<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


              /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 2000

                                       OR

            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: 000-21589

                         TRIANGLE PHARMACEUTICALS, INC.
             (Exact name of Registrant as specified in its charter)

                  DELAWARE                               56-1930728
      (State or other jurisdiction                      (I.R.S. Employer
      of incorporation or organization)                 Identification No.)


            4 University Place
            4611 University Drive
            Durham, North Carolina                          27707
          (Address of principal executive offices)          (zip code)

       Registrant's telephone number, including area code: (919) 493-5980


      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 / /

      As of June 30, 2000, there were 38,293,849 shares of Triangle
Pharmaceuticals, Inc. Common Stock outstanding.




<PAGE>


                         TRIANGLE PHARMACEUTICALS, INC.

                                TABLE OF CONTENTS

Part I. Financial Information

<TABLE>
                                                                                      Page No.
                                                                                      --------

        Item 1.  Financial Statements

<S>                                                                                     <C>
               Condensed Consolidated Balance Sheets -
                  June 30, 2000 (unaudited) and December 31, 1999........................ 3

               Condensed Consolidated Statements of Operations (unaudited) -
                  Three and Six Months Ended June 30, 2000 and June 30, 1999 and
                  Period From Inception (July 12, 1995) Through June 30, 2000............ 4

               Condensed Consolidated Statements of Cash Flows (unaudited) -
                  Six Months Ended June 30, 2000 and June 30, 1999 and
                  Period From Inception (July 12, 1995) Through June 30, 2000............ 5

               Condensed Consolidated Statements of Stockholders' Equity -
                  Period From Inception (July 12, 1995) Through
                  June 30, 2000 (unaudited)............................................ 6-7

               Notes to Condensed Consolidated Financial Statements (unaudited)........ 8-9

        Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations................................ 10-26

        Item 3.  Quantitative and Qualitative Disclosures About Market Risk............. 27

Part II. Other Information

        Item 2.  Changes in Securities and Use of Proceeds.............................. 28

        Item 4.  Submission of Matters to a Vote of Security Holders.................... 29

        Item 6.  Exhibits and Reports on Form 8-K....................................... 30

        Signatures...................................................................... 31
</TABLE>

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
         --------------------

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                     JUNE 30,    DECEMBER 31,
ASSETS                                                                 2000          1999
------                                                           --------------  ----------
                                                                   (UNAUDITED)
<S>                                                                 <C>            <C>
Current assets:
    Cash and cash equivalents .................................     $  46,788      $  58,486
    Restricted deposits .......................................            --             27
    Investments ...............................................        53,315         94,583
    Interest receivable .......................................         1,068          1,307
    Receivable from collaborative partner .....................           212          1,156
    Prepaid expenses ..........................................           896            555
                                                                    ---------      ---------
       Total current assets ...................................       102,279        156,114
                                                                    ---------      ---------
Property, plant and equipment, net ............................         6,128          5,701
Investments ...................................................        14,543          4,682
                                                                    ---------      ---------
       Total assets ...........................................     $ 122,950      $ 166,497
                                                                    =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
    Accounts payable ..........................................     $   8,377      $  11,495
    Payable to collaborative partner ..........................         6,713             --
    Capital lease obligation-current ..........................            68            133
    Accrued expenses ..........................................        15,940         14,587
    Deferred revenue ..........................................         6,977          6,250
                                                                    ---------      ---------
       Total current liabilities ..............................        38,075         32,465
                                                                    ---------      ---------
Capital lease obligation-noncurrent ...........................            --              9
Deferred revenue ..............................................        20,931         18,750
                                                                    ---------      ---------
       Total liabilities ......................................        59,006         51,224
                                                                    ---------      ---------
Commitments and contingencies (See note 4) ....................            --             --
Stockholders' equity:
    Convertible Preferred Stock, $0.001 par value; 5,000 shares
       authorized; 0 shares issued and outstanding ............            --             --
    Common Stock, $0.001 par value; 75,000 shares authorized;
       38,294 and 37,578 shares, issued and outstanding,
       respectively ...........................................            38             38
    Additional paid-in capital ................................       343,547        336,814
    Accumulated deficit during development stage ..............      (279,587)      (221,444)
    Accumulated other comprehensive loss ......................           (54)          (135)
                                                                    ---------      ---------
       Total stockholders' equity .............................        63,944        115,273
                                                                    ---------      ---------
       Total liabilities and stockholders' equity .............     $ 122,950      $ 166,497
                                                                    =========      =========
</TABLE>






  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.


                                       3
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                                                       PERIOD FROM
                                                                                                        INCEPTION
                                     THREE MONTHS ENDED JUNE 30,      SIX MONTHS ENDED JUNE 30,      (JULY 12, 1995)
                                     --------------------------       ---------------------------        THROUGH
                                        2000            1999             2000             1999        JUNE 30, 2000
                                     ---------        ---------       ----------        ---------     -------------
<S>                                  <C>              <C>              <C>              <C>              <C>
Revenue:
  Collaborative revenue ......       $   1,824        $      --        $   3,806        $      --        $   3,806

Operating expenses:
  License fees ...............             462            9,245              840            9,445           21,182
  Development ................          26,621           19,127           53,811           36,469          221,471
  Purchased research and
    development ..............              --            1,247            5,350            1,247           17,858
  Selling, general and
    administrative ...........           3,493            3,890            6,219            6,249           42,265
                                     ---------        ---------        ---------        ---------        ---------
   Total operating expenses ..          30,576           33,509           66,220           53,410          302,776
                                     ---------        ---------        ---------        ---------        ---------

Loss from operations .........         (28,752)         (33,509)         (62,414)         (53,410)        (298,970)

Interest income, net .........           1,994            1,080            4,271            2,550           19,383
                                     ---------        ---------        ---------        ---------        ---------

Net loss .....................       $ (26,758)       $ (32,429)       $ (58,143)       $ (50,860)       $(279,587)
                                     =========        =========        =========        =========        =========

Basic and diluted net loss per
  common share.................      $   (0.70)       $   (1.08)       $   (1.53)       $   (1.73)
                                     =========        =========        =========        =========
Shares used in computing basic
  and diluted net loss per
  common share ...............          38,181           29,930           37,903           29,422
                                     =========        =========        =========        =========
</TABLE>





















   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        4
<PAGE>


                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                       PERIOD FROM
                                                                                        INCEPTION
                                                        SIX MONTHS ENDED JUNE 30,     (JULY 12, 1995)
                                                        ---------------------------       THROUGH
                                                            2000           1999        JUNE 30, 2000
                                                        ------------   ------------   ---------------
<S>                                                     <C>            <C>            <C>
Cash flows from operating activities:
Net loss ..........................................     $ (58,143)     $ (50,860)     $(279,587)
Adjustments to reconcile net loss to net
  cash used by operating activities:
  Depreciation and amortization ...................           843            578          3,353
  Purchased research and development ..............         5,350          1,247         17,858
  Stock-based compensation ........................           322            141          1,861
  Change in assets and liabilities:
   Receivables ....................................         1,183           (308)        (1,280)
   Prepaid expenses ...............................          (341)          (446)          (896)
   Accounts payable ...............................         3,595         (1,529)        15,090
   Accrued expenses ...............................         1,353          7,455         15,940
   Deferred revenue ...............................         2,908             --         27,908
                                                        ---------      ---------      ---------
Net cash used by operating activities .............       (42,930)       (43,722)      (199,753)
                                                        ---------      ---------      ---------
Cash flows from investing activities:
  Sale of restricted deposits .....................            27             24             --
  Purchase of investments .........................       (81,354)       (35,473)      (301,640)
  Proceeds from sale and maturity of investments ..       112,842         20,246        233,728
  Purchase of property, plant and equipment .......        (1,270)          (833)        (9,307)
  Acquisition of Avid Corporation, net of cash
    acquired ......................................            --             --         (3,053)
                                                        ---------      ---------      ---------
Net cash provided (used) by investing activities ..        30,245        (16,036)       (80,272)
                                                        ---------      ---------      ---------
Cash flows from financing activities:
  Sale of stock, net of related issuance costs ....           656            164        326,102
  Sale of options under salary investment option
   grant program ..................................            27             50            289
  Proceeds from stock options/warrants exercised ..           378             39            620
  Proceeds from notes payable .....................            --             --            374
  Equipment financing .............................            --             --            354
  Principal payments on capital lease obligations
   and notes payable ..............................           (74)          (161)          (926)
                                                        ---------      ---------      ---------
Net cash provided by financing activities .........           987             92        326,813
                                                        ---------      ---------      ---------
Net (decrease) increase in cash and cash
   equivalents ....................................       (11,698)       (59,666)        46,788

Cash and cash equivalents at beginning of period ..        58,486         77,653             --
                                                        ---------      ---------      ---------
Cash and cash equivalents at end of period ........     $  46,788      $  17,987      $  46,788
                                                        =========      =========      =========
</TABLE>







   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        5
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                       CONVERTIBLE
                                     PREFERRED STOCK                        COMMON STOCK         ADDITIONAL
                               -------------------------                ----------------------    PAID-IN    ACCUMULATED
                                  SHARES        AMOUNT      WARRANTS      SHARES      AMOUNT      CAPITAL      DEFICIT
                               -----------    ----------   ----------   ---------   ----------  -----------  ----------

<S>                              <C>          <C>          <C>          <C>         <C>         <C>          <C>
Initial sale of stock ........         933    $       1    $      --        1,175   $       1   $     710    $      --
Additional sale of stock .....       4,249            4           --        1,495           2       3,137           --
Stock-based compensation .....          --           --           --           --          --          12           --
Comprehensive loss:
  Net loss ...................          --           --           --           --          --          --         (967)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, December 31, 1995 ...       5,182            5           --        2,670           3       3,859         (967)
Sale of stock ................       3,756            4           --        4,943           5      59,506           --
Stock-based compensation .....          --           --          152          700           1       1,127           --
Stock options exercised ......          --           --           --          317          --          57           --
Conversion of Preferred to
  Common Stock ...............      (8,938)          (9)          --        8,938           9          --           --
Comprehensive loss:
  Net loss ...................          --           --           --           --          --          --      (10,917)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, December 31, 1996 ...          --           --          152       17,568          18      64,549      (11,884)
Sale of stock ................          --           --           --        2,014           2      29,521           --
Acquisition of Avid Corp. ....          --           --           --          400          --       8,117           --
Sale of stock options ........          --           --           --           --          --          70           --
Stock-based compensation .....          --           --          (38)          --          --          --           --
Stock options exercised ......          --           --           --           13          --           3           --
Comprehensive loss:
  Net loss ...................          --           --           --           --          --          --      (37,668)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, December 31, 1997 ...          --           --          114       19,995          20     102,260      (49,552)
Sale of stock ................         170           --           --        8,868           9     116,325           --
Sale of stock options ........          --           --           --           --          --          97           --
Stock-based compensation .....          --           --           --           --          --          --           --
Stock options exercised ......          --           --           --            8          --           1           --
Comprehensive loss:
  Change in unrealized
   gains/(losses) on
   investments ...............          --           --           --           --          --          --           --
  Net loss ...................          --           --           --           --          --          --      (67,271)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, December 31, 1998 ...         170           --          114       28,871          29     218,683     (116,823)
Sale of stock ................          --           --           --        6,605           7     116,211           --
Sale of stock options ........          --           --           --           --          --          95           --
Stock-based compensation .....          --           --           --            6          --         101           --
Stock options/warrants
  exercised ..................          --           --         (114)         296          --         479           --
Conversion of Preferred to
  Common Stock ...............        (170)          --           --        1,700           2          (2)          --
Purchased in-process research
  and development costs.......          --           --           --          100          --       1,247           --
Comprehensive loss:
  Reclassification adjustment
   for gains/(losses) in net
   loss.......................          --           --           --           --          --          --           --
  Change in unrealized
   gains/(losses) on
   investments ...............          --           --           --           --          --          --           --
  Net loss ...................          --           --           --           --          --          --     (104,621)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, December 31, 1999 ...          --           --           --       37,578          38     336,814     (221,444)
(UNAUDITED)
Sale of stock ................          --           --           --           92          --         656           --
Sale of stock options ........          --           --           --           --          --          27           --
Stock-based compensation .....          --           --           --           --          --         322           --
Stock options/warrants
  exercised ..................          --           --           --          224          --         378           --
Purchased in-process research
  and development costs.......          --           --           --          400          --       5,350           --
Comprehensive loss:
  Reclassification adjustment
   for gains/(losses) in net
   loss.......................          --           --           --           --          --          --           --
  Change in unrealized
   gains/(losses) on
   investments................          --           --           --           --          --          --           --
  Net loss ...................          --           --           --           --          --          --      (58,143)
                                 ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, June 30, 2000 .......          --    $      --    $      --       38,294   $      38   $ 343,547    $(279,587)
                                 =========    =========    =========    =========   =========   =========    =========
</TABLE>



   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.


                                        6
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                ACCUMULATED
                                COMPREHENSIVE     OTHER
                                   INCOME       COMPREHENSIVE    DEFERRED
                                   (LOSS)      INCOME/(LOSS)   COMPENSATION    TOTAL
                                ------------- --------------   ------------   -------

<S>                              <C>          <C>              <C>          <C>
Initial sale of stock ........   $      --    $      --        $      --    $     712
Additional sale of stock .....          --           --               --        3,143
Stock-based compensation .....          --           --              (12)          --
Comprehensive loss:
  Net loss ...................        (967)          --               --         (967)
                                 ---------    ---------        ---------    ---------
Balance, December 31, 1995 ...        (967)          --              (12)       2,888
Sale of stock ................          --           --               --       59,515
Stock-based compensation .....          --           --             (141)       1,139
Stock options exercised ......          --           --              (26)          31
Conversion of Preferred to
  Common Stock ...............          --           --               --           --
Comprehensive loss:
  Net loss ...................     (10,917)          --               --      (10,917)
                                 ---------    ---------        ---------    ---------
Balance, December 31, 1996 ...     (10,917)          --             (179)      52,656
Sale of stock ................          --           --               --       29,523
Acquisition of Avid Corp. ....          --           --               --        8,117
Sale of stock options ........          --           --               --           70
Stock-based compensation .....          --           --               48           10
Stock options exercised ......          --           --                6            9
Comprehensive loss:
  Net loss ...................     (37,668)          --               --      (37,668)
                                 ---------    ---------        ---------    ---------
Balance, December 31, 1997 ...     (37,668)          --             (125)      52,717
Sale of stock ................          --           --               --      116,334
Sale of stock options ........          --           --               --           97
Stock-based compensation .....          --           --               48           48
Stock options exercised ......          --           --                7            8
Comprehensive loss:
  Change in unrealized
   gains/(losses) on
   investments ...............          18           18               --           18
  Net loss ...................     (67,271)          --               --      (67,271)
                                 ---------    ---------        ---------    ---------
Balance, December 31, 1998 ...     (67,253)          18              (70)     101,951
Sale of stock ................          --           --               --      116,218
Sale of stock options ........          --           --               --           95
Stock-based compensation .....          --           --               58          159
Stock options/warrants
  exercised ..................          --           --               12          377
Conversion of Preferred to
  Common Stock ...............          --           --               --           --
Purchased in-process research
  and development costs.......          --           --               --        1,247
Comprehensive loss:
  Reclassification adjustment
   for gains/(losses) in net
   loss.......................         (21)         (21)              --          (21)
  Change in unrealized
   gains/(losses) on
   investments ...............        (132)        (132)              --         (132)
  Net loss ...................    (104,621)          --               --     (104,621)
                                 ---------    ---------        ---------    ---------
Balance, December 31, 1999 ...    (104,774)        (135)              --      115,273
(UNAUDITED)
Sale of stock ................          --           --               --          656
Sale of stock options ........          --           --               --           27
Stock-based compensation .....          --           --               --          322
Stock options/warrants
  exercised ..................          --           --               --          378
Purchased in-process research
  and development costs.......          --           --               --        5,350
Comprehensive loss:
  Reclassification adjustment
   for gains/(losses) in net
   loss.......................         100          100               --          100
  Change in unrealized
   gains/(losses) on
   investments................         (19)         (19)              --          (19)
  Net loss ...................     (58,143)          --               --      (58,143)
                                 ---------    ---------        ---------    ---------
Balance, June 30, 2000 .......   $ (58,062)   $     (54)       $      --    $  63,944
                                 =========    =========        =========    =========
</TABLE>

   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

                                       7
<PAGE>


                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



1.    BASIS OF PRESENTATION

      The accompanying unaudited condensed consolidated financial statements of
Triangle Pharmaceuticals, Inc. and its wholly-owned subsidiary (the "Company" or
"Triangle") have been prepared in accordance with generally accepted accounting
principles and applicable Securities and Exchange Commission regulations for
interim financial information. These financial statements do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. It is presumed that users of this
interim financial information have read or have access to the audited financial
statements for the preceding fiscal year contained in the Company's Annual
Report on Form 10-K. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the full year.

      The preparation of financial statements in conformity with 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.

2.    PRINCIPLES OF CONSOLIDATION

      The condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated in consolidation.

3.    NET LOSS PER COMMON SHARE

      Basic net loss per common share is computed using the weighted average
number of shares of Common Stock outstanding during the period. Diluted net loss
per common share is computed using the weighted average number of shares of
common and dilutive potential common shares outstanding during the period.
Potential common shares consist of stock options, warrants and convertible
preferred stock using the treasury stock method and are excluded if their effect
is antidilutive. For the three and six month periods ended June 30, 2000 and
1999, the weighted average shares outstanding used in the calculation of net
loss per common share do not include potential shares outstanding because they
have the effect of reducing net loss per common share.

4.    LICENSING AGREEMENTS

      The Company's existing license agreements require future payments of up to
$86,000 contingent upon the achievement of certain development milestones and up
to $30,000 upon the achievement of certain sales milestones. One of the
Company's licensors has the option to receive $2,000 of such future milestone
payments in shares of Common Stock (based on the then current market price) in
lieu of a cash payment. The Company is also obligated to issue up to 1,650
shares of Common Stock upon the achievement of certain development milestones
relating to DMP-450 acquired in the acquisition of Avid Corporation ("Avid").
Additionally, the Company will pay royalties based on a percentage of net sales
of each licensed product incorporating these drug candidates. Most of the
Company's license agreements require minimum royalty payments commencing three
years after regulatory approval. Depending on the Company's success and timing
in obtaining regulatory approval, aggregate annual minimum royalties and license
preservation fees could range from $50 (if only a single drug candidate is
approved for one indication) to $51,500 (if all drug candidates are approved for
all indications) under the Company's existing license agreements.


                                       8
<PAGE>

                         TRIANGLE PHARMACEUTICALS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


5.    ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS
AND HEDGING ACTIVITIES" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. The Company
adopted SFAS 133, as amended and deferred by SFAS 137 and SFAS 138, in the three
month period ending June 30, 2000. SFAS 133 did not have a material impact on
the Company's consolidated financial position, results of operations, or cash
flows.

      In December 1999, the Securities and Exchange Commission (the
"Commission") issued Staff Accounting Bulletin No. 101, "REVENUE RECOGNITION IN
FINANCIAL STATEMENTS" ("SAB 101"). SAB 101, as amended by SAB 101A and 101B,
provided broad conceptual discussions and industry-specific guidance concerning
revenue recognition. The Company adopted SAB 101 in the three month period
ending December 31, 1999 and, accordingly, has reported the impact of the
strategic alliance with Abbott Laboratories in accordance with SAB 101's
conceptual guidance. Specifically, adoption of SAB 101 resulted in all
non-contingent research and development reimbursement under the Company's
strategic alliance to be amortized as collaborative revenue over the anticipated
research and development arrangement period.




                                       9
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         -----------------------------------------------------------
         AND RESULTS OF OPERATION
         ------------------------

      THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN CERTAIN PROJECTIONS,
ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS
AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED BELOW AT "--RISK AND
UNCERTAINTIES." WHILE THIS OUTLOOK REPRESENTS MANAGEMENT'S CURRENT JUDGMENT ON
THE FUTURE DIRECTION OF THE BUSINESS, SUCH RISKS AND UNCERTAINTIES COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FUTURE PERFORMANCE SUGGESTED BELOW.
WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANY REVISIONS TO
THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES ARISING
AFTER THE DATE HEREOF.

      THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" INCLUDED IN THE COMPANY'S 1999 ANNUAL REPORT ON FORM 10-K AS WELL AS
WITH THE COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
APPEARING ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q.

OVERVIEW

      Triangle is engaged in the development of new drug candidates primarily
for serious viral diseases. Since our inception on July 12, 1995, our operating
activities have related primarily to recruiting personnel, negotiating license
and option arrangements for our drug candidates, raising capital and developing
our drug candidates. We have not received any revenues from the sale of products
and do not expect any of our drug candidates to be commercially available until
at least the year 2002. As of June 30, 2000, our accumulated deficit was
approximately $279.6 million.

      We require substantial capital expenditures relating to the development
and potential commercialization of our drug candidates, including expenditures
for preclinical testing, chemical synthetic scale-up, manufacture of drug
substance for clinical trials and toxicology studies, clinical trials of drug
candidates, sales and marketing expenses and payments to our licensors. We have
been unprofitable since our inception and expect to incur substantial losses for
at least the next several years, due substantially to the expansion of our drug
development programs and the addition of infrastructure necessary to
commercialize our drug candidates. We will require substantial capital
expenditures relating to activities many of which may need to occur prior to,
and in anticipation of, the potential regulatory approval of our drug
candidates, including expenditures associated with the continued establishment
of a sales and marketing organization, the manufacture of drug substance, the
development of a distribution system with outside vendors and other
administrative expenditures. Many of these capital expenditures may be incurred
irrespective of whether our drug candidates are approved when anticipated or at
all. We expect that losses will fluctuate from period to period and that such
fluctuations may be substantial. See "--Risk and Uncertainties-- We have
incurred losses since inception and may never achieve profitability."

      We have only a limited operating history upon which an evaluation of
Triangle and our prospects can be based. The risks, expenses and difficulties
encountered by companies at an early stage of development must be considered
when evaluating our prospects. To address these risks, we must, among other
things, successfully develop and commercialize our drug candidates, secure all
necessary proprietary rights, respond to competitive developments, obtain
additional financing and continue to attract, retain and motivate qualified
personnel. We cannot assure you that we will be successful in addressing these
risks. See "--Risk and Uncertainties-- All of our product candidates are in
development and may never be successfully commercialized which would have an
adverse impact on your investment and our business" and "--Risk and
Uncertainties-- If we need additional funds and are unable to raise them, we
would have to curtail or cease operations."

      Our operating expenses will depend on several factors, including the level
of development expenses and the potential commercialization of our drug
candidates. Development expenses will depend on the progress and results of our
drug development efforts, which we cannot predict. Management may in some cases
be able to control the timing of development expenses in part by accelerating or
decelerating preclinical testing and clinical trial activities. The level of
expenses relating to the establishment of a sales and marketing organization,
the manufacture of drug substance and other administrative expenditures will
depend on the success of the development of our drug candidates; however, many
of these expenditures may be incurred irrespective of whether our drug
candidates are approved when anticipated or at all. As a result of these
factors, we believe that period to period comparisons are not necessarily
meaningful and should not be relied upon as an indication of future performance.
Due to all of the


                                       10
<PAGE>

foregoing factors, it is possible that our consolidated operating results will
be below the expectations of market analysts and investors. In such event, the
prevailing market price of the common stock could be materially adversely
affected. See "--Risk and Uncertainties-- The market price of our stock may be
adversely affected by market volatility."

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------

COLLABORATIVE REVENUE

      Collaborative revenue totaled $1.8 million for the three months ended June
30, 2000 as compared to no revenue for the same period in 1999. Revenue is
solely related to collaborative revenue associated with our strategic alliance
with Abbott Laboratories, Abbott, and arises from $31.7 million of
non-contingent research and development expense reimbursement which is being
amortized over the anticipated research and development arrangement period. See
"--Liquidity and Capital Resources."

LICENSE FEES

      License fees totaled $462,000 for the three months ended June 30, 2000 as
compared to $9.2 million for the same period in 1999. License fees for 2000
related to the expense of license or option preservation fees for certain of our
drug candidates. License fees for 1999 related to the expense of license
preservation fees, the recognition of milestone obligations required under our
license agreements and license initiation payments. The decrease of 2000 license
fees, as compared to 1999, is related to the timing of milestone obligations,
the magnitude of license or option preservation payments, as well as the timing
of license initiation fees associated with our portfolio of drug candidates.

DEVELOPMENT EXPENSES

      Development expenses totaled $26.6 million for the three months ended June
30, 2000 as compared to $19.1 million for the same period in 1999. The
substantial increase of 2000 development expenses as compared to 1999, is due
primarily to the continued and more expansive drug development activities on our
drug candidates, including the addition of development personnel necessary to
perform these activities. Development expenses for the second quarter of 2000
were heavily focused on our drug candidate, Coviracil(R).

      We expect our development expenses to increase in the future due to
continued expansion of drug development activities for our existing portfolio of
drug candidates, including preclinical testing and toxicology studies, clinical
trials and the manufacture of drug substance for preclinical tests, clinical
trials and production of commercial material in anticipation of product launch.
In addition, if we in-license or otherwise acquire rights to additional drug
candidates, development expenses would increase.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative, SG&A, expenses totaled $3.5 million
for the three months ended June 30, 2000 as compared to $3.9 million for the
same period in 1999. The decrease of 2000 SG&A expenses, as compared to 1999, is
primarily related to decreased 2000 sales and marketing spending for the period.
We expect that our SG&A expenses will increase in future periods as we continue
to expand development activities and when we expand our sales and marketing
organization in anticipation of product launch.

INTEREST INCOME, NET

      Net interest income totaled $2.0 million for the three months ended June
30, 2000 as compared to $1.1 million for the same period in 1999. The
significant increase of 2000 interest income, as compared to 1999, is due to
larger average investment balances and higher low-risk, short-term interest
rates in the second quarter of 2000. See "--Liquidity and Capital Resources."


                                       11
<PAGE>

SIX MONTHS ENDED JUNE 30, 2000 AND 1999
---------------------------------------

COLLABORATIVE REVENUE

      Collaborative revenue totaled $3.8 million for the six months ended June
30, 2000 as compared to no revenue for the same period in 1999. Revenue is
solely related to collaborative revenue associated with our strategic alliance
with Abbott, and arises from $31.7 million of non-contingent research and
development expense reimbursement which is being amortized over the anticipated
research and development arrangement period. See "--Liquidity and Capital
Resources."

LICENSE FEES

      License fees totaled $840,000 for the six months ended June 30, 2000 as
compared to $9.4 million for the same period in 1999. License fees for 2000
related to the expense of license or option preservation and initiation fees for
certain of our drug candidates. License fees for 1999 related to the expense of
license preservation fees, the recognition of milestone obligations required
under our license agreements and license initiation payments, including $4.0
million in payments arising from the license and settlement agreements relating
to Coviracil and a $5.0 million development milestone for clevudine, formerly
L-FMAU. The decrease of 2000 license fees, as compared to 1999, is related to
the timing of milestone obligations, the magnitude of license or option
preservation payments, as well as the timing of license initiation fees
associated with our portfolio of drug candidates.

DEVELOPMENT EXPENSES

      Development expenses totaled $53.8 million for the six months ended June
30, 2000 as compared to $36.5 million for the same period in 1999. Development
expenses for 2000 consisted primarily of expenses for drug synthesis, clinical
trials, employee compensation, and preclinical testing. Development expenses for
1999 consisted primarily of expenses for clinical trials, drug synthesis, and
employee compensation. The substantial increase of 2000 development expenses, as
compared to 1999, is due primarily to the continued and more expansive drug
development activities on our drug candidates, including the addition of
development personnel necessary to perform these activities. Development
expenses for 2000 were heavily focused on our drug candidate, Coviracil.
Currently, we have five drug candidates in active development, two candidates
that have dual indications for HIV and hepatitis B, and all candidates are in
clinical studies.

      We expect our development expenses to increase in the future due to
continued expansion of drug development activities for our existing portfolio of
drug candidates, including preclinical testing and toxicology studies, clinical
trials and the manufacture of drug substance for preclinical tests, clinical
trials and production of commercial material in anticipation of product launch.
In addition, if we in-license or otherwise acquire rights to additional drug
candidates, development expenses would increase.

PURCHASED RESEARCH AND DEVELOPMENT EXPENSE

      Purchased research and development expenses totaled $5.4 million for the
six months ended June 30, 2000, as compared to $1.2 million for the six months
ended June 30, 1999. On March 27, 2000, we issued 400,000 shares of common
stock, a component of the 2,000,000 contingent shares associated with the Avid
Corporation, Avid, acquisition, and agreed to increase the remaining number of
contingent shares by 50,000 as consideration to the former Avid stockholders for
extending the payment date of certain contingent consideration from February 28,
2000 to August 28, 2001 (the second DMP-450 milestone date extension.) The
charge in 1999 related to issuance of 100,000 shares of common stock as
consideration to the former Avid stockholders for extending the payment date of
certain contingent consideration from February 28, 1999 to February 28, 2000
(the first DMP-450 milestone date extension.) These in-process research and
development charges are based upon the fair market value of our common stock at
the date on which the extensions were granted and relate to mozenavir
dimesylate, formerly DMP-450, which is at an early stage of clinical development
and has no alternative future use. Accordingly, if we initiate pivotal Phase II
clinical trials with mozenavir dimesylate on or before August 28, 2001 or elect
on or before August 28, 2001 to continue development of mozenavir dimesylate
even if such clinical trials have not been initiated, we would issue 1,150,000
shares of common stock. Issuance of the remaining 500,000 of the 1,650,000
contingent


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<PAGE>

shares is dependent upon the attainment of other development milestones with
mozenavir dimesylate. Issuance of any additional contingent shares will be
recorded as additional purchase price and will be allocated upon resolution of
the underlying contingency.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      SG&A expenses totaled $6.2 million for the six months ended June 30, 2000
as compared to $6.2 million for the same period in 1999. SG&A expenses for 2000
consisted primarily of employee compensation; amounts paid for outside
professional services, primarily marketing, legal and investor relations
services; and rent expense. SG&A expenses for 1999 consisted primarily of
employee compensation, amounts paid for outside professional services and rent
expense. We expect that our SG&A expenses will increase in future periods as we
continue to expand development activities and when we expand our sales and
marketing organization in anticipation of product launch.

INTEREST INCOME, NET

      Net interest income totaled $4.3 million for the six months ended June 30,
2000 as compared to $2.6 million for the same period in 1999. The significant
increase of 2000 interest income, as compared to 1999, is due to larger average
investment balances and higher low-risk, short-term interest rates in 2000. See
"--Liquidity and Capital Resources."

LIQUIDITY AND CAPITAL RESOURCES

      We have financed our operations since inception (July 12, 1995) through
June 30, 2000 primarily with the net proceeds received from private placements
of equity securities, which provided aggregate net proceeds of approximately
$111.9 million (net of offering costs), and from initial and secondary public
offerings, which provided aggregate net proceeds of approximately $96.8 million
(net of offering costs), as well as net proceeds from the completion of the
strategic alliance with Abbott, the Abbott Alliance, (including net proceeds
from the sale of common stock and non-contingent research and development
reimbursement) of approximately $147.7 million. In addition, we have received
approximately $2.3 million as reimbursement of certain development expenses
under our license agreements.

      At June 30, 2000, we had net working capital of $64.2 million, a decrease
of approximately $59.4 million from December 31, 1999. The decrease in working
capital is principally the result of funding our normal operating expenses
partially offset by reimbursement of costs stipulated under the Abbott Alliance.
Our principal source of liquidity at June 30, 2000, was $46.8 million in cash
and cash equivalents and $65.9 million in investments which are considered
"available-for-sale," and approximately $2.0 million of strategic corporate
investments, reflecting a $43.1 million decrease of total cash, cash equivalent
and investment balances over those at December 31, 1999.

      We expect that our capital requirements will continue to increase in
future periods as we fund our drug development programs, pay obligations under
our license and/or option agreements, continue development of our sales and
marketing organization, acquire drug substance from third party manufacturers,
and incur other SG&A expenditures necessary to support our operations. Our
future capital requirements will depend on many factors, including the progress
of our drug development programs, the magnitude of these programs, the scope and
results of preclinical testing and clinical trials, the cost, timing and outcome
of regulatory reviews, the costs under the license and/or option agreements
relating to our drug candidates (including the costs of obtaining patent
protection for our drug candidates), the timing and the terms of the acquisition
of any additional drug candidates, the rate of technological advances,
determinations as to the commercial potential of our drug candidates,
administrative and legal expenses, the establishment of internal capacity and
third party arrangements for sales and marketing functions, the establishment of
third party arrangements for manufacturing, including Abbott, and other factors.

      Amounts payable by us in the future under our existing license agreements
are uncertain due to a number of factors, including the progress of our drug
development programs, our ability to obtain approval to commercialize any drug
candidate and the commercial success of any approved drug. As of June 30, 2000,
our existing license agreements may require future cash payments of up to $86.0
million contingent upon the achievement of certain development milestones and up
to $30.0 million upon the achievement of certain sales milestones. One of our


                                       13
<PAGE>


licensors has the option to receive $2.0 million of such future milestone
payments in shares of common stock (based on the then current market price) in
lieu of a cash payment. We are also obligated to issue up to an additional
1,650,000 shares of common stock upon the achievement of certain development
milestones relating to mozenavir dimesylate, which was acquired in the
acquisition of Avid. Additionally, we will pay royalties based on a percentage
of net sales of each licensed product incorporating these drug candidates. Most
of our license agreements require minimum royalty payments commencing three
years after regulatory approval. Depending on our success and timing in
obtaining regulatory approval, aggregate annual minimum royalties and license
preservation fees could range from $50,000 (if only a single drug candidate is
approved for one indication) to $51.5 million (if all drug candidates are
approved for all indications) under our existing license agreements.

      We believe that our cash, cash equivalents and investments will be
adequate to satisfy our anticipated capital requirements through approximately
June 2001, but expect that we will be required to raise additional funds through
equity or debt financings, or from other sources to fund operations beyond that
point. We cannot assure you that additional funding will be available on
favorable terms from any of these sources or at all. See "--Risk and
Uncertainties-- If we need additional funds and are unable to raise them, we
would have to curtail or cease operations."

COVIRACIL (FTC-302)

      In February 2000, we halted recruitment of patients in our pivotal FTC-302
study due to a higher than normal incidence of liver toxicity that occurred in
some of the 470 patients enrolled in the study. Analysis has indicated that
Coviracil has not been responsible for any significant liver toxicity in this
trial or in other trials. In April 2000, the Food and Drug Administration, FDA,
issued a clinical hold on the study and the South African Medicines Control
Council, MCC, terminated the study. The majority of patients participating in
the study have not encountered significant difficulties and the patients
receiving clinical benefit from the study are continuing to receive treatment on
compassionate grounds. Although the FDA has indicated that study FTC-302 may not
be adequate to provide pivotal data in support of a New Drug Application, NDA,
discussions with the FDA and with the MCC on this issue are continuing. Due to
these circumstances, the planned submission of a U.S. NDA for Coviracil may be
significantly delayed. Two additional studies with Coviracil have been
initiated; one is sponsored by us and the other is sponsored by the Agence
Nationale de Recherche sur le SIDA, located in France.

DYNAVAX TECHNOLOGIES CORPORATION

      In April 2000, our licensing and collaborative agreement with Dynavax
Technologies Corporation, Dynavax, to develop immunostimulatory pharmaceutical
candidates for the prevention and/or treatment of serious viral diseases, became
effective. This license grants Triangle exclusive worldwide rights to Dynavax'
proprietary immunostimulatory sequences for the treatment of HIV and the
prevention and treatment of hepatitis B and hepatitis C. This alliance
represents another element of Triangle's strategy to leverage strategic
alliances with carefully selected partners. We will collaborate with Dynavax in
the clinical development of immunostimulatory pharmaceutical candidates and we
will be responsible for funding certain development activities, as well as
paying development milestones and royalty payments under the agreement. Our
licensing and collaboration agreement with Dynavax occurred in conjunction with
the purchase of 400,000 shares of Dynavax Series T Preferred Stock for $2.0
million. This asset is recorded under the cost method as part of our long-term
investments.

LITIGATION AND OTHER CONTINGENCIES

      As discussed below in "Risk and Uncertainties," we are indirectly involved
in several patent opposition and adversarial proceedings and one lawsuit filed
in Australia regarding the patent rights related to two of our licensed drug
candidates, including Coviracil. Although we are not a named party in any of
these proceedings, we are obligated to reimburse our licensors for certain legal
expenses associated with these proceedings. We cannot predict the outcome of
these proceedings. We believe that an adverse judgment rendered against us would
not result in a material financial obligation, nor would we have to recognize an
impairment under Statement of Financial Accounting Standards No. 121,
"ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
DISPOSED OF" as no amounts have been capitalized related to our drug candidates.
However, any development in these proceedings adverse to our interests,
including but not limited to any adverse development related to the patent



                                       14
<PAGE>

rights licensed to us for these two drug candidates or our rights or obligations
related thereto, could have a material adverse effect on our business and future
consolidated financial position, results of operations and cash flow.

RISK AND UNCERTAINTIES

      IN ADDITION TO THE OTHER INFORMATION CONTAINED HEREIN, THE FOLLOWING RISKS
AND UNCERTAINTIES SHOULD BE CAREFULLY CONSIDERED IN EVALUATING TRIANGLE AND ITS
BUSINESS.

ALL OF OUR PRODUCT CANDIDATES ARE IN DEVELOPMENT AND MAY NEVER BE SUCCESSFULLY
COMMERCIALIZED WHICH WOULD HAVE AN ADVERSE IMPACT ON YOUR INVESTMENT AND OUR
BUSINESS.

      Some of our drug candidates are at an early stage of development and all
of our drug candidates will require expensive and lengthy testing and regulatory
clearances. None of our drug candidates has been approved by regulatory
authorities. We do not expect any of our drug candidates to be commercially
available until at least the year 2002. There are many reasons that we may fail
in our efforts to develop our drug candidates, including that:

      o  our drug candidates will be ineffective, toxic or will not receive
         regulatory clearances,
      o  our drug candidates will be too expensive to manufacture or market or
         will not achieve broad market acceptance,
      o  third parties will hold proprietary rights that may preclude us from
         developing or marketing our drug candidates, or
      o  third parties will market equivalent or superior products.

      The success of our business depends upon our ability to successfully
develop and market our drug candidates.

WE HAVE INCURRED LOSSES SINCE INCEPTION AND MAY NEVER ACHIEVE PROFITABILITY.

      We formed Triangle in July 1995 and we have only a limited operating
history for you to review in evaluating our business. We have incurred losses
since our inception. At June 30, 2000, our accumulated deficit was $279.6
million. Our historical costs relate primarily to the acquisition and
development of our drug candidates and selling, general and administrative
costs. We have not generated any revenue from the sale of our drug candidates to
date, and do not expect to do so until at least the year 2002. In addition, we
expect annual losses to increase over the next several years as we expand our
drug development and commercialization efforts. To become profitable, we must
successfully develop and obtain regulatory approval for our drug candidates and
effectively manufacture, market and sell any products we develop. We may never
generate significant revenue or achieve profitable operations.

IF WE NEED ADDITIONAL FUNDS AND ARE UNABLE TO RAISE THEM, WE WOULD HAVE TO
CURTAIL OR CEASE OPERATIONS.

      Our drug development programs and potential commercialization of our drug
candidates require substantial capital expenditures, including expenses for
preclinical testing, chemical synthetic scale-up, manufacture of drug substance
for clinical trials, toxicology studies, clinical trials of drug candidates,
sales and marketing expenses, payments to our licensors and potential commercial
launch of our drug candidates. We expect our capital requirements to continue to
increase. Our future capital needs will depend on many factors, including:

      o  the progress and magnitude of our drug development programs,
      o  the scope and results of preclinical testing and clinical trials,
      o  the cost, timing and outcome of regulatory reviews,
      o  the costs under current and future license and option agreements for
         our drug candidates, including the costs of obtaining patent protection
         for our drug candidates,
      o  the costs of acquiring any additional drug candidates,
      o  the rate of technological advances,


                                       15
<PAGE>

      o  the commercial potential of our drug candidates,
      o  the magnitude of our administrative and legal expenses,
      o  the costs of establishing sales and marketing functions, and
      o  the costs of establishing third party arrangements for manufacturing.

      We have incurred negative cash flow from operations since we incorporated
Triangle and do not expect to generate positive cash flow from our operations
for at least the next several years. Although the Abbott Alliance provided us
with significant additional funding, we cannot assure you that such funding
combined with other available sources of funds, will be sufficient to meet our
future needs. In addition, we cannot assure you that we will receive the
contingent future research funding payments under the Abbott Alliance.
Therefore, we may need additional future financings to fund our operations. We
may not be able to obtain adequate financing to fund our operations, and any
additional financing we obtain may be on terms that are not favorable to us. In
addition, any future financings could substantially dilute our stockholders. If
adequate funds are not available, we will be required to delay, reduce or
eliminate one or more of our drug development programs, to enter into new
collaborative arrangements or to modify the Abbott Alliance on terms that are
not favorable to us. These collaborative arrangements or modifications could
result in the transfer to third parties of rights that we consider valuable. In
addition, we often consider the acquisition of technologies and drug candidates
that would increase our capital requirements.

BECAUSE OUR PRODUCT CANDIDATES MAY NOT SUCCESSFULLY COMPLETE CLINICAL TRIALS
REQUIRED FOR COMMERCIALIZATION, OUR BUSINESS MAY NEVER ACHIEVE PROFITABILITY.

      To obtain regulatory approvals needed for the sale of our drug candidates,
we must demonstrate through preclinical testing and clinical trials that each
drug candidate is safe and effective. The clinical trial process is complex and
uncertain and the regulatory environment varies widely from country to country.
Positive results from preclinical testing and early clinical trials do not
ensure positive results in pivotal clinical trials. Many companies in our
industry have suffered significant setbacks in pivotal clinical trials, even
after promising results in earlier trials. Any of our drug candidates may
produce undesirable side effects in humans. These side effects could cause us or
regulatory authorities to interrupt, delay or halt clinical trials of a drug
candidate, as occurred with mozenavir dimesylate or could result in regulatory
authorities refusing to approve the drug candidate for any and all targeted
indications. In April 2000, the FDA issued a clinical hold on, and the MCC
terminated, clinical study FTC-302 for our drug candidate Coviracil, formerly
known as FTC. Study FTC-302 was being conducted under a U.S. Investigational New
Drug Application, IND, at sites in South Africa. The FDA indicated that study
FTC-302 may not be adequate to provide pivotal data in support of a NDA.
Discussions with the FDA and MCC on this issue are continuing. Due to these
circumstances, the planned submission of a U.S. NDA for Coviracil may be
significantly delayed. We, the FDA, or foreign regulatory authorities may
suspend or terminate clinical trials at any time if we or they believe the trial
participants face unacceptable health risks. Clinical trials may not demonstrate
that our drug candidates are safe or effective.

      Clinical trials are lengthy and expensive. They require adequate supplies
of drug substance and sufficient patient enrollment. Patient enrollment is a
function of many factors, including:

      o the size of the patient population,
      o the nature of the protocol,
      o the proximity of patients to clinical sites, and
      o the eligibility criteria for the clinical trial.

      Delays in patient enrollment can result in increased costs and longer
development times. Even if we successfully complete clinical trials, we may not
be able to file any required regulatory submissions in a timely manner and we
may not receive regulatory approval for the drug candidate.

      In addition, if the FDA or foreign regulatory authorities require
additional clinical trials, we could face increased costs and significant
development delays, as occurred with Coactinon(R) and which may occur with
Coviracil. Changes in regulatory policy or additional regulations adopted during
product development and regulatory review of information we submit could also
result in delays or rejections. The FDA has notified us that


                                       16
<PAGE>

two of our drug candidates, Coviracil and DAPD for the treatment of HIV, qualify
for designation as "fast track" products under provisions of the Food and Drug
Administration Modernization Act of 1997. The fast track provisions are designed
to expedite the review of new drugs intended to treat serious or
life-threatening conditions and essentially codified the criteria previously
established by the FDA for accelerated approval. These drug candidates may not,
however, continue to qualify for expedited review and our other drug candidates
may fail to qualify for fast track development or expedited review. Even though
some of our drug candidates have qualified for expedited review, the FDA may not
approve them at all or any sooner than other drug candidates that do not qualify
for expedited review.

IF WE OR OUR LICENSORS ARE NOT ABLE TO OBTAIN AND MAINTAIN ADEQUATE PATENT
PROTECTION FOR OUR PRODUCT CANDIDATES, WE MAY BE UNABLE TO COMMERCIALIZE OUR
PRODUCT CANDIDATES OR TO PREVENT OTHER COMPANIES FROM USING OUR TECHNOLOGY IN
COMPETITIVE PRODUCTS.

      Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our drug candidates and
to avoid infringing the proprietary rights of others, both in the United States
and in foreign countries. We have no patents in our own name and we have a small
number of patent applications of our own pending. One of our patent applications
is a joint application with co-inventors from another institution. We have,
however, licensed or we have an option to license patents, patent applications
and other proprietary rights from third parties for each of our drug candidates.
If we breach our licenses, we may lose rights to important technology and drug
candidates.

      Our patent position, like that of many pharmaceutical companies, is
uncertain and involves complex legal and factual questions for which important
legal principles are unresolved. We may not develop or obtain rights to products
or processes that are patentable. Even if we do obtain patents, they may not
adequately protect the technology we own or have in-licensed. In addition,
others may challenge, seek to invalidate, infringe or circumvent any patents we
own or in-license, and rights we receive under those patents may not provide
competitive advantages to us. Further, the manufacture, use or sale of our
products or processes may infringe the patent rights of others.

      Several pharmaceutical and biotechnology companies, universities and
research institutions have filed patent applications or received patents that
cover our technologies or technologies similar to ours. Others have filed patent
applications and received patents that conflict with patents or patent
applications we own or have in-licensed, either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those owned by
or licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our drug
candidates. For example, United States patent applications are confidential
while pending in the Patent and Trademark Office, PTO, and patent applications
filed in foreign countries are often first published six months or more after
filing. Any conflicts resulting from third party patent applications and patents
could significantly reduce the coverage of our patents and limit our ability to
obtain meaningful patent protection. If other companies obtain patents with
conflicting claims, we may be required to obtain licenses to these patents or to
develop or obtain alternative technology. We may not be able to obtain any such
license on acceptable terms or at all. Any failure to obtain such licenses could
delay or prevent us from pursuing the development or commercialization of our
drug candidates, which would adversely affect our business.

      There are significant risks regarding the patent rights of two of our
in-licensed drug candidates. We may not be able to commercialize Coviracil or
DAPD due to patent rights held by third parties other than our licensors. Third
parties have filed numerous patent applications and have received numerous
issued patents in the United States and many foreign countries that relate to
these drug candidates and their use alone or coactively to treat HIV and
hepatitis B. As a result, our patent position regarding the use of Coviracil and
DAPD to treat HIV and/or hepatitis B is highly uncertain and involves numerous
complex legal and factual questions that are unknown or unresolved. If any of
these questions is resolved in a manner that is not favorable to us, we would
not have the right to commercialize Coviracil and/or DAPD in the absence of a
license from one or more third parties, which may not be available on acceptable
terms or at all. In addition, even if any of these questions is favorably
resolved, we may still attempt to obtain licenses from one or more third parties
to reduce or eliminate the risks relating to some or all of these matters. Such
licenses may not be available on acceptable terms or at all. Our inability to
commercialize either of these drug candidates could adversely affect our
business.



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<PAGE>


      COVIRACIL (EMTRICITABINE)

      Coviracil, a purified form of FTC, belongs to the same general class of
nucleosides as lamivudine, also known as 3TC. In the United States, the FDA has
approved 3TC for the treatment of hepatitis B and for use in combination with
zidovudine, also known as AZT, for the treatment of HIV. Regulatory authorities
have approved 3TC for the treatment of hepatitis B in several other countries
and for use in combination with other nucleoside analogues for the treatment of
HIV in a number of other countries. Glaxo Wellcome plc, Glaxo, currently sells
3TC for the treatment of HIV and hepatitis B under a license agreement with
BioChem Pharma Inc., BioChem Pharma. We obtained rights to Coviracil under a
license from Emory University, Emory. In 1990 and 1991, Emory filed in the
United States and thereafter in numerous foreign countries patent applications
with claims to compositions of matter and methods to treat HIV and hepatitis B
with Coviracil. In 1991, Yale University, Yale, filed in the United States
patent applications on FTC, including Coviracil and its use to treat hepatitis
B, and subsequently licensed its rights under those patent applications to
Emory. Our license arrangement with Emory includes all rights to Coviracil and
its uses claimed in the Yale patent applications.

      HIV. Emory received a United States patent in 1993 covering a method to
treat HIV with Coviracil. Emory has also received United States and European
patents containing composition of matter claims that cover Coviracil. BioChem
Pharma filed a patent application in the United States in 1989 and received a
patent in 1991 covering a group of nucleosides in the same general class as
Coviracil, but which did not include Coviracil. BioChem Pharma filed foreign
patent applications in 1990, which expanded upon its 1989 United States patent
application to include FTC among a large class of nucleosides. The foreign
patent applications are pending in many countries and have issued in a number of
countries with claims directed to FTC that may cover Coviracil and its use to
treat HIV. In addition, BioChem Pharma filed a United States patent application
in 1991 specifically directed to Coviracil. BioChem Pharma has received two
patents in the United States based on this patent application, one directed to
Coviracil and the other directed to a method for treating viral diseases with
Coviracil. The PTO has determined that there are conflicts between both BioChem
Pharma patents and patent applications filed by Emory because they have
overlapping claims to the same technology. The PTO is conducting two adversarial
proceedings to determine whether BioChem Pharma or Emory is entitled to the
patent claims in dispute regarding BioChem Pharma's two issued patents. Emory
may not prevail in the adversarial proceedings, and the proceedings may also
delay the decision of the PTO regarding Emory's patent application. BioChem
Pharma also filed patent applications in many foreign countries based upon its
1991 United States patent application and has received patents in certain
countries. BioChem Pharma may have additional patent applications pending in the
United States.

      In the United States, the first to invent a technology is entitled to
patent protection on that technology. For patent applications filed prior to
January 1, 1996, United States patent law provides that a party who invented a
technology outside the United States is deemed to have invented the technology
on the earlier of the date it introduced the invention in the United States or
the date it filed its patent application. In a filing with the Securities and
Exchange Commission, SEC, BioChem Pharma stated that prior to January 1, 1996,
it conducted substantially all of its research activities outside the United
States. BioChem Pharma also stated that it considered this to be a disadvantage
in obtaining United States patents based on patent applications filed before
January 1, 1996 as compared to companies that mainly conducted research in the
United States. We do not know whether Emory or BioChem Pharma was the first to
invent the technology claimed in their respective United States patent
applications or patents. We also do not know whether BioChem Pharma invented the
technology disclosed in its patent applications in the United States or
introduced that technology in the United States before the date of its patent
applications.

      In foreign countries, the first party to file a patent application on a
technology, not the first to invent the technology, is entitled to patent
protection on that technology. We believe that Emory filed patent applications
disclosing Coviracil as a useful anti-HIV agent in many foreign countries before
BioChem Pharma filed its foreign patent applications on that technology.
However, BioChem Pharma has received patents in several foreign countries. In
addition, BioChem Pharma has filed patent applications on Coviracil and its uses
in certain countries in which Emory did not file patent applications. Emory has
opposed or otherwise challenged patent claims on Coviracil granted to BioChem
Pharma in Australia and Europe. Emory may not initiate patent opposition
proceedings in any other countries or be successful in any foreign proceeding
attempting to prevent the issuance of, revoke or limit the scope of patents
issued to BioChem Pharma. BioChem Pharma has opposed patent claims on Coviracil
granted to Emory in Europe, Japan, Australia and South Korea. BioChem Pharma may
make additional


                                       18
<PAGE>

challenges to Emory patents or patent applications, which Emory may not succeed
in defending. Our sales, if any, of Coviracil for the treatment of HIV may be
held to infringe United States and foreign patent rights of BioChem Pharma.
Under the patent laws of most countries, a product can be found to infringe a
third party patent either if the third party patent expressly covers the product
or method of treatment using the product, or if the third party patent covers
subject matter that is substantially equivalent in nature to the product or
method, even if the patent does not expressly cover the product or method. If it
is determined that the sale of Coviracil for the treatment of HIV infringes a
BioChem Pharma patent, we would not have the right to make, use or sell
Coviracil for the treatment of HIV in one or more countries in the absence of a
license from BioChem Pharma. We may be unable to obtain such a license from
BioChem Pharma on acceptable terms or at all.

      HEPATITIS B. Burroughs Wellcome Co, Burroughs Wellcome, filed patent
applications in March 1991 and May 1991 in Great Britain on a method to treat
hepatitis B with FTC and purified forms of FTC, that include Coviracil.
Burroughs Wellcome filed similar patent applications in other countries,
including the United States. Glaxo subsequently acquired Burroughs Wellcome's
rights under those patent applications. Those patent applications were filed in
foreign countries prior to the date Emory filed its patent application on the
use of Coviracil to treat hepatitis B. Burroughs Wellcome's foreign patent
applications, therefore, have priority over those filed by Emory. In July 1996,
Emory instituted litigation against Glaxo in the United States District Court to
obtain ownership of the patent applications filed by Burroughs Wellcome,
alleging that Burroughs Wellcome converted and misappropriated Emory's invention
and property and that an Emory employee is the inventor or a co-inventor of the
subject matter covered by the Burroughs Wellcome patent applications. In May
1999, Emory and Glaxo settled the litigation, and we became the exclusive
licensee of the United States and all foreign patent applications and patents
filed by Burroughs Wellcome on the use of Coviracil to treat hepatitis B. Under
the license and settlement agreements, Emory and we were also given access to
development and clinical data and drug substance held by Glaxo relating to
Coviracil.

      BioChem Pharma filed a patent application in May 1991 in Great Britain
also directed to a method to treat hepatitis B with FTC. BioChem Pharma filed
similar patent applications in other countries. In January 1996, BioChem Pharma
received a patent in the United States, which included a claim to treat
hepatitis B with Coviracil. The PTO has determined that there is a conflict
between the BioChem Pharma patent and patent applications filed by Yale and
Emory. The PTO is conducting an adversarial proceeding to determine which party
is entitled to the patent claims in dispute. Yale licensed all of its rights
relating to FTC, including Coviracil, and its uses claimed in this patent
application to Emory, which subsequently licensed these rights to us. Neither
Emory nor Yale may prevail in the adversarial proceeding, and the proceeding may
delay the decision of the PTO regarding Yale's and Emory's patent applications.
In addition, the PTO has recently added the U.S. patent application filed by
Burroughs Wellcome to this interference. Emory may not pursue or succeed in any
such proceedings. We will not be able to sell Coviracil for the treatment of
hepatitis B in the United States unless a United States court or administrative
body determines that the BioChem Pharma patent is invalid or unless we obtain a
license from BioChem Pharma. We may be unable to obtain such a license on
acceptable terms or at all. In July 1991, BioChem Pharma received a United
States patent on the use of 3TC to treat hepatitis B and has corresponding
patent applications pending or issued in foreign countries. If it is determined
that the use of Coviracil to treat hepatitis B is not substantially different
from the use of 3TC to treat hepatitis B, a court could hold that the use of
Coviracil to treat hepatitis B infringes these BioChem Pharma 3TC patents.

      In addition, BioChem Pharma has filed in the United States and foreign
countries several patent applications on manufacturing methods relating to a
class of nucleosides that includes Coviracil, from which BioChem Pharma has
received several patents in the United States and many foreign countries. If we
use a manufacturing method that is covered by patents issued on any of these
applications, we will not be able to manufacture Coviracil without a license
from BioChem Pharma. We may not be able to obtain such a license on acceptable
terms or at all.

      DAPD

      We obtained our rights to DAPD under a license from Emory and the
University of Georgia Research Foundation, Inc., University of Georgia. Our
rights to DAPD include a number of issued United States patents that cover
composition of matter, a method for the synthesis of DAPD, methods for the use
of DAPD alone or in combination with certain other agents for the treatment of
hepatitis B, and a method to treat HIV with DAPD. We


                                       19
<PAGE>

also have rights to several foreign patents and patent applications that cover
methods for the use of DAPD alone or in combination with certain other
anti-hepatitis B agents for the treatment of hepatitis B. Additional foreign
patent applications are pending which contain claims for the use of DAPD to
treat HIV. Emory and the University of Georgia filed patent applications
claiming these inventions in the United States in 1990 and 1992. BioChem Pharma
filed a patent application in the United States in 1988 on a group of
nucleosides in the same general class as DAPD and their use to treat HIV, and
has filed corresponding patent applications in foreign countries. The PTO issued
a patent to BioChem Pharma in 1993 covering a class of nucleosides that includes
DAPD and its use to treat HIV. Corresponding patents have been issued to BioChem
Pharma in many foreign countries. Emory has filed an opposition to patent claims
granted to BioChem Pharma by the European Patent Office based, in part, upon
Emory's assertion that BioChem Pharma's patent does not disclose how to make
DAPD. In a patent opposition hearing held at the European Patent Office on March
4, 1999, the Opposition Division ruled that the BioChem Pharma European patent
covering DAPD is valid. Emory has appealed this decision to the European Patent
Office Technical Board of Appeal. If the Technical Board of Appeal affirms the
decision of the Opposition Division, or if Emory or Triangle do not pursue the
appeal, we would not be able to sell DAPD in Europe without a license from
BioChem Pharma, which may not be available on acceptable terms or at all. Patent
claims granted to Emory on a portion of the DAPD technology by the Australian
Patent Office have also been opposed by BioChem Pharma. We cannot assure you
that a court or administrative body would invalidate BioChem Pharma's patent
claims. Further, a sale of DAPD by us may infringe BioChem Pharma's patents. If
Emory, the University of Georgia and we do not challenge, or are not successful
in any challenge to, BioChem Pharma's issued patents, pending patent
applications, or patents that may issue from such applications, we will not be
able to manufacture, use or sell DAPD in the United States and any foreign
countries in which BioChem Pharma receives a patent without a license from
BioChem Pharma. We may not be able to obtain such a license from BioChem Pharma
on acceptable terms or at all.

      IMMUNOSTIMULATORY SEQUENCE PRODUCT CANDIDATES

      In March 2000, we entered into a licensing and collaborative agreement
with Dynavax to develop immunostimulatory polynucleotide sequence product
candidates for the prevention and/or treatment of serious viral diseases, which
became effective in April 2000. Immunostimulatory sequences are polynucleotides
which stimulate the immune system, and could potentially be used in combination
with our small molecule product candidates to increase the body's ability to
defend against viral infection. Immunostimulatory sequences can be stabilized
for use through internal linkages that do not occur in nature, including
phosphorothioate linkages.

      There are a number of companies which have patent applications and issued
patents, both in the United States and in other countries, that cover
immunostimulatory sequences and their uses. Coley Pharmaceuticals, Inc. has
filed several patent applications in this area and has in addition exclusively
licensed a number of patent applications on this subject from the University of
Iowa and Isis Pharmaceuticals, Inc. A number of these patent applications have
been issued. A number of companies have also filed patent applications and have
or are expected to receive patents on certain polynucleotides and methods for
their use and manufacture. We could be prevented from making, using or selling
any immunostimulatory sequence that is covered by a patent issued to a third
party company, unless we obtain a license from that company, which may not be
available on reasonable terms or at all.

      With respect to any of our drug candidates, litigation, patent opposition
and adversarial proceedings, including the currently pending proceedings, could
result in substantial costs to us. We expect the costs of the currently pending
proceedings to increase significantly during the next several years. We
anticipate that additional litigation and/or proceedings will be necessary or
may be initiated to enforce any patents we own or in-license, or to determine
the scope, validity and enforceability of other parties' proprietary rights and
the priority of an invention. Any of these activities could result in
substantial costs and/or delays to us. The outcome of any of these proceedings
may significantly affect our drug candidates and technology. United States
patents carry a presumption of validity and generally can be invalidated only
through clear and convincing evidence. As indicated above, the PTO is conducting
three adversarial proceedings in connection with the emtricitabine technology.
We cannot assure you that a court or administrative body would hold our
in-licensed patents valid or would find an alleged infringer to be infringing.
Further, the license and option agreements with Emory, the University of
Georgia, The Regents of the University of California, The DuPont Pharmaceuticals
Company, Mitsubishi Chemical Corporation, and Dynavax provide that each of these
licensors is primarily responsible for any patent prosecution activities, such
as litigation, patent conflict proceeding, patent opposition or other actions,
for the technology licensed to us. These agreements also provide that in general
we are required to reimburse these licensors for the costs they incur in
performing these


                                       20
<PAGE>

activities. Similarly, Yale and the University of Georgia, the licensors of
clevudine to Bukwang Pharm. Ind. Co., Ltd., are primarily responsible for patent
prosecution activities with respect to clevudine at our expense. As a result, we
generally do not have the ability to institute or determine the conduct of any
such patent proceedings unless our licensors elect not to institute or to
abandon such proceedings. If our licensors elect to institute and prosecute
patent proceedings, our rights will depend in part upon the manner in which
these licensors conduct the proceedings. In any proceedings they elect to
initiate and maintain, these licensors may not vigorously pursue or defend or
may decide to settle such proceedings on terms that are unfavorable to us. An
adverse outcome of these proceedings could subject us to significant liabilities
to third parties, require disputed rights to be licensed from third parties or
require us to cease using such technology, any of which could adversely affect
our business. Moreover, the mere uncertainty resulting from the initiation and
continuation of any technology related litigation or adversarial proceeding
could adversely affect our business pending resolution of the disputed matters.

      We also rely on unpatented trade secrets and know-how to maintain our
competitive position, which we seek to protect, in part, by confidentiality
agreements with employees, consultants and others. These parties may breach or
terminate these agreements, and we may not have adequate remedies for any
breach. Our trade secrets may also be independently discovered by competitors.
We rely on certain technologies to which we do not have exclusive rights or
which may not be patentable or proprietary and thus may be available to
competitors. We have filed applications for, but have not obtained, trademark
registrations for various marks in the United States and other jurisdictions. We
have received U.S. trademark registrations for our corporate name and logo,
Coactinon(R) and Coviracil(R). We have also received registrations in the
European Union for the mark Coactinon(R) and our corporate logo. Our pending
application in the European Union for the mark CoviracilTM has been opposed by
Orsem, based upon registrations for the mark Coversyl in various countries, and
Les Laboratories Serveir, based on a French registration for the mark Coversyl.
We do not believe that the marks Coviracil and Coversyl are confusingly similar,
but, in the event they are found to be confusingly similar, we may need to adopt
a different product name for emtricitabine in the applicable jurisdictions.
Several other companies use trade names that are similar to our name for their
businesses. If we are unable to obtain any licenses that may be necessary for
the use of our corporate name, we may be required to change our name. Our
management personnel were previously employed by other pharmaceutical companies.
The prior employers of these individuals may allege violations of trade secrets
and other similar claims relating to their drug development activities for us.

WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND MAY FAIL TO RECEIVE
REGULATORY APPROVAL WHICH COULD PREVENT OR DELAY THE COMMERCIALIZATION OF OUR
PRODUCTS.

      In addition to preclinical testing, clinical trials and other approval
procedures for human pharmaceutical products, we are subject to numerous other
regulations covering the development of pharmaceutical products. These
regulations include, for example, domestic and international regulations
relating to the manufacturing, safety, labeling, storage, record keeping,
reporting, marketing and promotion of pharmaceutical products. We are also
regulated with respect to laboratory practices, safe working conditions and the
use and disposal of hazardous substances, including radioactive compounds and
infectious disease agents used in connection with our development work. The
requirements vary widely from country to country. We expect the process of
obtaining these approvals and complying with appropriate government regulations
to be time consuming and expensive. Even if our drug candidates receive
regulatory approval, we may still face difficulties in marketing and
manufacturing those drug candidates. Further, any approval may require
postmarketing studies or other conditions. The approval of any of our drug
candidates may limit the indicated uses of the drug candidate. A marketed
product, its manufacturer and the manufacturer's facilities are subject to
continual review and periodic inspections. The discovery of previously unknown
problems with a product, manufacturer or facility may result in restrictions on
the product or manufacturer, including withdrawal of the product from the
market. The failure to comply with applicable regulatory requirements can, among
other things, result in:

      o  fines,
      o  suspended regulatory approvals,
      o  refusal to approve pending applications,
      o  refusal to permit exports from the United States,
      o  product recalls,
      o  seizure of products,


                                       21
<PAGE>

      o  injunctions,
      o  operating restrictions, and
      o  criminal prosecutions.

      In addition, adverse clinical results by others could negatively impact
the development and approval of our drug candidates. Some of our drug candidates
are intended for use as coactive therapy with one or more other drugs, and
adverse safety, effectiveness or regulatory developments in connection with such
other drugs will also have an adverse effect on our business.

INTENSE COMPETITION MAY RENDER OUR DRUG CANDIDATES NONCOMPETITIVE OR OBSOLETE.

      We are engaged in segments of the drug industry that are highly
competitive and rapidly changing. Any of our current drug candidates that we
successfully develop will compete with numerous existing therapies. In addition,
many companies are pursuing novel drugs that target the same diseases we are
targeting. We believe that a significant number of drugs are currently under
development and will become available in the future for the treatment of HIV and
hepatitis B. We anticipate that we will face intense and increasing competition
as new products enter the market and advanced technologies become available. Our
competitors' products may be more effective, or more effectively marketed and
sold, than any of our products. Competitive products may render our products
obsolete or noncompetitive before we can recover the expenses of developing and
commercializing our drug candidates. Furthermore, the development of a cure or
new treatment methods for the diseases we are targeting could render our drug
candidates noncompetitive, obsolete or uneconomical. Many of our competitors:

      o  have significantly greater financial, technical and human resources
         than we have and may be better equipped to develop, manufacture and
         market products,
      o  have extensive experience in preclinical testing and clinical trials,
         obtaining regulatory approvals and manufacturing and marketing
         pharmaceutical products, and
      o  have products that have been approved or are in late stage development
         and operate large, well-funded research and development programs.

      Smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large pharmaceutical and
biotechnology companies. Academic institutions, governmental agencies and other
public and private research organizations are also becoming increasingly aware
of the commercial value of their inventions and are more actively seeking to
commercialize the technology they have developed.

      If we successfully develop and obtain approval for our drug candidates, we
will face competition based on the safety and effectiveness of our products, the
timing and scope of regulatory approvals, the availability of supply, marketing
and sales capability, reimbursement coverage, price, patent position and other
factors. Our competitors may develop or commercialize more effective or more
affordable products, or obtain more effective patent protection, than we do.
Accordingly, our competitors may commercialize products more rapidly or
effectively than we do, which could hurt our competitive position.

BECAUSE WE FACE RISKS RELATED TO OUR LICENSE AND OPTION AGREEMENTS, WE COULD
LOSE OUR RIGHTS TO OUR DRUG CANDIDATES.

      We have in-licensed or obtained an option to in-license our drug
candidates under agreements with our licensors. These agreements permit our
licensors to terminate the agreements under certain circumstances, such as our
failure to achieve certain development milestones or the occurrence of an
uncured material breach by us. The termination of any of these agreements could
result in the loss of our rights to a drug candidate. Upon termination of most
of our license agreements, we are required to return the licensed technology to
our licensors. In addition, most of these agreements provide that our licensors
are primarily responsible for any patent prosecution activities, such as
litigation, patent conflict, patent opposition or other actions, for the
technology licensed to us. These agreements also provide that in general we are
required to reimburse our licensors for the costs they incur in performing these
activities. We believe that these costs as well as other costs under our license
and option


                                       22
<PAGE>

agreements will be substantial and may increase significantly during the next
several years. Our inability or failure to pay any of these costs with respect
to any drug candidate could result in the termination of the license or option
agreement for the drug candidate.

BECAUSE WE MAY BE UNABLE TO SUCCESSFULLY MANUFACTURE OUR DRUG CANDIDATES, OUR
BUSINESS MAY NEVER ACHIEVE PROFITABILITY.

      We do not have any internal manufacturing capacity and we rely on third
party manufacturers for the manufacture of all of our clinical trial material.
We plan to expand our existing relationships or to establish relationships with
additional third party manufacturers for products that we successfully develop.
The terms of the Abbott Alliance provide that Abbott will manufacture all or a
portion of our product requirements for those products that are or become
covered by the Abbott Alliance. We may be unable to maintain our relationship
with Abbott or to establish or maintain relationships with other third party
manufacturers on acceptable terms, and third party manufacturers may be unable
to manufacture products in commercial quantities on a cost effective basis. Our
dependence upon third parties for the manufacture of our products may adversely
affect our profit margins and our ability to develop and commercialize products
on a timely and competitive basis. Further, third party manufacturers may
encounter manufacturing or quality control problems in connection with the
manufacture of our products and may be unable to maintain the necessary
governmental licenses and approvals to continue manufacturing our products.

WE MAY BE UNABLE TO SUCCESSFULLY MARKET, SELL OR DISTRIBUTE OUR DRUG CANDIDATES.

      In the United States, we currently intend to market the drug candidates
covered by the Abbott Alliance in collaboration with Abbott and to market other
drug candidates that we successfully develop, that do not become part of the
Abbott Alliance, through a direct sales force. Outside of the United States, we
expect Abbott to market drug candidates covered by the Abbott Alliance and, for
any other drug candidates that we successfully develop that do not become part
of the Abbott Alliance, we intend to market and sell through arrangements or
collaborations with third parties. In addition, we expect Abbott to handle the
distribution and sale of drug candidates covered by the Abbott Alliance both
inside and outside the United States. With respect to the United States, our
ability to market the drug candidates that we successfully develop will be
contingent upon recruitment, training and deployment of a sales and marketing
force as well as the performance of Abbott under the Abbott Alliance. We may be
unable to establish marketing or sales capabilities or to maintain arrangements
or enter into new arrangements with third parties to perform those activities on
favorable terms. In addition, any such third parties may have significant
control or influence over important aspects of the commercialization of our drug
candidates, including market identification, marketing methods, pricing,
composition of sales force and promotional activities. We also may have limited
control over the amount and timing of resources that a third party may devote to
our drug candidates. Our business may never achieve profitability if we fail to
establish or maintain a sales force and marketing, sales and distribution
capabilities.

BECAUSE WE DEPEND ON THIRD PARTIES FOR THE DEVELOPMENT AND ACQUISITION OF DRUG
CANDIDATES, WE MAY NOT BE ABLE TO SUCCESSFULLY ACQUIRE ADDITIONAL DRUG
CANDIDATES OR COMMERCIALIZE OR DEVELOP OUR CURRENT DRUG CANDIDATES.

      We have engaged and intend to continue to engage third party contract
research organizations and other third parties to help us develop our drug
candidates. Although we have designed the clinical trials for our drug
candidates, the contract research organizations have conducted many of the
clinical trials. As a result, many important aspects of our drug development
programs have been and will continue to be outside of our direct control. In
addition, the contract research organizations may not perform all of their
obligations under arrangements with us. If the contract research organizations
do not perform clinical trials in a satisfactory manner or breach their
obligations to us, the development and commercialization of any drug candidate
may be delayed or precluded. We do not currently intend to engage in drug
discovery. Our strategy for obtaining additional drug candidates is to utilize
the relationships of our management team and scientific consultants to identify
drug candidates for in-licensing from companies, universities, research
institutions and other organizations. We may not succeed in acquiring additional
drug candidates on acceptable terms or at all.


                                       23
<PAGE>


BECAUSE WE MAY NOT BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND ADVISORS, WE
MAY NOT SUCCESSFULLY DEVELOP OUR PRODUCTS OR ACHIEVE OUR OTHER BUSINESS
OBJECTIVES.

      We are highly dependent on our senior management and scientific staff,
including Dr. David Barry, our Chairman and Chief Executive Officer. We have
entered into employment agreements with each vice president of Triangle. Dr.
Barry's employment agreement contains certain non-competition provisions. In
addition, the employment agreements for each of the vice presidents provide for
certain severance payments which are contingent upon each vice president's
refraining from competition with Triangle. The loss of the services of any
member of our senior management or scientific staff may significantly delay or
prevent the achievement of product development and other business objectives.
Our ability to attract and retain qualified personnel, consultants and advisors
is critical to our success. In order to pursue our drug development programs and
marketing plans, we will need to hire additional qualified scientific and
management personnel. Competition for qualified individuals is intense and we
face competition from numerous pharmaceutical and biotechnology companies,
universities and other research institutions. We may be unable to attract and
retain these individuals, and our failure to do so would have an adverse effect
on our business.

HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT PRACTICES ARE
UNCERTAIN AND MAY ADVERSELY IMPACT THE COMMERCIALIZATION OF OUR PRODUCTS.

      The efforts of governments and third party payors to contain or reduce the
cost of health care will continue to affect the business and financial condition
of drug companies. A number of legislative and regulatory proposals to change
the health care system have been proposed in recent years. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase pressure on drug pricing. While we cannot predict whether
legislative or regulatory proposals will be adopted or what effect those
proposals or managed care efforts may have on our business, the announcement
and/or adoption of such proposals or efforts could have an adverse effect on our
profit margins and financial condition. Sales of prescription drugs depend
significantly on the availability of reimbursement to the consumer from third
party payors, such as government and private insurance plans. These third party
payors frequently require that drug companies give them predetermined discounts
from list prices, and they are increasingly challenging the prices charged for
medical products and services. Present coactive treatment regimens for the
treatment of HIV are expensive; published reports indicate the cost per patient
per year can exceed $13,000, and may increase as new combinations are developed.
These costs have resulted in limitations in the reimbursement available from
third party payors for the treatment of HIV infection, and we expect that
reimbursement pressures will continue in the future. If we succeed in bringing
one or more products to the market, these products may not be considered cost
effective and reimbursement to the consumer may not be available or sufficient
to allow us to sell our products on a competitive basis.

IF OUR DRUG CANDIDATES DO NOT ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS MAY NEVER
ACHIEVE PROFITABILITY.

      Our success will depend on the market acceptance of any products we
develop. The degree of market acceptance will depend upon a number of factors,
including the receipt and scope of regulatory approvals, the establishment and
demonstration in the medical community of the safety and effectiveness of our
products and their potential advantages over existing treatment methods, and
reimbursement policies of government and third party payors. Physicians,
patients, payors or the medical community in general may not accept or utilize
any product that we may develop.

WE MAY NOT HAVE ADEQUATE INSURANCE PROTECTION AGAINST PRODUCT LIABILITY.

      Our business exposes us to potential product liability risks that are
inherent in the testing of drug candidates and the manufacturing and marketing
of drug products and we may face product liability claims in the future. We
currently have only limited product liability insurance. We may be unable to
maintain our existing insurance and/or obtain additional insurance in the future
at a reasonable cost or in sufficient amounts to protect against potential
losses. A successful product liability claim or series of claims brought against
us could require us to pay substantial amounts that would decrease our
profitability, if any.



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<PAGE>

WE MAY INCUR SUBSTANTIAL COSTS RELATED TO OUR USE OF HAZARDOUS MATERIALS.

      We use hazardous materials, chemicals, viruses and various radioactive
compounds in our drug development programs. Although we believe that our
handling and disposing of these materials comply with state and federal
regulations, the risk of accidental contamination or injury still exists. In the
event of such an accident, we could be held liable for any damages or fines that
result and any such liability could exceed our resources.

OUR CONTROLLING STOCKHOLDERS MAY MAKE DECISIONS WHICH YOU DO NOT CONSIDER TO BE
IN YOUR BEST INTEREST.

      As of June 30, 2000, our directors, executive officers and their
affiliates, excluding Abbott, owned approximately 12.5% of our outstanding
common stock and Abbott owned approximately 17.3% of our outstanding common
stock. Pursuant to the terms of the Abbott Alliance, Abbott has the right to
purchase additional amounts of our common stock up to a maximum aggregate
percentage of 21% of our outstanding common stock and has certain rights to
purchase shares directly from us in order to maintain its existing level of
ownership, also known as antidilution protection. One Abbott designee serves as
a member of our Board of Directors. As a result, our controlling stockholders
are able to significantly influence all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership could also delay or prevent a
change in control of Triangle that may be favored by other stockholders.

THE MARKET PRICE OF OUR STOCK MAY BE ADVERSELY AFFECTED BY MARKET VOLATILITY.

      The market price of our common stock is likely to be volatile and could
fluctuate widely in response to many factors, including:

      o  announcements of the results of clinical trials by us or our
         competitors,
      o  developments with respect to patents or proprietary rights,
      o  announcements of technological innovations by us or our competitors,
      o  announcements of new products or new contracts by us or our
         competitors,
      o  actual or anticipated variations in our operating results due to the
         level of development expenses and other factors,
      o  changes in financial estimates by securities analysts and whether our
         earnings meet or exceed such estimates,
      o  conditions and trends in the pharmaceutical and other industries,
      o  new accounting standards,
      o  general economic, political and market conditions and other factors,
         and
      o  the occurrence of any of the risks described in these "Risk Factors."

      In the past, following periods of volatility in the market price of the
securities of companies in our industry, securities class action litigation has
often been instituted against those companies. If we face such litigation in the
future, it would result in substantial costs and a diversion of management
attention and resources, which would negatively impact our business.

      In addition, if our stockholders sell a substantial number of shares of
our common stock in the public market, the market price of our common stock
could be reduced. As of June 30, 2000, there were 38,293,849 shares of common
stock outstanding, of which approximately 24,500,000 were immediately eligible
for resale in the public market without restriction. Holders of approximately
6,850,000 shares have rights to cause us to register them for sale to the
public. We have filed registration statements to register the sale of
approximately 3,550,000 of these shares. On June 12, 2000, we filed a
registration statement on Form S-3 with the SEC for sale in the public market
substantially all of the 400,000 shares issued to former Avid stockholders in
March 2000. In addition, Abbott will have the right on or after June 30, 2002 to
cause us to register for resale in the public market the 6,571,428 shares of
common stock purchased at the closing of the Abbott Alliance. Any such sales may
make it more difficult for us to raise needed capital through an offering of our
equity or convertible debt securities and may reduce the market price of our
common stock.


                                       25
<PAGE>

ANTITAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD DELAY,
DEFER OR PREVENT A TENDER OFFER OR TAKEOVER ATTEMPT THAT YOU CONSIDER TO BE IN
YOUR BEST INTEREST.

      We have adopted a number of provisions that could have antitakeover
effects. On January 29, 1999, our Board of Directors, the Board, adopted a
preferred stock purchase rights plan, commonly referred to as a "poison pill."
The rights plan is intended to deter an attempt to acquire Triangle in a manner
or on terms not approved by the Board. Thus, the rights plan will not prevent an
acquisition of Triangle which is approved by the Board. Our charter authorizes
the Board to issue shares of undesignated preferred stock without stockholder
approval on terms as the Board may determine. Moreover, the issuance of
preferred stock may make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, voting control of Triangle. Our bylaws
divide the Board into three classes of directors with each class serving a three
year term. These and other provisions of our charter and our bylaws, as well as
certain provisions of Delaware law, could delay or impede the removal of
incumbent directors and could make more difficult a merger, tender offer or
proxy contest involving Triangle, even if the events could be beneficial to our
stockholders. These provisions could also limit the price that investors might
be willing to pay for our common stock.

WE HAVE NOT DECLARED OR PAID ANY DIVIDENDS ON OUR COMMON STOCK.

      We have never declared or paid any cash dividends on our common stock, and
we currently do not intend to pay any cash dividends on our common stock in the
foreseeable future. We intend to retain our earnings, if any, for the operation
of our business.



                                       26
<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

      Triangle is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. At June 30, 2000, Triangle had no
outstanding forward foreign currency contracts to hedge anticipated foreign
currency obligations but was subject to interest rate risk associated with its
investment portfolio. All derivative financial instruments, when purchased, are
done so in accordance with established policies and procedures and require the
approval, reporting and monitoring of derivative financial instrument
activities. The following discusses our exposure to market risk related to
changes in interest rates and foreign currency exchange rates.

INTEREST RATE SENSITIVITY

      Triangle is subject to interest rate risk on its investment portfolio. We
maintain an investment portfolio consisting primarily of high quality government
and corporate bonds with an average maturity of less than 18 months. We attempt
to mitigate default risk by investing in high credit quality securities and by
monitoring the credit rating of investment issuers. Our investment portfolio
includes only marketable securities with active secondary or resale markets to
help ensure portfolio liquidity and we have implemented guidelines limiting the
duration of investments. These available-for-sale securities are subject to
interest rate risk and will decrease in value if market interest rates increase.
If market rates were to increase by 10% from levels at June 30, 2000, the fair
value of the portfolio is expected to decline by an immaterial aggregate amount
primarily due to the relatively short maturity of the portfolio. At June 30,
2000, our portfolio consisted of approximately $53.3 million of investments
maturing within one year and approximately $12.5 million of investments maturing
after one year but within 30 months. Additionally, we generally have the ability
to hold our fixed income investments to maturity and therefore do not expect our
consolidated operating results, financial position or cash flows to be affected
by a significant amount due to a sudden change in interest rates.

FOREIGN CURRENCY EXCHANGE RISK

      The majority of our transactions occur in U.S. dollars and we do not have
subsidiaries or investments in foreign countries. Therefore, we are not subject
to significant foreign currency exchange risk. We have, however, established
policies and procedures for market risk assessment, including a foreign currency
hedging program. The goal of our hedging program is to economically guarantee,
or lock into, exchange rates on firm foreign currency cash outflows and to
minimize the impact to the Company of foreign currency fluctuations. These
policies specifically provide for the hedging of firm commitments and prohibit
the holding of derivative instruments for speculative or trading purposes. At
June 30, 2000, Triangle had no outstanding hedged foreign currency contracts.



                                       27
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS
         -----------------------------------------

c.    Issuance of Unregistered Securities

      On May 24, 2000, we issued 66,816 shares of common stock to Abbott which
were purchased pursuant to the terms of a stockholder rights agreement between
us and Abbott. The consideration received by us was approximately $407,000 in
cash, or a price of approximately $6.10 per share. No underwriters were involved
in the issuance of this common stock.

      The above securities were offered and sold by us in reliance upon
exemptions from registration under Regulation D promulgated by the SEC or,
alternatively, under Section 4(2) of the Securities Act of 1933. We did not use
any general advertisement or solicitation in connection with the offer or sale
of the securities and appropriate legends were affixed to the certificates of
these securities.



                                       28
<PAGE>

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

a.    The 2000 Annual Meeting of Stockholders of Triangle Pharmaceuticals, Inc.
      (the "Meeting") was held on May 18, 2000. The holders of 31,712,734 of the
      37,696,599 shares of the Company's Common Stock outstanding on the record
      date were present at the Meeting in person or by proxy.

b.    At the Meeting, David W. Barry, M.D. and George McFadden were duly
      nominated and properly elected as Directors of the Company to serve until
      the 2003 annual meeting of stockholders or until their successors are
      elected and have qualified. The number of votes cast for and withheld with
      respect to each nominee for office are indicated below:

                                                       AGAINST/
                                 FOR                   WITHHELD
                            -------------            -------------
      David W. Barry, M.D.    31,295,482                417,252
      George McFadden         31,659,929                 52,805

      The terms of office of Anthony B. Evnin, Ph.D., Standish M.
      Fleming, Dennis B. Gillings, Ph.D., Henry G. Grabowski, Ph.D.,
      Arthur J. Higgins and Chris A. Rallis, J.D. as directors of the
      Company continued after the Meeting.

      At the Meeting, a proposal to ratify the appointment of
      PricewaterhouseCoopers LLP as the Company's independent accountants for
      the fiscal year ending December 31, 2000 was approved. The number of votes
      cast for, against and to abstain on the proposal are indicated below:


           FOR             AGAINST         ABSTENTIONS
      ---------------    ------------    ----------------
        31,682,313           6,810            23,611



                                       29
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

a.    Exhibits

      27.1  Financial Data Schedule


b.    Reports on Form 8-K

      None



                                       30
<PAGE>


                         TRIANGLE PHARMACEUTICALS, INC.
                                   SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    TRIANGLE PHARMACEUTICALS, INC.


Date:  August 8, 2000                     By:  /s/ David W. Barry
                                               -------------------------
                                          David W. Barry
                                          Chairman and Chief Executive Officer



                                    TRIANGLE PHARMACEUTICALS, INC.



Date: August 8, 2000                      By:   /s/ Robert F. Amundsen, Jr.
                                                ---------------------------
                                          Robert F. Amundsen, Jr.
                                          Executive Vice President and
                                          Chief Financial Officer





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