issuance by the FASB as statements of financial accounting standards. Management considers the effect of the proposed statements on our financial statements and monitors the status of changes to issued exposure drafts and to proposed effective dates.

Corporate Code of Ethics

We have a code of ethics for our employees and officers. This document is available on our website at the following address: http://trimeris.com/140governance.aspx code of ethics.pdf

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

Our exposure to market risk is primarily in our investment portfolio. We do not use derivative financial instruments for speculative or trading purposes. Substantially all of our contracts are denominated in U.S. dollars; therefore, we have no material foreign currency risk. We have an investment policy that sets minimum credit quality standards for our investments. The policy also limits the amount of money we can invest in any one issue, issuer or type of instrument. We have not experienced any material loss in our investment portfolio and we believe the market risk exposure in our investment portfolio has remained consistent over this period.

The table below presents the carrying value, which is approximately equal to fair market value, and related weighted-average interest rates for our investment portfolio at December 31, 2006. Fair market value is based on actively quoted market prices. Our investments are generally most vulnerable to changes in short-term interest rates in the United States. Substantially all of our investments mature in twelve months or less, and have been given a rating of A1 or higher by a nationally recognized statistical rating organization or are the debt obligations of a federal agency and, therefore, we believe that the risk of material loss of principal due to changes in interest rates is minimal.

	Carrying Amount		Average Interest Rate
	(thousands)
Cash and cash equivalents—fixed rate	$	29,465	3.81	%
Investment securities		18,587	5.11	%
Overnight cash investments—fixed rate		587	4.10	%
Total investment securities	$	48,639	4.31	%

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is included in Item 15 of this Annual Report on Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with the Company’s independent registered public accounting firm, KPMG LLP.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.    We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation of the disclosure controls and procedures as of December 31, 2006, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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Management’s Report on Internal Control over Financial Reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2006. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2006, our internal control over financial reporting is effective based on those criteria.

Our management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears on page F-1 of this Annual Report on Form 10-K. KPMG LLP has also audited the financial statements of the Company, as stated in their report which appears on page F- 1, of this annual report on Form 10-K.

Changes in Internal Control over Financial Reporting.     There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION.

The following information would otherwise have been filed on Form 8-K under the heading “Item 1.01 Entry into a Material Definitive Agreement":

On March 13, 2007, Trimeris, Inc. (the “Company”) and F. Hoffmann-La Roche Ltd. (“Roche”) entered into an agreement (the “March 2007 Agreement”) amending the terms of their research agreement dated January 1, 2000 (the “Research Agreement”). Pursuant to the March 2007 Agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides covered by the Research Agreement will be returned to Trimeris. In exchange, Trimeris has agreed to pay Roche a low single digit royalty on future net sales of the Company’s lead next-generation fusion inhibitor peptide, TRI-1144, up to a specified limit. In addition, Roche has agreed to return to Trimeris the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche has retained an exclusive license to manufacture and sell FUZEON worldwide. Pursuant to the March 2007 Agreement, Trimeris will now have the sole right to continue development of TRI-1144 and any future costs related to TRI-1144 research and development that may be incurred will be borne solely by Trimeris.

The March 2007 Agreement is filed hereto as Exhibit 10.37 and is incorporated herein by reference.

The following information would otherwise have been filed on Form 8-K under the heading “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers":

On March 15, 2007, the Company announced that effective March 16, 2007, Dr. Dani P. Bolognesi, our Chief Executive Officer and Chief Scientific Officer of Trimeris will retire from his executive duties at the company. Dr. Bolognesi will remain a member of the Board of Directors until the next annual meeting of Trimeris stockholders, after which he will be a scientific consultant to Trimeris through October, 2008. In addition, Mr. Robert Bonczek, our Chief Financial Officer and General Counsel, will retire effective April 30, 2007.

On March 15, 2007, the Company also announced that Mr. E. Lawrence Hill, Jr. has been appointed Acting President and Chief Operating Officer by the Board of Directors effective March 15, 2007. Mr. Hill was formerly C.E.O. of Deltagen, Inc. from 2003-2005. He is currently President of Hickey & Hill, Inc, a management services firm. Additional information regarding Mr. Hill and the terms of his compensation will be filed by the Company on Form 8-K.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 as to principal accounting fees and services is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

63

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

		Page Number
(a)1.	Financial Statements
	Reports of Independent Registered Public Accounting Firm	F-1
	Balance Sheets as of December 31, 2006 and 2005	F-3
	Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-4
	Statements of Stockholders’ Equity for the Years Ended December 31, 2006, 2005 and 2004	F-5
	Statements of Cash Flows for the Years Ended December 31 2006, 2005 and 2004	F-6
	Notes to Financial Statements	F-7

(a)2.    Financial Statement Schedules

All financial statement schedules required under Regulation S-X are omitted, as the required information is not applicable.

(a)3.    Exhibits

The Exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits and are incorporated by reference. The Company has identified in the Exhibit Index each management contract and compensation plan or arrangement filed as an exhibit to this Annual Report on Form 10-K in response to Item 15(b) of Form 10-K.

64

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Trimeris, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Trimeris, Inc. (the Company), maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s 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 for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Trimeris, Inc., maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Trimeris, Inc. as of December 31, 2006 and 2005, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, and our report dated March 16, 2007, expressed an unqualified opinion on those financial statements.

/s/    KPMG LLP

Raleigh, North Carolina

March 16, 2007

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Trimeris, Inc:

We have audited the accompanying balance sheets of Trimeris, Inc. (the Company) as of December 31, 2006 and 2005, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trimeris, Inc. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (R), Share-Based Payment, as of January 1, 2006. As discussed in Note 8 to the financial statements, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), as of December 31, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 16, 2007, expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/    KPMG LLP

Raleigh, North Carolina

March 16, 2007

F-2

TRIMERIS, INC.

BALANCE SHEETS

(in thousands, except par value)

	December 31,
	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	30,052		$	23,559
Investment securities-available-for-sale		17,983			13,330
Accounts receivable—Roche		13,341			10,500
Other receivables		36			54
Prepaid expenses		1,068			1,369
Total current assets		62,480			48,812
Property, furniture and equipment, net of accumulated depreciation and amortization of $11,187 and $10,316 at December 31, 2006 and 2005, respectively		2,160			2,640
Long-term investment securities-available-for-sale		604			—
Patent costs, net of accumulated amortization of $438 and $292 at December 31, 2006 and 2005, respectively		2,584			2,424
Advanced payment—Roche		6,303			5,218
Deposits and other assets		772			1,048
Total assets	$	74,903		$	60,142
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	709		$	1,919
Accrued compensation—short-term		3,797			2,841
Deferred revenue—Roche		2,118			1,722
Accrued expenses		2,283			1,597
Total current liabilities		8,907			8,079
Deferred revenue—Roche		9,151			10,477
Accrued marketing costs		17,288			16,507
Accrued compensation—long-term		1,072			—
Other liabilities		713			706
Total liabilities		37,131			35,769
Stockholders’ equity:
Preferred stock at $.001 par value per share, 10,000 shares authorized, zero shares issued and outstanding at December 31, 2006 and December 31, 2005		—			—
Common stock at $.001 par value per share, 60,000 shares authorized, 22,132 and 22,057 shares issued and outstanding at December 31, 2006 and December 31, 2005		22			22
Additional paid-in capital		408,855			404,293
Accumulated deficit		(371,086	)		(378,470	)
Deferred compensation		—			(1,462	)
Accumulated other comprehensive loss		(19	)		(10	)
Total stockholders’ equity		37,772			24,373
Total liabilities and stockholders’ equity	$	74,903		$	60,142

See accompanying notes to financial statements.

F-3

TRIMERIS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the Years Ended December 31,
	2006			2005			2004
Revenue:
Milestone revenue	$	3,430		$	1,722		$	2,152
Royalty revenue		11,812			8,784			4,556
Collaboration income (loss)		21,738			8,553			(16,125	)
Total revenue and collaboration income (loss)		36,980			19,059			(9,417	)
Operating expenses:
Research and development:
Non-cash compensation		2,254			418			159
Other research and development expense		16,079			17,856			21,154
Total research and development expense		18,333			18,274			21,313
General and administrative:
Non-cash compensation		2,809			450			311
Other general and administrative expense		9,644			8,986			9,840
Total general and administrative expense		12,453			9,436			10,151
Total operating expenses		30,786			27,710			31,464
Operating income (loss)		6,194			(8,651	)		(40,881	)
Other income (expense):
Interest income		1,987			1,300			953
Gain (loss) on disposal of equipment		7			(9	)		—
Interest expense		(781	)		(746	)		(160	)
Total other income		1,213			545			793
Income (loss) before taxes and cumulative effect of change in accounting principle		7,407			(8,106	)		(40,088	)
Income tax provision		275			—			—
Income (loss) before cumulative effect of change in accounting principle		7,132			(8,106	)		(40,088	)
Cumulative effect of change in accounting principle		252			—			—
Net income (loss)	$	7,384		$	(8,106	)	$	(40,088	)
Basic net income (loss) per share before cumulative effect of accounting change	$	0.33		$	(0.37	)	$	(1.86	)
Accounting change		0.01			—			—
Basic net income (loss) per share	$	0.34		$	(0.37	)	$	(1.86	)
Diluted net income (loss) per share before cumulative effect of accounting change	$	0.33		$	(0.37	)	$	(1.86	)
Accounting change		0.01			—			—
Diluted net income (loss) per share	$	0.34		$	(0.37	)	$	(1.86	)
Weighted average shares used in basic per share computations		21,895			21,736			21,608
Weighted average shares used in diluted per share computations		22,005			21,736			21,608

See accompanying notes to financial statements.

F-4

TRIMERIS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2006, 2005, and 2004

(in thousands)

	Preferred Stock			Common Stock				Additional Paid-in Capital			Accumulated Deficit			Deferred Compensation			Other Comprehensive Loss			Total Stockholders’ Equity
	Number of Shares	Par Value		Number of Shares		Par Value
Balance as of December 31, 2003	—	$	—	21,573		$	22	$	398,925		$	(330,276	)	$	—		$	(3	)	$	68,668
Net loss	—		—	—			—		—			(40,088	)		—			—			(40,088	)
Unrealized loss on available-for-sale securities	—		—	—			—		—			—			—			(3	)		(3	)
Comprehensive loss for period	—		—																		(40,091	)
Exercise of stock options	—		—	56			—		505			—			—			—			505
Issuance of stock for 401(K) match	—		—	43			—		614			—			—			—			614
Issuance of stock under Employee Stock Purchase Plan	—		—	15			—		180			—			—			—			180
Non-employee stock compensation expense (reversal of	—		—
compensation expense)	—		—	—			—		(27	)		—			—			—			(27	)
Restricted stock grant(s)	—		—	242			—		3,283			—			(3,283	)		—			—
Restricted stock forfeited	—		—	(12	)		—		(173	)		—			173			—			—
Restricted stock amortization	—		—	—			—		—			—			497			—			497
Balance as of December 31, 2004	—	$	—	21,917		$	22	$	403,307		$	(370,364	)	$	(2,613	)	$	(6	)	$	30,346
Net loss	—		—	—			—		—			(8,106	)		—			—			(8,106	)
Unrealized loss on available-for-sale securities	—		—	—			—		—			—			—			(4	)		(4	)
Comprehensive loss for period																					(8,110	)
Exercise of stock options	—		—	85			—		440			—			—			—			440
Issuance of stock for 401(K) match	—		—	57			—		650			—			—			—			650
Issuance of stock under Employee Stock Purchase Plan	—		—	20			—		179			—			—			—			179
Non-employee stock compensation expense	—		—	—			—		25			—			—			—			25
Restricted stock grant(s)	—		—	—			—		5			—			(5	)		—			—
Restricted stock forfeited	—		—	(22	)		—		(313	)		—			313			—			—
Restricted stock amortization	—		—	—			—		—			—			843			—			843
Balance as of December 31, 2005	—	$	—	22,057		$	22	$	404,293		$	(378,470	)	$	(1,462	)	$	(10	)	$	24,373
Net income	—		—	—			—		—			7,384			—			—			7,384
Unrealized loss on available-for-sale securities	—		—	—			—		—			—			—			(3	)		(3	)
Comprehensive income for period	—		—	—			—		—			—			—			—			7,381
Cumulative effect of change in accounting principle	—		—	—			—		(252	)		—			—			—			(252	)
Adoption of SFAS 158 for postretirement benefits	—		—	—			—		—			—			—			(6	)		(6	)
Exercise of stock options	—		—	47			—		280			—			—			—			280
Issuance of stock for 401(K) match	—		—	59			—		745			—			—			—			745
Issuance of stock under Employee Stock Purchase Plan	—		—	21			—		188			—			—			—			188
Non-employee stock compensation expense	—		—	—			—		83			—			—			—			83
Employee stock option expense	—		—	—			—		4,300			—			—			—			4,300
Employee Stock Purchase Plan expense	—		—	—			—		88			—			—			—			88
Reversal of deferred compensation under SFAS 123R	—		—	—			—		(1,462	)		—			1,462			—			—
Restricted stock forfeited	—		—	(52	)		—					—			—			—			—
Restricted stock amortization	—		—	—			—		592			—			—			—			592
Balance as of December 31, 2006	—	$	—	22,132		$	22	$	408,855		$	(371,086	)	$	—		$	(19	)	$	37,772

See accompanying notes to financial statements.

F-5

TRIMERIS, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income (loss)	$	7,384		$	(8,106	)	$	(40,088	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization of property, furniture and equipment		958			1,022			1,340
Postretirement benefits		(6	)		—			—
Net (gain) loss on disposal of equipment		(7	)		9			—
Other amortization		170			105			64
Amortization of deferred revenue—Roche		(3,430	)		(1,722	)		(2,152	)
Non-cash compensation expense		5,063			868			470
Cumulative effect of change in accounting principle		(252	)		—			—
401 (K) plan stock match		745			650			614
Patent costs expensed		115			118			163
Accrued marketing costs		781			746			15,761
Decrease (increase) in assets:
Accounts receivable—Roche		(2,841	)		(4,622	)		(5,878	)
Other receivables		18			118			(144	)
Prepaid expenses		301			261			476
Advanced payment—Roche, net		(1,085	)		(720	)		(4,498	)
Deposits and other assets		252			(1,030	)		37
Increase (decrease) in liabilities:
Accounts payable		(1,210	)		495			531
Accounts payable—Roche		—			—			(11,029	)
Accrued compensation		2,028			(140	)		1,242
Accrued expenses		686			1,337			(414	)
Deferred revenue—Roche		2,500			—			750
Other liabilities		7			579			127
Net cash provided (used) by operating activities		12,177			(10,032	)		(42,628	)
Cash flows from investing activities:
Purchases of investment securities—available-for-sale		(19,792	)		(34,313	)		(40,149	)
Maturities of investment securities—available-for-sale		14,532			41,280			66,758
Proceeds from the sale of equipment		14			37			—
Purchases of property, furniture and equipment		(485	)		(1,328	)		(1,170	)
Patent costs		(421	)		(805	)		(406	)
Net cash (used) provided by investing activities		(6,152	)		4,871			25,033
Cash flows from financing activities:
Principal payments under capital lease obligations		—			—			(274	)
Employee stock purchase plan stock issuance		188			179			180
Proceeds from exercise of stock options		280			440			505
Net cash provided by financing activities		468			619			411
Net increase (decrease) in cash and cash equivalents		6,493			(4,542	)		(17,184	)
Cash and cash equivalents at beginning of year		23,559			28,101			45,285
Cash and cash equivalents at end of year	$	30,052		$	23,559		$	28,101
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	—		$	—		$	6
Cash paid during the period for income taxes	$	160		$	—		$	—
Supplemental disclosure of non-cash investing activity:
Other receivable for the sale of equipment	$	—		$	28		$	—

See accompanying notes to financial statements.

F-6

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Trimeris is a biopharmaceutical company engaged in the discovery, development and commercialization of novel therapeutic agents for the treatment of viral disease. The core technology platform of fusion inhibition is based on blocking viral entry into host cells. FUZEON, approved in the U.S., Canada and European Union, is the first in a new class of anti-HIV drugs called fusion inhibitors. Trimeris is developing FUZEON and future generations of peptide fusion inhibitors in collaboration with F. Hoffmann-La Roche Ltd., (“Roche”).

The Company has a worldwide agreement the (“Development and License Agreement”) with F. Hoffmann-La Roche Ltd., (“Roche”), to develop and market T-20, currently known as FUZEON, whose generic name is enfuvirtide. FUZEON is manufactured and distributed by Roche through Roche’s sales and distribution network throughout the world in countries where regulatory approval has been received. The Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, and receives a royalty based on net sales of FUZEON outside the United States and Canada.

The Company also has a separate agreement the (“Research Agreement”) with Roche that governs the identification of compounds that may become clinical candidates. In March 2007, the Company entered into an agreement with Roche that amends the terms of the Research Agreement whereby all rights and joint patents and other intellectual property rights to the next generation fusion inhibitor peptides falling under the Research Agreement, which includes the lead drug candidate TRI-1144, will revert to Trimeris. The Company is assessing the impact of this amendment on its future financial position, operating results and cash flows.

Liquidity

The Company has sufficient liquidity to fund its cash flow requirements through 2007. Although we expect to share the future development costs for FUZEON and our other potential peptide drug candidates covered under the Development and License Agreement for the United States and Canada equally with Roche, we have expended, and expect to continue to expend in the future, substantial funds to pursue our drug candidate and compound discovery and development efforts, including:

• expenditures for marketing activities related to FUZEON;

• research and development and preclinical testing of other product candidates, including TRI-1144;

• the development of our proprietary technology platform; and

• possible acquisitions and in licensing of research programs, clinical stage products and marketed products.

Under the current operating environment, based on current sales levels of FUZEON, we expect that our existing capital resources, together with the interest earned thereon, will be adequate to fund our current programs based on current expectations. However, any reduction in FUZEON sales below currently expected levels or increase in expenditures beyond currently expected levels could increase our capital requirements substantially beyond our current expectations. If we require additional funds and such funds are not available through debt or equity financing, or collaboration arrangements, we will be required to delay, scale-back or eliminate certain preclinical testing, clinical trials and research and development programs, including our collaborative efforts with Roche. In the event Roche becomes unable or unwilling to share future collaboration expenses, our capital requirements could increase substantially beyond our current expectations.

Since our initial public offering in 1997, we have obtained the majority of our funding through public or private offerings of our common stock. We expect to continue to obtain our funding through public or private offerings of our common stock until such time, if ever, as we are able to generate significant funds from operations.

F-7

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents of $30.1 million and $23.6 million December 31, 2006 and 2005, respectively, are stated at cost and consist primarily of overnight commercial paper, variable rate demand notes and mutual funds that hold these securities. The carrying amount of cash and cash equivalents approximates fair value.

Investment Securities—Available-For-Sale

Investment securities, which consist of corporate bonds, Euro dollar bonds, certificates of deposit, auction rate securities and federal agency notes, are classified as available-for-sale, and are reported at fair value based on quoted market prices. The cost of securities sold is determined using the specific identification method when computing realized gains and losses. Unrealized gains and losses are included as a component of stockholders’ equity until realized.

In accordance with its investment policy, the Company limits the amount of credit exposure with any one issuer. These investments are generally not collateralized and typically mature within one year.

Financial Instruments

Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” as amended, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value is determined using available market information.

Financial instruments, other than investment securities—available-for-sale, held by the Company include accounts receivable, accrued marketing costs, and accounts payable. The Company believes that the carrying amount of these financial instruments approximates their fair value.

Property, Furniture and Equipment

Property, furniture and equipment are recorded at cost.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the lesser of the lease term or estimated useful life of the asset.

The depreciable lives of our property, furniture and equipment are as follows:

Equipment and furniture	3.5 years
Computer / software	3 years
Leasehold improvements	Lesser of useful life or life of lease – 10 years

Intangible Assets

Management performs a continuing evaluation of the carrying value and remaining amortization periods of unamortized amounts of intangible assets. Any impairments would be recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. During 2006, 2005 and 2004, $115,000, $118,000 and $163,000 respectively, of patent costs were expensed in other research and development expense because the expected future benefits from these patents was less than their carrying value.

F-8

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

The costs of patents are capitalized and are amortized using the straight-line method over the estimated remaining lives of the patents, the longer of 17 years from the date the patent is granted or 20 years from the initial filing of the patent.

Patent amortization expense was $146,000, $92,000 and $64,000 in 2006, 2005 and 2004, respectively. The estimated aggregate amortization expense for the next five years is $141,000 per year for 2007 through 2011.

Also included in patent costs are intangibles that are not currently being amortized of $976,000 and $1.2 million as of December 31, 2006 and 2005, respectively.

Accounts Payable

As of December 31, 2006 and 2005 there were $37,000 and $32,000, respectively, due to related parties included in accounts payable on the Company’s balance sheets.

Accrued Marketing Costs

The Company and Roche agreed to limit the Company’s actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, the Company’s share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. The Company currently estimates this date to be in 2011. During the year ended December 31, 2004, the Company’s share of selling and marketing expenses exceeded $11.2 million. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company’s estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the agreement, discounted at a risk free interest rate. The Company is increasing the liability over time to the expected payment amount. In 2006, 2005 and 2004 the Company increased the initial recorded liability by $781,000, $746,000 and $154,000, respectively for accretion of interest. The total liability of $17.3 million and $16.5 million at December 31, 2006 and 2005, respectively, is reflected on our balance sheet under the caption “Accrued marketing costs.”

For the years ended December 31, 2006 and 2005, Trimeris has recorded its share of selling and marketing expenses in accordance with the terms and conditions of agreements we executed with Roche.

Advanced Payment—Roche

In September 2005, the Company entered into a Letter of Amendment (“Manufacturing Amendment”) with Roche setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Company will pay Roche for the Company’s share of the capital invested in Roche’s manufacturing facility over a seven-year period. The Company’s anticipated share of this capital investment is approximately $14.0 million. As a result, the Company has paid $8.5 million, accrued $500,000 and expects to pay approximately $500,000 per quarter through June 2009. As a result, Roche will no longer include the depreciation related to the manufacturing facility in the cost of goods sold. In the event our Development and License Agreement is terminated, the Company would not be obligated for any unpaid amounts for capital investment.

These payments, net of the portion allocated to cost of goods sold, are recorded as an asset presented as “Advanced payment—Roche.” This asset is amortized based on the units of FUZEON sold during the collaboration period, in order to properly allocate the capital investment to cost of goods sold as the related inventory is sold in future periods. Assuming all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 10 years. In addition, other peptide drug candidates discovered under our collaboration with Roche could be manufactured using the same Roche facility. The carrying value of this asset will be evaluated annually for impairment or if a triggering event occurs.

F-9

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Under the Manufacturing Amendment (see Note 9), the use of Roche owned facilities in Boulder for the manufacture of FUZEON will result in a credit to the collaboration if used to produce other products for Roche. During the period from July 2004 through June 2005 and January 2006 through September 2006, a key intermediate of another product was produced using these facilities that resulted in a credit to the collaboration. The Company’s share of this credit was approximately $632,000 and $900,000 for 2006 and 2005, respectively, and has been recorded on the Company’s balance sheet as a reduction to the “Advanced payment—Roche.” This credit offsets variances that would otherwise have been allocated to FUZEON if the facility had remained underutilized and will be recognized when the related FUZEON produced is sold.

Milestone Revenue and Deferred Revenue—Roche

Through December 31, 2006, the Company has received a $10.0 million license fee, research milestone payments of $15.0 million and $3.3 million in manufacturing milestone payments related to Roche achieving certain production levels. The license fee and research milestones were recorded as deferred revenue and are being recognized ratably over the research and development period. The manufacturing milestones were also recorded as deferred revenue and are being recognized ratably over the commercial life of FUZEON or through June 2013.

At the time of the license fee payment, Roche was granted a warrant to purchase Trimeris stock. The fair value of the warrant, $5.4 million, was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million license fee payment.

Over the course of the collaboration our estimate of the end of the research and development period has changed:

• During the fourth quarter of 2002, we changed our estimate of the end of this research and development period to 2007 based on the expected development schedule of T-1249 or a replacement compound, the final compound covered by our Development and License Agreement with Roche.

• During the first quarter of 2004, we changed our estimate of the end of the research and development period to 2010 from 2007. This change was due to a change in estimate of the development period for T-1249 or a replacement compound as further clinical development of T-1249 had been placed on hold. We recognized approximately $800,000 less of milestone revenue in 2004 compared to 2003 due largely in part to this change in estimate.

• In January 2005, based on our current evaluation of our research and development programs, we placed further clinical development of T-1249 on hold indefinitely due to challenges in achieving an extended release formulation that would allow significantly less dosing frequency. Taking into account the additional research that will be required to achieve our goals for formulation, in January 2005, we changed our estimate of the end of the research and development period from December 2010 to December 2012; as a result we recognized approximately $500,000 less revenue in 2005 compared to 2004.

In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005, as a reduction of research and development expense. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for the results of research that was performed outside the research plan during 2005. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this milestone over the extended period (the period of our continuing involvement). As a result of this amendment to the Research Agreement, the Company recognized $792,000 less in milestone revenue during 2006.

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

In 2006, Roche and Trimeris amended the terms of the Research Agreement that, among other things, modified the payment of future milestones under the Development and License Agreement. As a result of the amendment, Roche will only be responsible for one remaining $5.0 million milestone payable upon the achievement of a certain cumulative twelve-month sales threshold for FUZEON in the U.S. and Canada.

Royalty Revenue

The Company receives royalties on sales of FUZEON in countries outside of the United States and Canada. Roche is responsible for all activities related to FUZEON outside of the United States and Canada, including regulatory, manufacturing, sales and distribution. These royalties are recognized as revenue when the sales are earned. Royalties of $11.8 million, $8.8 million and $4.6 million were recognized as revenue during the years ended December 31, 2006, 2005 and 2004, respectively. In accordance with our agreement with Roche, our royalty rate has increased from 10% to 12%. This increase was in effect for the entire third quarter of 2006 and will remain at this level for the remainder of the collaboration.

Collaboration Income (Loss)

Product sales of FUZEON began in the United States on March 27, 2003 and are recorded by Roche. Under the Development and License Agreement with Roche, the Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche. Collaboration income (loss) is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross profit. Gross profit is reduced by selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income or loss as a component of revenue. Total net sales of FUZEON in the United States and Canada were $134.2 million, $112.7 million and $85.7 million during the years ended December 31, 2006, 2005 and 2004, respectively. During the year ended December 31, 2006 and 2005, the gross profit from the sale of FUZEON exceeded sales, marketing and other expenses resulting in the Company’s share of operating income from the sale of FUZEON in the United States and Canada of $21.7 million and $8.6 million. During the year ended December 31, 2004, sales, marketing and other expenses exceeded the gross profit from the sale of FUZEON resulting in the Company’s share of operating loss of $16.1 million.

Roche previously had an exclusive distribution arrangement with Bioscrip, formerly known as Chronimed, Inc., to distribute FUZEON in the United States during 2003. This exclusive arrangement terminated on April 26, 2004. Effective April 26, 2004, FUZEON became available through retail and specialty pharmacies across the United States. Prior to April 26, 2004, revenue from product sales had been recognized when title and risk of loss had passed to Bioscrip, which was when Bioscrip allocated drug for shipment to a patient. Since April 26, 2004, revenue is recognized when Roche ships the drug and title and risk of loss passes to wholesalers.

It is important to recognize that Roche is responsible for the manufacture, sales, marketing and distribution of FUZEON. Roche is manufacturing bulk quantities of FUZEON drug substance in its Boulder, Colorado facility and is producing finished drug product from bulk drug substance at another Roche facility. The finished drug product is then shipped to a Roche facility for distribution. Roche’s sales force is responsible for selling FUZEON. Under the Company’s Development and License Agreement with Roche, the Company does not have the ability or rights to co-market this drug or field our own FUZEON sales force. All third party contracts for manufacturing, distribution, sale, and reimbursement are between Roche and the third party. The Company is not a party to any of the material contracts in these areas. Roche provides the Company with information on manufacturing, sales and distribution of FUZEON. Roche is responsible for estimating reductions to gross sales for expected returns of expired products, government rebate programs, such as Medicaid reimbursements, and customer incentives, such as cash discounts for prompt payment. The Company reviews these items for accuracy and reasonableness.

F-11

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Roche prepares estimates for sales returns and allowances, discounts and rebates based primarily on its historical experience with FUZEON and other anti-HIV drugs and its estimates of the payor mix for FUZEON, updated for changes in facts and circumstances on a quarterly basis. If actual results differ from these estimates, these estimates will be adjusted which could have an effect on results of operations in the period of adjustment.

Concentrations

The Company has a Development and License Agreement with Roche, which accounted for 100% of the Company’s royalty revenue for the years ended December 31, 2006, 2005 and 2004. This agreement with Roche also provides the basis for substantially all of the Company’s results from the collaboration. Substantially all of the accounts receivable at December 2006 and 2005, are comprised of receivables from Roche.

Research and Development

Research and development costs, including the cost of producing drug material for clinical trials, are charged to operations as incurred.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates made by the Company in the preparation of its financial statements are: the estimate of the length of the research and development period for our Roche collaboration; the estimate of the future volatility of our stock price used to calculate the value of stock options granted to both employees and non-employees; the estimate(s) of sales returns and allowances, discounts and rebates related to sales of FUZEON; the estimate of losses incurred related to unusable product and supplies; the estimate of the period when our liability for accrued marketing costs comes due; the estimate of the patent life of FUZEON; and the estimate of the expected future operating cash flows from our intangible patent assets.

Basic and Diluted Net Income (Loss) Per Share

In accordance with SFAS No. 128, “Earnings Per Share” (“SFAS No. 128”), basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per common share reflects the maximum dilutive effect of common stock issuable upon exercise of stock options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan. The dilutive effect of outstanding options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of stock-based compensation required by SFAS No. 123 (revised). The following table sets forth the

F-12

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

computation of basic and diluted net income per share for the year ended December 31, 2006 (in thousands, except per share amounts):

	2006
Numerator:
Net income	$	7,384
Denominator:
Weighted average common shares used for basic calculation		21,895
Weighted average effect of dilutive securities:
Employee stock options		34
Restricted stock		76
Denominator for diluted calculation	$	22,005
Net income per share:
Basic	$	0.34
Diluted	$	0.34

The calculation of diluted net income per share excludes all anti-dilutive shares. For the year ended December 31, 2006, the number of anti-dilutive shares issuable upon exercise of options that were excluded, as calculated based on the weighted average closing price of the Company’s common stock for the period, amounted to approximately 3.7 million. Also excluded for 2006 were 362,000 warrants to purchase common stock due to their antidilutive effect.

Basic and diluted net loss per common share are the same for the years ended December 31, 2005 and 2004, as common equivalent shares from stock options, restricted stock, and stock warrants were anti-dilutive.

At December 31, 2006, there were 3,804,000 options to purchase common stock, 126,000 restricted stock grants, which become fully vested in 2007, 50,000 restricted stock grants (of which 29,000 will become vested in January 2007 and 21,000 will be forfeited), and 362,000 warrants to purchase common stock outstanding. At December 31, 2005 and 2004, there were 3,393,000 and 3,244,000 options to purchase common stock outstanding, respectively. At December 31, 2005 and 2004, there was a warrant outstanding with Roche to purchase 362,000 shares of common stock. At December 31, 2005 there were 157,000 restricted stock grants, which become fully vested in 2007, and 50,000 restricted stock grants, which become fully vested in 2008. At December 31, 2004, there were 179,000 restricted stock grants, which become fully vested in 2007 and 50,000 restricted stock grants, which become fully vested in 2008.

Stock-Based Compensation

The Company adopted SFAS No. 123 (revised) using the modified prospective method on January 1, 2006. Accordingly, during the year ended December 31, 2006, the Company recorded stock-based compensation expense for awards granted prior to, but not yet vested, as of January 1, 2006, and awards granted after January 1, 2006, using the Black-Scholes valuation model. The Company has recognized the compensation expense using a straight-line amortization method. As SFAS No. 123 (revised) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation for the year ended December 31, 2006 has been reduced for estimated forfeitures. When estimating forfeitures, the Company considered voluntary termination behaviors as well as trends of actual option forfeitures. As a result of the adoption of SFAS No. 123 (revised), the Company recognized non-cash compensation expense of approximately $4.4 million relating to the fair value of employee stock compensation during the year ended December 31, 2006. The additional expense incurred as a result of adoption of SFAS No. 123 (revised) is comprised of expense associated with employee stock options and the employee stock purchase plan.

Compensation costs for stock options granted to non-employees are accounted for in accordance with SFAS No. 123 (revised) and Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which require that compensation be measured at the end of each reporting period for changes in the fair value of the Company’s common stock until the options are vested.

Prior to the adoption of SFAS No. 123 (revised), the Company applied APB 25 and provided the disclosures required under SFAS No. 123. Employee stock-based compensation expense was not reflected in our results of operations for the years ended December 31, 2005 and 2004 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. Forfeitures of awards were recognized as they occurred. See further disclosures in Footnote 6 “Stock Based Compensation.”

Comprehensive Income

Comprehensive income (loss) includes all non-owner changes in equity during a period and is divided into two broad classifications: net income (loss) and other comprehensive income (“OCI”). OCI includes revenue, expenses, gains, and losses that are excluded from earnings under generally accepted accounting principles. For the Company, OCI consists of unrealized gains or losses on securities available-for-sale, and actuarial gains and losses and prior service costs for the postretirement health insurance plan that have not been recognized as components of net periodic postretirement benefit costs.

Segment Reporting

SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” establishes standards for reporting information about the Company’s operating segments. The Company operates in one business segment, the business of discovery, development and commercialization of novel pharmaceuticals.

2.    INVESTMENT SECURITIES—AVAILABLE-FOR-SALE

The following is a summary of available-for-sale securities. Estimated fair values of available-for-sale securities are based generally on quoted market prices (in thousands).

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Market Value
December 31, 2006
Short-term investment securities available-for-sale
Other debt securities maturing within 1 year	$	10,906		—		2	$	10,904
Other debt securities maturing after 1 year through 5 years		1,429		—		1		1,428
Corporate debt securities maturing within 1 year		1,724		—		—		1,724
Corporate debt securities maturing after 1 year through 5 years		3,135		—		7		3,128
Federal agency notes maturing within 1 year		801		—		2		799
Total short-term invesmtent securities available-for-sale	$	17,995	$	—	$	12	$	17,983
Long-term investment securities available-for-sale
Corporate debt securities maturing after 1 year through 5 years		300		—		—		300
Federal agency notes maturing after 1 year through 5 years		305		—		1		304
Total long-term invesmtent securities available-for-sale	$	605	$	—	$	1	$	604
December 31, 2005
Short-term investment securities available-for-sale
Other debt securities maturing within 1 year	$	575		—		—	$	575
Other debt securities maturing after 1 year through 5 years		5,920		—		5		5,915
Corporate debt securities maturing within 1 year		1,068		—		1		1,067
Corporate debt securities maturing after 1 year through 5 years		1,568		—		4		1,564
Corporate debt securities maturing after 10 years		701		—		—		701
Municipal bonds maturing after 5 years through 10 years		602		—		—		602
Municipal bonds maturing after 10 years		2,906		—		—		2,906
Total short-term investment securities available-for-sale	$	13,340	$	—	$	10	$	13,330

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

There were no sales of these investments or realized gains or losses during 2006 or 2005. All unrealized losses on investment securities are considered to be temporary given the credit ratings on these investment securities and the short durations of the unrealized losses.

3.    LEASES

The Company had no property, furniture or equipment under capital leases at December 31, 2006 and 2005.

The Company has several non-cancelable operating leases, primarily for office space and office equipment, that extend through January 2015. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. Rental expense, including maintenance charges, for operating leases during 2006, 2005 and 2004 was $1.8 million, $2.4 million and $1.9 million, respectively.

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) of December 31, 2006 (in thousands) are:

	OPERATING LEASES
Year ending December 31:
2007	$	1,508
2008		1,538
2009		1,569
2010		1,600
2011		1,633
Thereafter		5,240
Total minimum lease payments	$	13,088

4.    PROPERTY, FURNITURE AND EQUIPMENT

Property, furniture and equipment consists of the following at December 31, 2006 and 2005 (in thousands):

	2006			2005
Furniture and equipment	$	12,181		$	11,790
Leasehold improvements		1,166			1,166
		13,347			12,956
Less accumulated depreciation and amortization		(11,187	)		(10,316	)
	$	2,160		$	2,640

Depreciation expense was $958,000 and $1.0 million for the years ended December 31, 2006 and 2005 respectively.

5.    STOCKHOLDERS’ EQUITY

Warrant

In July 1999, the Company granted Roche a warrant to purchase 362,000 shares of common stock at a purchase price of $20.72 per share. The warrant is exercisable prior to the tenth annual anniversary of the grant date and was not exercised as of December 31, 2006. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million up-front payment received from Roche. We deferred $4.6 million, the net of the $10.0 million up-front payment and the $5.4 million warrant, over the research and development period. The value of the warrant was calculated using the Black-Scholes option-pricing model using the following assumptions: estimated dividend yield of 0%; expected stock price volatility of 86.00%; risk-free interest rate of 5.20%; and expected option life of ten years.

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Preferred Stock

The Board of Directors has the authority to issue shares of preferred stock and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences, without any further vote or action by the stockholders.

6.    STOCK BASED COMPENSATION

The fair value of common stock options is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the years ended December 31, 2006, 2005 and 2004:

	2006	2005	2004
Estimated dividend yield	0.00%	0.00%	0.00%
Expected stock price volatility	39.0-52.0%	45.0-50.0%	45.0-50.0%
Risk-free interest rate	4.46-4.96%	3.50-4.26%	3.50%
Expected term of options (in years)	4.4-9.0	5	5
Expected life of employee stock purchase plan options (in years)	2	2	2

The Company’s computation of expected volatility for the year ended December 31, 2006 is based on a combination of historical and market-based implied volatility from publicly traded and quoted options on the Company’s stock. The computation of expected life in 2006 was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The range provided above results from the behavior patterns of separate groups of employees that have similar historical experience. The risk-free interest rate for periods within the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of the grants.

The table below presents the Company’s stock based compensation for the years ended December 31, 2006, 2005 and 2004:

	2006		2005		2004
	(in thousands)
Employee Stock Option Plan*	$	4,300	$	—	$	—
Employee Stock Purchase Plan		88		—		—
Restricted stock to employees		592		843		497
Non-employee stock options		83		25		(27	)
Total stock option expense**	$	5,063	$	868	$	470

* Formally known as the Trimeris, Inc. Amended and Restated Stock Incentive Plan

** The Company adopted SFAS 123 (revised) on January 1, 2006.

Employee Stock Option Plan

In 1993, the Company adopted a stock option plan, which allowed for the issuance of non-qualified and incentive stock options (“1993 Plan”). During 1996, the Trimeris, Inc. Amended and Restated Stock Incentive Plan (the “Employee Stock Option Plan”) was implemented and replaced the 1993 Plan. Under the Employee Stock Option Plan, as amended, the Company may grant non-qualified or incentive stock options for up to 6,252,941 shares of common stock. The exercise price of each incentive stock option shall not be less than the fair market value of the Company’s common stock on the date of grant and an option’s maximum term is ten years. Outstanding incentive stock options have been issued at prices ranging from $0.34 to $78.50 per share. The vesting period generally occurs over four years. At December 31, 2006, there were approximately 787,000 options remaining available for grant. All incentive stock options which had been granted under the 1993 Plan were cancelled at the inception of the Employee Stock Option

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Plan while the non-qualified stock options remain outstanding at an exercise price of $0.43. No more grants will be made under the 1993 Plan. The Company has sufficient authorized and unissued shares to make all issuances under its share based compensation plans.

A summary of option activity under the Employee Stock Option Plan during the year ended December 31, 2006 is presented below:

	Number of Shares (in thousands)		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding options at January 1, 2006	3,393		$	23.83
Granted	594			10.15
Exercised	(47	)		5.89
Forfeited	(130	)		14.82
Expired	(6	)		0.34
Options outstanding at December 31, 2006	3,804		$	22.35	6.24	$	3,506
Options vested or expected to vest at December 31, 2006	3,691		$	22.67	6.16	$	3,327
Options exercisable at December 31, 2006	2,774		$	26.27	5.31	$	1,792

The weighted-average grant-date fair value of options granted during the years ended December 31, 2006, 2005 and 2004 was $5.25, $6.13 and $6.72, respectively. The total intrinsic value of options exercised during the years ended December 31, 2006, 2005 and 2004 was $311,000, $687,000 and $337,000, respectively.

The following summarizes information about stock options outstanding as of December 31, 2006:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding as of December 31, 2006	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.34-1.00	24,000	0.57	$	0.90	24,000	$	0.90
$1.01-8.00	146,000	1.32	$	7.82	146,000	$	7.82
$8.01-11.625	1,201,000	6.55	$	10.72	648,000	$	11.53
$11.626-15.00	857,000	8.28	$	13.27	554,000	$	13.53
$15.01-40.00	629,000	6.09	$	21.59	455,000	$	23.48
$40.00-45.11	474,000	5.31	$	42.97	474,000	$	42.97
$45.12-50.00	262,000	5.64	$	47.22	262,000	$	47.22
$50.00-78.50	211,000	3.53	$	63.02	211,000	$	63.02
$0.34-78.50	3,804,000	6.24	$	22.35	2,774,000	$	26.27

A summary of the activity of the Company’s nonvested options during the year ended December 31, 2006, is presented below:

	Number of Shares		Weighted- Average Grant- Date Fair Value
	(in thousands)
Nonvested at January 1, 2006	1,098		$	6.86
Granted	594			5.25
Vested	(548	)		7.18
Forfeited	(114	)		5.74
Nonvested at December 31, 2006	1,030		$	5.82

F-17

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

As of December 31, 2006, there was approximately $4.9 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Employee Stock Option Plan, which is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of shares vested during the year ended December 31, 2006 was $3.9 million.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan, which permits eligible employees to purchase newly issued shares of common stock of the Company up to an aggregate of 250,000 shares. Under this plan, employees may purchase from the Company a designated number of shares through payroll deductions at a price per share equal to 85% of the lesser of the fair market value of the Company’s common stock as of the date of the grant or the date the right to purchase is exercised. During the years ended December 31, 2006, 2005 and 2004, 21,000, 20,000 and 15,000 shares were issued under this plan. At December 31, 2006, there were 55,000 shares remaining available for issuance. As a result of the adoption of SFAS No. 123 (revised), the Company recognized $88,000 of compensation expense for the year ended December 31, 2006, related to the fair value of the shares purchased under the Employee Stock Purchase Plan.

Restricted Stock

In June 2004, an aggregate grant of 191,500 shares of restricted stock was made to substantially all employees. The shares vest 100% after three years. In September 2004, a grant of 50,000 shares of restricted stock was made to the newly appointed Chief Executive Officer (“CEO”). The shares granted to the CEO vest 100% after four years of service. Non-cash compensation expense, related to these restricted stock grants, in the amount of $592,000, $843,000 and $497,000 was recognized for the years ended December 31, 2006, 2005 and 2004, respectively. SFAS No. 123 (revised) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior to the adoption of SFAS No. 123 (revised), the Company recognized actual forfeitures of restricted stock upon occurrence. The cumulative effect of the change in accounting principle relating to this change was $252,000, and is included in the statement of operations for the year ended December 31, 2006. As of December 31, 2006, there was approximately $230,000 of total unrecognized compensation cost related to restricted stock grants.

Prior to the adoption of SFAS No. 123 (revised), the Company’s outstanding restricted stock granted to employees in June 2004 and the CEO in September 2004, was recorded as deferred compensation on the balance sheet as of December 31, 2005. Upon the adoption of SFAS No. 123 (revised) as of January 1, 2006, the unearned deferred compensation balance of approximately $1.5 million was reclassified to additional-paid-in-capital.

A summary of the activity of the Company’s nonvested restricted stock during the year ended December 31, 2006 is presented below:

	Number of Shares
	(in thousands)
Nonvested at January 1, 2006	207
Granted	—
Vested	—
Forfeited	(52	)
Nonvested at December 31, 2006	155

Options Granted to Non-employees

Compensation costs for stock options granted to non-employees are accounted for in accordance with SFAS No. 123 (revised) and EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that compensation be measured at the end of each reporting period for changes in the fair value of the Company’s common stock until the options are vested.

The Company recorded expense of $83,000 and $25,000 during the year ended December 31, 2006 and 2005 respectively, related to expense of non-cash compensation charges. The Company recorded $27,000 of income during the year ended December 31, 2004 in expense reversal.

Pro forma Information for Periods Prior to the Adoption of SFAS No. 123 (revised)

Prior to the adoption of SFAS No. 123 (revised), the Company applied APB 25 and provided the disclosures required under SFAS No. 123. Employee stock-based compensation expense was not reflected in our results of operations for the years ended December 31, 2005 and 2004 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. Forfeitures of awards were recognized as they occurred.

The pro forma amounts for the years ended December 31, 2005 and 2004 were as follows (in thousands, except per share data):

	Year Ended December 31,
	2005			2004
Net loss, as reported	$	(8,106	)	$	(40,088	)
Stock-based compensation expense included in reported net loss		843			497
Stock-based compensation expense that would have been included in the determination of net loss if the fair value method was applied		(6,030	)		(9,284	)
Pro forma net loss	$	(13,293	)	$	(48,875	)
Basic and diluted net loss per share:
As reported	$	(0.37	)	$	(1.86	)
Pro forma	$	(0.61	)	$	(2.26	)

7.    INCOME TAXES

During the year ended December 31, 2006, the Company recorded an income tax provision of $275,000, of which $115,000 is payable as of December 31, 2006 and included in accrued expenses. The expense was due primarily to the current tax expense caused by the Alternative Minimum Tax (“AMT”). A full valuation allowance was recognized related to the benefit of the AMT credit.

Income tax expense consists of:

	Current		Deferred		Total
	(in thousands)
Year ended December 31, 2006:
U.S. Federal	$	275	$	—	$	275
State and local		—		—		—
	$	275	$	—	$	275

There was no income tax expense for the years ended December 31, 2005 and 2004.

At December 31, 2006, the Company has net operating loss carryforwards (“NOLs”) for federal tax purposes of approximately $329.5 million, which expire in varying amounts between 2011 and 2025. The Company has state net economic losses of approximately $258.7 million, which expire in varying amounts between 2008 and 2020. The Company has research and development credits of $10.5 million, which expire in varying amounts between 2013 and

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

2025. The Company has Alternative Minimum Tax credit carryforwards of approximately $275,000 which are available to reduce Federal regular income taxes, if any, over an indefinite period.

The Tax Reform Act of 1986 contains provisions, which limit the ability to utilize net operating loss carryforwards and tax credit carryforwards in the case of certain events including significant changes in ownership interests. If the Company’s NOLs and/or tax credits are limited, and the Company has taxable income, which exceeds the permissible yearly NOL, the Company would incur a federal income and/or state tax liability even though NOLs would be available in future years.

The components of deferred tax assets and deferred tax liabilities as of December 31, 2006 and 2005 are as follows (in thousands):

	2006			2005
Deferred tax assets:
Tax loss carryforwards	$	123,819		$	128,644
Tax credits		10,762			10,111
Deferred revenue		3,850			4,189
Reserves and accruals		10,114			8,553
Total gross deferred tax assets		148,545			151,497
Valuation allowance		(148,545	)		(151,497	)
Net deferred asset		—			—
Deferred tax liability		—			—
Net deferred tax assets (liability)	$	—		$	—

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance represents the amount necessary to reduce the Company’s gross deferred tax assets to the amount that is more likely than not to be realized. The decrease in the valuation allowance was approximately $3.0 million for the year ended December 31, 2006. The increase in the valuation allowance was $3.4 million, and $10.4 million for the years ended December 31, 2005 and 2004, respectively. The valuation allowance includes deferred tax assets that when realized, may increase equity rather than reduce tax expense. The Company will evaluate this amount when the criteria for recognizing the deferred tax asset relating to these amounts are met.

The reasons for the difference between the actual income tax expense (benefit) for the years ended December 31, 2006, 2005 and 2004 and the amount computed by applying the statutory federal income tax rate to income (losses) before income tax expense (benefit) are as follows (in thousands):

	2006			% of Pre- tax Loss		2005			% of Pre- tax Loss		2004			% of Pre- tax Loss
Income tax expense (benefit) at statutory rate	$	2,520		34.00	%	$	(2,756	)	-34.00	%	$	(13,630	)	-34.00	%
State income taxes, net of federal benefit		95		1.29	%		(100	)	-1.24	%		3,599		8.98	%
Non-deductible meals and entertainment expenses and other		51		0.68	%		360		4.44	%		303		0.75	%
Non-deductible compensation		966		13.03	%		—		0.00	%		—		0.00	%
Research credit		(376	)	-5.07	%		(945	)	-11.65	%		(631	)	-1.57	%
Change in federal portion of valuation allowance		(2,981	)	-40.22	%		3,441		42.45	%		10,359		25.84	%
Income tax expense (benefit)	$	275		3.71	%	$	—		—		$	—		—

8.    EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company sponsors a 401(k) Profit Sharing Plan (the “401(k) Plan”) under Section 401 (k) of the Internal Revenue Code covering all qualified employees. Participants may elect a salary reduction from 1% to 75% as a

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

contribution to the 401(k) Plan, up to the annual Internal Revenue Service allowable contribution limit. Modifications of the salary reductions may be made monthly. The 401(k) Plan permits the Company to match participants’ contributions. Beginning in 1998, the Company matched up to 100% of a participant’s contributions with Company stock, provided the participant was employed on the last day of the year. The number of shares issued is based on the contributions to be matched divided by the closing price of the Company’s stock on the last trading day of the year. During 2006, 59,000 shares were issued, and compensation expense of $745,000 was recognized. During 2005, 57,000 shares were issued, and compensation expense of $650,000 was recognized. During 2004, 43,000 shares were issued, and compensation expense of $614,000 was recognized. These shares vest ratably based on a participant’s years of service and are fully vested after four years of service.

The normal retirement age shall be the later of a participant’s 65th birthday or the fifth anniversary of the first day of the 401(k) Plan year in which participation commenced. The 401(k) Plan does not have an early retirement provision.

Post-Retirement Health Insurance Continuation Plan

In June 2001, the Company adopted a post-retirement health insurance continuation plan (“Plan”). Employees who have achieved the eligibility requirements of 60 years of age and 10 years of service are eligible to participate in the Plan. The Plan provides participants the opportunity to continue participating in the Company’s group health plan after their date of retirement. Participants will pay the cost of health insurance premiums for this coverage, less any contributions by the Company; this amount was previously capped at $300 per month per participant. In November 2003, the Plan was amended and the limit on contributions by the Company was changed to 50% of the health insurance premium for the employee and his or her spouse.

Adoption of SFAS 158

On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. SFAS 158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan assets and the accumulated postretirement benefit obligation) of its postretirement plan in the December 31, 2006 balance sheet, with a corresponding adjustment to accumulated other comprehensive loss. The adjustment to accumulated other comprehensive loss at adoption represents the net unrecognized actuarial losses, unrecognized prior service costs, and unrecognized transition obligation remaining from the initial adoption of Statement 87, all of which were previously netted against the plan’s funded status in the Company’s balance sheet pursuant to the provisions of Statement 87. These amounts will be subsequently recognized as net periodic benefit costs pursuant to the Company’s historical accounting policy for amortizing such amounts. Further actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component of other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic benefit cost on the same basis as the amounts recognized in accumulated other comprehensive loss at adoption of Statement 158.

The incremental effects of adopting the provisions of SFAS 158 on the Company’s balance sheet at December 31, 2006 are presented in the following table. The adoption of SFAS 158 had no effect on the Company’s statements of operations for the year ended December 31, 2006, or for any prior period presented, and it will not effect the Company’s operating results in future periods.

	At December 31, 2006
	Prior to Adopting SFAS 158			Effect of Adopting SFAS 158			As Reported at December 31, 2006
	(in thousands)
Accrued benefit cost	$	(409	)	$	—		$	(409	)
Accumulated other comprehensive loss		—			(6	)		(6	)
Liability accrued for postretirement medical benefits	$	(409	)	$	(6	)	$	(415	)

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Included in accumulated other comprehensive loss at December 31, 2006 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service costs of $247,000 and unrecognized actuarial gains of $241,000. The prior service cost and actuarial gain included in accumulated other comprehensive loss and expected to be recognized in net periodic benefit cost during the year ended December 31, 2007 is $19,000 and $11,000, respectively.

Additionally, SFAS 158 requires an employer to measure the benefit obligations and the funded status of its plans as of the date of its year end balance sheet. This provision becomes effective for the Company for its December 31, 2008 year end. The benefit obligations and funded status are currently measured as of December 31.

Reconciliation of Funded Status and Accumulated Postretirement Benefit Obligation

The reconciliation of the beginning and ending balances of the projected postretirement benefit obligation and the fair value of plan assets for the years ended December 31, 2006 and 2005 and the accumulated postretirement benefit obligation at December 31, 2006 and 2005 is as follows (in thousands):

	December 31,
	2006			2005
Change in Postretirement Benefit Obligation
Postretirement benefit obligation at beginning of year	$	321		$	283
Service cost		74			71
Interest cost		18			17
Actuarial (gains) losses		125			(50	)
Curtailments		(123	)		—
Postretirement benefit obligation at end of year	$	415		$	321

The fair value of plan assets as of December 31, 2006 and 2005 was zero. Therefore, the plan was underfunded by $415,000 and $321,000 as of December 31, 2006 and 2005, respectively. The accrual of the underfunded balances is included in accrued compensation- short-term and long-term, respectively for the years ended December 31, 2006 and 2005. There are no plan assets for this plan.

The components of net periodic post-retirement benefits cost and the significant assumptions of the Plan for 2006, 2005 and 2004 consisted of the following (in thousands):

	2006			2005			2004
Service cost	$	74		$	71		$	135
Interest cost		18			17			30
Amortization of net actuarial gain		(17	)		(16	)		—
Amortization of prior service costs		24			24			24
Curtailments		(47	)		—			—
Total	$	52		$	96		$	189

The Plan’s funded status as of December 31, 2006 and 2005 is as follows:

	2006			2005
Accumulated post-retirement benefit obligation (APBO)	$	(415	)	$	(320	)
Unrecognized prior service cost		247			347
Unrecognized net gain		(241	)		(384	)
Accrued post-retirement benefit cost	$	(409	)	$	(357	)

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

The accumulated post-retirement benefit obligation (“APBO”) was determined using a discount rate of 6.00% and 5.75% at December 31, 2006 and 2005, respectively. This rate is determined based on high-quality fixed income investments that match the duration of the expected retiree medical benefits. The Company has typically used the corporate Aa bond rate for this assumption. An assumed annual medical trend rate of 9% was used beginning in 2007, reducing by 1% per year to an ultimate rate of 5% in 2011. A 1% increase in the trend factors would increase the projected APBO by approximately $106,000 and would increase the service and interest cost components by approximately $26,000. A 1% decrease in the trend factors would decrease the projected APBO by approximately $80,000 and would decrease the service and interest cost components by approximately $19,000.

The expected future benefit payments under the plan (in thousands) are as follows:

Year(s) ending	Amount
2007	$	3
2008		6
2009		6
2010		8
2011		9
2012 to 2016		74
Total	$	106

9.    ROCHE COLLABORATION

The Development and License Agreement

In July 1999, the Company entered into a worldwide agreement with Roche to develop and commercialize T-20, currently marketed as FUZEON, whose generic name is enfuvirtide, and T-1249, or a replacement compound. While the Company’s development agreement with Roche covers the commercialization of FUZEON, T-1249 or a replacement product, to date only FUZEON is commercially available.

This agreement with Roche grants them an exclusive, worldwide license for FUZEON and T-1249, and certain other compounds. Under this agreement with Roche, a joint management committee consisting of members from Trimeris and Roche oversees the strategy for the collaboration. Roche may terminate its license for a particular country in its sole discretion with advance notice. This agreement with Roche gives Roche significant control over important aspects of the commercialization of FUZEON and our other drug candidates, including but not limited to pricing, sales force activities, and promotional activities. Under the Development and License Agreement, Roche cannot adopt a budget for the marketing of FUZEON above certain limits without the agreement of the Company.

In September 2006, the Company entered into an agreement with Roche that amends the terms of the Research Agreement (defined below). This amendment also affected the Development and License Agreement by specifying that further development of T-1249 shall be limited to treating patients currently being administered T-1249. Currently, there are no patients being treated with T-1249. In addition, the Development and License Agreement only governs the activities with regard to FUZEON. Primarily as a result of the amendment, Roche will only be responsible for one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve month sales threshold for FUZEON in the United States and Canada.

Upon signing of the Development and License Agreement, the Company granted Roche a warrant to purchase 362,000 shares of common stock at a purchase price of $20.72 per share. The warrant is exercisable prior to the tenth annual anniversary of the grant date and was not exercised as of December 31, 2006. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million up-front payment received from Roche. The Company deferred $4.6 million, the net of the $10.0 million up-front payment and the

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

$5.4 million in warrants, over the research and development period. The value was calculated using the Black-Scholes option-pricing model using the following assumptions: estimated dividend yield of 0%; expected stock price volatility of 86.00%; risk-free interest rate of 5.20%; and expected option life of ten years.

Manufacturing Amendment

In September 2005, the Company entered into a Manufacturing Amendment with Roche setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment amends and supplements the terms of the Development and License Agreement and addresses several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche will be responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche will therefore be financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the U.S. and Canada. In addition, Roche will be responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee will govern the conversion schedule into Product of supply chain materials that are in inventory as of that date.

The Manufacturing Amendment also sets forth the terms for which Roche-owned, FUZEON manufacturing equipment and facilities in Boulder may be used for the manufacture of other products. In addition, the Manufacturing Amendment provides for Trimeris’ payment of certain pre-launch inventory carrying costs related to the sale of FUZEON and Roche’s payment to Trimeris of an outstanding manufacturing milestone payment under the collaboration. The Manufacturing Amendment also outlines certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions.

A schedule of Trimeris’ required contribution to the capital investment in Roche’s Boulder facility for FUZEON manufacturing is also set forth in the Manufacturing Amendment. The Company will pay Roche for Trimeris’ share of the capital invested in Roche’s manufacturing facility over a seven-year period. Trimeris’ anticipated share of this capital investment is approximately $14.0 million. As a result, the Company accrued an initial payment of $4.0 million at June 2004, and expects to pay approximately $500,000 per quarter through June 2009. As a result, Roche will no longer include the depreciation related to the manufacturing facility in the cost of goods sold. In the event the Development and License Agreement is terminated, the Company would not be obligated for any unpaid amounts for capital investment.

These payments, net of the portion allocated to cost of goods sold, are recorded as an asset presented as “Advanced payment—Roche.” This asset will be amortized based on the units of FUZEON sold during the collaboration period, in order to properly allocate the capital investment to cost of goods sold in future periods. Assuming all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 10 years. In addition, other peptide drug candidates discovered under our collaboration with Roche could be manufactured using the same Roche facility. The carrying value of this asset will be evaluated annually for impairment or if a triggering event occurs.

Development Expenses

Under the Development and License Agreement development costs are shared equally. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Both Roche and Trimeris incur development costs for FUZEON and T-1249. Quarterly, the companies reconcile the amounts expended and one party pays the other party on a 50/50 basis. Roche holds the IND and the NDA for FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. Development expenses pertaining to the United States and Canada are included on our Statement of Operations in operating expenses under research and development.

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

The Research Agreement

We have also entered into a research agreement with Roche to discover, develop and commercialize additional anti-HIV gp41 fusion inhibitor peptides (the “Research Agreement”). Pursuant to the Research Agreement, Trimeris and Roche agreed to share the worldwide research, development and commercialization expenses and profits from the worldwide sales of anti-HIV gp41 fusion inhibitor peptides created after July 1, 1999. The Research Agreement governs the identification of compounds that may become clinical and the work by the parties is performed according to an agreed upon research plan. Prior to March 2007, all research and development activities were performed under our Research Agreement with Roche and all costs related to the research and development were shared equally.

For 2006, the total reimbursement of research expense from Roche amounted to $3.0 million. In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for the results of research that was performed outside the research plan during 2005. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we will recognize the remainder of this milestone over the extended period (the period of our continuing involvement). For 2004, the total reimbursement of research expense from Roche amounted to $2.7 million.

In January 2006, Roche and Trimeris announced the selection of two next-generation fusion inhibitor peptides for co-development and progression into further pre-clinical studies. The peptides, TRI-1144 and TRI-999, first synthesized at Trimeris, are distinct compounds derived from HR2 sequences of HIV. These peptides have been developed with the specific goal of achieving durable suppression of HIV by increasing the potency of the molecules and raising their genetic barrier to the development of resistance. Also central to the development program is increased patient convenience via simpler, more patient-friendly administration, with a target of once-weekly dosing.

On September 7, 2006, we announced that our Research Agreement with Roche to co-develop a novel NGFI with the goal of durable HIV suppression and once weekly dosing was extended through December 31, 2008. The development work covered under the Research Agreement has focused on two distinct peptide classes, exemplified by TRI-999 and TRI-1144 as NGFI candidates. Based on the results of certain preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and is being advanced as the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. In March 2007, the Company entered into an agreement whereby Trimeris now has the sole right to continue development of TRI-1144. The Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared costs related to the research and development equally.

10.    OTHER COLLABORATIONS

In July 2001, the Company entered into a non-exclusive agreement with Array to discover orally-available small molecule fusion inhibitors of HIV and respiratory syncytial virus. In April 2002, the Company entered into a non-exclusive agreement with Neokimia to discover and develop small molecule HIV fusion inhibitors. Array and Neokimia will be entitled to receive payments and royalties based on achievement of certain developmental and commercial milestones. In June 2004, Trimeris and Array announced the renewal of their Research Agreement. As part of this renewed agreement, Trimeris will screen small molecule compounds created by Array, against HIV entry inhibitor targets. The terms of the agreement are substantially similar to those of the initial agreement, signed in 2001. The research term of the agreement expired according to the terms of the agreement on December 31, 2005. There are no research activities currently being performed pursuant to either of these agreements, although the agreements remain in effect.

The Company has an exclusive, worldwide, royalty-bearing license from the New York Blood Center (“NYBC”) under certain U.S. and foreign patents and patent applications relating to certain HIV peptides. Under this license, the

F-25

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Company is required to pay the NYBC a royalty in the amount equal to one-half of one percent of Net Sales (as defined in the license) of FUZEON sold by Trimeris, or by a sublicensee, in any calendar year, until such time as $100 million of Net Sales is attained; after which the Company will pay the NYBC a royalty in an amount equal to one-quarter of one percent of Net Sales of FUZEON sold by Trimeris and any sublicensee in any calendar year in any country where the NYBC has a pending, or issued, unexpired and valid claim contained in the licensed patents. The obligation to pay royalties to the NYBC under the Company’s exclusive license to the patents ends on August 22, 2012. We recognized expense of approximately $773,000, $717,000 and $575,000 during 2006, 2005, and 2004, respectively, for royalty payments due to the NYBC related to the sales of FUZEON. Trimeris and NYBC are currently in discussions regarding the correct interpretation of the license agreement as applied to the calculation of the royalty. We have taken into account various possible outcomes of these discussions in the course of our financial reporting and do not expect the results of these discussions to have a material impact on our financial statements.

In June 2005, the Company entered into a drug discovery and development agreement with ChemBridge Research Laboratories, Inc. (“CRL”). Under the terms of the agreement, Trimeris and CRL will work together to discover and develop small molecule inhibitors of HIV. Specifically, pursuant to the agreement, the Company is working with CRL to identify small molecule inhibitor compounds against two HIV entry targets. Trimeris and CRL will collaborate to identify orally active lead compounds and then optimize preclinical candidates. Trimeris will be responsible for preclinical and clinical development, manufacturing, regulatory and commercial activities on a worldwide basis for all compounds and products resulting from the collaboration. Trimeris will provide funding to CRL to support medicinal chemistry efforts, and CRL will work exclusively with the Company on these programs. CRL will be eligible to receive milestone payments based on the achievement of specific development and commercial events, and may also be eligible to receive royalties on net product sales. As of December 31, 2006, there are no research activities currently being performed pursuant to the agreement although the agreement itself remains in effect.

11.    COMMITMENTS AND CONTINGENCIES

The Company is involved in certain claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial position or results of operations of the Company.

Under the Development and License Agreement, Trimeris and Roche are obligated to share the future development expenses for FUZEON and T-1249 for the United States and Canada.

In 2004, the Company entered into a sublease agreement for its office and laboratory space in Morrisville, North Carolina. The sublease called for the payment of a security deposit for which the Company has accrued $503,000 as of December 31, 2006.

12.    REDUCTION IN WORKFORCE

During November 2006, the Company announced a shift in strategic emphasis and reorganization to focus on FUZEON profitability and research and early stage development. With this shift in strategic emphasis, the Company reduced its workforce by approximately 25% and recognized expense of $3.2 million for severance and other costs in the fourth quarter of 2006. Of the $3.2 million total expense, $64,000 was paid as of December 31, 2006.

During January 2004, the Company and Roche put further clinical development of T-1249 on hold. In connection with this programmatic change, the Company reduced its workforce by approximately 25% and recognized related expenses of $450,000 during the year ended December 31, 2004.

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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

13.    SUBSEQUENT EVENTS

Research Agreement Amendment

On March 13, 2007 the Company entered into an agreement with Roche that amends the terms of the Research Agreement whereby all rights and joint patents and other intellectual property rights to the next generation fusion inhibitor peptides falling under the Research Agreement, which includes the lead drug candidate TRI-1144, will revert to Trimeris. Trimeris will have the right to develop and commercialize TRI-1144 as it chooses. Trimeris will pay to Roche a low single digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit. Roche and Trimeris will share all costs associated with the TRI-1144 joint research program incurred through March 13, 2007. Roche retains its right to conduct research on certain HIV gp41 fusion inhibitor peptides at Roche’s cost for a specified period of time. Trimeris retains the right to opt-in and co-develop with Roche any one of these peptides under a 50-50 cost and profit split worldwide.

The Company is currently reviewing its strategic options regarding this program. Prior to the execution of this agreement, Roche and Trimeris shared costs related to the research and development equally. Beginning on March 14, 2007, any future costs related to research and development that may be incurred will be borne solely by Trimeris. The impact of regaining full control over the TRI-1144 development program on our future financial position, operating results and cash flows will depend on several factors including the Company’s determination for the strategic direction of the NGFI program. Management is in the process of analyzing the financial implications of the amendment.

Changes in Executive Officers

Dani P. Bolognesi, Chief Executive Officer and Chief Scientific Officer announced his retirement effective March 16, 2007. Dani will remain on the Board of Directors until the next annual meeting of Trimeris’ Stockholders.

Robert R. Bonczek, Chief Financial Officer announced his retirement effective April 30, 2007.

E. Lawrence Hill, Jr. was appointed President and Chief Operating Officer effective March 12, 2007.

F-27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Trimeris, Inc. (Registrant)
March 16, 2007	/s/    DANI P. BOLOGNESI
	Dani P. Bolognesi Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Capacity	Date
/s/    DANI P. BOLOGNESI         Dani P. Bolognesi, Ph.D.	Chief Executive Officer, Chief Scientific Officer and Vice Chairman of the Board of Directors	March 16, 2007
/s/    ROBERT R. BONCZEK         Robert R. Bonczek	Chief Financial Officer and General Counsel (principal financial officer)	March 16, 2007
/s/    ANDREW L. GRAHAM         Andrew L. Graham	Director of Finance and Secretary (principal accounting officer)	March 16, 2007
/s/    JEFFREY M. LIPTON         Jeffrey M. Lipton	Chairman of the Board of Directors	March 16, 2007
/s/    E. GARY COOK         E. Gary Cook, Ph.D.	Director	March 16, 2007
/s/    FELIX J. BAKER         Felix J. Baker	Director	March 16, 2007
/s/    JULIAN C. BAKER         Julian C. Baker	Director	March 16, 2007
/s/    J. RICHARD CROUT         J. Richard Crout, M.D.	Director	March 16, 2007
/s/    KEVIN C. TANG         Kevin C. Tang	Director	March 16, 2007

S-1

EXHIBIT INDEX

(a) Exhibits

3.1(r)	Second Amended and Restated Bylaws of the Registrant.
3.2(r)	Fifth Amended and Restated Certificate of Incorporation of the Registrant
4.1*	Specimen certificate for shares of Common Stock.
4.2(r)	Description of Capital Stock (contained in the Fifth Amended and Restated Certificate of Incorporation of the Corporation of the Registrant, filed as Exhibit 3.2).
10.1*	License Agreement dated February 3, 1993, between the Registrant and Duke University.
10.2(t)	Trimeris, Inc. Amended and Restated Stock Incentive Plan. †
10.3*	Trimeris, Inc. Employee Stock Purchase Plan. †
10.4*	Sixth Amended and Restated Registration Rights Agreement dated June 27, 1997, by and among the Registrant and certain stockholders of the Registrant.
10.5*	Form of Indemnification Agreements.
10.6*	License Agreement dated September 9, 1997 between the Registrant and The New York Blood Center.
10.7(g)	Poyner & Spruill, L.L.P. Defined Contribution Prototype Plan and Trust for the Trimeris, Inc. Employee 401(k) Plan. †
10.8(g)	Adoption Agreement for the Trimeris, Inc. Employee 401(k) Plan. †
10.9(p)	Executive Employment Agreement between Trimeris and Dani P. Bolognesi dated August 9, 2005.
10.10(p)	Incentive Stock option Agreement between Trimeris and Dani P. Bolognesi dated August 9, 2005.
10.11(h)	Executive Employment Agreement between Trimeris, Inc. and George W. Koszalka dated June 21, 2004. †
10.12(i)	Executive Employment Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 8, 2004. †
10.13(i)	Incentive Stock Option Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 9, 2004. †
10.14(i)	Restricted Stock Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 9, 2004. †
10.15(a)	Development and License Agreement between Trimeris and Hoffmann-La Roche dated July 1, 1999 (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.).
10.16(a)	Financing Agreement between Trimeris, Inc. and Roche Finance Ltd. dated as of July 9, 1999.
10.17(a)	Registration Rights Agreement between Trimeris, Inc. and Roche Finance Ltd. dated as of July 9, 1999.
10.18(h)	Sublease Agreement between Trimeris, Inc. and PPD Development, LP dated June 30, 2004.
10.19(h)	Lease Agreement and Amendments between PPD Development, LP (formerly PPD Pharmaco, Inc.) and Weeks Realty, LP relating to Sublease Agreement filed as Exhibit 10.18 hereto
10.20(b)	Executive Agreement between Trimeris and Robert R. Bonczek dated January 7, 2000. †
10.21(d)	Research Agreement between Trimeris, Inc., F. Hoffmann-La Roche Ltd, and Hoffmann-La Roche, Inc. dated January 1, 2000 (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.).

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10.22(e)	Form of Purchase Agreement dated as of May 7, 2001 by and between Trimeris, Inc. and the purchasers set forth on the signature page thereto.
10.23(j)	First Amendment to the Research Agreement by and between Trimeris, Inc. and F. Hoffmann-La Roche Ltd. And Hoffmann-La Roche Inc. dated November 13, 2003. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.)
10.24(f)	Form of Purchase Agreement dated as of January 23, 2002 by and between Trimeris, Inc. and the purchasers set forth on the signature page thereto.
10.25(h)	Rescission of the Amendment to the Development and License Agreement dated July 12, 2004.
10.26(k)	Amendment to the Development and License Agreement between Trimeris, Inc. and Hoffman-La Roche dated on July 12, 2004. (Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.)
10.27(l)	Description of non-management director compensation arrangements.
10.28(m)	Letter Agreement between Trimeris, Inc. and Roche Laboratories, Inc. dated May 12, 2005.
10.29‡	Collaboration, Development and License Agreement between Trimeris, Inc. and ChemBridge Research Laboratories, Inc. dated June 8, 2005.
10.30(o)	License Agreement between The Regents of the University of California and Roche and Trimeris for Method of Preventing and Treating a Viral Condition by Inhibiting Membrane Fusion dated June 27, 2005.
10.31(q)	Letter of Amendment with F. Hoffman-La Roche, Ltd. And Hoffman-La Roche, Inc. dated September 2, 2005.
10.32(s)	Trimeris, Inc. Incentive Pay Plan. †
10.33	401(k) Plan Amendment
10.34(u)	Second Amendment to the Research Agreement between Roche and Trimeris (effective as of December 31, 2005).
10.35(v)	Amended and Restated Severance Pay Plan, effective date December 3, 2006
10.36(w)	Third Amendment to the Research Agreement between Roche and Trimeris (effective August 15, 2006)
10.37	Letter of agreement with F. Hoffman–La Roche, Ltd. Dated March 13, 2007
23	Consent of KPMG LLP.
31.1	Rule 13a-14(a) Certification by Dani P. Bolognesi as Chief Executive Officer.
31.2	Rule 13a-14(a) Certification by Robert R. Bonczek as Chief Financial Officer.
32.1	Section 1350 Certification by Dani P. Bolognesi as Chief Executive Officer.
32.2	Section 1350 Certification by Robert R. Bonczek as Chief Financial Officer.

^† Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(a) of this report.

* Incorporated by reference to Trimeris’ Registration Statement on Form S-1, as amended (File No. 333-31109) initially filed with the Commission on July 11, 1997.

^‡ Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.

(a) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.

(b) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 1999.

(c) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.

(d) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.

(e) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed on May 11, 2001.

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(f) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on January 30, 2002.

(g) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 27, 2003.

(h) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2004.

(i) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 10, 2004.

(j) Incorporated by reference to Trimeris’ Annual Report on Form 10-K/A for the year ended December 31, 2003, filed with the Commission on October 15, 2004.

(k) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2004, filed with the Commission on October 15, 2004.

(l) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2004.

(m) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on May 12, 2005.

(n) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on June 14, 2005.

(o) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on June 27, 2005.

(p) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on August 10, 2005.

(q) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 26, 2005.

(r) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(s) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on January 30, 2006.

(t) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2005.

(u) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on February 21, 2006.

(v) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on December 7, 2006.

(w) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 7, 2006.

All financial statement schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the Financial Statements and Notes thereto.

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EX-10.29

Exhibit 10.29

Confidential Materials omitted and filed separately with the Securities and Exchange

Commission. Asterisks denote omissions.

COLLABORATION, DEVELOPMENT AND LICENSE AGREEMENT

This COLLABORATION, DEVELOPMENT AND LICENSE AGREEMENT (the “Agreement”), effective as of this 8th day of June, 2005 (the “Effective Date”), is made by and between Trimeris, Inc., having a principal place of business at 3500 Paramount Parkway, Morrisville, North Carolina 27560, U.S.A. (“Trimeris”), and ChemBridge Research Laboratories, Inc. (together with its Affiliates, “CRL”), having a principal place of business at 16981 Via Tazon, Suite K, San Diego, California 92127, U.S.A.

RECITALS

WHEREAS CRL has skills, expertise and experience in the application of discovery chemistry and biology for use in identifying small molecule modulators for drug targets, and has identified, developed, rights to and owns proprietary chemistry and biological technologies suitable for preclinical drug discovery as high throughput biological screening assays and medicinal chemistry;

WHEREAS Trimeris has identified, developed, rights to and owns proprietary biological models, assays, and materials that have the potential to be used as the basis for drug discovery programs for Targets (as defined below) specific for Trimeris;

WHEREAS Trimeris and CRL desire to collaborate to identify Compounds (as defined below) with activity as anti-viral agents against the Targets, with the goal of delivering Compounds with desired activity and selectivity for developing Products (as defined below) in the Field (as defined below) with the Compounds and information which result from the Research Collaboration (as defined below).

NOW, THEREFORE, for and in consideration of the covenants, conditions and undertakings hereinafter set forth, it is agreed by and between the Parties as follows:

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS	1
ARTICLE 2 RESEARCH COLLABORATION	9
ARTICLE 3 MANAGEMENT	28
ARTICLE 4 LICENSES & GRANTS	31
ARTICLE 5 DEVELOPMENT	33
ARTICLE 6 PAYMENTS	34
ARTICLE 7 BOOKS AND RECORDS FOR PAYMENTS	41
ARTICLE 8 DUE DILIGENCE	42
ARTICLE 9 INTELLECTUAL PROPERTY	43
ARTICLE 10 CONFIDENTIALITY	49
ARTICLE 11 REPRESENTATIONS AND WARRANTIES	52
ARTICLE 12 INDEMNIFICATION	53
ARTICLE 13 TERM AND TERMINATION	55
ARTICLE 14 DISPUTE RESOLUTION	60
ARTICLE 15 MISCELLANEOUS	62

ARTICLE 1

DEFINITIONS

Unless the context clearly indicates otherwise, the following rules shall govern the interpretation of this Agreement:

a. The definitions of all terms defined herein shall apply equally to the singular, plural, and possessive forms of such terms.

b. All references to “Sections,” or “Articles”, or “Exhibits” shall mean the corresponding Sections of, Articles of and Exhibits to this Agreement.

As used herein, the following terms will have the meanings set forth below:

1.1 “Active” shall mean a compound developed and tested under the Research Plan which meets potency and selectivity guidelines with respect to a Target, as provided in the Research Plan. The potency and selectivity guidelines defining an “Active” may be amended from time to time, based on SAR and available data, by the Joint Research Committee (“JRC”) in accordance with the JRC Decision-Making Process.

1.2 “ADMET” shall mean studies that are designed to examine preliminary adsorption, distribution, metabolism, excretion or toxicology profiles of a Compound in vitro and/or in animals, which may or nay not be conducted under GLP conditions.

1.3 Affiliate” shall mean any corporation or other entity, whether de jure or de facto, which is directly or indirectly controlling, controlled by or under common control of a Party hereto for so long as such control exists. For the purposes of this Section 1.3, “control” shall mean the direct or indirect ownership of at least fifty percent (³50%) of the voting securities, income interest, a comparable equity in such or other voting rights of such subject entity having the power to vote on or direct the affairs of the entity, or if not meeting the preceding, the maximum voting right that may be held by the particular entity under the laws of the country where such entity exists. In case of CRL, affiliates shall include ChemBridge Corporation, having a principal place of business at 16981

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Via Tazom, Suite G, San Diego, CA, 92127, U.S.A.; and ChemBridge Ltd., having a principal place of business at 1 Malya Pyrogovskaya, Moscow, 119435, Russian Federation.

1.4 “Change of Control” shall have the meaning as set forth in Section 2.15.

1.5 “Chemist” shall mean a scientist with the sufficient knowledge and training in medicinal and synthetic organic chemistry, including but not limited to the design and synthesis of chemical entities, and whom possesses unique skills and expertise, to enable timely performance of the obligations as set out in the Research Plan, and with scientific qualifications that meets or exceeds industry standards for a research chemist performing in a drug discovery collaboration between two companies.

1.6 “Collaboration Technology” shall mean all Inventions and other intellectual property, including without limitation any Know-How and Patent Rights relating thereto, made solely by either CRL or solely by Trimeris, or jointly by CRL and Trimeris in the course of performing or in connection with the Research Collaboration. It is understood and agreed that Collaboration Technology shall not include any CRL Technology, or Trimeris Technology, or Development Technology.

1.6.1 “Know-How” shall mean all ideas, inventions, data, instructions, processes, formulas, expert opinions and information, including, without limitation, biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, clinical, safety, manufacturing and quality control data and information developed either solely by CRL or Trimeris, or jointly by CRL and Trimeris during performing and in connection with the Research Collaboration, in each case, which is necessary for the development, manufacture, use or sale or commercialization of Compounds and/or Products, to the extent CRL or Trimeris has the right to license or sublicense the same; provided, however, that Know-How does not include any CRL Technology, Trimeris Technology, Development Technology, or any inventions otherwise included in the Patent Rights.

1.6.2 “Patent Rights” shall mean (i) all patents and patent applications the subject of which is an invention conceived and reduced to practice either solely by CRL or Trimeris, or jointly

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by CRL and Trimeris in the performance of or in connection with the Research Collaboration, that claim a Compound (including, but not limited to, their progeny and derivatives and all non-covalent derivatives, acid addition salts and cationic salts, and all diastereomeric and enantiomeric forms thereof), and including without limitation a Focused Library Compound, a Lead Compound, Development Compound, a Compound, or method of use or process for the synthesis or manufacture thereof or composition-of-matter containing such Compound, and (ii) any divisionals, continuations, continuations-in-part, reissues, reexaminations, extensions or other governmental actions which extend any of the subject matter of the patent applications or patents in (i) above; provided, however, that Patent Rights shall not include any CRL Technology, or Trimeris Technology, or Development Technology.

1.7 “Compound” shall mean any one or more chemical entity(ies) that is (i) specifically designed by Trimeris and/or CRL in the course of performing or in connection with the Research Plan; or (ii) designed by Trimeris and/or CRL, and synthesized by CRL, in the course of performing or in connection with the Research Plan; or (iii) synthesized by CRL in the course of performing or in connection with the Research Plan; or (iv) has been designated as a Development Compound under Section 2.4.4(c) below. Except as expressly provided for in this Section 1.7, or in Section 2.4.4(c) below, it is understood and agreed that Library Compounds shall not be deemed Compounds. Compounds shall not include any Trimeris Technology.

1.8 “CRL Library” shall mean the collection of CRL proprietary chemical entities and other chemical libraries that CRL makes available on a non-exclusive basis to Third Parties; provided, however, CRL Library shall not include any Compounds.

1.9 “CRL Technology” shall mean certain know-how, intellectual property or patents, as shown by contemporaneous documentation, that is (i) developed, licensed and/or owned by CRL, prior to the Effective Date, or (ii) developed, licensed and/or owned by CRL at any time outside of the Research Collaboration, or (iii) developed during the term of the Research Collaboration and not having specific application to the Research Plan (i.e. such know-how, intellectual property, or patents having application only outside of the specific composition of matter, method of synthesis, manufacture, sale or importation of a Compound and/or a Product).

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1.10 “Database Mining Compound” shall mean a chemical entity that is received by CRL from a third party vendor or is a Library Compound. A Database Mining Compound shall not be deemed a Compound unless it is a Library Compound designated as a Development Compound under Section 2.4.4(c) below.

1.11 “Development Compound” shall mean any Compound that is selected by Trimeris for preclinical drug development or is entered into IND Enabling Studies, whichever occurs first.

1.12 “Development Technology” shall mean certain know-how, intellectual property or patents, as shown by contemporaneous documentation, developed, licensed or owned by Trimeris, or jointly developed by Trimeris and a Third Party, during the development by or on behalf of Trimeris of a Development Compound or Product pursuant to this Agreement.

1.13 “Field” shall mean the discovery, development and commercialization of small chemical molecules for the diagnosis of, or the therapeutic and/or prophylactic treatment of all human conditions and/or diseases.

1.14 “Focused Library” shall mean a library of Compounds, consisting of a total of approximately [**] to approximately [**] Compounds, which is created to specifically explore the SAR of an Active, the timeline for making and testing of a Focused Library to be determined by amendment of the Research Plan by the JRC.

1.15 “Focused Library Compound” shall mean any Compound that is contained in a Focused Library.

1.16 “FTE” shall mean a full-time person dedicated to the Research Collaboration or, in the case of a less than full-time, dedicated person, a full-time, equivalent person year based upon a total of one thousand eight hundred eighty (1,880) hours per year of work in connection with the Research Plan. [**].

1.17 “GLP” shall mean Good Laboratory Practice, as defined in the U.S. Food, Drug and Cosmetic Act.

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1.18 “IND” shall mean an Investigational New Drug application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, for initiating clinical trials in the United States, or any corresponding foreign application, registration or certification.

1.19 “IND Enabling Studies” shall mean studies performed specifically for inclusion in an IND, including without limitation ADMET and GLP toxicology, as well as formulation and manufacturing development necessary to obtain the permission of regulatory authorities to begin human clinical testing. Notwithstanding the foregoing, IND Enabling Studies shall not include any non-GLP studies, including ADMET or formulation studies, undertaken by Trimeris pursuant to the Research Plan prior to the designation of a Compound as a Development Compound.

1.20 “International Territory” shall mean all countries and territories outside of the U.S. Territory.

1.21 “Invention” shall mean any new and useful process, manufacture, compound or composition of matter, patentable or unpatentable, or any improvement thereof, conceived or first reduced to practice, or demonstrated to have utility by a Party, pursuant to the Research Plan and during the term of the Research Collaboration.

1.22 “JRC” or “Joint Research Committee” shall have the meaning set forth in Section 3.1.

1.23 “LC-MS/ELSD” shall mean liquid chromatography mass spectrometry with evaporative light scattering detector.

1.24 “Lead Compound” shall mean any Focused Library Compound that meets the JRC guidelines for a Lead Compound and is so designated in writing by the JRC, in accordance with the JRC Decision-Making Process, for further investigation pursuant to the Research Collaboration.

1.25 “Library Compound” shall mean any chemical entity that is contained in the CRL Library.

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1.26 “NDA” shall mean a New Drug Application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated therein, or any corresponding foreign application, registration or certification.

1.27 “Net Sales” shall mean the gross invoice price for all Products sold by Trimeris, its Affiliates or Sublicensees (“Selling Party”), under this Agreement in arm’s length sales to Third Parties, less deductions allowed to the Third Party customer by the Selling Party on such sales that are for: (a) trade, quantity, and cash discounts, including charge-backs; (b) credits, rebates (including those to managed-care entities and government agencies), and allowances or credits to customers on account of rejection or returns (including, but not limited to, wholesaler and retailer returns) or on account of retroactive price reductions affecting such Product; (c) freight, postage, transportation insurance, packaging materials for dispatch of Product, and duties; and (d) sales and excise taxes, other consumption taxes, customs duties and compulsory payments to governmental authorities and any other governmental charges imposed upon the sale of such Product to Third Parties. In addition, the Selling Party may exclude from Net Sales a reasonable provision for uncollectible accounts to the extent such reserve is determined in accordance with generally accepted accounting standards, consistently applied across all product lines of Selling Party but not to exceed 3% of gross invoiced amounts, until such amounts are actually collected. Notwithstanding the foregoing, Net Sales shall not include sales among Trimeris, its Affiliates and Sublicensees for resale of Product, provided that such resale shall be included within Net Sales.

1.28 “Party” shall mean CRL or Trimeris individually, and “Parties” shall mean CRL and Trimeris collectively, unless otherwise specifically indicated.

1.29 “Phase I” shall mean human clinical trials conducted under the approval of the U.S. Food and Drug Administration (or any corresponding foreign regulatory counterpart), the principal purpose of which is to establish safety, or safety and proof of concept of efficacy, wherein the dosing with a Development Compound or Product is done over a period of thirty (30) days or less, and which is performed for purposes of supporting an NDA application, or its corresponding foreign regulatory counterpart.

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1.30 “Phase II” shall mean human clinical trials conducted under the approval of the U.S. Food and Drug Administration (or any corresponding foreign regulatory counterpart), the principal purpose of which is to establish safety and dose response activity, wherein the dosing with a Development Compound or Product is done over a period of at least thirty one (31) days, and which is performed for purposes of supporting an NDA application, or its corresponding foreign regulatory counterpart.

1.31 “Phase III” shall mean human clinical trials conducted under the approval of the U.S. Food and Drug Administration (or any corresponding foreign regulatory counterpart), the principal purpose of which is to establish acceptable safety and statistically significant efficacy of one or more particular doses of a Development Compound or Product in patients being studied, and which will (or are intended to) satisfy the requirements of a pivotal trial for purposes of obtaining approval to market a Product in a country by the health regulatory authority in such country to market such Product.

1.32 “Product” shall mean any human diagnostic, human therapeutic and/or human prophylactic product for use within the Field and incorporating a Compound.

1.33 “Research Collaboration” shall mean the research activities undertaken by the Parties pursuant to ARTICLE 2 below.

1.34 “Research Plan” shall mean the written research plan (including a detailed budget) governing the joint effort of the Parties in conducting the Research Collaboration, which may be amended in writing from time to time by the Joint Research Committee, as it deems necessary or appropriate. The initial Research Plan is attached hereto as APPENDIX A.

1.35 “Research Use License” shall have the meaning set forth in Section 2.4.4(c).

1.36 “SAR” shall mean the relationship between the biological activity of a chemical entity and its molecular structure.

1.37 “Stage I Research” shall mean the research activities undertaken by the Parties pursuant to Sections 2.4.1 and 2.4.2 below.

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1.38 “Sublicensee” shall mean, with respect to a particular Product, a Third Party to whom Trimeris has granted a license or sublicense under CRL Technology pursuant to Section 4.2.1 to either make, have made, offer for sale, import, export or sell such Product. As used in this Agreement, “Sublicensee” shall also include a Third Party to whom Trimeris has granted the right to distribute such Product, provided that such Third Party has responsibility for marketing and promotion of such Product within the Field and country for which such distribution rights are granted.

1.39 “Target(s)” shall mean any one or more of (a) the HIV gp120 glycoprotein, including all genetic variants of such glycoprotein, or (b) the HIV gp41 glycoprotein, including all genetic variants of such glycoprotein.

1.40 “Target Screening Assay” shall mean an in vitro assay utilized by or on behalf of Trimeris to detect or measure the modulation of a Target by interaction with a Library Compound or Compound.

1.41 “Third Party” shall mean any person or entity other than CRL and Trimeris, and their respective Affiliates.

1.42 “Trimeris Technology” shall mean certain know-how, intellectual property or patents, as shown by contemporaneous documentation, that is (i) developed, licensed and/or owned by Trimeris, prior to the Effective Date; or (ii) developed, licensed and/or owned by Trimeris at any time outside of the Research Collaboration; or (iii) developed during the term of the Research Collaboration and not having specific application to the Research Plan (i.e. such know-how, intellectual property, or patents having application only outside of the specific composition of matter, method of synthesis, manufacture, sale or importation of Compounds and/or Products); or (iv) Development Technology developed, licensed or owned solely by Trimeris, or by Trimeris and a Third Party.

1.43 “U.S. Territory” shall mean the United States of America, excluding Puerto Rico and the U.S. Virgin Islands.

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1.44 “Valid Claim” shall mean a claim of an issued, unexpired and unabandoned patent within the Patent Rights, which has not been held invalid in a final decision of a court of competent jurisdiction, which has not been appealed or from which no appeal may be taken, and which has not been disclaimed or admitted to be invalid or unenforceable through reissue or otherwise, and such that making, having made, offering for sale, importing, exporting or selling a Product would infringe such claim.

ARTICLE 2

RESEARCH COLLABORATION

2.1 Goals. The goal of the Research Collaboration is to develop Products for use in the Field pursuant to a Research Plan, which Research Plan is expected to consist of multiple steps, as the research under the Research Plan progresses.

2.2 Conduct of the Research Collaboration. Subject to the terms and conditions set forth herein, the Parties agree to conduct research under the Research Collaboration, which shall be funded as set forth in Section 2.8 below. During the term of the Research Collaboration, CRL and Trimeris shall collaborate and shall each use their commercially reasonable efforts to conduct the Research Collaboration in accordance with the Research Plan within the time schedules contemplated therein, and to keep the other Party informed as to the progress and results of the Research Collaboration hereunder.

2.3 Research Plan. The Research Collaboration shall be carried out in accordance with a mutually agreed upon written Research Plan, which shall establish specific research objectives and the research tasks to be performed and resources to be provided by each Party according to the terms and conditions specified in Section 2.4. The Research Plan shall, among other things, establish: (i) the scope of the research activities which will be performed; (ii) the research objectives, work plan activities and time schedules with respect to the Research Collaboration; (iii) the respective obligations of the Parties with respect to the Research Collaboration; and (iv) guidelines for determining when a Compound shall be deemed an Active or a Lead Compound. As of the Effective Date, the initial “Research Plan” shall be attached and incorporated herein as APPENDIX A. The

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Research Plan shall be reviewed on an ongoing basis, and may be amended during Stage I Research by the JRC, provided that any changes or adjustments in the allocation of CRL resources to a Target research program that are recommended by the JRC be made in accordance with the provisions outlined in Section 2.7.2 and ARTICLE 3, such adjustments to fall within the specific CRL resource allocation specified therein.

2.4 Research Collaboration Activities.

2.4.1 Stage I Research for the gp41 Target: Identification of inhibitors of HIV gp41-mediated fusion as a Lead Compound.

(a) CRL Responsibilities. In accordance with the Research Plan, CRL shall (i) supply Database Mining Compounds, as selected by the JRC to Trimeris for analysis, providing that the total number of Database Mining Compounds provided by CRL free of charge in accordance with this Section will not exceed [**]; and (ii) consult with Trimeris on the design of, and be subsequently responsible for the chemical synthesis of Focused Library Compounds. In addition, at Trimeris’ request, CRL shall make available to Trimeris a copy of any and all quality control data, methods used for characterization of, and the complete chemical structure of, Database Mining Compounds delivered to Trimeris which are designated as “Actives” by the JRC and pursuant to the Research Plan. CRL shall provide Trimeris with such Database Mining Compounds and Focused Library Compounds according to the specifications (including quantities degree of purity, and timelines) agreed upon by the Parties in the Research Plan, so as to facilitate the implementation of the Research Plan. CRL shall also provide to Trimeris the complete chemical structure for each Focused Library Compound. In addition, at Trimeris’ request, CRL shall make available to Trimeris a copy of any and all quality control data and methods used for characterization of the Focused Library Compounds delivered to Trimeris. The Parties recognize that during Stage I Research CRL will create at least one (1) Initial Focused Library , as defined in the Research Plan under APPENDIX A and approved by the JRC; and that subsequent Stage I Research may comprise the creation and subsequent analysis of more than one (1) Focused Library and/or the creation of multiple Focused Libraries for different Actives, provided however that any changes or adjustments in the allocation of CRL resources to the gp41 Target research program for

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the purpose of generating one or more Focused Libraries as recommended by the JRC be made in accordance with the provisions outlined in Section 2.7.2 and ARTICLE 3, such adjustments to fall within the specific CRL resource allocation specified therein.

(b) Trimeris Responsibilities. In accordance with the Research Plan, Trimeris shall assay the Database Mining Compounds and Focused Library Compounds, made available to it pursuant to this Section 2.4.1(a), for in vitro activity in the Target Screening Assay(s) in accordance with the Research Plan, and for purposes of establishing SAR data with respect to such Database Mining Compounds and Focused Library Compounds.

(c) Designation of Lead Compounds. In accordance with the responsibilities of the JRC and its decision making process in accordance with Section 3.1, the JRC shall designate Lead Compounds which will be further evaluated under the Research Plan for possible designation as Development Compounds.

2.4.2 Stage I Research for the gp120 Target: Identification of inhibitors of HIV entry as a Lead Compound.

(a) CRL Responsibilities. In accordance with the Research Plan, CRL shall (i) supply up to [**] Database Mining Compounds, as selected by the JRC to Trimeris for analysis; (ii) synthesize and supply Compounds based on the initial chemistry plan as agreed on between the Parties and incorporated into the Initial Research Plan; and (iii) consult with Trimeris on the design of, and be subsequently responsible for the chemical synthesis of, Focused Library Compounds. In addition, at Trimeris’ request, CRL shall make available to Trimeris a copy of any and all quality control data, methods used for characterization of, and the complete chemical structure of, Database Mining Compounds and Compounds delivered to Trimeris which are designated as “Actives” pursuant to the Research Plan. CRL shall provide Trimeris with such Database Mining Compounds, Compounds, and Focused Library Compounds according to the specifications (including quantities degree of purity, and timelines) agreed upon by the Parties in the Research Plan, so as to facilitate the implementation of the Research Plan. CRL shall also provide to Trimeris the complete chemical structure for each Compound and Focused Library Compound. In

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addition, at Trimeris’ request, CRL shall make available to Trimeris a copy of any and all quality control data and methods used for characterization of the Compounds and Focused Library Compounds delivered to Trimeris. The Parties recognize that during Stage I Research CRL will create at least one (1) Initial Focused Library , as defined in the Research Plan under APPENDIX A and approved by the JRC; and that subsequent Stage I Research may comprise the creation and subsequent analysis of more than one (1) Focused Library and/or the creation of multiple Focused Libraries, provided however that any changes or adjustments in the allocation of CRL resources to the gp120 Target research program for the purpose of generating one or more Focused Libraries as recommended by the JRC be made in accordance with the provisions outlined in Section 2.7.2 and ARTICLE 3, such adjustments to fall within the specific CRL resource allocation specified therein.

(b) Trimeris Responsibilities. In accordance with the Research Plan, Trimeris shall assay the Database Mining Compounds, Compounds, and Focused Library Compounds, made available to it pursuant to this Section 2.4.2(a), for in vitro activity in the Target Screening Assay(s) in accordance with the Research Plan, and for purposes of establishing SAR data with respect to such Database Mining Compounds, Compounds, and Focused Library Compounds.

(c) Designation of Lead Compounds. In accordance with the responsibilities of the JRC and its decision making process in accordance with Section 3.1, the JRC shall designate Lead Compounds which will be further evaluated under the Research Plan for possible designation as Development Compounds.

2.4.3 Focused Library Exclusivity. All Focused Library Compounds made for either the gp120 Target or the gp41 Target pursuant to this Agreement shall be deemed Compounds, and shall be made solely available to Trimeris on an exclusive basis, and such Focused Library Compounds shall not be included in any CRL Library supplied to a Third Party by CRL under a separate agreement.

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2.4.4 Development Compound Identification.

(a) General. Using the data and information regarding Actives, Focused Libraries, Lead Compounds, structures thereof, and SAR data obtained from Stage I Research, the Parties shall define the properties desired of a Development Compound to be pursued, and conduct research activities in accordance with an updated Research Plan directed to validating and optimizing Lead Compounds for each Target for the purpose of determining whether a Lead Compound can be declared a Development Compound appropriate for further development and possible commercialization into a Product.

(b) Selection of Development Compounds. Based upon the results generated during the Research Collaboration and the evaluation of Focused Library Compounds and Lead Compounds, the JRC may, from time to time, nominate a Focused Library Compound, Lead Compound or Compound for consideration by Trimeris as a potential Development Compound, and shall inform Trimeris of such recommendation. Notwithstanding the recommendation of the JRC, Trimeris shall have the right, in its sole discretion, to designate any Active, Focused Library Compound, Lead Compound or Compound as a Development Compound during the term of this Agreement. CRL acknowledges and agrees that the final decision as to whether or not to designate any Active, Focused Library Compound, Lead Compound or Compound as a Development Compound shall rest with Trimeris, and that such decision will be made by Trimeris in accordance with Trimeris’ standard internal procedures for the nomination and selection of a Development Compound. Trimeris shall give CRL written notice of its designation of a Compound as a Development Compound; and a Focused Library Compound, Lead Compound or a Compound shall not be deemed a Development Compound unless so designated by Trimeris by such written notice. Trimeris agrees not to undertake any IND-Enabling Studies with respect to a particular Focused Library Compound, Lead Compound or Compound until such compound has been designated a Development Compound in accordance with this Section 2.4.4(b); provided however, that Trimeris may undertake to perform non-GLP ADMET studies on Compounds in order to determine whether or not it shall designate a Compound as a Development Compound. All Development Compounds shall be made solely available to Trimeris on an exclusive basis, and such Development Compounds shall not be, unless the prior written consent of Trimeris is obtained, included in any CRL Library supplied to a Third Party by CRL under a separate agreement.

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(c) It is understood between the Parties that CRL is in the business of providing compound libraries to Third Parties, and except as expressly provided herein, nothing herein shall prevent or restrict CRL from providing Library Compounds to Third Parties, or from using the Library Compounds for any purposes for other than to screen against the Targets to its best knowledge. It is further understood that CRL may grant to Third Parties rights to acquire licenses in the Library Compounds similar to those granted to Trimeris hereunder except to screen against the Targets (as specified in 2.11.1); accordingly, Trimeris’ right to designate any particular Library Compound as a Development Compound, and CRL’s grant of rights to Trimeris thereto under Section 4.2, are limited to the extent that CRL has, prior to Trimeris’ request, granted a Third Party a license or other right with respect to such a Library Compound. In the event that Trimeris wishes to designate a Library Compound as a Development Compound pursuant to Section 2.4.4(c), CRL must inform Trimeris within five (5) business days whether or not CRL has previously granted a Third Party rights that would prevent CRL from granting Trimeris an exclusive license to such Library Compound and designation by Trimeris of such Library Compound as a Development Compound. In the event that CRL informs Trimeris that CRL has not granted to a Third Party rights that would prevent CRL from granting Trimeris an exclusive license to such Library Compound as a Development Compound, such Library Compound shall be deemed a Development Compound under this Agreement. In the event CRL informs Trimeris that CRL has granted a Third Party rights that would prevent CRL from granting Trimeris an exclusive license to such Library Compound as a Development Compound, and within five (5) business days of so informing Trimeris, Trimeris shall automatically be granted by CRL a nonexclusive, sublicensable, royalty-free, non-transferable license and right to use such Library Compound solely for research purposes by Trimeris or its Third Party contractors, for a term of ten (10) years (“Research Use License”), as long as the rights to such Library Compound granted by CRL to the Third Party does not preclude the granting by CRL to Trimeris of such Research Use License. A chemical entity or entities developed by Trimeris as a result of such Research Use License which does not infringe a Valid Claim of a CRL patent existing as of the date of granting of such Research Use License to Trimeris shall: (i) be solely owned by Trimeris, including all right, title, interest, and intellectual property to any such chemical entity; and (ii) constitute Trimeris Technology. It is understood and agreed that so long as CRL complies with this Section 2.4.4(c), CRL shall have no liability with respect to any

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conflict of Trimeris’ rights and those rights granted to Third Parties by CRL regarding such Library Compound. A Research Use License granted under this Section 2.4.4(c), shall be separate and distinct from the license rights granted to Trimeris by CRL under Section 4.1.2 of this Agreement. CRL makes no representation or warranty that any Library Compound designated by Trimeris as a Development Compound does not or will not infringe the intellectual property rights of any Third Party.

2.5 General Resources and Responsibilities.

2.5.1 CRL Responsibilities. During the term of the Research Collaboration, CRL shall be primarily responsible for the following activities, in connection with the Research Collaboration as specified in the Research Plan:

(a) Supply of Database Mining Compounds to Trimeris as specified under Sections 2.4.1 and 2.4.2;

(b) Design, chemical synthesis, purification, and analysis of Compounds and Focused Library Compounds;

(c) Computational chemistry and structure-based drug design and pharmacophore mapping as well as de novo virtual library generation;

(d) Transfer protocols and materials, and provide assistance to Trimeris, pursuant to this Agreement, and also as specified in the Research Plan; and

(e) Medicinal chemistry in support of the generation of Focused Libraries, chemical optimization of Lead Compound(s).

2.5.2 Trimeris Responsibilities. During the Research Term, Trimeris shall be primarily responsible for the following activities, among others, as specified in the Research Plan or in connection with the Research Collaboration:

(a) Pursuant to the Initial Chemistry Plan, design of the initial set of Compounds for the gp120 Target;

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(b) Assist CRL in the design of additional Compounds and/or Focused Libraries for the gp120 target and the gp41 Target as needed;

(c) Primary and secondary analysis for activity and selectivity;

(d) Anti-viral activity assays;

(e) Dose-response titrations in viral inhibition assays;

(f) ADMET studies on Compounds;

(g) In vivo proof of concept;

(h) In vitro and ex vivo metabolite profiling;

(i) Providing information for structural biology; and

(j) Initiation of pre-clinical studies.

2.6 Conduct of Research Collaboration. During the term of the Research Collaboration, each Party shall:

2.6.1 undertake its obligations under the Research Collaboration as set forth in the Research Plan, provided however that any changes or adjustments in the allocation of CRL resources to the gp120 Target research program and/or the gp41 Target research program or within such programs as recommended by the JRC be made in accordance with the provisions outlined in Section 2.7.2 and ARTICLE 3, such adjustments to fall within the specific CRL resource allocation specified therein;

2.6.2 use all reasonable efforts and proceed diligently to perform the work set out for such Party to perform the Research Plan, including without limitation by using personnel with such sufficient skills and experience, together with sufficient equipment and facilities to perform its obligations under the Research Plan;

2.6.3 conduct the Research Plan in good scientific manner and in compliance in all material respects with the requirements of applicable laws, rules and regulations, and all other requirements of any applicable good laboratory practices to attempt to achieve its objectives efficiently and expeditiously;

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2.6.4 within thirty (30) days following the end of each calendar month during the first six months of the term of the Research Collaboration furnish the other Party with a reasonably detailed written report summarizing the activities conducted by such Party under the Research Plan during such month; and

2.6.5 provide reasonable and informal access to, and communication with, any and all of such Party’s FTEs assigned to the Research Collaboration, as well as to records pertaining to research activities under the Research Plan on a need-to-know basis and in accordance with Section 2.10 herein.

2.7 Staffing of the Research Collaboration

2.7.1 For the first [**] of the term of the Research Collaboration, CRL shall devote [**] FTEs to the Research Plan as follows:

(a) [**], located at CRL’s San Diego facility, each of whose efforts under the Research Collaboration will be considered a [**] for billing purposes;

(b) [**], located at CRL’s facility in the Russian Federation, each of whose efforts under the Research Collaboration will be considered a [**] for billing purposes; and

(c) [**] located at CRL’s San Diego facility, responsible for senior level project management, molecular modeling, analytical, purification and any other chemistry support as necessary for CRL to meet its obligations and perform its activities pursuant to the Research Plan and whose efforts under the Research Collaboration will be considered a [**] for billing purposes.

2.7.2 FTE adjustments [**] after the Effective Date. For the term of the Research Collaboration beyond the first [**] of the Research Collaboration, the Parties agree as follows:

(a) Trimeris, in its sole discretion and at its sole option, can adjust by either increasing or decreasing the level of CRL’s FTEs from the initial level of [**] FTEs to an adjusted level of between [**] FTEs; provided, however, that the number of CRL FTEs shall in any event be

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reasonable in light of CRL’s Research Collaboration responsibilities. Trimeris shall give CRL [**] written notice of the desire to make such adjustment of FTE levels, with such adjusted level of FTEs taking effect at the end of the [**] notice period. Trimeris can opt to adjust the level of FTEs multiple times during the term of the Research Collaboration, so long as Trimeris provides CRL with [**] written notice of such adjustment. The JRC shall be timely advised of any such adjustment in the FTE level so that the JRC can then re-apportion FTE allocation with respect to CRL’s obligations and activities under the Research Plan. CRL shall then adapt the skill set of CRL’s FTEs to facilitate such re-apportioned FTE allocation between its San Diego Facility and its Russian Federation facility, provided that CRL must maintain at least [**] FTE within the San Diego Facility covering senior level project management as long as the FTE level set by Trimeris is at least [**] FTE. All such CRL FTE’s shall be billable to Trimeris [**] unless otherwise determined in writing by CRL as specified in Section 2.8.3(d).

(b) At a time no later than [**] from the Effective Date of this Agreement, the JRC shall convene to review the progress made under the Research Plan, and to determine whether or not Stage I Research for each Target is timely attaining the specific objectives set forth in the Research Plan. Based on the results of the JRC review process, Trimeris will then determine whether to terminate the Agreement as specified in ARTICLE 13 or to continue with the Research Collaboration.

(c) At any time after [**] from the Effective Date of the Agreement, Trimeris, in its sole discretion and at its sole option, can terminate the Research Collaboration activities under the Research Plan with respect to either the gp41 Target or the gp120 Target, and then adjust the level of CRL’s FTEs for performing research related to the remaining Target according to the process set forth in Section 2.7.2(a) herein. CRL shall then adapt the skill set of CRL’s FTEs to facilitate such adjustment in FTE allocation.

2.7.3 For the term of the Research Collaboration, Trimeris will provide, at its own costs, the personnel as necessary for Trimeris to meet its obligations and perform its activities pursuant to the Research Plan.

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2.8 Research Collaboration Funding.

2.8.1 Research Tax Credits. To the extent permitted by law, Trimeris shall have the sole right to claim any tax credits due on account of research expenses and milestone payments Trimeris incurs under this Agreement.

2.8.2 Equipment, Supplies, and Capital Expenditures. Unless the Parties otherwise agree in writing, or as specified below under Section 2.8.2(a), the Parties acknowledge and agree that CRL is solely responsible for the cost of all equipment, supplies, chemicals, solvents, laboratory scale reagents, materials, handling, disposal, and capital items that CRL uses (or is required to use) in connection with the obligations of CRL under the Research Collaboration. Unless the Parties otherwise agree in writing, the Parties acknowledge and agree that Trimeris is solely responsible for the cost of all equipment, supplies, chemicals, solvents, reagents, materials, handling, disposal, and capital items that Trimeris uses (or is required to use) in connection with the obligations of Trimeris under the Research Collaboration.

(a) Costs for Extraordinary Research Use Reagents. The Parties agree that if Trimeris makes a request for CRL to synthesize one or more particular Compounds either individually or collectively as part of a Focused Library to support the Research Plan and CRL would need to purchase a research reagent from a Third Party that costs more than [**] dollars ($[**]) to effect such Compound synthesis (“Extraordinary Research Use Reagent”), then CRL will ask the JRC to approve in advance such expense in writing. Upon receiving JRC written approval to proceed with the purchase of the Extraordinary Research Use Reagent, Trimeris will reimburse CRL for [**] percent ([**]%) of the costs of such Extraordinary Research Use Reagent in accordance with the terms and conditions specified in Section 2.8.4 .

(b) Reagent costs for synthesis of bulk amounts of Compounds by CRL. The Parties hereby agree that if the JRC makes a request in writing for CRL to synthesize more than [**] of any individual Compound to support the Research Plan, then Trimeris will reimburse CRL for [**] percent ([**]%) the cost of any and all Third Party reagents purchased by CRL to effect the synthesis of more than [**] of any individual Compound to support the Research Plan.

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2.8.3 Research Payments to CRL by Trimeris.

(a) [**]. For the [**] of the term of the Research Collaboration, Trimeris shall pay to CRL the sum of [**] dollars ($[**]) covering the cost of [**]. Payment to CRL of such [**] costs will be in accordance with Section 7.2. If Trimeris terminates this Agreement at the end of [**] after the Effective Date by providing written notice to CRL pursuant to ARTICLE 13, Trimeris shall pay to CRL the additional sum of [**] dollars ($[**]) as compensation for the remaining [**] period. Trimeris shall be under no further obligation to make any further payments to CRL after the effective Termination Date.

(b) During the period between [**]and [**] after the Effective Date. If Trimeris does not terminate the Agreement after [**], then for the period between [**] and [**] Trimeris shall pay CRL [**] for the FTEs allocated by the JRC to the Research Plan, as specified under Section 2.7.2. Payment to CRL of such [**] costs will be in accordance with Section 7.2. CRL shall make available a minimum of [**] FTEs and a maximum of [**] FTEs for sourcing the needs identified by the JRC under the Research Plan during this period.

(c) During the period starting [**] after the Effective Date. If Trimeris does not terminate the Agreement after [**], then for the period after [**] Trimeris shall pay CRL for the FTEs allocated by the JRC to the Research Plan [**] unless CRL elects to [**] as specified in Section 2.8.3(d) below. Payment to CRL of such [**] will be in accordance with Section 7.2. CRL shall make available a minimum of [**] FTEs and a maximum of [**] FTEs for sourcing the needs identified by the JRC under the Research Plan during this period until such time a Development Compound is declared by Trimeris.

(d) CRL [**] Option [**] after the Effective Date. At least [**] before the beginning of the [**] of the term of the Research Collaboration, CRL shall have the option to [**] by providing Trimeris written notice of such election. If CRL elects this option, Trimeris will pay CRL for CRL FTEs allocated to the Research Plan [**] at the beginning of the [**] of the term of the Research Collaboration, and in doing so the provisions of Section 6.2 will immediately take effect. If CRL does not elect to [**] by the date specified herein, then Trimeris will continue to [**] allocated to the Research Plan [**], and CRL shall forego its option to [**] at any time thereafter.

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2.8.4 Payment Terms for Research Payments to CRL. CRL shall provide Trimeris with an invoice at the end of each calendar quarter detailing any and all amounts due CRL for costs incurred under the Research Plan during the immediately preceding calendar quarter which are in accordance with the terms and conditions specified in this Section 2.8. Trimeris shall make payments to CRL within 30 days of receipt of an invoice specifying such costs in accordance with Section 7.2.

2.9 Term and Termination of Research Collaboration. The term of the Research Collaboration shall commence on the Effective Date and shall end by a termination of the Research Collaboration or this Agreement pursuant to Article 13.

2.10 Records; Inspection.

2.10.1 Records. CRL and Trimeris shall each maintain records of the Research Collaboration (or cause such records to be maintained) in sufficient detail and in good scientific manner as will properly reflect: (a) all work done and results achieved by the respective Party in the performance of the Research Plan (including all data in the form required under any applicable governmental regulations and as directed by the JRC); and (b) all FTEs used in connection with, including the number of FTEs utilized in performing its activities related to each of the two Targets under, the Research Plan. Each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all such records of the other Party to the extent reasonably required in connection with the performance of its obligations or exercise of its rights under this Agreement; however such inspection may be made no more than once per calendar year. Each Party shall maintain such records and the information of the other Party contained therein in confidence in accordance with ARTICLE 10.

2.10.2 Reports and Information Exchange. Each of Trimeris and CRL shall use commercially reasonable and diligent efforts to disclose to the other Party all material information relating to the Research Collaboration, including without limitation any Actives, Focused Library

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Compounds, Lead Compounds, Development Compound, or Compound promptly after such information is learned or its materiality is appreciated. In addition to the exchange of reports under Section 2.6.4, during the term of the Research Collaboration each Party shall keep the JRC informed as to its progress under the Research Plan by means of written reports to the JRC. Such written reports shall be provided to the JRC at least seven (7) days in advance of each bimonthly meeting of the JRC, and shall contain in reasonable detail a description of the work done and include all results achieved and data generated in performance of the Research Plan since the last report. The written reports submitted to the JRC shall be forwarded by the JRC to senior management representatives of the respective Parties, as determined by the JRC.

(a) Within thirty (30) days following June 30^th and December 30^th in a calendar year during the Research Collaboration, CRL shall provide Trimeris with a reasonably detailed written report describing the progress to date of all activities for which CRL was allocated responsibility during such six (6) month period under the Research Plan. Each written report by CRL shall summarize the results and experimental procedures of the activities conducted by CRL and include a description of all Collaboration Technology and Compound structures, except that CRL will not disclose the chemical structure of a Database Mining Compound which was not designated as an Active by the JRC. CRL shall make available to Trimeris: analytical data related to Compounds; physical chemical characterization data of Compounds; Compound numbers, lot numbers, names of Compound, and dates when Compounds were prepared; full details of synthesis methods (especially new methods or modifications and new applications of existing methods) for all Actives, Lead Compounds, and Development Compounds; Compound purification conditions and protocols, chemical reaction schemes, conditions, protocols, yields, and certificate of analysis; and such other matters as Trimeris may reasonably request. CRL shall provide a final report to Trimeris within thirty (30) days after the earlier of (i) completion of the Research Plan, or (ii) termination or expiration of this Agreement. In no event shall CRL be required to disclose to Trimeris any CRL Technology, except as provided for in this ARTICLE 2.

(b) Within thirty (30) days following June 30^th and December 30^th in a calendar year during the Research Collaboration, Trimeris shall provide CRL with a reasonably detailed written report describing the progress to date of all activities for which Trimeris was

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allocated responsibility during such six (6) month period under the Research Plan. Each written report by Trimeris shall summarize the results and experimental procedures of the activities conducted by Trimeris that include hits generated from Target Screening Assays, analysis, toxicology studies, in vitro activity studies, and SAR. Each such written report will contain the results and general protocols for all experiments performed by Trimeris using Database Mining Compounds, Compounds and any other compound derived from active substances generated under the Research Plan, including, but not limited to, Target Screening Assays, in-vitro activity studies, SAR, in-vivo activity, toxicity, ADME, non-GLP pharmacokinetic and/or pharmacodynamic studies. Trimeris shall not be required to disclose to CRL any Trimeris Technology, except as provided for in this ARTICLE 2.

2.11 Exclusivity pertaining to the gp41 Target and the gp120 Target.

2.11.1 CRL. Except as set forth herein, prior to termination of this Agreement pursuant to Section 13.1, CRL shall not knowingly conduct, participate in, or fund, directly or indirectly, alone or with a Third Party, drug discovery research and/or drug development efforts directed to the identification of, or grant any right to exploit, chemical entities for use against either the gp41 Target or the gp120 Target, except pursuant to this Agreement. The provisions of this Section 2.11.1 shall apply so long as Trimeris is utilizing commercially reasonable efforts (as described in Section 8.1) to pursue the research, development and/or commercialization of Compound(s) or Product(s) pursuant to the terms and conditions specified in this Agreement.

2.11.2 Trimeris. Except as provided in Sections 2.11.2 (a) and (b) herein, nothing in this Agreement shall prevent or restrict Trimeris from using its screening assays and analytical methods to assay compound libraries provided by Third Parties, and/or to do any one or more of develop, commercialize, make, have made, use (for any purpose), own or license compounds provided by Third Parties related to the gp41 Target or the gp120 Target.

(a) During the first [**] of the term of Research Collaboration, nothing in this Agreement shall prevent or restrict Trimeris from using its screening assays and analytical methods to assay compound libraries provided by Third Parties, and/or to do any one or more of

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develop, commercialize, make, use (for any purpose), have made, own, sell or license compounds provided by Third Parties related to the gp120 Target, except that Trimeris will not knowingly work with a Third Party with a compound which is identified to be in the same chemical family as a chemical entity provided to Trimeris by CRL.

(b) During the Limited Exclusivity Period (as defined below in Section 2.11.2(c)) applicable to Trimeris only, Trimeris shall not knowingly conduct, participate in, or fund, directly or indirectly, with a Third Party, drug discovery research and/or drug development efforts directed to the identification of small molecule chemical entities with a molecular size of [**] for use against the gp120 Target, except pursuant to this Agreement.

(c) Limited Exclusivity Period. For purposes of this Agreement, the “Limited Exclusivity Period” shall mean the period beginning [**] after the Effective Date of the Agreement and terminating by the earlier of either: (i) exercise by Trimeris’ of its option to terminate the Limited Exclusivity Period pursuant to Section 2.11.2(d) herein; or (ii) [**] from the Effective Date; or (iii) termination of this Agreement.

(d) Trimeris can, at its sole discretion and option, terminate the Limited Exclusivity Period by giving written notice to CRL of Trimeris’ termination of the Limited Exclusivity Period. If Trimeris elects the option to terminate the Limited Exclusivity Period prior to its expiration, CRL shall remain bound by the exclusivity provisions specified in Section 2.11.1.

2.12 Effect of Termination of Limited Exclusivity Period.

2.12.1 If Trimeris terminates the Limited Exclusivity Period prior to its expiration (as specified in Section 2.11.2(c)(ii)) and Trimeris then terminates the Agreement prior to Trimeris’ selection of a Development Compound for the gp120 Target, and if during the Limited Exclusivity Period CRL provided FTEs to the Research Collaboration funded [**], Trimeris shall pay to CRL at the time the Agreement is terminated a Limited Exclusivity Period termination fee (“Limited Exclusivity Period Termination Fee”) equal to [**] percent ([**]%) of the aggregate FTE payments made by Trimeris to CRL after the [**] of the term of the Research Collaboration, provided, however, that in no event shall the Limited Exclusivity Period Termination Fee due and payable to CRL exceed [**] dollars ($[**]).

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2.12.2 If Trimeris terminates the Limited Exclusivity Period prior to its expiration, and Trimeris subsequently declares a first Development Compound for the gp120 Target, Trimeris shall pay CRL the applicable milestone after selection of such Development Compound, and no Limited Exclusivity Period Termination Fee shall be due and payable to CRL by Trimeris.

2.12.3 If Trimeris terminates the Limited Exclusivity Period prior to its expiration and CRL had elected to provide [**] to the Research Collaboration after the [**] pursuant to Section 2.8.3(d), then no Limited Exclusivity Period Termination Fee shall be due and payable to CRL by Trimeris upon termination of the Agreement by Trimeris.

2.13 Certain Matters Relating to Acquisition of CRL. If (i) this Agreement is assigned upon a Change of Control of CRL, and (ii) at the time of such Change of Control, the surviving entity had ongoing, or subsequently undertakes, a program for drug discovery research and/or drug development efforts specifically directed to the identification of chemical entities for use against a Target, then subject to the provisions of Section 2.11.1, then:

2.13.1 The entity that CRL becomes immediately subsequent to such Change of Control shall not disclose Trimeris Confidential Information and shall not disclose non-public Collaboration Technology and shall not utilize Collaboration Technology except pursuant to the terms and conditions of this Agreement;

2.13.2 The Parties shall put procedures in place to prevent the unauthorized disclosure or use of Trimeris Confidential Information or non-public Collaboration Technology prohibited under paragraph (a) above;

2.13.3 CRL Technology and Collaboration Technology shall not include any intellectual property or subject matter of the acquiring party existing as of the date of the Change of Control. CRL Technology and Collaboration Technology shall not include any intellectual property or subject matter created or acquired by the surviving entity following the Change of Control, unless

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(i) such intellectual property or subject matter would otherwise be within CRL Technology or Collaboration Technology, and (ii) was so created after the Change of Control in the course of activities performed under the Research Plan. Subject to the foregoing and Sections 2.13.1 and 2.13.2 above, Section 2.11.1 shall not apply with respect to the activities of the surviving entity;

2.13.4 CRL shall provide Trimeris a written notice of such Change of Control on the date of first public announcement of such Change in Control. Trimeris shall have the right, in its sole discretion, at any time following receipt of such notice to terminate the Research Plan, the Research Collaboration, or this Agreement.

2.14 Certain Matters Relating to Acquisition of Trimeris. If (i) this Agreement is assigned upon a Change of Control of Trimeris, and (ii) at the time of such Change of Control, the surviving entity had ongoing, or subsequently undertakes, a program for drug discovery research and/or drug development efforts specifically directed to the identification of chemical entities for use in the Field, then subject to the provisions of Section 2.11.1, then:

2.14.1 The entity that Trimeris becomes immediately subsequent to such Change of Control shall not disclose CRL Confidential Information shall not disclose non-public Collaboration Technology and shall not utilize Collaboration Technology except pursuant to the terms and conditions of this Agreement;

2.14.2 The Parties shall put procedures in place to prevent the unauthorized disclosure or use of CRL Confidential Information or non-public Collaboration Technology prohibited under Section 2.14.1 above.

2.14.3 Trimeris Technology and Collaboration Technology shall not include any intellectual property or subject matter of the acquiring party existing as of the date of the Change of Control. Trimeris Technology and Collaboration Technology shall not include any intellectual property or subject matter created or acquired by the surviving entity following the Change of Control, unless (i) such intellectual property or subject matter would otherwise be within Trimeris Technology or Collaboration Technology, and (ii) was so created after the Change of Control in the course of activities performed under the Research Plan. Subject to the foregoing and paragraphs Sections 2.14.1 and 2.14.2 above, Section 2.11.1 shall not apply with respect to the activities of the surviving entity.

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2.14.4 Trimeris shall provide CRL a written notice of such Change of Control on the date of first public announcement of such Change in Control. CRL shall have the right, in its sole discretion, at any time following receipt of such notice, to terminate the exclusivity provision of Section 2.11.1 of this Agreement.

2.15 For purposes of Sections 2.13 and 2.14, a “Change of Control” shall mean if any one of the following occurs as of the Effective Date:

2.15.1 any “Person” or “Group” (as such terms are defined below) is or becomes the “Beneficial Owner” (as defined below), directly or indirectly, of shares of capital stock or other interests (including partnership interests) of such Party then outstanding and normally entitled without regard to the occurrence of any contingency) to vote in the election of the directors, managers or similarly supervisory positions (“Voting Stock”) of such Party representing fifty percent (50%) or more of the total voting power of all outstanding classes of Voting Stock of such Party or has the power, directly or indirectly, to elect a majority of the members of the Board of Directors; or

2.15.2 such Party enters into a merger, consolidation or similar transaction with another Person (whether or not such Party is the surviving entity) and as a result of such merger, consolidation or similar transaction (i) the members of the Board of Directors of such Party or the surviving Person immediately prior to such transaction constitute less than a majority of the members of the Board of Directors of such Party immediately following such transaction, or (ii) the Persons that “Beneficially Owned” (as defined below), directly or indirectly, the shares of Voting Stock of such Party immediately prior to such transaction cease to “Beneficially Own” (as defined below), directly or indirectly, shares of Voting Stock of such Party representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving Person in substantially the same proportions as their ownership of Voting Stock of such Party immediately prior to such transaction; or

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2.15.3 such Party sells or transfers to any Third Party(ies), in one or more related transactions, properties or assets representing all or substantially all of such Party’s consolidated total assets; or

2.15.4 the holders of capital stock of such Party approve any plan or proposal for the liquidation or dissolution of such Party (whether or not otherwise in compliance with the terms hereof).

2.15.5 For the purpose of the definition of “Change in Control”, (i) “Person” and “Group” have the meanings given such terms under Sections 13(d) and 14(d) of the Exchange Act or any successor provision to either of the foregoing, and the term “Group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act (or any successor provision thereto), (ii) a “Beneficial Owner” shall be determined in accordance with Rule 13d-3 under the Exchange Act, as in effect on the Effective Date, except that the number of shares of Voting Stock of such Party shall be deemed to include, in addition to all outstanding shares of Voting Stock of such Party, all shares of Voting Stock not outstanding that are subject to options, warrants, rights to purchase or conversion privileges exercisable within sixty (60) days of the date of determination of a Change in Control (“Unissued Shares”) deemed to be held by the Person or Group or other Person with respect to which the Change in Control determination is being made and all Unissued Shares deemed to be held by all other Persons, and (iii) the terms “Beneficially Owned” and “Beneficially Own” shall have meanings correlative to that of “Beneficial Owner.”

ARTICLE 3

MANAGEMENT

3.1 Joint Research Committee. Within [**] of the Effective Date, Trimeris and CRL will establish a Joint Research Committee to oversee, review and recommend direction of the Research Collaboration. The responsibilities of the Joint Research Committee shall include, among other things:

3.1.1 amending the Research Plan as necessary to reflect the Parties mutually agreed upon Research Collaboration activities, and to reflect any changes in the level and/or allocation of FTE resources made pursuant to this Agreement;

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3.1.2 monitoring and reporting research progress and ensuring open and frequent exchange between the Parties regarding Research Collaboration activities;

3.1.3 coordinating of a collaborative chemical validation and optimization program to create Focused Library Compounds and identify Lead Compounds for each Target;

3.1.4 establishing subcommittees, as deemed appropriate by the JRC, to facilitate the activities under the Research Plan;

3.1.5 designation of a Library Compound as a Compound;

3.1.6 amending the Research Plan to include guidelines for qualifying a Compound as an Active or Lead Compound, and designation of Lead Compounds;

3.1.7 nominating of a Focused Library Compound, Lead Compound or Compound for consideration by Trimeris as a Development Compound;

3.1.8 amending the Research Plan as necessary for defining the properties desired of a Development Compound for each Target consistent with the provisions as specified in Section 2.4.4(a) herein; and

3.1.9 sourcing a supply of each Development Compound in quantities sufficient to perform IND-Enabling Studies.

3.2 Membership. The JRC shall include two (2) representatives of each of Trimeris and CRL, each Party’s members selected by that Party, provided however that CRL must designate one senior level representative from its San Diego Facility. CRL and Trimeris may each replace its JRC representatives at any time, upon written notice to the other Party. From time to time, the JRC may establish subcommittees, to oversee particular projects or activities under the Research Plan, and such subcommittees will be constituted as the JRC agrees.

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3.3 Meetings. During the first six months of the term of the Research Collaboration, the JRC shall meet at least once per month either in person or by telephone or video conferencing. After the first six months of the term of the Research Collaboration, the JRC shall meet at least quarterly or as agreed by the Parties, at such locations as the Parties agree, and will otherwise communicate regularly by telephone, electronic mail, facsimile and/or video conference. With the consent of the Parties, other representatives of CRL or Trimeris may attend JRC meetings as nonvoting observers. Each Party shall be responsible for all of its own expenses associated with attendance of such meetings. The first meeting of the JRC shall occur within [**] after the Effective Date.

3.4 Minutes. The JRC shall keep accurate minutes of its deliberations, which shall record all proposed decisions and all actions recommended or taken. The secretary of the JRC shall be a designee from and chosen by Trimeris and shall be responsible for the preparation of draft minutes. Draft minutes shall be sent to all members of the JRC within ten (10) business days after each meeting. Each JRC member shall have thirty (30) days, from the date the draft minutes were sent to the JRC, to provide comments in writing to the secretary of the JRC on such draft minutes. The secretary of the JRC shall incorporate any changes to the minutes that are reasonably requested by any member of the JRC unless such change is not unanimously supported by all the JRC members, in which case the provisions of Section 3.5 shall take effect. The failure of a JRC member to provide comments on the draft minutes to the secretary of the JRC within the thirty (30) day period to do so shall be deemed an approval of those draft minutes. All records of the JRC shall at all times be available to both CRL and Trimeris.

3.5 Decision Making. Except as otherwise provided for in this Agreement, decisions of the JRC regarding activities under the Research Plan shall be made by unanimous agreement among the JRC members. In the event that the matter cannot be resolved because unanimity is not achieved within the JRC, the matter will be referred to CRL’s Chief Executive Officer and Trimeris’ Chief Executive Officer, who shall promptly discuss the matter and endeavor in good faith to resolve such matter within ten (10) days from the date of such referral to such officers. If such officers are unable to resolve such matter, Trimeris shall have the final vote in the JRC in making such decision, thereby resolving the matter; provided, however, that any changes or adjustments in the allocation of CRL

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resources to either the gp120 Target research program or the gp41 Target research program or within such programs as recommended by the JRC be made in accordance with the provisions outlined in Section 2.7.2 and ARTICLE 3, such adjustments to fall within the specific CRL resource allocation specified therein.

ARTICLE 4

LICENSES & GRANTS

4.1 Research Licenses.

4.1.1 Grant from Trimeris. Trimeris hereby grants CRL a worldwide, non-exclusive, non-transferable, non-sublicensable, royalty-free, right and license under the Trimeris Technology and Trimeris’ interest in the Collaboration Technology solely to conduct activities assigned to CRL under the Research Plan during the term of the Research Collaboration.

4.1.2 Grant from CRL. CRL hereby grants Trimeris a worldwide, non-exclusive, non-transferable, non-sublicensable, royalty-free, right and license under the CRL Technology solely to conduct activities assigned to Trimeris under the Research Plan during the term of the Research Collaboration.

4.1.3 Limitations on Licenses under this Section 4.1. The licenses granted under this Section 4.1 shall not include the right to grant or authorize sublicenses; provided, however, that the use by Trimeris of subcontractors to conduct non-clinical development activities shall not be construed as a sublicense. Neither CRL nor Trimeris shall have any right to sell or otherwise distribute any Product by virtue of the licenses set forth in this Section 4.1, and no such sale or distribution right shall be implied. The licenses set forth in this Section 4.1 shall expire immediately upon expiration or termination of the Research Collaboration or this Agreement for any reason.

4.2 Licenses to Trimeris.

4.2.1 Subject to the terms and conditions of this Agreement, CRL hereby grants to Trimeris a nonexclusive, royalty-free, worldwide, transferable and sublicensable right and license to

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CRL Technology to the extent that it is necessary for Trimeris, to develop, make, have made, use, import, export, offer for sale, have sold and sell Development Compound(s) and/or Product(s).

4.2.2 Sublicenses. Subject to the terms and conditions of this Agreement, Trimeris shall have the right to sublicense the rights granted in Section 4.2.1 above upon prior written notice to CRL. Within sixty (60) days following the execution of a sublicense for a Development Compound and/ or a Product, Trimeris shall provide CRL with a full copy of such sublicense agreement, which shall be treated as Confidential Information of Trimeris. Each sublicense granted by Trimeris shall be consistent with all the terms and conditions of this Agreement, and subordinate thereto, and Trimeris shall remain responsible to CRL for the compliance of each such Sublicensee with the financial and other obligations due under this Agreement.

4.3 Grants to Trimeris

4.3.1 Marketing Rights for Products. Subject to compliance with all applicable milestone and royalty payment obligations under this Agreement, Trimeris shall solely own all marketing rights to Products, including, not limited to, the exclusive, worldwide, transferable rights to market, sell, have sold, import, export and distribute solely Products. In exercising such rights, Trimeris shall have the sole right to select trademarks for Products, and Trimeris shall own all right, title or interest in such trademarks (subject to any pre-existing rights of CRL or Third Parties).

4.3.2 Trimeris Exclusive Use of Compounds. CRL hereby acknowledges and agrees that CRL will provide all Compounds described in Sections 1.7, 1.11, 1.14, 1.15, 1.24, and 1.32 above to Trimeris on an exclusive basis, and CRL is expressly prohibited from providing any and all such Compounds to a Third Party as part of the CRL Library, without the prior written consent of Trimeris.

4.4 No Implied Licenses. Only the licenses granted pursuant to the express terms of this Agreement shall be of any legal force or effect. No other license or rights, including without limitation any license or right to CRL Technology or Trimeris Technology or Development Technology, shall be created by implication, estoppel or otherwise.

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ARTICLE 5

DEVELOPMENT

5.1 Development of Compounds and Products.

5.1.1 Development Compound Funding and Decisions. Once a Development Compound has been designated by Trimeris pursuant to Sections 2.4.4(b) or 2.4.4(c), Trimeris shall be solely responsible for all costs and decisions associated with further development of such Development Compound, and for conducting all activities related to non-clinical and human clinical development of such Development Compound or Product resulting from such Development Compound, including manufacture, formulation, packaging and commercialization of such Development Compound on a worldwide basis

5.1.2 Opt-In Opportunity. At any time up until [**] following Trimeris’ designation of a Development Compound according to Sections 2.4.4(a) or 2.4.4(c), CRL shall have the opportunity to notify Trimeris in writing that CRL wishes to enter into good faith negotiations with Trimeris for the purpose of co-funding a portion of the future development costs associated with such Development Compound, including all internal and external Third Party costs associated with the further development of such declared Development Compound, through and to the conclusion of any and all Phase I clinical trials for that particular Development Compound (“Opt-In Opportunity”). CRL must notify Trimeris of CRL desire to enter such negotiations by delivering written notification to Trimeris within [**] of Trimeris’ designation of a Development Compound. CRL may elect to enter such negotiations on a Development Compound-by-Development Compound basis, at its sole discretion. Upon Trimeris’ receipt of such written notification by CRL within the applicable period set forth herein, Trimeris and CRL agree to begin good-faith negotiations for the purpose of determining the conditions under which CRL could pay for a portion of the internal and external costs associated with the further development of such declared Development Compound, through and to the conclusion of any and all Phase I clinical trials for that particular Development Compound in exchange for a positive adjustment in either the milestone package or royalty due CRL for such Development Compound. The parties will endeavor to reach an agreement on such negotiation within 90 days after initiating discussions, provided however that

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Trimeris shall have the final say as to whether such negotiations culminate in a written amendment to this Agreement signed by both Parties specifying the terms and conditions related to this matter.

5.1.3 Ownership of Regulatory Filings & Regulatory Cooperation

(a) General. All INDs, NDAs and other regulatory filings (both in the US and in all other countries) made or filed by Trimeris for any Development Compound or Product shall be owned solely by Trimeris.

(b) Cooperation. CRL shall cooperate with Trimeris in a reasonable manner and in good faith with respect to such regulatory filings, including providing to Trimeris access to and copies of all data, information and results in the possession of CRL relating to such Compounds that would facilitate any one or more of the preparation, filing, and approval of such regulatory filings. Trimeris shall pay any out-of-pocket costs incurred by CRL in providing such cooperation.

ARTICLE 6

PAYMENTS

6.1 Development Milestones and Royalties for a Development Compound and a Product Based on [**]

6.1.1 Subject to Sections 6.1.2 and 6.3, for a Development Compound and a Product resulting from the Research Collaboration during which CRL is paid for its FTE contributions [**] pursuant to Section 2.8.3(c), Trimeris shall pay to CRL the following milestone payments.

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Milestones	Payment Amount
		[**] $US
1. Designation by Trimeris of the first Development Compound	$	[**]
2. Dosing first patient in first human clinical trial in any country with the first Development Compound or Product (Phase I clinical trial)	$	[**]
3. Initiation of the first Phase II clinical trial with the first Development Compound or Product	$	[**]
4. Initiation of the first Pivotal (Phase III) clinical trial with the first Development Compound or Product	$	[**]
5. Approval of an NDA for any Product in the U.S.	$	[**]
6. First EU major country launch of the first Product (first launch in either the UK, France, Germany, Italy, or Spain), including pricing approval in such country.*	$	[**]
Total Milestones	$	5.25 M

* In the event that pricing approval is not required for commercialization of Product in such country, then this milestone will be deemed to have been achieved upon Product launch in such country.

6.1.2 If a first Development Compound for a particular Target has been granted NDA approval in the U.S., then for a second and each subsequent Development Compounds and Products for the same Target, and resulting from the Research Collaboration during which is paid for its FTE contributions [**] pursuant to Section 2.8.3(c), Trimeris shall pay to CRL only the following milestone payment, on a Product-by-Product basis, as applicable.

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Milestones	Payment Amount
		M = million $US
1. Approval of an NDA for a Product in the U.S.	$	1.25 M
Total Milestones	$	1.25 M

6.1.3 Royalties on Net Sales of Product under [**]. For Net Sales of a Product resulting from the Research Collaboration during which CRL is paid for its FTE contributions [**] pursuant to Section 2.8.3(c), Trimeris shall pay to CRL the following annual royalty on Net Sales of such Product in the respective territory.

Annual Net Sales per Product, on a Product-by-Product basis
Territory of Sales	Royalty Rate
U.S. Territory	[**]	%
International Territory	[**]	%

6.1.4 [**] Royalty Structure For Net Sales of a Product resulting from the Research Collaboration during which CRL is paid for its FTE contributions [**] pursuant to Section 2.8.3(c), and where CRL has contributed more than [**] during the term of the Research Collaboration, Trimeris shall pay to CRL the following annual royalty on Net Sales of such Product in the respective territory (in lieu of the royalty rate provided in Section 6.1.3).

Annual Net Sales per Product, on a Product-by-Product basis
Territory of Sales	Royalty Rate
U.S. Territory	[**]	%
International Territory	[**]	%

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6.2 Development Milestones for a Development Compound and a Product Based on [**].

6.2.1 Subject to Sections 6.2.2 and 6.3, for a Development Compound and a Product resulting from the Research Collaboration during which CRL is paid for its FTE contributions [**] pursuant to Section 2.8.3(d), Trimeris shall pay to CRL the following milestone payments.

Milestones	Payment Amount
		[**]$US
1. Designation by Trimeris of the first Development Compound	$	[**]
2. Dosing first patient in the first human clinical trial in any country with the first Development Compound or Product (Phase I clinical trial)	$	[**]
3. Initiation of the first Phase II clinical trial with the first Development Compound or Product	$	[**]
4. Initiation of the first Pivotal (Phase III) clinical trial with the Development Compound or Product	$	[**]
5. Approval of any NDA for a Product in the U.S.	$	[**]
6. First EU major country launch of a Product (first launch in either the UK, France, Germany, Italy, or Spain), including pricing approval in such country.*	$	[**]
Total Milestones	$	5.25 M

* In the event that pricing approval is not required for commercialization of Product in such country, then this milestone will be deemed to have been achieved upon Product launch in such country.

6.2.2 If the first Development Compound for a particular Target has been granted NDA approval in the U.S., then for a second and all subsequent Development Compounds and Products for the same Target, and resulting from the Research Collaboration during which CRL is

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paid for its FTE contributions [**] pursuant to Section 2.8.3(d), Trimeris shall pay to CRL only the following milestone payment, on a Product-by-Product basis, as applicable.

Milestones	Payment Amount
		M = million $US
1. Approval of first NDA for a Product in the U.S.	$	1.25 M
Total Milestones	$	1.25 M

6.2.3 For a Product resulting from the Research Collaboration during which CRL is paid for its FTE contributions [**] pursuant to Section 2.8.3(d), no royalties shall be due and payable to CRL by Trimeris for Net Sales of such Product.

6.3 Milestones Paid Only Once. The applicable milestone payments set forth in this ARTICLE 6 that shall be due with respect to each Development Compound (on a Development Compound-by- Development Compound basis) and Product (on a Product-by-Product basis), shall be paid only once per Development Compound or Product. Should all development of a particular Development Compound or Product for a particular Target be discontinued for any reason by Trimeris, and Trimeris replaces the discontinued Development Compound or Product with another Compound or Product for the same Target, then, upon the next such Development Compound or Product achieving a milestone for which a corresponding milestone payment was made for the discontinued Development Compound or Product, no payment shall be due CRL with respect to such alternative Development Compound or Product with respect to such milestone.

6.4 Milestone Payments. The applicable milestone payments identified in this ARTICLE 6 shall be due upon the first achievement of that milestone by the Trimeris or its Affiliates, Sublicensees or other designees, as the case may be. Trimeris shall provide CRL with written notice of the achievement of each such milestone within thirty (30) days after such achievement. The applicable milestone payments shall be paid by Trimeris to CRL within thirty (30) days of receipt by Trimeris of an invoice from CRL reflecting such amount.

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6.5 Royalties. The applicable royalty payments identified in and due under this ARTICLE 6 shall be paid by Trimeris to CRL within ninety (90) days after the end of each calendar quarter, and shall be based on a running royalty amount on Net Sales of Product sold by or under authority of Trimeris or its Affiliates, Sublicensees or other designees, as the case may be.

6.5.1 Payment of Royalties following Sublicense. In the event that Trimeris sublicenses rights to a Sublicensee to commercialize a Product(s) to a Third Party in a given territory or country, then the applicable royalty payments identified in and due under this ARTICLE 6 for that territory or country shall be paid by Trimeris to CRL within ninety (90) days after the end of each calendar quarter. The applicable royalty amount shall be based on a running royalty amount on Net Sales of a Product sold by or under authority of Trimeris’ Sublicensee during that calendar quarter. The royalty amount due to CRL for a Product in a given calendar quarter shall be determined by calculating the total Net Sales of that particular Product for the particular calendar quarter in the U.S. Territory or the International Territory on a calendar quarter basis, and applying the appropriate royalty rate to the total Net Sales for that calendar quarter in the respective territory according to the appropriate schedule set forth in this ARTICLE 6.

6.5.2 Royalty Term. Trimeris’ obligation to pay royalties to CRL under this ARTICLE 6 shall continue for each Product, on a country-by-country basis, until the later of (i) the expiration of the last to expire Valid Claim claiming a composition of matter comprising such Product, or a method of using such Product covering the specific indication for which the Product has been approved for marketing and sale in such country, or (b) 10 years from the first date of Product Launch in such country. In the event that no such patent has issued within one (1) year of the initial sale of the Product in a country in which such Product is being sold, Trimeris’ obligations to pay royalties to CRL under this ARTICLE 6 will be suspended until such time as a patent containing a Valid Claim claiming a composition of matter comprising such Product, or claiming a method of using such Product for the specific indication for which the Product has been approved for marketing and sale, issues in such country.

(a) Expiration of the Royalty Term. Upon expiration of the royalty term for each Product, on a country-by-country basis, Trimeris will have a no further monetary obligations

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to CRL with respect to such Products, and Trimeris will have a fully paid up, perpetual, royalty-free, worldwide, non-exclusive, sublicensable, irrevocable license right to CRL Technology granted pursuant to Section 4.2.1 to develop, make, have made, use, import, export, offer for sale, have sold and sell such Products.

6.6 Calendar Quarter. For the purposes of this Agreement, a calendar quarter is considered to be a 3 month time period selected from the group consisting of (a) from January 01^st to March 31^st, (b) from April 01^st to June 30^th, (c) from July 01^st to September 30^th, and (d) October 01^st to December 31^st.

6.7 Initiation of a Clinical Trial. For purposes of this ARTICLE 6, a clinical trial shall be deemed initiated upon the first dosing of the first patient in such trial.

6.8 Product Launch. For purposes of this ARTICLE 6, a Product Launch by Trimeris, its Affiliate or its respective Sublicensee for such Product :

(a) in the United States, its territories, commonwealths, and possessions (“U.S.”), is the first date of commercial sale of a Product to a Third Party wholesaler at an arms length transaction in the U.S.;

(b) in a major European Union country shall be deemed achieved upon receipt of the first written approval to market a Product from a major European country (i.e., France, Germany, Italy, Spain, or the United Kingdom), including the written receipt of pricing approval from such country; and

(c) in a country other than provided for in Sections 6.8(a)& (b), is the first date of commercial sale of a Product to a Third Party wholesaler at an arms length transaction in such other country including the written receipt of pricing approval from such country if so required by the governing authority in such country.

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ARTICLE 7

BOOKS AND RECORDS FOR PAYMENTS

7.1 Royalty Reports and Payments.

7.1.1 Trimeris. After the first sale of a Product on which royalties are payable by Trimeris or its Affiliates or Sublicensees hereunder, Trimeris shall make quarterly written reports to CRL, with each quarterly report being accompanied by any royalty payment due for that calendar quarter. Each quarterly written report shall state, separately for Trimeris and each Affiliate and Sublicensee, the number and description of Products sold, aggregate Net Sales by country, of each Product sold during the calendar quarter upon which a royalty is payable under ARTICLE 6 above, the total deductions taken in calculating such Net Sales, and the exchange rates used to calculate payment. Trimeris shall also provide to CRL informal monthly reports stating, separately for Trimeris and each Affiliate and Sublicensee, the number, description, and aggregate Net Sales, by country, of each Product sold during that month upon which a royalty is payable.

7.2 Payment Method. All payments due to CRL under this Agreement shall be made from a bank located in the United States by bank wire transfer in immediately available funds to a bank account designated by CRL. All payments hereunder shall be made in U.S. dollars. In the event that the due date of any payment subject to ARTICLE 6 hereof is a Saturday, Sunday or national holiday, such payment may be paid on the following business day. Any payments that are not paid on the date such payments are due under this Agreement shall bear interest to the extent permitted by applicable law at the prime rate as reported by the Chase Manhattan Bank, New York, New York, on the date such payment is due, plus an additional two percent (2%), calculated on the number of days such payment is delinquent.

7.3 Place of Royalty Payment; Currency Conversion. If any currency conversion shall be required in connection with the calculation of royalties hereunder, such conversion shall be made using the selling exchange rate for conversion of the foreign currency into U.S. Dollars, quoted for current transactions reported in The Wall Street Journal for the average over the calendar quarter to which such payment pertains.

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7.4 Records; Inspection. Trimeris and its Affiliates and Sublicensees shall keep complete, true and accurate books of account and records for the purpose of determining the royalty amounts payable under this Agreement. Such books and records shall be kept at the principal place of business of Trimeris for at least three (3) years following the end of the calendar year to which they pertain. Such records will be open for inspection during such three (3) year period by a public accounting firm, representing CRL, to whom Trimeris has no reasonable objection, solely for the purpose of verifying royalty statements hereunder; and such records shall be treated and maintained as Confidential Information of Trimeris, as defined in ARTICLE 10 herein. Such inspections may be made no more than once each calendar year, at reasonable times and on reasonable notice. Inspections conducted under this Section 7.4 shall be at the expense of CRL, unless an inspection reveals an underpayment or underreporting by Trimeris exceeding five percent (5%) of the amount paid or reported for any period covered by the inspection is established in the course of any such inspection, whereupon all reasonable costs relating to the inspection for such period and any unpaid amounts that are discovered will be paid promptly by Trimeris to CRL together with interest thereon from the date such payments were due at the lesser of the prime rate as reported by the Chase Manhattan Bank, New York, New York, plus an additional two percent (2%). The interest payable to CRL pursuant to this Section 7.4 shall in no way limit any other remedies available to CRL for such underpayment or underreporting.

7.5 Withholding Taxes. CRL will pay any and all taxes levied on account of such payment. If any taxes are required to be withheld by Trimeris, Trimeris will (a) deduct such taxes from the payment made to CRL, (b) timely pay the taxes to the proper taxing authority, and (c) send proof of payment to CRL and certify its receipt by the taxing authority within 30 days following such payment.

ARTICLE 8

DUE DILIGENCE

8.1 Due Diligence. CRL and Trimeris shall each use commercially reasonable efforts consistent with prudent business practices to fulfill their respective obligations under the Research

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Collaboration. “Commercially reasonable efforts” for CRL shall mean the standard of effort consistent with the efforts that private biotechnology companies (or, in the event that CRL becomes a publicly traded biotechnology company, a public biotechnology company) devote to significant general practice of research, development and commercialization of products having similar market potential which are derived from internal research programs. “Commercially reasonable efforts” for Trimeris shall mean the standard of effort consistent with the efforts that public biotechnology companies devote to significant general practice of research, development and commercialization of products having similar market potential which are derived from internal research programs. In addition, Trimeris shall develop and commercialize Development Compound(s), and corresponding Product(s) using efforts comparable to those efforts it uses (or would use) for its own development candidates and products of comparable value, based on its own judgment and criteria for determining the potential technical and/or commercial success of such Development Compound(s), and corresponding Product(s).

ARTICLE 9

INTELLECTUAL PROPERTY

9.1 Inventorship and Disclosure.

9.1.1 Inventorship. Inventorship of any Invention and other intellectual property conceived and/or reduced to practice pursuant to this Agreement shall be determined in accordance with the patent laws of the country(ies) in which the invention was invented. CRL warrants that it has the necessary agreements executed with the Chemists it uses, including those of its Affiliates, which obligates them, if deemed inventors of Inventions, to assign complete ownership of such Inventions to CRL. CRL is solely responsible for any and all costs necessary to effect transfer to, and assignment of, such Inventions from such Chemists to CRL.

9.1.2 Disclosure of Inventions. Each Party shall promptly disclose to the other Party any inventions made in performance of, and in connection with this Agreement.

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9.2 Ownership of Inventions.

9.2.1 Collaboration Technology.

(a) All right, title and interest in and to all Collaboration Technology shall be owned solely by Trimeris. CRL shall reasonably cooperate with Trimeris, at no additional expense to Trimeris, and promptly execute and provide all reasonably necessary information, data, paperwork or other documents necessary to transfer and effect all right, title, interest and sole ownership of Collaboration Technology to Trimeris. The Parties agree that any such Inventions are subject to, and patent application(s) filed claiming such Inventions will comply with the requirements of, the CREATE Act (The Cooperative Research and Technology Enhancement Act of 2004). Other than as expressly provided for in this Agreement, CRL shall have the right to exploit the Collaboration Technology without the express prior written consent of Trimeris.

(b) The Parties recognize that there may be commercialization of Product(s) by Trimeris or its Sublicensee in a dosage form combined with an active drug substance other than Product which active drug substance is licensed to Trimeris by a Third Party (“Combination Drug”). In such event, the Parties shall negotiate in good faith to successfully complete negotiation of the operative and financial terms between the Parties for such commercialization, such operative and financial terms shall in no event exceed payment terms provided for such Product according to Article 6. If the Parties fail to successfully complete such negotiation within a reasonable time period, the Parties agree that the operative and financial terms for such commercialization shall be determined and settled by binding arbitration in an arbitration process set forth in Article 14 herein.

(c) In the event that a Third Party asserts that commercialization of a Product by Trimeris would infringe the intellectual property rights of such Third Party, then a Party receiving such assertion will promptly give written notice to the other Party of such assertion. In such event, the Parties shall negotiate in good faith a plan of action with respect to such Third Party assertions. If the plan of action is to license such Third Party intellectual property rights, the Parties shall negotiate in good faith to successfully complete negotiation of the operative and financial terms between the Parties for such commercialization in taking into account any payments made or to be made to the Third Party for such license, such operative and financial terms shall in no event exceed payment terms provided for such Product according to Article 6. If the Parties fail to

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successfully complete such negotiation within a reasonable time period, the Parties agree that the operative and financial terms for such plan of action or commercialization shall be determined and settled by binding arbitration in an arbitration process set forth in Article 14 herein.

9.2.2 CRL Technology and Trimeris Technology. Notwithstanding Section 9.2.1 above or any other provision of this Agreement: (a) all right, title and interest in and to CRL Technology shall be owned by CRL; and (b) all right, title and interest in and to Trimeris Technology shall be owned by Trimeris.

9.3 Development Technology. With respect to the rights of Trimeris to develop a Development Compound or Product, Trimeris shall have the right to engage a Third Party contractor in formulation technology or delivery technology or product criteria maximization to the extent Trimeris deems necessary for achieving a Product it desires to commercialize. A written agreement of Trimeris with such Third Party subcontractor shall have provisions regarding confidentiality and prohibitions on transfer of information, and non-use and ownership of intellectual property, consistent with those contained herein. If, during the Third Party subcontracting a new invention not covered by Collaboration Technology is conceived and/or reduced to practice (“Development Technology”) relating to the formulated or deliverable Product (“Modified Product”), Trimeris shall use its best efforts to negotiate sole ownership of Modified Product, or at least joint ownership with the Third Party contractor. In such event, the Parties shall negotiate in good faith to successfully complete negotiation of the operative and financial terms between the Parties for such commercialization of a Modified Product, such operative and financial terms shall in no instance exceed payment terms provided for such Product according to Article 6. If the Parties fail to successfully complete such negotiation within a reasonable time period, the Parties agree that the operative and financial terms for such commercialization shall be determined and settled by binding arbitration in an arbitration process set forth in Article 14 herein.

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9.4 Patent Prosecution.

9.4.1 Collaboration Technology.

(a) Trimeris shall be solely responsible, at its expense, for preparing, filing, prosecuting and maintaining patent applications and patents directed to Collaboration Technology, and conducting any interferences, re-examinations, reissues and oppositions relating thereto. CRL shall reasonably cooperate with Trimeris, at no additional expense to Trimeris, and promptly execute and provide all reasonably necessary information, data, paperwork or other documents requested by Trimeris, and making scientists and scientific records reasonably available to Trimeris, in order to enable Trimeris to file, prosecute and maintain such patent applications and to conduct any such proceedings.

(b) Trimeris may elect, upon ninety (90) days’ prior notice, to discontinue prosecution of any such patent applications and/or not to file or conduct any further activities with respect to any such patent applications or patents related to Collaboration Technology. In the event Trimeris declines to file or, having filed, fails to further prosecute or maintain any such patent applications or patents, or conduct any proceedings including, but not limited to, interferences, re-examinations, reissues, oppositions relating thereto, then CRL shall have the right to prepare, file, prosecute and maintain such patent applications and patents in such countries as it deems appropriate, and conduct such proceedings, at its sole expense. In such case, Trimeris shall immediately execute all necessary documents that may be required in order to enable CRL to file, prosecute and maintain such patent applications and to conduct any such proceedings.

9.4.2 Other Technology. Except as provided in Section 9.4.1, each Party shall be responsible, at its own expense and in its sole discretion, for preparing, filing, prosecuting and maintaining, in such countries as it deems appropriate, any and all patent applications and patents directed to inventions owned or controlled by such Party (Trimeris Technology in the case of Trimeris, and CRL Technology in the case of CRL) and conducting any interferences, re-examinations, reissues and oppositions relating to such patent applications and patents.

9.5 Reports. Trimeris shall keep CRL informed as to the status of patent matters described in Section 9.4.1(a) by providing CRL with a semi-annual report containing a list of the patent applications and patents, which Trimeris is prosecuting and maintaining according to Section 9.4.1(a), that minimally includes the number assigned to each application or patent, the applicable

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filing date and/or issue date, and the current status of each application or patent. Accompanying the semi-annual report, Trimeris will provide to CRL copies of patent applications which have been filed by Trimeris according to Section 9.4.1(a) during the six month period covered by the semi-annual report.

9.6 Enforcement and Defense.

9.6.1 Notice. Each Party shall promptly notify the other of any knowledge it acquires of any material infringement or reasonable belief of such material infringement by a Third Party of the rights licensed to it according to Section 4.1 and Section 4.2.

9.6.2 Trimeris. Trimeris shall have the initial right, but not the obligation, to take reasonable legal action to enforce against infringements by Third Parties or defend any declaratory judgment action relating to any patent filed by it pursuant to Section 9.4.1(a) using counsel of its choice, provided that CRL has the right to join the action as a matter of law. CRL shall have the right to participate, at its own expense which is not subject to recovery pursuant to Section 9.6.4, and with counsel of its choice, in any such legal action initiated by Trimeris, to the extent permitted by applicable law, and CRL shall give to Trimeris all authority, information and assistance necessary to defend or settle any such suit, action or proceeding. If, within six (6) months following receipt of information pertaining to a possible infringement by a Third Party, or within three (3) months following receipt of a notice of any declaratory judgment action relating to any patent filed by Trimeris pursuant to Section 9.4.1(a), Trimeris fails to take such action to halt a commercially significant infringement or defend any declaratory judgment action related to any patent filed pursuant to Section 9.4.1(a) within a timeframe so as not to jeopardize the following right of CRL, CRL shall, in its sole discretion, have the right, at its sole expense, to take such action.

9.6.3 CRL. CRL shall have the initial right, but not the obligation, to take reasonable legal action to enforce against infringements by Third Parties of CRL Technology licensed to Trimeris according to Section 4.1 and Section 4.2, or defend any declaratory judgment action relating to any patent filed by CRL pursuant to Section 9.4.1(b), using counsel if its choice. If, within six (6) months following receipt of information pertaining to a possible infringement by a

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Third Party, or within three (3) months following receipt of a notice of any declaratory judgment action relating to any patent filed by CRL pursuant to Section 9.4.1(b), CRL fails to take such action to halt a commercially significant infringement or defend any declaratory judgment action related to any patent filed pursuant to Section 9.4.1(b) within a timeframe so as not to jeopardize the following right of Trimeris, Trimeris shall, in its sole discretion, have the right, at its sole expense, to take such action.

9.6.4 Cooperation; Costs and Recoveries. Each Party agrees to render such reasonable assistance as the enforcing Party may request, at the enforcing Party’s expense. Unless as otherwise provided for in this Agreement, amounts recovered from enforcing a patent filed pursuant to Section 9.4.1 and Section 9.6.2, whether as payment in settlement or otherwise, shall first be applied to expenses of such litigation, including reasonable attorneys’ fees, incurred by the Parties, with any remaining amounts recovered belonging to the Party bringing the action, except that any recovery realized by a Party as a result of such litigation, after reimbursement of the Parties’ litigation expenses, shall, only to the extent directly attributable to lost sales or lost profits with respect to Products, be treated as Net Sales of the applicable Product for purposes of this Agreement. The costs in bringing any action to enforce a patent filed pursuant to Section 9.4.2, 9.6.2 or 9.6.3 relating to CRL Technology or Collaboration Technology shall be paid by, and all recoveries therefrom belong to the Party bring the action.

9.7 Infringement Claims. If the manufacture, sale or use of any Product pursuant to this Agreement because of the practice of the Collaboration Technology results in any claim, suit or proceeding alleging patent infringement against CRL or Trimeris (or either’s Affiliates or Sublicensees), such Party shall promptly notify the other Party hereto in writing setting forth the facts of such claim in reasonable detail. The defendant shall have the exclusive right and obligation to defend and control the defense of any such claim, suit or proceeding, at its own expense, using counsel of its own choice; provided, however, it shall not enter into any settlement which admits or concedes that any aspect of the Collaboration Technology is invalid or unenforceable, without the prior written consent of such other Party, such consent not to be unreasonably withheld. The defendant shall keep the other Party hereto reasonably informed of all material developments in connection with any such claim, suit or proceeding.

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ARTICLE 10

CONFIDENTIALITY

10.1 Confidential Information. Except as otherwise expressly provided herein, the Parties agree that, for the term of this Agreement and for ten (10) years thereafter, the receiving Party shall not, except as expressly provided in this ARTICLE 10, disclose to any Third Party or use for any purpose any Confidential Information furnished to it by the disclosing Party hereto pursuant to this Agreement, or any results of the Research Collaboration (“Results”). For purposes of this ARTICLE 10, “Confidential Information” shall mean any information, which if disclosed in tangible form is marked “Confidential” or with other similar designation to indicate its confidential or proprietary nature, or, if disclosed orally, is indicated orally to be confidential or proprietary at the time of such disclosure and is confirmed in writing as Confidential Information within forty-five (45) days after such disclosure. Notwithstanding the foregoing, Confidential Information shall not include any information that can be established by the receiving Party by competent proof that such information:

10.1.1 was already known to the receiving Party, other than under an obligation of confidentiality, at the time of disclosure;

10.1.2 was generally available to the public or otherwise part of the public domain at the time of its disclosure to the receiving Party;

10.1.3 became generally available to the public or otherwise part of the public domain after its disclosure and other than through any act or omission of the receiving Party in breach of this Agreement;

10.1.4 was independently developed by the receiving Party as demonstrated by documented evidence prepared contemporaneously with such independent development; or

10.1.5 was disclosed to the receiving Party, other than under an obligation of confidentiality, by a Third Party who had no obligation to the disclosing Party not to disclose such information to others.

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10.1.6 Notwithstanding anything to the contrary in this Agreement, the chemical structures of, Compounds, and synthetic methods specific to Compounds, shall be deemed Confidential Information of Trimeris, whether or not so marked. The chemical structures of Library Compounds and synthetic methods specific to Library Compounds shall be deemed Confidential Information of CRL, whether or not so marked.

10.2 Permitted Use and Disclosures. Each Party hereto may use or disclose Confidential Information disclosed to it by the other Party or Results only to the extent such use or disclosure is reasonably necessary and permitted in the exercise of the rights granted hereunder to the Party seeking to use or disclose Confidential Information, including: in filing or prosecuting patent applications; prosecuting or defending litigation; complying with applicable governmental laws, regulations or court order or otherwise submitting information to tax or other governmental authorities; optimizing a Product; conducting clinical trials; or making a permitted sublicense, or otherwise exercising license rights expressly granted by the other Party to it pursuant to the terms of this Agreement; provided that if a Party is required to make any such disclosure, other than pursuant to a confidentiality agreement, it will give reasonable advance notice to the other Party of such disclosure and, save to the extent inappropriate in the case of patent applications, will use its commercially reasonable efforts to secure confidential treatment of such information in consultation with the other Party prior to its disclosure (whether through protective orders or otherwise). Notwithstanding anything contrary in this Agreement, without advance notice to the other Party, either Party may make reports to or filings with the Securities and Exchange Commission as it determines, based on advice of counsel, are reasonably necessary to comply with applicable laws and regulations, while limiting disclosure of Confidential Information to that which the Party reasonably believes is required to be disclosed by such applicable laws and regulations.

10.3 Termination of Prior Agreement. Notwithstanding anything contrary in this Agreement, all information exchanged between the Parties under the Mutual Nondisclosure Agreement dated 08 July 2004 between the Parties shall be deemed Confidential Information and shall be subject to the terms of this ARTICLE 10.

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10.4 Nondisclosure of Terms. Each of the Parties hereto agrees not to disclose the terms of this Agreement to any Third Party without the prior written consent of the other Party hereto, which consent shall not be unreasonably withheld, except to such Party’s attorneys, advisors, investors and others on a need to know basis under circumstances that reasonably ensure the confidentiality thereof, or to the extent required by law or applicable governmental regulation. Notwithstanding the foregoing, the Parties agree upon a joint press release as expressly provided in APPENDIX B of this Agreement and shall announce the execution of this Agreement after the Effective Date. Thereafter, CRL and Trimeris may each disclose to Third Parties the information contained in such press release without the need for further approval by the other. However, Trimeris and CRL shall not make public statements regarding the receipt by CRL of milestone and royalty payments made by Trimeris as specified in ARTICLE 6, unless such Party believes that such disclosure is required by applicable law. Notwithstanding the foregoing, CRL may not make public statements about Compounds delivered to Trimeris under the Research Collaboration without the expressed written consent of Trimeris. Trimeris may, in its sole discretion, make public statements about progress of the Research Collaboration and may communicate information regarding the status of a Compound or Product.

10.5 Publication. Notwithstanding any term in this Agreement that may state or imply to the contrary, but subject to Section 10.1 hereof, results and data generated by the Parties in performing the Research Collaboration may be submitted for publication through Trimeris in accordance with Trimeris’ customary practices regarding public dissemination of such information. Except as otherwise specifically provided for herein, Trimeris has the sole right to determine when and if to publicly disclose any non-public information regarding (a) the status of the Research Collaboration or the Agreement, (b) the status or research data obtained on Compounds, (c) the data from preclinical evaluation of Compounds, (d) the status of any clinical trial utilizing Compounds (including all data from such trials), (e) progress in development of the Compounds, or (f) any other business and technical information directly relating to the Agreement or to Compounds. CRL shall not make any public statements or make any other disclosures in writing regarding any aspect of the Agreement or any business or technical information directly relating to the Compounds or studies using such Compounds without the express written consent of Trimeris. Any scientific publication

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by either Party, which is first approved pursuant to this Section 10.5 for publication, shall acknowledge the other Party’s contribution to the extent consistent with standard practice for scientific publications.

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

11.1 Trimeris. Trimeris represents and warrants on its own behalf and on behalf of its Affiliates that: (i) it has the legal power, authority and right to enter into this Agreement and to perform all of its obligations hereunder; (ii) this Agreement is a legal and valid obligation binding upon it and enforceable in accordance with its terms; (iii) it has the full right to enter into this Agreement, and to fully perform its obligations hereunder; (iv) it has not previously granted, and during the term of this Agreement will not knowingly make any commitment or grant any rights which are in conflict in any material way with the rights and licenses granted herein; and (v) to the best of its knowledge as of the Effective Date, there are no existing or threatened actions, suits or claims pending against it that would materially impair the Trimeris Technology.

11.2 CRL. CRL represents and warrants on its own behalf and on behalf of its Affiliates that: (i) it has the legal power, authority and right to enter into this Agreement and to perform all of its obligations hereunder; (ii) this Agreement is a legal and valid obligation binding upon it and enforceable in accordance with its terms; (iii) it has the full right to enter into this Agreement, and to fully perform its obligations hereunder; (iv) it has not previously granted, and during the term of this Agreement will not knowingly make any commitment or grant any rights which are in conflict in any material way with the rights and licenses granted herein; and (v) to the best of its knowledge as of the Effective Date, there are no existing or threatened actions, suits or claims pending against it that would materially impair the CRL Technology.

11.3 Disclaimer. Trimeris and CRL specifically disclaim any guarantee that the Research Collaboration will be successful, in whole or in part. The failure of Trimeris to successfully develop Actives, Focused Library Compounds, Lead Compounds, Development Compounds, or Products will not constitute a breach of any representation or warranty or other obligation under this

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Agreement. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, CRL AND TRIMERIS MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE COLLABORATION TECHNOLOGY, TRIMERIS TECHNOLOGY, LIBRARY COMPOUNDS, FOCUSED LIBRARY COMPOUNDS, ACTIVES, LEAD COMPOUNDS, DEVELOPMENT COMPOUNDS, INFORMATION DISCLOSED HEREUNDER OR PRODUCTS INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF ANY COLLABORATION TECHNOLOGY, PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

11.4 Limitation of Liability. EXCEPT FOR PAYMENTS UNDER ARTICLE 6 AND LIABILITY FOR BREACH OF ANY OF ARTICLES 9 AND 10, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE GRANTED HEREUNDER; provided, however, that this Section 11.4 shall not be construed to limit either party’s indemnification obligations under Article 12.

ARTICLE 12

INDEMNIFICATION

12.1 Trimeris. Trimeris agrees to indemnify, defend and hold CRL and its Affiliates and their respective directors, officers, employees, agents and their respective successors, heirs and assigns (the “CRL Indemnitees”) harmless from and against any losses, costs, claims, damages, liabilities or expense (including reasonable attorneys’ and professional fees and other expenses of litigation) (collectively, “Liabilities”) arising, directly or indirectly out of or in connection with Third Party claims, suits, actions, demands or judgments, relating to (i) any Products developed, manufactured, used, sold or otherwise distributed by or on behalf of Trimeris, its Affiliates or Sublicensees or other designees (including, without limitation, product liability and patent

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infringement claims), (ii) the performance of the Research Collaboration by Trimeris, (iii) with respect to Trimeris’ activities to commercialize a Product, the use of the Targets which are involved in the conduct of the Research Collaboration, and the making or use of modulators of such Targets, and (iv) any breach by Trimeris of the covenants, representations and warranties made in this Agreement; except, in each case, to the extent such Liabilities result from the gross negligence or intentional misconduct of CRL.

12.2 CRL. CRL agrees to indemnify, defend and hold Trimeris and its Affiliates and their respective directors, officers, employees, agents and their respective successors, heirs and assigns (the “Trimeris Indemnitees”) harmless from and against any losses, costs, claims, damages, liabilities or expense (including reasonable attorneys’ and professional fees and other expenses of litigation) (collectively, “Liabilities”) arising, directly or indirectly out of or in connection with Third Party claims, suits, actions, demands or judgments, relating to (i) the performance of the Research Collaboration by CRL, and (ii) any breach by CRL of its covenants, representations and warranties made in this Agreement; except, in each case, to the extent such Liabilities result from the gross negligence or intentional misconduct of Trimeris.

12.3 Indemnification Procedure. A Party that intends to claim indemnification (the “Indemnitee”) under this ARTICLE 12 shall promptly notify the other Party (the “Indemnitor”) in writing of any claim, complaint, suit, proceeding or cause of action with respect to which the Indemnitee intends to claim such indemnification (for purposes of this Section 12.3, each a “Claim”), and the Indemnitor shall have sole control of the defense and/or settlement thereof; provided that the Indemnitee shall have the right to participate, at its own expense, with counsel of its own choosing in the defense and/or settlement of such Claim. The indemnification obligations of the Parties under this ARTICLE 12 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any such Claim, if prejudicial to its ability to defend such action, shall relieve such Indemnitor of any liability to the Indemnitee under this ARTICLE 12, but the omission so to deliver written notice to the Indemnitor shall not relieve the Indemnitor of any liability to any Indemnitee otherwise than under this ARTICLE 12. The Indemnitee under this

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ARTICLE 12, and its employees, at the Indemnitor’s request and expense, shall provide full information and reasonable assistance to Indemnitor and its legal representatives with respect to such Claims covered by this indemnification. It is understood that only Trimeris may claim indemnity under this ARTICLE 12 (on its own behalf or on behalf of a Trimeris Indemnitee), and other Trimeris Indemnitees may not directly claim indemnity hereunder. Likewise, it is understood that only CRL may claim indemnity under this ARTICLE 12 (on its own behalf or on behalf of a CRL Indemnitee), and other CRL Indemnitees may not directly claim indemnity hereunder.

ARTICLE 13

TERM AND TERMINATION

13.1 Term. Unless terminated earlier as provided in this ARTICLE 13, the term of this Agreement shall commence on the Effective Date, and shall continue in full force and effect on a country-by-country and Product-by-Product basis until Trimeris and its Sublicensees have no remaining payment obligations in a country as described in ARTICLE 6.

13.2 Termination for Breach. Either Party to this Agreement may terminate the Research Collaboration and this Agreement in the event the other Party hereto shall have materially breached or defaulted in the performance of any of its material obligations hereunder, and such default shall have continued for sixty (60) days after written notice thereof was provided to the breaching Party by the non-breaching Party. Any termination shall become effective at the end of such sixty (60) day period unless: (a) the breaching Party (or any other Party on its behalf) has cured any such breach or default prior to the expiration of the sixty (60) day period; or (b) the Party alleged to be in breach disputes in good faith such termination pursuant to ARTICLE 14, or such other dispute resolution as the Parties may agree, whereupon such right to terminate shall be tolled for so long as such dispute resolution procedures are being pursued by such Party in good faith and if it is finally and conclusively determined pursuant to such procedures that such Party is in breach, then such Party shall have the right to cure within a sixty (60) day period following such determination.

13.3 Termination for Insolvency. If voluntary or involuntary proceedings by or against a Party are instituted in bankruptcy under any insolvency law, or a receiver or custodian is appointed

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for such Party, or proceedings are instituted by or against such Party for corporate reorganization, dissolution, liquidation or winding-up of such Party, which proceedings, if involuntary, shall not have been dismissed within sixty (60) days after the date of filing, or if such Party makes an assignment for the benefit of creditors, or substantially all of the assets of such Party are seized or attached and not released within sixty (60) days thereafter, the other Party may immediately terminate the Research Collaboration and/or this Agreement, effective upon notice of such termination.

13.4 Permissive Termination

13.4.1 Termination of the Research Collaboration by Trimeris.

(a) At six (6) months from the Effective Date, Trimeris shall have the right, in its sole discretion and option, to terminate this Agreement and/or the Research Collaboration, by giving CRL thirty days written notice. Termination shall become effective as of the end of the thirty (30) day notification period.

(b) At any time after six (6) months from the Effective Date, Trimeris shall have the right, in its sole discretion and option, to terminate this Agreement and/or the Research Collaboration, by giving CRL sixty (60) days written notice. Termination shall become effective as of the end of the sixty (60) day notification period.

13.4.2 Termination of The Research Collaboration on a Target by Trimeris. Pursuant to Section 2.7.2(b), at any time during the term of the Research Collaboration, Trimeris may elect to discontinue its research and/or development activities with respect to a particular Target, and may elect to proceed with Research Collaboration activities with respect to the remaining Target. Trimeris shall have the right to discontinue any of its research, development and/or commercialization of either Target without prejudice to: (a) Trimeris’ rights under the Research Collaboration to develop and commercialize a remaining Target; and (b) Trimeris’ rights under the Research Collaboration to develop and commercialize a Product according to the terms of this Agreement.

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13.4.3 Termination of Development and/or Commercialization of a Product by Trimeris for Safety Reasons. If Trimeris determines, in good faith, that it is not feasible for Trimeris or its sublicensess to pursue the research and/or development of a Compound or a Development Compound, or the launch or sale of a Product due to safety concerns, including due to adverse events of such Product (or a Development Compound being advanced towards a Product) or due to other health and safety concerns, then Trimeris shall promptly notify CRL in writing of its determination, and of its decision to terminate its obligations with respect to pursuing the research, development, launch or sale such Product or such Development Compound. Termination of a Development Compound or Product by Trimeris pursuant to this Section 13.4.3 shall not be considered a breach of Trimeris’ Commercially reasonable efforts under Section 8.1.

13.4.4 Termination of the Research Collaboration by CRL. At any time after two (2) years from the Effective Date, CRL may terminate the Research Collaboration, for any reason or no reason, upon ninety (90) days’ written notice to Trimeris. In the event of termination by CRL of the Research Collaboration pursuant to this Section 13.4.4:

(a) after such termination, CRL shall have no further obligation to perform Research Plan activities and Trimeris shall have no further obligation to provide FTE funding, research payments, or costs to CRL under Section 2.8; and upon termination, CRL shall cease all Research Plan activities;

(b) all licenses granted by Trimeris to CRL hereunder shall terminate and revert to Trimeris;

(c) Section 5.1.2 shall terminate and be of no further force or effect;

(d) except as set forth above in this Section 13.4.4, this Agreement shall otherwise remain in full force and effect in accordance with its terms (including, without limitation, the licenses granted to Trimeris under Article 4 and the provisions of Article 6); provided, however, that if CRL terminates the Research Collaboration prior to designation of the first Development Compound, then Trimeris shall not be obligated to pay milestones or royalties to CRL under Article 6 with respect to any Focused Library Compound, Lead Compound or Compound that Trimeris subsequently designates as a Development Compound or otherwise clinically develops or commercializes as Product.

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13.5 Effect of Breach or Termination.

13.5.1 Accrued Rights and Obligations. Termination of this Agreement for any reason shall not release either Party hereto from any liability which, at the time of such termination, has already accrued to the other Party or which is attributable to a period prior to such termination, nor preclude either Party from pursuing any rights and remedies it may have hereunder or at law or in equity with respect to any breach of this Agreement.

13.5.2 Return of Materials. Upon any termination of this Agreement, Trimeris and CRL shall promptly return to the other Party all Confidential Information (including, without limitation, all Know-How) received from the other Party and to which the Party does not retain rights hereunder, except one copy of which may be retained for archival purposes only.

13.5.3 Licenses & Grants.

(a) Research Licenses.

(1) The Research Licenses granted to each of Trimeris and CRL under Section 4.1 shall terminate in the event of any termination of the Agreement by either Party pursuant to Section 13.2, or upon expiration of this Agreement.

(2) The Research License granted to CRL under Section 4.1 shall terminate in the event of any termination of the Agreement by Trimeris pursuant to Sections 2.13.4, or 13.4.1.

(3) In the event of termination of this Agreement by Trimeris pursuant to Sections 2.13.4, 13.2 or 13.3, any Research Use License granted to Trimeris under Section 2.4.4(c) shall survive.

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(b) Commercial Licenses.

(1) In the event of any termination of this Agreement by Trimeris pursuant to Sections 2.13.4, 13.3 (to the extent allowed by law), or 13.4, the Licenses and Grants granted to Trimeris pursuant to Section 4.2 and 4.3 shall remain in effect; and, if following such termination Trimeris continues to develop Compounds and/or sell Products, any milestone or royalty payments that would have become due and payable to CRL according to ARTICLE 6 but for such termination by Trimeris, shall continued to be paid by Trimeris pursuant to, and for only for the duration as specified in, ARTICLE 6.

(2) In the event that Trimeris terminates this Agreement pursuant to Section 13.2, the Licenses and Grants granted to Trimeris pursuant to Sections 4.2 and 4.3 shall remain in effect; and, if following such termination Trimeris continues to develop Compounds and/or sell Products, any milestone or royalty payments that would have become due and payable to CRL according to ARTICLE 6 but for such termination by Trimeris, shall be escrowed by Trimeris (“Escrowed Amounts”) using an escrow agent (“Escrow Agent”) of Trimeris’ choice, such Escrow Agent being suitably qualified to perform such duties as are customary for such matters, until final resolution by an arbitrator pursuant to ARTICLE 14 related to such breach, and the arbitrator’s determination of the release and proper distribution of the Escrowed Amounts.

13.5.4 Exclusivity of Compounds

(a) In the event of any termination of this Agreement and/or of the Research Collaboration pursuant to Sections 2.13.4, 13.2 or 13.3 (the latter with respect to applicable law) by Trimeris, or pursuant to Section 13.4.4 by CRL, Trimeris shall have the right in and to, and for the use of, any and all Compounds described in Sections 1.7, 1.11, 1.14, 1.15, 1.24, and 1.32, and associated regulatory filings and marketing rights. CRL or its Affiliates or its Sublicensees shall not develop, sell, or otherwise transfer any or all of such Compounds, or information about such compounds (including, but not limited to, Compound structure, methods of synthesis, physical characteristics, formulations, etc.) for any use without the prior written consent of Trimeris; nor shall CRL provide any or all of such Compounds to a Third Party as part of the CRL Library, without the prior written consent of Trimeris.

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(b) In the event of any termination of this Agreement by CRL pursuant to Sections 13.2 or 13.3 (the latter with respect to the extent allowed by law), the exclusivity provision pursuant to Section 2.11.1 shall expire.

13.5.5 Survival Sections. Sections 4.3.2, 9.2.1(a), 9.2.2, 9.4, 13.5 and ARTICLES 1, 10, 12, 14 and 15 of this Agreement shall survive the expiration or termination of this Agreement for any reason.

ARTICLE 14

DISPUTE RESOLUTION

14.1 Initiation of Arbitration. Unless otherwise explicitly set forth in this Agreement, in the event that the Parties are unable to resolve any dispute, controversy or claim arising out of, or in relation to this Agreement, or the breach, termination or invalidity thereof (collectively “Issue”), the Parties shall attempt in good faith to resolve such Issue by referring such Issue to the Consultation process pursuant to Section 15.13 herein. In the event that the Issue remains unresolved following such Consultation process, either Party may initiate arbitration in accordance with this subsection under the guidelines of the American Arbitration Association (“AAA”) in Wilmington, Delaware , under the commercial rules then in effect for AAA, except as provided herein.

14.1.1 A Party shall notify the other Party in writing should it intend to initiate arbitration. The Parties shall select, by mutual agreement, one arbitrator within a time period of thirty (30) days after receipt of such notice. Should no arbitrator be chosen within the thirty (30) days period, the AAA shall appoint the arbitrator within thirty (30) days after the end of such period. The arbitrator shall be a lawyer knowledgeable and experienced in the law concerning the subject matter of the dispute, and shall not be an Affiliate, employee, consultant, officer, director or stockholder of any Party.

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14.1.2 Within thirty (30) days after selection of such arbitrator, each Party shall Parties shall be required to set forth in writing all disputed Issues and a proposed resolution on the merits of each such Issue, and the reasons for proposing and supporting the resolution.

14.1.3 Should either Party desire a joint meeting before the arbitrator, then such meeting shall be held within forty five (45) days after the end of the above resolution submission period. The arbitrator shall set a date for a hearing within the forty five (45) day period to discuss each of the issues identified by the Parties. The Parties shall have the right to be represented by counsel. Except as provided herein, the arbitration shall be governed by the Commercial Arbitration Rules of the AAA; provided, however, that the Federal Rules of Evidence shall apply with regard to the admissibility of evidence and the arbitration shall be conducted by a single arbitrator.

(a) Within thirty (30) days after the later of (i) the end of the resolution submission period, or (ii) holding of the joint meeting with the arbitrator, the arbitrator shall decide the matter by selecting either (a) one of such resolutions submitted by either Party, or (b) creating a compromise solution incorporating elements of both Parties submitted resolutions. The arbitrator shall have sole discretion as to how best to resolve the Issue using his best reasonable judgment and capacity. All rulings of the arbitrator shall be in writing and shall be delivered to the Parties

(b) Unless otherwise agreed by the Parties, the arbitrator shall make such decision based on the following factors in descending order of importance: (i) consistency with the provisions of this Agreement; (ii) consistency with the intent of the Parties as reflected in this Agreement; and (iii) customary and reasonable provisions included in agreements of comparable subject matter. The decision of the arbitrator will be binding upon the Parties without the right of appeal, and judgment upon the decision rendered by the arbitrator may be entered in any court(s) having jurisdiction thereof.

(c) The Parties shall share equally the reasonable documented cost of such arbitration proceeding, but not the individual cost of the Parties in participating in such proceeding.

Page 61

ARTICLE 15

MISCELLANEOUS

15.1 Governing Laws. This Agreement and any dispute arising from the construction, performance or breach hereof shall be governed by and construed, and enforced in accordance with, the laws of the State of Delaware, without reference to conflicts of laws principles, and the Parties agree and accept to be subject to the jurisdiction of the State of Delaware.

15.2 Waiver. It is agreed that no waiver by either Party hereto of any breach or default of any of the covenants or agreements herein set forth shall be deemed a waiver as to any subsequent and/or similar breach or default.

15.3 Assignment. Unless otherwise expressly permitted hereunder, neither Party may assign any of its rights or delegate any of its duties under this Agreement without the prior written consent of the other Party, except that either Party may assign its rights and responsibilities hereunder without the other Party’s consent as part of either: (i) the sale of all or substantially all of the assets or the entire business to which this Agreement relates, or a merger, consolidation, reorganization or other combination with or into another person or entity; or (ii) the transfer or assignment to an Affiliate, in each case, pursuant to which the surviving entity or assignee assumes the assigning or merging Party’s obligations hereunder. Any assignment made in violation of this Section 15.3 shall be null and void.

15.4 Independent Contractors. The relationship of the Parties hereto is that of independent contractors. The Parties hereto are not deemed to be agents, partners or joint venturers of the others for any purpose as a result of this Agreement or the transactions contemplated thereby.

15.5 Compliance with Laws. In exercising their rights under this license, the Parties shall fully comply in all material respects with the requirements of any and all applicable laws, regulations, rules and orders of any governmental body having jurisdiction over the exercise of rights under this license including, without limitation, those applicable to the discovery, development, manufacture, distribution, import and export and sale of Products pursuant to this Agreement.

Page 62

15.6 Patent Marking. Trimeris agrees to mark and have its Affiliates and Sublicensees mark all Products sold by Trimeris and its Affiliates and Sublicensees pursuant to this Agreement in accordance with the applicable statute or regulations relating to patent marking in the country or countries of manufacture and sale thereof.

15.7 Notices. All notices, requests and other communications hereunder shall be in writing and shall be personally delivered or by registered or certified mail, return receipt requested, postage prepaid, in each case to the respective address specified below, or such other address as may be specified in writing to the other Parties hereto and shall be deemed to have been given upon receipt:

If to Trimeris:	Trimeris, Inc.
	3500 Paramount Parkway
	Morrisville, NC 27560
	Attention: Vice President, Corporate Development
	Facsimile: (919) 419-1816
	with copy to: Legal Counsel
If to CRL:	ChemBridge Research Laboratories, LLC
	16981 Via Tazon, Suite K
	San Diego, CA 92127
	U.S.A.
	Attention: Chief Executive Officer
	Facsimile: (858) 451-7402
	with copy to: Legal Counsel

Page 63

15.8 Severability. Each Party hereby agrees that it does not intend to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries. Should one or more provisions of this Agreement be or become invalid, the Parties hereto shall substitute, by mutual consent, valid provisions for such invalid provisions which valid provisions in their economic effect are sufficiently similar to the invalid provisions that it can be reasonably assumed that the Parties would have entered into this Agreement with such valid provisions. In case such valid provisions cannot be agreed upon, the invalidity of one or several provisions of this Agreement shall not affect the validity of this Agreement as a whole, unless the invalid provisions are of such essential importance to this Agreement that it is to be reasonably assumed that the Parties would not have entered into this Agreement without the invalid provisions. In the event a Party seeks to avoid a material provision of this Agreement upon an assertion that such provision is invalid, illegal or otherwise unenforceable, the other Party shall have the right to terminate this Agreement upon sixty (60) days prior written notice to the asserting Party, unless such assertion is eliminated and cured within such sixty (60) day period. Such a termination shall be deemed a termination by such Party for breach pursuant to Section 13.2.

15.9 Advice of Counsel. CRL and Trimeris have each consulted counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one Party or another and will be construed accordingly.

15.10 Performance Warranty. Each Party hereby warrants and guarantees the performance of any and all rights and obligations of this Agreement by its Affiliates and Sublicensees and permitted Third Party subcontractors.

15.11 Force Majeure. Neither Party shall lose any rights hereunder or be liable to the other Party for damages or losses (except for payment obligations) on account of failure of performance by the defaulting Party if the failure is occasioned by war, strike, fire, Act of God, earthquake, flood, lockout, embargo, governmental acts or orders or restrictions, failure of suppliers, or any other

Page 64

reason where failure to perform is beyond the reasonable control and not caused by the negligence, intentional conduct or misconduct of the non-performing Party and such Party has exerted all reasonable efforts to avoid or remedy such force majeure; provided, however, that in no event shall a Party be required to settle any labor dispute or disturbance.

15.12 Complete Agreement. This Agreement with its Exhibits, constitutes the entire agreement, both written and oral, between the Parties with respect to the subject matter hereof, and all prior agreements respecting the subject matter hereof, either written or oral, express or implied, shall be abrogated, canceled, and are null and void and of no effect. No amendment or change hereof or addition hereto shall be effective or binding on either of the Parties hereto unless reduced to writing and executed by the respective duly authorized representatives of CRL and Trimeris.

15.13 Consultation. Except as otherwise provided in this Agreement, if an unresolved dispute arises out of or relates to this Agreement, or the breach thereof, either Party may refer such dispute to the Chief Executive Officer of Trimeris and the Chief Executive Officer of CRL, who shall meet in person or by telephone within forty-five (45) days after such referral to attempt in good faith to resolve such dispute.

15.14 Headings. The captions to the several Sections hereof are not a part of this Agreement, but are included merely for convenience of reference and shall not affect its meaning or interpretation.

15.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement.

REST OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE TO FOLLOW

Page 65

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed by their authorized representatives and delivered in duplicate originals as of the Effective Date.

TRIMERIS, INC.		CHEMBRIDGE RESEARCH LABORATORIES, INC.
By:	/s/ Steven D. Skolsky	By:	/s/ Eugene Vaisberg
Name: Steven D. Skolsky		Name: Eugene Vaisberg
Title: CEO		Title: CEO

Page 66

APPENDIX A

INITIAL RESEARCH PLAN

1. gp120 TARGET

The objective of the Stage I Research for the gp120 Target is to identify potent and selective inhibitors of HIV fusion/entry as Lead Compounds.

[**]

Page 67

APPENDIX B

PRESS RELEASE

(To be attached)

Page 68

EX-10.33

Exhibit 10.33

TRIMERIS, INC. EMPLOYEE 401(K) PLAN

Amendment 2006-1 Dated December      , 2006

Trimeris, Inc. Employee 401(k) Plan

¨ (3)     As a discretionary nonelective contribution.

¨ (4)     To reduce nonelective contributions.

x (b) Nonelective contribution forfeitures. To the extent attributable to Employer nonelective contributions: (Choose one of (1) through (4))

x (1)     As a discretionary nonelective contribution.

¨ (2)     To reduce nonelective contributions.

¨ (3)     As a discretionary matching contribution.

¨ (4)     To reduce matching contributions.

¨ (c) Reduce administrative expenses. First to reduce the Plan’s ordinary and necessary administrative expenses for the Plan Year and then allocate any remaining forfeitures in the manner described in Sections 3.05(a) or (b) as applicable.

Timing of forfeiture allocation. The Plan Administrator will allocate forfeitures under Section 3.05 in the Plan Year: (Choose one of(d) or (e))

x (d)     In which the forfeiture occurs.

¨ (e)     Immediately following the Plan Year in which the forfeiture occurs.

18. ALLOCATION CONDITIONS (3.06).

Allocation conditions. The Plan does not apply any allocation conditions to deferral contributions, 401(k) safe harbor contributions (under Section 3.01(d)) or to Davis-Bacon contributions (except as the Davis-Bacon contract provides). To receive an allocation of matching contributions, nonelective contributions, qualified nonelective contributions or Participant forfeitures, a Participant must satisfy the following allocation condition(s): (Choose one or more of (a) through (i) as applicable)

¨ (a) Hours of Service condition. The Participant must complete at least the specified number of Hours of Service (not exceeding 1,000) during the Plan Year:             .

x (b) Employment condition. The Participant must be employed by the Employer on the last day of the Plan Year (designate time period).

¨ (c) No allocation conditions.

¨ (d) Elapsed Time Method. The Participant must complete at least the specified number (not exceeding 182) of consecutive calendar days of employment with the Employer during the Plan Year:             .

¨ (e) Termination of Service/501 Hours of Service coverage rule. The Participant either must be employed by the Employer on the last day of the Plan Year or must complete at least 501 Hours of Service during the Plan Year. If the Plan uses the Elapsed Time Method of crediting Service, the Participant must complete at least 91 consecutive calendar days of employment with the Employer during the Plan Year.

¨ (f) Special allocation conditions for matching contributions. The Participant must complete at least              Hours of Service during the                      (designate time period) for the matching contributions made for that time period.

¨ (g) Death, Disability or Normal Retirement Age. Any condition specified in Section 3.06                      applies if the Participant incurs a Separation from Service during the Plan Year on account of:                      (e.g., death, Disability or Normal Retirement Age).

¨ (h) Suspension of allocation conditions for coverage. The suspension of allocation conditions of Plan Section 3.06(E) applies to the Plan.

x (i) Limited allocation conditions. The Plan does not impose an allocation condition for the following types of contributions: 2006 matching contributions for all Participants laid off in connection with the Employer’s December 2006 reduction in force. [Note: Any election to limit the Plan’s allocation conditions to certain contributions must be the same for all Participants, be definitely determinable and not discriminate in favor of Highly Compensated Employees.]

10

Trimeris, Inc. Employee 401(k) Plan

Execution Page

The Trustee (and Custodian, if applicable), by executing this Adoption Agreement, accepts its position and agrees to all of the obligations, responsibilities and duties imposed upon the Trustee (or Custodian) under the Prototype Plan and Trust. The Employer hereby agrees to the provisions of this Plan and Trust, and in witness of its agreement, the Employer by its duly authorized officers, has executed this Adoption Agreement, and the Trustee (and Custodian, if applicable) has signified its acceptance, on: December 3, 2006.

Name of Employer: Trimeris, Inc.
Employer’s EIN: 56-1808663
Signed:	/s/ Dani Bolognesi
	Dani Bolognesi / CEO & CSO
	[Name/Title]
Name(s) of Trustee:
	Prudential Trust Company
Trust EIN (Optional):
	n/a
Signed:
	[Name/Title]
Signed:
	[Name/Title]
Signed:
	[Name/Title]
Signed:
	[Name/Title]
Signed:
	[Name/Title]
Name of Custodian (Optional):
	n/a
Signed:
	[Name/Title]

31. Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA reporting purposes (Form 5500 Series) is: 001.

Use of Adoption Agreement. Failure to complete properly the elections in this Adoption Agreement may result in disqualification of the Employer’s Plan. The Employer only may use this Adoption Agreement in conjunction with the basic plan document referenced by its document number on Adoption Agreement page one.

Execution for Page Substitution Amendment Only. If this paragraph is completed, this Execution Page documents an amendment to Adoption Agreement Section(s) 18i effective December 1, 2006, by substitute Adoption Agreement page number(s) 10.

Prototype Plan Sponsor. The Prototype Plan Sponsor identified on the first page of the basic plan document will notify all adopting employers of any amendment of this Prototype Plan or of any abandonment or discontinuance by the Prototype Plan Sponsor of its maintenance of this Prototype Plan. For inquiries regarding the adoption of the Prototype Plan, the Prototype Plan

17

Trimeris, Inc. Employee 401(k) Plan

Sponsor’s intended meaning of any Plan provisions or the effect of the opinion letter issued to the Prototype Plan Sponsor, please contact the Prototype Plan Sponsor at the following address and telephone number: P.O. Box 10096, Raleigh NC 27605, 919.783.6400.

Reliance on Sponsor Opinion Letter. The Prototype Plan Sponsor has obtained from the IRS an opinion letter specifying the form of this Adoption Agreement and the basic plan document satisfy, as of the date of the opinion letter, Code §401. An adopting Employer may rely on the Prototype Sponsor’s IRS opinion letter only to the extent provided in Announcement 2001-77, 2001-30 I.R.B. The Employer may not rely on the opinion letter in certain other circumstances or with respect to certain qualification requirements, which are specified in the opinion letter and in Announcement 2001-77. In order to have reliance in such circumstances or with respect to such qualification requirements, the Employer must apply for a determination letter to Employee Plans Determinations of the Internal Revenue Service.

18

EX-10.37

Exhibit 10.37

[LETTERHEAD OF ROCHE PHARMACEUTICALS]

Dr. Dani Bolognesi

Trimeris, Inc.

3500 Paramount Parkway

Morrisville, NC 27560

U.S.A.

Basel, 13 March 2007

Re: Roche/Trimeris Research Agreement dated January 1, 2000 (as amended)

Dear Dani:

Roche elects to Opt Out pursuant to Article 5 of the Third Amendment to the Research Agreement and Accord. Accordingly, the rights and obligations set forth in Article 5(a) through (e) are activated. In addition, Trimeris will have the right to develop and commercialize TRI-1144 as it chooses. Trimeris will pay to Roche a royalty of one percent (1%) of Net Sales of all products containing TRI-1144 in every country in which Trimeris owns an unexpired patent that claims the making, using, selling, offering for sale, or importing of TRI-1144, up to an aggregated total on royalties set at twenty-four million dollars (US$24,000,000).

Pursuant to Paragraph 5 of the Third Amendment to the Research Agreement and Accord, Roche retains its right to develop up to five (5) Penzberg peptides subject to Trimeris’ right to co-develop any such peptide accepted by Roche into development before December 31, 2008.

Roche and Trimeris will share all costs associated with the TRI-1144 joint research program for 2007, through the date of execution of this letter.

This letter is being provided in duplicate originals. If Trimeris agrees with the above paragraph, please sign and return one original.

Best regards,

/s/ William M. Burns

William M. Burns

Agreed and Accepted:

Trimeris, Inc.

/s/ Dani P. Bolognesi

Dani P. Bolognesi, Ph.D., Chief Executive Officer

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Trimeris, Inc.:

We consent to the incorporation by reference in the Registration Statements (No. 333- 44145, No. 333-44147, No. 333-64064, No. 333-66401, No. 333-74304, No. 333-90377, No. 333-107508, No. 333-129600, and No. 333-138807) on Form S-8 and the Registration Statements (No. 333-31662, No. 333-60724, No. 333-76689, No. 333-81708, and No. 333-98587) on Form S-3 of Trimeris, Inc. of our reports dated March 16, 2007, with respect to the balance sheets of Trimeris, Inc. as of December 31, 2006 and 2005, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2006, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, which reports appear in the December 31, 2006 annual report on Form 10-K of Trimeris, Inc.

Our report on the financial statements refers to the Company’s adoption of the provisions of Statement of Financial Accounting Standards No. 123 (R), Share-Based Payment, as of January 1, 2006 and Statement of Financial Accounting Standards No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), as of December 31, 2006.

/s/ KPMG LLP

Raleigh, North Carolina

March 16, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Dani P. Bolognesi, certify that:

1. I have reviewed this annual report on Form 10-K of Trimeris, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date : March 16, 2007

/s/    DANI P. BOLOGNESI

Dani P. Bolognesi

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert R. Bonczek, certify that:

1. I have reviewed this annual report on Form 10-K of Trimeris, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date : March 16, 2007

/s/    ROBERT R. BONCZEK

Robert R. Bonczek

Chief Financial Officer and General Counsel

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Trimeris, Inc. (the “Company”) for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dani P. Bolognesi, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DANI P. BOLOGNESI

Dani P. Bolognesi

Chief Executive Officer

March 16, 2007

The foregoing certification is being furnished solely pursuant to § 18 U.S.C. 1350 and is not being filed as part of the Report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Trimeris, Inc. (the “Company”) for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert R. Bonczek, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROBERT R. BONCZEK

Robert R. Bonczek

Chief Financial Officer

March 16, 2007

The foregoing certification is being furnished solely pursuant to § 18 U.S.C. 1350 and is not being filed as part of the Report or as a separate disclosure document.