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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended June 30, 2010



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

For the transition period from  to

Commission File Number 0-23155





TRIMERIS, INC.

(Exact name of registrant as specified in its charter)







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

2530 Meridian Parkway,
2ndFloor

Durham, North Carolina 27713

(Address of principal executive offices, including zip code)

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





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    x  Yes    No   ̈

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

The number of shares outstanding of the registrants common stock as of August 4, 2010 was 22,349,841.

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



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









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##### Table of Contents

TRIMERIS, INC.

FORM 10-Q

June 30, 2010

INDEX



|               |  |                                                                                              |  |     
|-------------- |  | -------------------------------------------------------------------------------------------- |  | ----
|               |  |                                                                                              |  | Page
|PART I.        |  | FINANCIAL INFORMATION                                                                        |  |     
|               |  |                                                                                             
|Item 1.        |  | Financial Statements (unaudited)                                                             |  | 3   
|               |  |                                                                                             
|               |  | Condensed Balance Sheets as of June 30, 2010 and December 31, 2009                           |  | 3   
|               |  |                                                                                             
|               |  | Condensed Statements of Operations for the Three and Six Months Ended June 30, 2010 and 2009 |  | 4   
|               |  |                                                                                             
|               |  | Condensed Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009           |  | 5   
|               |  |                                                                                             
|               |  | Notes to Condensed Financial Statements                                                      |  | 6   
|               |  |                                                                                             
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations        |  | 11  
|               |  |                                                                                             
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                                   |  | 22  
|               |  |                                                                                             
|Item 4.        |  | Controls and Procedures                                                                      |  | 22  
|               |  |                                                                                             
|PART II.       |  | OTHER INFORMATION                                                                            |  |     
|               |  |                                                                                             
|Item 1.        |  | Legal Proceedings                                                                            |  | 23  
|               |  |                                                                                             
|Item 1A.       |  | Risk Factors                                                                                 |  | 24  
|               |  |                                                                                             
|Item 2.        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                  |  | 25  
|               |  |                                                                                             
|Item 3.        |  | Defaults Upon Senior Securities                                                              |  | 25  
|               |  |                                                                                             
|Item 4.        |  | [Removed and Reserved]                                                                       |  | 25  
|               |  |                                                                                             
|Item 5.        |  | Other Information                                                                            |  | 25  
|               |  |                                                                                             
|Item 6.        |  | Exhibits                                                                                     |  | 25  
|               | 
|Signature Page |  | 26                                                                                          
|               | 
|Exhibit Index  |  | 27                                                                                          



2



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRIMERIS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except par value) (unaudited)



|                                                                                                           |  |              |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                           |  | June 30,2010 |          |   | December 31,2009 |  
|Assets                                                                                                     |  |              |          |   |                  |   |          |  
|Current assets:                                                                                            |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                  |  | $            | 46,880   |   |                  | $ | 47,420   |  
|Investment securities available-for-sale                                                                   |  |              |         |   |                  |   | 1,020    |  
|Accounts receivable - Roche                                                                                |  |              | 2,541    |   |                  |   | 2,465    |  
|Deferred tax asset                                                                                         |  |              | 160      |   |                  |   | 160      |  
|Prepaid expenses                                                                                           |  |              | 242      |   |                  |   | 157      |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total current assets                                                                                       |  |              | 49,823   |   |                  |   | 51,222   |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Other assets:                                                                                              |  |              |          |   |                  |   |          |  
|Patent costs, net                                                                                          |  |              | 2,444    |   |                  |   | 2,117    |  
|Advanced payment - Roche                                                                                   |  |              | 5,911    |   |                  |   | 6,403    |  
|Deposits and other assets                                                                                  |  |              | 184      |   |                  |   | 196      |  
|Deferred tax asset                                                                                         |  |              | 320      |   |                  |   | 320      |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total other assets                                                                                         |  |              | 8,859    |   |                  |   | 9,036    |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total assets                                                                                               |  | $            | 58,682   |   |                  | $ | 60,258   |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|Liabilities and Stockholders Equity                                                                       |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                       |  |              |          |   |                  |   |          |  
|Accounts payable                                                                                           |  | $            | 102      |   |                  | $ |         |  
|Taxes payable                                                                                              |  |              | 633      |   |                  |   | 3,012    |  
|Accrued compensation - short-term                                                                          |  |              | 284      |   |                  |   | 13       |  
|Deferred revenue  Roche                                                                                   |  |              | 265      |   |                  |   | 265      |  
|Accrued expenses                                                                                           |  |              | 359      |   |                  |   | 2,727    |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total current liabilities                                                                                  |  |              | 1,643    |   |                  |   | 6,017    |  
|                                                                                                           |  |             
|Deferred revenue - Roche                                                                                   |  |              | 907      |   |                  |   | 1,039    |  
|Accrued marketing costs                                                                                    |  |              | 18,658   |   |                  |   | 18,528   |  
|Accrued compensation-long-term                                                                             |  |              | 96       |   |                  |   | 142      |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total liabilities                                                                                          |  |              | 21,304   |   |                  |   | 25,726   |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|Stockholders equity:                                                                                      |  |              |          |   |                  |   |          |  
|Preferred Stock at $.001 par value per share, 10,000 shares authorized, zero shares issued and outstanding |  |              |         |   |                  |   |         |  
|Common Stock at $.001 par value per share, 60,000 shares authorized, 22,350 shares issued and outstanding  |  |              | 22       |   |                  |   | 22       |  
|Additional paid-in capital                                                                                 |  |              | 358,205  |   |                  |   | 357,691  |  
|Accumulated deficit                                                                                        |  |              | (321,023 | ) |                  |   | (323,356 | )
|Accumulated other comprehensive income                                                                     |  |              | 174      |   |                  |   | 175      |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total stockholders equity                                                                                 |  |              | 37,378   |   |                  |   | 34,532   |  
|                                                                                                           |  |              |          |   |                  |   |          |  
|                                                                                                           |  |             
|Total liabilities and stockholders equity                                                                 |  | $            | 58,682   |   |                  | $ | 60,258   |  
|                                                                                                           |  |              |          |   |                  |   |          |  

See accompanying notes to condensed financial statements.



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TRIMERIS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------- |  | ---------------------------------- | ------ | - | -------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                               |  | For the Three Months EndedJune 30, |        |   | For the Six Months EndedJune 30, |  
|                                                               |  | 2010                               |        |   | 2009                             |   |        | 2010 |  |   | 2009   |  
|Revenue:                                                       |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Milestone revenue                                              |  | $                                  | 66     |   |                                  | $ | 66     |      |  | $ | 132    |   |  | $ | 132    |  
|Royalty revenue                                                |  |                                    | 1,616  |   |                                  |   | 2,141  |      |  |   | 3,521  |   |  |   | 4,110  |  
|Collaboration income                                           |  |                                    | 1,579  |   |                                  |   | 1,411  |      |  |   | 2,740  |   |  |   | 3,853  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Total revenue and collaboration income                         |  |                                    | 3,261  |   |                                  |   | 3,618  |      |  |   | 6,393  |   |  |   | 8,095  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Operating expenses:                                            |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|General and administrative                                     |  |                                    | 1,135  |   |                                  |   | 1,679  |      |  |   | 2,567  |   |  |   | 3,136  |  
|Gain on disposal of equipment                                  |  |                                    |       |   |                                  |   |       |      |  |   |       |   |  |   | (23    | )
|                                                               |  |                                    |        |   |                                  |   |        |     
|Total operating expenses                                       |  |                                    | 1,135  |   |                                  |   | 1,679  |      |  |   | 2,567  |   |  |   | 3,113  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Operating income                                               |  |                                    | 2,126  |   |                                  |   | 1,939  |      |  |   | 3,826  |   |  |   | 4,982  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Other income (expense):                                        |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Interest income                                                |  |                                    | 19     |   |                                  |   | 115    |      |  |   | 33     |   |  |   | 279    |  
|Gain on investments                                            |  |                                    |       |   |                                  |   | 23     |      |  |   |       |   |  |   | 57     |  
|Interest expense                                               |  |                                    | (65    | ) |                                  |   | (64    | )    |  |   | (130   | ) |  |   | (128   | )
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|Total other income (expense)                                   |  |                                    | (46    | ) |                                  |   | 74     |      |  |   | (97    | ) |  |   | 208    |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Income before taxes                                            |  |                                    | 2,080  |   |                                  |   | 2,013  |      |  |   | 3,729  |   |  |   | 5,190  |  
|Income tax provision                                           |  |                                    | 735    |   |                                  |   | 735    |      |  |   | 1,396  |   |  |   | 1,779  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Net income                                                     |  | $                                  | 1,345  |   |                                  | $ | 1,278  |      |  | $ | 2,333  |   |  | $ | 3,411  |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Basic net income per share                                     |  | $                                  | 0.06   |   |                                  | $ | 0.06   |      |  | $ | 0.10   |   |  | $ | 0.15   |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Diluted net income per share                                   |  | $                                  | 0.06   |   |                                  | $ | 0.06   |      |  | $ | 0.10   |   |  | $ | 0.15   |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Weighted average shares used in basic per share computations   |  |                                    | 22,320 |   |                                  |   | 22,320 |      |  |   | 22,320 |   |  |   | 22,285 |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  
|                                                               |  |                                    |        |  
|Weighted average shares used in diluted per share computations |  |                                    | 22,326 |   |                                  |   | 22,320 |      |  |   | 22,327 |   |  |   | 22,285 |  
|                                                               |  |                                    |        |   |                                  |   |        |      |  |   |        |   |  |   |        |  

See accompanying notes to condensed financial statements.



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TRIMERIS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)



|                                                                                            |  |                          |        |   |      |   |        |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                            |  | Six Months EndedJune 30, |       
|                                                                                            |  | 2010                     |        |   | 2009 |  
|Cash flows from operating activities:                                                       |  |                          |        |   |      |   |        |  
|Net income                                                                                  |  | $                        | 2,333  |   |      | $ | 3,411  |  
|Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |                          |        |   |      |   |        |  
|Gain on disposal of equipment                                                               |  |                          |       |   |      |   | (23    | )
|Patent/license amortization                                                                 |  |                          | 227    |   |      |   | 204    |  
|Amortization of deferred revenue  Roche                                                    |  |                          | (132   | ) |      |   | (132   | )
|Stock compensation expense                                                                  |  |                          | 514    |   |      |   | 558    |  
|Accrued marketing costs                                                                     |  |                          | 130    |   |      |   | 128    |  
|Changes in operating assets and liabilities:                                                |  |                          |        |   |      |   |        |  
|Accounts receivable - Roche                                                                 |  |                          | (77    | ) |      |   | 304    |  
|Other receivables                                                                           |  |                          |       |   |      |   | 8      |  
|Prepaid expenses                                                                            |  |                          | (85    | ) |      |   | 248    |  
|Advanced payment - Roche                                                                    |  |                          | 492    |   |      |   | (196   | )
|Deposits and other assets                                                                   |  |                          |       |   |      |   | 105    |  
|Accounts payable                                                                            |  |                          | 102    |   |      |   | (20    | )
|Taxes payable                                                                               |  |                          | (2,379 | ) |      |   |       |  
|Accrued compensation                                                                        |  |                          | 225    |   |      |   | (652   | )
|Accrued expenses                                                                            |  |                          | (2,368 | ) |      |   | (1,196 | )
|                                                                                            |  |                          |        |   |      |   |        |  
|                                                                                            |  |                         
|Net cash (used in) provided by operating activities                                         |  |                          | (1,018 | ) |      |   | 2,747  |  
|                                                                                            |  |                          |        |   |      |   |        |  
|                                                                                            |  |                         
|Cash flows from investing activities:                                                       |  |                          |        |   |      |   |        |  
|Sales of investment securities available-for-sale                                           |  |                          |       |   |      |   | 650    |  
|Maturities of investment securities available-for-sale                                      |  |                          | 1,019  |   |      |   | 8,439  |  
|Proceeds from the sale of equipment                                                         |  |                          |       |   |      |   | 23     |  
|Patent costs                                                                                |  |                          | (541   | ) |      |   | (411   | )
|                                                                                            |  |                          |        |   |      |   |        |  
|                                                                                            |  |                         
|Net cash provided by investing activities                                                   |  |                          | 478    |   |      |   | 8,701  |  
|                                                                                            |  |                          |        |   |      |   |        |  
|                                                                                            |  |                         
|Net cash (used in) provided by financing activities                                         |  |                          |       |   |      |   |       |  
|                                                                                            |  |                          |        |   |      |   |        |  
|                                                                                            |  |                         
|Net (decrease) increase in cash and cash equivalents                                        |  |                          | (540   | ) |      |   | 11,448 |  
|Cash and cash equivalents, beginning of period                                              |  |                          | 47,420 |   |      |   | 14,389 |  
|                                                                                            |  |                          |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                                    |  | $                        | 46,880 |   |      | $ | 25,837 |  
|                                                                                            |  |                          |        |   |      |   |        |  

See accompanying notes to condensed financial statements.



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TRIMERIS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF
PRESENTATION

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

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

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

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

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

2. BASIC AND DILUTED NET INCOME PER SHARE

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



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|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|------------------------------------------- |  | ------------------------------- | ------ | ------------------------------- | - | ----------------------------- |  | ----------------------------- | ------ |  | - | ------
|                                            |  | Three Months EndedJune 30, 2010 |        | Three Months EndedJune 30, 2009 |   | Six Months EndedJune 30, 2010 |  | Six Months EndedJune 30, 2009
|Numerator:                                  |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|Net income                                  |  | $                               | 1,345  |                                 | $ | 1,278                         |  | $                             | 2,333  |  | $ | 3,411 
|                                            |  |                                 |        |                                
|Denominator:                                |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|Weighted average common shares              |  |                                 | 22,320 |                                 |   | 22,320                        |  |                               | 22,320 |  |   | 22,285
|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|Denominator for basic calculation           |  |                                 | 22,320 |                                 |   | 22,320                        |  |                               | 22,320 |  |   | 22,285
|Restricted stock and restricted stock units |  |                                 | 6      |                                 |   |                              |  |                               | 7      |  |   |      
|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|Denominator for diluted calculation         |  |                                 | 22,326 |                                 |   | 22,320                        |  |                               | 22,327 |  |   | 22,285
|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|                                            |  |                                 |        |                                
|Net income per share:                       |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|Basic                                       |  | $                               | 0.06   |                                 | $ | 0.06                          |  | $                             | 0.10   |  | $ | 0.15  
|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       
|                                            |  |                                 |        |                                
|Diluted                                     |  | $                               | 0.06   |                                 | $ | 0.06                          |  | $                             | 0.10   |  | $ | 0.15  
|                                            |  |                                 |        |                                 |   |                               |  |                               |        |  |   |       

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

At June 30, 2010, there were options to purchase 2,100,000 shares of common stock and there were 30,000 shares of restricted stock
outstanding. At June 30, 2009, there were options to purchase 2,100,000 shares of common stock, 30,000 shares of restricted stock/restricted stock units and warrants to purchase 362,000 shares of common stock outstanding.

3. 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 cover only the development and commercialization of FUZEON. The Development and License Agreement will effectively terminate upon the expiration of the last relevant patent covering FUZEON which is expected to occur in 2021.

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

As mentioned above, in March 2007, the Company entered into an agreement with Roche that amended the terms of both the Development and
License Agreement and the Research Agreement. This amendment provided that all intellectual property that was formerly shared between the companies, other than intellectual property related to FUZEON, would now belong solely to the Company.
Following the March 2007 amendment, Roche is responsible for only 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 profit from the sale of FUZEON in the United States and Canada equally with Roche. Collaboration income is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any
discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross profit. Gross profit is reduced by certain selling, marketing, and other expenses and post-marketing commitments related to
the sale of FUZEON resulting in operating income or loss. The Companys share of the operating income or loss is reported as collaboration



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income or loss as a component of revenue. Total net sales of FUZEON in the United States and Canada were $15.2 million and $19.7 million during the six months ended June 30, 2010 and
June 30, 2009, respectively. Total net sales of FUZEON in the United States and Canada were $8.0 million and $9.7 million during the three months ended June 30, 2010 and June 30, 2009, respectively. During the six months ended
June 30, 2010 and June 30, 2009, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses resulting in the Companys share of operating profit from the sale of FUZEON in the United States of $2.7
million and $3.9 million, respectively. During the three months ended June 30, 2010 and June 30, 2009, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses resulting in the Companys share of
operating profit from the sale of FUZEON in the United States of $1.6 million and $1.4 million, respectively. Revenue is recognized when Roche ships the drug and title and risk of loss passes to wholesalers. FUZEON is widely available through retail
pharmacies and wholesalers across North America.

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 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 for that year. Based on certain terms of the Development and License Agreement, the Companys share of the additional expenses incurred by Roche during
2004 will be payable to Roche beginning at a future date that the Company now estimates to be in 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment
amount. For the six months ended June 30, 2010 and June 30, 2009, the Company increased the recorded liability by $130,000 and $128,000, respectively, for accretion of interest. For the three months ended June 30, 2010 and
June 30, 2009, the Company increased the recorded liability by $65,000 and $64,000, respectively, for accretion of interest. The total liability of $18.7 million and $18.5 million at June 30, 2010 and December 31, 2009 is reflected on
the Companys balance sheets under the caption Accrued marketing costs. The accrued marketing costs apply only to the 2004 FUZEON marketing costs; with respect to both 2010 and 2009, there are no accrued marketing costs.

Advanced PaymentRoche

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

Under the terms of the Manufacturing Amendment, the Companys contribution to the capital improvements made at Roches
manufacturing facility is reviewed on an annual basis. Following such review, the Companys contribution is adjusted, when necessary, to reflect changes to the relative geographic distribution of FUZEON sales. The Companys required
contribution was approximately $12.1 million, and has been paid as of June 30, 2010. No further capital improvement payments are due or expected to become due.

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



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Under the Manufacturing Amendment, if the Roche-owned facilities in Boulder, Colorado used
for the manufacture of FUZEON, are used to produce other products for Roche, a credit to the collaboration will result. The Companys share of this credit was approximately $1.9 million through the three months ended June 30, 2010. These
credits have been recorded on the Companys balance sheets as a reduction to the Advanced payment  Roche. These credits offset variances that would otherwise have been allocated to FUZEON if the facilities had remained
underutilized and will be recognized when the related FUZEON produced during these periods is sold.

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. 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 of $3.5 million and $4.1 million were recognized during the six months ended June 30, 2010 and
June 30, 2009, respectively. Royalty revenue of $1.6 million and $2.1 million were recognized during the three months ended June 30, 2010 and June 30, 2009, respectively.

Development Expenses

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

4. COMPREHENSIVE
INCOME

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

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



|                                                        |  |                            |       |                          |   |       |  |   |       |   |  |   |      
|------------------------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | - | ----- | - |  | - | -----
|(in thousands)                                          |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                                        |  | 2010                       |       | 2009                     |   | 2010  |  |   | 2009 
|                                                        |  |                            |       |                         
|Net income                                              |  | $                          | 1,345 |                          | $ | 1,278 |  | $ | 2,333 |   |  | $ | 3,411
|                                                        |  |                            |       |                         
|Unrealized (loss) gain on securities available-for-sale |  |                            |      |                          |   | 198   |  |   | (1    | ) |  |   | 316  
|                                                        |  |                            |       |                          |   |       |  |   |       |   |  |   |      
|                                                        |  |                            |       |                         
|Other comprehensive income (OCI)                        |  | $                          | 1,345 |                          | $ | 1,476 |  | $ | 2,332 |   |  | $ | 3,727
|                                                        |  |                            |       |                          |   |       |  |   |       |   |  |   |      

5. INVESTMENT SECURITIES AVAILABLE-FOR-SALE

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



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



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

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

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

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

June 30, 2010



|                          |  |       |        |                                       |   |                                |  |                              |   |  |   |  
|------------------------- |  | ----- | ------ | ------------------------------------- | - | ------------------------------ |  | ---------------------------- | - |  | - | -
|(in thousands)            |  | Total |        | QuotedPrices inActiveMarkets(Level 1) |   | OtherObservableInputs(Level 2) |  | Un-observableInputs(Level 3)
|Money market funds        |  | $     | 46,880 |                                       | $ | 46,880                         |  | $                            |  |  | $ | 
|                          |  |       |        |                                       |   |                                |  |                              |   |  |   |  
|Total as of June 30, 2010 |  | $     | 46,880 |                                       | $ | 46,880                         |  | $                            |  |  | $ | 
|                          |  |       |        |                                       |   |                                |  |                              |   |  |   |  

June 30, 2009



|                          |  |       |        |                                       |   |                                |  |                              |       |  |   |  
|------------------------- |  | ----- | ------ | ------------------------------------- | - | ------------------------------ |  | ---------------------------- | ----- |  | - | -
|(in thousands)            |  | Total |        | QuotedPrices inActiveMarkets(Level 1) |   | OtherObservableInputs(Level 2) |  | Un-observableInputs(Level 3)
|Money market funds        |  | $     | 28,083 |                                       | $ | 25,837                         |  | $                            | 2,246 |  | $ | 
|Corporate bonds           |  |       | 6,169  |                                       |   | 6,169                          |  | $                            |      |  | $ | 
|                          |  |       |        |                                       |   |                                |  |                              |       |  |   |  
|Total as of June 30, 2009 |  | $     | 34,252 |                                       | $ | 32,006                         |  | $                            | 2,246 |  | $ | 
|                          |  |       |        |                                       |   |                                |  |                              |       |  |   |  

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

6. INCOME
TAXES

We recognized income tax expense of $1,396,000 and $1,779,000 for the six months ended June 30, 2010 and
June 30, 2009. For 2010, the Company believes, based on current estimates, that the effective annual blended tax rate will be approximately 37.4%.

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



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

7. COMMITMENTS AND CONTINGENCIES

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

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

The
271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. On March 7, 2008, we received formal service of the complaint in this case and on May 29, 2008, Trimeris filed with Roche an
answer and counterclaim requesting relief on several grounds including non-infringement, patent invalidity, unenforceability and double-patenting. Also on May 29, 2008, we filed with Roche a motion to transfer or, in the alternative, dismiss
Trimeris pursuant to the Federal Rules of Civil Procedure. On July 30, 2008, Novartis filed an answer to the Roche-Trimeris counterclaims. On August 1, 2008, Trimeris filed with Roche a reply in support of its motion to transfer. On
September 3, 2008, the Court dismissed the Roche-Trimeris motion for transfer of venue without prejudice. On October 10, 2008, Trimeris filed with Roche a renewed motion to transfer. On March 3, 2009, Trimeris filed with Roche
invalidity contentions with the court. On December 2, 2009, the Federal Circuit for the Court of Appeals granted the Roche-Trimeris petition for a writ of mandamus and ordered that the case be transferred to the Eastern District of North
Carolina. The case was ordered transferred to the Eastern District of North Carolina on December 4, 2009. On June 28, 2010, the parties, in response to an earlier Court order, filed a proposed joint scheduling order with the court. No
trial date has been scheduled and the outcome of this matter cannot be determined at this time. In connection with its suit, Novartis is seeking money damages, attorneys fees and injunctive relief which, if successful, would prevent Roche and
Trimeris from manufacturing and selling FUZEON.

8. ARIGENE TRANSACTION

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

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

Executive Summary

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

Trimeris has a worldwide agreement (the Development and License Agreement) with F. Hoffmann-La Roche Ltd., or
Roche, to develop and market T-20, marketed as FUZEON, whose generic name is enfuvirtide. FUZEON is manufactured and



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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.

For the second quarter of 2010, the Company recorded net income of $1.3 million, or $0.06 per share, compared to $1.3 million or $0.06
per share, in the second quarter of 2009. This result was primarily driven by decreased operating expenses offset, in part, by decreased FUZEON® sales.

Outlook for 2010

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



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



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



| |  |  | Cost of Goods Sold  In 2008 we exercised our rights under the Development and License Agreement and entered into negotiations with Roche related
to excess capacity charges and cost of goods sold variances for 2008 and overall cost of goods sold for 2009 and 2010. The negotiations were ongoing throughout 2009 and continue today. Accordingly, we cannot accurately determine if cost of goods
sold as a percentage of net sales will increase, decrease or remain the same in the future. Although active discussions are ongoing, we cannot be certain when a final resolution will be reached. Depending upon the resolution of our negotiations
with Roche, cost of goods sold may increase or decrease in future periods.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | Novartis Litigation  We, along with our partner Roche, will continue to work with outside counsel to come to the most expedient and satisfactory
resolution of the patent infringement suit brought by Novartis.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

RESULTS OF OPERATIONS

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

Revenues

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



|                                       |  |                            |       |                    |   |       |  |   |      |  
|-------------------------------------- |  | -------------------------- | ----- | ------------------ | - | ----- |  | - | ---- | -
|(in thousands)                         |  | Three Months EndedJune 30, |       | Increase(Decrease) |  
|                                       |  | 2010                       |       | 2009               |   |       | 
|Milestone revenue                      |  | $                          | 66    |                    | $ | 66    |  | $ |     |  
|Royalty revenue                        |  |                            | 1,616 |                    |   | 2,141 |  |   | (525 | )
|Collaboration income                   |  |                            | 1,579 |                    |   | 1,411 |  |   | 168  |  
|                                       |  |                            |       |                    |   |       |  |   |      |  
|                                       |  |                            |      
|Total revenue and collaboration income |  | $                          | 3,261 |                    | $ | 3,618 |  | $ | (357 | )
|                                       |  |                            |       |                    |   |       |  |   |      |  

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

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



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|               |  |                |       |               |                  |                                             |   |                                                          |  |                          |    |  |              
|-------------- |  | -------------- | ----- | ------------- | ---------------- | ------------------------------------------- | - | -------------------------------------------------------- |  | ------------------------ | -- |  | -------------
|(in thousands) |  | MilestoneTotal |       | Date Achieved |                  | Total RevenueRecognizedThrough June 30,2010 |   | Revenue Recognizedfor the
ThreeMonths EndedJune 30, 2010 |  | End of RecognitionPeriod
|               |  | $              | 2,500 |               | June        2003 |                                             | $ | 1,620                                                    |  | $                        | 50 |  | November 2014
|               |  |                |       |               |                 
|               |  |                | 750   |               | June        2004 |                                             |   | 458                                                      |  |                          | 16 |  | November 2014
|               |  |                |       |               |                  |                                             |   |                                                          |  |                          |    |  |              
|               |  |                |       |               |                 
|Total          |  | $              | 3,250 |               |                  |                                             | $ | 2,078                                                    |  | $                        | 66 |  |              
|               |  |                |       |               |                  |                                             |   |                                                          |  |                          |    |  |              

Royalty revenue: Royalty revenue represents the royalty payments earned from Roche
based on total net sales of FUZEON outside the United States and Canada and will continue until all patents covering FUZEON, licensed to Roche, on a country by country basis have expired. Sales of FUZEON outside the United States and Canada began in
June 2003. 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 decreased for the three months ended June 30, 2010 as
compared to the three months ended June 30, 2009 as a result of decreased net sales of FUZEON outside the U.S. and Canada. Net sales of FUZEON outside the U.S. and Canada for the three months ended June 30, 2010 and June 30, 2009,
were $14.6 million and $19.4 million, respectively. The decline in royalty revenue reflects decreased sales of FUZEON outside the United States and Canada. These sales are currently largely dependent on sales in Brazil. Historically, sales in Brazil
have been intermittent and we expect that sales figures for rest of world sales (i.e. FUZEON sales excluding the U.S. and Canada) in future quarters would be negatively impacted if sales in Brazil were not made in that quarter.

Collaboration income:The table below presents our collaboration income (United States and Canada) for the three months ended
June 30, 2010 compared to the three months ended June 30, 2009. Under our Development and License Agreement with Roche, we share gross profit equally from the sale of FUZEON in the United States and Canada. The sharing of expenses is
according to contractual arrangements and is not equal in all cases. FUZEON was launched commercially in March 2003. Collaboration income increased for the three months ended June 30, 2010 compared to the three months ended June 30, 2009
as a result of a decrease in selling and marketing expenses offset, in part, by a decrease in net sales of FUZEON in the U.S. and Canada.



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|                                        |  |                            |        |   |        |   |        |   |  |   |        |  
|--------------------------------------- |  | -------------------------- | ------ | - | ------ | - | ------ | - |  | - | ------ | -
|(dollars in thousands)                  |  | Three Months EndedJune 30, |        |   | Change |  
|                                        |  | 2010                       |        |   | 2009   |   |       
|                                        |  |                            |       
|Gross FUZEON sales by Roche             |  | $                          | 10,804 |   |        | $ | 11,899 |   |  | $ | (1,095 | )
|Less sales adjustments                  |  |                            | (2,780 | ) |        |   | (2,154 | ) |  |   | (626   | )
|Sales adjustments as a % of Gross Sales |  |                            | 26     | % |        |   | 18     | % |  |   |        |  
|                                        |  |                            |        |   |        |   |        |   |  |   |        |  
|                                        |  |                            |       
|Net sales                               |  |                            | 8,024  |   |        |   | 9,745  |   |  |   | (1,721 | )
|Cost of goods sold                      |  |                            | (3,277 | ) |        |   | (3,252 | ) |  |   | (25    | )
|Cost of goods sold as a % of Net Sales  |  |                            | 41     | % |        |   | 33     | % |  |   |        |  
|                                        |  |                            |        |   |        |   |        |   |  |   |        |  
|                                        |  |                            |       
|Gross profit                            |  |                            | 4,747  |   |        |   | 6,493  |   |  |   | (1,746 | )
|Gross profit as a % of Net Sales        |  |                            | 59     | % |        |   | 67     | % |  |   |        |  
|Selling and marketing expenses          |  |                            | (1,158 | ) |        |   | (2,832 | ) |  |   | 1,674  |  
|Roche development expenses              |  |                            | (71    | ) |        |   | (480   | ) |  |   | 409    |  
|Other costs                             |  |                            | (254   | ) |        |   | (708   | ) |  |   | 454    |  
|                                        |  |                            |        |   |        |   |        |   |  |   |        |  
|Total shared profit                     |  |                            | 3,264  |   |        |   | 2,473  |   |  |   | 791    |  
|Trimeris share *                        |  |                            | 1,633  |   |        |   | 1,483  |   |  |   | 150    |  
|Costs exclusive to Trimeris             |  |                            | (54    | ) |        |   | (72    | ) |  |   | 18     |  
|                                        |  |                            |        |   |        |   |        |   |  |   |        |  
|                                        |  |                            |       
|Collaboration income                    |  | $                          | 1,579  |   |        | $ | 1,411  |   |  | $ | 168    |  
|                                        |  |                            |        |   |        |   |        |   |  |   |        |  



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

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

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



|             |  |       |  |       
|------------ |  | ----- |  | ------
|Kits Shipped |  | 2010  |  | 2009  
|Q1           |  | 4,200 |  | 5,000 
|Q2           |  | 4,100 |  | 4,800 
|Q3           |  |      |  | 5,500 
|Q4           |  |      |  | 4,700 
|             |  |       |  |       
|Total        |  | 8,300 |  | 20,000
|             |  |       |  |       

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

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



14



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##### Table of Contents

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

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

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

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

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

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

General and Administrative Expenses

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



|                                          |  |                             |       |          |   |            |  |   |      |  
|----------------------------------------- |  | --------------------------- | ----- | -------- | - | ---------- |  | - | ---- | -
|(in thousands)                            |  | Three Months EndedJune 
30, |       | Increase |  
|                                          |  | 2010                        |       | 2009     |   | (Decrease) | 
|                                          |  |                             |      
|Total general and administrative expenses |  | $                           | 1,135 |          | $ | 1,679      |  | $ | (544 | )
|                                          |  |                             |       |          |   |            |  |   |      |  

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

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



|                                  |  |                            |     |   |          |   |     |            |  |   |      |  
|--------------------------------- |  | -------------------------- | --- | - | -------- | - | --- | ---------- |  | - | ---- | -
|(in thousands)                    |  | Three Months EndedJune 30, |     |   | Increase |  
|                                  |  | 2010                       |     |   | 2009     |   |     | (Decrease) | 
|Interest income                   |  | $                          | 19  |   |          | $ | 115 |            |  | $ | (96  | )
|Gain on investments               |  |                            |    |   |          |   | 23  |            |  |   | (23  | )
|Interest expense                  |  |                            | (65 | ) |          |   | (64 | )          |  |   | (1   | )
|                                  |  |                            |     |   |          |   |     |            |  |   |      |  
|                                  |  |                            |    
|Total other income (expense), net |  | $                          | (46 | ) |          | $ | 74  |            |  | $ | (120 | )
|                                  |  |                            |     |   |          |   |     |            |  |   |      |  



15



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##### Table of Contents

Interest income decreased for the three months ended June 30, 2010 primarily due to
lower interest rates within the Companys investment portfolios.

Interest expense relates to the accretion of the excess
marketing expenses recorded on the balance sheets as Accrued marketing costs. The Company and Roche agreed to limit the Companys actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2
million, even though Roche spent significantly more on these expenses for that year. Based on certain terms of the Development and License Agreement, the Companys share of the additional expenses incurred by Roche during 2004 will be payable
to Roche beginning at a future date that the Company now estimates to be in 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment amount. For the three
months ended June 30, 2010 and June 30, 2009, the Company increased the recorded liability by $65,000 and $64,000, respectively, for accretion of interest. The total liability of $18.7 million and $18.5 million at June 30, 2010 and
December 31, 2009 respectively is reflected on our condensed balance sheets.

Income Tax Provision

We recognized income tax expense of $735,000 at June 30, 2010 and 2009 respectively. For 2010, the Company believes, based on current
estimates, that the effective annual blended tax rate will be approximately 37.4%.

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

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

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

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 2010 and June 30, 2009

Revenues

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



|                                       |  |                          |       |          |   |       |  |   |        |  
|-------------------------------------- |  | ------------------------ | ----- | -------- | - | ----- |  | - | ------ | -
|(in thousands)                         |  | Six Months EndedJune 30, |       | Increase |  
|                                       |  | (Decrease)               |      
|                                       |  | 2010                     |       | 2009     |   |       | 
|Milestone revenue                      |  | $                        | 132   |          | $ | 132   |  | $ |       |  
|Royalty revenue                        |  |                          | 3,521 |          |   | 4,110 |  |   | (589   | )
|Collaboration income                   |  |                          | 2,740 |          |   | 3,853 |  |   | (1,113 | )
|                                       |  |                          |       |          |   |       |  |   |        |  
|                                       |  |                          |      
|Total revenue and collaboration income |  | $                        | 6,393 |          | $ | 8,095 |  | $ | (1,702 | )
|                                       |  |                          |       |          |   |       |  |   |        |  

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

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



16



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##### Table of Contents

|               |  |                |       |               |                  |                                             |   |                                                         |  |                          |     |  |              
|-------------- |  | -------------- | ----- | ------------- | ---------------- | ------------------------------------------- | - | ------------------------------------------------------- |  | ------------------------ | --- |  | -------------
|(in thousands) |  | MilestoneTotal |       | Date Achieved |                  | Total RevenueRecognizedThrough June 30,2010 |   | Revenue Recognizedfor the Six MonthsEnded June 30, 2010 |  | End of RecognitionPeriod
|               |  | $              | 2,500 |               | June        2003 |                                             | $ | 1,620                                                   |  | $                        | 100 |  | November 2014
|               |  |                |       |               |                 
|               |  |                | 750   |               | June        2004 |                                             |   | 458                                                     |  |                          | 32  |  | November 2014
|               |  |                |       |               |                  |                                             |   |                                                         |  |                          |     |  |              
|               |  |                |       |               |                 
|Total          |  | $              | 3,250 |               |                  |                                             | $ | 2,078                                                   |  | $                        | 132 |  |              
|               |  |                |       |               |                  |                                             |   |                                                         |  |                          |     |  |              

Royalty revenue: Royalty revenue represents the royalty payments earned from Roche
based on total net sales of FUZEON outside the United States and Canada and will continue until all patents covering FUZEON, licensed to Roche, on a country by country basis have expired. Sales of FUZEON outside the United States and Canada began in
June 2003. 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 decreased for the six months ended June 30, 2010 as compared
to the six months ended June 30, 2009 as a result of decreased net sales of FUZEON outside the U.S. and Canada. Net sales of FUZEON outside the U.S. and Canada for the six months ended June 30, 2010 and June 30, 2009, were $31.9
million and $37.2 million, respectively. The decline in royalty revenue reflects decreased sales of FUZEON outside the United States and Canada. These sales are currently largely dependent on sales in Brazil. Historically, sales in Brazil have been
intermittent and we expect that sales figures for rest of world sales (i.e. FUZEON sales excluding the U.S. and Canada) in future quarters would be negatively impacted if sales in Brazil were not made in that quarter.

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



17



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##### Table of Contents

|                                        |  |                          |        |   |        |   |        |   |  |   |        |  
|--------------------------------------- |  | ------------------------ | ------ | - | ------ | - | ------ | - |  | - | ------ | -
|(dollars in thousands)                  |  | Six Months EndedJune 30, |        |   | Change |  
|                                        |  | 2010                     |        |   | 2009   |   |       
|Gross FUZEON sales by Roche             |  | $                        | 21,674 |   |        | $ | 24,061 |   |  | $ | (2,387 | )
|Less sales adjustments                  |  |                          | (6,456 | ) |        |   | (4,362 | ) |  |   | (2,094 | )
|Sales adjustments as a % of Gross Sales |  |                          | 30     | % |        |   | 18     | % |  |   |        |  
|                                        |  |                          |        |   |        |   |        |   |  |   |        |  
|                                        |  |                          |       
|Net sales                               |  |                          | 15,218 |   |        |   | 19,699 |   |  |   | (4,481 | )
|Cost of goods sold                      |  |                          | (6,627 | ) |        |   | (4,574 | ) |  |   | (2,053 | )
|Cost of goods sold as a % of Net Sales  |  |                          | 44     | % |        |   | 23     | % |  |   |        |  
|                                        |  |                          |        |   |        |   |        |   |  |   |        |  
|                                        |  |                          |       
|Gross profit                            |  |                          | 8,591  |   |        |   | 15,125 |   |  |   | (6,534 | )
|Gross profit as a % of Net Sales        |  |                          | 56     | % |        |   | 77     | % |  |   |        |  
|Selling and marketing expenses          |  |                          | (2,309 | ) |        |   | (5,809 | ) |  |   | 3,500  |  
|Roche development expenses              |  |                          | (128   | ) |        |   | (1,063 | ) |  |   | 935    |  
|Other costs                             |  |                          | (461   | ) |        |   | (1,381 | ) |  |   | 920    |  
|                                        |  |                          |        |   |        |   |        |   |  |   |        |  
|                                        |  |                          |       
|Total shared profit                     |  |                          | 5,693  |   |        |   | 6,872  |   |  |   | (1,179 | )
|Trimeris share *                        |  |                          | 2,847  |   |        |   | 4,004  |   |  |   | (1,157 | )
|Costs exclusive to Trimeris             |  |                          | (107   | ) |        |   | (151   | ) |  |   | 44     |  
|                                        |  |                          |        |   |        |   |        |   |  |   |        |  
|                                        |  |                          |       
|Collaboration income                    |  | $                        | 2,740  |   |        | $ | 3,853  |   |  | $ | (1,113 | )
|                                        |  |                          |        |   |        |   |        |   |  |   |        |  



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

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

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



|             |  |       |  |       
|------------ |  | ----- |  | ------
|Kits Shipped |  | 2010  |  | 2009  
|Q1           |  | 4,200 |  | 5,000 
|Q2           |  | 4,100 |  | 4,800 
|Q3           |  |      |  | 5,500 
|Q4           |  |      |  | 4,700 
|             |  |       |  |       
|Total        |  | 8,300 |  | 20,000
|             |  |       |  |       

Sales adjustments: Sales adjustments are
recorded by Roche based on Roches experience with selling FUZEON. Based on discussions with Roche, we expect sales adjustments for 2010 to fall within a range of 25% to 30% of gross sales for 2010 as compared to 21 % for the full year
2009. Sales adjustments for the first quarter of 2010 were higher than expected as a result of a one-time adjustment to the returns reserve in order to account for the liability related to inventory in the sales channel.

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

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



18



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##### Table of Contents

remainder of the excess capacity charges for 2008 and 2009. The resolution of this dispute may result in an additional credit to cost of goods sold for the collaboration in future periods.

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

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

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

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

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

General and Administrative Expenses

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



|                                          |  |                           |       |                    |   |       |  |   |      |  
|----------------------------------------- |  | ------------------------- | ----- | ------------------ | - | ----- |  | - | ---- | -
|(in thousands)                            |  | Six Months EndedJune 
30, |       | Increase(Decrease) |  
|                                          |  | 2010                      |       | 2009               |  
|Total general and administrative expenses |  | $                         | 2,567 |                    | $ | 3,136 |  | $ | (569 | )
|                                          |  |                           |       |                    |   |       |  |   |      |  

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

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



|                           |  |                          |      |   |                    |   |      |   |  |   |      |  
|-------------------------- |  | ------------------------ | ---- | - | ------------------ | - | ---- | - |  | - | ---- | -
|(in thousands)             |  | Six Months EndedJune 30, |      |   | Increase(Decrease) |  
|                           |  | 2010                     |      |   | 2009               |   |     
|Interest income            |  | $                        | 33   |   |                    | $ | 279  |   |  | $ | (246 | )
|Gain/(Loss) on investments |  |                          |     |   |                    |   | 57   |   |  |   | (57  | )
|Interest expense           |  |                          | (130 | ) |                    |   | (128 | ) |  |   | (2   | )
|                           |  |                          |      |   |                    |   |      |   |  |   |      |  
|                           |  |                          |     
|Total other income, net    |  | $                        | (97  | ) |                    | $ | 208  |   |  | $ | (305 | )
|                           |  |                          |      |   |                    |   |      |   |  |   |      |  

Interest income decreased for the six months ended June 30, 2010 primarily due to lower interest rates
within the Companys investment portfolios.



19



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##### Table of Contents

Interest expense relates to the accretion of the excess marketing expenses recorded on the
balance sheets as Accrued marketing costs. The Company and Roche agreed to limit the Companys actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent
significantly more on these expenses for that year. Based on certain terms of the Development and License Agreement, the Companys share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future
date that the Company now estimates to be in 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment amount. For the six months ended June 30, 2010
and June 30, 2009, the Company increased the recorded liability by $130,000 and $128,000, respectively, for accretion of interest. The total liability of $18.7 million and $18.5 million at June 30, 2010 and December 31, 2009 is
reflected on our condensed balance sheets.

Income Tax Provision

We recognized income tax expense of $1,396,000 at June 30, 2010 compared to income tax expense of $1,779,000 at June 30, 2009.
For 2010, the Company believes, based on current estimates, that the effective annual blended tax rate will be approximately 37.4%.

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

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

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

LIQUIDITY AND CAPITAL
RESOURCES

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



|                                                     |  |                           |        |   |      |   |       
|---------------------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ------
|(in thousands)                                       |  | Six Months Ended June 30,
|                                                     |  | 2010                      |        |   | 2009
|Net cash (used in) provided by operating activities  |  | $                         | (1,018 | ) |      | $ | 2,747 
|Net cash provided by investing activities            |  |                           | 478    |   |      |   | 8,701 
|Net cash (used in) provided by financing activities  |  |                           |       |   |      |   |      
|                                                     |  |                           |        |   |      |   |       
|                                                     |  |                          
|Net (decrease) increase in cash and cash equivalents |  |                           | (540   | ) |      |   | 11,448
|Cash and cash equivalents, beginning of period       |  |                           | 47,420 |   |      |   | 14,389
|                                                     |  |                           |        |   |      |   |       
|Cash and cash equivalents, end of period             |  | $                         | 46,880 |   |      | $ | 25,837
|                                                     |  |                           |        |   |      |   |       

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, 2010, cash provided by operating activities decreased primarily as a result of the following:



20



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##### Table of Contents

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



| |  |  | payments made in connection with the Arigene transaction, namely taxes paid on the $12 million reverse termination fee and fees paid to advisors.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------

During the remainder of 2010, cash provided by operating activities will depend on several factors,
primarily the sales, cost of sales and commercialization expenses and post-marketing commitments related to the sale of FUZEON (profitability of the collaboration with Roche), and expenses related to the patent infringement suit brought by Novartis
Vaccines and Diagnostics, Inc.

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

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

Total Cash, Cash Equivalents and Investment Securities Available-for-Sale. As of June 30, 2010, we had $46.9 million in cash
and cash equivalents and investment securities available-for-sale, compared to $48.4 million as of December 31, 2009.

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



| |  |  | expenditures for marketing activities related to FUZEON; and
| | - |  | ------------------------------------------------------------



| |  |  | legal costs to defend the patent infringement suit brought by Novartis Vaccines and Diagnostics, Inc.
| | - |  | -----------------------------------------------------------------------------------------------------

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

Contractual Obligations.The following table summarizes our material contractual
commitments at June 30, 2010 for the remainder of 2010 and subsequent years (in thousands):



|                                                             |  |      |   |      |   |      |  |      |   |      |   |            |  |       |   |  |   |        |  |   |       
|------------------------------------------------------------ |  | ---- | - | ---- | - | ---- |  | ---- | - | ---- | - | ---------- |  | ----- | - |  | - | ------ |  | - | ------
|Contractual Obligation*                                      |  | 2010 |   | 2011 |   | 2012 |  | 2013 |   | 2014 |   | Thereafter |  | Total
|Other long-term liabilities reflected on the Balance Sheet * |  | $    |  |      | $ |     |  | $    |  |      | $ |           |  | $     |  |  | $ | 22,204 |  | $ | 22,204
|                                                             |  |      |   |      |   |      |  |      |   |      |   |            |  |       |   |  |   |        |  |   |       
|Total                                                        |  | $    |  |      | $ |     |  | $    |  |      | $ |           |  | $     |  |  | $ | 22,204 |  | $ | 22,204
|                                                             |  |      |   |      |   |      |  |      |   |      |   |            |  |       |   |  |   |        |  |   |       



|* | Our 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 for that year. Based on certain terms of the Development and License Agreement, the Companys share of these additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date that the Company
now estimates to be in 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, and is increasing the liability over time to the expected payment amount. During the six months ended June 30, 2010, we increased this
liability by $130,000. The total liability of $18.7 million at June 30, 2010, is reflected on our condensed balance sheet under the caption Accrued marketing costs. The amount reflected in the above table represents the undiscounted
value of the obligation.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company also has contractual obligations to the New York Blood Center pursuant to
a license agreement that requires the Company to make payments based on a contracted term. During the six months ended June 30, 2010 and June 30, 2009, we expended approximately $107,000 and $151,000, respectively, related to this
obligation.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies

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



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any significant changes to the critical accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2009.

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 FUZEON; 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 any future clinical trials the Company may undertake; 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 the Companys Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2010.

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

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

Item 4. Controls and Procedures

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

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



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Novartis Patent Lawsuit

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

The 271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. On
March 7, 2008, we received formal service of the complaint in this case and on May 29, 2008, Trimeris filed with Roche an answer and counterclaim requesting relief on several grounds including non-infringement, patent invalidity,
unenforceability and double-patenting. Also on May 29, 2008, we filed with Roche a motion to transfer or, in the alternative, dismiss Trimeris pursuant to the Federal Rules of Civil Procedure. On July 30, 2008, Novartis filed an answer to
the Roche-Trimeris counterclaims. On August 1, 2008, Trimeris filed with Roche a reply in support of its motion to transfer. On September 3, 2008, the Court dismissed the Roche-Trimeris motion for transfer of venue without prejudice. On
October 10, 2008, Trimeris filed with Roche a renewed motion to transfer. On March 3, 2009, Trimeris filed with Roche invalidity contentions with the court. On December 2, 2009, the Federal Circuit for the Court of Appeals granted the
Roche-Trimeris petition for a writ of mandamus and ordered that the case be transferred to the Eastern District of North Carolina. The case was ordered transferred to the Eastern District of North Carolina on December 4, 2009. On June 28,
2010, the parties, in response to an earlier Court order, filed a proposed joint scheduling order with the court. No trial date has been scheduled and the outcome of this matter cannot be determined at this time. In connection with its suit,
Novartis is seeking money damages, attorneys fees and injunctive relief which, if successful, would prevent Roche and Trimeris from manufacturing and selling FUZEON.



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Item 1A. Risk Factors

There have been no material changes in our risk factors since the filing of our most recent 10-K. Our business activities involve various
elements of risk. We consider the following issues to be some of the critical risks that should be considered in evaluating our Company and our business:



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



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



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



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



| |  |  | We have been named as defendants in a lawsuit in which Novartis Vaccines and Diagnostics, Inc. has alleged infringement of a patent in connection with
the manufacture and sale of FUZEON. If we cannot resolve this lawsuit on favorable terms and at a reasonable expense, our business may be materially harmed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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

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



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



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



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

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Removed and Reserved

Item 5. Other Information



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



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

Item 6.
Exhibits



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

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



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SIGNATURES

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



|                |  |  |  |                |  |                                                                     
|--------------- |  |  |  | -------------- |  | --------------------------------------------------------------------
|                |  |  |  | Trimeris, Inc.
|                |  |  |  | (Registrant)  
|                |  |  | 
|August 12, 2010 |  |  |  | By:            |  | /s/ MARTIN A. MATTINGLY                                             
|                |  |  |  |                |  | Martin A. Mattingly Chief
Executive Officer                         
|                |  |  | 
|August 12, 2010 |  |  |  | By:            |  | /s/ ANDREW L. GRAHAM                                                
|                |  |  |  |                |  | Andrew L. Graham                                                    
|                |  |  |  |                |  | Chief Financial Officer and Secretary (Principal Accounting Officer)



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EXHIBIT INDEX



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



27