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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended June 30, 2007



| ̈ | 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



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TRIMERIS, INC.

(Exact name of registrant as specified in its charter)



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

3500 Paramount Parkway

Morrisville, North Carolina 27560

(Address of principal executive offices,
including zip code)

Registrants telephone number, including area code: (919) 419-6050



---

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 large accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large
accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

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 August 1, 2007 was 22,204,399.



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##### Table of Contents

TRIMERIS, INC.

FORM 10-Q

For the Six Months Ended June 30, 2007

INDEX



|               |  |                                                                                           |  |     
|-------------- |  | ----------------------------------------------------------------------------------------- |  | ----
|               |  |                                                                                           |  | Page
|PART I.        |  | FINANCIAL INFORMATION                                                                     |  |     
|               |  |                                                                                          
|Item 1.        |  | Financial Statements (unaudited)                                                          |  | 1   
|               |  |                                                                                          
|               |  | Balance Sheets as of June 30, 2007 and December 31, 2006                                  |  | 1   
|               |  |                                                                                          
|               |  | Statements of Operations for the Three Months and Six Months Ended June 30, 2007 and 2006 |  | 2   
|               |  |                                                                                          
|               |  | Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006                  |  | 3   
|               |  |                                                                                          
|               |  | Notes to Financial Statements                                                             |  | 4   
|               |  |                                                                                          
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations     |  | 11  
|               |  |                                                                                          
|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                                                                              |  | 25  
|               |  |                                                                                          
|Item 2.        |  | Unregistered Sales of Equity Securities and Use of Proceeds                               |  | 27  
|               |  |                                                                                          
|Item 3.        |  | Defaults Upon Senior Securities                                                           |  | 27  
|               |  |                                                                                          
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                       |  | 27  
|               |  |                                                                                          
|Item 5.        |  | Other Information                                                                         |  | 27  
|               |  |                                                                                          
|Item 6.        |  | Exhibits                                                                                  |  | 27  
|               | 
|Signature Page |  | 28                                                                                       
|               | 
|Exhibit Index  |  |                                                                                          



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##### Table of Contents

PART I. FINANCIAL INFORMATION



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

TRIMERIS, INC.

BALANCE SHEETS

(in thousands, except par value)



|                                                                                                                     |  |              |          |   |                  |   |          |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                     |  | June 30,2007 |          |   | December 31,2006 |  
|                                                                                                                     |  | (unaudited)  |          |   |                  |  
|Assets                                                                                                               |  |              |          |   |                  |   |          |  
|Current assets:                                                                                                      |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                            |  | $            | 36,037   |   |                  | $ | 30,052   |  
|Investment securities available-for-sale                                                                             |  |              | 19,732   |   |                  |   | 17,983   |  
|Accounts receivable - Roche                                                                                          |  |              | 8,753    |   |                  |   | 13,341   |  
|Other receivables                                                                                                    |  |              | 148      |   |                  |   | 36       |  
|Prepaid expenses                                                                                                     |  |              | 538      |   |                  |   | 1,068    |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total current assets                                                                                                 |  |              | 65,208   |   |                  |   | 62,480   |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Property, furniture and equipment, net                                                                               |  |              | 1,972    |   |                  |   | 2,160    |  
|Long-term investment securities available-for-sale                                                                   |  |              | 3,120    |   |                  |   | 604      |  
|                                                                                                                     |  |             
|Other assets:                                                                                                        |  |              |          |   |                  |   |          |  
|Patent costs, net                                                                                                    |  |              | 2,753    |   |                  |   | 2,584    |  
|Advanced payment - Roche                                                                                             |  |              | 7,174    |   |                  |   | 6,303    |  
|Deposits and other assets                                                                                            |  |              | 383      |   |                  |   | 772      |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total other assets                                                                                                   |  |              | 10,310   |   |                  |   | 9,659    |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total assets                                                                                                         |  | $            | 80,610   |   |                  | $ | 74,903   |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|                                                                                                                     |  |             
|Liabilities and Stockholders Equity                                                                                 |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                                 |  |              |          |   |                  |   |          |  
|Accounts payable                                                                                                     |  | $            | 358      |   |                  | $ | 709      |  
|Accrued compensation                                                                                                 |  |              | 4,175    |   |                  |   | 3,797    |  
|Deferred revenue  Roche                                                                                             |  |              | 333      |   |                  |   | 2,118    |  
|Accrued expenses                                                                                                     |  |              | 1,301    |   |                  |   | 2,283    |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total current liabilities                                                                                            |  |              | 6,167    |   |                  |   | 8,907    |  
|                                                                                                                     |  |             
|Deferred revenue - Roche                                                                                             |  |              | 1,645    |   |                  |   | 9,151    |  
|Accrued marketing costs                                                                                              |  |              | 17,692   |   |                  |   | 17,288   |  
|Accrued compensation-long-term                                                                                       |  |              | 1,597    |   |                  |   | 1,072    |  
|Other liabilities                                                                                                    |  |              | 717      |   |                  |   | 713      |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total liabilities                                                                                                    |  |              | 27,818   |   |                  |   | 37,131   |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|                                                                                                                     |  |             
|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, 22,204 and 22,132 shares issued and outstanding |  |              | 22       |   |                  |   | 22       |  
|Additional paid-in capital                                                                                           |  |              | 411,002  |   |                  |   | 408,855  |  
|Accumulated deficit                                                                                                  |  |              | (358,260 | ) |                  |   | (371,086 | )
|Accumulated other comprehensive income (loss)                                                                        |  |              | 28       |   |                  |   | (19      | )
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total stockholders equity                                                                                           |  |              | 52,792   |   |                  |   | 37,772   |  
|                                                                                                                     |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                           |  | $            | 80,610   |   |                  | $ | 74,903   |  
|                                                                                                                     |  |              |          |   |                  |   |          |  

See accompanying notes to financial statements.



1



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##### Table of Contents

TRIMERIS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|---------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | -------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                   |  | For the Three Months EndedJune 30, |        |   | For the Six Months EndedJune 30, |  
|                                                                                   |  | 2007                               |        |   | 2006                             |   |        | 2007 |  |   | 2006   |  
|Revenue:                                                                           |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Milestone revenue                                                                  |  | $                                  | 83     |   |                                  | $ | 1,055  |      |  | $ | 9,291  |   |  | $ | 2,111  |  
|Royalty revenue                                                                    |  |                                    | 3,219  |   |                                  |   | 2,408  |      |  |   | 7,081  |   |  |   | 4,988  |  
|Collaboration income                                                               |  |                                    | 5,806  |   |                                  |   | 3,815  |      |  |   | 10,174 |   |  |   | 7,609  |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Total revenue and collaboration income                                             |  |                                    | 9,108  |   |                                  |   | 7,278  |      |  |   | 26,546 |   |  |   | 14,708 |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                   |  |                                    |        |  
|Operating expenses:                                                                |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Research and development                                                           |  |                                    | 2,959  |   |                                  |   | 4,961  |      |  |   | 6,056  |   |  |   | 10,141 |  
|General and administrative                                                         |  |                                    | 1,937  |   |                                  |   | 2,927  |      |  |   | 8,476  |   |  |   | 6,083  |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                           |  |                                    | 4,896  |   |                                  |   | 7,888  |      |  |   | 14,532 |   |  |   | 16,224 |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Operating income (loss)                                                            |  |                                    | 4,212  |   |                                  |   | (610   | )    |  |   | 12,014 |   |  |   | (1,516 | )
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                   |  |                                    |        |  
|Other income (expense):                                                            |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Interest income                                                                    |  |                                    | 727    |   |                                  |   | 470    |      |  |   | 1,397  |   |  |   | 888    |  
|Gain on disposal of equipment                                                      |  |                                    | 5      |   |                                  |   |       |      |  |   | 7      |   |  |   |       |  
|Interest expense                                                                   |  |                                    | (203   | ) |                                  |   | (194   | )    |  |   | (404   | ) |  |   | (386   | )
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Total other income                                                                 |  |                                    | 529    |   |                                  |   | 276    |      |  |   | 1,000  |   |  |   | 502    |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                   |  |                                    |        |  
|Income (loss) before taxes and cumulative effect of change in accounting principle |  |                                    | 4,741  |   |                                  |   | (334   | )    |  |   | 13,014 |   |  |   | (1,014 | )
|Income tax provision                                                               |  |                                    | 66     |   |                                  |   |       |      |  |   | 188    |   |  |   |       |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) before cumulative effect of change in accounting principle           |  |                                    | 4,675  |   |                                  |   | (334   | )    |  |   | 12,826 |   |  |   | (1,014 | )
|Cumulative effect of change in accounting principle                                |  |                                    |       |   |                                  |   |       |      |  |   |       |   |  |   | 252    |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                                                  |  | $                                  | 4,675  |   |                                  | $ | (334   | )    |  | $ | 12,826 |   |  | $ | (762   | )
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                   |  |                                    |        |  
|Basic net income (loss) per share before cumulative effect of accounting change    |  | $                                  | 0.21   |   |                                  | $ | (0.02  | )    |  | $ | 0.58   |   |  | $ | (0.05  | )
|Accounting change                                                                  |  |                                    |       |   |                                  |   |       |      |  |   |       |   |  |   | 0.01   |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Basic net income (loss) per share                                                  |  | $                                  | 0.21   |   |                                  | $ | (0.02  | )    |  | $ | 0.58   |   |  | $ | (0.04  | )
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                                                   |  |                                    |        |  
|Diluted net income (loss) per share before cumulative effect of accounting change  |  | $                                  | 0.21   |   |                                  | $ | (0.02  | )    |  | $ | 0.58   |   |  | $ | (0.05  | )
|Accounting change                                                                  |  |                                    |       |   |                                  |   |       |      |  |   |       |   |  |   | 0.01   |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Diluted net income (loss) per share                                                |  | $                                  | 0.21   |   |                                  | $ | (0.02  | )    |  | $ | 0.58   |   |  | $ | (0.04  | )
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Weighted average shares used in basic per share computations                       |  |                                    | 22,043 |   |                                  |   | 21,896 |      |  |   | 22,036 |   |  |   | 21,877 |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Weighted average shares used in diluted per share computations                     |  |                                    | 22,184 |   |                                  |   | 21,896 |      |  |   | 22,096 |   |  |   | 21,877 |  
|                                                                                   |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  

See accompanying notes to financial statements.



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TRIMERIS, INC.

STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



|                                                                                         |  |                          |         |   |      |   |        |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                         |  | Six Months EndedJune 30, |        
|                                                                                         |  | 2007                     |         |   | 2006 |  
|Cash flows from operating activities:                                                    |  |                          |         |   |      |   |        |  
|Net income (loss)                                                                        |  | $                        | 12,826  |   |      | $ | (762   | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                          |         |   |      |   |        |  
|Depreciation and amortization of property, furniture and equipment                       |  |                          | 443     |   |      |   | 483    |  
|Postretirement benefits                                                                  |  |                          | 55      |   |      |   |       |  
|Net gain on sale of equipment                                                            |  |                          | (7      | ) |      |   |       |  
|Patent/license amortization                                                              |  |                          | 88      |   |      |   | 83     |  
|Patent costs expensed                                                                    |  |                          | 12      |   |      |   | 57     |  
|Amortization of deferred revenue  Roche                                                 |  |                          | (9,291  | ) |      |   | (2,111 | )
|Stock compensation expense                                                               |  |                          | 2,015   |   |      |   | 3,089  |  
|Cumulative effect of change in accounting principle                                      |  |                          |        |   |      |   | (252   | )
|Accrued marketing costs                                                                  |  |                          | 404     |   |      |   | 386    |  
|Decrease (increase) in assets:                                                           |  |                          |         |   |      |   |        |  
|Accounts receivable - Roche                                                              |  |                          | 4,588   |   |      |   | 1,922  |  
|Other receivables                                                                        |  |                          | (112    | ) |      |   | 28     |  
|Prepaid expenses                                                                         |  |                          | 530     |   |      |   | 689    |  
|Advanced payment - Roche                                                                 |  |                          | (871    | ) |      |   | (416   | )
|Deposits and other assets                                                                |  |                          | 376     |   |      |   | 42     |  
|Increase (decrease) in liabilities:                                                      |  |                          |         |   |      |   |        |  
|Accounts payable                                                                         |  |                          | (351    | ) |      |   | (687   | )
|Accrued compensation                                                                     |  |                          | 903     |   |      |   | (258   | )
|Accrued expenses                                                                         |  |                          | (982    | ) |      |   | 288    |  
|Deferred revenue - Roche                                                                 |  |                          |        |   |      |   | 2,500  |  
|Other liabilities                                                                        |  |                          | 4       |   |      |   | 4      |  
|                                                                                         |  |                          |         |   |      |   |        |  
|Net cash provided by operating activities                                                |  |                          | 10,630  |   |      |   | 5,085  |  
|                                                                                         |  |                          |         |   |      |   |        |  
|                                                                                         |  |                         
|Cash flows from investing activities:                                                    |  |                          |         |   |      |   |        |  
|Purchases of investment securities available-for-sale                                    |  |                          | (23,448 | ) |      |   | (7,298 | )
|Maturities of investment securities available-for-sale                                   |  |                          | 19,175  |   |      |   | 7,500  |  
|Purchases of property and equipment                                                      |  |                          | (256    | ) |      |   | (402   | )
|Proceeds from the sale of equipment                                                      |  |                          | 8       |   |      |   | 5      |  
|Patent costs                                                                             |  |                          | (256    | ) |      |   | (215   | )
|                                                                                         |  |                          |         |   |      |   |        |  
|Net cash (used) by investing activities                                                  |  |                          | (4,777  | ) |      |   | (410   | )
|                                                                                         |  |                          |         |   |      |   |        |  
|                                                                                         |  |                         
|Cash flows from financing activities:                                                    |  |                          |         |   |      |   |        |  
|Proceeds from employee stock purchase plan exercise                                      |  |                          | 48      |   |      |   | 138    |  
|Proceeds from exercise of stock options                                                  |  |                          | 84      |   |      |   | 265    |  
|                                                                                         |  |                          |         |   |      |   |        |  
|Net cash provided by financing activities                                                |  |                          | 132     |   |      |   | 403    |  
|                                                                                         |  |                          |         |   |      |   |        |  
|                                                                                         |  |                         
|Net increase in cash and cash equivalents                                                |  |                          | 5,985   |   |      |   | 5,078  |  
|Cash and cash equivalents, beginning of period                                           |  |                          | 30,052  |   |      |   | 23,559 |  
|                                                                                         |  |                          |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                                 |  | $                        | 36,037  |   |      | $ | 28,637 |  
|                                                                                         |  |                          |         |   |      |   |        |  

See accompanying notes to financial statements.



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TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

Trimeris, Inc. (the Company or Trimeris) was incorporated on January 7, 1993 in Delaware, to discover and develop novel
therapeutic agents that block viral infection by inhibiting viral fusion with host cells.

The Company has a worldwide agreement (the Development and License Agreement) with F. Hoffmann-La Roche Ltd., (Roche), to develop and market T-20, currently known 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 three and six months ended
June 30, 2007 and 2006. The Development and License Agreement also provides the basis for substantially all of the Companys results from the collaboration and milestone revenue. Substantially all of the accounts receivable at
June 30, 2007 and December 31, 2006, are comprised of receivables from Roche owing under the Development and License Agreement.

The accompanying unaudited 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 2006 financial statements and notes thereto included in the Companys 2006 Annual Report on Form 10-K for the year ended December 31, 2006 filed with the SEC on
March 16, 2007.

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.

2. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

In accordance with SFAS No. 128, Earnings Per Share (SFAS No. 128), basic net income (loss) per common share is
calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) 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 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 SFAS No. 123 (revised), Share-Based Payment. The following table sets forth
the computation of basic and diluted net income per share for the three and six months ended June 30, 2007 (in thousands, except per share amounts):



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##### Table of Contents

|                                                |  |                                 |        |                               |   |       
|----------------------------------------------- |  | ------------------------------- | ------ | ----------------------------- | - | ------
|                                                |  | Three Months EndedJune 30, 2007 |        | Six Months EndedJune 30, 2007
|Numerator:                                      |  |                                 |        |                               |   |       
|Net income                                      |  | $                               | 4,675  |                               | $ | 12,826
|                                                |  |                                
|Denominator:                                    |  |                                 |        |                               |   |       
|Weighted average common shares                  |  |                                 | 22,043 |                               |   | 22,036
|                                                |  |                                 |        |                               |   |       
|Denominator for basic calculation               |  |                                 | 22,043 |                               |   | 22,036
|Weighted average effect of dilutive securities: |  |                                 |        |                               |   |       
|Employee stock options                          |  |                                 | 73     |                               |   | 3     
|Employee stock purchase plan                    |  |                                 | 2      |                               |   | 1     
|Restricted stock                                |  |                                 | 66     |                               |   | 56    
|                                                |  |                                 |        |                               |   |       
|Denominator for diluted calculation             |  |                                 | 22,184 |                               |   | 22,096
|                                                |  |                                 |        |                               |   |       
|                                                |  |                                
|Net income per share:                           |  |                                 |        |                               |   |       
|Basic                                           |  | $                               | 0.21   |                               | $ | 0.58  
|                                                |  |                                 |        |                               |   |       
|Diluted                                         |  | $                               | 0.21   |                               | $ | 0.58  
|                                                |  |                                 |        |                               |   |       

The calculation of diluted net income per share excludes all anti-dilutive shares. For the three
and six months ended June 30, 2007, 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 2,867,000 and 2,812,000 respectively. Also excluded for the three and six months ended June 30, 2007 were 362,000 warrants to purchase common stock, due to their antidilutive effect. Diluted net loss per common share
for the three and six months ended June 30, 2006 is not shown, as common equivalent shares from stock options, restricted stock and stock warrants had an anti-dilutive effect.

At June 30, 2007, there were 2,969,000 options to purchase common stock, 85,000 shares of restricted stock to be granted in March 2009 and 362,000
warrants to purchase common stock outstanding. At June 30, 2006, there were 3,567,000 options to purchase common stock, 153,000 restricted stock grants, which become fully vested in 2007, 50,000 restricted stock grants, which become fully
vested in 2008 and 362,000 warrants to purchase common stock outstanding.

3. STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2007 and 2006 approximately $404,000 and $386,000, respectively, was charged to interest expense for the accretion
of the liability resulting from the Companys share of estimated selling and marketing expenses. The Company recorded a liability of $15.6 million during 2004, as part of collaboration loss, which represents the net present value of the
Companys estimated share of these expenses, based on the expected timing and terms of payment under the Development and License Agreement, as amended July 12, 2004. No cash was paid for interest during the six months ended June 30,
2007 and 2006.

4. ROCHE COLLABORATION

The
Development and License Agreement

In July 1999, the Company entered into a 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 only cover the development and commercialization of FUZEON.

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 Trimeris 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.



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As mentioned above, in March 2007, the Company entered into an agreement with Roche that amends the terms
of both the Development and License Agreement and the Research Agreement (defined below). This amendment states that all intellectual property that was formerly shared between the companies, other than intellectual property related to FUZEON, shall
now belong solely to Trimeris. The returned intellectual property covers both research and development stage molecules, including T-1249. Currently, there are no patients being treated with T-1249. Following the March 2007 amendment, Roche will only
be responsible for one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve month sales threshold for FUZEON in the United States and Canada.

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 with Roche, the Company shares gross profits equally from the sale of FUZEON in the United States and Canada 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 costs of goods sold resulting in gross
profit. Gross profit is reduced by certain selling, marketing and other expenses related to the sale of FUZEON, 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. Total net sales of FUZEON in the United States and Canada were $62.2 million and $58.5 million during the six months ended June 30, 2007 and 2006, respectively. Total net sales of FUZEON in the United States and
Canada were $32.9 million and $31.1 million during the three months ended June 30, 2007 and 2006, respectively. During the six months ended June 30, 2007 and 2006, 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 $10.2 million and $7.6 million, respectively. During the three months ended June 30, 2007 and 2006, 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 $5.8 million and $3.8 million, respectively. Revenue is recognized when
Roche ships drug and title and risk of loss passes to wholesalers. FUZEON is widely available through retail pharmacies and wholesalers across North America.

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s sales force is responsible for selling FUZEON. Under the Companys Development and License
Agreement with Roche, the Company does not have the ability or rights 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

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. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, the Companys share of the additional expenses incurred by Roche during
2004 will be payable to Roche beginning at a future date over several years from that future date. The Company currently estimates this date to be in 2011. During the year ended December 31, 2004, the Companys share of selling and
marketing expenses exceeded $11.2 million. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Companys estimated share of the expenses that were in excess of
approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the Development and License Agreement, discounted at a risk free interest rate. The Company is increasing the liability
over time to the expected payment amount. For the six months ended June 30, 2007 and 2006, the Company increased the initial recorded liability by $404,000 and $386,000, respectively, for accretion of interest. For the three months ended
June 30, 2007 and 2006, the Company increased the initial recorded liability by $203,000 and $194,000, respectively, for accretion of interest. The total liability of $17.7 million and $17.3 million at June 30, 2007 and December 31,
2006, respectively, is reflected on our balance sheets under the caption Accrued marketing costs.



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The accrued marketing costs apply only to the 2004 FUZEON marketing costs. With respect to both 2007 and
2006, there are no accrued marketing costs.

Advanced PaymentRoche

In September 2005, the Company entered into a Letter of Amendment (Manufacturing Amendment) with Roche, which amended the Development and
License Agreement and set forth certain rights and responsibilities that the parties previously agreed to with respect to the manufacture and sale of FUZEON. The Company will pay Roche for the Companys share of the capital invested in
Roches manufacturing facility over a seven-year period. The Companys anticipated share of this capital investment is approximately $14.0 million. As a result, the Company has capitalized costs of $10.0 million, and expects to pay
approximately $500,000 per quarter through June 2009. As a result, Roche will no longer include the depreciation related to the manufacturing facility in the cost of goods sold. In the event the Development and License Agreement is terminated, the
Company would not be obligated for any unpaid amounts for capital investment.

These payments, net of the portion allocated to cost of
goods sold, are recorded as an asset presented as Advanced payment  Roche. This asset is amortized based on 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 all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 9 years. The carrying value of this asset
will be evaluated annually for impairment or if an event occurs that triggers impairment.

Under the Manufacturing Amendment, if the
Roche-owned facilities in Boulder, used for the manufacture of FUZEON, are used to produce other products for Roche, a credit to the collaboration will result. During the period from January 2006 through September 2006, a key intermediate used in
the manufacture of another product was produced using these facilities that resulted in a credit to the collaboration. The Companys share of this credit was approximately $632,000. During the period from July 2004 through June 2005, we also
received a similar credit of which our share was approximately $900,000. These payments have been recorded on the Companys balance sheets as a reduction to the Advanced payment  Roche. This credit offsets 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 this period is sold. During the three and six months ended June 30, 2007, there were no products
other than FUZEON produced at the Roche-owned facilities in Boulder.

Royalty Revenue

The Company receives royalties 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. In accordance with our Development and License Agreement with
Roche, our royalty rate increased from 10% to 12%, effective during the third quarter of 2006. Royalties of $7.1 million and $5.0 million were recognized as revenue during the six months ended June 30, 2007 and 2006, respectively. Royalties of
$3.2 million and $2.4 million were recognized as revenue during the three months ended June 30, 2007 and 2006, respectively.

Development Expenses

Under the Development and License Agreement, development costs for FUZEON are shared 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. Both Roche and Trimeris incur development costs for FUZEON.
Quarterly, the companies reconcile the amounts expended and one party pays the other party on a 50/50 basis. Roche holds the Investigational New Drug (IND) and the New Drug Application (NDA) for FUZEON and is responsible for
all regulatory issues, maintenance activities and communications with the FDA. Development expenses pertaining to the United States and Canada are included in our statements of operations as operating expenses under Research and Development.

The Research Agreement

Research, or the process of identifying clinical candidates, is generally distinct from the advanced testing of these compounds, a process referred to herein as development (see discussion
above Development Expenses). In the Companys collaboration with Roche, the identification of compounds that may become clinical candidates had been governed by a separate research agreement and the work by the parties was performed
according to an agreed upon research plan. In 2001, the Company entered into a research agreement (the Research Agreement) with Roche to discover, develop and commercialize novel generations of HIV fusion inhibitor peptides. In September
2006, we announced that our Research Agreement with Roche to co-develop a novel next generation fusion inhibitor (NGFI) was extended through December 31, 2008. The development work covered under the Research Agreement had focused on
two distinct peptide classes, exemplified by TRI-999 and TRI-1144, as NGFI candidates. Based on the results of certain preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and was being advanced as
the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. In addition, the Company has the option to participate in the co-development and commercialization of certain Roche-developed fusion
inhibitor peptides. In order to exercise its option, the Company must pay Roche a one-time, lump sum payment of $4.5 million, per candidate.



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In March 2007, the Company entered into an agreement with Roche that amended the terms of the Research
Agreement whereby all rights, joint patents and other intellectual property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the
Company accelerated revenue recognition for those milestones being amortized over the length of the research and development period of the NGFI peptides because the period of our joint development has ended. The acceleration of these milestones
resulted in $8.7 million of additional milestone revenue during the first quarter of 2007. Under this agreement, the Company has maintained the option to participate in the co-development and commercialization of certain Roche-developed fusion
inhibitor peptides, as described in the preceding paragraph.

5. COMPREHENSIVE INCOME (LOSS)

SFAS No. 130, Reporting Comprehensive Income, establishes rules for the reporting and display of comprehensive income or loss and its
components. Comprehensive income (loss) includes all non-owner changes in equity during a period and is divided into two broad classifications: net income (loss) 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 securities available-for-sale, and actuarial gains and losses and prior service costs
for the post-retirement health insurance plan that have not been recognized as components of net periodic post-retirement benefit costs.

The table below presents the Companys other comprehensive income (loss) for the three and six months ended June 30, 2007 and 2006.



|                                                                              |  |                            |       |   |                          |   |      |      |  |   |        |   |  |   |      |  
|----------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------ | - | ---- | ---- |  | - | ------ | - |  | - | ---- | -
|                                                                              |  | Three Months EndedJune 30, |       |   | Six Months EndedJune 30, |  
|                                                                              |  | 2007                       |       |   | 2006                     |   |      | 2007 |  |   | 2006   |  
|Net income (loss)                                                             |  | $                          | 4,675 |   |                          | $ | (334 | )    |  | $ | 12,826 |   |  | $ | (762 | )
|                                                                              |  |                            |       |  
|Unrealized (loss) on securities available-for-sale                            |  |                            | (14   | ) |                          |   | (8   | )    |  |   | (8     | ) |  |   | (16  | )
|                                                                              |  |                            |       |  
|Unrecognized prior service costs and actuarial gains for post-retirement plan |  |                            | (3    | ) |                          |   |     |      |  |   | 49     |   |  |   |     |  
|                                                                              |  |                            |       |   |                          |   |      |      |  |   |        |   |  |   |      |  
|Other comprehensive income (loss)                                             |  | $                          | 4,658 |   |                          | $ | (342 | )    |  | $ | 12,867 |   |  | $ | (778 | )
|                                                                              |  |                            |       |   |                          |   |      |      |  |   |        |   |  |   |      |  

6. STOCK-BASED COMPENSATION

The Company adopted SFAS No. 123 (revised) using the modified prospective method on January 1, 2006. Accordingly, during the three and six months ended June 30, 2007, the Company recorded stock-based
compensation expense for awards granted prior to, but not yet vested, as of January 1, 2006, and awards granted after January 1, 2006, using the Black-Scholes valuation model. The Company has recognized the compensation expense using a
straight-line amortization method. As SFAS No. 123 (revised) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation for the three and six months ended June 30, 2007
and 2006 have been reduced for estimated forfeitures. When estimating forfeitures, the Company considered voluntary termination behaviors, as well as trends of actual option forfeitures.

On March 9, 2007, in conjunction with his employment agreement, the Company agreed to grant Dani Bolognesi 50,000 shares of restricted stock. On
March 14, 2007, in conjunction with his retirement agreement, the vesting of these restricted shares was accelerated. As a result, the Company recorded non-cash compensation expense of approximately $512,000 during the first quarter of 2007.



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On March 9, 2007, in conjunction with his employment agreement, the Company agreed to grant Robert
Bonczek 35,000 shares of restricted stock. On March 14, 2007, in conjunction with his retirement agreement, the vesting of these restricted shares was accelerated. As a result, the Company recorded non-cash compensation expense of approximately
$358,000 during the first quarter of 2007.

7. POST-RETIREMENT HEALTH INSURANCE CONTINUATION PLAN

In June 2001, the Company adopted a post-retirement health insurance continuation plan (the Plan). Employees who have achieved the eligibility
requirements of 60 years of age and 10 years of service are eligible to participate in the Plan. The Plan provides participants the opportunity to continue participating in the Companys group health plan after their date of retirement.
Participants will pay the cost of health insurance premiums for this coverage, less any contributions by the Company. In November 2003, the Plan was amended and the limit on contributions by the Company was changed to 50% of the health insurance
premium for the employee and his or her spouse.

On December 31, 2006, the Company adopted the recognition and disclosure provisions
of SFAS No.158, Employers Accounting for Defined Benefit Pension and Other Post Retirement Plans. SFAS 158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan assets and the
accumulated post-retirement benefit obligation) of its post-retirement plan in the December 31, 2006 balance sheet, with a corresponding adjustment to accumulated other comprehensive loss. The adjustment to accumulated other comprehensive loss
at adoption represented the net unrecognized actuarial losses, unrecognized prior service costs, and unrecognized transition obligation remaining from the initial adoption of Statement 87, Employers Accounting for Pensions, all of
which were previously netted against the plans funded status in the Companys balance sheets pursuant to the provisions of Statement 87. These amounts will be subsequently recognized as net periodic benefit costs pursuant to the
Companys historical accounting policy for amortizing such amounts. Further actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic benefit costs in the same periods will be recognized as a component
of other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic benefit cost on the same basis as the amounts recognized in accumulated other comprehensive loss at adoption of SFAS 158.

The components of net periodic post-retirement benefit cost of the Plan for the three and six months ended June 30, consisted of the following (in
thousands):



|                                    |  |                            |    |   |                          |   |    |      |  |   |      |   |  |   |    |  
|----------------------------------- |  | -------------------------- | -- | - | ------------------------ | - | -- | ---- |  | - | ---- | - |  | - | -- | -
|                                    |  | Three Months EndedJune 30, |    |   | Six Months EndedJune 30, |  
|                                    |  | 2007                       |    |   | 2006                     |   |    | 2007 |  |   | 2006 |  
|Service cost                        |  | $                          | 13 |   |                          | $ | 18 |      |  | $ | 29   |   |  | $ | 36 |  
|Interest cost                       |  |                            | 6  |   |                          |   | 5  |      |  |   | 12   |   |  |   | 9  |  
|Amortization of net actuarial gain  |  |                            | 4  |   |                          |   | (4 | )    |  |   | 9    |   |  |   | (8 | )
|Amortization of prior service costs |  |                            | (3 | ) |                          |   | 6  |      |  |   | (6   | ) |  |   | 12 |  
|Curtailments                        |  |                            |   |   |                          |   |   |      |  |   | (13  | ) |  |   |   |  
|                                    |  |                            |    |   |                          |   |    |      |  |   |      |   |  |   |    |  
|Total                               |  | $                          | 20 |   |                          | $ | 25 |      |  | $ | 31   |   |  | $ | 49 |  
|                                    |  |                            |    |   |                          |   |    |      |  |   |      |   |  |   |    |  

8. INCOME TAXES

Income tax expense has been accrued for the three and six months ended June 30, 2007 in the amount of $66,000 and $188,000, respectively. The Company is anticipating incurring a current tax liability for Federal
alternative minimum taxes and does not believe that it is more likely than not that the corresponding alternative minimum tax credit will be realized in the foreseeable future.

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement
No. 109 (FIN No. 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109, Accounting for Income
Taxes. FIN No. 48 prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return. This interpretation is effective
for fiscal years beginning after December 15, 2006. The Company has adopted FIN No. 48 as of January 1, 2007 with no material impact on the financial statements.



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9. COMMITMENTS AND CONTINGENCIES

The Company is involved in certain claims arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the financial
position or results of operations of the Company.

Under the Development and License Agreement, Trimeris and Roche are obligated to share
equally the future development expenses for FUZEON for the United States and Canada. The Company also expects to have capital expenditures of approximately $81,000 during the remainder of 2007 that will not be shared with Roche. The Company may
finance these expenditures with capital or operating leases, debt or working capital.

In 2004, the Company entered into a sublease
agreement for its office and laboratory space in Morrisville, North Carolina. The sublease called for the payment of a security deposit for which the Company has accrued $126,000 as of June 30, 2007.

In April 2007, the North Carolina Department of Revenue notified the Company that adjustments to Trimeris 2003, 2004 and 2005 North Carolina
Corporate Income and Franchise Tax returns were required. The Company maintains that these returns were filed correctly and is currently protesting the position of the North Carolina Department of Revenue.

10. REDUCTION IN WORKFORCE

During November 2006, the
Company announced a shift in strategic emphasis and reorganization to focus on FUZEON profitability and research and early stage development. With this shift in strategic emphasis, the Company reduced its workforce by approximately 25% and
recognized expense of $3.2 million for severance and other costs in the fourth quarter of 2006.

During March 2007, as a continued part of
the shift in strategic emphasis, the Company reduced its workforce by approximately 25% and recognized expense of $4.3 million for severance and other costs in the first quarter of 2007. Of this $4.3 million, $870,000 was related to the acceleration
of vesting of restricted stock and is excluded from the table below (see footnote 6 Stock Based Compensation for further explanation).

During April 2007, as a continued part of the shift in strategic emphasis, the Company reduced its workforce by approximately 7% and recognized expense of $77,000 for severance and other costs in the second quarter of 2007.

Following is a summary of activity related to the 2006 and 2007 restructuring accruals (in thousands):



|                             |  |                            |        |   |                            |   |       |       |  |   |        |  
|---------------------------- |  | -------------------------- | ------ | - | -------------------------- | - | ----- | ----- |  | - | ------ | -
|                             |  | Severance andBenefits 2006 |        |   | Severance andBenefits 2007 |   |       | Total | 
|2006 severance charge        |  | $                          | 3,161  |   |                            | $ |      |       |  | $ | 3,161  |  
|Payments                     |  |                            | (64    | ) |                            |   |      |       |  |   | (64    | )
|                             |  |                            |        |   |                            |   |       |       |  |   |        |  
|Balance at December 31, 2006 |  |                            | 3,097  |   |                            |   |      |       |  |   | 3,097  |  
|2007 severance charge        |  |                            |       |   |                            |   | 3,344 |       |  |   | 3,344  |  
|Adjustments                  |  |                            | 130    |   |                            |   |      |       |  |   | 130    |  
|Payments                     |  |                            | (1,061 | ) |                            |   |      |       |  |   | (1,061 | )
|                             |  |                            |        |   |                            |   |       |       |  |   |        |  
|Balance at March 31, 2007    |  | $                          | 2,166  |   |                            | $ | 3,344 |       |  | $ | 5,510  |  
|                             |  |                            |        |   |                            |   |       |       |  |   |        |  
|2007 severance charge        |  |                            |        |   |                            | $ | 77    |       |  | $ | 77     |  
|Adjustments                  |  |                            | (66    | ) |                            |   |      |       |  |   | (66    | )
|Payments                     |  |                            | (440   | ) |                            |   | (543  | )     |  |   | (983   | )
|                             |  |                            |        |   |                            |   |       |       |  |   |        |  
|Balance at June 30, 2007     |  | $                          | 1,660  |   |                            | $ | 2,878 |       |  | $ | 4,538  |  
|                             |  |                            |        |   |                            |   |       |       |  |   |        |  



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

Executive Summary

We are a biopharmaceutical company primarily engaged in the development and
commercialization of a new class of antiviral drug treatments called fusion inhibitors. Fusion inhibitors impair 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 first commercial product and our compounds under research offer a novel mechanism of action to
treat and potentially prevent the transmission of HIV.

We have a worldwide agreement (the 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. In 2001, the Company
entered into the research agreement (the Research Agreement) with Roche to discover, develop and commercialize novel generations of HIV fusion inhibitor peptides.

For the second quarter of 2007, the Company recorded net income of $4.7 million, or $0.21 per share, compared to a net loss of $334,000, or ($0.02) per
share, in the second quarter of 2006. This result was primarily driven by the following factors:



| |  |  | Collaboration income - Collaboration income increased to $5.8 million in the second quarter of 2007 compared to $3.8 million in the second quarter of 2006. This
result was primarily driven by (1) an increase in FUZEON sales in North America and (2) a decrease in selling and marketing expenses.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Royalty revenue  Royalty revenue increased to $3.2 million in the second quarter of 2007 from $2.4 million in the second quarter of 2006. This result was
primarily driven by (1) an increase in FUZEON sales outside of North America and (2) an increase in our royalty rate from 10% to 12% that occurred in the third quarter of 2006.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Research and development expenses - Research and development expenses decreased to $3.0 million in the second quarter of 2007 from $5.0 million in the second
quarter of 2006. This result was primarily driven by (1) decreased costs associated with ongoing clinical trials for FUZEON and (2) decreased employee costs as a result of our reduced headcount.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General and administrative expenses - General and administrative expenses decreased to $1.9 million in the second quarter of 2007 from $2.9 million in the second
quarter of 2006. This result was primarily driven by decreased employee costs as a result of our reduced headcount.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These factors were
offset, in part, by reduced milestone revenue. Milestone revenue decreased to $83,000 in the second quarter of 2007 from $1.1 million in the second quarter of 2006. On March 13, 2007, the Company entered into an agreement with Roche that
amended the terms of the Research Agreement whereby all rights and joint patents and other intellectual property rights to the Next Generation Fusion Inhibitor (NGFI) peptides falling under the Research Agreement, which includes the lead
drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue for those milestones being amortized over the length of the research and development period of the NGFI peptides into the first quarter of
2007 because our period of joint development ended.

For a comparison of the six months ended June 30, 2007 and 2006, see
Results of Operations  Comparison of Six Months Ended June 30, 2007 and 2006.

Recent Company Announcements

On June 29, 2007, Stephen R. Davis and Barry D. Quart, Pharm.D. were appointed to the Board of Directors of the Company.
Mr. Davis is Executive Vice President and Chief Operating Officer of Neurogen Corporation. Dr. Quart is President and Chief Executive Officer of Ardea Biosciences, Inc. Also on June 27, 2007, Jeffrey M. Lipton and E. Gary Cook
announced their intentions to retire from the Trimeris Board of Directors effective at the 2007 Annual Meeting of Stockholders. Dr. J. Richard Crout and Dani P. Bolognesi had previously announced their retirements from the Trimeris Board of
Directors also effective at the 2007 Annual Meeting of Stockholders.

On July 27, 2007, Daniel Ratto, 49, was appointed as acting
Chief Financial Officer of Trimeris. Mr. Ratto has over 20 years of experience as a financial consultant for more than 30 U.S. entities and has served in many in-house roles for clients, including at various times, CFO, Vice President of
Finance and Controller. Mr. Ratto also currently serves as CFO of Deltagen, Inc., a leading provider of drug discovery tools and services to the biopharmaceutical industry, a position he has held since June 2003. From 2001 to 2002,
Mr. Ratto served as CFO of Signature Fruit LLC. Mr. Ratto has served as a financial consultant to Trimeris since March of this year.



11



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##### Table of Contents

Mr. Ratto has been retained through an engagement of Hickey & Hill, Inc., a management
advisory firm. The Company expects to enter into an engagement agreement with Hickey & Hill, Inc. pursuant to which Hickey & Hill will charge the Company for Mr. Rattos services as acting CFO.

Target Product Profile for TRI-1144

In preclinical studies, TRI-1144 has demonstrated excellent antiviral, pharmacokinetic, safety and physical properties. The Company has adopted a target product profile of a convenient, low-volume, once per day injection, delivered by a
pre-filled auto-injector with minimal to no injection site reactions. In addition the target product profile for TRI-1144 seeks to retain the excellent systemic safety profile of FUZEON. Future line extensions or modifications to the current target
product profile could include less frequent than once per day dosing.

The TRI-1144 preclinical safety program is ongoing with an IND
filing planned for the first half of next year followed shortly by comprehensive Phase I/II clinical study that we anticipate will provide key data to support our target product profile.

Managements Discussion and Analysis in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the
year ended December 31, 2006, as filed with the SEC on March 16, 2007.

RESULTS OF OPERATIONS

Comparison Of Three Months Ended June 30, 2007 and 2006

Revenues

The table below presents our revenue sources for the three months ended June 30, 2007 compared to the
three months ended June 30, 2006.



|                                       |  |                            |       |                     |   |       |  |   |       |  
|-------------------------------------- |  | -------------------------- | ----- | ------------------- | - | ----- |  | - | ----- | -
|(in thousands)                         |  | Three Months EndedJune 30, |       | Increase (Decrease) |  
|                                       |  | 2007                       |       | 2006                |  
|Milestone revenue                      |  | $                          | 83    |                     | $ | 1,055 |  | $ | (972  | )
|Royalty revenue                        |  |                            | 3,219 |                     |   | 2,408 |  |   | 811   |  
|Collaboration income                   |  |                            | 5,806 |                     |   | 3,815 |  |   | 1,991 |  
|                                       |  |                            |       |                     |   |       |  |   |       |  
|Total revenue and collaboration income |  | $                          | 9,108 |                     | $ | 7,278 |  | $ | 1,830 |  
|                                       |  |                            |       |                     |   |       |  |   |       |  

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

The table below presents our achieved milestones from Roche as of June 30, 2007. We are recognizing
the milestones with remaining unrecognized balances on a straight-line basis over the estimated commercial period of FUZEON.



12



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##### Table of Contents

|               |  |                |        |   |               |         |                                             |      |                                                |   |                          |  |   |    |  |          
|-------------- |  | -------------- | ------ | - | ------------- | ------- | ------------------------------------------- | ---- | ---------------------------------------------- | - | ------------------------ |  | - | -- |  | ---------
|(in thousands) |  | MilestoneTotal |        |   | Date Achieved |         | Total RevenueRecognizedThrough June 30,2007 |      | Revenue for theThree Months EndedJune 30, 2007 |   | End of RecognitionPeriod
|               |  | $              | 4,600  | * |               | July    |                                             | 1999 |                                                | $ | 4,600                    |  | $ |   |  | **       
|               |  |                | 2,000  |   |               | October |                                             | 2000 |                                                |   | 2,000                    |  |   |   |  | **       
|               |  |                | 8,000  |   |               | March   |                                             | 2003 |                                                |   | 8,000                    |  |   |   |  | **       
|               |  |                | 5,000  |   |               | May     |                                             | 2003 |                                                |   | 5,000                    |  |   |   |  | **       
|               |  |                | 2,500  |   |               | June    |                                             | 2003 |                                                |   | 1,014                    |  |   | 62 |  | June 2013
|               |  |                | 750    |   |               | June    |                                             | 2004 |                                                |   | 258                      |  |   | 21 |  | June 2013
|               |  |                | 2,500  |   |               | January |                                             | 2006 |                                                |   | 2,500                    |  |   |   |  | **       
|               |  |                |        |   |               |         |                                             |      |                                                |   |                          |  |   |    |  |          
|Total          |  | $              | 25,350 |   |               |         |                                             |      |                                                | $ | 23,372                   |  | $ | 83 |  |          
|               |  |                |        |   |               |         |                                             |      |                                                |   |                          |  |   |    |  |          

---

|* | Roche made a nonrefundable initial cash payment to the Company of $10 million during 1999. In July 1999, the Company granted Roche a warrant to purchase 362,000 shares of common
stock at a purchase price of $20.72 per share. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10 million up-front payment received from Roche. We had deferred $4.6 million
over the research and development period. This deferred amount was the net of the $10 million up-front payment and the $5.4 million for the warrant.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | On March 13, 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement whereby all rights, joint patents and other intellectual
property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue, into the first quarter of 2007, for
those milestone payments being amortized over the length of the research and development period of the NGFI peptides because our period of joint development ended.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Royalty revenue: Royalty revenue represents the royalty payments earned from Roche based on total net sales of FUZEON outside the United
States and Canada. Sales of FUZEON outside the United States and Canada began in June 2003. In accordance with our agreement with Roche, our royalty rate has increased from 10% to 12%. This increase has been in effect since, and including, the third
quarter of 2006. To calculate the royalty revenue, an 8% distribution charge is deducted from Roches reported net sales, from which the Company receives a 12% royalty. Royalty revenue increased for the three months ended June 30, 2007 as
compared to the three months ended June 30, 2006 as a result of sales growth during the second quarter of 2007 compared to the second quarter of 2006 and the increase in the royalty rate mentioned above.

Collaboration Income:The table below presents our collaboration income (United States and Canada) for the three months ended June 30, 2007
compared to the three months ended June 30, 2006. Collaboration income is reported on our Statements of Operations as a component of revenue. Under our Development and License Agreement with Roche, we share gross profits 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.



13



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##### Table of Contents

|                                        |  |                            |         |   |        |   |         |   |  |   |       |  
|--------------------------------------- |  | -------------------------- | ------- | - | ------ | - | ------- | - |  | - | ----- | -
|(in thousands)                          |  | Three Months EndedJune 30, |         |   | Change |  
|                                        |  | 2007                       |         |   | 2006   |   |        
|Gross FUZEON sales by Roche             |  | $                          | 39,111  |   |        | $ | 37,123  |   |  | $ | 1,988 |  
|Less sales adjustments                  |  |                            | (6,234  | ) |        |   | (6,041  | ) |  |   | (193  | )
|Sales adjustments as a % of Gross Sales |  |                            | 16      | % |        |   | 16      | % |  |   |       |  
|                                        |  |                            |         |   |        |   |         |   |  |   |       |  
|Net sales                               |  |                            | 32,877  |   |        |   | 31,082  |   |  |   | 1,795 |  
|Cost of goods sold                      |  |                            | (10,681 | ) |        |   | (11,021 | ) |  |   | 340   |  
|Cost of goods sold as a % of Net Sales  |  |                            | 32      | % |        |   | 35      | % |  |   |       |  
|                                        |  |                            |         |   |        |   |         |   |  |   |       |  
|Gross profit                            |  |                            | 22,196  |   |        |   | 20,061  |   |  |   | 2,135 |  
|Gross profit as a % of Net Sales        |  |                            | 68      | % |        |   | 65      | % |  |   |       |  
|Selling and marketing expenses          |  |                            | (9,082  | ) |        |   | (11,878 | ) |  |   | 2,796 |  
|Other costs                             |  |                            | (983    | ) |        |   | (1,095  | ) |  |   | 112   |  
|                                        |  |                            |         |   |        |   |         |   |  |   |       |  
|Total shared profit                     |  |                            | 12,131  |   |        |   | 7,088   |   |  |   | 5,043 |  
|Trimeris share *                        |  |                            | 6,066   |   |        |   | 4,068   |   |  |   | 1,998 |  
|Costs exclusive to Trimeris             |  |                            | (260    | ) |        |   | (253    | ) |  |   | (7    | )
|                                        |  |                            |         |   |        |   |         |   |  |   |       |  
|Net income from collaboration           |  | $                          | 5,806   |   |        | $ | 3,815   |   |  | $ | 1,991 |  
|                                        |  |                            |         |   |        |   |         |   |  |   |       |  

---

|* | At present the Company is still in discussions with Roche to finalize the budget and share of marketing expenses for 2007. Under the terms of our Development and License Agreement,
Roche cannot adopt a budget for the marketing of FUZEON above certain limits without the agreement of the Company. For the second quarter of 2007, the Company has recorded 50% of the selling and marketing expenses as reported by Roche although the
Company maintains its right to limit this spending. The Companys contribution to selling and marketing expenses was limited in 2006. As a result, the Companys and Roches share of the collaboration income was not equal in 2006.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 number of kits shipped to wholesalers in the U.S. and Canada during 2007 and 2006.



|             |  |        |  |       
|------------ |  | ------ |  | ------
|Kits Shipped |  | 2007   |  | 2006  
|Q1           |  | 17,900 |  | 17,100
|Q2           |  | 19,200 |  | 19,800
|Q3           |  |       |  | 19,900
|Q4           |  |       |  | 22,900
|             |  |        |  |       
|Total        |  | 37,100 |  | 79,700
|             |  |        |  |       

Sales adjustments: Sales adjustments are recorded by Roche based on their experience with
selling FUZEON. There were no material revisions to Roches recorded estimates related to total sales adjustments compared to net sales for the three months ended June 30, 2007.

Cost of goods sold:Cost of goods sold as a percentage of net sales decreased for the three months ended June 30, 2007 as compared to the
three months ended June 30, 2006 as Roche is now selling FUZEON inventory manufactured at lower costs due to manufacturing efficiencies. We expect the cost of goods sold as a percentage of sales will continue at the same rate for the majority
of 2007, after which time we may see an increase in our cost of goods sold as a percentage of sales.

Selling and marketing
expenses: At present the Company is still in discussions with Roche to finalize the budget and share of marketing expenses for 2007. Under the terms of our Development and License Agreement, Roche cannot adopt a budget for the marketing of
FUZEON above certain limits without the agreement of the Company. For the second quarter of 2007, the Company has recorded 50% of the selling and marketing expenses. The Companys contribution to selling and marketing expenses was limited in
2006.



14



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##### Table of Contents

Other costs: Other costs for the three months ended June 30, 2007 and 2006 include general
and administrative costs and distribution charges. Other costs for the three months ended June 30, 2007 also include inventory write-offs. The Company is responsible for 50% of these costs under the Development and License Agreement.

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

Research and Development Expenses

The table below presents our research and development expenses for the three months ended June 30, 2007 compared to the three months ended
June 30, 2006.



|                                        |  |                            |       |                    |   |       |  |   |        |  
|--------------------------------------- |  | -------------------------- | ----- | ------------------ | - | ----- |  | - | ------ | -
|(in thousands)                          |  | Three Months EndedJune 30, |       | Increase(Decrease) |  
|                                        |  | 2007                       |       | 2006               |  
|Total research and development expenses |  | $                          | 2,959 |                    | $ | 4,961 |  | $ | (2,002 | )
|                                        |  |                            |       |                    |   |       |  |   |        |  

Total research and development expenses include:



| |  |  | Development expenses for FUZEON, which we share equally with Roche, and
| | - |  | -----------------------------------------------------------------------



| |  |  | Research expenses for the preclinical development of the NGFIs, which we shared equally with Roche in 2006 and through March 13, 2007, the date of the signing
of the agreement with Roche whereby all rights, joint patents and other intellectual property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to the Company. After
March 13, 2007, these expenses became the sole responsibility of the Company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total research and development
expenses: Total research and development expenses decreased during the three months ended June 30, 2007 compared to the three months ended June 30, 2006, primarily as a result of the following:



| |  |  | Decreased employee costs as a result of reduced headcount,
| | - |  | ----------------------------------------------------------



| |  |  | Decreased expenses related to our employee share-based compensation, and
| | - |  | ------------------------------------------------------------------------



| |  |  | Decreased costs associated with ongoing clinical trials for FUZEON and T-1249.
| | - |  | ------------------------------------------------------------------------------

We expect total research and development expenses, net of the reimbursements for FUZEON development costs from Roche for the remainder of 2007 to be
comparable to those incurred in 2006.

General and Administrative Expenses

The table below presents our general and administrative expenses for the three months ended June 30, 2007 compared to the three months ended
June 30, 2006.



|                                          |  |                            |       |                    |   |       |  |   |      |  
|----------------------------------------- |  | -------------------------- | ----- | ------------------ | - | ----- |  | - | ---- | -
|(in thousands)                            |  | Three Months EndedJune 30, |       | Increase(Decrease) |  
|                                          |  | 2007                       |       | 2006               |  
|Total general and administrative expenses |  | $                          | 1,937 |                    | $ | 2,927 |  | $ | (990 | )
|                                          |  |                            |       |                    |   |       |  |   |      |  

Total general and administrative expenses: Total general and administrative expenses decreased
during the three months ended June 30, 2007 compared to the three months ended June 30, 2006, primarily as a result of reduced employee costs as a result of our reduced headcount.

We expect total general and administrative expenses for the remainder of 2007 will be comparable to those incurred in 2006.

Other Income (Expense):The table below presents our other income (expense) for the three months ended June 30, 2007 and 2006.



15



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##### Table of Contents

|                              |  |                            |      |   |                    |   |      |   |  |   |     |  
|----------------------------- |  | -------------------------- | ---- | - | ------------------ | - | ---- | - |  | - | --- | -
|(in thousands)                |  | Three Months EndedJune 30, |      |   | Increase(Decrease) |  
|                              |  | 2007                       |      |   | 2006               |   |     
|Interest income               |  | $                          | 727  |   |                    | $ | 470  |   |  | $ | 257 |  
|Gain on disposal of equipment |  |                            | 5    |   |                    |   |     |   |  |   | 5   |  
|Interest expense              |  |                            | (203 | ) |                    |   | (194 | ) |  |   | (9  | )
|                              |  |                            |      |   |                    |   |      |   |  |   |     |  
|Total other income, net       |  | $                          | 529  |   |                    | $ | 276  |   |  | $ | 253 |  
|                              |  |                            |      |   |                    |   |      |   |  |   |     |  

Other income (expense) principally consists of interest income and accretion of interest. The
increase in interest income for the three months ended June 30, 2007 was primarily due to interest earned on higher cash balances. Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as
Accrued marketing costs. Our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for
FUZEON in the United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. We are increasing the liability
over time to the expected payment amount.

Income Tax Provision

Income tax expense has been accrued for the three months ended June 30, 2007 at approximately 1.39% as the Company is anticipating incurring a current tax liability for Federal alternative minimum taxes and does
not believe that it is more likely than not that the corresponding alternative minimum tax credit will be realized in the foreseeable future.

RESULTS
OF OPERATIONS

Comparison of Six Months Ended June 30, 2007 and 2006

Revenues

The table below
presents our revenue sources for the six months ended June 30, 2007 compared to the six months ended June 30, 2006.



|                                       |  |                          |        |                    |   |        |  |   |       
|-------------------------------------- |  | ------------------------ | ------ | ------------------ | - | ------ |  | - | ------
|(in thousands)                         |  | Six Months EndedJune 30, |        | Increase(Decrease)
|                                       |  | 2007                     |        | 2006               |  
|Milestone revenue                      |  | $                        | 9,291  |                    | $ | 2,111  |  | $ | 7,180 
|Royalty revenue                        |  |                          | 7,081  |                    |   | 4,988  |  |   | 2,093 
|Collaboration income                   |  |                          | 10,174 |                    |   | 7,609  |  |   | 2,565 
|                                       |  |                          |        |                    |   |        |  |   |       
|Total revenue and collaboration income |  | $                        | 26,546 |                    | $ | 14,708 |  | $ | 11,838
|                                       |  |                          |        |                    |   |        |  |   |       

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

The table below presents our achieved milestones from Roche as of June 30, 2007. We are recognizing
the milestones with remaining unrecognized balances on a straight-line basis over the estimated commercial period of FUZEON.



16



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##### Table of Contents

|               |  |                 |        |   |               |         |                                             |      |                                             |   |                          |  |   |       |  |          
|-------------- |  | --------------- | ------ | - | ------------- | ------- | ------------------------------------------- | ---- | ------------------------------------------- | - | ------------------------ |  | - | ----- |  | ---------
|(in thousands) |  | Milestone Total |        |   | Date Achieved |         | Total RevenueRecognizedThroughJune 30, 2007 |      | Revenue for theSix MonthsEnded June 30,2007 |   | End of RecognitionPeriod
|               |  | $               | 4,600  | * |               | July    |                                             | 1999 |                                             | $ | 4,600                    |  | $ | 891   |  | **       
|               |  |                 | 2,000  |   |               | October |                                             | 2000 |                                             |   | 2,000                    |  |   | 501   |  | **       
|               |  |                 | 8,000  |   |               | March   |                                             | 2003 |                                             |   | 8,000                    |  |   | 4,192 |  | **       
|               |  |                 | 5,000  |   |               | May     |                                             | 2003 |                                             |   | 5,000                    |  |   | 2,750 |  | **       
|               |  |                 | 2,500  |   |               | June    |                                             | 2003 |                                             |   | 1,014                    |  |   | 124   |  | June 2013
|               |  |                 | 750    |   |               | June    |                                             | 2004 |                                             |   | 258                      |  |   | 41    |  | June 2013
|               |  |                 | 2,500  |   |               | January |                                             | 2006 |                                             |   | 2,500                    |  |   | 792   |  | **       
|               |  |                 |        |   |               |         |                                             |      |                                             |   |                          |  |   |       |  |          
|Total          |  | $               | 25,350 |   |               |         |                                             |      |                                             | $ | 23,372                   |  | $ | 9,291 |  |          
|               |  |                 |        |   |               |         |                                             |      |                                             |   |                          |  |   |       |  |          

---

|* | Roche made a nonrefundable initial cash payment to the Company of $10 million during 1999. In July 1999, the Company granted Roche a warrant to purchase 362,000 shares of common
stock at a purchase price of $20.72 per share. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10 million up-front payment received from Roche. We had deferred $4.6 million
over the research and development period. This deferred amount was the net of the $10 million up-front payment and the $5.4 million for the warrant.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | On March 13, 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement whereby all rights, joint patents and other intellectual
property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue, into the first quarter of 2007, for
those milestone payments being amortized over the length of the research and development period of the NGFI peptides because our period of joint development ended.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Royalty revenue: Royalty revenue represents the royalty payment earned from Roche based on total net sales of FUZEON outside the United
States and Canada. Sales of FUZEON outside the United States and Canada began in June 2003. In accordance with our Development and License Agreement, our royalty rate has increased from 10% to 12%. This increase has been in effect since, and
including, the third quarter of 2006. To calculate the royalty revenue, an 8% distribution charge is deducted from Roches reported net sales, from which Trimeris receives a 12% royalty. Royalty revenue increased for the six months ended
June 30, 2007 as compared to the six months ended June 30, 2006 as a result of sales growth during 2007 compared to 2006 and the increase in the royalty rate mentioned above.

Collaboration Income:The table below presents our collaboration income (United States and Canada) for the six months ended June 30, 2007
compared to the six months ended June 30, 2006. Collaboration income is reported on our Statements of Operations as a component of revenue. Under our Development and License Agreement with Roche, we share gross profits equally from the sale of
FUZEON in the United States and Canada. The sharing of expenses is according to contractual arrangement and is not equal in all cases. FUZEON was launched in March 2003.



17



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##### Table of Contents

|                                        |  |                           |         |   |        |   |         |   |  |   |        |  
|--------------------------------------- |  | ------------------------- | ------- | - | ------ | - | ------- | - |  | - | ------ | -
|(in thousands)                          |  | Six Months Ended June 30, |         |   | Change |  
|                                        |  | 2007                      |         |   | 2006   |   |        
|Gross FUZEON sales by Roche             |  | $                         | 74,088  |   |        | $ | 69,328  |   |  | $ | 4,760  |  
|Less sales adjustments                  |  |                           | (11,879 | ) |        |   | (10,868 | ) |  |   | (1,011 | )
|Sales adjustments as a % of Gross Sales |  |                           | 16      | % |        |   | 16      | % |  |   |        |  
|                                        |  |                           |         |   |        |   |         |   |  |   |        |  
|Net sales                               |  |                           | 62,209  |   |        |   | 58,460  |   |  |   | 3,749  |  
|Cost of goods sold                      |  |                           | (20,625 | ) |        |   | (20,530 | ) |  |   | (95    | )
|Cost of goods sold as a % of Net Sales  |  |                           | 33      | % |        |   | 35      | % |  |   |        |  
|                                        |  |                           |         |   |        |   |         |   |  |   |        |  
|Gross profit                            |  |                           | 41,584  |   |        |   | 37,930  |   |  |   | 3,654  |  
|Gross profit as a % of Net Sales        |  |                           | 67      | % |        |   | 65      | % |  |   |        |  
|Selling and marketing expenses          |  |                           | (18,287 | ) |        |   | (21,855 | ) |  |   | 3,568  |  
|Other costs                             |  |                           | (1,944  | ) |        |   | (1,762  | ) |  |   | (182   | )
|                                        |  |                           |         |   |        |   |         |   |  |   |        |  
|Total shared profit                     |  |                           | 21,353  |   |        |   | 14,313  |   |  |   | 7,040  |  
|Trimeris share *                        |  |                           | 10,684  |   |        |   | 8,087   |   |  |   | 2,597  |  
|Costs exclusive to Trimeris             |  |                           | (510    | ) |        |   | (478    | ) |  |   | (32    | )
|                                        |  |                           |         |   |        |   |         |   |  |   |        |  
|Net income from collaboration           |  | $                         | 10,174  |   |        | $ | 7,609   |   |  | $ | 2,565  |  
|                                        |  |                           |         |   |        |   |         |   |  |   |        |  

---

|* | At present the Company is still in discussions with Roche to finalize the budget and share of marketing expenses for 2007. Under the terms of our Development and License Agreement,
Roche cannot adopt a budget for the marketing of FUZEON above certain limits without the agreement of the Company. For the first six months of 2007, the Company has recorded 50% of the selling and marketing expenses as reported by Roche although the
Company maintains its right to limit this spending. The Companys contribution to selling and marketing expenses was limited in 2006. As a result, the Companys and Roches share of the collaboration income was not equal in 2006.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 number of kits shipped to wholesalers in the U.S. and Canada during 2007 and 2006.



|             |  |        |  |       
|------------ |  | ------ |  | ------
|Kits Shipped |  | 2007   |  | 2006  
|Q1           |  | 17,900 |  | 17,100
|Q2           |  | 19,200 |  | 19,800
|Q3           |  |       |  | 19,900
|Q4           |  |       |  | 22,900
|             |  |        |  |       
|Total        |  | 37,100 |  | 79,700
|             |  |        |  |       

Sales adjustments: Sales adjustments are recorded by Roche based on their experience with
selling FUZEON. There were no material revisions to Roches recorded estimates related to total sales adjustments compared to net sales for the six months ended June 30, 2007.

Cost of goods sold:Cost of goods sold as a percentage of net sales decreased for the six months ended June 30, 2007 as compared to the six
months ended June 30, 2006 as Roche is now selling FUZEON inventory manufactured at lower costs due to manufacturing efficiencies.

Selling and marketing expenses: At present the Company is still in discussions with Roche to finalize the budget and share of marketing expenses for 2007. Under the terms of our Development and License Agreement, Roche cannot adopt a
budget for the marketing of FUZEON above certain limits without the agreement of the Company. For the first six months of 2007, the Company has recorded 50% of the selling and marketing expenses. The Companys contribution to selling and
marketing expenses was limited in 2006.



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##### Table of Contents

Other costs: Other costs for the six months ended June 30, 2007 and June 30, 2006
include general and administrative costs and distribution charges. Other costs for the six months ended June 30, 2007 also include inventory write-offs. The Company is responsible for 50% of these costs under the Development and License
Agreement

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

Research and Development Expenses

The table below presents our research and development expenses for the six months ended June 30, 2007 compared to the six months ended June 30,
2006.



|                                        |  |                          |       |                    |   |        |  |   |        |  
|--------------------------------------- |  | ------------------------ | ----- | ------------------ | - | ------ |  | - | ------ | -
|(in thousands)                          |  | Six Months EndedJune 30, |       | Increase(Decrease) |  
|                                        |  | 2007                     |       | 2006               |  
|Total research and development expenses |  | $                        | 6,056 |                    | $ | 10,141 |  | $ | (4,085 | )
|                                        |  |                          |       |                    |   |        |  |   |        |  

Total research and development expenses include:



| |  |  | Development expenses for FUZEON, which we share equally with Roche, and
| | - |  | -----------------------------------------------------------------------



| |  |  | Research expenses for the preclinical development of the NGFIs, which we shared equally with Roche in 2006 and through March 13, 2007, the date of the signing
of the agreement with Roche whereby all rights, joint patents and other intellectual property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to the Company. After
March 13, 2007, these expenses became the sole responsibility of the Company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Total research and development
expenses: Total research and development expenses decreased during the six months ended June 30, 2007 compared to the six months ended June 30, 2006, primarily as a result of the following:



| |  |  | Decreased employee costs as a result of reduced headcount
| | - |  | ---------------------------------------------------------



| |  |  | Decreased expenses related to our employee share-based compensation, and
| | - |  | ------------------------------------------------------------------------



| |  |  | Decreased costs associated with ongoing clinical trial costs for FUZEON and T-1249
| | - |  | ----------------------------------------------------------------------------------

General and Administrative Expenses

The table below presents our general and administrative expenses for the six months ended June 30, 2007 compared to the six months ended June 30, 2006.



|                                          |  |                          |       |                    |   |       |  |   |      
|----------------------------------------- |  | ------------------------ | ----- | ------------------ | - | ----- |  | - | -----
|(in thousands)                            |  | Six Months EndedJune 30, |       | Increase(Decrease)
|                                          |  | 2007                     |       | 2006               |  
|Total general and administrative expenses |  | $                        | 8,476 |                    | $ | 6,083 |  | $ | 2,393
|                                          |  |                          |       |                    |   |       |  |   |      

Total general and administrative expenses:Total general and administrative expenses
increased during the six months ended June 30, 2007 compared to the six months ended June 30, 2006, primarily as a result of expenses related to the reduction in force we implemented in the first quarter of 2007. These expenses were
offset, in part, by decreased expenses related to our employee share based compensation and reduced employee costs as a result of our reduced headcount.

Other Income (Expense):The table below presents our other income (expense) for the six months ended June 30, 2007 and 2006.



19



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##### Table of Contents

|                                     |  |                          |       |   |                    |   |      |   |  |   |     |  
|------------------------------------ |  | ------------------------ | ----- | - | ------------------ | - | ---- | - |  | - | --- | -
|(in thousands)                       |  | Six Months EndedJune 30, |       |   | Increase(Decrease) |  
|                                     |  | 2007                     |       |   | 2006               |   |     
|Interest income                      |  | $                        | 1,397 |   |                    | $ | 888  |   |  | $ | 509 |  
|Gain (loss) on disposal of equipment |  |                          | 7     |   |                    |   |     |   |  |   | 7   |  
|Interest expense                     |  |                          | (404  | ) |                    |   | (386 | ) |  |   | (18 | )
|                                     |  |                          |       |   |                    |   |      |   |  |   |     |  
|Total other income, net              |  | $                        | 1,000 |   |                    | $ | 502  |   |  | $ | 498 |  
|                                     |  |                          |       |   |                    |   |      |   |  |   |     |  

Other income (expense) consists of interest income and accretion of interest. The increase in
interest income for the six months ended June 30, 2007 was primarily due to interest earned on higher cash balances. Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as Accrued
marketing costs. Our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the
United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. We are increasing the liability over time to the
expected payment amount.

Income Tax Provision

Income tax expense has been accrued for the six months ended June 30, 2007 at approximately 1.44% as the Company is anticipating incurring a current tax liability for Federal alternative minimum taxes and does
not believe that it is more likely than not that the corresponding alternative minimum tax credit will be realized in the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

The table below presents our cash flows for the six months ended June 30, 2007 as
compared to the six months ended June 30, 2006.



|                                               |  |                          |        |   |      |   |        |  
|---------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | -
|(in thousands)                                 |  | Six Months EndedJune 30, |       
|                                               |  | 2007                     |        |   | 2006 |  
|Net cash provided by operating activities      |  | $                        | 10,630 |   |      | $ | 5,085  |  
|Net cash used by investing activities          |  |                          | (4,777 | ) |      |   | (410   | )
|Net cash provided by financing activities      |  |                          | 132    |   |      |   | 403    |  
|                                               |  |                          |        |   |      |   |        |  
|Net increase in cash and cash equivalents      |  |                          | 5,985  |   |      |   | 5,078  |  
|Cash and cash equivalents, beginning of period |  |                          | 30,052 |   |      |   | 23,559 |  
|                                               |  |                          |        |   |      |   |        |  
|Cash and cash equivalents, end of period       |  | $                        | 36,037 |   |      | $ | 28,637 |  
|                                               |  |                          |        |   |      |   |        |  

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 our Development and License Agreement with Roche.

For the six months ended June 30, 2007, cash provided by operating activities resulted from net income primarily due to increased payments from Roche for the collaboration activities. We use our cash primarily to
fund research and development relating to FUZEON and TRI-1144 and costs for the commercialization of FUZEON.

During the remainder of 2007,
cash provided by operating activities will depend on several factors including the sales, cost of sales and commercialization expenses related to the sale of FUZEON (profitability of the collaboration with Roche) and the amount of money we deploy
into developing our research pipeline and post marketing commitments for FUZEON (development expenses.)

Investing Activities. The
amount used by investing activities for the six months ended June 30, 2007 and 2006 primarily resulted from the net purchases of investment securities available-for-sale, the purchase of property and equipment and patent costs. The purchase and
maturity of investment securities available-for-sale was due to the normal maturity and repurchase of investments.



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##### Table of Contents

During the remainder of 2007, cash provided by investing activities will depend primarily on the net
maturities of investments. We expect spending on the purchase of property and equipment to be less than 2006. We expect patent costs in 2007 to approximate the spending in 2006.

Financing Activities. The amount provided by financing activities for the six months ended June 30, 2007 and 2006 resulted from the exercise
of stock options and the purchase of shares under our employee stock purchase plan.

Total Cash, Cash Equivalents and Investment
Securities-Available-for-Sales. As of June 30, 2007, we had $58.9 million in cash and cash equivalents and investment securities available-for-sale, compared to $48.6 million as of December 31, 2006.

Future Capital Requirements. Depending on FUZEON sales, the level of expenses and other factors, we may not be able to generate sufficient
positive cash flows to fund our operations in the foreseeable future. Although we expect to share the future development costs for FUZEON and our other potential drug candidates for the United States and Canada equally with Roche, we have expended,
and expect to continue to expend in the future, substantial funds to pursue our drug candidates and compound discovery and development efforts, including:



| |  |  | expenditures for commercialization activities related to FUZEON,
| | - |  | ----------------------------------------------------------------



| |  |  | research and development and preclinical testing of TRI-1144,
| | - |  | -------------------------------------------------------------

Under the current operating environment, excluding any extraordinary items, based on expected sales levels of FUZEON, we expect that our existing capital resources, together with the interest earned thereon, will be
adequate to fund our current programs for at least the next 24 months. However, any reduction in FUZEON sales below currently expected levels or increase in expenditures beyond currently expected levels could increase our capital requirements
substantially beyond our current expectations. If we require additional funds and such funds are not available through debt or equity financings, or collaboration arrangements, we will be required to delay, scale-back or eliminate certain
preclinical testing, clinical trials and research and development programs, including our collaborative efforts with Roche. In the event Roche becomes unable or unwilling to share future development expenses for FUZEON, our capital requirements
would increase substantially beyond our current expectations.

Our future capital requirements and the adequacy of available funds will
depend on many factors, including the level of market acceptance and sales levels achieved by FUZEON; expenses related to the sale of FUZEON; the condition of the capital markets; the progress and scope of our product development programs; the
magnitude of these programs; the results of preclinical testing and clinical trials; the need for additional facilities based on the results of these clinical trials and other product development programs; changes in the focus and direction of our
product development programs; the costs involved in preparing, filing, processing, maintaining, protecting and enforcing patent claims and other intellectual property rights; competitive factors and technological advances; the cost, timing and
outcome of regulatory reviews; changes in the requirements of the FDA; administrative and legal expenses; evaluation of the commercial viability of potential product candidates and compounds; the establishment of capacity, either internally or
through relationships with third parties, for manufacturing, sales, marketing and distribution functions; the results of our business development activities, including in-licensing and merger and acquisition opportunities; and other factors, many of
which are outside of our control.

Since our initial public offering in 1997, we have obtained the majority of our funding through public
or private offerings of our common stock. We expect to continue to obtain our funding through public or private offerings of our common stock or other equity like instruments, such as convertible preferred stock or convertible debt, until such time,
if ever, as we are able to generate significant funds from operations.

We may have difficulty raising additional funds by selling equity.
If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have a material adverse effect on the market price of our common stock and restrict or eliminate our ability to raise additional funds by
selling equity. The public capital markets in which shares of our common stock are traded have been extremely volatile. Therefore, even if we do achieve positive clinical or financial results that meet or exceed the expectations of securities
analysts and investors, the state of the public equity markets in general and particularly the public equity market for biotechnology companies may prohibit us from raising funds in the equity markets on acceptable terms or at all. Even if we are
able to obtain additional funding through an equity financing, the terms of this financing could be highly dilutive to current stockholders.

We may also attempt to obtain additional funding through debt and debt-like financings such as convertible debt and/or arrangements with new or existing collaborative partners. Any debt financings may contain restrictive terms that limit
our operating flexibility. Arrangements with collaborative partners may require us to relinquish rights to our technologies or product candidates or to reduce our share of potential profits. This could have a material adverse effect on our business,
financial condition or results of operations.



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##### Table of Contents

Contractual Obligations.The following table summarizes our material contractual commitments at
June 30, 2007 for the remainder of 2007 and subsequent years (in thousands):



|                                                               |  |      |       |      |   |       |  |      |       |      |   |            |  |       |       |  |   |        |  |   |       
|-------------------------------------------------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | ----- | ----- |  | - | ------ |  | - | ------
|Contractual Obligation****                                     |  | 2007 |       | 2008 |   | 2009  |  | 2010 |       | 2011 |   | Thereafter |  | Total
|Operating leases*                                              |  | $    | 755   |      | $ | 1,538 |  | $    | 1,569 |      | $ | 1,600      |  | $     | 1,632 |  | $ | 5,240  |  | $ | 12,334
|Other contractual obligations**                                |  |      | 1,000 |      |   | 2,000 |  |      | 1,000 |      |   |           |  |       |      |  |   |       |  |   | 4,000 
|Other long-term liabilities reflected on the Balance Sheet *** |  |      |      |      |   |      |  |      |      |      |   |           |  |       | 7,468 |  |   | 14,936 |  |   | 22,404
|                                                               |  |      |       |      |   |       |  |      |       |      |   |            |  |       |       |  |   |        |  |   |       
|Total                                                          |  | $    | 1,755 |      | $ | 3,538 |  | $    | 2,569 |      | $ | 1,600      |  | $     | 9,100 |  | $ | 20,176 |  | $ | 38,738
|                                                               |  |      |       |      |   |       |  |      |       |      |   |            |  |       |       |  |   |        |  |   |       

---

|* | Includes payments due under a sublease signed during June 2004, which commenced on January 1, 2005, on an existing office and laboratory building.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------

|** | We are making advance payments to Roche for our share of the cost of the capital improvements made at Roches Boulder facility where FUZEON drug substance is produced. We
reached an agreement with Roche whereby we will pay Roche for our share of the capital invested in Roches manufacturing facility over a seven-year period. Our share of this capital investment is approximately $14.0 million. At June 30,
2007, we have capitalized costs of $10 million, and expect to pay approximately $500,000 per quarter through June 2009. This amount, net of charges to cost of goods sold as the related inventory is sold, is recorded as an asset on our balance sheets
under the caption Advanced paymentRoche. In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*** | Our actual cash contribution to the selling and marketing expenses for FUZEON in 2004 was limited to approximately $11.2 million, even though Roche spent significantly more on these
expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of these additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from
that future date. We currently estimate this date to be in 2011. During the year ended December 31, 2004, we reached the $11.2 million limitation for the year. We recorded a liability of approximately $15.6 million as part of collaboration loss
during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk-free interest rate from the expected payment date based on achievement of the sales
milestones in the agreement. We are increasing the liability over time to the expected payment amount. During the six months ended June 30, 2007, we increased this liability by $404,000. The total liability of $17.7 million at June 30,
2007, is reflected on our balance sheet under the caption Accrued marketing costs. The amount reflected in the above table represents the undiscounted value of the obligation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|**** | The Company may have other contractual obligations to the following entities upon achievement of certain developmental, clinical and commercial milestones. At present there is no
certainty of achievement of these milestones.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Array Biopharma, Inc. (Array)

Our agreement with Array contemplates that the Company could owe Array up to $9.7 million in milestone payments in the event a compound reaches certain
developmental, clinical and commercialization milestones. During the years ended December 31, 2006, 2005 and 2004, we incurred costs, under this agreement, of $0, $5,000 and $15,000, respectively. During the six months ended June 30, 2007,
we incurred no costs under this agreement.

Neokimia, Inc. (Neokimia)

Our agreement with Neokimia contemplates that the Company could owe Neokimia up to $20 million in milestone payments in the event a compound reaches
certain developmental, clinical and commercialization milestones. During the years ended December 31, 2006, 2005 and 2004, we incurred no costs under this agreement. During the six months ended June 30, 2007, we incurred no costs under
this agreement.

New York Blood Center

The Company does not have milestone obligations under this license agreement, however does make payments based on a contracted term.

ChemBridge Research Laboratories (CRL)

Our agreement with CRL contemplates that the Company
could owe CRL up to $5.25 million in milestone payments in the event a compound reaches certain developmental, clinical and commercialization milestones with an additional $1.25 million in milestone payments due for each additional compound
commercialized. During the year ended December 31, 2006, we incurred costs of $383,000 under this agreement. During the six months ended June 30, 2007, we incurred no costs under this agreement.



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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases for our properties. In the past we have entered into derivative transactions that represented call options sold on our stock to a third
party financial institution and were entered into in order to generate cash from the option premiums and provide us with the opportunity to raise capital at prices significantly in excess of the market price at the time of the transaction. All of
these options have expired unexercised. In the event these options were exercised, we expect they would have been settled by issuing shares of our stock. We may enter into similar transactions in the future, subject to market conditions. We enter
into these transactions as a potential method to raise capital and not to speculate on the future market price of our stock. We have no subsidiaries or other unconsolidated limited purpose entities, and we have not guaranteed or otherwise supported
the obligations of any other entity.

Accounting and Other Matters

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes: An Interpretation of FASB Statement No. 109 (FIN No. 48). This interpretation
clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS No. 109. FIN No. 48 prescribes a recognition threshold and measurement principles for the financial
statement recognition and measurement of tax positions taken or expected to be taken on a tax return. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company has adopted FIN No. 48 as of
January 1, 2007 with no material impact on the financial statements.

Net Operating Loss Carryforwards

As of December 31, 2006, we had a net operating loss carryforward for federal tax purposes of approximately $329.5 million. We have recognized a
valuation allowance equal to the deferred asset represented by this net operating loss carryforward and other deferred tax assets, net of deferred tax liabilities, and therefore recognized no tax benefit. Our ability to utilize this net operating
loss carryforward may be subject to an annual limitation in future periods pursuant to the change in ownership rules under Section 382 of the Internal Revenue Code of 1986, as amended.

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, 2006, filed with the SEC on March 16, 2007. 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, 2006 except as follows.

Milestone Revenue and Deferred Revenue  Roche

In March 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement whereby all rights, joint patents and other intellectual property rights to the NGFI peptides falling under the Research
Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue recognition for those milestones being amortized over the length of the research and development period
of the NGFI peptides because the period of our joint development has ended.

Cautionary Statements Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q and any attachments may contain 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: there is uncertainty regarding the success of research and development activities, regulatory authorizations and product
commercializations; we are dependent on third parties for the sale, marketing and distribution of our drug candidates; the market for HIV therapeutics is very competitive with regular new product entries that could affect the sale of our products;
the results of our previous clinical trials are not necessarily indicative of future clinical trials; and our drug candidates 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, 2007 and its periodic reports filed with the SEC.

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



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##### Table of Contents

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, 2006, for a 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 US
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. We have not experienced any material loss in our investment portfolio, and we believe the market risk exposure in our investment portfolio has remained consistent over this period.

The table below presents the carrying value, which is approximately equal to fair value, and related weighted-average interest rates for our investment
portfolio at June 30, 2007. Fair value is based on actively quoted market prices. Our investments are generally most vulnerable to changes in short-term interest rates in the United States. Substantially all of our investments mature in twelve
months or less, and have been given a rating of A1 or higher by a nationally recognized statistical rating organization or are the debt obligations of a federal agency and, therefore, we believe that the risk of material loss of principal due to
changes in interest rates is minimal.



|                                                       |  |                |        |                      |      |  
|------------------------------------------------------ |  | -------------- | ------ | -------------------- | ---- | -
|                                                       |  | CarryingAmount |        | AverageInterest Rate |     
|                                                       |  | (thousands)    |        |                      |     
|Cash equivalentsfixed rate                            |  | $              | 35,771 |                      | 4.17 | %
|Investment securities - available-for-sale-fixed rate  |  |                | 22,852 |                      | 5.30 | %
|Overnight cash investmentsfixed rate                  |  |                | 266    |                      | 4.11 | %
|                                                       |  |                |        |                      |      |  
|Total cash, cash equivalents and investment securities |  | $              | 58,889 |                      | 4.61 | %
|                                                       |  |                |        |                      |      |  



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

Our President and
Chief Operating Officer and Chief Financial Officer reviewed and evaluated the effectiveness of our disclosure controls and procedures, with the participation of the Companys management, as of June 30, 2007. The term disclosure
controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), means controls and 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 June 30, 2007, our President and Chief Operating 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.

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act
of 1934) occurred during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



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

None.



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

Other than as discussed
below, there have been no material changes in our risk factors. 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:



| |  |  | that if FUZEON does not maintain or increase its market acceptance, our business will be materially harmed;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | that we may not be able to maintain profitability;
| | - |  | --------------------------------------------------



| |  |  | that Roche has significant inventory of both finished product and raw materials on hand. If FUZEON sales do not increase we could face the risk of significant
write-offs;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that our business may require substantial additional capital, which we may not be able to obtain on commercially reasonable terms, and we could be required to cut
back or stop certain operations if we are unable to raise or obtain needed funding;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that in order to remain profitable we will need to maintain arrangements with third parties for the sale, marketing and distribution of our current and future drug
candidates or expend significant resources to develop these capabilities;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if sufficient amounts of FUZEON, or any other drugs we attempt to bring to market, cannot be manufactured on a cost-effective basis, our financial condition
and results of operations will be materially and adversely affected;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that since Roche discontinued co-development of TRI-1144, we may incur significant financial hardship;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | that our lead Next Generation Fusion Inhibitor peptide drug candidate is still in the early stages of development and remains subject to clinical testing and
regulatory approval. If we are unable to successfully develop and test our lead drug candidate, our business will be materially harmed;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that we face intense competition in our efforts to develop commercially successful drugs in the biopharmaceutical industry. If we are unable to compete
successfully, our business will suffer;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that we may not receive all necessary regulatory approvals for future drug candidates or approvals may be delayed;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | that the FDA may not accept our application to broaden the indication for FUZEON administration or may request additional studies, which could have an adverse
effect on our stock price;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that HIV is likely to develop resistance to FUZEON and any of our future drug candidates, which could adversely affect demand for those drug candidates and harm our
competitive position;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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 candidates;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | that we are dependent on the successful outcome of clinical trials for our drug candidates;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | that obtaining regulatory approvals and maintaining compliance with government regulations will entail significant costs that could harm our ability to achieve
profitability;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if we cannot maintain commercial manufacturing arrangements with third parties on acceptable terms, or if these third parties do not perform as agreed, the
commercial development of our drug candidates could be delayed or otherwise materially and adversely affected;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if Roche or our manufacturing partners do not maintain good manufacturing practices, it could negatively impact our ability to obtain regulatory approvals and
commercialize our drug candidates;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that our internal research programs and our efforts to obtain rights to new products from third parties may not yield potential products for clinical development,
which would adversely affect any future revenues;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that the intellectual property of our competitors or other third parties may prevent us from developing or commercializing our drug candidates;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if an accident or injury involving hazardous materials occurs, we could incur fines or liability, which could materially and adversely affect our business and
our reputation;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if the testing or use of our drug candidates harms people, we could face costly and damaging product liability claims far in excess of our liability and
indemnification coverage;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if we cannot attract and retain qualified management and scientific personnel on acceptable terms, the development of our drug candidates and our financial
position may suffer;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that if we are unable to meet or maintain the standards for maintaining internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, our
stock price could be materially harmed;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that 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, and;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that any additional financing we obtain may result in dilution to our stockholders, restrictions on our operating flexibility or the transfer of particular rights
to technologies or drug candidates.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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The risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2006
(See Item 1A-Risk Factors in the Form 10-K filed by Trimeris on March 16, 2007) have materially changed as follows:

If we cannot retain and attract qualified independent directors, our performance and our stock price could be adversely affected.

Our board of directors performs a valuable oversight function and is an important resource to management through their guidance and leadership. On April 4, 2007, one of our directors, Dr. J. Richard Crout,
notified the Company that he will not stand for re-election to the Board of Directors at the Companys 2007 annual meeting of stockholders. Dr. Crout has been a director since November 1998 and has served as Chairman of the Audit and
Finance Committee of the Companys Board of Directors since June 2000. On March 16, 2007, Dr. Dani Bolognesi notified the Company that he would retire from the board of directors effective at the 2007 annual meeting of stockholders as
well. Dr. Bolognesi has been a director of the Company since its inception and was formerly the Companys Chief Executive Officer and Chief Scientific Officer.

We may have to attract and recruit additional directors. Future recruitment and retention of qualified independent directors is critical
to our success. In addition to the leadership and oversight provided by the board, the NASDAQ Stock Market listing requirements set forth specific standards that must be met in terms of director independence and qualification in order for the
Companys shares to continue to be listed on the exchange. We cannot assure you that we will succe ssfully attract and retain the requisite number of qualified board members. If we cannot attract and retain the requisite number of qualified
directors or if a significant number of our directors depart, the Companys performance and our stock price could be adversely affected.



|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. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

Not applicable.



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

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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##### Table of Contents

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)  
|               |  |  | 
|August 9, 2007 |  |  |  | By:            |  | /s/ E. LAWRENCE HILL, JR.                                       
|               |  |  |  |                |  | E. Lawrence Hill, Jr.                                           
|               |  |  |  |                |  | President and Chief Operating Officer                           
|               |  |  | 
|August 9, 2007 |  |  |  | By:            |  | /s/ DAN RATTO                                                   
|               |  |  |  |                |  | Dan Ratto                                                       
|               |  |  |  |                |  | Chief Financial Officer (Principal Financial Officer)           
|               |  |  | 
|August 9, 2007 |  |  |  | By:            |  | /s/ ANDREW L. GRAHAM                                            
|               |  |  |  |                |  | Andrew L. Graham                                                
|               |  |  |  |                |  | Director of Finance and Secretary (Principal
Accounting Officer)



28



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##### Table of Contents

EXHIBIT INDEX



|       |  |                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------
|Number |  | Description                                                                                                                
|10.1   |  | Executive Employment Agreement between Trimeris, Inc. and Carol Ohmstede dated August 1, 2006                              
|       | 
|10.2   |  | Letter Agreement between Trimeris, Inc. and Carol Ohmstede dated August 1, 2007                                            
|       | 
|10.3   |  | Letter Agreement between Trimeris, Inc. and Andrew L. Graham dated August 1, 2007                                          
|       | 
|10.4   |  | Executive Engagement Agreement between Trimeris, Inc and Hickey & Hill, Inc. and E. Lawrence Hill, Jr. dated August 2, 2007
|       | 
|10.5   |  | Executive Engagement Agreement between Trimeris, Inc and Hickey & Hill, Inc. and Daniel Ratto dated August 2, 2007         
|       | 
|31.1   |  | Rule 13a-14(a) Certification by E. Lawrence Hill, Jr. as President and Chief Operating Officer.                            
|       | 
|31.2   |  | Rule 13a-14(a) Certification by Dan Ratto as Chief Financial Officer.                                                      
|       | 
|32.1   |  | Section 1350 Certification by E. Lawrence Hill, Jr. as President and Chief Operating Officer.                              
|       | 
|32.2   |  | Section 1350 Certification by Dan Ratto as Chief Financial Officer.