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 September 30, 1999

                                       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 October 15, 1999, there were 37,576,695 shares of Triangle
Pharmaceuticals, Inc. Common Stock outstanding.

<PAGE>

                         Triangle Pharmaceuticals, Inc.

                                Table of Contents

PART I. FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                  Page No.
                                                                                  --------
<S>                                                                                 <C>
      Item 1.  Financial Statements

               Condensed Consolidated Balance Sheets -
                  September 30, 1999 (unaudited) and December 31, 1998 .........      3

               Condensed Consolidated Statements of Operations (unaudited) -
                  Three and Nine Months Ended September 30, 1999 and
                  September 30, 1998 and Period From Inception (July 12, 1995)
                  Through September 30, 1999 ...................................      4

               Condensed Consolidated Statements of Cash Flows (unaudited) -
                  Nine Months Ended September 30, 1999 and September 30, 1998
                  and Period From Inception (July 12, 1995) Through
                  September 30, 1999 ...........................................      5

               Condensed Consolidated Statements of Stockholders' Equity -
                  Period From Inception (July 12, 1995) Through December 31,
                  1995, 1996, 1997, 1998 and
                  the Nine Months Ended September 30, 1999 (unaudited) .........      6

               Notes to Condensed Consolidated Financial Statements (unaudited).    7-8

      Item 2.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations ............................   9-24

      Item 3.  Quantitative and Qualitative Disclosures About Market Risk ......     25

Part II. Other Information

      Item 2.  Changes in Securities and Use of Proceeds .......................     26

      Item 6.  Exhibits and Reports on Form 8-K ................................     27

      Signatures ...............................................................     28
</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>
                                                               September 30,  December 31,
Assets                                                              1999         1998
------                                                         -------------  ------------
                                                                 (unaudited)
<S>                                                             <C>             <C>
Current assets:
    Cash and cash equivalents ...............................   $  72,319       $  77,653
    Restricted deposits .....................................          39              49
    Investments .............................................      89,181          22,933
    Interest receivable .....................................       1,346             612
    Prepaid expenses ........................................       3,798             769
                                                                ---------       ---------
       Total current assets .................................     166,683         102,016
                                                                ---------       ---------
Property, plant and equipment, net ..........................       5,167           4,164
Investments .................................................          --          18,106
Restricted deposits .........................................          --              27
                                                                ---------       ---------
       Total assets .........................................   $ 171,850       $ 124,313
                                                                =========       =========

<CAPTION>
Liabilities and Stockholders' Equity
------------------------------------
<S>                                                             <C>             <C>
Current liabilities:
    Accounts payable ........................................   $   6,026       $  11,778
    Capital lease obligation-current ........................         134             126
    Long-term debt-current ..................................          16             158
    Accrued expenses ........................................      19,336          10,147
                                                                ---------       ---------
       Total current liabilities ............................      25,512          22,209
                                                                ---------       ---------
Capital lease obligation-noncurrent .........................          43             153
                                                                ---------       ---------
       Total liabilities ....................................      25,555          22,362
                                                                ---------       ---------
Commitments and contingencies (See notes 4 and 5) ...........          --              --
Stockholders' equity:
    Convertible Preferred Stock, $0.001 par value;
       5,000 shares authorized; 0 and 170 shares,
       issued and outstanding, respectively .................          --              --
    Common Stock, $0.001 par value; 75,000 shares authorized;
       37,577 and 28,871 shares, issued and outstanding,
       respectively .........................................          38              29
    Warrants ................................................          --             114
    Additional paid-in capital ..............................     336,646         218,683
    Accumulated deficit during development stage ............    (190,246)       (116,823)
    Accumulated other comprehensive (loss) income ...........        (114)             18
    Deferred compensation ...................................         (29)            (70)
                                                                ---------       ---------
       Total stockholders' equity ...........................     146,295         101,951
                                                                ---------       ---------

       Total liabilities and stockholders' equity ...........   $ 171,850       $ 124,313
                                                                =========       =========
</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 September 30,  Nine Months Ended September 30,       (July 12, 1995)
                                            -------------------------------   -------------------------------          Through
                                                 1999            1998              1999            1998          September 30, 1999
                                            -------------    --------------   -------------    -------------     -------------------
<S>                                           <C>               <C>              <C>              <C>                  <C>
Operating expenses:
  License fees ............................   $     210         $     167        $   9,655        $   6,333            $  20,032
  Development .............................      19,660            14,472           56,129           35,906              138,454
  Purchased research and development ......          --                --            1,247               --               12,508
  Selling, general and administrative .....       4,640             2,170           10,889            7,207               32,296
                                              ---------         ---------        ---------        ---------            ---------
Loss from operations ......................     (24,510)          (16,809)         (77,920)         (49,446)            (203,290)
Interest income, net ......................       1,947             1,190            4,497            3,163               13,044
                                              ---------         ---------        ---------        ---------            ---------

Net loss ..................................   $ (22,563)        $ (15,619)       $ (73,423)       $ (46,283)           $(190,246)
                                              =========         =========        =========        =========            =========
Basic and diluted net loss per
  common share ............................   $   (0.64)        $   (0.65)       $   (2.34)       $   (2.06)
                                              =========         =========        =========        =========
Shares used in computing basic and
  diluted net loss per common share .......      35,157            24,058           31,354           22,511
                                              =========         =========        =========        =========
</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
                                                                        Nine Months Ended September 30,          (July 12, 1995)
                                                                        -------------------------------               Through
                                                                        1999                   1998            September 30, 1999
                                                                     ---------              ---------          ------------------
<S>                                                                  <C>                    <C>                    <C>
Cash flows from operating activities:
Net loss ......................................................      $ (73,423)             $ (46,283)             $(190,246)
Adjustments to reconcile net loss to net
  cash used by operating activities:
  Depreciation and amortization ...............................            905                    632                  2,209
  Purchased research and development ..........................          1,247                     --                 12,508
  Stock-based compensation: license fees ......................             --                     --                    636
  Stock-based compensation: development .......................             33                     33                    467
  Stock-based compensation: general and
   administrative .............................................            128                     27                    396
  Change in assets and liabilities:
   Receivables ................................................           (734)                  (101)                (1,346)
   Prepaid expenses ...........................................         (3,029)                    24                 (3,798)
   Accounts payable ...........................................         (5,752)                   193                  6,026
   Accrued expenses ...........................................          9,174                  6,564                 19,200
                                                                     ---------              ---------              ---------
Net cash used by operating activities .........................        (71,451)               (38,911)              (153,948)
                                                                     ---------              ---------              ---------
Cash flows from investing activities:
  Sale (purchase) of restricted deposits ......................             37                     33                    (39)
  Purchase of investments .....................................        (76,158)               (29,273)              (194,317)
  Proceeds from sale and maturity of investments ..............         27,884                 22,845                105,022
  Purchase of property, plant and equipment ...................         (1,908)                (1,739)                (7,200)
  Acquisition of Avid Corporation, net of cash
   acquired ...................................................             --                     --                 (3,053)
                                                                     ---------              ---------              ---------
Net cash used by investing activities .........................        (50,145)                (8,134)               (99,587)
                                                                     ---------              ---------              ---------
Cash flows from financing activities:
  Sale of stock, net of related issuance costs ................        116,218                 56,309                325,445
  Sale of options under salary investment option
   grant program ..............................................             73                     73                    240
  Proceeds from stock options/warrants exercised ..............            215                      1                    242
  Proceeds from notes payable .................................             --                     --                    374
  Equipment financing .........................................             --                     --                    354
  Principal payments on capital lease obligations
   and notes payable ..........................................           (244)                  (321)                  (801)
                                                                     ---------              ---------              ---------
Net cash provided by financing activities .....................        116,262                 56,062                325,854
                                                                     ---------              ---------              ---------
Net (decrease) increase in cash and cash
  equivalents .................................................         (5,334)                 9,017                 72,319
Cash and cash equivalents at beginning of period ..............         77,653                 34,698                     --
                                                                     ---------              ---------              ---------
Cash and cash equivalents at end of period ....................      $  72,319              $  43,715              $  72,319
                                                                     =========              =========              =========
</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)
  (Unaudited)
Sale of stock .......................          --           --           --        6,605           7     116,211           --
Sale of stock options ...............          --           --           --           --          --          73           --
Stock-based compensation ............          --           --           --            6          --         101           --
Stock options/warrants
  exercised .........................          --           --         (114)         295          --         333           --
Conversion of Preferred to
  Common Stock ......................        (170)          --           --        1,700           2          (2)          --
Additional purchase consideration
  Avid Corp. ........................          --           --           --          100          --       1,247           --
Comprehensive loss:
  Reclassification adjustment for
   gains/(losses) in net loss .......          --           --           --           --          --          --           --
  Change in unrealized gains/(losses)
   on investments ...................          --           --           --           --          --          --           --
  Net loss ..........................          --           --           --           --          --          --      (73,423)
                                        ---------    ---------    ---------    ---------   ---------   ---------    ---------
Balance, September  30, 1999 ........          --    $      --    $      --       37,577   $      38   $ 336,646    $(190,246)
                                        =========    =========    =========    =========   =========   =========    =========
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                        Accumulated
                                      Comprehensive         Other
                                          (Loss)      Comprehensive     Deferred
                                          Income       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
  (Unaudited)
Sale of stock .......................           --              --           --      116,218
Sale of stock options ...............           --              --           --           73
Stock-based compensation ............           --              --           36          137
Stock options/warrants
  exercised .........................           --              --            5          224
Conversion of Preferred to
  Common Stock ......................           --              --           --           --
Additional purchase consideration
  Avid Corp. ........................           --              --           --        1,247
Comprehensive loss:
  Reclassification adjustment for
   gains/(losses) in net loss .......          (14)            (14)          --          (14)
  Change in unrealized gains/(losses)
   on investments ...................         (118)           (118)          --         (118)
  Net loss ..........................      (73,423)             --           --      (73,423)
                                         ---------       ---------    ---------    ---------
Balance, September  30, 1999 ........    $ (73,555)      $    (114)   $     (29)   $ 146,295
                                         =========       =========    =========    =========
</TABLE>

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


                                       6
<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 month and nine month periods ended September 30,
1999 and 1998, 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
$74,250 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 2,000
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. Substantially all
of the 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 annual license
preservation fees could range from $50 (if only a single drug candidate is
approved for one indication) to $46,500 (if all drug candidates are approved for
all indications) under the Company's existing license agreements.


                                       7
<PAGE>

                         Triangle Pharmaceuticals, Inc.
                          (A Development Stage Company)
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)
                    (In thousands, except per share amounts)

5. Strategic Alliance

      On August 3, 1999, the Company closed its worldwide strategic alliance
(the "Abbott Alliance") with Abbott Laboratories ("Abbott") covering six
antiviral compounds for the prevention and treatment of HIV and hepatitis B
virus. In the United States, Abbott and Triangle will co-promote four Triangle
drug candidates currently in active development for HIV and/or hepatitis B,
Coactinon(R), Coviracil(R), DAPD and L-FMAU. In addition, Triangle has rights to
co-promote two Abbott HIV compounds in the United States, Norvir(R), also known
as ritonavir, and ABT-378. Outside the United States, Abbott has exclusive sales
and marketing rights to promote the four Triangle drug candidates and Abbott's
two HIV compounds. Triangle and Abbott will share profits and losses for the
four Triangle drug candidates. Triangle will receive detailing fees and
commissions on incremental sales they generate for Abbott's two HIV compounds.
In addition, Abbott will have the right of first discussion to co-promote future
Triangle compounds.

      Under the terms of the Abbott Alliance, Abbott purchased approximately
6,571 shares of Triangle Common Stock at $18.00 per share. The net proceeds of
this issuance, after deducting issuance costs, were approximately $115,900.
Additionally, the Abbott Alliance provides for non-contingent research funding
of $31,700 to be received by January 15, 2000, up to $185,000 of contingent
milestone payments and the sharing of future commercialization costs and overall
profits and losses from the four Triangle compounds.

6. 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. SFAS 133 is
effective for financial statements for all fiscal quarters of all fiscal years
beginning after June 15, 2000. The Company intends to adopt SFAS 133 when
required; however, SFAS 133 is not expected to have a material impact on the
Company's consolidated financial position, results of operations, or cash flows.


                                       8
<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 "--Risks 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.
The Company undertakes no obligation to release publicly the results of any
revisions to these forward-looking statements or 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 1998 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 in
the antiviral area. Since its inception on July 12, 1995, the Company's
operating activities have related primarily to recruiting personnel, negotiating
license and option arrangements for its drug candidates, raising capital and
developing its drug candidates. The Company has not received any revenues from
the sale of products and does not expect any of its drug candidates to be
commercially available until at least the year 2000. As of September 30, 1999,
the Company's accumulated deficit was approximately $190.2 million.

      The Company requires substantial capital expenditures relating to the
development and potential commercialization of its 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 the Company's
licensors. The Company has been unprofitable since its inception and expects to
incur substantial and increasing losses for at least the next several years, due
substantially to the expansion of its drug development programs and the addition
of infrastructure necessary to commercialize its drug candidates. The Company
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 its drug candidates, including expenditures associated
with the establishment of a sales and marketing organization, the manufacture of
drug substance, and other administrative expenditures necessary to support the
Company. Many of these capital expenditures may be incurred irrespective of
whether the Company's drug candidates are approved when anticipated or at all.
The Company expects that losses will fluctuate from period to period and that
such fluctuations may be substantial. See "--Risks and Uncertainties--We have
incurred losses since inception and may never achieve profitability."

      The Company has only a limited operating history upon which an evaluation
of the Company and its prospects can be based. The risks, expenses and
difficulties encountered by companies at an early stage of development must be
considered when evaluating the Company's prospects. To address these risks, the
Company must, among other things, successfully develop and commercialize its
drug candidates, secure all necessary proprietary rights, respond to competitive
developments, continue to attract, retain and motivate qualified personnel and
it may need to obtain additional financing to fund future capital requirements.
There can be no assurance that the Company will be successful in addressing
these risks. See "--Risks and Uncertainties--All of our products are in
development and may never be successfully commercialized which would have an
adverse impact on your investment and our business, and --We have incurred
losses since inception and may never achieve profitability."

      The operating expenses of the Company will depend on several factors,
including the level of development expenses and the potential commercialization
of its drug candidates. Development expenses will depend on the progress and
results of the Company's drug development efforts, which the Company 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 the Company's drug candidates; however, many of these capital
expenditures may


                                       9
<PAGE>

be incurred irrespective of whether the Company's drug candidates are approved
when anticipated or at all. As a result of these factors, the Company believes
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
foregoing factors, it is possible that the Company's consolidated operating
results will be below the expectations of market analysts and investors. In such
event, the prevailing market price of the Company's Common Stock could be
materially adversely affected. See "--Risks and Uncertainties--The market price
of our stock may be adversely affected by market volatility."

RESULTS OF OPERATIONS

Three Months ended September 30, 1999 and 1998

Interest Income, Net

      The Company had net interest income of $1.9 million for the three months
ended September 30, 1999, compared to $1.2 million for the same period in 1998.
The increase in net interest income is due primarily to higher average cash and
investment balances. See "--Liquidity and Capital Resources."

License Fees

      License fees totaled $210,000 for the three months ended September 30,
1999, compared to $167,000 for the same period in 1998. License fees in both
periods relate primarily to the expense of license preservation fees for the
Company's drug candidates.

Development Expenses

      Development expenses totaled $19.7 million for the three months ended
September 30, 1999, compared to $14.5 million for the same period in 1998. The
increase in 1999 development expenses, as compared to the same period in 1998,
is the result of the Company's continued and more extensive drug development
activities on compounds under active development as these compounds move into
later stages of clinical development, including the addition of development
personnel necessary to perform these activities. The Company expects its
development expenses to continue to increase in the future due to the continued
expansion of drug development activities, especially as more drug candidates
enter later stages of clinical development.

Selling, General and Administrative Expenses

      Selling, general and administrative ("SG&A") expenses totaled $4.6 million
for the three months ended September 30, 1999, compared to $2.2 million for the
same period in 1998. The increase in 1999 SG&A expenses, as compared to the same
period in 1998, is predominantly attributable to continued development of the
Company's sales and marketing organization and other administrative growth to
support expanded clinical and development activities.

Nine Months ended September 30, 1999 and 1998

Interest Income, Net

      The Company had net interest income of $4.5 million in the nine months
ended September 30, 1999 compared to $3.2 million for the same period in 1998.
The increase in interest income is due primarily to an increase in the average
investment balance for the nine month period ended September 30, 1999,
associated with proceeds from financing activities in the fourth quarter of 1998
and from the sale of Common Stock associated with the closing of the Abbott
Alliance, partially offset by a small decline in low-risk, short-term interest
rates. See "--Liquidity and Capital Resources."

License Fees

      License fees totaled $9.7 million for the nine months ended September 30,
1999, as compared to $6.3 million for the same period in 1998. License fees in
1999 relate to the expense of license preservation fees, the


                                       10
<PAGE>

recognition of milestone obligations required under the Company's license
agreements and license initiation payments, whereas in 1998, fees were
predominantly associated with a license initiation payment for L-FMAU. The
increase in license fees relates primarily to the recognition of milestone
obligations as the Company continues to achieve development and other
milestones.

Development Expenses

      Development expenses totaled $56.1 million for the nine months ended
September 30, 1999, as compared to $35.9 million for the same period in 1998.
Development expenses for the nine month period ended September 30, 1999
consisted primarily of expenses for development work relating to clinical
trials, drug synthesis, compensation expense, preclinical testing, outside
professional services and toxicology studies. Development expenses for the nine
months ended September 30, 1998 consisted primarily of expenses for development
work relating to drug synthesis, clinical trials, compensation expense,
toxicology studies, patent related activities and preclinical testing. The
substantial increase in 1999 development expenses, as compared to the same
period in 1998, is the result of the Company's continued and more extensive drug
development activities on its compounds as they move into the later stages of
clinical development, including the addition of development personnel necessary
to perform those activities. The Company expects its development expenses to
continue to increase in the future due to continued expansion of drug
development activities, including preclinical testing, clinical trials,
toxicology studies, the manufacture of drug substance for preclinical tests and
clinical trials as well as the continued pursuit of proprietary rights to its
drug candidates, especially as more drug candidates enter later stages of
clinical development. In addition, if the Company in-licenses or otherwise
acquires rights to additional drug candidates, development expenses would
increase as a result.

Purchased Research and Development

      Purchased research and development expenses totaled $1.2 million for the
nine months ended September 30, 1999, as compared to none for the nine months
ended September 30, 1998. On April 1, 1999, the Company issued 100,000 shares of
Common Stock as consideration to former stockholders of Avid for extending the
payment date of certain contingent consideration from February 28, 1999 to
February 28, 2000. Additional purchase price and related purchased research and
development expense was recorded based upon the fair market value of the
Company's Common Stock at the date on which the extension was granted as this
compound is still at an early stage of clinical development and has no
alternative future use.

Selling, General and Administrative Expenses

      SG&A expenses totaled $10.9 million for the nine months ended September
30, 1999 compared to $7.2 million for the same period in 1998. SG&A expenses for
the nine months ended September 30, 1999 consisted primarily of compensation
expenses, amounts paid for outside professional services, marketing and
advertising, and rent expense. SG&A expenses for the nine months ended September
30, 1998 consisted primarily of compensation expenses, amounts paid for outside
professional services and rent expense. The increase in 1999 SG&A expenses, as
compared to the same period in 1998, is primarily due to the continued
development of the Company's sales and marketing organization, increases in
compensation and general operating expenses associated with increased
development activities, and overall corporate growth. The Company expects that
its SG&A expenses will continue to increase in future periods, especially as the
Company continues development of its sales and marketing organization.

LIQUIDITY AND CAPITAL RESOURCES

      The Company has financed its operations since inception (July 12, 1995)
through September 30, 1999 primarily with the net proceeds received from private
placements of equity securities, which provided aggregate net proceeds of
approximately $227.7 million (net of offering costs), and the Company's initial
and secondary public offerings, which provided aggregate net proceeds to the
Company totaling approximately $96.8 million (net of offering costs). In
addition, the Company has received approximately $2.0 million as reimbursement
of certain development expenses under a license agreement for one of its drug
candidates.


                                       11
<PAGE>

      At September 30, 1999 the Company had net working capital of approximately
$141.2 million, an increase of approximately $61.4 million over working capital
at December 31, 1998. The increase is principally the result of the August 3,
1999 closing of the Abbott Alliance which provided $115.9 million in net
proceeds from the sale of Triangle Common Stock. Additionally, the Abbott
Alliance will provide another $31.7 million in non-contingent research funding
payments to be received by January 15, 2000 and potentially up to $185.0 million
in contingent milestone payments.

      At September 30, 1999, the Company's principal source of liquidity was
$72.3 million in cash and cash equivalents and $89.2 million in investments
which are "available for sale," reflecting an approximate $42.8 million increase
of cash, cash equivalent and investment balances over those at December 31,
1998.

      The Company expects that its capital requirements will increase in future
periods as the Company funds its drug development programs, pays obligations
under its license and/or option agreements, continues to develop a sales and
marketing organization, acquires drug substance from third party manufacturers,
and incurs other administrative expenditures necessary to support the Company.
The Company's future capital requirements will depend on many factors, including
the progress of the Company's 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 the Company's drug candidates (including
costs of obtaining patent protection for the Company's drug candidates), the
timing and terms of the acquisition of any additional drug candidates, the rate
of technological advances, determinations as to the commercial potential of the
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 the Company in the future under its existing license
agreements are uncertain due to a number of factors, including the progress of
the Company's drug development programs, the Company's ability to obtain
approval to commercialize any drug candidate and the commercial success of any
approved drug. The Company's existing license agreements require future payments
of up to $74.3 million contingent upon the achievement of certain development
milestones and up to $30.0 million upon the achievement of certain sales
milestones. One of the Company's 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. The Company is also
obligated to issue up to 2.0 million shares of Common Stock contingent upon the
achievement of certain development milestones relating to DMP-450 acquired in
the acquisition of 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 annual license preservation fees could range from $50,000
(if only a single drug candidate is approved for one indication) to $46.5
million (if all drug candidates are approved for all indications) under the
Company's existing license agreements.

      The Company believes that its existing cash, cash equivalents,
investments, and expected non-contingent and contingent future cash payments
associated with the Abbott Alliance will be adequate to satisfy its anticipated
capital requirements through June 2001. The Company expects that it may be
required to raise additional funds through equity or debt financings or from
other sources. There can be no assurance that additional funding will be
available on favorable terms from any of these sources or at all. See "--Risks
and Uncertainties--If we need additional funds and are unable to raise them, we
would have to curtail or cease operations."

ABBOTT ALLIANCE

      On August 3, 1999, Triangle closed its worldwide alliance with Abbott. The
Abbott Alliance gives Triangle access to Abbott's international and domestic
infrastructure to market and distribute the products receiving regulatory
approval, global manufacturing capabilities, United States co-promotion rights
to two Abbott compounds and financial support to help fund the continued
development of Triangle's portfolio of drug candidates. The terms of the Abbott
Alliance provided for the sale of approximately 6.571 million shares of Triangle
Common Stock at $18.00 per share, non-contingent research funding of $31.7
million to be received by January 15, 2000, up to $185.0 million of contingent
milestone payments as well as the sharing of commercialization costs and overall
profits and


                                       12
<PAGE>

losses from the four Triangle compounds covered by the Abbott Alliance. The
completion of the Abbott Alliance generated approximately $115.9 million of net
proceeds, after deducting issuance costs, related to the sale of Triangle Common
Stock. "See--Liquidity and Capital Resources."

LITIGATION AND OTHER CONTINGENCIES

      As discussed below in "Risks and Uncertainties," the Company is indirectly
involved in several patent opposition and adversarial proceedings and one
lawsuit filed in Australia regarding the patent rights related to two of its
licensed drug candidates, including Coviracil. Although the Company is not a
named party in any of these proceedings, it is obligated to reimburse its
licensors for certain legal expenses associated with these proceedings. The
Company cannot predict the outcome of these proceedings. The Company believes
that an adverse judgment in these pending proceedings would not result in a
material financial obligation to the Company, nor would the Company have to
recognize an impairment under Statement of Financial Accounting Standards No.
121, "Accounting for Impairment of Long-Lived Assets," as no amounts have been
capitalized related to these drug candidates. However, any development of these
proceedings adverse to the Company's interests, including but not limited to any
adverse development related to the patent rights licensed to the Company for
these two drug candidates or the Company's rights or obligations related
thereto, could have a material adverse effect on the Company's future
consolidated financial position, results of operations and cash flows.

YEAR 2000 COMPLIANCE

      The Company recognizes the need to ensure that Year 2000 hardware and
software issues will not adversely impact its operations. The Company has
completed an assessment of its internal informational systems which support
business applications and has completed the modification or replacement of these
portions of software, hardware and other equipment that it has determined are
non-compliant. Testing and verification of all critical and significant systems,
by internal and/or external experts, has been completed. Additionally, the
Company has confirmed compliance regarding Year 2000 issues for the information
systems of its key business vendors. This process entailed communicating with
significant suppliers, financial institutions, insurance companies and other
parties that provide significant services to the Company. The Company has
completed its evaluation of key business vendors and has developed contingency
plans for all key vendors, regardless of their state of preparedness. In
addition, the Company will periodically monitor each key vendor's Year 2000
campaign throughout 1999 to reevaluate each vendor's Year 2000 readiness.
Expenditures required to make the Company Year 2000 compliant have been expensed
as incurred and have not been, and any future expenses are not expected to be,
material to the Company's consolidated financial position or results of
operations. See "--Risks and Uncertainties--If we fail to be Year 2000
compliant, it could disrupt our business activities."

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 products are in development and may never be successfully
commercialized which would have an adverse impact on your investment and our
business.

      Many 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 2000. 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
            marketing our drug candidates, or

      o     third parties will market equivalent or superior products.


                                       13
<PAGE>

      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 September 30, 1999, our accumulated deficit was $190.2
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 to date and do not expect to do so
until at least the year 2000. 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 and toxicology studies, clinical trials of drug candidates,
sales and marketing expenses and payments to our licensors. 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 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,

      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, there can be no assurance that such funding
will be sufficient to meet our future needs. In addition, there can be no
assurance 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 products 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 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


                                       14
<PAGE>

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. These side effects could also result in the U.S. Food and Drug
Administration, FDA, or foreign regulatory authorities refusing to approve the
drug candidate for any and all targeted indications. 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. 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
three of our drug candidates, Coactinon, Coviracil for the treatment of HIV, 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 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 products, we may be unable to commercialize our products 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


                                       15
<PAGE>

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.

      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 is a conflict between the latter
BioChem Pharma patent and a patent application filed by Emory because they have
overlapping claims to the same technology. The PTO is conducting an adversarial
proceeding to determine whether BioChem Pharma or Emory is entitled to the
patent claims in dispute. Emory may not prevail in the adversarial proceeding,
and the proceeding 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


                                       16
<PAGE>

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 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, Japan and Norway. 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 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
parties are 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 may determine that it will conduct adversarial proceedings
with respect to a patent application filed by Burroughs Wellcome. 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


                                       17
<PAGE>

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 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
informed Triangle that it 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.

      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
two 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, and
Mitsubishi Chemical Corporation provide that


                                       18
<PAGE>

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 activities. Similarly, Yale and the University of
Georgia, the licensors of L-FMAU to Bukwang Pharm. Ind. Co., Ltd., are primarily
responsible for patent prosecution activities with respect to L-FMAU 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 an application for, but have not obtained, a
trademark registration for our corporate name and corporate logo. An opposition
to the European Community trademark application for the mark Coviracil has been
filed by Orsem and Les Laboratories Serveir based on registrations in certain
countries for the mark Coversyl(R) for pharmaceuticals. We do not believe that
the marks Coviracil and Coversyl are confusingly similar. However, if we do not
prevail in the opposition, we may need to adopt a different product name for
emtricitabine. 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 and
reporting 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,


                                       19
<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 agreements will be substantial and may increase significantly during
the next several years. Our inability or failure


                                       20
<PAGE>

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 intend to engage in drug discovery. Our
strategy for obtaining additional drug candidates is to utilize the
relationships of our management team and Scientific Advisory Board 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.


                                       21
<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 the President and each vice president of
Triangle. Dr. Barry's employment agreement contains certain non-competition
provisions. In addition, the employment agreements for the President and each of
the vice presidents provide for certain severance payments which are contingent
upon the officer'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.

If we fail to be Year 2000 compliant, it could disrupt our business activities.

      The Year 2000 issue is the result of date-sensitive devices, systems and
computer programs that use a two digit rather than a four digit recognition
system to define an applicable year. We have initiated a program and task force
to assess the Year 2000 compliance of our systems and the systems of our key
business vendors. We have inventoried and assessed our significant internal
information and operation systems, and we have replaced or modified those
portions of our software, hardware and other equipment which we have determined
are non-compliant. We have completed the required changes to, and the testing
and verification of, our critical and significant internal systems. Accordingly,
we expect that the Year 2000 issue will not pose significant operational
problems for our internal systems and equipment. If, however, we failed to fix
any critical or significant systems utilizing a two digit recognition system, we
could experience system failures or miscalculations causing disruption of
operations,


                                       22
<PAGE>

including the temporary inability to process transactions or conduct normal
business activities in the new millennium.

      We are also assessing our key business vendors' Year 2000 compliance. We
have requested information from these vendors regarding their compliance efforts
and written assurances of their Year 2000 compliance. We have completed our risk
assessments, readiness evaluations and action and contingency plans related to
these vendors. However, it is extremely difficult to assess the likelihood of
these third parties' Year 2000 compliance or the impact their noncompliance may
have on our operations. If we have failed to implement successfully our Year
2000 compliance plan, our business could be adversely affected. In addition,
significant delays or unanticipated Year 2000 issues with key business vendors
could adversely affect the development of our drug candidates and our financial
condition.

      Incremental expenditures associated with our Year 2000 compliance program
have not been material to our consolidated financial position, results of
operations, and cash flow. We have expensed all Year 2000 compliant costs as
they have been incurred.

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, 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.

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 October 15, 1999, our directors, executive officers and their
affiliates, excluding Abbott, owned approximately 18.4% of our outstanding
common stock and Abbott owned approximately 17.5% 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 the Company in order to maintain its existing
level of ownership, also known as antidilution protection. In addition, we have
granted Abbott the right to appoint one or more representatives to our Board of
Directors, in proportion to its ownership of our common stock. As of October 31,
1999, one Abbott designee served 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,

      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,


                                       23
<PAGE>

      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 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 October 15, 1999, there were 37,576,695 shares of common
stock outstanding, of which approximately 22,500,000 were immediately eligible
for resale in the public market without restriction. Holders of approximately
8,500,000 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 4,200,000 of these shares. 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.

      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.

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 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.


                                       24
<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 September 30, 1999, 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 one year. 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 September 30, 1999, the
fair value of the portfolio is expected to decline by an immaterial aggregate
amount primarily due to the short maturity of the portfolio. At September 30,
1999, our portfolio consisted of approximately $89.2 million of investments
maturing within one year. 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
September 30, 1999, Triangle had no outstanding foreign currency contracts.


                                       25
<PAGE>

TRIANGLE PHARMACEUTICALS, INC.

PART II - OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

c. Issuance of Unregistered Securities

      On August 3, 1999, the Company issued 6,571,428 shares of Common Stock at
a price of $18.00 per share to Abbott Laboratories in connection with the
closing of the Company's strategic alliance with Abbott (the "Abbott Alliance").
The net proceeds of this issuance, after deducting issuance costs, were
approximately $115.9 million. Additionally, the Abbott Alliance provides for
non-contingent research funding of $31.7 million to be received by January 15,
2000, up to $185.0 million of contingent milestone payments and the sharing of
future commercialization costs and overall profits and losses from the four
Triangle compounds. No underwriters were involved in the issuance of such Common
Stock.

      The above securities were offered and sold by the Company 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. The Company did
not use any general advertisement or solicitation in connection with the offer
or sale of the securities. Appropriate legends were affixed to the certificates
for the securities.


                                       26
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.    Exhibits

      (1)3.1  Restated Certificate of Incorporation of the Company

      (1)3.2  Second Restated Certificate of Incorporation of the Company

      +10.1   Supply and Manufacturing Agreement by and between Abbott
              Laboratories and the Company dated August 3, 1999

      +10.2   First Amendment to Option Agreement by and between The Regents of
              the University of California and the Company dated June 9, 1999

      +10.3   Second Amendment to Option Agreement by and between The Regents of
              the University of California and the Company dated August 31, 1999

      11.1    Computation of Net Loss Per Common Share

      27.1    Financial Data Schedule

      (+)     Certain confidential portions of this Exhibit were omitted by
              means of marking such portions with an asterisk (the "Mark"). This
              Exhibit has been filed separately with the Secretary of the
              Commission without the Mark pursuant to the Company's Application
              Requesting Confidential Treatment under Rule 406 under the
              Securities Act.

      (1)     These exhibits were previously filed as part of, and are hereby
              incorporated by reference to, the same numbered exhibit filed with
              the Company's Form 10-K (No. 000-21589) filed on March 19, 1999.

b.    Reports on Form 8-K

      None


                                       27
<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: November 12, 1999                 By: /s/ David W. Barry
                                        ------------------------------------
                                        David W. Barry
                                        Chairman and Chief Executive Officer


                                     TRIANGLE PHARMACEUTICALS, INC.

Date: November 12, 1999                 By: /s/ Thomas R. Staab, II
                                        ------------------------------------
                                        Thomas R. Staab, II
                                        Acting Chief Financial Officer
                                        and Treasurer


                                       28