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, 2001

                                       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, 2001, there were 76,816,387 shares of Triangle
Pharmaceuticals, Inc. Common Stock outstanding.
<Page>

                         TRIANGLE PHARMACEUTICALS, INC.

                                TABLE OF CONTENTS

Part I. Financial Information

                                                                        Page No.
                                                                        --------

         Item 1.  Financial Statements

                  Condensed Consolidated Balance Sheets -
                      September 30, 2001 (unaudited) and December 31, 2000.... 3

                  Condensed Consolidated Statements of Operations
                      (unaudited) - Three and Nine Months Ended
                      September 30, 2001 and September 30, 2000
                      and Period From Inception (July 12, 1995)
                      Through September 30, 2001.............................. 4

                  Condensed Consolidated Statements of Cash Flows
                      (unaudited) - Nine Months Ended September 30,
                      2001 and September 30, 2000 and Period From
                      Inception (July 12, 1995) Through
                      September 30, 2001...................................... 5

                  Condensed Consolidated Statements of Stockholders'
                      Equity - Period From Inception (July 12, 1995)
                      Through September 30, 2001 (unaudited)................ 6-7

                  Notes to Condensed Consolidated Financial Statements
                      (unaudited).......................................... 8-10

         Item 2.  Management's Discussion and Analysis of Financial
                      Condition and Results of Operations................. 11-29

         Item 3.  Quantitative and Qualitative Disclosures About Market
                      Risk................................................... 30

Part II. Other Information

         Item 2.  Changes in Securities and Use of Proceeds.................. 31

         Item 6.  Exhibits and Reports on Form 8-K........................... 31

         Signatures.......................................................... 32


                                       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                                                                         2001            2000
------                                                                    -------------    ------------
                                                                           (UNAUDITED)
<S>                                                                         <C>             <C>
Current assets:
     Cash and cash equivalents .......................................      $  48,544       $  14,055
     Investments .....................................................         15,692          39,472
     Interest receivable .............................................            579           1,081
     Receivable from collaborative partner ...........................            123             413
     Prepaid expenses ................................................            667             543
                                                                            ---------       ---------
        Total current assets .........................................         65,605          55,564
                                                                            ---------       ---------
Property, plant and equipment, net ...................................          4,815           6,093
Investments ..........................................................         13,466           9,404
                                                                            ---------       ---------

        Total assets .................................................      $  83,886       $  71,061
                                                                            =========       =========

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

Current liabilities:
     Accounts payable ................................................      $   9,858       $   9,580
     Payable to collaborative partner ................................          2,274           6,005
     Capital lease obligation-current ................................             --               7
     Accrued expenses ................................................         20,918          17,268
     Deferred revenue ................................................          4,139           6,977
                                                                            ---------       ---------
        Total current liabilities ....................................         37,189          39,837
                                                                            ---------       ---------
Deferred revenue .....................................................         15,521          17,443
                                                                            ---------       ---------
        Total liabilities ............................................         52,710          57,280
                                                                            ---------       ---------
Commitments and contingencies (See notes 4, 6 and 7) .................             --              --
Stockholders' equity:
     Convertible Preferred Stock, $0.001 par value; 5,000 shares
        authorized; 0 shares issued and outstanding ..................             --              --
     Common Stock, $0.001 par value; 75,000 shares authorized;
        58,143 and 38,529 shares, issued and outstanding, respectively             58              39
     Additional paid-in capital ......................................        423,936         344,550
     Accumulated deficit during development stage ....................       (393,187)       (330,969)
     Accumulated other comprehensive income ..........................            369             161
                                                                            ---------       ---------
        Total stockholders' equity ...................................         31,176          13,781
                                                                            ---------       ---------

        Total liabilities and stockholders' equity ...................      $  83,886       $  71,061
                                                                            =========       =========
</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
                                              2001              2000              2001              2000        SEPTEMBER 30, 2001
                                        ----------------  ----------------  ----------------  ----------------  ------------------
<S>                                        <C>               <C>               <C>               <C>                 <C>
Revenue:
  Collaborative revenue ..............     $  1,271          $  1,744          $  4,760          $  5,550            $  12,054

Operating expenses:
  License fees .......................          500             2,978             2,453             3,818               27,325
  Development ........................       15,477            22,925            58,115            76,736              327,138
  Purchased research and development .          320                --               320             5,350               18,178
  Selling, general and administrative         1,602             3,621             6,561             9,840               55,507
  Restructuring ......................        2,342                --             2,342                --                2,342
                                           --------          --------          --------          --------            ---------
    Total operating expenses .........       20,241            29,524            69,791            95,744              430,490
                                           --------          --------          --------          --------            ---------

Loss from operations .................      (18,970)          (27,780)          (65,031)          (90,194)            (418,436)
Interest income, net .................          773             1,723             2,813             5,994               25,249
                                           --------          --------          --------          --------            ---------

Net loss .............................     $(18,197)         $(26,057)         $(62,218)         $(84,200)           $(393,187)
                                           ========          ========          ========          ========            =========

Basic and diluted net loss per common
  share ..............................     $  (0.35)         $  (0.68)         $  (1.32)         $  (2.21)
                                           ========          ========          ========          ========
Shares used in computing basic and
  diluted net loss per common share ..       52,366            38,301            47,036            38,037
                                           ========          ========          ========          ========
</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
                                                                 2001               2000       SEPTEMBER 30, 2001
                                                             ------------       ------------   ------------------
<S>                                                            <C>              <C>               <C>
Cash flows from operating activities:
Net loss ..............................................        $(62,218)        $ (84,200)        $(393,187)
Adjustments to reconcile net loss to net
  cash used by operating activities:
  Depreciation and amortization .......................           1,349             1,282             5,591
  Loss from disposal of property, plant and equipment .             260                --               260
  Purchased research and development ..................             320             5,350            18,178
  Stock-based compensation ............................             183               322             2,070
  Change in assets and liabilities:
    Receivables .......................................             792             1,459              (702)
    Prepaid expenses ..................................            (124)             (178)             (667)
    Accounts payable ..................................          (3,453)            3,633            12,132
    Accrued expenses ..................................           3,650             4,140            20,918
    Deferred revenue ..................................          (4,760)            1,164            19,660
                                                               --------         ---------         ---------
Net cash used by operating activities .................         (64,001)          (67,028)         (315,747)
                                                               --------         ---------         ---------
Cash flows from investing activities:
  Sale of restricted deposits .........................              --                27                --
  Purchase of investments .............................         (19,184)          (90,223)         (329,692)
  Proceeds from sale and maturity of investments ......          39,110           119,616           300,903
  Purchase of property, plant and equipment ...........            (331)           (1,516)          (10,491)
  Acquisition of Avid Corporation, net of cash acquired              --                --            (3,053)
                                                               --------         ---------         ---------
Net cash provided (used) by investing activities ......          19,595            27,904           (42,333)
                                                               --------         ---------         ---------
Cash flows from financing activities:
  Sale of stock, net of related issuance costs ........          78,557               801           405,610
  Sale of options under salary investment option
    grant program .....................................              57                40               372
  Proceeds from stock options/warrants exercised ......             288               378               908
  Proceeds from notes payable .........................              --                --               374
  Equipment financing .................................              --                --               354
  Principal payments on capital lease obligations
    and notes payable .................................              (7)             (111)             (994)
                                                               --------         ---------         ---------
Net cash provided by financing activities .............          78,895             1,108           406,624
                                                               --------         ---------         ---------
Net increase (decrease) in cash and cash equivalents ..          34,489           (38,016)           48,544
Cash and cash equivalents at beginning of period ......          14,055            58,486                --
                                                               --------         ---------         ---------
Cash and cash equivalents at end of period ............        $ 48,544         $  20,470         $  48,544
                                                               ========         =========         =========
</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              COMPREHENSIVE
                               ----------------------               ----------------------     PAID-IN   ACCUMULATED     INCOME
                                 SHARES      AMOUNT      WARRANTS     SHARES      AMOUNT       CAPITAL     DEFICIT       (LOSS)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
<S>                                <C>     <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)        (967)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 1995..        5,182           5           --       2,670           3        3,859         (967)        (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)     (10,917)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 1996..           --          --          152      17,568          18       64,549      (11,884)     (10,917)
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)     (37,668)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 1997..           --          --          114      19,995          20      102,260      (49,552)     (37,668)
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..............           --          --           --          --          --           --           --           18
  Net loss..................           --          --           --          --          --           --      (67,271)     (67,271)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 1998..          170          --          114      28,871          29      218,683     (116,823)     (67,253)
Sale of stock...............           --          --           --       6,605           7      116,211           --           --
Sale of stock options.......           --          --           --          --          --           95           --           --
Stock-based compensation....           --          --           --           6          --          101           --           --
Stock options/warrants
  exercised.................           --          --         (114)        296          --          479           --           --
Conversion of Preferred to
  Common Stock..............         (170)         --           --       1,700           2           (2)          --           --
Purchased in-process research
  and development costs.....           --          --           --         100          --        1,247           --           --
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................           --          --           --          --          --           --           --          (21)
  Change in unrealized
   gains/(losses) on
   investments..............           --          --           --          --          --           --           --         (132)
  Net loss..................           --          --           --          --          --           --     (104,621)    (104,621)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 1999..           --  $       --   $       --      37,578  $       38   $  336,814  $  (221,444) $  (104,774)
(CONTINUED)

<Caption>
                                 ACCUMULATED
                                   OTHER
                                COMPREHENSIVE    DEFERRED
                                INCOME/(LOSS)  COMPENSATION      TOTAL
                                -------------  ------------   -----------
<S>                             <C>            <C>            <C>
Initial sale of stock.......    $        --    $        --    $       712
Additional sale of stock....             --             --          3,143
Stock-based compensation....             --            (12)            --
Comprehensive loss:
  Net loss..................             --             --           (967)
                                -----------    -----------    -----------
Balance, December 31, 1995..             --            (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)
                                -----------    -----------    -----------
Balance, December 31, 1996..             --           (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)
                                -----------    -----------    -----------
Balance, December 31, 1997..             --           (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
  Net loss..................             --             --        (67,271)
                                -----------    -----------    -----------
Balance, December 31, 1998..             18            (70)       101,951
Sale of stock...............             --             --        116,218
Sale of stock options.......             --             --             95
Stock-based compensation....             --             58            159
Stock options/warrants
  exercised.................             --             12            377
Conversion of Preferred to
  Common Stock..............             --             --             --
Purchased in-process research
  and development costs.....             --             --          1,247
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................            (21)            --            (21)
  Change in unrealized
   gains/(losses) on
   investments..............           (132)            --           (132)
  Net loss..................             --             --       (104,621)
                                -----------    -----------    -----------
Balance, December 31, 1999..    $      (135)   $        --    $   115,273
(CONTINUED)
</Table>

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


                                       6
<Page>

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

<Table>
<Caption>
                                    CONVERTIBLE
                                   PREFERRED STOCK                       COMMON STOCK        ADDITIONAL              COMPREHENSIVE
                               ----------------------               ----------------------     PAID-IN   ACCUMULATED     INCOME
                                 SHARES      AMOUNT      WARRANTS     SHARES      AMOUNT       CAPITAL     DEFICIT       (LOSS)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
<S>                                   <C>  <C>          <C>             <C>     <C>          <C>         <C>          <C>
(CONTINUED)
Sale of stock...............           --  $       --   $       --         326  $        1   $    1,608  $        --  $
Sale of stock options.......           --          --           --          --          --           52           --
Stock-based compensation....           --          --           --          --          --          348           --
Stock options/warrants
  exercised.................           --          --           --         225          --          378           --
Purchased in-process research
  and development costs.....           --          --           --         400          --        5,350           --
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................           --          --           --          --          --           --           --          133
  Change in unrealized
   gains/(losses) on
   investments..............           --          --           --          --          --           --           --          163
  Net loss..................           --          --           --          --          --           --     (109,525)    (109,525)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, December 31, 2000..           --          --           --      38,529          39      344,550     (330,969)    (109,229)
(UNAUDITED)
Sale of stock...............          200          --           --      17,385          17       78,540           --
Sale of stock options.......           --          --           --          --          --           57           --
Stock-based compensation....           --          --           --          --          --          183           --
Stock options/warrants
  exercised.................           --          --           --         129          --          288           --
Purchased in-process research
  and development costs.....           --          --           --         100          --          320           --
Conversion of Preferred to
  Common Stock..............         (200)         --           --       2,000           2           (2)          --
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................           --          --           --          --          --           --           --          (32)
  Change in unrealized
   gains/(losses) on
   investments..............           --          --           --          --          --           --           --          240
  Net loss..................           --          --           --          --          --           --      (62,218)     (62,218)
                               ----------  ----------   ----------  ----------  ----------   ----------  -----------  -----------
Balance, September 30, 2001.           --  $       --   $       --      58,143  $       58   $  423,936  $  (393,187) $   (62,010)
                               ==========  ==========   ==========  ==========  ==========   ==========  ===========  ===========

<Caption>
                                 ACCUMULATED
                                   OTHER
                                COMPREHENSIVE    DEFERRED
                                INCOME/(LOSS)  COMPENSATION      TOTAL
                                -------------  ------------   -----------
<S>                             <C>            <C>            <C>
(CONTINUED)
Sale of stock...............    $        --    $        --    $     1,609
Sale of stock options.......             --             --             52
Stock-based compensation....             --             --            348
Stock options/warrants
  exercised.................             --             --            378
Purchased in-process research
  and development costs.....             --             --          5,350
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................            133             --            133
  Change in unrealized
   gains/(losses) on
   investments..............            163             --            163
  Net loss..................             --             --       (109,525)
                                -----------    -----------   ------------
Balance, December 31, 2000..            161             --         13,781
(UNAUDITED)
Sale of stock...............             --             --         78,557
Sale of stock options.......             --             --             57
Stock-based compensation....             --             --            183
Stock options/warrants
  exercised.................             --             --            288
Purchased in-process research
  and development costs.....             --             --            320
Conversion of Preferred to
  Common Stock..............             --             --             --
Comprehensive loss:
  Reclassification  adjustment
   for gains/(losses) in net
   loss.....................            (32)            --            (32)
  Change in unrealized
   gains/(losses) on
   investments..............            240             --            240
  Net loss..................             --             --        (62,218)
                                -----------    -----------   ------------
Balance, September 30, 2001.    $       369    $        --    $    31,176
                                ===========    ===========   ============
</Table>

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


                                       7
<Page>

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

1.    BASIS OF PRESENTATION

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

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2.    PRINCIPLES OF CONSOLIDATION

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

3.    NET LOSS PER COMMON SHARE

      Basic net loss per common share is computed using the weighted average
number of shares of Common Stock outstanding during the period. Diluted net loss
per common share is computed using the weighted average number of shares of
common and dilutive potential common shares outstanding during the period.
Potential common shares consist of stock options, warrants and convertible
preferred stock using the treasury stock method and are excluded if their effect
is antidilutive. For the three- and nine-month periods ended September 30, 2001
and 2000, 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

      As of September 30, 2001, the Company has multiple license agreements for
its drug candidates as well as collaborative agreements with specific third
parties to assist in the identification and development of other novel drug
candidates. In the aggregate, these agreements may require future payments of up
to $83,000 contingent upon the achievement of development milestones, up to
$30,000 upon the achievement of sales milestones, and $2,500 of future research
and development payments. One of the Company's licensors has the option to
receive $2,000 of 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 250 shares of common stock if development milestones are
achieved regarding compounds for the treatment of hepatitis B obtained in the
Avid Corporation acquisition. 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 of the licensed
compound. 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 $51,500 (if all drug candidates are approved for all indications)
under the Company's existing license agreements. In addition, the Company has
option agreements that allow it to obtain licenses on additional drug candidates
in the future.


                                       8
<Page>

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

5.    RESTRUCTURING CHARGE

      In August 2001, the Company recorded a restructuring charge of $2,342. The
restructuring was designed to lower near term monthly cash usage and focus
financial and human resources on activities that are expected to have the
highest probability of near term regulatory approval and economic return. This
focus includes weighting corporate resources towards drug candidates in Phase
III development, eliminating most resources dedicated to basic research, and
reducing resources dedicated to sales, marketing and general administration.
Approximately $1,650 of the charge resulted from severance and other termination
benefits related to an approximate 35% reduction in the Company's total
workforce. The remaining $692 represents a write-down of net assets, the loss
associated with underutilized lease obligations and legal and other expenses
associated with reducing the Company's workforce. At September 30, 2001,
approximately $1.1 million of all restructuring costs had yet to be paid, as
severance benefits extend into the fourth quarter of 2001 for all terminated
employees, and two employees had employment agreements which provide for monthly
severance benefits beyond 2001.

6.    EQUITY FINANCING AND RELATED SUBSEQUENT EVENT

      On August 24, 2001, the Company entered into a purchase agreement with
Warburg Pincus Private Equity VIII, L.P. ("Warburg Pincus") for the sale of
approximately 28,302 shares of Common Stock in a two-stage private placement at
a purchase price of $2.65 per share. On the same day, the first closing of the
private placement occurred and the Company issued approximately 9,628 shares of
Common Stock for net proceeds totaling $23,975.

      The purchase agreement provided for the sale of approximately an
additional 13,757 shares of our Common Stock to Warburg Pincus and an additional
4,917 shares of Common Stock to other investors (including QFinance, Inc., a
related party) at a purchase price of $2.65 per share in a second closing
subject to several conditions, including stockholder approval of the sale.
Stockholder approval and the second closing occurred on October 10, 2001 and
resulted in net proceeds totaling $46,550 that will be recorded in the Company's
financial statements for the quarter ending December 31, 2001. In the purchase
agreement with Warburg Pincus, the Company agreed to register the shares of
common stock sold in both closings, to cause two individuals nominated by
Warburg Pincus to be appointed to the Board of Directors, and granted Warburg
Pincus rights to participate in certain future sales of Common Stock by the
Company. Accordingly, the Company filed a registration statement with the
Securities and Exchange Commission on October 18, 2001 covering the resale of
approximately 28,302 shares of Common Stock; two additional directors affiliated
with Warburg Pincus were elected to the Board of Directors; and Warburg Pincus
has the right to participate proportionally in future equity financings, as long
as Warburg Pincus owns approximately 5,846 shares of the Company's outstanding
Common Stock.

7.    CONTINGENCIES

      The Company is indirectly involved in several opposition and interference
proceedings and two lawsuits filed in Australia regarding the patent rights
related to two of its licensed drug candidates. 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. In one
of these patent opposition proceedings, on November 8, 2000, the Australian
Patent Office held that several patent claims of Emory University directed to
amdoxovir, (formerly known as DAPD) are not patentable over an earlier opposing
patent. Emory has appealed this decision of the Australian Patent Office to the
Australian Federal Court. If Emory and the Company are unsuccessful in the
appeal, then the Company will not be able to sell amdoxovir in Australia without
a license, which may not be available on reasonable terms or at all. The Company
cannot predict the outcome of these proceedings. The Company believes that an
adverse judgment 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 AND LONG-LIVED ASSETS TO BE DISPOSED OF" as no amounts have
been capitalized related to these drug candidates. However, any development in
these proceedings adverse to the


                                       9
<Page>

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

Company's interests could have a material adverse effect on the Company's future
consolidated financial position, results of operations and cash flow.

8.    RECENT ACCOUNTING PRONOUNCEMENTS

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "BUSINESS
COMBINATIONS" and SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS." SFAS No.
141 eliminates the pooling-of-interests method of accounting for business
combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. SFAS No. 142 changes the accounting for goodwill and
indefinite lived intangible assets from an amortization method to an
impairment-only approach.

      In August 2001, the FASB issued SFAS No. 143, "ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS." The objectives of SFAS No. 143 are to establish
accounting standards for the recognition and measurement of an asset retirement
obligation and its associated asset retirement cost. SFAS No. 143 is effective
for fiscal years beginning after June 15, 2002.

      In October 2001, the FASB issued SFAS No. 144, "ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS." This statement supersedes SFAS No.
121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF" and Accounting Principles Board Opinion No. 30,
"REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS." The provisions of SFAS No. 144 are effective for
fiscal years beginning after December 15, 2001.

      The Company intends to adopt SFAS No. 142 and 144 as of January 1, 2002,
and SFAS No. 143 as of January 1, 2003, as required. Adoption of SFAS Nos. 141,
142 and 143 are not expected to have any financial impact, and the Company is
currently assessing the impact of SFAS 144 on its consolidated financial
position, results of operations and cash flows.


                                       10
<Page>

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

      This Quarterly Report on Form 10-Q may contain projections, estimates and
other forward-looking statements that involve a number of risks and
uncertainties, including those discussed below at "--Risk and Uncertainties."
While this outlook represents management's current judgment on the future
direction of the business, risks and uncertainties could cause actual results to
differ materially from any future performance suggested below.

      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 our 2000 Annual Report on Form 10-K as well as with our
condensed consolidated financial statements and notes appearing elsewhere in
this Quarterly Report on Form 10-Q.

OVERVIEW

      Triangle is engaged in the development of new drug candidates primarily
for serious viral diseases. Since our inception on July 12, 1995, our operating
activities have related primarily to recruiting personnel, negotiating license
and option arrangements for our drug candidates, raising working capital and
developing our drug candidates. We have not received any revenues from the sale
of products and do not believe it likely that any of our drug candidates will be
commercially available until at least the year 2003. As of September 30, 2001,
our accumulated deficit was approximately $393.2 million.

      We require substantial working capital to fund the development and
potential commercialization of our drug candidates. We will require significant
expenditures to fund pre-clinical testing, clinical research studies, drug
synthesis and manufacturing, license obligations, development of a sales and
marketing infrastructure and ongoing administrative support before receiving
regulatory approvals for our drug candidates. These approvals may be delayed or
not granted at all. We have been unprofitable since our inception and expect to
incur substantial losses for at least the next several years. Because of the
nature of our business, we expect that losses will fluctuate from period to
period and that fluctuations may be substantial. See "--Risk and Uncertainties--
We have incurred losses since inception and may never achieve profitability."

      You should consider the operating and financial risks associated with drug
development activities when evaluating our prospects. To address these risks we
must, among other things, successfully develop and commercialize our drug
candidates, secure and maintain all necessary proprietary rights, respond to a
rapidly changing competitive market, obtain additional financing and continue to
attract, retain and motivate qualified personnel. We cannot assure you that we
will be successful in addressing these risks. See "--Risk and Uncertainties--
All of our drug candidates are in development and we may never successfully
commercialize them" and "-- If we need additional funds and are unable to raise
them, we will have to curtail or cease operations."

      Our operating expenses are difficult to predict and will depend on several
factors. Development expenses, including expenses for drug synthesis and
manufacturing, pre-clinical testing and clinical research activities, will
depend on the ongoing requirements of our drug development programs,
availability of capital and direction from regulatory agencies, which are
difficult to predict. Management may in some cases be able to control the timing
of development expenses in part by accelerating or decelerating pre-clinical
testing and clinical trial activities, but many of these expenditures will occur
irrespective of whether our drug candidates are approved when anticipated or at
all. As a result of these factors, we believe that period to period comparisons
are not necessarily meaningful and you should not rely on them as an indication
of future performance. Due to all of the foregoing factors, it is possible that
our consolidated operating results will be below the expectations of market
analysts and investors. In such event, the prevailing market price of our common
stock could be materially adversely affected. See "--Risk and Uncertainties--
The market price of our stock may fall as a result of market volatility and
future developments in our industry."


                                       11
<Page>

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
----------------------------------------------

COLLABORATIVE REVENUE

      Revenue totaled $1.3 million for the three months ended September 30, 2001
as compared to $1.7 million for the same period in 2000. Revenue is solely
related to collaborative revenue associated with our strategic alliance with
Abbott Laboratories and arises from $31.7 million of non-contingent research and
development expense reimbursement which is being amortized over the anticipated
research and development arrangement period. The decrease in 2001 collaborative
revenue reflects an extension of the projected development period in 2001 for
which collaborative revenue is amortized.

LICENSE FEES

      License fees totaled $500,000 for the three months ended September 30,
2001 as compared to $3.0 million for the same period in 2000. The decrease in
2001 license fees, as compared to 2000, is related to the timing and magnitude
of milestone obligations, including license or option preservation payments for
our portfolio of drug candidates. Future license fees may consist of milestone
payments or preservation payments under our license or option agreements, the
amount of which could be substantial and the timing of which will depend on a
number of factors that we cannot predict. These factors include, among others,
the success of our drug development programs, the amount of capital available
for allocation to individual drug candidates in our portfolio, and the extent to
which we may in-license or out-license drug candidates.

DEVELOPMENT EXPENSES

      Development expenses totaled $15.5 million for the three months ended
September 30, 2001 as compared to $22.9 million for the same period in 2000. The
substantial decrease in 2001 development expenses as compared to 2000 is due
primarily to reduced manufacturing costs for Coviracil(R) and, to a lesser
extent, decreased clinical costs associated with Coviracil and Coactinon(R),
somewhat offset by increased Coviracil patent costs. We are continuing to focus
our development resources on Coviracil, amdoxovir, and Coactinon. Accordingly,
approximately 81% of the third quarter 2001's development expenses were incurred
for these candidates.

      Our future development expenses will depend on the results and magnitude
of our clinical and preclinical activities, restrictions on our targeted future
cash usage, availability of capital to simultaneously fund multiple drug
candidate development programs and requirements imposed by regulatory agencies.
Accordingly, our development expenses may fluctuate significantly from period to
period. In addition, if we in-license or out-license rights to drug candidates
our development expenses may fluctuate significantly from prior periods.

PURCHASED RESEARCH AND DEVELOPMENT EXPENSE

      Purchased research and development expense totaled $320,000 for the three
months ended September 30, 2001 as compared to no expense for the same period in
2000. In September 2001, we issued 100,000 shares of common stock as
consideration to the former Avid Corporation shareholders for their remaining
rights relating to mozenavir dimesylate, which is at an early stage of clinical
development and has no alternative future use. The 2001 in-process research and
development charge is based upon the fair market value of our common stock on
the date on which we were obligated to issue additional shares of common stock
to the former Avid Corporation shareholders. This issuance satisfies all current
and any future obligations in regards to contingent development obligations for
mozenavir dimesylate to the former Avid Corporation shareholders. Under our
license agreement, we are still responsible to the DuPont Pharmaceuticals
Company for milestone, license preservation, and royalty payments, as well as
reimbursing DuPont for patent prosecution costs for mozenavir dimesylate. In
addition, there remains a contingency for the issuance of 250,000 shares of
common stock if development milestones are achieved regarding compounds for the
treatment of hepatitis B obtained in the Avid Corporation acquisition. Issuance
of any additional contingent shares will be recorded as additional purchase
price and will be allocated upon resolution of the underlying contingency.


                                       12
<Page>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative expenses totaled $1.6 million for the
three months ended September 30, 2001 as compared to $3.6 million for the same
period in 2000. The decrease in 2001 selling, general and administrative
expenses, as compared to 2000, is primarily related to decreased 2001 sales and
marketing spending for the period. Our selling, general and administrative
expenses may fluctuate from period to period and such fluctuations may be
significant. Future selling, general and administrative expenses will depend on
the level of our future development and commercialization activities and the
commercial availability of our products. We expect that our selling, general and
administrative expenses will increase in future periods that immediately precede
and follow our first product launch.

RESTRUCTURING EXPENSE

      Restructuring expense totaled $2.3 million for the three months ended
September 30, 2001 as compared to no expense for the same period in 2000. In
August 2001, we announced and began a restructuring of our development
activities and overall operations designed to lower our near term monthly cash
usage and to focus our financial and human resources on activities that are
expected to have the highest probability of near term regulatory approval and
economic return. This focus includes weighting our resources towards our drug
candidates in Phase III development, eliminating most resources dedicated to
basic research, and reducing resources dedicated to sales, marketing and general
administration. Approximately $1.7 million of the total restructuring charge
resulted from severance and other termination benefits related to an approximate
35% reduction in our total workforce. The remainder of the charge represents a
write-down of net assets, the loss associated with underutilized lease
obligations and legal and other expenses associated with reducing our workforce.
In September 2001, we terminated our licensing and collaborative agreement with
Arrow Therapeutics Limited. This collaboration was to identify and develop novel
anti-viral agents for the treatment of hepatitis C and required us to fund the
screening program and to pay development milestones and royalty payments on
sales of products which resulted from the collaboration.

INTEREST INCOME, NET

      Net interest income totaled $773,000 for the three months ended September
30, 2001 as compared to $1.7 million for the same period in 2000. The
significant decrease in 2001 interest income, as compared to 2000, is due to
smaller average investment balances and a much lower low-risk, short-term
interest rates in the third quarter of 2001. Future interest income will depend
on our future cash and investment balances and the return on these investments.
See "--Liquidity and Capital Resources."

NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
---------------------------------------------

COLLABORATIVE REVENUE

      Revenue totaled $4.8 million for the nine months ended September 30, 2001
as compared to $5.6 million for the same period in 2000. Revenue is solely
related to collaborative revenue associated with our strategic alliance with
Abbott Laboratories and arises from $31.7 million of non-contingent research and
development expense reimbursement which is being amortized over the anticipated
research and development arrangement period. The decrease in 2001 collaborative
revenue reflects an extension of the projected development period in 2001 for
which collaborative revenue is amortized.

LICENSE FEES

      License fees totaled $2.5 million for the nine months ended September 30,
2001 as compared to $3.8 million for the same period in 2000. License fees for
2001 and 2000 relate to the recognition of milestone obligations and/or
preservation fees under our license and option agreements for our portfolio of
drug candidates. The decrease in 2001 license fee expense, as compared to 2000,
is related to the timing and magnitude of milestone obligations and preservation
payments under our license and option agreements for our portfolio of drug
candidates. Future license fees may consist of milestone payments or
preservation payments under our license or option agreements, the amount of
which could be substantial and the timing of which will depend on a number of
factors,


                                       13
<Page>

that we cannot predict. These factors include, among others, the success of our
drug development programs, the amount of capital available for allocation to
individual drug candidates in our portfolio, and the extent to which we may
in-license or out-license drug candidates.

DEVELOPMENT EXPENSES

      Development expenses totaled $58.1 million for the nine months ended
September 30, 2001 as compared to $76.7 million for the same period in 2000.
Development expenses for 2001 consisted primarily of expenses for drug
synthesis, clinical trials, employee compensation, amounts paid for professional
services, patent costs and preclinical testing. Development expenses for 2000
consisted primarily of expenses for drug synthesis, clinical trials, employee
compensation, and preclinical testing. The substantial decrease in 2001
development expenses, as compared to 2000, is due primarily to reduced
manufacturing costs for Coviracil and, to a lesser extent, decreased clinical
costs for Coviracil and Coactinon, somewhat offset by increased Coviracil patent
costs. Development expenses for 2001 have been incurred primarily for Coviracil,
amdoxovir and Coactinon.

      Our future development expenses will depend on the results and magnitude
of our clinical and preclinical activities, restrictions on our targeted future
cash usage, availability of capital to simultaneously fund multiple drug
candidate development programs and requirements imposed by regulatory agencies.
Accordingly, our development expenses may fluctuate significantly from period to
period. In addition, if we in-license or out-license rights to drug candidates
our development expenses may fluctuate significantly from prior periods.

PURCHASED RESEARCH AND DEVELOPMENT EXPENSE

      Purchased research and development expense totaled $320,000 for the nine
months ended September 30, 2001 as compared to $5.4 million for the same period
in 2000. The decrease in 2001 purchased research and development expense, as
compared to 2000, is related to the magnitude and fair market value of the
common stock that was issued as consideration to satisfy milestone obligations
for mozenavir dimesylate. In September 2001, we issued 100,000 shares of common
stock as consideration to the former Avid Corporation shareholders for their
remaining rights relating to mozenavir dimesylate, which is at an early stage of
clinical development and has no alternative future use. In March 2000, we issued
400,000 shares of common stock as consideration for the extension of a milestone
payment date for mozenavir dimesylate. The in-process research and development
charges are based upon the fair market value of our common stock on the date on
which we were obligated to issue additional shares of common stock to the former
Avid Corporation shareholders. The 2001 issuance satisfies all current and any
future obligations in regards to contingent development obligations for
mozenavir dimesylate to the former Avid Corporation shareholders. There,
however, remains a contingency for the issuance of 250,000 shares of common
stock if development milestones are achieved regarding compounds for the
treatment of hepatitis B obtained in the Avid Corporation acquisition. Issuance
of any additional contingent shares will be recorded as additional purchase
price and will be allocated upon resolution of the underlying contingency.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative expenses totaled $6.6 million for the
nine months ended September 30, 2001 as compared to $9.8 million for the same
period in 2000. Selling, general and administrative expenses for 2001 and 2000
consisted primarily of employee compensation, amounts paid for outside
professional services, and rent expense. The decrease in 2001 selling, general
and administrative expenses, as compared to 2000, is primarily related to
decreased 2001 sales and marketing spending for the period. Our selling, general
and administrative expenses may fluctuate from period to period and such
fluctuations may be significant. Future selling, general and administrative
expenses will depend on the level of our future development and
commercialization activities and the commercial availability of our products. We
expect that our selling, general and administrative expenses will increase in
future periods that immediately precede and follow our first product launch.

RESTRUCTURING EXPENSE

      Restructuring expense totaled $2.3 million for the nine months ended
September 30, 2001 as compared to no expense for the same period in 2000. In
August 2001, we announced and began a restructuring of our development
activities and overall operations designed to lower our near term monthly cash
usage and to focus our


                                       14
<Page>

financial and human resources on activities that are expected to have the
highest probability of near term regulatory approval and economic return. This
focus includes weighting our resources towards our drug candidates in Phase III
development, eliminating most resources dedicated to basic research, and
reducing resources dedicated to sales, marketing and general administration.

INTEREST INCOME, NET

      Net interest income totaled $2.8 million for the nine months ended
September 30, 2001 as compared to $6.0 million for the same period in 2000. The
significant decrease in 2001 interest income, as compared to 2000, is due to
smaller average investment balances in 2001 and lower short-term interest rates.
Future interest income will depend on our future cash and investment balances
and the return on these investments. See "--Liquidity and Capital Resources."

LIQUIDITY AND CAPITAL RESOURCES

      We have financed our operations since inception (July 12, 1995) through
September 30, 2001 primarily with the net proceeds received from private
placements of equity securities, which have provided aggregate net proceeds of
approximately $190.3 million, and from initial and secondary public offerings,
which have provided aggregate net proceeds of approximately $96.8 million, as
well as net proceeds from the completion of our strategic alliance with Abbott
Laboratories, including net proceeds from the sale of common stock and
non-contingent research and development reimbursement of approximately $147.7
million. In November 2000, we entered into a $100.0 million Firm Underwritten
Equity Facility, the Facility, that provided us the ability to sell our common
stock in the public market through November 2003. We have raised approximately
$807,000 in total net proceeds from the Facility. In October 2001, we terminated
the Facility due to the added liquidity provided by the financing led by Warburg
Pincus Private Equity VIII, L.P., the Warburg Pincus financing. Our financial
position and liquidity have been further enhanced through the second closing of
the Warburg Pincus financing which took place on October 10, 2001 and which
resulted in approximately $46.6 million of net proceeds to be recorded in our
fourth quarter financial statements. See "--Equity Financings."

      At September 30, 2001, we had net working capital of $28.4 million, an
increase of approximately $12.7 million over December 31, 2000. The increase in
working capital is principally the result of three separate private equity
financings completed during the nine-month period ending September 30, 2001,
partially offset by use of funds for our normal operating expenses. Our
principal sources of liquidity at September 30, 2001 were $48.5 million in cash
and cash equivalents, $27.2 million in investments which are considered
"available-for-sale," and $2.0 million of strategic corporate investments. The
balance at September 30, 2001 reflected a $14.8 million increase of cash, cash
equivalent and investment balances over those at December 31, 2000.

      Our working capital requirements may fluctuate in future periods depending
on many factors, including the efficiency of manufacturing processes developed
on our behalf by third parties, the cost of drugs supplied by third party
contractors (including Abbott Laboratories), the magnitude, scope and timing of
our drug development programs, the cost, timing and outcome of regulatory
reviews and changes in regulatory requirements, costs under the license and/or
option agreements relating to our drug candidates (including the costs of
obtaining patent protection for our drug candidates), the timing and terms of
business development activities related to current and new drug candidates, the
rate of technological advances relevant to our operations, the timing, method
and cost of the commercialization of our drug candidates, the level of required
administrative and legal support, and the potential expansion of required
facility space.

      Amounts payable by us in the future under our existing license and
research agreements are uncertain due to a number of factors, including the
progress of our drug development programs, our ability to obtain approval to
commercialize drug candidates and the commercial success of approved drugs. Our
existing license and research agreements, as of September 30, 2001, may require
future cash payments of up to $83.0 million contingent on the achievement of
development milestones, up to $30.0 million on the achievement of sales
milestones, and $2.5 million of future research and development payments. One of
our licensors has the option to receive $2.0 million of future milestone
payments in shares of common stock, based on the then current market price, in
lieu of a cash payment. We are also obligated to issue 250,000 shares of common
stock if development milestones are achieved regarding compounds for the
treatment of hepatitis B obtained in the acquisition of Avid Corporation.
Additionally,


                                       15
<Page>

we will pay royalties based on a percentage of net sales of each licensed
product incorporating these drug candidates. Most of our license agreements
require minimum royalty payments commencing three years after regulatory
approval of the licensed compound. Depending on our success and timing in
obtaining regulatory approval, aggregate annual minimum royalties and license
preservation fees under our existing license agreements could range from $50,000
if only a single drug candidate is approved for one indication, to $51.5 million
if all drug candidates are approved for all indications. In addition, we have
option agreements that allow us to obtain licenses on additional drug candidates
in the future. Exercise of these option agreements would increase our license
obligations.

      In August 2001, we announced and initiated a restructuring of our
development activities and overall operations designed to lower our near term
monthly cash usage. This reduction is expected to be accomplished by
prioritizing the allocation of financial and human resources to the development
of compounds in Phase III development which are expected to have the highest
probability of near term regulatory approval and economic return. In addition,
we are reducing resources dedicated to basic research, sales, marketing and
general administration. In September 2001, we terminated our licensing and
collaborative agreement with Arrow Therapeutics Limited. This collaboration had
been established to identify and develop novel antiviral agents for the
treatment of hepatitis C and required us to fund the screening program and to
pay development milestones and royalty payments on sales of products which
resulted from this collaboration. Our ability to achieve our reduced cash usage
targets is subject to several risks including unanticipated cost overruns,
delays in streamlining operations, the need to expand the magnitude and/or scope
of existing development programs, the need to change the number and/or timing of
clinical trials and unanticipated regulatory requirements.

      We believe that our existing cash, cash equivalents and investments
(including the $46.6 million of net proceeds raised on October 10, 2001 in the
second closing of the Warburg Pincus financing) will be adequate to satisfy our
anticipated working capital requirements through the second quarter of 2003. We
expect that we will be required to raise additional capital to fund our future
operations through equity or debt financings or from other sources. We may also
consider modifying the timing or scope of our clinical programs or out-licensing
one or more of our compounds which may impact our anticipated capital
requirements. We cannot assure you that additional funding will be available on
favorable terms from any of these sources or at all. See "--Risk and
Uncertainties-- If we need additional funds and are unable to raise them, we
will have to curtail or cease operations."

EQUITY FINANCINGS

      On August 24, 2001, we entered into a purchase agreement with Warburg
Pincus for the sale of 28,301,887 shares of common stock in a two-stage private
placement at a purchase price of $2.65 per share. On the same day, the first
closing of the private placement occurred and we issued 9,628,002 shares of
common stock for net proceeds totaling approximately $24.0 million.

      The purchase agreement provided for the sale of an additional 13,756,885
shares of our common stock to Warburg Pincus and an additional 4,917,000 shares
of common stock to other investors (including QFinance, Inc., a related party)
at a purchase price of $2.65 per share in a second closing subject to several
conditions, including stockholder approval of the sale. Stockholder approval and
the second closing occurred on October 10, 2001 and resulted in net proceeds
totaling approximately $46.6 million which will be recorded in our fourth
quarter financial statements. In the purchase agreement with Warburg Pincus, we
agreed to register the shares of common stock sold in both closings, to cause
two individuals nominated by Warburg Pincus to be appointed to the Board of
Directors, and granted Warburg Pincus rights to participate in certain future
sales of common stock. Accordingly, we filed a registration statement with the
Securities and Exchange Commission on October 18, 2001 covering the resale of
28,301,887 shares of common stock; two additional directors affiliated with
Warburg Pincus were elected to the Board of Directors; and Warburg Pincus has
the right to participate proportionally in future equity financings, as long as
Warburg Pincus owns approximately 5,846,000 shares of our outstanding common
stock.

LITIGATION AND OTHER CONTINGENCIES

      As discussed below in "Risk and Uncertainties," we are indirectly involved
in several patent opposition and adversarial proceedings and two lawsuits filed
in Australia regarding the patent rights related to two of our licensed drug
candidates, Coviracil and amdoxovir. Although we are not a named party in any of
these proceedings, we are


                                       16
<Page>

obligated to reimburse our licensors for legal expenses associated with these
proceedings. In one of these patent opposition proceedings, on November 8, 2000,
the Australian Patent Office held that several patent claims of Emory University
directed to amdoxovir are not patentable over an earlier Shire Pharmaceuticals,
Inc., formerly BioChem Pharma, Inc., patent. Emory has appealed this decision of
the Australian Patent Office to the Australian Federal Court. If Emory, the
University of Georgia Research Foundation, Inc. or Triangle is unsuccessful in
the appeal, then we will not be able to sell amdoxovir in Australia without a
license from Shire Pharmaceuticals, which may not be available on reasonable
terms or at all. We cannot predict the outcome of this or any of the other
proceedings. We believe that an adverse judgment rendered against us would not
result in a material financial obligation, nor would we have to recognize an
impairment under Statement of Financial Accounting Standards No. 121 "ACCOUNTING
FOR IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF" as
no amounts have been capitalized related to our drug candidates. However, any
development in these proceedings adverse to our interests, including any adverse
development related to the patent rights licensed to us for these two drug
candidates or our related rights or obligations, could have a material adverse
effect on our business and future consolidated financial position, results of
operations and cash flow.

      In July 2001, the Financial Accounting Standards Board, FASB, issued
Statement of Financial Accounting Standards, SFAS, No. 141, "BUSINESS
COMBINATIONS" and SFAS No. 142, "GOODWILL AND OTHER INTANGIBLE ASSETS." SFAS No.
141 eliminates the pooling-of-interests method of accounting for business
combinations except for qualifying business combinations that were initiated
prior to July 1, 2001. SFAS No. 142 changes the accounting for goodwill and
indefinite lived intangible assets from an amortization method to an
impairment-only approach. In August 2001, the FASB issued SFAS No. 143,
"ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS." The objectives of SFAS No. 143
are to establish accounting standards for the recognition and measurement of an
asset retirement obligation and its associated asset retirement cost. In October
2001, the FASB issued SFAS No. 144, "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL
OF LONG-LIVED ASSETS." This statement supersedes SFAS No. 121, "ACCOUNTING FOR
THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF"
and Accounting Principles Board Opinion No. 30, "REPORTING THE RESULTS OF
OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF BUSINESS, AND
EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS."

      We intend to adopt SFAS No. 142 and 144 as of January 1, 2002, and SFAS
No. 143 as of January 1, 2003, as required. Adoption of SFAS Nos. 141, 142 and
143 are not expected to have any financial impact, and we are currently
assessing the impact of SFAS 144 on our consolidated financial position, results
of operations and cash flows.

RISK AND UNCERTAINTIES

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

ALL OF OUR DRUG CANDIDATES ARE IN DEVELOPMENT AND WE MAY NEVER SUCCESSFULLY
COMMERCIALIZE THEM.

      Some of our drug candidates are at an early stage of development and all
of our drug candidates will require expensive and lengthy testing and regulatory
clearances. The regulatory authorities have not approved any of our drug
candidates. We do not expect any of our drug candidates to be commercially
available until at least the year 2003. There are many reasons that we may fail
in our efforts to develop our drug candidates, including that:

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

      The success of our business depends on 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 have incurred losses since our
inception. At September 30, 2001, our accumulated deficit was $393.2 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 from the sale of our drug candidates to date, and do not
expect to do so until at least the year 2003. In addition, we expect annual
losses to continue over the next several years as a result of our drug
development and commercialization efforts. To


                                       17
<Page>

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
profitability.

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

      Our drug development programs and our efforts to commercialize our drug
candidates require substantial working capital, including expenses for:

      o     preclinical testing,
      o     chemical synthetic scale-up,
      o     manufacture of drug substance for clinical trials,
      o     toxicology studies,
      o     clinical trials of drug candidates,
      o     sales and marketing,
      o     payments to our licensors, and
      o     potential commercial launch of our drug candidates.

      Our future working capital needs will depend on many factors, including:

      o     the progress, magnitude and success of our drug development
            programs,
      o     the scope and results of preclinical testing and clinical trials,
      o     the cost, timing and outcome of regulatory filings and reviews,
      o     the costs under current and future license and option agreements for
            our drug candidates, including the costs of obtaining and enforcing
            patent protection for our drug candidates,
      o     the costs of acquiring any additional drug candidates,
      o     the out-licensing of existing drug candidates,
      o     the rate of technological advances by us and other companies,
      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. We believe that our existing cash, cash
equivalents and investments, considering our recent steps to reduce cash usage
and completed financings (including the sale of shares to Warburg Pincus and
other investors on October 10, 2001), will be adequate through the second
quarter of 2003. We expect that we will need additional future financings to
fund our operations. We cannot assure you that available sources of funds will
be sufficient to meet our future needs. In addition, we cannot assure you that
we will receive the contingent development milestone payments under our
strategic alliance with Abbott Laboratories, the Abbott Alliance. 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 may not be favorable
to us. These collaborative arrangements or modifications could result in the
transfer of valuable rights to third parties. In addition, we may acquire
technologies and drug candidates that would increase our working capital
requirements.

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

      To obtain regulatory approvals needed for the sale of our drug candidates,
we must demonstrate through preclinical testing and clinical trials that each
drug candidate is safe and effective. The clinical trial process is complex and
uncertain and the regulatory environment varies widely from country to country.
Positive results from


                                       18
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preclinical testing and early clinical trials do not ensure positive results in
pivotal clinical trials. Many companies in our industry have suffered
significant setbacks in pivotal clinical trials, even after promising results in
earlier trials. Any of our drug candidates may produce undesirable side effects
in humans. These side effects could cause us or regulatory authorities to
interrupt, delay or halt clinical trials of a drug candidate, as occurred with
mozenavir dimesylate, or could result in regulatory authorities refusing to
approve the drug candidate for any and all targeted indications. In 2000, the
South African Medicines Control Council terminated one of our phase III clinical
studies, study FTC-302, for our drug candidate Coviracil and the Food and Drug
Administration, the FDA, issued a clinical hold on the study. Our planned
submission of an U.S. New Drug Application for Coviracil will likely be delayed
until data from our ongoing FTC-301 study is available for inclusion in the
filing. 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 TAKE LONGER TO COMPLETE AND COST MORE THAN WE EXPECT, WHICH
WOULD ADVERSELY AFFECT OUR ABILITY TO COMMERCIALIZE DRUG CANDIDATES AND ACHIEVE
PROFITABILITY.

      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,
      o     the eligibility criteria for the clinical trial, and
      o     the perceived benefit of participating in a 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 new regulations could also result in
delays or rejections of our applications for approval of our drug candidates.
The FDA has notified us that three of our drug candidates for the treatment of
HIV, Coviracil, Coactinon and amdoxovir, qualify for designation as "fast track"
products under provisions of the Food and Drug Administration Modernization Act
of 1997. The fast track provisions are designed to expedite the review of new
drugs intended to treat serious or life-threatening conditions and essentially
codified the criteria previously established by the FDA for accelerated
approval. These drug candidates may not, however, continue to qualify for
expedited review and our other drug candidates may fail to qualify for fast
track development or expedited review. Even though some of our drug candidates
have qualified for expedited review, the FDA may not approve them at all or any
sooner than other drug candidates that do not qualify for expedited review.

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

      Our success will depend on our ability and the ability of our licensors to
obtain and maintain patents and proprietary rights for our drug candidates and
to avoid infringing the proprietary rights of others, both in the United States
and in foreign countries. We have no patents solely in our own name and we have
a small number of patent applications of our own pending. We have one U.S.
patent which is jointly owned with another institution. We have licensed, or
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 on some of our drug candidates, 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 licensed. In addition, others may challenge, seek to


                                       19
<Page>

invalidate, infringe or circumvent any patents we own or license. If they do so
successfully, 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 licensed, either by claiming the same methods or
compounds or by claiming methods or compounds that could dominate those owned by
or licensed to us. In addition, we may not be aware of all patents or patent
applications that may impact our ability to make, use or sell any of our drug
candidates. For example, United States patent applications are confidential
while pending in the Patent and Trademark Office, 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 license on
acceptable terms or at all. Any failure to obtain licenses could delay or
prevent us from pursuing the development or commercialization of our drug
candidates, which would adversely affect our ability to achieve profitability.

      There are significant risks regarding the patent rights of two of our
licensed drug candidates. We may not be able to commercialize Coviracil or
amdoxovir 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 in combination to treat HIV and
hepatitis B. As a result, our patent position regarding the use of Coviracil and
amdoxovir 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 amdoxovir in the
absence of a license from one or more third parties, which may not be available
on acceptable terms or at all. Even if any of these questions is resolved in our
favor, we may still attempt to obtain licenses from one or more third parties to
reduce the risks of challenges to our patent positions. These licenses may not
be available on acceptable terms or at all. Our inability to commercialize
either of these drug candidates would adversely affect our ability to achieve
profitability.

      COVIRACIL (EMTRICITABINE)

      Coviracil, a purified form of FTC, belongs to the same general class of
nucleosides as lamivudine. In the United States, the FDA has approved lamivudine
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 lamivudine for the treatment of hepatitis B and for use in combination
with other nucleoside analogues for the treatment of HIV in a number of other
countries. GlaxoSmithKline plc, Glaxo, currently sells lamivudine for the
treatment of HIV and hepatitis B under a license agreement with Shire
Pharmaceuticals Group, plc. Shire Pharmaceuticals obtained its rights under this
license agreement through a merger with BioChem Pharma, Inc. We obtained rights
to Coviracil under a license from Emory University. In 1990 and 1991, Emory
filed in the United States and then 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 filed in the United States
patent applications on FTC, including emtricitabine 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, now Shire Pharmaceuticals, 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. Shire
Pharmaceuticals filed foreign patent applications in 1990, which expanded on 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
patents have been issued in a number of countries with claims directed to FTC
that may cover Coviracil and its use to treat HIV. In addition, Shire
Pharmaceuticals filed a United States patent application in 1991 specifically
directed to Coviracil. Shire Pharmaceuticals has received two patents in the
United


                                       20
<Page>

States based on this patent application, one directed to Coviracil and the other
directed to a method for treating viral diseases with Coviracil. The Patent and
Trademark Office has determined that there are conflicts between both Shire
Pharmaceuticals patents and patent applications filed by Emory because they have
overlapping claims to the same technology. The Patent and Trademark Office is
conducting two adversarial proceedings, interferences, to determine whether
Shire Pharmaceuticals or Emory is entitled to the patent claims in dispute
regarding Shire Pharmaceuticals' two issued patents. On July 5, 2001, the Patent
and Trademark Office issued a decision awarding the patent on the method for
treating HIV with Coviracil to Emory and ruled that Shire Pharmaceuticals'
patent on that subject matter is invalid. The time to appeal this decision has
now expired. The decision is therefore final. Emory may not prevail in the
remaining adversarial proceeding, and the proceeding may also delay the decision
of the Patent and Trademark Office regarding Emory's patent application. Shire
Pharmaceuticals also filed patent applications in many foreign countries based
on its 1991 United States patent application and has received patents in some of
these countries. Shire Pharmaceuticals may have additional patent applications
pending in the United States.

      In the United States, the first to invent a technology is entitled to
patent protection on that technology. For patent applications filed prior to
January 1, 1996, United States patent law provides that a party who invented a
technology outside the United States is deemed to have invented the technology
on the earlier of the date it introduced the invention in the United States or
the date it filed its patent application. In a filing with the Securities and
Exchange Commission, Shire Pharmaceuticals stated that prior to January 1, 1996,
it conducted substantially all of its research activities outside the United
States. Shire Pharmaceuticals 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 Shire
Pharmaceuticals was the first to invent the technology claimed in their
respective United States patent applications or patents. We also do not know
whether Shire Pharmaceuticals 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
Shire Pharmaceuticals filed its foreign patent applications on that technology.
However, Shire Pharmaceuticals has received patents in several foreign
countries. In addition, Shire Pharmaceuticals has filed patent applications on
Coviracil and its uses in countries in which Emory did not file patent
applications. Emory has opposed or otherwise challenged patent claims on
Coviracil granted to Shire Pharmaceuticals in Australia, Europe and South Korea.
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 Shire Pharmaceuticals. Shire
Pharmaceuticals has opposed patent claims on Coviracil granted to Emory in
Europe, Japan, Australia and South Korea. The South Korean patent office issued
a decision upholding patent claims to Emory that cover Coviracil. Shire
Pharmaceuticals can appeal this decision. Shire Pharmaceuticals 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 Shire
Pharmaceuticals. 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 any governmental authority determined that the sale of Coviracil
for the treatment of HIV infringes a Shire Pharmaceuticals patent, we would not
have the right to make, use or sell Coviracil for the treatment of HIV in that
country in the absence of a license from Shire Pharmaceuticals. We may be unable
to obtain a license from Shire Pharmaceuticals on acceptable terms or at all.

      HEPATITIS B. Burroughs Wellcome Co. 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 emtricitabine. 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 emtricitabine 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


                                       21
<Page>

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 emtricitabine 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 emtricitabine.

      Shire Pharmaceuticals filed a patent application in May 1991 in Great
Britain also directed to a method to treat hepatitis B with FTC. Shire
Pharmaceuticals filed similar patent applications in other countries. In January
1996, Shire Pharmaceuticals received a patent in the United States, which
included a claim to treat hepatitis B with emtricitabine. The Patent and
Trademark Office has determined that there is a conflict between the Shire
Pharmaceuticals patent and patent applications filed by Yale and Emory. The
Patent and Trademark Office is conducting an adversarial proceeding, an
interference, to determine which party is entitled to the patent claims in
dispute. Yale licensed all of its rights relating to FTC, including
emtricitabine, 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
Patent and Trademark Office regarding Yale's and Emory's patent applications. In
addition, the Patent and Trademark Office has recently added the U.S. patent
application filed by Burroughs Wellcome to this interference. Emory may not
pursue or succeed in these proceedings. We will not be able to sell
emtricitabine for the treatment of hepatitis B in the United States unless a
United States court or administrative body determines that the Shire
Pharmaceuticals patent is invalid or unless we obtain a license from Shire
Pharmaceuticals. We may be unable to obtain a license on acceptable terms or at
all. In July 1991, Shire Pharmaceuticals received a United States patent on the
use of lamivudine to treat hepatitis B and has corresponding patent applications
pending or issued in foreign countries. If the Patent and Trademark Office
determines that the use of emtricitabine to treat hepatitis B is not
substantially different from the use of lamivudine to treat hepatitis B, a court
could hold that the use of emtricitabine to treat hepatitis B infringes these
Shire Pharmaceuticals lamivudine patents.

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

      AMDOXOVIR (FORMERLY KNOWN AS DAPD)

      We obtained our rights to amdoxovir under a license from Emory and the
University of Georgia Research Foundation, Inc., University of Georgia. Our
rights to amdoxovir include a number of issued United States patents that cover:

      o     composition of matter,
      o     a method for the synthesis of amdoxovir,
      o     methods for the use of amdoxovir alone or in combination with
            several other agents for the treatment of hepatitis B, and
      o     a method to treat HIV with amdoxovir.

      We also have rights to several foreign patents and patent applications
that cover methods for the use of amdoxovir alone or in combination with other
anti-hepatitis B agents for the treatment of hepatitis B. Additional foreign
patent applications are pending which contain claims for the use of amdoxovir to
treat HIV. Emory and the University of Georgia filed patent applications
claiming these inventions in the United States in 1990 and 1992.

      Shire Pharmaceuticals filed a patent application in the United States in
1988 on a group of nucleosides in the same general class as amdoxovir and their
use to treat HIV, and has filed corresponding patent applications in foreign
countries. The Patent and Trademark Office issued a patent to Shire
Pharmaceuticals in 1993 covering a class of nucleosides that includes amdoxovir
and its use to treat HIV. Corresponding patents have been issued to Shire
Pharmaceuticals in many foreign countries. Emory has filed an opposition to
patent claims granted to Shire


                                       22
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Pharmaceuticals by the European Patent Office based, in part, on Emory's
assertion that Shire Pharmaceuticals' patent does not disclose how to make
amdoxovir. In a patent opposition hearing held at the European Patent Office on
March 4, 1999, the Opposition Division ruled that the Shire Pharmaceuticals
European patent covering amdoxovir is valid. Emory has appealed this decision to
the European Patent Office Technical Board of Appeal. If the Technical Board of
Appeal affirms the decision of the Opposition Division, or if we or Emory do not
pursue the appeal, we would not be able to sell amdoxovir in Europe without a
license from Shire Pharmaceuticals, which may not be available on acceptable
terms or at all. Shire Pharmaceuticals has opposed patent claims granted to
Emory on both amdoxovir and DXG, the parent drug into which amdoxovir is
converted in the body, in the Australian Patent Office.

      In a decision dated November 8, 2000, the Australian Patent Office held
that Emory's patent claims directed to amdoxovir are not patentable over an
earlier Shire Pharmaceuticals patent. Emory has appealed this decision of the
Australian Patent Office to the Australian Federal Court. If Emory, the
University of Georgia or we are unsuccessful in the appeal, then we will not be
able to sell amdoxovir in Australia without a license from Shire
Pharmaceuticals, which may not be available on acceptable terms or at all. Shire
Pharmaceuticals' opposition to Emory's patent claims on DXG in Australia is
ongoing. If Emory, the University of Georgia or we do not challenge, or are not
successful in any challenge to, Shire Pharmaceuticals' issued patents, pending
patent applications, or patents that may issue from its applications, we will
not be able to manufacture, use or sell amdoxovir in the United States and any
foreign countries in which Shire Pharmaceuticals receives a patent without a
license from Shire Pharmaceuticals. We may not be able to obtain a license from
Shire Pharmaceuticals on acceptable terms or at all.

      IMMUNOSTIMULATORY SEQUENCE PRODUCT CANDIDATES

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

      There are a number of companies which have patent applications and issued
patents, both in the United States and in other countries, that cover
immunostimulatory sequences and their uses. Coley Pharmaceuticals, Inc. has
filed several patent applications in this area and has in addition exclusively
licensed a number of patent applications on this subject from the University of
Iowa and Isis Pharmaceuticals, Inc. A number of these patent applications have
been issued. A number of companies have also filed patent applications and have
or are expected to receive patents on a number of polynucleotides and methods
for their use and manufacture. These patents, if granted, could prevent us from
making, using or selling any immunostimulatory sequence that is covered by a
patent issued to a third party unless we obtain a license from that party which
may not be available 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. The costs of the currently pending
proceedings are significant and may 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 are
significant and 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 rights to
develop and commercialize 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
Patent and Trademark Office is conducting three adversarial proceedings in
connection with the emtricitabine technology. We cannot assure you that a court
or administrative body would hold our licensed patents valid or would find an
alleged infringer to be infringing. Further, the license and option agreements
with Emory, the University of Georgia, The Regents of the University of
California, The DuPont Pharmaceuticals Company, Mitsubishi Pharma Corporation
(formerly, Mitsubishi-Tokyo Pharmaceuticals,


                                       23
<Page>

Inc.) and Dynavax provide that each of these licensors is primarily responsible
for any patent prosecution activities, such as litigation, patent conflict
proceeding, patent opposition or other actions, for the technology licensed to
us. These agreements also provide that we generally must reimburse these
licensors for the costs they incur in performing these activities. Similarly,
Yale and the University of Georgia, the licensors of clevudine to Bukwang Pharm.
Ind. Co., Ltd., are primarily responsible for patent prosecution activities with
respect to clevudine at our expense. As a result, we generally do not have the
ability to institute or determine the conduct of any patent proceedings unless
our licensors elect not to institute or to abandon the proceedings. If our
licensors elect to institute and prosecute patent proceedings, our rights will
depend in part on 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 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 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.

BECAUSE WE MAY NOT BE ABLE TO MAINTAIN THE CONFIDENTIALITY OF OUR TRADE SECRETS
AND KNOW-HOW, WE MAY LOSE A COMPETITIVE ADVANTAGE.

      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 technologies to which we do not have exclusive rights or which may
not be patentable or proprietary and may be available to competitors. We have
filed applications for, but have not obtained, trademark registrations for
various marks in the United States and other jurisdictions. We have received
U.S. trademark registrations for our corporate name and our corporate name and
logo, as well as the marks Coactinon(R) and Coviracil(R). We have received
Canadian trademark registrations for the marks Coactinon(R) and Coviracil(R). We
have also received registrations in the European Union for the mark Coactinon(R)
and our corporate logo. Our pending application in the European Union for the
mark Coviracil(TM) has been opposed by Orsem, based on registrations for the
mark Coversyl in various countries, and Les Laboratories Serveir, based on a
French registration for the mark Coversyl. We do not believe that the marks
Coviracil and Coversyl are confusingly similar, but, in the event they are found
to be confusingly similar, we may need to adopt a different product name for
emtricitabine in the applicable jurisdictions. Several other companies use trade
names that are similar to our name for their businesses. If we are unable to
obtain any licenses that may be necessary for the use of our corporate name, we
may be required to change our name. Our management personnel were previously
employed by other pharmaceutical companies. The prior employers of these
individuals may allege violations of trade secrets and other similar claims
relating to their drug development activities for us.

THE COSTS AND TIME REQUIRED TO COMPLY WITH EXTENSIVE GOVERNMENT REGULATIONS
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
domestic and international regulations covering the development and registration
of pharmaceutical products. These regulations affect:

      o     manufacturing,
      o     safety,
      o     labeling,
      o     storage,
      o     record keeping,
      o     reporting, and
      o     marketing and promotion.

      We must also comply with regulations governing non-clinical and clinical
laboratory practices, safe working conditions, and the use and disposal of
hazardous substances, including radioactive compounds and infectious disease
agents we use in connection with our development work. The requirements vary
widely from


                                       24
<Page>

country to country and some requirements may vary from state to state in the
United States. 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. Any approval
may be contingent on 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,
      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 combination therapy with one or more other drugs, and
adverse safety, effectiveness or regulatory developments in connection with the
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 many factors including:


                                       25
<Page>

      o     the safety and effectiveness of our products,
      o     the timing and scope of regulatory approvals,
      o     the availability of supply,
      o     marketing and sales capability,
      o     reimbursement coverage,
      o     price, and
      o     patent position.

      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.

IF OUR LICENSORS TERMINATE THEIR AGREEMENTS WITH US, WE COULD LOSE OUR RIGHTS TO
OUR DRUG CANDIDATES.

      We have licensed or obtained an option to license our drug candidates
under agreements with our licensors. These agreements permit our licensors to
terminate the agreements in circumstances such as our failure to achieve
development milestones or the occurrence of an uncured material breach by us.
The termination of any of these agreements would result in the loss of our
rights to a drug candidate. On the 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 we generally must reimburse
our licensors for the costs they incur in performing any patent prosecution
activities such as litigation, patent conflict, patent opposition or other
actions, for the technology licensed to us. 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 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.

IF WE ARE NOT ABLE 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 use our existing relationships or to establish relationships with
additional third party manufacturers for products that we develop. The terms of
the Abbott Alliance provide that Abbott Laboratories 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 manufacturers
on acceptable terms, and manufacturers may be unable to manufacture products in
commercial quantities on a cost effective basis. Our dependence on 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 manufacturing our products and may be unable to maintain the
necessary governmental licenses and approvals to continue manufacturing our
products.

BECAUSE WE DEPEND ON THIRD PARTIES, WE MAY BE UNABLE TO SUCCESSFULLY MARKET,
SELL OR DISTRIBUTE PRODUCTS WE DEVELOP.

      In the United States, we currently intend to market the products covered
by the Abbott Alliance in collaboration with Abbott and to market other products
that we successfully develop, that do not become part of the Abbott Alliance,
through a direct sales force or through arrangements or collaborations with
third parties. Outside of the United States, we expect Abbott to market products
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 products
covered by the Abbott Alliance both inside and outside the United States. With
respect to the United States, our ability to market the products that we
successfully develop may be contingent on 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, 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.


                                       26
<Page>

We may have limited control over the amount and timing of resources that a third
party devotes to our products. 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 DISCOVERY AND DEVELOPMENT OF DRUG
CANDIDATES, WE MAY NOT SUCCESSFULLY ACQUIRE ADDITIONAL DRUG CANDIDATES OR
DEVELOP OUR CURRENT DRUG CANDIDATES.

      We do not currently intend to engage in drug discovery. Our strategy for
obtaining additional drug candidates is to utilize the relationships of our
management team and scientific consultants to identify drug candidates for
in-licensing from companies, universities, research institutions and other
organizations. We may not succeed in acquiring additional drug candidates on
acceptable terms or at all.

      Because 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, 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.

BECAUSE WE MAY NOT BE ABLE TO ATTRACT AND RETAIN KEY PERSONNEL AND ADVISORS, WE
MAY NOT SUCCESSFULLY DEVELOP OUR DRUG CANDIDATES 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. 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. 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. If we are not able to attract and
retain these individuals we may not be able to successfully commercialize our
drug candidates.

HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT PRACTICES ARE
UNCERTAIN AND MAY DELAY OR PREVENT THE COMMERCIALIZATION OF OUR DRUG CANDIDATES.

      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 considered 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. 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
proposals could have an adverse effect on our ability to earn profits 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 for medical products and
services. Present combination treatment regimens for the treatment of HIV are
expensive and costs 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 these limitations will
continue in the future. Third party payors may not consider products we may
bring to the market cost effective and may not reimburse the consumer
sufficiently to allow us to sell our products on a profitable basis.

IF OUR PRODUCTS 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 on a number of factors,
including:


                                       27
<Page>

      o     the receipt and scope of regulatory approvals,
      o     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
      o     reimbursement policies of government and third party payors.

      Physicians, patients, payors or the medical community in general may not
accept or utilize any product that we may develop.

WE MAY NOT HAVE ADEQUATE INSURANCE PROTECTION AGAINST PRODUCT LIABILITY.

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

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. We
could be held liable for any damages or fines that result from any accidental
contamination or injury and the liability could exceed our resources.

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

      As of October 15, 2001, our directors, executive officers and their
affiliates, excluding Abbott and Warburg Pincus, owned approximately 12.8% of
our outstanding common stock. Abbott owned approximately 10.3% of our
outstanding common stock and Warburg Pincus owned approximately 30.4% of our
outstanding common stock. Under the terms of the Abbott Alliance, Abbott has the
right to purchase additional shares of our common stock up to a maximum
aggregate percentage of 21% of our outstanding common stock and has rights to
purchase shares directly from us in order to maintain its existing level of
ownership. For so long as Warburg Pincus continues to own at least 5,846,222
shares of our common stock and at least 10% of our outstanding common stock,
Warburg Pincus has the right to participate in any sales of equity securities by
Triangle, other than sales in connection with a registered underwritten
offering, a merger or similar transaction or a stock option or similar plan, in
proportion to the percentage of all outstanding securities of Triangle held by
Warburg Pincus at the time of the transaction. Abbott has the right to designate
one person to serve as a member of our Board of Directors and Warburg Pincus has
the right to designate two people to serve as members 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 FALL AS A RESULT OF MARKET VOLATILITY AND
FUTURE DEVELOPMENTS IN OUR INDUSTRY.

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

      o     announcements of the results of clinical trials by us or our
            competitors,
      o     announcements of the timing of regulatory submissions and/or
            approvals by us or our competitors,
      o     developments with respect to patents or proprietary rights,
      o     announcements of technological innovations by us or our competitors,
      o     announcements of new products or new contracts by us or our
            competitors,


                                       28
<Page>

      o     actual or anticipated variations in our operating results, including
            targeted cash usage, 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 analysts' estimates,
      o     conditions and trends in the pharmaceutical and other industries,
      o     new accounting standards,
      o     general economic, political and market conditions and other factors,
            and
      o     the occurrence of any of the risks described in these "Risk
            Factors."

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

APPROXIMATELY 28,000,000 SHARES OF OUR COMMON STOCK MAY BE SOLD WITHOUT
RESTRICTION AND APPROXIMATELY 38,950,000 SHARES ARE REGISTERED FOR SALE. SALES
OF A LARGE NUMBER OF OUR SHARES MAY CAUSE OUR STOCK PRICE TO FALL EVEN IF OUR
BUSINESS IS DOING WELL.

      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 decline.
As of October 15, 2001, there were 76,816,387 shares of common stock
outstanding, of which approximately 28,000,000 were immediately eligible for
resale in the public market without restriction. Holders of approximately
42,200,000 shares have rights to cause us to register their shares for sale to
the public. We have filed registration statements to register the sale of
approximately 38,950,000 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.

      Declines in our stock price might harm our ability to issue equity or
secure other types of financing arrangements. The price at which we issue shares
is generally based on the market price of our common stock and a decline in our
stock price would result in our needing to issue a greater number of shares to
raise a given amount of funds or acquire a given amount of goods or services.
For this reason, a decline in our stock price might also result in increased
ownership dilution to our stockholders.

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. We have 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 of
Directors. The rights plan will not prevent an acquisition of Triangle which is
approved by the Board of Directors. Our charter authorizes the Board of
Directors to determine the terms of any shares of undesignated preferred stock
and issue them without stockholder approval. 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 of
Directors 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
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.


                                       29
<Page>

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

      Triangle is exposed to various market risks, including changes in foreign
currency exchange rates, investment market value 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, 2001, we
had no forward foreign currency contracts, but had approximately $250,000 of
investments in foreign currencies to hedge foreign currency commitments. We
have, however, established policies and procedures for market risk assessment
and the approval, reporting and monitoring of derivative financial instrument
activities. The following discusses our exposure to risks related to changes in
interest rates, foreign currency exchange rates and investment market value.

INTEREST RATE SENSITIVITY

      Triangle is subject to interest rate risk on its investment portfolio. We
maintain an investment portfolio consisting primarily of high quality money
market instruments, government and corporate bonds. Our portfolio has a current
average maturity of less than 12 months. We attempt to mitigate default risk by
investing in high credit quality securities and by monitoring the credit rating
of investment issuers. Our investment portfolio includes only marketable
securities with active secondary or resale markets to help ensure portfolio
liquidity and we have implemented guidelines limiting the duration of
investments. These available-for-sale securities are subject to interest rate
risk and will decrease in value if market interest rates increase. If market
rates were to increase by 10 percent from levels at September 30, 2001, we
expect that the fair value of our investment portfolio would decline by an
immaterial aggregate amount primarily due to the relatively short maturity of
the portfolio. At September 30, 2001, our portfolio consisted of approximately
$15.7 million of investments maturing within one year and approximately $11.5
million of investments maturing after one year but within 30 months.
Additionally, we generally have the ability to hold our fixed income investments
to maturity and therefore do not expect that our consolidated operating results,
financial position or cash flows will 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 establish fixed
exchange rates on firm foreign currency cash outflows and to minimize the impact
to Triangle 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,
2001, Triangle had no forward foreign currency contracts, but had investments in
foreign currencies totaling approximately $250,000 used to hedge foreign
currency commitments. The purchase and the holding of foreign currencies are
governed by established corporate policies and procedures and are entered into
when management determines this methodology to be in our best interests. These
investments are subject to both foreign currency risk and interest rate risk.
The hypothetical loss associated with a 10 percent devaluation of these foreign
currencies would not materially affect our consolidated operating results,
financial position or cash flow.

STRATEGIC INVESTMENT RISK

      In addition to our normal investment portfolio, we also have a strategic
investment in Dynavax Technologies Corporation for $2.0 million. This investment
represents unregistered preferred stock and is subject to higher investment risk
than our normal investment portfolio due to the lack of an active resale market
for the investment.


                                       30
<Page>

                           PART II - OTHER INFORMATION

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

c.    Issuance of Unregistered Securities

      On August 24, 2001, we entered into a purchase agreement with Warburg
Pincus for the sale of 28,301,887 shares of common stock in a two-stage private
placement at a purchase price of $2.65 per share. On the same day, the first
closing of the private placement occurred and we issued 9,628,002 shares of
common stock for net proceeds totaling approximately $24.0 million. The purchase
agreement provided for the additional sale of 18,673,885 shares of our common
stock to Warburg Pincus and other investors at a purchase price of $2.65 per
share in a second closing subject to several conditions, including stockholder
approval of the sale. Stockholder approval and the second closing occurred on
October 10, 2001 and resulted in net proceeds totaling approximately $46.6
million which will be recorded in our fourth quarter financial statements.

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

a.    Exhibits

      None

b.    Reports on Form 8-K

      On August 7, 2001, we filed a current report on Form 8-K announcing second
quarter results, layoffs, the reduction of cash usage and an update on Coviracil
regulatory status.

      On August 10, 2001, we filed a current report on Form 8-K announcing the
election of James Tyree to the Board of Directors.

      On August 24, 2001, we filed a current report of Form 8-K announcing our
completion of a private placement of 9,628,002 newly issued shares of common
stock to Warburg Pincus.


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<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 9, 2001                    By: /s/ CHRIS A. RALLIS
                                              ------------------------------
                                          Chris A. Rallis
                                          President and Chief Operating Officer


                                 TRIANGLE PHARMACEUTICALS, INC.

Date: November 9, 2001                    By: /s/ ROBERT F. AMUNDSEN, JR.
                                              ------------------------------
                                          Robert F. Amundsen, Jr.
                                          Executive Vice President and
                                          Chief Financial Officer


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