<PAGE>



                          SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C.  20549
                                           
                                      FORM 10-Q
                                           
  X           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
----          OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the quarterly period ended September 30, 1997
                                           
                                          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 31, 1997, there were 19,995,338 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 (unaudited)

         Condensed Consolidated Balance Sheets -
           December 31, 1996 and September 30, 1997...................    3 - 4

         Condensed Consolidated Statements of Operations -
           Three and Nine Months Ended September 30, 1996 and 1997,
           and Period From Inception (July 12, 1995) Through
           September 30, 1997.........................................        5

         Condensed Consolidated Statements of Cash Flows -
           Nine Months Ended September 30, 1996 and 1997 and
           Period From Inception (July 12, 1995) Through
           September 30, 1997.........................................        6

         Condensed Consolidated Statements of Stockholders' Equity -
           Period From Inception (July 12, 1995) Through
           December 31, 1995, 1996 and Nine Months Ended
           September 30, 1997.........................................        7

         Notes to Condensed Consolidated Financial Statements.........   8 - 10

    Item 2.   Management's Discussion and Analysis of Financial
                Condition and Results of Operations...................  11 - 26

Part II. Other Information

    Item 2.   Changes in Securities...................................       27

    Item 6.   Exhibits and Reports on Form 8-K........................       28

    Signatures........................................................       29


                                      2
<PAGE>

                        PART I - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS

                      TRIANGLE PHARMACEUTICALS, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                                           
                                           



                                        DECEMBER 31,     SEPTEMBER 30,
ASSETS                                      1996              1997
------                                 -------------     -------------
                                                          (unaudited)
Current assets:
   Cash and cash equivalents........    $25,255,006       $45,288,572
   Restricted deposits..............         56,067            42,087
   Investments......................     17,226,221        21,047,462
   Interest receivable..............        272,716           319,248
   Other receivables................        455,910             1,110
   Prepaid expenses.................        558,423           283,248
                                       -------------     -------------
      Total current assets..........     43,824,343        66,981,727
                                       -------------     -------------
Property, plant and equipment, net..        832,049         1,689,761
Investments.........................     10,719,917                --
Restricted deposits.................        118,933            86,901
                                       -------------     -------------

      Total assets..................    $55,495,242       $68,758,389
                                       -------------     -------------
                                       -------------     -------------


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


                                     3
<PAGE>

                      TRIANGLE PHARMACEUTICALS, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                   CONDENSED CONSOLIDATED BALANCE SHEETS



                                                 DECEMBER 31,     SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY                 1996              1997
------------------------------------             ------------     -------------
                                                                   (unaudited)
Current liabilities:
  Accounts payable............................   $  1,584,348     $  2,380,667
  Accrued license fees........................        150,000               --
  Capital lease obligation-current............        102,006          176,909
  Other accrued expenses......................        639,255        2,775,730
                                                 ------------     ------------
      Total current liabilities...............      2,475,609        5,333,306
Capital lease obligation-noncurrent...........        364,385          344,082
                                                 ------------     ------------
      Total liabilities.......................      2,839,994        5,677,388
                                                 ------------     ------------
Commitments and contingencies (See notes 4
  and 5)......................................             --               --
Stockholders' equity:
  Common Stock, $0.001 par value; authorized
   75,000,000 shares; issued and outstanding
   17,567,890 and 19,995,338 shares...........         17,568           19,995
Warrants......................................        151,873          216,471
Additional paid-in capital....................     64,548,647      102,242,194
Accumulated deficit during development stage..    (11,884,166)     (39,259,071)
Deferred compensation.........................       (178,674)        (138,588)
                                                 ------------     ------------
      Total stockholders' equity..............     52,655,248       63,081,001
                                                 ------------     ------------

      Total liabilities and stockholders'
       equity.................................   $ 55,495,242     $ 68,758,389
                                                 ------------     ------------
                                                 ------------     ------------

             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 OPERATIONS 
                                   (UNAUDITED)



<TABLE>

                                                                                                                 PERIOD FROM
                                                                                                                  INCEPTION
                                                                                                                (JULY 12, 1995)
                                          THREE MONTHS ENDED SEPTEMBER 30,    NINE MONTHS ENDED SEPTEMBER 30,      THROUGH
                                          --------------------------------    -------------------------------    SEPTEMBER 30,
                                              1996                1997           1996                1997           1997
                                          -----------         ------------    -----------        ------------   --------------
<S>                                       <C>                 <C>             <C>                <C>             <C> 
Operating expenses:
  License fees.........................   $   494,397         $         --    $ 3,246,226        $    500,000    $  3,767,147
  Development..........................     1,270,731            6,568,629      2,613,322          13,262,108      18,228,840
  Purchased research and
    development........................            --           11,261,150             --          11,261,150      11,261,150
  General and administrative...........       998,528            1,471,220      2,488,684           4,935,830       9,498,686
                                          -----------         ------------    -----------        ------------    ------------
                                            2,763,656           19,300,999      8,348,232          29,959,088      42,755,823
                                          -----------         ------------    -----------        ------------    ------------
Interest income........................       224,797            1,086,993        309,955           2,584,183       3,496,752
                                          -----------         ------------    -----------        ------------    ------------

Net loss...............................   $(2,538,859)        $(18,214,006)   $(8,038,277)       $(27,374,905)   $(39,259,071)
                                          -----------         ------------    -----------        ------------    ------------
                                          -----------         ------------    -----------        ------------    ------------

Net loss per share.....................            --         $      (0.91)            --        $      (1.48)
                                                              ------------                       ------------    
                                                              ------------                       ------------    
Pro forma net loss per share...........      $  (0.19)                  --    $     (0.58)                 --
                                          -----------                         -----------    
                                          -----------                         -----------    
Shares used in computing pro forma 
  net loss per share and net loss per
  share................................    13,045,548           19,988,451     13,863,850          18,554,524
                                          -----------         ------------    -----------        ------------    
                                          -----------         ------------    -----------        ------------    
</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 Cash Flows
                                  (Unaudited) 

<TABLE>
<CAPTION>                                                                                      PERIOD FROM 
                                                                                                INCEPTION
                                                        NINE MONTHS ENDED SEPTEMBER 30,      (JULY 12, 1995)
                                                        -------------------------------         THROUGH
                                                             1996             1997         SEPTEMBER 30, 1997
                                                        --------------    -------------    ------------------
<S>                                                     <C>               <C>              <C>
Cash flows from operating activities: 
Net loss............................................... $  (8,038,277)    $ (27,374,905)      $ (39,259,071)
Adjustments to reconcile net loss to net 
   cash used by operating activities: 
   Depreciation and amortization.......................        51,035           195,534             296,226
   Purchased research and development..................            --        11,261,150          11,261,150
   Stock-based compensation: license fees..............       636,000                --             636,000
   Stock-based compensation: development...............       332,135            33,647             380,216
   Stock-based compensation: general and 
      administrative...................................       185,286            91,818             323,340
Change in assets and liabilities:.....
   Receivables.........................................      (523,049)          408,268            (320,358)
   Prepaid expenses....................................      (686,348)          275,175            (283,248)
   Accounts payable....................................       229,868           796,319           2,380,667
   Accrued license fees and other expenses.............     1,377,141         1,967,614           2,687,078
                                                        -------------    --------------       -------------
Net cash used by operating activities..................    (6,436,209)      (12,345,380)        (21,898,000)
                                                        -------------    --------------       -------------
Cash flows from investing activities: 
   (Purchase) sale of restricted deposits..............      (175,000)           46,012            (128,988)
   Purchase of investments.............................    (9,558,127)      (17,564,880)        (50,832,805)
   Proceeds from sale and maturity of investments......            --        24,463,556          29,785,343
   Purchase of property, plant and equipment...........      (745,454)         (994,446)         (1,810,723)
   Acquisition of Avid Corp., net of cash acquired.....            --        (3,052,921)         (3,052,921)
                                                        -------------    --------------       -------------
Net cash (used by) provided from investing activities..   (10,478,581)        2,897,321         (26,040,094)
                                                        -------------    --------------       -------------
Cash flows from financing activities: 
   Sale of stock, net of related issuance costs........    18,496,839        29,523,079          92,892,975
   Sale of options.....................................            --            52,500              52,500
   Sale of warrants....................................           130                --                 130
   Proceeds from stock options exercised...............        23,588               975              26,063
   Equipment financing.................................            --                --             354,416
   Principal payments on capital lease obligation......            --           (94,929)            (99,418)
                                                        -------------    --------------       -------------
Net cash provided from financing activities............    18,520,557        29,481,625          93,226,666
                                                        -------------    --------------       -------------
Net increase in cash and cash equivalents..............     1,605,767        20,033,566          45,288,572
Cash and cash equivalents at beginning of period.......     3,081,586        25,255,006                  --  
                                                        -------------    --------------       -------------
Cash and cash equivalents at end of period............. $   4,687,353     $  45,288,572       $  45,288,572
                                                        -------------    --------------       -------------
                                                        -------------    --------------       -------------

Supplemental disclosure of noncash investing activities:
  On August 28, 1997, the Company issued 400,000 shares of common stock in exchange for 
  all outstanding shares of Avid Corporation.
</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

<TABLE>
<CAPTION>


                               CONVERTIBLE
                              PREFERRED STOCK                COMMON STOCK       ADDITIONAL
                           ------------------            -------------------      PAID-IN    ACCUMULATED     DEFERRED 
                             SHARES    AMOUNT  WARRANTS    SHARES     AMOUNT      CAPITAL      DEFICIT     COMPENSATION   TOTAL
                           ---------- -------  --------  ----------  -------    ----------  ------------   ------------ -----------
<S>                        <C>        <C>      <C>       <C>         <C>        <C>         <C>            <C>          <C>
Initial sale of stock......   933,334  $  933        --   1,175,000  $ 1,175    $  709,642            --            --  $   711,750
Additional sale of stock... 4,248,337   4,249        --   1,495,000    1,495     3,137,355            --            --    3,143,099
Stock-based compensation...        --      --        --          --       --        12,000            --     $ (11,750)         250
Net loss, July 12 through     
 December 31, 1995.........        --      --        --          --       --            --  $   (967,583)           --     (967,583)
                           --------------------------------------------------------------------------------------------------------
Balance, December 31, 1995. 5,181,671   5,182        --   2,670,000    2,670     3,858,997      (967,583)      (11,750)   2,887,516
                                            
Sale of stock.............. 3,756,234   3,756        --   4,942,652    4,943    59,506,348            --            --   59,515,047
Sale of warrants...........        --      --  $    130          --       --            --            --            --          130
Stock-based compensation...        --      --   151,743     700,000      700     1,126,500            --       141,181)   1,137,762
Stock options exercised....        --      --        --     317,333      317        56,802            --       (25,743)      31,376
Conversion of Preferred to 
 Common Stock..............(8,937,905) (8,938)       --   8,937,905    8,938            --            --            --           --
Net loss...................        --      --        --          --       --            --   (10,916,583)           --  (10,916,583)
                           --------------------------------------------------------------------------------------------------------
Balance, December 31, 1996.        --      --   151,873  17,567,890   17,568    64,548,647   (11,884,166)     (178,674)  52,655,248
 (UNAUDITED)  
Sale of stock..............                               2,014,448    2,014    29,521,065            --            --   29,523,079
Acquisition of Avid........        --      --        --     400,000      400     8,117,100            --            --    8,117,500
Sale of options............        --      --        --          --       --        52,500            --            --       52,500
Stock-based compensation...        --      --    64,598          --       --            --            --        35,891      100,489
Stock options exercised....        --      --        --      13,000       13         2,882            --         4,195        7,090
Net loss...................        --      --        --          --       --            --   (27,374,905)           --  (27,374,905)
                           --------------------------------------------------------------------------------------------------------
Balance, September 30, 
1997.......................        --  $   --  $216,471  19,995,338  $19,995  $102,242,194  $(39,259,071)  $  (138,588) $63,081,001
                           --------------------------------------------------------------------------------------------------------
                           --------------------------------------------------------------------------------------------------------

</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)

1.  Basis of Presentation

    The accompanying unaudited condensed financial statements of Triangle 
Pharmaceuticals, Inc. and its 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 Triangle 
Pharmaceuticals, Inc. 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.

2.  Principles of Consolidation

    The condensed consolidated financial statements include the accounts of 
Triangle Pharmaceuticals, Inc. and its wholly-owned subsidiary.  All 
significant intercompany accounts and transactions have been eliminated.

3.  Net Loss Per Share

    The weighted average shares outstanding used in the calculation of pro 
forma net loss per share includes the effect of the conversion of all of the 
Company's Preferred Stock as if such conversion occurred as of July 12, 1995. 
Additionally, common stock or equivalent shares from stock options and awards 
sold or issued at prices below the Initial Public Offering ("IPO") price per 
share in the twelve months preceding the initial filing of the Company's 
Registration Statement on Form S-1 on September 11, 1996, have been included 
in the calculations as if outstanding from July 12, 1995 through June 30, 
1996 pursuant to the requirements of the Securities and Exchange Commission. 
The common stock equivalents have been excluded from the calculation 
subsequent to June 30, 1996 because they have the effect of reducing net loss 
per share.

    For the three and nine month periods ended September 30, 1997, the 
weighted average shares outstanding used in the calculation of net loss per 
share do not include Common Stock equivalents because they have the effect of 
reducing net loss per share.  Fully diluted earnings per share were not 
materially different from primary earnings per share.

4.  Licensing Agreements

    The Company's existing license agreements require future payments of up 
to $43,250,000 contingent upon the achievement of certain development 
milestones.  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 after regulatory approval.  Depending on the Company's success and 
timing in obtaining regulatory approval, aggregate annual minimum royalties 
could range from $2,000,000 (if only a single drug candidate is approved for 
one indication) to $49,500,000 (if all drug candidates are approved for all 
indications) under the Company's existing license agreements.  In addition, 
beginning in 1998 the Company is required to make an annual payment ranging 
from $500,000 to $1,000,000 to maintain the exclusivity of it's license for 
one of it's drug candidates beginning in 1998.

                                       8
<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

5.  Avid Acquisition

    On August 28, 1997 ("the Closing Date"), the Company  acquired Avid 
Corporation ("Avid"), a private, antiviral pharmaceutical company. Pursuant 
to the merger agreement, Triangle issued 400,000 shares of  common stock for 
all outstanding shares of Avid and agreed to issue up to 2,100,000 additional 
shares of common stock contingent upon the attainment of certain development 
milestones of Avid's compounds.  The 400,000 shares issued had an aggregate 
fair market value of approximately $8,117,500 and direct transaction costs 
were approximately $1,100,000.  The total purchase price of $9,217,500 has 
been allocated to the assets purchased and liabilities assumed based on their 
respective values. In connection with the acquisition, the Company incurred a 
non-recurring charge of $11,261,150 for acquired in-process research and 
development as it assumed operating and other liabilities of Avid totaling 
$1,250,000 and certain development liabilities totaling approximately 
$1,000,000.  Each option under Avid's stock option plans and each warrant to 
purchase Avid stock outstanding at the closing was converted into the right 
upon exercise to receive that portion of the merger consideration that would 
have been received had such option or warrant been exercised immediately 
prior to the merger.  The merger is being accounted for as a purchase and the 
operating results of Avid have been included from the date of acquisition.

    The issuance of any of the 2,100,000 contingent shares of the Company's 
common stock will be recorded as additional purchase price and will be 
allocated upon resolution of the underlying contingency.  The amount recorded 
will be the fair market value of the common stock issued at the time the 
contingency is resolved.

    Avid's principal assets consist of worldwide license rights to a protease 
inhibitor (DMP-450) for the treatment of human immunodeficiency virus 
infection, early preclinical stage compounds for the treatment of Hepatitis B 
virus infection, proprietary assays to screen drug candidates for the 
treatment of HBV and assay technology for the potential use in screening drug 
candidates for the treatment of Hepatitis C virus infection.

    The following unaudited pro forma consolidated results of operations have 
been prepared as if the acquisition of Avid had occurred at the beginning of 
1996 and 1997:

                                           NINE MONTHS ENDED SEPTEMBER 30,
                                          ---------------------------------
                                               1996               1997
                                          ---------------   ---------------
          Revenues                        $           --    $           --
                                          ---------------   ---------------
                                          ---------------   ---------------
          Net (loss)                      $  (21,066,205)   $  (30,527,921)
                                          ---------------   ---------------
                                          ---------------   ---------------
          Net (loss) per common share     $        (1.48)   $        (1.62)
                                          ---------------   ---------------
                                          ---------------   ---------------

    The pro forma net loss and net loss per share amounts for each period 
above include the acquired in-process research and development charge.  The 
pro forma consolidated results do not purport to be indicative of results 
that would have occurred had the acquisition been in effect for the periods 
presented, nor do they purport to be indicative of the results that will be 
obtained in the future.

                                       9
<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.
                         (A DEVELOPMENT STAGE COMPANY)

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)


6.  Accounting Pronouncements

    In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards ("SFAS 128"), "Earnings per 
Share."  SFAS 128 changes the computation of net income per share from the 
method currently prescribed by Accounting Principles Board Opinion No. 15. 
The Company intends to adopt SFAS 128 for periods ending after December 15, 
1997 and to restate previously reported historical information at that time. 
Adoption of SFAS 128 is not expected to materially affect the Company's 
financial statements.

    Statement of Financial Accounting Standards No. 130, "Reporting 
Comprehensive Income" ("SFAS 130"), was issued in June 1997.  SFAS 130 
establishes standards for reporting and display of comprehensive income and 
its components in a full set of general-purpose financial statements.  SFAS 
130 is effective for financial statements for fiscal years beginning after 
December 31, 1997.  The Company believes that the adoption of SFAS 130 will 
not have a material impact on the Company's financial position or results of 
operations.

                                       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 certain projections, 
estimates and other forward-looking statements that involve a number of risks 
and uncertainties, including those discussed below at "-Risks and 
Uncertainties."  While this outlook represents management's current judgment 
on the future direction of the business, such risks and uncertainties could 
cause actual results to differ materially from any future performance 
suggested below.  The Company undertakes no obligation to release publicly 
the results of any revisions to the   statements contained in this report to 
reflect events or circumstances arising after the date hereof.  Unless the 
context otherwise requires, references in this Quarterly Report on Form 10-Q 
to "Triangle" and the "Company" are to Triangle Pharmaceuticals, Inc. and its 
wholly-owned subsidiary, Avid Corporation.

    The following should be read in conjunction with the Company's condensed 
consolidated financial statements.

OVERVIEW

    Triangle is a pharmaceutical company engaged in the development of new 
drug candidates primarily in the antiviral area. Since its inception on July 
12, 1995, the Company's operating activities have related primarily to 
recruiting personnel, negotiating license and option arrangements for its 
drug candidates, raising capital and developing the Company's drug 
candidates. The Company has not received any revenues from the sale of 
products, and does not expect any of its drug candidates to be commercially 
available for at least the next several years. As of September 30, 1997, the 
Company's consolidated accumulated deficit was approximately $39.3 million.

    The Company's drug development programs will require substantial capital 
expenditures, including expenditures for preclinical testing, chemical 
synthetic scale-up, clinical trials of drug candidates and payments to the 
Company's licensors. The Company has been unprofitable since its inception 
and expects to incur substantial and increasing losses for at least the next 
several years, due primarily to the expansion of its drug development 
programs. The Company expects that losses will fluctuate from period to 
period and that such fluctuations may be substantial. See "--Risks and 
Uncertainties--History of Operating Losses; Accumulated Deficit; Uncertainty 
of Future Profitability."

    The Company has only a limited operating history upon which an evaluation 
of the Company and its prospects can be based. The risks, expenses and 
difficulties  encountered by companies at an early stage of development must 
be considered when evaluating the Company's prospects. To address these 
risks, the Company must, among other things, successfully develop and 
commercialize its drug candidates, secure all necessary proprietary rights, 
respond to competitive developments and continue to attract, retain and 
motivate qualified persons.  There can be no assurance that the Company will 
be successful in addressing these risks. See "--Risks and 
Uncertainties--Development Stage Company; Uncertainty of Product Development."

    The operating expenses of the Company will depend on several factors, 
including the level of development expenses. Development expenses will depend 
on the progress and results of the Company's drug development efforts, which 
the Company cannot predict. Management may in some cases be able to control 
the timing of development expenses in part by accelerating or decelerating 
preclinical testing and clinical trial activities. As a result of these 
factors, the Company believes that period to period comparisons in the future 
are not necessarily meaningful and should not be relied upon as an indication 
of future performance. Due to all of the foregoing factors, it is possible 
that the Company's operating results will be below the expectations of market 
analysts and investors. In such event, the prevailing market price of the 
Common Stock would likely be materially adversely affected. See "--Risks and 
Uncertainties--Volatility of Stock Price."

                                       11
<PAGE>

RESULTS OF OPERATIONS

AVID ACQUISITION

    On August 28, 1997 ("the Closing Date"), the Company  acquired Avid 
Corporation ("Avid"), a private, antiviral pharmaceutical company. Pursuant 
to the merger agreement, Triangle issued 400,000 shares of the Company's 
common stock for all outstanding shares of Avid and agreed to issue up to 
2,100,000 additional shares of common stock contingent upon the attainment of 
certain development milestones of Avid's compounds.  The 400,000 shares 
issued had an aggregate fair market value of approximately $8,117,500 and 
direct transaction costs were approximately $1,100,000.  The total purchase 
price of $9,217,500 has been allocated to the assets purchased and 
liabilities assumed based on their respective values. In connection with the 
acquisition, the Company incurred a non-recurring charge of $11,261,150 for 
acquired in-process research and development as it assumed operating and 
other liabilities of Avid totaling $1,250,000 and certain development 
liabilities totaling approximately $1,000,000.  Each option under Avid's 
stock option plans and each warrant to purchase Avid stock outstanding at the 
closing was converted into the right upon exercise to receive that portion of 
the merger consideration that would have been received had such option or 
warrant been exercised immediately prior to the merger.  The merger is being 
accounted for as a purchase and the operating results of Avid have been 
included from the date of acquisition.

    The issuance of any of the 2,100,000 contingent shares of the Company's 
common stock will be recorded as additional purchase price and will be 
allocated upon resolution of the underlying contingency.  The amount recorded 
will be the fair market value of the common stock issued at the time the 
contingency is resolved.

    Avid's principal assets consist of worldwide license rights to a protease 
inhibitor (DMP-450) for the treatment of human immunodeficiency virus ("HIV") 
infection, early preclinical stage compounds for the treatment of Hepatitis B 
virus ("HBV") infection, proprietary assays to screen drug candidates for the 
treatment of HBV and assay technology for the potential use in screening drug 
candidates for the treatment of Hepatitis C virus infection.

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 

    The Company had total interest income of $1,086,993 for the three months 
ended September 30, 1997, compared to $224,797  for the same period in 1996. 
The increase in interest income is due primarily to an increase in 
investments associated with financing activities. See "--Liquidity and 
Capital Resources."

    There were no license fees  for the three months ended September 30, 
1997, compared to $494,397 for the same period in 1996.  The decrease is due 
to the absence of any new license agreements executed by the Company during 
the three month period ended September 30, 1997.  The amount in the prior 
year relates to one of the Company's license agreements.

    Purchased research and development totaled $11,261,150  for the three 
months ended September 30, 1997 which relates to the Company's acquisition of 
Avid on August 28, 1997.  The amount represents a non-recurring charge for 
in-process research and development technology.

    Development expenses totaled $6,568,629 for the three months ended 
September 30, 1997, compared to $1,270,731 for the same period in 1996.  The 
increase is due to the expansion of the Company's drug development 
activities. Development expenses for the three month period ended September 
30, 1997 consisted primarily of expenses for development work relating to 
drug synthesis, clinical trials, compensation expenses, toxicology studies, 
and preclinical testing of the Company's drug candidates.  During the same 
period the Company also recognized non-cash charges of $11,234  relating to 
the amortization of deferred consulting expenses. Development expenses were 
reduced by approximately $202,000 relating to the reimbursable development 
expenses by the licensor under the agreement for one of the Company's drug 
candidates.  Development expenses for the three months ended September 30, 
1996 consisted primarily of expenses related to the preclinical testing of 
certain of the Company's drug candidates.  During the 

                                       12
<PAGE>

same period the Company also recognized non-cash charges of $18,808 relating 
to the amortization of deferred consulting expenses.  The Company expects its 
development expenses to continue to increase substantially in the future as 
the Company continues to expand its drug development activities, including 
preclinical testing and clinical trials.  In addition, the Company's 
acquisition of rights to additional drug candidates, like DMP-450, will 
increase significantly the Company's development expenses.

    General and administrative expenses totaled $1,471,220  for the three 
months ended September 30, 1997, compared to $998,528 for the same period in 
1996. General and administrative expenses for the three months ended 
September 30, 1997, consisted primarily of compensation expenses, rent 
expense and amounts paid for outside professional services and included 
non-cash charges of $25,544 related to the amortization of deferred 
compensation expenses. The increase in general and administrative expenses 
compared to the three months ended September 30, 1996, is comprised primarily 
of increases in compensation expense, rent expenses associated with office 
and laboratory facilities due to the hiring of additional employees and 
increases in professional fees due to the growth of the Company's operations. 
The Company expects that its general and administrative expenses will 
increase in future periods.

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

    The Company had total interest income of $2,584,183 in the nine months 
ended September 30, 1997 compared to $309,955 for the same period in 1996. 
The increase in interest income is due primarily to an increase in 
investments associated with financing activities.  See "-Liquidity and 
Capital Resources."

    License fees totaled $500,000 for the nine months ended September 30, 
1997 and related to the execution of the license agreement with Mitsubishi 
for the anti-HIV drug candidate, MKC-442. License fees totaled $3,246,226 
during the same period in 1996.  The decrease is due primarily to a decrease 
in the number of license agreements executed during the nine month period 
ended September 30, 1997 as compared to the same period in 1996.  Future 
license fees may also consist of milestone payments under licensing 
arrangements, the amount of which could be substantial and the timing of 
which will depend on a number of factors that the Company cannot predict. 
These factors include, among others, the success of the Company's drug 
development programs and the extent to which the Company acquires rights to 
additional drug candidates.

    Purchased research and development totaled $11,261,150 for the nine 
months ended September 30, 1997, and relates to the Company's acquisition of 
Avid on August 28, 1997.  The amount represents a non-recurring charge for 
in-process research and development.

    Development expenses totaled $13,262,108 for the nine months ended 
September 30, 1997, compared to $2,613,322 for the same period in 1996. 
Development expenses consisted primarily of expenses for development work 
relating to drug synthesis, clinical trials, toxicology studies and 
compensation expenses.  The Company also recognized non-cash charges of 
$33,647 related to the amortization of deferred consulting expenses.  The 
increase in development expenses relates to the expansion of drug development 
activities. Development expenses were reduced by approximately $1,168,000 
relating to the reimbursable development expenses by the licensor under the 
agreement for one of the Company's drug candidates.  The Company expects its 
development expenses to continue to increase substantially in the future as 
the Company continues to expand its drug development activities, including 
preclinical testing and clinical trials. In addition, the Company's 
acquisition of rights to additional drug candidates, like DMP-450, will 
increase significantly the Company's development expenses.

    General and administrative expenses totaled $4,935,830 for the nine 
months ended September 30, 1997 compared to $2,488,684  for the same period 
in 1996.  General and administrative expenses for the nine months ended 
September 30, 1997 consisted primarily of compensation expenses, rent expense 
and amounts paid for outside professional services and included non-cash 
charges of $91,818 related to the amortization of deferred compensation 
expenses.  The increase in general and administrative expenses compared to 
the nine months ended September 30, 1996, is comprised primarily of increases 
in compensation expense, rent expenses associated with office and laboratory 
facilities, the hiring of additional employees and increases in professional 
fees.  The increase is due primarily to the growth of

                                       13
<PAGE>

the Company's operations.  The Company expects that its general and 
administrative expenses will increase in future periods.

LIQUIDITY AND CAPITAL RESOURCES

    The Company has financed its operations since inception (July 12, 1995) 
through September 30, 1997 primarily with the net proceeds received from 
private placements of equity securities, which provided aggregate net 
proceeds of approximately $51,700,000, and the Company's initial public 
offering, which provided aggregate net proceeds to the Company totaling 
$42,153,664 before deducting expenses of the offering of approximately 
$1,100,000.

    Through September 30, 1997,  the Company received approximately 
$2,000,000 as reimbursement of certain development expenses under an 
agreement for one of its drug candidates.

    As a result of the acquisition of Avid on August 28, 1997, the Company 
assumed operating and other liabilities of Avid totaling approximately 
$1,250,000 and certain development expenses totaling approximately 
$1,000,000, previously incurred by Avid.  The Company also expects 
development expenses to increase as a result of its acquisition of the Avid 
compounds.

    At September 30, 1997, the Company's principal source of liquidity was 
$45,288,572 in cash and cash equivalents and $21,047,462 in short term 
investments which are "available for sale."  At September 30, 1997, the 
Company had utilized $529,679  of a secured equipment lease-line facility 
for which the ability to borrow additional funds expired on August 9, 1997.

    The Company expects that its capital requirements will increase 
substantially in future periods as the Company's drug development programs 
expand. The Company's future capital requirements will depend on many 
factors, including the progress of the Company's drug development programs, 
the magnitude of these programs, the scope and results of preclinical testing 
and clinical trials, the cost, timing and outcome of regulatory reviews, the 
costs under the license and/or option agreements relating to the Company's 
drug candidates, administrative and legal expenses, the establishment of 
capacity for sales and marketing functions, the establishment of 
relationships with third parties for manufacturing and sales and marketing 
functions, and other factors. Amounts payable by the Company in the future 
under its existing license agreements are uncertain due to a number of 
factors, including the progress of the Company's drug development programs, 
the Company's ability to obtain approval to commercialize any drug candidate 
and the commercial success of any approved drug. The Company's existing 
license agreements require future payments of up to $43,250,000 contingent 
upon the achievement of certain development milestones.  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 after regulatory 
approval. Depending on the Company's success and timing in obtaining 
regulatory approval, aggregate annual minimum royalties could range from 
$2,000,000 (if only a single drug candidate is approved for one indication) 
to $49,500,000 (if all drug candidates are approved for all indications) 
under the Company's existing license agreements.  In addition, beginning in 
1998 the Company is required to make an annual payment ranging from $500,000 
to $1,000,000 to maintain the exclusivity of its license to one of it's drug 
candidates.

    The Company believes that its existing cash and investments will be 
adequate to satisfy its anticipated capital requirements through June 1998.  
The Company expects that it will be required to raise substantial additional 
funds through equity or debt financings, collaborative arrangements with 
corporate partners or from other sources.  There can be no assurance that 
additional funding will be available on favorable terms from any of these 
sources or at all.  See "--Risks and Uncertainties--Future Capital Needs; 
Uncertainty of Additional Funding."

                                       14
<PAGE>

RISKS AND UNCERTAINTIES

    DEVELOPMENT STAGE COMPANY; UNCERTAINTY OF PRODUCT DEVELOPMENT

    Triangle was incorporated in July 1995 and accordingly has only a limited 
operating history upon which an evaluation of the Company's business and 
prospects can be based.  In addition, the Company's drug candidates are all 
in the early developmental stage and require significant, time consuming and 
costly development, testing and regulatory clearances.  The Company does not 
expect any of its drug candidates to be commercially available for at least 
the next several years.  The successful development of any new drug, 
including any of the Company's drug candidates, is highly uncertain and is 
subject to a number of significant risks.  These risks include, among others, 
the possibility that any or all of the Company's drug candidates will be 
found to be ineffective, toxic or otherwise fail to receive necessary 
regulatory clearances; that the drug candidates will be uneconomical to 
manufacture, market or will not achieve broad market acceptance; that third 
parties will hold proprietary rights that will preclude the Company from 
marketing the drug candidates; or that third parties will market equivalent 
or superior products.  The failure of the Company's drug development programs 
to result in commercially viable products would have a material adverse 
effect on the Company.

    HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE 
PROFITABILITY

    The Company has incurred losses since its inception. As of September 30, 
1997, the Company's consolidated accumulated deficit was approximately $39.3 
million. Losses have resulted principally from costs incurred in the 
acquisition and development of the Company's drug candidates and general and 
administrative costs.  These costs have exceeded the Company's revenues, 
which to date have been generated primarily from interest income. The Company 
has not generated any revenue to date from the sale of drugs and does not 
expect to do so for at least the next several years. The Company expects to 
incur significant additional operating losses over the next several years and 
expects losses to increase as the Company's drug development efforts expand. 
The Company's ability to achieve profitability will depend upon its ability 
to develop and obtain regulatory approval for its drug candidates and to 
develop the capacity (or establish relationships with third parties) to 
manufacture, market and sell any drug candidates it successfully develops. 
There can be no assurance that the Company will ever generate significant 
revenues or achieve profitable operations.

    FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING

    The Company's drug development programs currently require and will in the 
future require substantial capital expenditures, including expenditures for 
preclinical testing, chemical synthetic scale up, clinical trials of drug 
candidates and payments to the Company's licensors. The Company's future 
capital requirements will depend on many factors, including the progress of 
the Company's drug development programs, the magnitude of these programs, the 
scope and results of preclinical testing and clinical trials, the cost, 
timing and outcome of regulatory reviews, the costs under the license and/or 
option agreements relating to the Company's drug candidates, the costs of 
seeking and maintaining patent protection for the Company's drug candidates, 
administrative and legal expenses, the establishment of capacity for sales 
and marketing functions, the establishment of relationships with third 
parties for manufacturing and sales and marketing functions, and other 
factors. The Company expects that its capital requirements will increase 
significantly in the future.

    The Company has incurred negative cash flow from operations since 
inception and does not expect to generate positive cash flow to fund its 
operations for at least the next several years. As a result, the Company 
believes that substantial additional equity or debt financings will be 
required to fund its operations. There can be no assurance that the Company 
will be able to consummate any such financings at all or on favorable terms, 
or that such financings will be adequate to meet the Company's capital 
requirements. Any additional equity or convertible debt financings could 
result in substantial dilution to the Company's stockholders. If adequate 
funds are not available, the Company may be required to delay, reduce the 
scope of or eliminate one or more of its drug development programs or attempt 
to continue development by entering into arrangements with collaborative 
partners or others that may require the Company to relinquish some or all of 
its rights to certain technologies or

                                       15
<PAGE>

drug candidates that the Company would not otherwise desire to relinquish. In 
addition, from time to time, the Company considers the acquisition of 
technologies and drug candidates that, if completed, could increase the 
Company's capital requirements. The Company's inability to fund its capital 
requirements would have a material adverse effect on the Company.

    UNCERTAINTIES RELATED TO CLINICAL TRIALS

    Before obtaining required regulatory approvals for the commercial sale of 
any of its drug candidates under development, the Company must demonstrate 
through preclinical testing and clinical trials that each product is safe and 
effective for use in each target indication. The results from preclinical 
testing and early clinical trials may not be predictive of results that will 
be obtained in pivotal clinical trials, and there can be no assurance that 
the Company's clinical trials will demonstrate sufficient safety and 
effectiveness to obtain required regulatory approvals or will result in 
marketable products.  A number of companies in the pharmaceutical industry 
have suffered significant setbacks in advanced clinical trials, even after 
promising results in earlier trials. The administration of any drug candidate 
developed by the Company may produce undesirable side effects in humans.  The 
occurrence of side effects could interrupt, delay or halt clinical trials of 
such drug candidate and could ultimately prevent its approval by the United 
States Food and Drug Administration ("FDA") or foreign regulatory authorities 
for any and all targeted indications.  The Company or the FDA may suspend or 
terminate clinical trials at any time if it is believed that the trial 
participants are being exposed to unacceptable health risks.  There can be no 
assurance that clinical trials will demonstrate that any drug candidate under 
development by the Company is safe or effective.

    The rate of completion of the Company's clinical trials will depend upon, 
among other factors, obtaining adequate clinical supplies and the rate of 
patient enrollment. Patient enrollment is a function of many factors, 
including the size of the patient population, the nature of the protocol, the 
proximity of patients to clinical sites and the eligibility criteria for the 
study. Delays in planned patient enrollment can result in increased costs or 
delays or both, which could have a material adverse effect on the Company. 
There can be no assurance that if clinical trials are successfully completed, 
the Company will be able to submit a New Drug Application ("NDA") in a timely 
manner or that any such application will be approved by the FDA. Any failure 
of the Company to complete successfully its clinical trials and obtain 
approvals of corresponding NDAs would have a material adverse effect on the 
Company.

    UNCERTAINTY OF PATENTS; DEPENDENCE ON PATENTS, LICENSES AND PROPRIETARY 
RIGHTS

    The Company's success will depend in large part on the ability of the 
Company and its licensors to obtain patent protection with respect to its 
drug candidates, defend patents once obtained, maintain trade secrets and 
operate without infringing upon the patents and proprietary rights of others 
and to obtain appropriate licenses to patents or proprietary rights held by 
third parties, both in the United States and in foreign countries. The 
Company has no patents in its own name and has only one patent application of 
its own pending, but has obtained licenses to patents, patent applications 
and other proprietary rights from third parties with respect to each of the 
Company's eight drug candidates.

    The patent positions of pharmaceutical companies, including those of the 
Company, are uncertain and involve complex legal and factual questions for 
which important legal principles are unresolved. There can be no assurance 
that the Company or its licensors have or will develop or obtain the rights 
to products or processes that are patentable, that patents will issue from 
any of the pending applications or that claims allowed will be sufficient to 
protect the technology licensed to the Company. In addition, no assurance can 
be given that any patents issued to or licensed by the Company will not be 
challenged, invalidated, infringed or circumvented, or that the rights 
granted thereunder will provide competitive advantages to the Company. The 
Company's success will also depend in large part on the Company not breaching 
the licenses pursuant to which the Company obtained its technology and drug 
candidates.

    A number of pharmaceutical companies, biotechnology companies, 
universities and research institutions have filed patent applications or 
received patents to technologies that cover or are similar to the technologies

                                       16
<PAGE>

licensed by the Company. The Company is aware of certain patent applications 
previously filed by and patents already issued to others that conflict with 
patents or patent applications licensed to the Company either by claiming the 
same methods or compounds or by claiming methods or compounds that could 
dominate those licensed to the Company. In addition, there can be no 
assurance that the Company is aware of all patents or patent applications 
that may materially affect the Company's ability to make, use or sell any 
drug candidates that are successfully developed. United States patent 
applications are confidential while pending in the United States Patent and 
Trademark Office ("PTO"), and patent applications filed in foreign countries 
are often first published six months or more after filing. Any conflicts 
resulting from third party patent applications and patents could 
significantly reduce the coverage of the patents licensed to the Company and 
limit the ability of the Company or its licensors to obtain meaningful patent 
protection. If patents are issued to other companies that contain competitive 
or conflicting claims, the Company may be required to obtain licenses to 
these patents or to develop or obtain alternative technology. There can be no 
assurance that the Company will be able to obtain any such license on 
acceptable terms or at all. If such licenses are not obtained, the Company 
could be delayed in or prevented from pursuing the development or 
commercialization of its drug candidates, which would have a material adverse 
effect on the Company.

    The Company is aware of significant risks regarding the patent rights 
licensed by the Company relating to three of the eight compounds comprising 
the Company's existing drug candidate portfolio. The Company may not be able 
to commercialize FTC, DAPD or CS-92 for HIV and/or  HBV due to patent rights 
held by third parties other than the Company's licensors. The Company is 
aware of numerous patent applications and issued patents in the United States 
and numerous foreign countries held by third parties other than the Company's 
licensors that relate to these compounds and their use alone or with other 
compounds to treat HIV and HBV. As a result, the positions of the Company and 
its licensors with respect to the use of FTC, DAPD and CS-92 to treat HIV 
and/or HBV are highly uncertain and involve 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 the Company's licensors or 
the Company, the Company would not have the right to commercialize FTC, DAPD 
and/or CS-92 in the absence of a license from one or more third parties, 
which may not be available on acceptable terms or at all. In addition, even 
in the absence of an unfavorable resolution of any of these questions, the 
Company may attempt to obtain licenses from one or more third parties in 
order to reduce or eliminate the risks relating to some or all of these 
matters. There can be no assurance that the Company will elect to obtain any 
such licenses or that such licenses will be available on acceptable terms or 
at all. The Company's inability to commercialize any of these compounds would 
have a material adverse effect on the Company.   

    FTC

    FTC belongs to the same general class of nucleosides as 3TC, which  has 
been approved in the United States by the FDA for use in combination with AZT 
for the treatment of HIV and by similar regulatory agencies in Europe for use 
in combination with other nucleoside analogues for the treatment of HIV. 3TC 
is currently being sold by Glaxo Wellcome plc ("Glaxo") for the treatment of 
HIV under a license agreement with BioChem Pharma Inc. ("BioChem Pharma"). 
The Company obtained its rights to purified forms of FTC under a license from 
Emory University ("Emory").  In 1990 and 1991, Emory filed in the United 
States and thereafter in numerous foreign countries patent applications with 
claims to composition of matter and methods to treat HIV and HBV with FTC. 
Yale University ("Yale") filed patent applications on FTC and its use to 
treat HBV in 1991 in the United States, and subsequently licensed its rights 
under those patent applications to Emory. The Company's license arrangement 
with Emory includes all rights under the Yale patent applications.

    HIV. Emory received a United States patent in 1993 covering a method to 
treat HIV infection with FTC. BioChem Pharma filed a patent application in 
the United States in 1989 and was issued a patent in 1991 covering a group of 
nucleosides in the same general class as FTC, but which did not include FTC. 
BioChem Pharma filed foreign patent applications in 1990 based upon its 1989 
United States patent application, and in those foreign applications included 
FTC among a large class of nucleosides. The foreign patent applications are 
pending in a large number of countries, and have issued in a number of 
countries with claims directed to FTC and its use to treat HIV. In addition, 
BioChem Pharma filed a United States patent application in 1991 specifically 
directed to a purified form of FTC that exhibits advantageous properties for 
the treatment of HIV on which two patents have

                                       17
<PAGE>

issued, one directed to the purified form of FTC and another directed to a 
method for treating antiviral diseases with the purified form of FTC.  The 
PTO has recently declared an interference between the latter BioChem Pharma 
patent and a patent application filed by Emory. There can be no assurance, 
however, that Emory will prevail in the interference proceeding, or that the 
interference proceeding will not delay the decision of the PTO regarding 
Emory's patent application.  BioChem Pharma has also filed patent 
applications in a large number of foreign countries based upon its 1991 
United States patent application, and patents have issued in certain 
countries. BioChem Pharma may have additional patent applications pending in 
the United States.

    In the United States, the first to invent a subject matter is entitled to 
patent protection on that invention. With respect to patent applications 
filed prior to January 1, 1996, United States patent law provides that if a 
party invented a technology outside the United States, then for purposes of 
determining the first to invent the technology, that party 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 registration statement filed with the United States Securities and 
Exchange Commission, BioChem Pharma stated that since it conducts 
substantially all of its research activities outside the United States, it is 
at a disadvantage as to inventions made prior to January 1, 1996 with respect 
to obtaining United States patents as compared to companies that maintain 
research facilities in the United States. The Company does not know whether 
Emory or BioChem Pharma was the first to invent the subject matter claimed in 
their respective United States patent applications or patents, or whether 
BioChem Pharma invented the technology disclosed in its patent applications 
in the United States or introduced that technology in the United States 
before the date of its patent applications. In foreign countries, the first 
party to file a patent application on an invention, not the first to invent 
the subject matter, is entitled to patent protection on that invention. While 
the Company believes that Emory's patent applications that disclosed FTC as a 
useful anti-HIV agent were filed in foreign countries before BioChem Pharma 
filed its foreign patent applications on that subject matter, BioChem Pharma 
has been issued patents in several foreign countries.  Further, BioChem 
Pharma has filed for patent protection on FTC and its uses in certain 
countries in which Emory did not file for patent protection.  There can be no 
assurance that Emory will initiate or be successful in any foreign proceeding 
attempting to revoke patents issued to BioChem Pharma or addressing the 
relative rights of BioChem Pharma and Emory. BioChem Pharma has opposed 
patent claims on FTC granted to Emory in Japan and Australia.  Emory has 
opposed patent claims on FTC granted to BioChem Pharma in Norway.  There can 
be no assurance that BioChem Pharma will not make additional challenges to 
any Emory patents or patent applications, or that Emory will succeed in 
defending any such challenges. There can be no assurance that the sale of FTC 
by the Company for the treatment of HIV would not be held to infringe United 
States and foreign patent rights of BioChem Pharma. Under the patent laws of 
most countries, a product can be found to infringe a third party patent 
either if the third party patent expressly covers the product or method of 
treatment using the product, or in certain circumstances, if the third party 
patent, while not expressly covering the product or method, covers subject 
matter that is substantially equivalent in nature to the product or method. 
If it is determined that the sale of FTC for the treatment of HIV infringes a 
BioChem Pharma patent, the Company would not have the right to make, use or 
sell FTC for the treatment of HIV in one or more countries in the absence of 
a license from BioChem Pharma. There can be no assurance that the Company 
could obtain a license from BioChem Pharma on acceptable terms or at all.

    HBV. Burroughs Wellcome Co. ("Burroughs Wellcome")  filed patent 
applications in March and May 1991 in Great Britain on a method to treat HBV 
with FTC. Burroughs Wellcome  filed similar patent applications in other 
countries, which the Company believes includes the United States. Glaxo 
subsequently acquired Burroughs Wellcome's rights under those patent 
applications. Those applications were filed in foreign countries prior to the 
date Emory filed its patent application on the use of FTC to treat HBV, and 
therefore, the foreign patent applications filed by Burroughs Wellcome have 
priority over those filed by Emory. In July 1996, Emory instituted litigation 
against Glaxo in the United States District Court to obtain ownership of the 
patent applications filed by Burroughs Wellcome, alleging that Burroughs 
Wellcome converted and misappropriated Emory's invention and property, and 
that an Emory employee is the inventor or a co-inventor of the subject matter 
covered by the Burroughs Wellcome patent applications. There can be no 
assurance that Emory will succeed in its efforts to establish ownership 
rights. If Emory fails to establish ownership rights, the Company could not 
make, use or sell FTC for the treatment of HBV in countries in which patents 
are issued to Glaxo without a license from Glaxo. If Emory establishes only 
co-ownership rights (and not sole ownership) to these patents and patent 
applications, laws in Europe, Korea and perhaps other countries could 
prohibit Emory from licensing any co-owned patent rights

                                       18
<PAGE>

without Glaxo's consent. If the Company is required to obtain a license from 
Glaxo to sell FTC for the treatment of HBV, there can be no assurance that 
the Company would be able to obtain such a license on acceptable terms or at 
all.

    BioChem Pharma filed a patent application in May 1991 in Great Britain 
also directed to a method to treat HBV with FTC. BioChem Pharma filed similar 
patent applications in other countries, and in January 1996 was issued a 
patent in the United States. The PTO has recently declared an interference 
between the BioChem Pharma patent and a patent application filed by Yale. 
There can be no assurance, however, that Yale will prevail in the 
interference proceeding, or that the interference proceeding will not delay 
the decision of the PTO regarding Yale's patent application.  In addition, 
Emory has informed the Company that Emory intends to challenge BioChem 
Pharma's issued United States patent. There can be no assurance that Emory 
will pursue or succeed in any such proceeding. The Company cannot sell FTC 
for the treatment of HBV in the United States unless the BioChem Pharma 
patent is held invalid by a United States court or administrative body or 
unless the Company obtains a license from Biochem Pharma. There can be no 
assurance that the Company would be able to obtain such a license on 
acceptable terms or at all. In July 1991, BioChem Pharma was issued a United 
States patent on the use of 3TC to treat HBV and has corresponding 
applications pending or issued in foreign countries. If it is determined that 
the use of FTC to treat HBV is not substantially different from the use of 
3TC to treat HBV, a court could hold that the use of FTC to treat HBV 
infringes these BioChem Pharma 3TC patents.

    In addition, BioChem Pharma has filed in the United States and foreign 
countries several patent applications on manufacturing methods relating to a 
class of nucleosides that includes FTC. If the Company uses a manufacturing 
method that is covered by patents issuing on any of these applications, the 
Company would not be able to manufacture FTC without a license from BioChem 
Pharma. There can be no assurance that the Company would be able to obtain 
such a license on acceptable terms or at all.

    DAPD

    The Company obtained its rights to DAPD under a license from Emory and 
University of Georgia Research Foundation, Inc. ("UGARF").  The DAPD 
portfolio licensed to the Company consists of two issued United States 
patents and several United States and foreign patent applications that cover 
a method for the synthesis of DAPD and its use to treat HIV and HBV. Emory 
and UGARF filed patent applications claiming these inventions in the United 
States in 1990, 1992 and 1993, respectively. BioChem Pharma filed a patent 
application in the United States in 1988 on a group of nucleosides in the 
same general class as DAPD and their use to treat HIV, and has filed 
corresponding patent applications in foreign countries. The PTO issued a 
patent to BioChem Pharma in 1993 covering a class of nucleosides that 
includes DAPD and its use to treat HIV. Corresponding patents have been 
issued to BioChem Pharma in many foreign countries. Emory has filed an 
opposition to BioChem Pharma's granted patent application in the European 
Patent Office based, in part, upon Emory's assertion that BioChem Pharma's 
patent does not disclose how to make DAPD, and Emory has informed the Company 
that Emory intends to challenge BioChem Pharma's patents and patent 
applications in other countries.  Patent claims granted to Emory on a portion 
of the DAPD technology by the Australian Patent Office have been opposed by 
BioChem Pharma. There can be no assurance that a court or administrative body 
would invalidate BioChem Pharma's patent claims or that a sale of DAPD by the 
Company would not infringe BioChem Pharma's patents. If Emory, UGARF and the 
Company do not challenge, or are not successful in any challenge to, BioChem 
Pharma's issued patents or pending patent applications (or patents that may 
issue as a result of such applications), the Company will not be able to 
manufacture, use or sell DAPD in the United States and any foreign countries 
in which BioChem Pharma receives a patent without a license from BioChem 
Pharma. There can be no assurance that the Company would be able to obtain a 
license from BioChem Pharma on acceptable terms or at all.

                                       19
<PAGE>

    CS-92

    The Company obtained its rights to CS-92 under a license from Emory and 
UGARF. Emory and UGARF have obtained two United States patents that cover 
CS-92 and its use to treat HIV, and have filed a European patent application 
and a Japanese patent application with claims limited to the use of CS-92 as 
a method for administering AZT, which includes the administration of CS-92 as 
a precursor form of AZT, to treat HIV infection. Burroughs Wellcome filed an 
application with the European Patent Office in September 1986 directed to a 
broad group of nucleosides that includes CS-92, and their use to treat HIV 
infection. Burroughs Wellcome subsequently filed similar applications in 
other countries, and the Company believes Burroughs Wellcome filed a similar 
patent application in the United States. Patents have been issued to 
Burroughs Wellcome in certain countries based upon these patent applications. 
Glaxo now has the rights to these patents and patent applications. There can 
be no assurance that, if challenged, a court would uphold the Emory/UGARF 
patents in light of the disclosures contained in the earlier filed Burroughs 
Wellcome patent applications. In addition, CS-92 is metabolized to AZT in 
cell lines IN VITRO, and based on that, the Company believes that it may 
likewise be converted to AZT IN VIVO. A court could hold that United States 
and foreign patents owned by Glaxo covering the use of AZT to treat HIV 
infection would be infringed by the sale of CS-92 to treat HIV infection. If 
the use of CS-92 is found to infringe the patents owned by Glaxo, then the 
Company would not have the right to sell CS-92 in one or more countries 
without a license from Glaxo. There can be no assurance that the Company 
would be able to obtain a license from Glaxo on acceptable terms or at all.

    Litigation, which could result in substantial cost to the Company, may 
also be necessary to enforce any patents to which the Company has rights or 
to determine the scope, validity and enforceability of other parties' 
proprietary rights, which may affect the Company's drug candidates and 
technology. United States patents carry a presumption of validity and 
generally can be invalidated only through clear and convincing evidence. The 
Company's licensors may also have to participate in interference proceedings 
declared by the PTO to determine the priority of an invention, which could 
result in substantial cost and/or delays to the Company.  As indicated above, 
one interference has already been declared by the PTO in connection with the 
FTC technology.  There can be no assurance that the Company's licensed 
patents would be held valid by a court or administrative body or that an 
alleged infringer would be found to be infringing. Further, with respect to 
the drug candidates licensed or optioned by the Company from Emory, UGARF and 
the Regents of the University of California ("Regents"), and The Dupont Merck 
Pharmaceutical Company ("Dupont Merck"), Emory, UGARF, the Regents and Dupont 
Merck are primarily responsible for any litigation, interference, opposition 
or other action pertaining to patents or patent applications related to the 
licensed technology and the Company is required to reimburse them for the 
costs they incur in performing these activities. As a result, the Company 
generally does not have the ability to institute or determine the conduct of 
any such patent proceedings unless Emory, UGARF and/or the Regents and/or 
Dupont Merck do not elect to institute or elect to abandon such proceedings. 
In cases where Emory, UGARF and/or the Regents and/or Dupont Merck elect to 
institute and prosecute patent proceedings, the Company's rights will be 
dependent in part upon the manner in which Emory, UGARF and/or the Regents 
and/or Dupont Merck conduct the proceedings. Emory, UGARF and/or the Regents 
and/or Dupont Merck could, in any of these proceedings they elect to initiate 
and maintain, elect not to vigorously pursue or defend or to settle such 
proceedings on terms that are not favorable to the Company. An adverse 
outcome in any patent litigation or interference proceeding could subject the 
Company to significant liabilities to third parties, require disputed rights 
to be licensed from third parties or require the Company to cease using such 
technology, any of which could have a material adverse effect on the Company. 
Moreover, the mere uncertainty resulting from the initiation and continuation 
of any technology related litigation or interference proceeding could have a 
material adverse effect on the Company pending resolution of the disputed 
matters.

    The Company also relies on unpatented trade secrets and know-how to 
maintain its competitive position, which it seeks to protect, in part, by 
confidentiality agreements with employees, consultants and others. There can 
be no assurance that these agreements will not be breached or terminated, 
that the Company will have adequate remedies for any breach, or that the 
Company's trade secrets will not otherwise become known or be independently 
discovered by competitors. The Company relies on certain technologies to 
which it does not have exclusive rights or which may not be patentable or 
proprietary and thus may be available to competitors. The Company has filed 
an application for but has not obtained a trademark registration with respect 
to its corporate name and its logo.

                                       20
<PAGE>

Another company has filed an application to obtain a trademark registration 
for the name "Triangle Coordinated Care," and the Company is aware that 
several other companies use trade names that are similar to the Company's for 
their businesses. If the Company is not able to obtain any licenses that may 
be necessary for the Company to use its corporate name, it may be required to 
change its corporate name. The Company's management personnel were previously 
employed by other pharmaceutical companies. In many cases, these individuals 
are conducting drug development activities for the Company in areas similar 
to those in which they were involved prior to joining the Company. As a 
result, the Company, as well as these individuals, could be subject to 
allegations of violation of trade secrets and other similar claims. 

    EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVAL

    Human pharmaceutical products are subject to rigorous preclinical testing 
and clinical trials and other approval procedures mandated by the FDA and 
foreign regulatory authorities. Various federal and foreign statutes and 
regulations also govern or influence the manufacturing, safety, labeling, 
storage, record keeping and marketing of pharmaceutical products. The process 
of obtaining these approvals and the subsequent compliance with appropriate 
United States and foreign statutes and regulations are time consuming and 
require the expenditure of substantial resources. In addition, these 
requirements and processes vary widely from country to country. The time 
required for completing preclinical testing and clinical trials and obtaining 
regulatory approvals is uncertain. The Company may decide to replace a drug 
candidate in preclinical testing and/or clinical trials with a modified drug 
candidate, thus extending the development period. In addition, the FDA or 
similar foreign regulatory authorities may require additional clinical 
trials, which could result in increased costs and significant development 
delays. Delays or rejections may also be encountered based upon changes in 
FDA policy during the period of product development and FDA review. Similar 
delays or rejections may be encountered in other countries. The Company's 
drug candidates may not qualify for accelerated development and/or approval 
under FDA regulations and, even if some of the Company's drug candidates 
qualify for accelerated development and/or approval, they may not be approved 
for marketing sooner than would be historically expected or at all. There can 
be no assurance that even after substantial time and expenditures, any of the 
Company's drug candidates under development will receive marketing approval 
in any country on a timely basis or at all. If the Company is unable to 
demonstrate the safety and effectiveness of its drug candidates to the 
satisfaction of the FDA or foreign regulatory authorities, the Company will 
be unable to commercialize its drug candidates and would be materially and 
adversely affected. Further, even if regulatory approval of a drug candidate 
is obtained, the approval may entail limitations on the indicated uses for 
which the drug candidate may be marketed. A marketed product, its 
manufacturer and the manufacturer's facilities are subject to continual 
review and periodic inspections, and subsequent discovery of previously 
unknown problems with a product, manufacturer or facility may result in 
restrictions on such 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 fines, suspension of 
regulatory approvals, refusal to approve pending applications, refusal to 
permit exports from the United States, product recalls, seizure of products, 
injunctions, operating restrictions and criminal prosecutions. Further, FDA 
policy may change and additional government regulations may be established 
that could prevent or delay regulatory approval of the Company's drug 
candidates.   

    The effect of governmental regulation may be to delay the marketing of 
new products for a considerable period of time or to prevent such marketing 
altogether, to impose costly requirements on the Company's activities or to 
provide a competitive advantage to other companies that compete with the 
Company. Adverse clinical results by others could have a negative impact on 
the regulatory process and timing with respect to the development and 
approval of the Company's drug candidates. A delay in obtaining or failure to 
obtain regulatory approvals could have a material adverse effect on the 
Company. The extent and character of potentially adverse governmental 
regulation that may arise from future legislation or administrative action 
cannot be predicted.

    The Company is also subject to various federal, state and local laws and 
regulations relating to safe working conditions, laboratory and manufacturing 
practices, the experimental use of animals and the use and disposal of 
hazardous or potentially hazardous substances, including radioactive 
compounds and infectious disease agents, used in connection with its 
development work.

                                       21
<PAGE>

    INTENSE COMPETITION; RISK OF TECHNOLOGICAL CHANGE

    The Company is engaged in segments of the pharmaceutical industry that 
are highly competitive and rapidly changing. If successfully developed and 
approved, the drug candidates that the Company is currently developing will 
compete with numerous existing therapies. In addition, a number of companies 
are pursuing the development of novel pharmaceuticals that target the same 
diseases the Company is targeting. The Company believes that a significant 
number of drugs are currently under development and will become available in 
the future for the treatment of HIV. The Company anticipates that it will 
face intense and increasing competition in the future as new products enter 
the market and advanced technologies become available. There can be no 
assurance that existing products or new products developed by the Company's 
competitors will not be more effective, or more effectively marketed and 
sold, than any that may be developed by the Company. Competitive products may 
render the Company's licensed technology and products obsolete or 
noncompetitive prior to the Company's recovery of development or 
commercialization expenses incurred with respect to any such products. The 
development by others of a cure or new treatment methods for the indications 
for which the Company is developing drug candidates could render the 
Company's drug candidates noncompetitive, obsolete or uneconomical. Many of 
the Company's competitors have significantly greater financial, technical and 
human resources than the Company and may be better equipped to develop, 
manufacture and market products. In addition, many of these companies have 
extensive experience in preclinical testing and clinical trials, obtaining 
FDA and other regulatory approvals and manufacturing and marketing 
pharmaceutical products. Many of these competitors also 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. Furthermore, academic 
institutions, governmental agencies and other public and private research 
organizations are becoming increasingly aware of the commercial value of 
their inventions and are more actively seeking to commercialize the 
technology they have developed.

    If the Company's drug candidates are successfully developed and approved, 
the Company will face competition based on the safety and effectiveness of 
its products, the timing and scope of regulatory approvals, availability of 
supply, marketing and sales capability, reimbursement coverage, price and 
patent position. There can be no assurance that the Company's competitors 
will not develop more effective or more affordable technology or products, or 
achieve earlier patent protection, product development or product 
commercialization than the Company. Accordingly, the Company's competitors 
may succeed in commercializing products more rapidly or effectively than the 
Company, which could have a material adverse effect on the Company. 

    RISKS RELATED TO LICENSE AND OPTION AGREEMENTS

    The agreements pursuant to which the Company has in-licensed or obtained 
an option to in-license its drug candidates permit the Company's licensors to 
terminate the agreements under certain circumstances, such as the failure by 
the Company to achieve certain development milestones or the occurrence of an 
uncured material breach by the Company. The termination of any of these 
agreements could have a material adverse effect on the Company. Upon 
termination of the license agreements with Emory and UGARF, the Company is 
required to grant to Emory and UGARF a non-exclusive, royalty free license to 
all of the Company's interest in the licensed technology (including any 
improvements to the technology developed by the Company). Upon termination of 
the license agreement with Dupont Merck, the Company is required to transfer 
all approved and pending NDA's relating to DMP-450 to Dupont Merck. In 
addition, the license and option agreements with Emory, UGARF, the Regents 
and Dupont Merck provide that Emory, UGARF, the Regents and DuPont Merck are 
primarily responsible for any litigation, interference, opposition or other 
action seeking to obtain patent protection for the technology licensed to the 
Company, and except for litigation expenses incurred by DuPont Merck, the 
Company is required to reimburse them for the costs they incur in performing 
these activities. The Company believes that these costs as well as other 
costs under the license and option agreements relating to the Company's drug 
candidates will be substantial, and any inability or failure of the Company 
to pay these costs with respect to any drug candidate could result in the 
termination of the license or option agreement for such drug candidate.   


                                      22
<PAGE>

    LACK OF MANUFACTURING CAPABILITIES

    The Company does not have any manufacturing capacity and currently plans 
to seek to establish relationships with third party manufacturers for the 
manufacture of clinical trial material and the commercial production of any 
products it may develop. There can be no assurance that the Company will be 
able to establish relationships with third party manufacturers on 
commercially acceptable terms or that third party manufacturers will be able 
to manufacture products in commercial quantities under good manufacturing 
practices mandated by the FDA on a cost effective basis. The Company's 
dependence upon third parties for the manufacture of its products may 
adversely affect the Company's profit margins and its ability to develop and 
commercialize products on a timely and competitive basis. Further, there can 
be no assurance that manufacturing or quality control problems will not arise 
in connection with the manufacture of the Company's products or that third 
party manufacturers will be able to maintain the necessary governmental 
licenses and approvals to continue manufacturing the Company's products. Any 
failure to establish relationships with third parties for its manufacturing 
requirements on commercially acceptable terms would have a material adverse 
effect on the Company.

    LACK OF SALES AND MARKETING CAPABILITIES

    The Company currently has only one marketing employee and no sales 
personnel. The Company will have to develop a sales force or rely on 
marketing partners or other arrangements with third parties for the 
marketing, distribution and sale of any products it develops. The Company 
currently intends to market in the United States most of the drug candidates 
that it successfully develops primarily through a direct sales force and 
outside the United States through a combination of a direct sales force and 
arrangements with third parties. There can be no assurance that the Company 
will be able to establish marketing, distribution or sales capabilities or 
make arrangements with third parties to perform those activities on terms 
satisfactory to the Company or that any internal capabilities or third party 
arrangements will be cost effective.

    In addition, any third parties with which the Company establishes 
marketing, distribution or sales arrangements may have significant control 
over important aspects of the commercialization of the Company's products, 
including market identification, marketing methods, pricing, composition of 
sales force and promotional activities. There can be no assurance that the 
Company will be able to control the amount and timing of resources that any 
third party may devote to the Company's products or prevent any third party 
from pursuing alternative technologies or products that could result in the 
development of products that compete with the Company's products and the 
withdrawal of support for the Company's programs.

    DEPENDENCE ON THIRD PARTIES FOR DEVELOPMENT, MANUFACTURING AND 
IN-LICENSING

    The Company intends to engage third party contract research organizations 
("CROs") to perform certain functions in connection with the development of 
the Company's drug candidates and third parties to perform many aspects of 
the manufacture of drug substance. The Company intends to design clinical 
trials, but have CROs conduct the clinical trials. The Company will rely on 
the CROs to perform many important aspects of clinical trials. As a result, 
these aspects of the Company's drug development programs will be outside the 
direct control of the Company. In addition, there can be no assurance that 
the CROs or third parties will perform all of their obligations under 
arrangements with the Company. In the event that the CROs or third parties do 
not perform clinical trials or manufacture drug substance in a satisfactory 
manner or breach their obligations to the Company, the commercialization of 
any drug candidate may be delayed or precluded, which would have a material 
adverse effect on the Company. The Company does not intend to engage in drug 
discovery. The Company's strategy for obtaining additional drug candidates is 
to utilize the relationships of its management team and Scientific Advisory 
Board to identify compounds for in-licensing from companies, universities, 
research institutions and other organizations. There can be no assurance that 
the Company will succeed in in-licensing additional drug candidates on 
acceptable terms or at all.     

                                      23
<PAGE>

NO ASSURANCE OF MARKET ACCEPTANCE

    The Company's success will depend in substantial part on the extent to 
which any product it develops achieves market acceptance. The degree of 
market acceptance will depend upon a number of factors, including the receipt 
and scope of regulatory approvals, the establishment and demonstration in the 
medical community of the safety and effectiveness of the Company's products 
and their potential advantages over existing treatment methods, and 
reimbursement policies of government and third party payors. There can be no 
assurance that physicians, patients, payors or the medical community in 
general will accept or utilize any product that the Company may develop.

    RISKS RELATING TO COMBINATION THERAPY

    The Company's success will also depend in large part on the extent to 
which combination therapy for the treatment of HIV in the United States and 
Europe and for the treatment of HBV in developing areas of the world, 
particularly Asia, achieves market acceptance. Present combination treatment 
regimens for the treatment of HIV are expensive (published reports indicate 
the cost per patient per year can exceed $13,000), and may increase as new 
combinations are developed. These costs have resulted in a limitation of 
reimbursement available from third party payors for the treatment of HIV 
infection, and the Company expects that reimbursement pressures will continue 
in the future. If combination therapy is accepted as a method to treat HBV, 
treatment regimens are also likely to be expensive. The Company expects that 
even the cost of monotherapy for HBV will be considered expensive in 
developing countries. Any failure of combination therapy to achieve 
significant market acceptance for the treatment of HIV or potentially HBV 
could have a material adverse effect on the Company. 

    DEPENDENCE ON KEY EMPLOYEES

    The Company is highly dependent on its senior management and scientific 
staff, including Dr. David Barry, the Company's Chairman and Chief Executive 
Officer. Except for Dr. Barry, the Company has not entered into employment 
agreements with any of its personnel. The loss of the services of any member 
of its senior management or scientific staff may significantly delay or 
prevent the achievement of product development and other business objectives. 
Retaining and attracting qualified personnel, consultants and advisors is 
critical to the Company's success. In order to pursue its drug development 
programs and marketing plans, the Company will be required to hire additional 
qualified scientific and management personnel. Competition for qualified 
individuals is intense and the Company faces competition from numerous 
pharmaceutical and biotechnology companies, universities and other research 
institutions. There can be no assurance that the Company will be able to 
attract and retain such individuals on acceptable terms or at all, and the 
failure to do so would have a material adverse effect on the Company. In 
addition, the Company relies on members of its Scientific Advisory Board to 
assist the Company in formulating its drug development strategy. All of the 
members of the Scientific Advisory Board are employed by other employers and 
each such member may have commitments to, or consulting or advisory 
contracts, with other entities that may limit his availability to the Company.

    UNCERTAINTY OF HEALTH CARE REFORM MEASURES AND THIRD PARTY REIMBURSEMENT

    The business and financial condition of pharmaceutical companies will 
continue to be affected by the efforts of governments and third party payors 
to contain or reduce the cost of health care through various means. A number 
of legislative and regulatory proposals aimed at changing the health care 
system have been proposed in recent years. In addition, an increasing 
emphasis on managed care in the United States has and will continue to 
increase the pressure on pharmaceutical pricing. While the Company cannot 
predict whether legislative or regulatory proposals will be adopted or the 
effect those proposals or managed care efforts may have on its business, the 
announcement and/or adoption of such proposals or efforts could have a 
material adverse effect on the Company. In the United States and elsewhere, 
sales of prescription pharmaceuticals are dependent in part on the 
availability of reimbursement to the consumer from third party payors, such 
as government and private insurance plans that mandate predetermined 
discounts from list prices. Third party payors are increasingly challenging 
the prices charged for medical products and services. If the Company succeeds 
in bringing one or more products to the market, there can be no assurance 
that these products will be considered cost effective or that 

                                      24
<PAGE>

reimbursement to the consumer will be available or will be sufficient to 
allow the Company to sell its products on a competitive basis.

    LIMITED PRODUCT LIABILITY INSURANCE; INSURANCE RISKS

    The Company's business will expose it to potential product liability 
risks that are inherent in the testing, manufacturing and marketing of 
pharmaceutical products. There can be no assurance that product liability 
claims will not be asserted against the Company. The Company currently has 
only limited product liability insurance relating to potential claims arising 
from its clinical trials. The Company intends to expand its insurance 
coverage if and when the Company begins marketing commercial products. There 
can be no assurance, however, that the Company will be able to obtain any 
additional product liability insurance on commercially acceptable terms or 
that the Company will be able to maintain its existing insurance and/or any 
additional insurance it may obtain in the future at a reasonable cost or in 
sufficient amounts to protect the Company against potential losses. A 
successful product liability claim or series of claims brought against the 
Company could have a material adverse effect on the Company.

    HAZARDOUS MATERIALS

    The Company's drug development programs involve the controlled use of 
hazardous materials, chemicals, viruses and various radioactive compounds. 
Although the Company believes that its handling and disposing of such 
materials comply with the standards prescribed by state and federal 
regulations, the risk of accidental contamination or injury from these 
materials cannot be completely eliminated. In the event of such an accident, 
the Company could be held liable for any damages or fines that result and any 
such liability could exceed the resources of the Company.

    CONCENTRATION OF STOCK OWNERSHIP; CONTROL BY MANAGEMENT AND EXISTING 
STOCKHOLDERS

    As of October 31, 1997 the Company's directors, executive officers and 
their respective affiliates beneficially owned approximately 45% of the 
Company's outstanding Common Stock. As a result, these stockholders are able 
to exercise significant influence over all matters requiring stockholder 
approval, including the election of directors and approval of significant 
corporate transactions. Such concentration of ownership may also have the 
effect of delaying or preventing a change in control of the Company that may 
be favored by other stockholders.

    VOLATILITY OF STOCK PRICE

    The market price of the Company's Common Stock is likely to be highly 
volatile and could be subject to wide fluctuations in response to factors 
such as announcements of the results of clinical trials, developments with 
respect to patents or proprietary rights, announcements of technological 
innovations, new products or new contracts by the Company or its competitors, 
actual or anticipated variations in the Company's operating results due to a 
number of factors including, among others, the level of development expenses, 
changes in financial estimates by securities analysts, conditions and trends 
in the pharmaceutical and other industries, adoption of new accounting 
standards affecting the industry, general market conditions and other 
factors. As a result, it is possible that the Company's operating results 
will be below the expectations of market analysts and investors, which would 
likely have a material adverse effect on the prevailing market price of the 
Common Stock.

    Sales of a substantial number of shares of Common Stock in the public 
market could also adversely affect the market price of the Common Stock. In 
addition, holders of approximately 11,740,000 shares of Common Stock 
(including shares issuable upon the exercise of outstanding warrants) are 
entitled to certain rights with respect to registration of such shares of 
Common Stock for offer or sale to the public. Any such sales may have an 
adverse effect on the Company's ability to raise needed capital through an 
offering of its equity or convertible debt securities and may adversely 
affect the prevailing market price of the Common Stock.

                                      25
<PAGE>

    Further, the stock market has experienced extreme price and volume 
fluctuations that have particularly affected the market prices of equity 
securities of many pharmaceutical and biotechnology companies and that often 
have been unrelated or disproportionate to the operating performance of such 
companies. These market fluctuations, as well as general economic, political 
and market conditions such as recessions or international currency 
fluctuations, may adversely affect the market price of the Common Stock. In 
the past, following periods of volatility in the market price of the 
securities of companies in the pharmaceutical and biotechnology industries, 
securities class action litigation has often been instituted against those 
companies. Such litigation, if instituted against the Company, could result 
in substantial costs and a diversion of management attention and resources, 
which would have a material adverse effect on the Company. The realization of 
any of the risks described in these "Risks and Uncertainties" could have a 
dramatic and adverse impact on the market price of the Common Stock.

    ANTITAKEOVER EFFECTS OF CHARTER, BYLAWS AND DELAWARE LAW

    The Company's Second Restated Certificate of Incorporation (the 
"Certificate") authorizes the Company's Board of Directors (the "Board") to 
issue shares of undesignated preferred stock without stockholder approval on 
such terms as the Board may determine. The rights of the holders of Common 
Stock will be subject to, and may be adversely affected by, the rights of the 
holders of any such preferred stock that may be issued in the future. 
Moreover, the issuance of preferred stock may make it more difficult for a 
third party to acquire, or may discourage a third party from acquiring, a 
majority of the voting stock of the Company.  The Company's Restated Bylaws 
(the "Bylaws") divide the Board into three classes of directors with each 
class serving a three year term. These and other provisions of the 
Certificate and the Bylaws, as well as certain provisions of Delaware law, 
could delay or impede the removal of incumbent directors and could make more 
difficult a merger, tender offer or proxy contest involving the Company, even 
if such events could be beneficial to the interest of the stockholders. Such 
provisions could limit the price that certain investors might be willing to 
pay in the future for the Common Stock.

    NO DIVIDENDS

    The Company has never declared or paid any cash dividends on its capital 
stock. The Company currently does not intend to pay any cash dividends in the 
foreseeable future and intends to retain its earnings, if any, for the 
operation of its business.

                                       
                                       







                                      26


<PAGE>

                        TRIANGLE PHARMACEUTICALS, INC.

                          PART II - OTHER INFORMATION


ITEM 2.  CHANGES IN SECURITIES

    c.   Issuance of Unregistered Securities

    On August 28, 1997, Triangle acquired Avid Corporation, through a merger 
(the "Merger") of Triangle's wholly-owned subsidiary, Project Z Corporation, 
a Delaware corporation ("Merger Sub"), with and into Avid. The Merger was 
consummated on the terms set forth in an Agreement and Plan of Reorganization 
dated June 30, 1997, by and among Triangle, Merger Sub and Avid (the "Merger 
Agreement"). As a result of the Merger, Avid is now a wholly-owned subsidiary 
of Triangle.

    In connection with the Merger, on August 28, 1997, the Company issued to 
Avid's stockholders 400,000 shares of the Company's Common Stock and agreed 
to issue up to an additional 2,100,000 shares of its Common Stock contingent 
upon the attainment of certain development milestones with Avid's drug 
candidates.  The shares of the Company's Common Stock were issued to the Avid 
stockholders in exchange for all outstanding capital stock of Avid.  The 
Company also assumed all outstanding options and warrants to acquire Avid 
common stock.  The assumed options and warrants are exercisable for the 
portion of the shares of the Company's Common Stock that the option or 
warrant holder would have received had the option or warrant been exercised 
immediately prior to the Merger.

    The shares issued by Triangle in connection with the Merger are 
restricted and may not be transferred or sold, except pursuant to a 
registration of the shares or an available exemption from registration.  The 
offer and sale of the shares was made pursuant to a claim of exemption under 
Regulation D promulgated by the Securities and Exchange Commission or, 
alternatively, under Section 4(2) of the Securities Act of 1933, as amended.  
The Company did not use any general advertisement or solicitation in 
connection with the offer or sale of the shares to the Avid stockholders.  
The Avid stockholders represented and warranted, among other things, that 
they were purchasing the shares for investment only and not with a view to 
distribution.  Less than 35 of the Avid stockholders were not "accredited 
investors" (as defined in Regulation D), and each of these stockholders was 
represented by a purchaser representative.  Appropriate legends were affixed 
to the certificates for the shares.

                                       27
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    a.   Exhibits

         *10.1     License Agreement dated as of December 18, 1996 between
                   Avid Corporation and The Dupont Merck Pharmaceutical Company.

         *10.2     First Amendment to License Agreement between Avid
                   Corporation and The Dupont Merck Pharmaceutical Company, 
                   dated as of August 26, 1997.

          11.1     Computation of Net Loss Per Share and Pro Forma Net Loss
                   Per Share

          27.1     Financial Data Schedule

    b.   Reports on Form 8-K.

         On September 11, 1997 the Company filed a Current Report on Form 8-K 
         dated September 11, 1997 describing the Company's acquisition of 
         Avid Corporation.

         On November 12, 1997, the Company filed Amendment No. 1 to Current 
         Report on Form 8-K, amending its Current Report on form 8-K filed 
         September 11, 1997, to include financial statements of Avid 
         Corporation and pro forma financial statements of the combined 
         companies.


         ---------------
         *Certain confidential portions of this Exhibit were omitted by means 
          of marking such portions with an asterisk (the "Mark").  This 
          Exhibit has been filed separately with the Secretary of the 
          Securities and Exchange Commission without the Mark pursuant to the 
          Company's Application Requesting Confidential Treatment pursuant to 
          Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

                                       28
<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, hereunto duly authorized.

                                       TRIANGLE PHARMACEUTICALS, INC.


Date:  November 14, 1997                   By:  /s/ David W. Barry 
                                                  ----------------------------
                                                  David W. Barry
                                                  Chairman and Chief 
                                                  Executive Officer


                                       TRIANGLE PHARMACEUTICALS, INC.


Date: November 14, 1997                    By:  /s/ James A. Klein, Jr.
                                                  ----------------------------
                                                  James A. Klein, Jr.
                                                  Chief Financial Officer 
                                                  and Treasurer


                                       29
<PAGE>

                                 EXHIBIT INDEX

EXHIBIT                           DESCRIPTION
-------                           -----------
*10.1        License Agreement dated as of December 18, 1996 between
             Avid Corporation and The Dupont Merck Pharmaceutical Company.

*10.2        First Amendment to License Agreement between Avid
             Corporation and The Dupont Merck Pharmaceutical Company, dated
             as of August 26, 1997.

 11.1        Computation of Net Loss Per Share and Pro Forma Net Loss
             Per Share

 27.1        Financial Data Schedule

          ------------------------
          * Certain confidential portions of this Exhibit were omitted by means
            of marking such portions with an asterisk (the "Mark").   This
            Exhibit has been filed separately with the Secretary of the
            Securities and Exchange Commission without the Mark pursuant to the
            Company's Application Requesting Confidential Treatment pursuant to
            Rule 24b-2 under the Securities Exchange Act of 1934, as amended.



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