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UNITED STATES

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, 2010



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

For the transition period from  to

Commission File Number 0-23155





TRIMERIS, INC.

(Exact name of registrant as specified in its charter)







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

2530 Meridian
Parkway, 2ndFloor

Durham, North Carolina 27713

(Address of principal executive offices, including zip code)

Registrants telephone number, including area code: (919) 806-4682





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.    x  Yes    No   ̈

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

The number of shares outstanding of the registrants common stock as of November 5, 2010 was 22,349,841.

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



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  |  ̈
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (do not check if a smaller reporting company) |  | Smaller Reporting Company |  | x









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TRIMERIS, INC.

FORM 10-Q

September 30, 2010

INDEX



|               |  |                                                                                                    |    |      |    | 
|-------------- |  | -------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|               |  |                                                                                                    |    | Page |   
|               |  |                                                                                                   
|PART I.        |  | FINANCIAL INFORMATION                                                                              |    |      |    | 
|               |  |                                                                                                   
|Item 1.        |  | Financial Statements (unaudited)                                                                   |    |      | 3  | 
|               |  |                                                                                                   
|               |  | Condensed Balance Sheets as of September 30, 2010 and December 31, 2009                            |    |      | 3  | 
|               |  |                                                                                                   
|               |  | Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2010 and
2009 |    |      | 4  | 
|               |  |                                                                                                   
|               |  | Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2010 and
2009           |    |      | 5  | 
|               |  |                                                                                                   
|               |  | Notes to Condensed Financial Statements                                                            |    |      | 6  | 
|               |  |                                                                                                   
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations              |    |      | 12 | 
|               |  |                                                                                                   
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                                         |    |      | 24 | 
|               |  |                                                                                                   
|Item 4.        |  | Controls and Procedures                                                                            |    |      | 24 | 
|               |  |                                                                                                   
|PART II.       |  | OTHER INFORMATION                                                                                  |    |      |    | 
|               |  |                                                                                                   
|Item 1.        |  | Legal Proceedings                                                                                  |    |      | 25 | 
|               |  |                                                                                                   
|Item 1A.       |  | Risk Factors                                                                                       |    |      | 26 | 
|               |  |                                                                                                   
|Item 2.        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                        |    |      | 28 | 
|               |  |                                                                                                   
|Item 3.        |  | Defaults Upon Senior Securities                                                                    |    |      | 28 | 
|               |  |                                                                                                   
|Item 4.        |  | [Removed and Reserved]                                                                             |    |      | 28 | 
|               |  |                                                                                                   
|Item 5.        |  | Other Information                                                                                  |    |      | 28 | 
|               |  |                                                                                                   
|Item 6.        |  | Exhibits                                                                                           |    |      | 28 | 
|               | 
|Signature Page |  |                                                                                                    | 29 |     



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PART I. FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

TRIMERIS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except par value)

(unaudited)



|                                                                                                           |  |                   |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                           |  | September 30,2010 |          |   | December 31,2009 |  
|Assets                                                                                                     |  |                   |          |   |                  |   |          |  
|Current assets:                                                                                            |  |                   |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                  |  | $                 | 44,135   |   |                  | $ | 47,420   |  
|Investment securities available-for-sale                                                                   |  |                   |         |   |                  |   | 1,020    |  
|Accounts receivable - Roche                                                                                |  |                   | 1,989    |   |                  |   | 2,465    |  
|Taxes receivable                                                                                           |  |                   | 1,259    |   |                  |   |         |  
|Deferred tax asset                                                                                         |  |                   | 160      |   |                  |   | 160      |  
|Prepaid expenses                                                                                           |  |                   | 198      |   |                  |   | 157      |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total current assets                                                                                       |  |                   | 47,741   |   |                  |   | 51,222   |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Other assets:                                                                                              |  |                   |          |   |                  |   |          |  
|Patent costs, net                                                                                          |  |                   | 2,204    |   |                  |   | 2,117    |  
|Advanced payment - Roche                                                                                   |  |                   | 5,687    |   |                  |   | 6,403    |  
|Deposits and other assets                                                                                  |  |                   | 177      |   |                  |   | 196      |  
|Deferred tax asset                                                                                         |  |                   | 320      |   |                  |   | 320      |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total other assets                                                                                         |  |                   | 8,388    |   |                  |   | 9,036    |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total assets                                                                                               |  | $                 | 56,129   |   |                  | $ | 60,258   |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Liabilities and Stockholders Equity                                                                       |  |                   |          |   |                  |   |          |  
|Current liabilities:                                                                                       |  |                   |          |   |                  |   |          |  
|Taxes payable                                                                                              |  |                   |         |   |                  |   | 3,012    |  
|Accrued compensation - short-term                                                                          |  |                   | 378      |   |                  |   | 13       |  
|Deferred revenue - Roche                                                                                   |  |                   | 265      |   |                  |   | 265      |  
|Accrued expenses                                                                                           |  |                   | 568      |   |                  |   | 2,727    |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total current liabilities                                                                                  |  |                   | 1,211    |   |                  |   | 6,017    |  
|                                                                                                           |  |                  
|Deferred revenue - Roche                                                                                   |  |                   | 840      |   |                  |   | 1,039    |  
|Accrued marketing costs                                                                                    |  |                   |         |   |                  |   | 18,528   |  
|Accrued compensation-long-term                                                                             |  |                   | 95       |   |                  |   | 142      |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total liabilities                                                                                          |  |                   | 2,146    |   |                  |   | 25,726   |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Stockholders equity:                                                                                      |  |                   |          |   |                  |   |          |  
|Preferred Stock at $.001 par value per share, 10,000 shares authorized, zero shares issued and outstanding |  |                   |         |   |                  |   |         |  
|Common Stock at $.001 par value per share, 60,000 shares authorized, 22,350 shares issued and outstanding  |  |                   | 22       |   |                  |   | 22       |  
|Additional paid-in capital                                                                                 |  |                   | 358,357  |   |                  |   | 357,691  |  
|Accumulated deficit                                                                                        |  |                   | (304,570 | ) |                  |   | (323,356 | )
|Accumulated other comprehensive income                                                                     |  |                   | 174      |   |                  |   | 175      |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total stockholders equity                                                                                 |  |                   | 53,983   |   |                  |   | 34,532   |  
|                                                                                                           |  |                   |          |   |                  |   |          |  
|                                                                                                           |  |                  
|Total liabilities and stockholders equity                                                                 |  | $                 | 56,129   |   |                  | $ | 60,258   |  
|                                                                                                           |  |                   |          |   |                  |   |          |  

See accompanying notes to condensed financial statements.



3



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TRIMERIS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------- |  | --------------------------------------- | ------ | - | -------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                               |  | For the Three Months EndedSeptember 30, |        |   | For the Nine Months EndedSeptember 30, |  
|                                                               |  | 2010                                    |        |   | 2009                                   |   |        | 2010 |  |   | 2009   |  
|Revenue:                                                       |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|Milestone revenue                                              |  | $                                       | 67     |   |                                        | $ | 67     |      |  | $ | 199    |   |  | $ | 199    |  
|Royalty revenue                                                |  |                                         | (2,697 | ) |                                        |   | 2,141  |      |  |   | 824    |   |  |   | 6,251  |  
|Collaboration income                                           |  |                                         | 19,973 |   |                                        |   | 1,702  |      |  |   | 22,713 |   |  |   | 5,555  |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Total revenue and collaboration income                         |  |                                         | 17,343 |   |                                        |   | 3,910  |      |  |   | 23,736 |   |  |   | 12,005 |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Operating expenses:                                            |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|General and administrative                                     |  |                                         | 1,433  |   |                                        |   | 1,669  |      |  |   | 4,000  |   |  |   | 4,805  |  
|Gain on disposal of equipment                                  |  |                                         |       |   |                                        |   |       |      |  |   |       |   |  |   | (23    | )
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                       |  |                                         | 1,433  |   |                                        |   | 1,669  |      |  |   | 4,000  |   |  |   | 4,782  |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Operating income                                               |  |                                         | 15,910 |   |                                        |   | 2,241  |      |  |   | 19,736 |   |  |   | 7,223  |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Other income (expense):                                        |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|Interest income                                                |  |                                         | 28     |   |                                        |   | 59     |      |  |   | 61     |   |  |   | 338    |  
|Gain on investments                                            |  |                                         |       |   |                                        |   | 241    |      |  |   |       |   |  |   | 298    |  
|Interest expense                                               |  |                                         |       |   |                                        |   | (64    | )    |  |   | (130   | ) |  |   | (192   | )
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|Total other income (expense)                                   |  |                                         | 28     |   |                                        |   | 236    |      |  |   | (69    | ) |  |   | 444    |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Income before taxes                                            |  |                                         | 15,938 |   |                                        |   | 2,477  |      |  |   | 19,667 |   |  |   | 7,667  |  
|Income tax (benefit) provision                                 |  |                                         | (515   | ) |                                        |   | 833    |      |  |   | 881    |   |  |   | 2,612  |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Net income                                                     |  | $                                       | 16,453 |   |                                        | $ | 1,644  |      |  | $ | 18,786 |   |  | $ | 5,055  |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Basic net income per share                                     |  | $                                       | 0.74   |   |                                        | $ | 0.07   |      |  | $ | 0.84   |   |  | $ | 0.23   |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Diluted net income per share                                   |  | $                                       | 0.74   |   |                                        | $ | 0.07   |      |  | $ | 0.84   |   |  | $ | 0.23   |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Weighted average shares used in basic per share computations   |  |                                         | 22,320 |   |                                        |   | 22,320 |      |  |   | 22,320 |   |  |   | 22,297 |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                         |        |  
|Weighted average shares used in diluted per share computations |  |                                         | 22,332 |   |                                        |   | 22,320 |      |  |   | 22,332 |   |  |   | 22,297 |  
|                                                               |  |                                         |        |   |                                        |   |        |      |  |   |        |   |  |   |        |  

See accompanying notes to condensed financial statements.



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TRIMERIS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



|                                                                                            |  |                                |         |   |      |   |        |  
|------------------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                            |  | Nine Months EndedSeptember 30, |        
|                                                                                            |  | 2010                           |         |   | 2009 |  
|Cash flows from operating activities:                                                       |  |                                |         |   |      |   |        |  
|Net income                                                                                  |  | $                              | 18,786  |   |      | $ | 5,055  |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |                                |         |   |      |   |        |  
|Gain on disposal of equipment                                                               |  |                                |        |   |      |   | (23    | )
|Patent/license amortization                                                                 |  |                                | 189     |   |      |   | 175    |  
|Patent costs expensed                                                                       |  |                                | 419     |   |      |   | 197    |  
|Amortization of deferred revenue - Roche                                                    |  |                                | (199    | ) |      |   | (199   | )
|Stock compensation expense                                                                  |  |                                | 666     |   |      |   | 819    |  
|Accrued marketing costs                                                                     |  |                                | (18,528 | ) |      |   | 192    |  
|Changes in operating assets and liabilities:                                                |  |                                |         |   |      |   |        |  
|Accounts receivable - Roche                                                                 |  |                                | 476     |   |      |   | (35    | )
|Other receivables                                                                           |  |                                |        |   |      |   | (147   | )
|Prepaid expenses                                                                            |  |                                | (41     | ) |      |   | 331    |  
|Advanced payment - Roche                                                                    |  |                                | 716     |   |      |   | 19     |  
|Deposits and other assets                                                                   |  |                                |        |   |      |   | 126    |  
|Accounts payable                                                                            |  |                                |        |   |      |   | (52    | )
|Taxes payable                                                                               |  |                                | (4,271  | ) |      |   |       |  
|Accrued compensation                                                                        |  |                                | 318     |   |      |   | (367   | )
|Accrued expenses                                                                            |  |                                | (2,159  | ) |      |   | (1,602 | )
|                                                                                            |  |                                |         |   |      |   |        |  
|                                                                                            |  |                               
|Net cash (used in) provided by operating activities                                         |  |                                | (3,628  | ) |      |   | 4,489  |  
|                                                                                            |  |                                |         |   |      |   |        |  
|                                                                                            |  |                               
|Cash flows from investing activities:                                                       |  |                                |         |   |      |   |        |  
|Sales of investment securities available-for-sale                                           |  |                                |        |   |      |   | 13,752 |  
|Maturities of investment securities available-for-sale                                      |  |                                | 1,019   |   |      |   |       |  
|Proceeds from the sale of equipment                                                         |  |                                |        |   |      |   | 23     |  
|Patent costs                                                                                |  |                                | (676    | ) |      |   | (643   | )
|                                                                                            |  |                                |         |   |      |   |        |  
|                                                                                            |  |                               
|Net cash provided by investing activities                                                   |  |                                | 343     |   |      |   | 13,132 |  
|                                                                                            |  |                                |         |   |      |   |        |  
|                                                                                            |  |                               
|Net cash (used in) provided by financing activities                                         |  |                                |        |   |      |   |       |  
|                                                                                            |  |                                |         |   |      |   |        |  
|                                                                                            |  |                               
|Net (decrease) increase in cash and cash equivalents                                        |  |                                | (3,285  | ) |      |   | 17,621 |  
|Cash and cash equivalents, beginning of period                                              |  |                                | 47,420  |   |      |   | 14,389 |  
|                                                                                            |  |                                |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                                    |  | $                              | 44,135  |   |      | $ | 32,010 |  
|                                                                                            |  |                                |         |   |      |   |        |  

See accompanying notes to condensed financial statements.



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TRIMERIS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

Trimeris, Inc. (Trimeris or the Company) is a biopharmaceutical company primarily engaged in the commercialization
of a new class of antiviral drug treatments called fusion inhibitors. Fusion inhibitors prevent viral fusion, a complex process by which viruses attach to, penetrate and infect host cells. If a virus cannot enter a host cell, the virus cannot
replicate. By inhibiting the fusion process of particular types of viruses, like the Human Immunodeficiency Virus (HIV), Trimeris commercial product, T-20, and Trimeris development-stage compound, TRI-1144, offer a novel
mechanism of action to treat and potentially prevent the transmission of HIV.

Trimeris has a worldwide agreement (the
Development and License Agreement) with F. Hoffmann-La Roche Ltd. (Roche) to develop and market T-20, marketed as FUZEON®, whose generic name is enfuvirtide. FUZEON is manufactured and distributed by Roche through
Roches sales and distribution network throughout the world in countries where regulatory approval has been received. The Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, and receives a
royalty based on net sales of FUZEON outside the United States and Canada.

The Development and License Agreement with Roche
accounted for 100% of the Companys royalty revenue for the nine months ended September 30, 2010 and September 30, 2009. The Development and License Agreement also provides substantially all of the Companys collaboration and
milestone revenue. Substantially all of the accounts receivable at September 30, 2010 and December 31, 2009 are comprised of receivables from Roche under the Development and License Agreement.

The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted
accounting principles and applicable Securities and Exchange Commission (the SEC) regulations for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in
accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results that may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations sections and the financial statements and notes thereto included in
the Companys Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 16, 2010.

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The
Companys Critical Accounting Policies discussed in this Form 10-Q are updates from the Companys Annual Report on Form 10-K filed with the SEC on March 16, 2010.

2. BASIC AND DILUTED NET INCOME PER SHARE

In accordance with Financial Accounting
Standards Board, (FASB), Accounting Standards Codification (ASC), Topic 260, Earnings Per Share, basic net income per common share is calculated by dividing net income by the weighted-average number of common
shares outstanding for the period. Diluted net income per common share reflects the maximum dilutive effect of common stock issuable upon exercise of stock options, restricted stock, stock warrants and purchases under the Companys Employee
Stock Purchase Plan (the Employee Stock Purchase Plan). The dilutive effect of outstanding options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan is reflected in diluted earnings per share by
application of the treasury stock method, which includes consideration of stock-based compensation required by FASB ASC Topic 718, Compensation-Stock Compensation (ASC 718). The following table sets forth the computation of
basic and diluted net income per share for the three and nine months ended September 30, 2010 and September 30, 2009 (in thousands, except per share amounts):



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|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|------------------------------------------- |  | ------------------------------------- | ------ |  | ------------------------------------- | - | ------ | ------------------------------------ |  | - | ------------------------------------ |  |  | - | ------ | 
|                                            |  | Three Months 
EndedSeptember 30, 2010 |        |  | Three Months 
EndedSeptember 30, 2009 |   |        | Nine Months 
EndedSeptember 30, 2009 |  |   | Nine Months 
EndedSeptember 30, 2009 | 
|                                            |  |                                       |        | 
|Numerator:                                  |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|Net income                                  |  | $                                     | 16,453 |  |                                       | $ | 1,644  |                                      |  | $ | 18,786                               |  |  | $ | 5,055  | 
|                                            |  |                                       |        | 
|Denominator:                                |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|Weighted average common shares              |  |                                       | 22,320 |  |                                       |   | 22,320 |                                      |  |   | 22,320                               |  |  |   | 22,297 | 
|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|Denominator for basic calculation           |  |                                       | 22,320 |  |                                       |   | 22,320 |                                      |  |   | 22,320                               |  |  |   | 22,297 | 
|Restricted stock and restricted stock units |  |                                       | 12     |  |                                       |   |       |                                      |  |   | 12                                   |  |  |   |       | 
|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|Denominator for diluted calculation         |  |                                       | 22,332 |  |                                       |   | 22,320 |                                      |  |   | 22,332                               |  |  |   | 22,297 | 
|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|                                            |  |                                       |        | 
|Net income per share:                       |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|Basic                                       |  | $                                     | 0.74   |  |                                       | $ | 0.07   |                                      |  | $ | 0.84                                 |  |  | $ | 0.23   | 
|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 
|                                            |  |                                       |        | 
|Diluted                                     |  | $                                     | 0.74   |  |                                       | $ | 0.07   |                                      |  | $ | 0.84                                 |  |  | $ | 0.23   | 
|                                            |  |                                       |        |  |                                       |   |        |                                      |  |   |                                      |  |  |   |        | 

The calculation of diluted net income per share excludes all anti-dilutive shares. For the three and nine
months ended September 30, 2010, the number of anti-dilutive shares issuable upon exercise of options that were excluded, as calculated based on the weighted average closing price of the Companys common stock for these periods, amounted
to approximately 2.1 million and 1.8 million, respectively. For the three and nine months ended September 30, 2009, the number of anti-dilutive shares issuable upon exercise of options that were excluded, as calculated based on the
weighted average closing price of the Companys common stock for these periods, amounted to approximately 2.4 million.

At September 30, 2010, there were options to purchase 2,300,000 shares of common stock outstanding and there were 30,000 shares of
restricted stock, due to vest in August 2011, outstanding. At September 30, 2009, there were options to purchase 2,400,000 shares of common stock outstanding and there were 30,000 shares of restricted stock, due to vest in August 2011,
outstanding.

3. ROCHE COLLABORATION

The Development and License Agreement

In July 1999, the Company entered
into the Development and License Agreement with Roche to develop and commercialize T-20, currently marketed as FUZEON, whose generic name is enfuvirtide, and T-1249, or a replacement compound. The Development and License Agreement has been amended
several times; most recently in March 2007, the agreement was amended to cover only the development and commercialization of FUZEON. The Development and License Agreement will effectively terminate upon the expiration of the last relevant patent
covering FUZEON, which is expected to occur in 2021.

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

As mentioned above, in March 2007, the Company entered into an agreement with Roche that amended the terms of both the Development and
License Agreement and the Research Agreement then existing between Roche and the Company. This amendment granted the Company sole ownership of all intellectual property that was formerly shared between the companies, other than intellectual property
related to FUZEON. Following the March 2007 amendment, Roche remains responsible for only one potential remaining $5.0 million milestone payment under the Development and License Agreement which is payable upon the achievement of a certain
cumulative twelve-month sales threshold for FUZEON in the United States and Canada, in addition to the profit-sharing payments described below under Collaboration Income and the royalties described below under Royalty Revenue.

Collaboration Income

Product sales of FUZEON began in the United States in March 2003 and are recorded by Roche. Under the Development and License Agreement, the Company shares gross profit from the sale of FUZEON in the
United States and Canada equally with Roche. Collaboration income is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are
reduced by cost of goods sold resulting in gross profit. Gross profit is reduced by certain selling, marketing, and other expenses and post-marketing commitments related to the sale of FUZEON



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resulting in operating income or loss. The Companys share of the operating income or loss is reported as collaboration income or loss as a component of revenue. Revenue is recognized when
Roche ships the drug and title and risk of loss passes to wholesalers. FUZEON is widely available through retail pharmacies and wholesalers across North America.

Total net sales of FUZEON in the United States and Canada were $24.2 million and $30.1 million during the nine months ended September 30, 2010 and September 30, 2009, respectively. Total net
sales of FUZEON in the United States and Canada were $9.0 million and $10.4 million during the three months ended September 30, 2010 and September 30, 2009, respectively. During the nine months ended September 30, 2010 and
September 30, 2009, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses, which included a one-time $18.7 million increase in collaboration income pursuant to the Deferred Marketing Expenses Agreement
described below, resulting in the Companys share of operating profit from the sale of FUZEON in the United States of $22.7 million and $5.6 million, respectively. During the three months ended September 30, 2010 and September 30,
2009, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses resulting in the Companys share of operating profit from the sale of FUZEON in the United States of $20.0 million, which included a one-time $18.7
million increase in collaboration income pursuant to the Deferred Marketing Expenses Agreement described below, and $1.7 million, respectively.

A major determinant of collaboration income, and the Companys resulting profits, is the cost of goods sold of FUZEON. In 2009, we notified Roche of our objection to the manner in which costs of
goods sold for FUZEON were being calculated and entered into negotiations with Roche related to excess capacity charges and cost of goods sold variances for 2008 and overall cost of goods sold for 2009 and 2010. The negotiations were ongoing
throughout 2009 and continue today. Accordingly, we cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same in the future. Although active discussions are ongoing, we cannot be
certain when a final resolution will be reached. Depending upon the resolution of our negotiations with Roche, cost of goods sold may increase or decrease for the periods in dispute or for future periods, and profit rates and, as discussed below,
royalty rates may be similarly impacted. While the Company is considering all available options for resolution of this issue, it currently intends to continue working with Roche to reach agreement on the appropriate cost of goods sold for FUZEON.

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

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

Accrued Marketing Costs

On September 23, 2010, the Company and Roche entered into an agreement relieving the Company of any obligation to
repay certain deferred marketing expenses (the Deferred Marketing Expenses Agreement). The Deferred Marketing Expenses Agreement relates to the parties collaboration for the development and commercialization of FUZEON. Under the
Development and License Agreement, the Company and Roche had agreed that certain expenses related to the selling and marketing of FUZEON that were incurred by Roche in 2004 would be subject to repayment by Trimeris, assuming certain terms and
conditions were met. Pursuant to the Deferred Marketing Expenses Agreement, the Company is no longer obligated to pay these deferred marketing expenses to Roche. As a result, the Company made a one-time increase in collaboration income of $18.7
million in the third quarter of 2010.

Advanced PaymentRoche

In September 2005, the Company entered into a Letter of Amendment (the Manufacturing Amendment) with Roche, which set forth
certain rights and responsibilities that the parties previously agreed to with respect to the manufacture and sale of FUZEON. The Company was obligated to pay Roche for the Companys share of the capital invested in Roches manufacturing
facility over a seven-year period, which ended in 2009. As a result, Roche no longer includes the depreciation related to the manufacturing facility in cost of goods sold.

Under the terms of the Manufacturing Amendment, the Companys contribution to the capital improvements made at Roches manufacturing facility is reviewed on an annual basis. Following such
review, the Companys contribution is adjusted, when necessary, to reflect changes to the relative geographic distribution of FUZEON sales. The Companys required contribution for the



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seven-year period was approximately $12.1 million, and has been paid as of June 30, 2009. No further capital improvement payments are due or expected to become due.

These payments, net of the portion allocated to cost of goods sold, were recorded as an asset presented as Advanced payment 
Roche. This asset is amortized based on an estimate of the units of FUZEON sold during the collaboration period in order to properly allocate the capital investment to cost of goods sold as the related inventory is sold in future periods.
Assuming sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 11 years. The carrying value of this asset will be evaluated for impairment if an event occurs that triggers an impairment review.

Under the Manufacturing Amendment, if the Roche-owned facilities in Boulder, Colorado used for the manufacture of FUZEON, are
used to produce other products for Roche, a credit to the collaboration will result. The Companys share of this credit was approximately $1.9 million through September 30, 2010. These credits have been recorded on the Companys
balance sheets as a reduction to the Advanced payment  Roche. These credits offset variances that would otherwise have been allocated to FUZEON if the facilities had remained underutilized and will be recognized when the related
FUZEON produced during these periods is sold. We are currently in discussions with Roche related to the calculation cost of goods sold for FUZEON for the period from 2008 through the present. The manner in which FUZEON manufacturing costs are
accounted for and allocated among the parties, and accordingly the calculation of any advanced payments to Roche, is subject to change with the results of this negotiation.

Royalty Revenue

The Company receives royalties from Roche on sales of
FUZEON in countries outside of the United States and Canada. Roche is responsible for all activities related to FUZEON outside of the United States and Canada, including regulatory, manufacturing, sales and distribution. These royalties are
recognized as revenue when the sales are made by Roche. To calculate the royalty revenue, an 8% distribution charge is deducted from Roches reported net sales, and the Company receives a royalty on the adjusted net sales amount. The royalty
rate reported by the Company in its quarterly reports for periods ending on or immediately prior to June 30, 2010 was 12%.

In October 2010, Roche informed the Company that, in reliance on a clause in the Development and License Agreement that permits Roche to
reduce its royalty payments to the Company if the cost of goods sold outside the U.S. and Canada exceed a certain proportion of FUZEON net sales outside the U.S. and Canada, Roche would reduce the royalty paid to Trimeris on sales outside the U.S.
and Canada from 12%, the amount previously paid, to 6% with application retroactive to January 1, 2010. As previously disclosed, in April 2009, the Company notified Roche that it did not agree with the manner in which FUZEON cost of goods sold
were being calculated and charged to the collaboration. Roche and the Company have been in discussions regarding this calculation since that time.

The Company has notified Roche of its objection to the timing and application of the royalty reduction clause, both under the terms of the contract and in light of its ongoing discussion related to the
calculation of cost of goods sold. While the Company is considering all available options for resolution of this issue, it currently intends to continue working with Roche to reach agreement on the appropriate cost of goods sold for FUZEON.

Roches imposition of this reduced royalty rate resulted in a reduction in royalty revenue for the first six months of
2010 of $1.8 million which has been recognized in the third quarter of 2010 and will result in significant reductions in expected royalty revenues for so long as the reduced royalty rate is in effect.

Although the Company is disputing Roches cost of goods sold calculations and the imposition of a reduced royalty rate as described
above, the Company has recorded a 2010 adjustment to royalty revenue as an accounting change in estimate in the three months ended September 30, 2010. The adjustment resulted in a reduction in royalty revenue for the first six months of 2010 of
$1.8 million which has been recognized in the third quarter of 2010.

The table below presents revenue, net income and
earnings per share for the quarters ended March 31 and June 30, 2010 at the reported rate of 12% and the revised 6% rate as if the revised 6% had been retroactively applied to the prior quarters:



|               |  |                                   |       |  |                                  |  |       |     |  |   |       |  |  |  |       | 
|-------------- |  | --------------------------------- | ----- |  | -------------------------------- |  | ----- | --- |  | - | ----- |  |  |  | ----- | 
|(in thousands) |  | Three Months EndedMarch 
31, 2010 |       |  | Three Months EndedJune 
30, 2010 | 
|               |  | 12%                               |       |  | 6%                               |  |       | 12% |  |   | 6%    | 
|               |  |                                   |       | 
|Total Revenue  |  | $                                 | 3,132 |  |                                  |  | 2,179 |     |  | $ | 3,261 |  |  |  | 2,453 | 
|Net Income     |  |                                   | 988   |  |                                  |  | 413   |     |  |   | 1,345 |  |  |  | 770   | 
|EPS            |  | $                                 | 0.04  |  |                                  |  | 0.02  |     |  | $ | 0.06  |  |  |  | 0.03  | 



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Development
Expenses

Under the Development and License Agreement, the Company and Roche share development costs for FUZEON equally.
Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Currently, only Roche incurs development costs for FUZEON.
Quarterly, the companies reconcile the amounts expended and Trimeris pays Roche on a 50/50 basis. Roche holds the Investigational New Drug and the New Drug Application for FUZEON and is responsible for all regulatory issues, maintenance activities
and communications with the FDA. Pursuant to FASB ASC Topic 808 Collaborative Arrangements (ASC 808), all development expenses generated at Roche related to FUZEON are included in the Companys collaboration income. We
expect Roches development costs to continue to decline as substantially all activities have been completed.

4. COMPREHENSIVE INCOME

Comprehensive income includes all non-owner changes in equity during a period and is divided into two broad classifications:
net income and other comprehensive income (OCI). OCI includes revenue, expenses, gains, and losses that are excluded from earnings under generally accepted accounting principles. For the Company, OCI consists of unrealized gains or
losses on available-for-sale securities.

The table below presents the Companys OCI for the three and nine months ended
September 30, 2010 and September 30, 2009:



|                                                        |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |       | 
|------------------------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ----- | ---- |  | - | ------ |  |  | - | ----- | 
|(in thousands)                                          |  | Three Months EndedSeptember 30, |        |  | Nine Months EndedSeptember 30, |  
|                                                        |  | 2010                            |        |  | 2009                           |   |       | 2010 |  |   | 2009   | 
|                                                        |  |                                 |        | 
|Net income                                              |  | $                               | 16,453 |  |                                | $ | 1,644 |      |  | $ | 18,786 |  |  | $ | 5,055 | 
|                                                        |  |                                 |        | 
|Unrealized (loss) gain on securities available-for-sale |  |                                 |       |  |                                |   | (146  | )    |  |   |       |  |  |   | 170   | 
|                                                        |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |       | 
|                                                        |  |                                 |        | 
|Other comprehensive income (OCI)                        |  | $                               | 16,453 |  |                                | $ | 1,498 |      |  | $ | 18,786 |  |  | $ | 5,225 | 
|                                                        |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |       | 

5. INVESTMENT SECURITIES AVAILABLE-FOR-SALE

Investment securities are classified as available-for-sale, and are reported at fair value based on quoted market prices and other observable inputs. The cost of securities sold is determined using the
specific identification method when computing realized gains and losses. Unrealized gains and losses are included as a component of stockholders equity until realized. In accordance with its investment policy, the Company limits the amount of
credit exposure with any one issuer and the investments are generally not collateralized. The Company did not have any available-for-sale securities for the nine months ended September 30, 2010.

The Company adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, (ASC 820) effective
January 1, 2008 for financial assets and liabilities measured on a recurring basis. ASC 820 applies to all financial assets and liabilities that are being measured and reported on a fair value basis. There was no impact to the financial
statements upon the adoption of ASC 820. ASC 820 establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the
following three categories:



|         |  |                                                                                                                                                      
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|         | 
|Level 1: |  | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities.           
|         | 
|Level 2: |  | Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
|         | 
|Level 3: |  | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.                                   

A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the
fair value measurement.



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The Companys
assets that are measured at fair value on a recurring basis are generally classified within Level 1 or Level 2 of the fair value hierarchy. The types of instruments valued based on quoted market prices in active markets include most money market
securities, and corporate bonds. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The
following tables set forth, by level, within the fair value hierarchy, financial assets and liabilities accounted for at fair value under ASC 820 as of September 30, 2010 and December 31, 2009:

September 30, 2010



|                               |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 
|------------------------------ |  | ----- | ------ |  | ------------------------------------- | - | ------ | ------------------------------ |  | - | --------------------------- |  |  | - | - | 
|(in thousands)                 |  | Total |        |  | QuotedPrices inActiveMarkets(Level 1) |   |        | OtherObservableInputs(Level 2) |  |   | UnobservableInputs(Level
3) | 
|                               |  |       |        | 
|Money market funds             |  | $     | 44,134 |  |                                       | $ | 44,134 |                                |  | $ |                            |  |  | $ |  | 
|                               |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 
|Total as of September 30, 2010 |  | $     | 44,134 |  |                                       | $ | 44,134 |                                |  | $ |                            |  |  | $ |  | 
|                               |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 

December 31, 2009



|                              |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 
|----------------------------- |  | ----- | ------ |  | ------------------------------------- | - | ------ | ------------------------------ |  | - | --------------------------- |  |  | - | - | 
|(in thousands)                |  | Total |        |  | QuotedPrices inActiveMarkets(Level 1) |   |        | OtherObservableInputs(Level 2) |  |   | UnobservableInputs(Level 3) | 
|                              |  |       |        | 
|Money market funds            |  | $     | 47,420 |  |                                       | $ | 47,420 |                                |  | $ |                            |  |  | $ |  | 
|Corporate bonds               |  |       | 1,020  |  |                                       |   | 1,020  |                                |  | $ |                            |  |  | $ |  | 
|                              |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 
|Total as of December 31, 2009 |  | $     | 48,440 |  |                                       | $ | 48,440 |                                |  | $ |                            |  |  | $ |  | 
|                              |  |       |        |  |                                       |   |        |                                |  |   |                             |  |  |   |   | 

The carrying value of other financial instruments, including accounts receivable, accounts payable, and
accrued liabilities approximate fair value due to their short maturities.

6. INCOME TAXES

We recognized income tax expense of $881,000 and $2,612,000 for the nine months ended September 30, 2010 and September 30, 2009.
For 2010, based on current estimates, the effective annual blended tax rate will be approximately 4.5%. The estimated effective rate for the year has decreased from prior quarters due mainly to an increase in projected income as a result of the
reduction of the deferred marketing accrual which is offset by the expected utilization of a portion of the related deferred tax asset in the current year. The change did not impact future utilization of the deferred tax asset.

At December 31, 2009, the Company had net operating loss carryforwards (NOLs) for federal income tax purposes of
approximately $302.7 million, which expire in varying amounts between 2018 and 2025. We have determined that an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the Code) occurred
during 2008. The effect of this ownership change was the imposition of a $457,000 annual limitation on the use of NOL carryforwards attributable to periods before the change. This annual limitation will result in the expiration of NOL carryforwards
before they become available for utilization. Based on the $457,000 annual limitation, the Company anticipates that a total of approximately $7.3 million of NOL carryforwards will be available for utilization prior to 2025.

As of September 30, 2010, the Company recognized a deferred tax benefit of $480,000 related to the anticipated future use of some of
the Companys federal net operating loss carryovers. In the future, the Company may reduce the valuation allowance over our federal net operating loss carryovers and recognize an additional deferred tax benefit. Management assesses this
potential based upon all available evidence, including the last several quarters of profitability and forecasts. The Company continues to carry a full valuation allowance on its other deferred tax assets, the majority of which represent net
operating loss carry forwards and tax credit carryovers which the Company generated prior to achieving profitability.

7. COMMITMENTS AND
CONTINGENCIES



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Under the Development
and License Agreement, Trimeris shares equally with Roche the future development expenses for FUZEON for the United States and Canada. We expect Roches development costs to continue to decline as substantially all activities have been
completed.

On November 20, 2007, the Company was informed that Novartis Vaccines and Diagnostics, Inc.
(Novartis) had filed suit against Hoffman-La Roche Inc., Roche Laboratories Inc., Roche Colorado Corp., and F. Hoffman- La Roche LTD. (collectively, the Roche Entities) and Trimeris alleging infringement of Novartis
U.S. Patent No. 7,285,271 B1, entitled Antigenic Composition Comprising an HIV gag or env Polypeptide (the 271 Patent) related to the manufacture, sale and offer for sale of FUZEON. The lawsuit was originally filed
in the Eastern District of Texas (Marshal Division) and was transferred to the Eastern District of North Carolina (Wilmington Division) on December 4, 2009.

On September 23, 2010, the Company and Roche entered into a settlement agreement with Novartis resolving the litigation related to FUZEON involving the 271 Patent (the Settlement
Agreement). Under the terms of the Settlement Agreement, the Roche and Company collaboration will continue to sell FUZEON under a license from Novartis to the 271 Patent. In exchange for the grant of this license, Roche and the Company
have agreed to pay royalties to Novartis on net sales of FUZEON of one and one-half percent (1.5%) on sales occurring in the U.S. and Canada in a calendar year, and one percent (1%) on sales outside of the U.S. and Canada in a calendar
year. The royalty rate increases to three percent (3%) in the U.S. and Canada and one and one-half percent (1.5%) in the rest of the world on any portion of FUZEON sales in excess of $50,000,000 in the relevant region in a calendar year.
Roche and the Company will share responsibility for payment of these royalties equally.

In addition, pursuant to the terms of
the Settlement Agreement, the Company made payments to Novartis for the Companys share of royalties beginning in the fourth quarter of 2007 through the third quarter of 2010 in the aggregate amount of approximately $2.7 million ($1.5 million
has been recorded as a reduction to royalty revenue and $1.2 million has been recorded as a reduction to collaboration income). Pursuant to the terms of the Settlement Agreement and immediately following execution of the Settlement Agreement, the
Company made a payment to Novartis in the amount of approximately $2.446 million representing the Companys 50% share of back royalties on sales of FUZEON through March 31, 2010. The Companys share of the payments to Novartis for the
three months ended September 30, 2010 was approximately $114,000.

On September 28, 2010, the lawsuit was dismissed
with prejudice from the Eastern District of North Carolina.

8. ARIGENE TRANSACTION

On October 2, 2009, Trimeris entered into an Agreement and Plan of Merger (the Merger Agreement) with Arigene Co., Ltd.,
a corporation organized under the laws of the Republic of Korea (Arigene). Under the Merger Agreement, Arigene agreed to purchase all outstanding shares of Trimeris common stock at a price per share of $3.60, or an aggregate
purchase price of approximately $81 million, via a cash tender offer followed by a merger. Trimeris terminated the Merger Agreement effective December 31, 2009, when Arigene, through counsel, informed us that Arigene did not have sufficient
funds to consummate the tender offer and subsequent merger pursuant to the Merger Agreement. In connection with granting consent in November, 2009, to an extension of the deadline for consummation of the tender offer, Arigene paid Trimeris a $12
million fee, which Trimeris has retained, net of taxes and transaction, advisors and legal fees incurred in connection with entering into the Merger Agreement. As of December 31, 2009, in connection with the transaction, we incurred
approximately $2.3 million in fees and expenses payable to Trimeris advisor, Goldman Sachs, Inc. and an additional $1 million in legal fees payable to the Companys outside legal advisors.



|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Executive Summary

Trimeris is a biopharmaceutical company primarily engaged in the commercialization of a class of antiviral drug treatments called fusion
inhibitors. Fusion inhibitors prevent viral fusion, a complex process by which viruses attach to, penetrate and infect host cells. If a virus cannot enter a host cell, the virus cannot replicate. By inhibiting the fusion process of particular types
of viruses, like the Human Immunodeficiency Virus (HIV), our commercial product, T-20, and our development-stage compound, TRI-1144, offer a novel mechanism of action to treat and potentially prevent the transmission of HIV.

Trimeris worldwide Development and License Agreement with Roche to develop and market T-20, marketed as FUZEON, whose generic name
is enfuvirtide. FUZEON is manufactured and distributed by Roche through Roches sales and distribution network throughout the world in countries where regulatory approval has been received. The Company shares gross profits equally from the sale
of FUZEON in the United States and Canada with Roche, and receives a royalty based on net sales of FUZEON outside the United States and Canada.



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For the third quarter
of 2010, the Company recorded net income of $16.5 million, or $0.74 per share, compared to $1.6 million or $0.07 per share, in the third quarter of 2009. This result was primarily driven by (1) the Deferred Marketing Expenses Agreement
described below with Roche, which relieved Trimeris of any obligation to repay certain deferred marketing expenses and accordingly resulted in a one-time increase in collaboration income for the third quarter of 2010 of $18.7 million;
(2) reduction in sales and marketing expense in the collaboration; and (3) reduction in income tax expense; offset, in part, by (1) the Settlement Agreement with Novartis related to the U.S. patent infringement suit for FUZEON, which
decreased royalty revenue by $1.5 million and decreased collaboration income by $1.2 million for the third quarter of 2010; (2) a decrease in royalty revenue of $2.3 million based on Roches imposition of a royalty reduction on FUZEON
sales outside the U.S. and Canada; and (3) a decrease in global net sales of FUZEON.

Outlook for 2010

During 2010, we have continued, and will continue, to execute the strategic plan implemented during 2008. Our main focus during 2010 has
been and will be on managing profitability, as we expect that FUZEON sales will continue to see pressure. For 2010, our focus has been, and will continue to be primarily on the following areas:



| |  |  | Strategic Alternatives  We will continue to evaluate strategic alternatives to enhance stockholder value.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | Profitability  We will focus our efforts on maintaining profitability based on FUZEON sales.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Cost of Goods Sold  As previously disclosed, in 2009, we notified Roche of our objection to the manner in which cost of goods sold for FUZEON
were being calculated and entered into negotiations with Roche related to excess capacity charges and cost of goods sold variances for 2008 and overall cost of goods sold for 2009 and 2010. The negotiations were ongoing throughout 2009 and continue
today. Accordingly, we cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same in the future. Although active discussions are ongoing, we cannot be certain when a final resolution
will be reached. Depending upon the resolution of our negotiations with Roche, cost of goods sold may increase or decrease for the periods in dispute and for future periods, and accordingly, the Companys profits and, as disclosed below,
royalty rates, may be similarly impacted.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In October 2010, Roche informed the Company that, in reliance on
a clause in the Development and License Agreement that permits Roche to reduce its royalty payments to the Company if the cost of goods sold outside the U.S. and Canada exceed a certain proportion of FUZEON net sales outside the U.S. and Canada,
Roche would reduce the royalty paid to Trimeris on sales outside the U.S. and Canada from 12%, the amount previously paid, to 6% with application retroactive to January 1, 2010.

The Company has notified Roche of its objection to the timing and application of the royalty reduction clause, both under the terms of
the contract and in light of its on-going discussions with Roche related to the calculation of cost of goods sold. While the Company is considering all available options for resolution of this issue, it currently intends to continue working with
Roche to reach agreement on the appropriate cost of goods sold for FUZEON, and accordingly, the proper royalty rates to be afforded to the Company.



| |  |  | Competition  We believe that weekly prescription trends for FUZEON will continue to decline moderately in 2010 as compared to 2009. Future FUZEON
prescription trends will depend on the further refinement of the optimal regimen for treatment experienced patients and the role of FUZEON in these regimens.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | FUZEON Sales and Marketing  We believe that our selling and marketing expense in 2010 will continue to be lower than 2009, since, as of
June 30, 2010, Roche no longer fields a sales force marketing FUZEON.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Settlement of Novartis Litigation  On September 23, 2010, the Company and Roche signed the Settlement Agreement resolving the litigation
related to FUZEON then pending in the U.S. District Court for the Eastern District of North Carolina. Under the terms of the Settlement Agreement, the Companys collaboration with Roche will continue to sell FUZEON under a license to
Novartis 271 Patent. In exchange for the grant of this license, the Company and Roche agreed to pay royalties to Novartis on net sales of FUZEON of one and one-half percent (1.5%) on sales occurring in the U.S. and Canada in a
calendar year, and one percent (1%) on sales outside of the U.S. and Canada in a calendar year. The royalty rate increases to three percent (3%) in the U.S. and Canada and one and one-half percent (1.5%) on any portion of FUZEON sales
in excess of $50,000,000 in the relevant region in a calendar year. Additional royalty rate tiers would apply to sales that exceed $100,000,000 in a region in a calendar year. The Company and Roche will share responsibility for payment of these
royalties equally.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, pursuant to the terms of the Settlement Agreement, the Company made
payments to Novartis for the Companys share of royalties beginning in the fourth quarter of 2007 through the third quarter of 2010 in the aggregate amount of approximately $2.7 million ($1.5 million has been recorded as a reduction to royalty
revenue and $1.2 million has been recorded as a reduction to collaboration income). Pursuant to the terms of the Settlement



13



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Agreement and immediately following execution of the Settlement Agreement, the Company made a payment to Novartis in the amount of approximately $2.446 million representing the Companys 50%
share of back royalties on sales of FUZEON through March 31, 2010. The Companys share of the payments to Novartis for the three months ended September 30, 2010 was approximately $114,000.

RESULTS OF OPERATIONS

Comparison of
Three Months Ended September 30, 2010 and September 30, 2009

Revenues

The table below presents our revenue sources for the three months ended September 30, 2010 compared to the three months ended
September 30, 2009.



|                                       |  |                                 |        |   |                    |   |       |  |  |   |        |  
|-------------------------------------- |  | ------------------------------- | ------ | - | ------------------ | - | ----- |  |  | - | ------ | -
|(in thousands)                         |  | Three Months EndedSeptember 30, |        |   | Increase(Decrease) |  
|                                       |  | 2010                            |        |   | 2009               |   |       |  | 
|Milestone revenue                      |  | $                               | 67     |   |                    | $ | 67    |  |  | $ |       |  
|Royalty revenue                        |  |                                 | (2,697 | ) |                    |   | 2,141 |  |  |   | (4,838 | )
|Collaboration income                   |  |                                 | 19,973 |   |                    |   | 1,702 |  |  |   | 18,271 |  
|                                       |  |                                 |        |   |                    |   |       |  |  |   |        |  
|                                       |  |                                 |       
|Total revenue and collaboration income |  | $                               | 17,343 |   |                    | $ | 3,910 |  |  | $ | 13,433 |  
|                                       |  |                                 |        |   |                    |   |       |  |  |   |        |  

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

The table below presents certain achieved milestones from Roche as of September 30,
2010. We are recognizing the milestones with remaining unrecognized balances on a straight-line basis through the expiration of certain FUZEON patents.



|               |  |                |       |  |               |  |      |                                                  |  |  |                                                               |  |  |                          |     |  |  |   |    |  |  |  |               | 
|-------------- |  | -------------- | ----- |  | ------------- |  | ---- | ------------------------------------------------ |  |  | ------------------------------------------------------------- |  |  | ------------------------ | --- |  |  | - | -- |  |  |  | ------------- | 
|(in thousands) |  | MilestoneTotal |       |  | Date Achieved |  |      | Total 
RevenueRecognizedThroughSeptember 30,2010 |  |  | Revenue Recognizedfor the ThreeMonths EndedSeptember 30, 2010 |  |  | End of RecognitionPeriod |    
|               |  | $              | 2,500 |  |               |  | June |                                                  |  |  | 2003                                                          |  |  | $                        | 51  |  |  | $ | 51 |  |  |  | November 2014 | 
|               |  |                | 750   |  |               |  | June |                                                  |  |  | 2004                                                          |  |  |                          | 474 |  |  |   | 16 |  |  |  | November 2014 | 
|               |  |                |       |  |               |  |      |                                                  |  |  |                                                               |  |  |                          |     |  |  |   |    |  |  |  |               | 
|Total          |  | $              | 3,250 |  |               |  |      |                                                  |  |  |                                                               |  |  | $                        | 525 |  |  | $ | 67 |  |  |  |               | 
|               |  |                |       |  |               |  |      |                                                  |  |  |                                                               |  |  |                          |     |  |  |   |    |  |  |  |               | 

Royalty Revenue: Roches modification to the royalty calculation, which is
discussed above, resulted in a reduction in royalty revenue for the first six months of 2010 of $1.8 million, all of which has been recognized in the third quarter of 2010.

Royalty revenue decreased for the three months ended September 30, 2010 as compared to the three months ended September 30, 2009 as a result of (1) the Settlement Agreement with Novartis,
which decreased royalty revenue by $1.5 million, (2) a decrease in net FUZEON sales outside the U.S. and Canada as noted above and (3) a reduction in the royalty rate for net FUZEON sales outside the U.S. and Canada as noted above. Net
sales of FUZEON outside the U.S. and Canada for the third quarter of 2010 were $9.3 million, down 52 percent from $19.4 million in the third quarter of 2009. A significant portion of this decline in net sales resulted from the fact that the
government of Brazil did not purchase any FUZEON in the third quarter of 2010 after purchasing for eight consecutive quarters.

Collaboration Income:The table below presents our collaboration income (United States and Canada) for the three months ended
September 30, 2010 compared to the three months ended September 30, 2009. Under the Development and License Agreement, we share gross profit equally from the sale of FUZEON in the United States and Canada. The sharing of expenses is
according to contractual arrangements and is not equal in all cases. FUZEON was launched commercially in March 2003. Collaboration income increased for the three months ended September 30, 2010 compared to the three months ended
September 30,



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##### Table of Contents

2009 primarily as a result of the release of any obligation to repay certain deferred marketing expenses in the amount of $18.7 million and a decrease in selling and marketing expenses offset, in
part, by payments under the Settlement Agreement with Novartis, which reduced collaboration income by $1.2 million and a decrease in net sales of FUZEON in the U.S and Canada. Net sales of FUZEON in the U.S. and Canada for the third quarter of 2010
were $9.0 million, down 14 percent from $10.4 million in the third quarter of 2009.



|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  
|--------------------------------------- |  | ------------------------------- | ------ | - | -------- | - | ------ | - |  | - | ------ | -
|(dollars in thousands)                  |  | Three Months EndedSeptember 30, |        |   | $ Change |  
|                                        |  | 2010                            |        |   | 2009     |   |       
|                                        |  |                                 |       
|Gross FUZEON sales by Roche             |  | $                               | 9,964  |   |          | $ | 13,844 |   |  | $ | (3,880 | )
|Less sales adjustments                  |  |                                 | (1,005 | ) |          |   | (3,467 | ) |  |   | 2,462  |  
|Sales adjustments as a % of Gross Sales |  |                                 | 10     | % |          |   | 25     | % |  |   |        |  
|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  
|                                        |  |                                 |       
|Net sales                               |  |                                 | 8,959  |   |          |   | 10,377 |   |  |   | (1,418 | )
|Cost of goods sold                      |  |                                 | (3,147 | ) |          |   | (3,732 | ) |  |   | 585    |  
|Cost of goods sold as a % of Net Sales  |  |                                 | 35     | % |          |   | 36     | % |  |   |        |  
|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  
|                                        |  |                                 |       
|Gross profit                            |  |                                 | 5,812  |   |          |   | 6,645  |   |  |   | (833   | )
|Gross profit as a % of Net Sales        |  |                                 | 65     | % |          |   | 64     | % |  |   |        |  
|Selling and marketing expenses          |  |                                 | (193   | ) |          |   | (2,860 | ) |  |   | 2,667  |  
|Roche development expenses              |  |                                 | (24    | ) |          |   | (124   | ) |  |   | 100    |  
|Novartis royalty payment*               |  |                                 | (2,484 | ) |          |   | 0      |   |  |   | (2,484 | )
|Other costs                             |  |                                 | (365   | ) |          |   | (118   | ) |  |   | (247   | )
|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  
|                                        |  |                                 |       
|Total shared profit                     |  |                                 | 2,746  |   |          |   | 3,543  |   |  |   | (797   | )
|Trimeris share                          |  |                                 | 1,372  |   |          |   | 1,772  |   |  |   | (400   | )
|Deferred Marketing**                    |  |                                 | 18,658 |   |          |   |       |   |  |   |        |  
|Costs exclusive to Trimeris             |  |                                 | (57    | ) |          |   | (70    | ) |  |   | 13     |  
|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  
|                                        |  |                                 |       
|Collaboration income                    |  | $                               | 19,973 |   |          | $ | 1,702  |   |  | $ | (387   | )
|                                        |  |                                 |        |   |          |   |        |   |  |   |        |  



|* | On September 23, 2010, Trimeris and Roche signed the Settlement Agreement with Novartis resolving the litigation related to FUZEON then pending in the U.S.
District Court for the Eastern District of North Carolina. Under the Settlement Agreement with Novartis, this amount covers a period beginning in 2007 through the third quarter of 2010. Trimeris is responsible for 50% of this amount.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | On September 23, 2010, Trimeris signed the Deferred Marketing Expenses Agreement with Roche, which relieved Trimeris of any obligation to repay certain deferred
marketing expenses and resulted in a one-time increase in collaboration income for the third quarter of 2010 of $18.7 million.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross FUZEON sales by Roche: Revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers.

The table below presents the approximate number of kits shipped to wholesalers in the U.S. and Canada during 2010 and 2009.



|             |  |      |        |  |      |  |        | 
|------------ |  | ---- | ------ |  | ---- |  | ------ | 
|Kits Shipped |  | 2010 |        |  | 2009 | 
|Q1           |  |      | 4,200  |  |      |  | 5,000  | 
|Q2           |  |      | 4,100  |  |      |  | 4,800  | 
|Q3           |  |      | 4,000  |  |      |  | 5,500  | 
|Q4           |  |      |       |  |      |  | 4,700  | 
|             |  |      |        |  |      |  |        | 
|Total        |  |      | 12,300 |  |      |  | 20,000 | 
|             |  |      |        |  |      |  |        | 

Sales adjustments: Sales adjustments are recorded by Roche based on Roches experience with
selling FUZEON. Based on discussions with Roche, we expect sales adjustments for 2010 to fall within a range of 25% to 30% of gross sales for 2010 as compared to 21 % for 2009.



15



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##### Table of Contents



Cost of Goods Sold:The Company entered into negotiations with Roche, in accordance with the Development and License Agreement, related to excess capacity charges and cost of goods sold variances for 2008 and overall cost of goods sold for 2009 and 2010. These
negotiations are ongoing today. Accordingly, the Company cannot predict the outcome of negotiations with respect to cost of goods sold for 2008, 2009 and 2010, and as a result, accurately determine if cost of goods sold as a percentage of net sales
will increase, decrease or remain the same in the future or be certain when a final resolution will be reached. Depending upon the resolution of the Companys negotiations with Roche, cost of goods sold may increase or decrease for the
periods in dispute or for future periods.

During 2008, the Company recorded a reserve for 2008 excess capacity charges in the
amount of $4.1 million to be shared equally between Roche and the Company. In the first quarter of 2009, Roche informed the Company that actual excess capacity charges for 2008 were $1.9 million. The difference of $2.2 million has been recorded as a
credit (reduction to) to cost of goods sold for the first quarter of 2009. The Companys share of this credit was $1.1 million. The Company is disputing with Roche the remainder of the excess capacity charges for 2008 and 2009. The resolution
of this dispute may result in an additional credit to cost of goods sold for the collaboration in future periods.

Selling
and Marketing Expenses: Selling and marketing expenses for the three months ended September 30, 2010 were lower than those for the three months ended September 30, 2009 as Roche has reduced its selling and marketing efforts. We believe
that our overall selling and marketing expense in 2010 will be lower than 2009 since, as of June 30, 2010, Roche no longer fields a sales force marketing FUZEON.

Development Expenses: Under the Development and License Agreement, development costs for FUZEON are shared equally with Roche. Development typically includes certain clinical and pre-clinical
studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Currently only Roche incurs development costs for FUZEON. Roche holds the Investigational New Drug and the New Drug Application for
FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. We expect Roches development costs to continue to decline as substantially all activities have been completed.

Novartis royalty payment:As discussed, pursuant to the terms of the Settlement Agreement, the Company made payments to Novartis
for the Companys share of royalties beginning in the fourth quarter of 2007 through the third quarter of 2010, in the aggregate amount of approximately $2.7 million ($1.5 million has been recorded as a reduction to royalty revenue and $1.2
million has been recorded as a reduction to collaboration income). Pursuant to the terms of the Settlement Agreement and immediately following execution of the Settlement Agreement, the Company made a payment to Novartis in the amount of
approximately $2.446 million representing the Companys 50% share of back royalties on sales of FUZEON through March 31, 2010. The Companys share of the payments to Novartis for the three months ended September 30, 2010 was
approximately $114,000.

Other Costs: Other costs for the three months ended September 30, 2010 and
September 30, 2009 include general and administrative costs and distribution charges. The Company is responsible for 50% of these costs under the Development and License Agreement.

Deferred Marketing:On September 23, 2010, the Company and Roche entered into the Deferred Marketing Expenses Agreement
relieving the Company of any obligation to repay certain deferred marketing expenses to Roche. The Deferred Marketing Expenses Agreement relates to the parties collaboration for the development and commercialization of FUZEON. Under the
existing Development and License Agreement between the parties, the Company and Roche had agreed that certain expenses related to the selling and marketing of FUZEON that were incurred by Roche in 2004 would be subject to re-payment by Trimeris,
assuming certain terms and conditions were met and Trimeris had recorded the obligation on its balance sheet under the caption Accrued Marketing Expenses. Pursuant to the Deferred Marketing Expenses Agreement, the Company is no longer
obligated to pay these deferred marketing expenses to Roche. As a result, the Company eliminated such accrued marketing costs, which resulted in a one-time increase in collaboration income of $18.7 million in the third quarter of 2010.

Costs exclusive to the Company:Costs exclusive to the Company include license fees, based on net sales of FUZEON, for certain
technology paid to a third party.

General and Administrative Expenses

The table below presents our general and administrative expenses for the three months ended September 30, 2010 compared to the three
months ended September 30, 2009.



|                                          |  |                                 |       |  |                    |   |       |  |  |   |      |  
|----------------------------------------- |  | ------------------------------- | ----- |  | ------------------ | - | ----- |  |  | - | ---- | -
|(in thousands)                            |  | Three Months EndedSeptember 30, |       |  | Increase(Decrease) |  
|                                          |  | 2010                            |       |  | 2009               |   |       |  | 
|                                          |  |                                 |      
|Total general and administrative expenses |  | $                               | 1,433 |  |                    | $ | 1,669 |  |  | $ | (236 | )
|                                          |  |                                 |       |  |                    |   |       |  |  |   |      |  



16



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##### Table of Contents



Total general and
administrative decreased for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. We expect general and administrative expenses to continue to decrease in 2010, when compared to 2009, as a result
of a decrease in general business activities.

Other Income (Expense):The table below presents our other income
(expense) for the three months ended September 30, 2010 and September 30, 2009.



|                                  |  |                                 |    |  |      |   |     |                    |  |   |      |  
|--------------------------------- |  | ------------------------------- | -- |  | ---- | - | --- | ------------------ |  | - | ---- | -
|(in thousands)                    |  | Three Months EndedSeptember 30, |    |  |      |  
|                                  |  | 2010                            |    |  | 2009 |   |     | Increase(Decrease) | 
|                                  |  |                                 |   
|Interest income                   |  | $                               | 28 |  |      | $ | 59  |                    |  | $ | (31  | )
|Gain on investments               |  |                                 |   |  |      |   | 241 |                    |  |   | (241 | )
|Interest expense                  |  |                                 |   |  |      |   | (64 | )                  |  |   | 64   |  
|                                  |  |                                 |    |  |      |   |     |                    |  |   |      |  
|                                  |  |                                 |   
|Total other income (expense), net |  | $                               | 28 |  |      | $ | 236 |                    |  | $ | (208 | )
|                                  |  |                                 |    |  |      |   |     |                    |  |   |      |  

Interest income decreased for the three months ended September 30, 2010 primarily due to lower interest
rates within the Companys investment portfolios. There was a realized gain on investments for the three months ended September 30, 2009 as a result of our redemptions of our investment in Bank of America Corporations Columbia
Strategic Cash Portfolio (the Fund). In December 2007, Columbia Management Group, LLC, the Funds manager, determined that the assets of the Fund had declined in fair value and the Fund would no longer seek to maintain a net
asset value (NAV) of one dollar per share. As a result, the Funds NAV began to fluctuate based on changes in the market values of the assets owned by the Fund. The Fund ceased accepting orders for new shares and began an orderly
liquidation of Fund assets for distribution to its shareholders. During the third quarter of 2009, the Companys investment in this fund was liquidated and as a result, we recorded a realized gain of $241,000 related to this investment.

Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as Accrued
Marketing Costs. The Company and Roche agreed to limit the Companys actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these
expenses for that year. Based on certain terms of the Development and License Agreement, the Companys share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date that the Company now
estimates to be in 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment amount. On September 23, 2010, the Company and Roche entered into the
Deferred Marketing Expenses Agreement relieving Trimeris of any obligation to repay certain deferred marketing expenses. For the three months ended September 30, 2009, the Company increased the recorded liability by $64,000 for accretion of
interest.

Income Tax Provision

We recognized an income tax benefit of $515,000 for the three months ended September 30, 2010 and an income tax expense of $833,000 for the three months ended September 30, 2009. For 2010, based
on current estimates, the effective annual blended tax rate will be approximately 4.5%. The estimated effective rate for the year has decreased from prior quarters due mainly to an increase in projected income as a result of the reduction of the
deferred marketing accrual which is offset by the expected utilization of a portion of the related deferred tax asset in the current year. The change did not impact future utilization of the deferred tax asset.

At December 31, 2009, the Company had NOLs for federal tax purposes of approximately $302.7 million, which expire in varying amounts
between 2018 and 2025. We have determined that an ownership change as defined under Section 382 of the Code occurred during 2008. The effect of this ownership change was the imposition of a $457,000 annual limitation on the use of NOL
carryforwards attributable to periods before the change. This annual limitation will result in the expiration of NOL carryforwards before they become available for utilization. Based on the $457,000 annual limitation, the Company anticipates that a
total of approximately $7.3 million of NOL carryforwards will be available for utilization prior to 2025.

As of
September 30, 2010, we have recognized a deferred tax benefit of $480,000 related to the anticipated future use of some of our federal net operating loss carryovers. In the future, we may reduce the valuation allowance over our federal net
operating loss carryovers and recognize an additional deferred tax benefit. Management assesses this potential based upon all available evidence, including the last several quarters of profitability and forecasts. At the end of the first quarter,
management determined that it was not appropriate to reduce the valuation allowance to recognize additional benefit.



17



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##### Table of Contents



The Company continues
to carry a full valuation allowance on its other deferred tax assets, the majority of which represent net operating loss carry forwards and tax credit carryovers which we generated prior to achieving profitability.

RESULTS OF OPERATIONS

Comparison of
Nine months ended September 30, 2010 and September 30, 2009

Revenues

The table below presents our revenue sources for the nine months ended September 30, 2010 compared to the nine months ended
September 30, 2009.



|                                       |  |                                |        |  |                    |   |        |  |  |   |        |  
|-------------------------------------- |  | ------------------------------ | ------ |  | ------------------ | - | ------ |  |  | - | ------ | -
|(in thousands)                         |  | Nine Months EndedSeptember 30, |        |  | Increase(Decrease) |  
|                                       |  | 2010                           |        |  | 2009               |   |        |  | 
|Milestone revenue                      |  | $                              | 199    |  |                    | $ | 199    |  |  | $ |       |  
|Royalty revenue                        |  |                                | 824    |  |                    |   | 6,251  |  |  |   | (5,427 | )
|Collaboration income                   |  |                                | 22,713 |  |                    |   | 5,555  |  |  |   | 17,158 |  
|                                       |  |                                |        |  |                    |   |        |  |  |   |        |  
|                                       |  |                                |       
|Total revenue and collaboration income |  | $                              | 23,736 |  |                    | $ | 12,005 |  |  | $ | 11,731 |  
|                                       |  |                                |        |  |                    |   |        |  |  |   |        |  

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

The table below presents certain achieved milestones from Roche as of September 30,
2010. We are recognizing the milestones with remaining unrecognized balances on a straight-line basis through the expiration of certain FUZEON patents.



|               |  |                |       |  |               |  |      |                                                  |  |  |                                                              |  |  |                          |       |  |  |   |     |  |  |  |               | 
|-------------- |  | -------------- | ----- |  | ------------- |  | ---- | ------------------------------------------------ |  |  | ------------------------------------------------------------ |  |  | ------------------------ | ----- |  |  | - | --- |  |  |  | ------------- | 
|(in thousands) |  | MilestoneTotal |       |  | Date Achieved |  |      | Total 
RevenueRecognizedThroughSeptember 30,2010 |  |  | Revenue Recognizedfor the NineMonths EndedSeptember 30, 2010 |  |  | End of RecognitionPeriod |      
|               |  | $              | 2,500 |  |               |  | June |                                                  |  |  | 2003                                                         |  |  | $                        | 1,671 |  |  | $ | 151 |  |  |  | November 2014 | 
|               |  |                | 750   |  |               |  | June |                                                  |  |  | 2004                                                         |  |  |                          | 474   |  |  |   | 48  |  |  |  | November 2014 | 
|               |  |                |       |  |               |  |      |                                                  |  |  |                                                              |  |  |                          |       |  |  |   |     |  |  |  |               | 
|Total          |  | $              | 3,250 |  |               |  |      |                                                  |  |  |                                                              |  |  | $                        | 2,145 |  |  | $ | 199 |  |  |  |               | 
|               |  |                |       |  |               |  |      |                                                  |  |  |                                                              |  |  |                          |       |  |  |   |     |  |  |  |               | 

Royalty Revenue: Roches modification to the royalty calculation, which is
discussed above, resulted in a reduction in royalty revenue for the first six months of 2010 of $1.8 million, all of which has been recognized in the third quarter of 2010.

Royalty revenue decreased for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009 as a result of (1) the Settlement Agreement with Novartis,
which decreased royalty revenue by $1.5 million, (2) a decrease in net FUZEON® sales outside the U.S. and Canada as noted above and (3) a reduction in the royalty rate for net FUZEON sales outside the U.S. and Canada as noted above.

Collaboration Income:The table below presents our collaboration income (United States and Canada) for the nine months
ended September 30, 2010 compared to the nine months ended September 30, 2009. Under the Development and License Agreement, we share gross profit equally from the sale of FUZEON in the United States and Canada. The sharing of expenses is
according to contractual arrangements and is not equal in all cases. FUZEON was launched commercially in March 2003.



18



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##### Table of Contents



|                                        |  |                                |        |   |      |   |        |          |  |   |        |  
|--------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -------- |  | - | ------ | -
|(dollars in thousands)                  |  | Nine Months EndedSeptember 30, |        |   |      |  
|                                        |  | 2010                           |        |   | 2009 |   |        | $ Change | 
|                                        |  |                                |       
|Gross FUZEON sales by Roche             |  | $                              | 31,638 |   |      | $ | 37,906 |          |  | $ | (6,268 | )
|Less sales adjustments                  |  |                                | (7,461 | ) |      |   | (7,828 | )        |  |   | 367    |  
|Sales adjustments as a % of Gross Sales |  |                                | 24     | % |      |   | 21     | %        |  |   |        |  
|                                        |  |                                |        |   |      |   |        |          |  |   |        |  
|                                        |  |                                |       
|Net sales                               |  |                                | 24,177 |   |      |   | 30,078 |          |  |   | (5,901 | )
|Cost of goods sold                      |  |                                | (9,774 | ) |      |   | (8,306 | )        |  |   | (1,468 | )
|Cost of goods sold as a % of Net Sales  |  |                                | 40     | % |      |   | 28     | %        |  |   |        |  
|                                        |  |                                |        |   |      |   |        |          |  |   |        |  
|                                        |  |                                |       
|Gross profit                            |  |                                | 14,403 |   |      |   | 21,772 |          |  |   | (7,369 | )
|Gross profit as a % of Net Sales        |  |                                | 60     | % |      |   | 72     | %        |  |   |        |  
|Selling and marketing expenses          |  |                                | (2,502 | ) |      |   | (8,670 | )        |  |   | 6,168  |  
|Novartis royalty payment*               |  |                                | (2,484 | ) |      |   |       |          |  |   | (2,484 | )
|Roche development expenses              |  |                                | (152   | ) |      |   | (1,187 | )        |  |   | 1,035  |  
|Other costs                             |  |                                | (826   | ) |      |   | (362   | )        |  |   | (464   | )
|                                        |  |                                |        |   |      |   |        |          |  |   |        |  
|                                        |  |                                |       
|Total shared profit                     |  |                                | 8,439  |   |      |   | 11,553 |          |  |   | (3,114 | )
|Trimeris share **                       |  |                                | 4,219  |   |      |   | 5,776  |          |  |   | (1,557 | )
|Deferred Marketing ***                  |  |                                | 18,658 |   |      |   |       |          |  |   | 18,658 |  
|Costs exclusive to Trimeris             |  |                                | (164   | ) |      |   | (221   | )        |  |   | 57     |  
|                                        |  |                                |        |   |      |   |        |          |  |   |        |  
|                                        |  |                                |       
|Collaboration income                    |  | $                              | 22,713 |   |      | $ | 5,555  |          |  | $ | 17,158 |  
|                                        |  |                                |        |   |      |   |        |          |  |   |        |  



|* | On September 23, 2010, Trimeris and Roche signed the Settlement Agreement with Novartis resolving the litigation related to FUZEON then pending in the U.S.
District Court for the Eastern District of North Carolina. Under the Settlement Agreement with Novartis, this amount covers a period beginning in 2007 through the third quarter of 2010. Trimeris is responsible for 50% of this amount.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | During 2009, we exercised our right under the Development and License Agreement that prevents Roche from adopting a budget for the marketing of FUZEON above a certain
limit without our consent. As a result, the Companys share of the collaboration income was not equal to Roches share of such collaboration income in the first quarter of 2009.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | On September 23, 2010, Trimeris signed the Deferred Marketing Expenses Agreement with Roche, which relieved Trimeris of any obligation to repay certain deferred
marketing expenses and resulted in a one-time increase in collaboration income for the third quarter of 2010 of $18.7 million.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross FUZEON sales by Roche: Revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers.

The table below presents the approximate number of kits shipped to wholesalers in the U.S. and Canada during 2010 and 2009.



|             |  |      |        |  |      |  |        | 
|------------ |  | ---- | ------ |  | ---- |  | ------ | 
|Kits Shipped |  | 2010 |        |  | 2009 | 
|Q1           |  |      | 4,200  |  |      |  | 5,000  | 
|Q2           |  |      | 4,100  |  |      |  | 4,800  | 
|Q3           |  |      | 4,000  |  |      |  | 5,500  | 
|Q4           |  |      |       |  |      |  | 4,700  | 
|             |  |      |        |  |      |  |        | 
|Total        |  |      | 12,300 |  |      |  | 20,000 | 
|             |  |      |        |  |      |  |        | 

Sales adjustments:Sales adjustments are recorded by Roche based on Roches experience with
selling FUZEON. Based on discussions with Roche, we expect overall sales adjustments for 2010 to fall within a range of 25% to 30% of gross sales for 2010 as compared to 21 % for the full year 2009.

Cost of Goods Sold:The Company entered into negotiations with Roche, in accordance with the Development and License Agreement,
related to excess capacity charges and cost of goods sold variances for 2008 and overall cost of goods sold for 2009 and 2010. These negotiations are ongoing today. Accordingly, the Company cannot predict the outcome of negotiations with respect to



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cost of goods sold for 2008, 2009 and 2010, and as a result, accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same in the future or be
certain when a final resolution will be reached. Depending upon the resolution of the Companys negotiations with Roche, cost of goods sold may increase or decrease for the periods in dispute or for future periods.

During 2008, the Company recorded a reserve for 2008 excess capacity charges in the amount of $4.1 million to be shared equally between
Roche and the Company. In the first quarter of 2009, Roche informed the Company that actual excess capacity charges for 2008 were $1.9 million. The difference of $2.2 million has been recorded as a credit (reduction to) to cost of goods sold for the
first quarter of 2009. The Companys share of this credit was $1.1 million. The Company is disputing with Roche the remainder of the excess capacity charges for 2008 and 2009. The resolution of this dispute may result in an additional credit to
cost of goods sold for the collaboration in future periods.

Selling and Marketing Expenses: Selling and marketing
expenses for the nine months ended September 30, 2010 were lower than those for the nine months ended September 30, 2009 as Roche has reduced its selling and marketing efforts. We believe that our selling and marketing expense in 2010 will
be lower than 2009 since, as of June 30, 2010, Roche no longer fields a sales force marketing FUZEON.

During 2009, we
exercised our right under the Development and License Agreement that prevents Roche from adopting a budget for the marketing of FUZEON above a certain limit without our consent. As a result, the Companys share of the collaboration income was
not equal to Roches share of such collaboration income in the first quarter of 2009.

Development Expenses: Under
the Development and License Agreement, development costs for FUZEON are shared equally with Roche. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing
commitments related to approved drugs. Currently only Roche incurs development costs for FUZEON. Roche holds the IND and the NDA for FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. We
expect Roches development costs to continue to decline as substantially all activities have been completed.

Novartis
royalty payment:As discussed, pursuant to the terms of the Settlement Agreement, the Company made payments to Novartis for the Companys share of royalties, beginning in the fourth quarter of 2007 through the third quarter of 2010 in the
aggregate amount of approximately $2.7 million ($1.5 million has been recorded as a reduction to royalty revenue and $1.2 million has been recorded as a reduction to collaboration income). Pursuant to the terms of the Settlement Agreement and
immediately following execution of the Settlement Agreement, the Company made a payment to Novartis in the amount of approximately $2.446 million representing the Companys 50% share of back royalties on sales of FUZEON through March 31,
2010 The Companys share of the payments to Novartis for the three months ended September 30, 2010 was approximately $114,000.

Other Costs: Other costs for the nine months ended September 30, 2010 and September 30, 2009 include general and administrative costs and distribution charges. The Company is responsible
for 50% of these costs under the Development and License Agreement.

Deferred Marketing Expenses:On September 23,
2010, the Company and Roche entered into the Deferred Marketing Expenses Agreement relieving the Company of any obligation to repay certain deferred marketing expenses to Roche. The Deferred Marketing Expenses Agreement relates to the parties
collaboration for the development and commercialization of FUZEON. Under the existing Development and License Agreement between the parties, the Company and Roche had agreed that certain expenses related to the selling and marketing of FUZEON that
were incurred by Roche in 2004 would be subject to re-payment by Trimeris, assuming certain terms and conditions were met and Trimeris had recorded the obligation on its balance sheet under the caption Accrued Marketing Expenses.
Pursuant to the Deferred Marketing Expenses Agreement, the Company is no longer obligated to pay these deferred marketing expenses to Roche. As a result, the Company eliminated such accrued marketing costs, which resulted in a one-time increase in
collaboration income of $18.7 million in the third quarter of 2010.

Costs exclusive to the Company:Costs exclusive to
the Company include license fees, based on net sales of FUZEON, for certain technology paid to a third party.

General
and Administrative Expenses

The table below presents our general and administrative expenses for the nine months ended
September 30, 2010 compared to the nine months ended September 30, 2009.



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|                                          |  |                                |       |  |                    |   |       |  |  |   |      |  
|----------------------------------------- |  | ------------------------------ | ----- |  | ------------------ | - | ----- |  |  | - | ---- | -
|(in thousands)                            |  | Nine Months EndedSeptember 30, |       |  | Increase(Decrease) |  
|                                          |  | 2010                           |       |  | 2009               |   |       |  | 
|                                          |  |                                |      
|Total general and administrative expenses |  | $                              | 4,000 |  |                    | $ | 4,805 |  |  | $ | (805 | )
|                                          |  |                                |       |  |                    |   |       |  |  |   |      |  

Total general and administrative expenses decreased for the nine months ended September 30, 2010
compared to the nine months ended September 30, 2009 primarily due to a one-time real estate commission of $496,000 paid in connection with the release of obligations under our lease of our former corporate office and research facility in the
quarter ended September 30, 2009. We expect general and administrative expenses to decrease in 2010, when compared to 2009, as a result of a decrease in general business activities.

Other Income (Expense):The table below presents our other income (expense) for the nine months ended September 30, 2010 and
September 30, 2009.



|                                  |  |                                |      |   |      |   |      |                    |  |   |      |  
|--------------------------------- |  | ------------------------------ | ---- | - | ---- | - | ---- | ------------------ |  | - | ---- | -
|(in thousands)                    |  | Nine Months EndedSeptember 30, |      |   |      |  
|                                  |  | 2010                           |      |   | 2009 |   |      | Increase(Decrease) | 
|                                  |  |                                |     
|Interest income                   |  | $                              | 61   |   |      | $ | 338  |                    |  | $ | (277 | )
|Gain on investments               |  |                                |     |   |      |   | 298  |                    |  |   | (298 | )
|Interest expense                  |  |                                | (130 | ) |      |   | (192 | )                  |  |   | 62   |  
|                                  |  |                                |      |   |      |   |      |                    |  |   |      |  
|                                  |  |                                |     
|Total other (expense) income, net |  | $                              | (69  | ) |      | $ | 444  |                    |  | $ | (513 | )
|                                  |  |                                |      |   |      |   |      |                    |  |   |      |  

Interest income decreased for the nine months ended September 30, 2010 primarily due to lower interest
rates within the Companys investment portfolios. There was a realized gain on investments for the nine months ended September 30, 2009 as a result of our redemptions of our investment in Bank of America Corporations Columbia
Strategic Cash Portfolio, which is discussed in more detail above. For the nine months ended September 30, 2009, we recorded a realized gain of $298,000 related to this investment.

Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as Accrued Marketing
Costs. The Company and Roche agreed to limit the Companys actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these expenses for that
year. Based on certain terms of the Development and License Agreement, the Companys share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date that the Company now estimates to be in
2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment amount. For the nine months ended September 30, 2010 and September 30, 2009, the Company
increased the recorded liability by $130,000 and $192,000, respectively, for accretion of interest. On September 23, 2010, the Company and Roche entered into the Deferred Marketing Expenses Agreement relieving Trimeris of any obligation to
repay certain deferred marketing expenses. The total liability of $0 million and $18.5 million at September 30, 2010 and December 31, 2009 is reflected on our condensed balance sheets.

Income Tax Provision

We recognized income tax expense of $881,000 for the nine months ended September 30, 2010 compared to income tax expense of $2,612,000 for the nine months ended September 30, 2009. For 2010,
based on current estimates, the effective annual blended tax rate will be approximately 4.5%. The estimated effective rate for the year has decreased from prior quarters due mainly to an increase in projected income as a result of the reduction of
the deferred marketing accrual which is offset by the expected utilization of a portion of the related deferred tax asset in the current year. The change did not impact future utilization of the deferred tax asset.

At December 31, 2009, the Company had NOLs for federal tax purposes of approximately $302.7 million, which expire in varying amounts
between 2018 and 2025. We have determined that an ownership change as defined under Section 382 of the Code occurred during 2008. The effect of this ownership change was the imposition of a $457,000 annual limitation on the use of NOL
carryforwards attributable to periods before the change. This annual limitation will result in the expiration of NOL carryforwards before they become available for utilization. Based on the $457,000 annual limitation, the Company anticipates that a
total of approximately $7.3 million of NOL carryforwards will be available for utilization prior to 2025.



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As of
September 30, 2010, we have recognized a deferred tax benefit of $480,000 related to the anticipated future use of some of our federal net operating loss carryovers. In the future, we may reduce the valuation allowance over our federal net
operating loss carryovers and recognize an additional deferred tax benefit. Management assesses this potential based upon all available evidence, including the last several quarters of profitability and forecasts. At the end of the first quarter,
management determined that it was not appropriate to reduce the valuation allowance to recognize additional benefit.

The
Company continues to carry a full valuation allowance on its other deferred tax assets, the majority of which represent net operating loss carry forwards and tax credit carryovers which we generated prior to achieving profitability.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents our cash flows for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009.



|                                                     |  |                                |        |   |      |   |        | 
|---------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | 
|(in thousands)                                       |  | Nine Months EndedSeptember 30, |       
|                                                     |  | 2010                           |        |   | 2009 |  
|                                                     |  |                               
|Net cash (used in) provided by operating activities  |  | $                              | (3,628 | ) |      | $ | 4,489  | 
|Net cash provided by investing activities            |  |                                | 343    |   |      |   | 13,132 | 
|Net cash (used in) provided by financing activities  |  |                                |       |   |      |   |       | 
|                                                     |  |                                |        |   |      |   |        | 
|                                                     |  |                               
|Net (decrease) increase in cash and cash equivalents |  |                                | (3,285 | ) |      |   | 17,621 | 
|Cash and cash equivalents, beginning of period       |  |                                | 47,420 |   |      |   | 14,389 | 
|                                                     |  |                                |        |   |      |   |        | 
|Cash and cash equivalents, end of period             |  | $                              | 44,135 |   |      | $ | 32,010 | 
|                                                     |  |                                |        |   |      |   |        | 

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

For the nine months ended September 30, 2010, cash provided by operating activities decreased primarily as a result of the following:



| |  |  | decreased payments from Roche as a result of decreased FUZEON sales and the imposition of the decreased royalty rate offset, in part, by lower selling
and marketing expenses;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | payments made pursuant to the Settlement Agreement with Novartis; and
| | - |  | ---------------------------------------------------------------------



| |  |  | payments made in connection with the Arigene Merger Agreement and its termination, including chiefly taxes paid on the $12 million reverse termination
fee and fees paid to advisors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the remainder of 2010, cash provided by operating activities will
depend on several factors, primarily the results of negotiations with Roche related to cost of goods sold and Roches calculation of the rest-of-world FUZEON royalty rate, and the sales, cost of sales and commercialization expenses and
post-marketing commitments related to the sale of FUZEON (profitability of the collaboration with Roche).

Investing
Activities. The amount provided by investing activities for the nine months ended September 30, 2010 and September 30, 2009 primarily relates to the net maturities of investment securities available-for-sale. The maturity of investment
securities available-for-sale was due to the normal maturities of investments.

During the remainder of 2010, cash provided by
investing activities will depend primarily on the net purchases/maturities of investments. We do not expect to purchase any property and equipment in 2010. We expect patent costs for the remainder of 2010 to approximate the spending in 2009.

Total Cash, Cash Equivalents and Investment Securities Available-for-Sale. As of September 30, 2010, we had $44.1
million in cash and cash equivalents and investment securities available-for-sale, compared to $48.4 million as of December 31, 2009.

Future Capital Requirements. We have expended, and expect to continue to expend in the future, substantial funds in the following areas:



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| |  |  | general operating expense associated with a publicly-traded company; and
| | - |  | ------------------------------------------------------------------------



| |  |  | expenses related to the on-going discussions with Roche related to cost of goods sold for FUZEON.
| | - |  | -------------------------------------------------------------------------------------------------

Based on expected sales levels of FUZEON, expenses related to the sale of FUZEON, the costs involved in preparing, filing, processing,
maintaining, protecting and enforcing patent claims and other intellectual property rights, and litigation expenses, we expect that our existing capital resources, together with the interest earned thereon, will be adequate to fund our operating
expenses for the foreseeable future.

Contractual Obligations.In September 2010, the Company and Roche entered into
the Deferred Marketing Expenses Agreement relieving Trimeris of any obligation to repay certain deferred marketing expenses. The Deferred Marketing Expenses Agreement relates to the parties collaboration for the development and
commercialization of FUZEON. Under the existing Development and License Agreement between the parties, Trimeris and Roche had agreed that certain expenses related to the selling and marketing of FUZEON that were incurred by Roche in 2004 would be
subject to re-payment by Trimeris, assuming certain terms and conditions were met. Pursuant to the Deferred Marketing Expenses Agreement Trimeris will no longer be obligated to pay these deferred marketing expenses to Roche.

The re-payment obligation was recorded on the Companys balance sheet as a single entry under the caption Accrued Marketing
Costs. This liability was $18.7 million at June 30, 2010. The reversal of this liability is reflected as part of Collaboration income in the third quarter of 2010.

Pursuant to the Settlement Agreement with Novartis, Roche and Trimeris have agreed to pay royalties to Novartis on net sales of FUZEON of one and one-half percent (1.5%) on sales occurring in the
U.S. and Canada in a calendar year, and one percent (1%) on sales outside of the U.S. and Canada in a calendar year. The royalty rate increases to three percent (3%) in the U.S. and Canada and one and one-half percent (1.5%) on any
portion of FUZEON sales in excess of $50,000,000 in the relevant region in a calendar year. Roche and Trimeris will share responsibility for payment of these royalties equally.

The Company also has contractual obligations to the New York Blood Center pursuant to a license agreement that requires the Company to
make payments based on a contracted term. During the nine months ended September 30, 2010 and September 30, 2009, we expended approximately $164,000 and $221,000, respectively, related to this obligation.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

Reference is made to Critical Accounting Policies included in our Annual Report on Form 10-K for the year
ended December 31, 2009, filed with the SEC on March 16, 2010. As of the date of the filing of this Quarterly Report, the Company has not identified any significant changes to the critical accounting policies discussed in our Annual Report
on Form 10-K for the year ended December 31, 2009.

Royalty Revenue

The Company receives royalties from Roche on sales of FUZEON in countries outside of the United States and Canada. Roche is responsible
for all activities related to FUZEON outside of the United States and Canada, including regulatory, manufacturing, sales and distribution. These royalties are recognized as revenue when the sales are made by Roche. To calculate the royalty revenue,
an 8% distribution charge is deducted from Roches reported net sales, and the Company receives a royalty on the adjusted net sales amount. The royalty rate reported by the Company in its quarterly reports for periods ending on or immediately
prior to June 30, 2010 was 12%.

In October 2010, Roche informed the Company that, in reliance on a clause in the
Development and License Agreement that permits Roche to reduce its royalty payments to the Company if the cost of goods sold outside the U.S. and Canada exceed a certain proportion of FUZEON net sales outside the U.S. and Canada, Roche would reduce
the royalty paid to Trimeris on sales outside the U.S. and Canada from 12%, the amount previously paid, to 6% with application retroactive to January 1, 2010. As previously disclosed, in April 2009, the Company notified Roche that it did not
agree with the manner in which FUZEON cost of goods sold were being calculated and charged to the collaboration. Roche and the Company have been in discussions regarding this calculation generally.

The Company has notified Roche of its objection to the timing and application of the royalty reduction clause, both under the terms of
the contract and in light of its on-going discussions with Roche related to the calculation of cost of goods sold. While the Company is considering all available options for resolution of this issue, it currently intends to continue working with
Roche to reach



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agreement on the appropriate cost of goods sold for FUZEON, and accordingly, the proper royalty rates to be afforded to the Company.

Cautionary Statements Regarding Forward Looking Statements

This Quarterly
Report on Form 10-Q contains forward-looking information about the Companys financial results and business prospects that involve substantial risks and uncertainties. These statements can be identified by the fact that they use words such as
expect, project, intend, plan, believe and other words and terms of similar meaning. Among the factors that could cause actual results to differ materially are the following: the Company is
dependent on third parties for the sale, marketing and distribution of its drug candidates; the market for HIV therapeutics is very competitive with regular new product entries that could affect the sales of its products; the results of its previous
clinical trials are not necessarily indicative of future clinical trials; there can be no assurance that the Company will be able to resolve its dispute with Roche related to the calculation of cost of goods sold, or that in resolving such dispute,
the Company will not incur significant costs or adversely affect its critical business relationship with Roche; and the Companys commercial drug and drug candidate are based upon novel technology, are difficult and expensive to manufacture and
may cause unexpected side effects. For a detailed description of these factors, see Trimeris Form 10-K filed with the Securities and Exchange Commission on March 16, 2010.

Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this report. We
disclaim any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. See Risk Factors, in Part II -Item 1A in this Quarterly Report on Form 10-Q and in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2009 for further discussion regarding some of the reasons that actual results may be materially different from those that we anticipate.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

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

Fair value is based on actively quoted market prices and other observable inputs. Our investments are
generally most vulnerable to changes in short-term interest rates in the United States. We believe that the risk of material loss of principal due to changes in interest rates is minimal.

Investment securities are classified as available-for-sale, and are reported at fair value based on quoted market prices and other
observable inputs. The cost of securities sold is determined using the specific identification method when computing realized gains and losses. Unrealized gains and losses are included as a component of stockholders equity until realized. The
Company did not have any available-for-sale securities for the nine months ended September 30, 2010 as all of our cash was invested in money market funds.

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



|Item 4. | Controls and Procedures
|------- | -----------------------

Our Chief Executive Officer and our Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and
procedures, with the participation of the Companys management, as of September 30, 2010. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other
procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in
the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2010, our Chief Executive Officer and Chief Financial Officer have each concluded that, as of such date, our disclosure controls and
procedures were effective at the reasonable assurance level.



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No change in the
Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), occurred during the fiscal quarter ended September 30, 2010 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.

PART II. OTHER
INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Novartis Patent Lawsuit

On November 20, 2007, the Company was informed that Novartis Vaccines and Diagnostics, Inc. (Novartis) had filed suit against Hoffman-La Roche Inc., Roche Laboratories Inc., Roche
Colorado Corp., and F. Hoffman- La Roche LTD. (collectively the Roche Entities) and Trimeris alleging infringement of Novartis U.S. Patent No. 7,285,271 B1, entitled Antigenic Composition Comprising an HIV gag or env
Polypeptide (the 271 Patent) related to the manufacture, sale and offer for sale of FUZEON. The lawsuit was originally filed in the Eastern District of Texas (Marshal Division) and was transferred to the Eastern District of
North Carolina (Wilmington Division) on December 4, 2009.

On September 23, 2010, the Company and
Roche entered into the Settlement Agreement with Novartis resolving the litigation related to FUZEON involving the 271 Patent. Under the terms of the Settlement Agreement, the Roche and Company collaboration will continue to sell FUZEON under
a license from Novartis to the 271 Patent. In exchange for the grant of this license, Roche and the Company have agreed to pay royalties to Novartis on net sales of FUZEON of one and one-half percent (1.5%) on sales occurring in the U.S.
and Canada in a calendar year, and one percent (1%) on sales outside of the U.S. and Canada in a calendar year. The royalty rate increases to three percent (3%) in the U.S. and Canada and one and one-half percent (1.5%) in the rest of
the world on any portion of FUZEON sales in excess of $50,000,000 in the relevant region in a calendar year. Additional royalty rate tiers would apply to sales that exceed $100,000,000 in a region in a calendar year. Roche and the Company will share
responsibility for payment of these royalties equally.

In addition, pursuant to the terms of the Settlement
Agreement and immediately following execution of the Settlement Agreement, the Company made a payment to Novartis in the amount of approximately $2.446 million representing the Companys 50% share of back royalties on sales of FUZEON through
March 31, 2010. The Companys share of the payments to Novartis for the three months ended September 30, 2010 was approximately $114,000.

On September 28, 2010, the lawsuit was dismissed with prejudice from the Eastern District of North Carolina.



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|Item 1A. | Risk Factors
|-------- | ------------

A material
change in our risk factors since the filing of our most recent 10-K is included below. Our business activities involve various elements of risk. We consider the following issues to be some of the critical risks that should be considered in
evaluating our Company and our business:



| |  |  | We derive substantially all our income from the sales of FUZEON. If we are unable to sustain sales above a critical threshold, our business will suffer
and may become unprofitable.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We face intense competition in our efforts to increase sales of FUZEON. If we are unable to compete successfully, our business will suffer.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | In order to remain profitable we will need to maintain arrangements with third parties for the sale, marketing and distribution of FUZEON or expend
significant resources to develop these capabilities.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If sufficient amounts of FUZEON, cannot be manufactured on a cost-effective basis, our financial condition and results of operations will be materially
and adversely affected.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | HIV is likely to develop resistance to FUZEON and our drug candidate TRI-1144, which could adversely affect demand for FUZEON or our drug candidate
TRI-1144 and harm our competitive position.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our business is based on a novel technology called fusion inhibition, and unexpected side effects or other characteristics of this technology may delay
or otherwise adversely affect the development, regulatory approval and/or commercialization of our drug candidate TRI-1144.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In order to move forward with the development and commercialization of TRI-1144 we would need to partner with a company that has the requisite
expertise and capabilities related to the development, manufacturing, sale, marketing and distribution of drugs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If we cannot maintain arrangements with third parties for the manufacturing of FUZEON, we will not remain profitable.
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | The intellectual property of our competitors or other third parties may materially harm our business or prevent us from developing or commercializing
our drug candidate TRI-1144.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | If the testing or use of FUZEON or our drug candidate - TRI-1144 harms people, we could face costly and damaging product liability claims far in excess
of our liability and indemnification coverage.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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

The risk factors described in our
Annual Report on Form 10-K for the year ended December 31, 2009, (See Item 1A-Risk Factors in the Form 10-K filed by Trimeris on March 16, 2010) have materially changed as follows.

If we are unable to agree on favorable terms with Roche on cost of goods sold for FUZEON, our business could be materially harmed.

As previously disclosed, in April 2009, the Company notified Roche that it did not agree with the manner in which
FUZEON cost of goods sold were being calculated and charged to the collaboration. Roche and the Company have been in discussions regarding this calculation for the years 2008, 2009 and 2010. In October 2010, Roche informed the Company that, in
reliance on a clause in the Development and License Agreement that permits Roche to reduce its royalty payments to the Company if the cost of goods sold outside the U.S. and Canada exceeds a certain proportion of FUZEON net sales outside the U.S.
and Canada, Roche would reduce the royalty paid to Trimeris on sales outside the U.S. and Canada from 12%, the amount previously paid, to 6% with application retroactive to January 1, 2010.

The Company has notified Roche of its objection to the timing and application of the royalty reduction clause, both under the terms of
the contract and in light of its on-going discussions with Roche related to the calculation of cost of goods sold. While the Company is considering all available options for resolution of this issue, it currently intends to continue working with
Roche to reach agreement on the appropriate cost of goods sold for FUZEON.

If we are unable to agree upon favorable terms
regarding the cost of goods sold our business will suffer because the Companys share of net profits could be reduced as cost of goods increases. Additionally, royalty rates paid by Roche to the Company for sales outside the U.S. and Canada
could be substantially reduced for the periods in dispute or future periods. The Company could incur significant costs pursuing a resolution of this dispute with Roche, and its critical business relationship with Roche could be adversely affected.

Future events could substantially decrease our royalty payments from Roche for sales of FUZEON in territories outside the United States
and Canada.

Pursuant to the Development and License Agreement, if Roche determines, in good faith, that it must
make payments under patent rights or know-how controlled by a third-party that are necessary for the sale of FUZEON in a given country outside the U.S. and Canada, Roche may reduce the royalty paid to Trimeris on sales in
such country or countries by up to 50%.

Additionally, Roche currently has or may have sales in jurisdictions
where Trimeris does not have an issued patent. Pursuant to the Development and License Agreement, if in any calendar quarter, a third party is able to obtain a significant percentage of the market for HIV drugs in a country outside
the U.S. and Canada by selling a product containing T-20, the active ingredient of FUZEON, Roche may reduce the royalty paid to Trimeris on sales in such country or countries by up to 50%.

The Company cannot prevent the issuance or granting of valid third party intellectual party rights in any jurisdiction or sales of
third party products that contain T-20. If such intellectual property rights emerge, and Roche incurs payment obligations with respect to those rights, or a third party achieves significant market penetration, with a product containing
T-20, our business will suffer as royalty rates paid by Roche to the Company for sales outside the U.S. and Canada could be substantially reduced.



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|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



| | (a) | Not applicable.
| | --- | ---------------



| | (b) | Not applicable.
| | --- | ---------------



| | (c) | Not applicable.
| | --- | ---------------



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

Not applicable.



|Item 4. | Removed and Reserved
|------- | --------------------



|Item 5. | Other Information
|------- | -----------------



| | (a) | None.
| | --- | -----



| | (b) | None.
| | --- | -----



|Item 6. | Exhibits
|------- | --------



| | (a) | Exhibits
| | --- | --------

The exhibits filed as
part of this Quarterly Report on Form 10-Q are listed on the Exhibit Index and such list is incorporated herein by reference.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                  |  |                |  |                                                                     
|----------------- |  | -------------- |  | --------------------------------------------------------------------
|                  |  | Trimeris, Inc.
|                  |  | (Registrant)  
|                  |  |               
|November 15, 2010 |  | By:            |  | /s/    MARTIN A. MATTINGLY                                          
|                  |  |                |  | Martin A. Mattingly                                                 
|                  |  |                |  | Chief Executive Officer                                             
|                  |  |               
|November 15, 2010 |  | By:            |  | /s/    ANDREW L. GRAHAM                                             
|                  |  |                |  | Andrew L. Graham                                                    
|                  |  |                |  | Chief Financial Officer and
Secretary (Principal Accounting Officer)



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EXHIBIT INDEX



|       |  |                                                                                
|------ |  | -------------------------------------------------------------------------------
|Number |  | Description                                                                    
|       | 
|31.1   |  | Rule 13a-14(a) Certification by Martin A. Mattingly as Chief Executive Officer.
|       | 
|31.2   |  | Rule 13a-14(a) Certification by Andrew L. Graham as Chief Financial Officer.   
|       | 
|32.1   |  | Section 1350 Certification by Martin A. Mattingly as Chief Executive Officer.  
|       | 
|32.2   |  | Section 1350 Certification by Andrew L. Graham as Chief Financial Officer.     



30