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 and our compound under research 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 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 third quarter of 2008, the Company recorded net income of $3.6 million, or $0.16 per share, compared to $5.5 million, or $0.25 per share, in the third quarter of 2007. This decrease was driven by decreased revenue offset, in part, by decreased operating expenses.

2008 will continue to be a year of transition for Trimeris:

• Special Cash Dividend - On May 8, 2008, the Company's Board of Directors declared a one-time special cash dividend of $1.50 per share of common stock to stockholders of record on May 22, 2008. The dividend payment totaled approximately $33.3 million and was paid on June 6, 2008.

• Stock Repurchase Program - Also on May 2, 2008, the Board of Directors authorized a share repurchase program to purchase up to $17.0 million of Trimeris common stock from time to time on the open market, in block trades or otherwise. The timing of repurchases and the amount of any shares repurchased will be determined by Trimeris management based on its evaluation of market conditions and other factors. The repurchase program may be suspended or discontinued at any time and will expire on December 31, 2008. Any repurchased shares will be available for use in connection with Trimeris stock plans and for other corporate purposes. Both the special cash dividend and any repurchases under the stock repurchase program will be funded using Trimeris working capital. As of September 30, 2008, the Company has not repurchased any outstanding shares of common stock.

• Competition - FUZEON sales have been significantly impacted by the recent market introduction of three new oral HIV agents. We believe it is too early to determine the future sales trend after this initial negative impact.

• Cost of Goods Sold - We have concluded our discussions related to the calculation of cost of goods sold for 2008. We believe that cost of goods sold for 2008 will remain at current year-to-date levels of approximately 37% of net sales. Cost of goods sold is dependent on many factors, which are outside of the Company's control, including plant utilization, staffing levels and purchasing volumes. Therefore, we cannot accurately determine if future cost of goods sold as a percentage of net sales will increase, decrease or remain the same.

• Novartis Litigation - We, along with our partner Roche, are working with outside counsel to come to the most expedient and satisfactory resolution of the patent infringement suit brought by Novartis Vaccines and Diagnostics, Inc.

For a comparison of the nine months ended September 30, 2008 and 2007, see "Results of Operations - Comparison of Nine Months Ended September 30, 2008 and 2007."

Recent announcements

In August 2008, the Company announced preliminary results from study TRI-1144-101, a Phase 1 study of the next-generation HIV fusion inhibitor, TRI-1144. Conducted in 24 healthy subjects, study TRI 1144-101 was a placebo-controlled, double-blind, single-dose trial that explored the safety, tolerability and pharmacokinetics of four doses of TRI-1144. A total of 18 subjects received TRI-1144, ranging from 25 mg to 250 mg while 6 subjects received placebo. Pharmacokinetic analyses showed that the plasma half-life ranged from 13 to 20 hours depending on the dose administered, with a time to maximal exposure ranging from 10 to 13 hours.

There were no serious adverse events observed during the trial. Eight subjects experienced a total of 13 adverse events. Of these eight subjects, five were in the TRI-1144 group (5/18 or 28%) while three subjects were in the placebo group (3/6 or 50%). With respect to the events observed in the TRI-1144 group, five were considered mild (5/6 or 83%) and one was moderate (1/6 or 17%) (backache; unrelated). With respect to adverse events observed in the placebo group, five events were considered mild (5/7 or 71%) and two were moderate in intensity (2/7 or 29%). No serious injection-site reactions (ISRs) were observed. Two out of six (33%) and

15/18 (83%) of subjects receiving placebo or TRI-1144, respectively, experienced mild or moderate ISRs. No ISRs were experienced in the TRI-1144 25 mg group. Erythema and pain/discomfort were the most frequent signs/symptoms observed and most ISRs resolved by 96 hours. No ISRs were experienced in the 25 mg group. Full data from the trial was presented at a recent medical conference.

RESULTS OF OPERATIONS

Comparison Of Three Months Ended September 30, 2008 and 2007

Revenues

The table below presents our revenue sources for the three months ended
September 30, 2008 compared to the three months ended September 30, 2007.



                                                Three Months Ended
     (in thousands)                               September 30,          Increase
                                                 2008         2007      (Decrease)
     Milestone revenue                        $       67          78   $        (11 )
     Royalty revenue                               3,373       4,781         (1,408 )
     Collaboration income                          1,961       5,518         (3,557 )

     Total revenue and collaboration income   $    5,401    $ 10,377   $     (4,976 )

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

The table below presents our achieved milestones from Roche as of September 30, 2008. We are recognizing the milestones with remaining unrecognized balances on a straight-line basis over the estimated commercial period of FUZEON.

                                            Total Revenue        Revenue for the
         Milestone                       Recognized Through    Three Months Ended    End of Recognition
           Total       Date Achieved     September 30, 2008    September 30, 2008          Period
                                                (in thousands)
        $     2,500     June      2003   $             1,272   $                50        November 2014  *
                750     June      2004                   343                    17        November 2014  *

Total   $     3,250                      $             1,615   $                67

* During the third quarter of 2007, the Company extended the recognition of the remaining milestones through November 2014, as the patent term associated with these milestones was extended through this date. The original expiration of the associated patents was June 2013.

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 September 30, 2008 as compared to the three months ended September 30, 2007 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 September 30, 2008 and 2007, were $30.6 million and $43.3 million, respectively.

Collaboration income: The table below presents our collaboration income (United States and Canada) for the three months ended September 30, 2008 compared to the three months ended September 30, 2007. Collaboration income is reported on our Statements of Operations as a component of revenue. Under our Development and License Agreement with Roche, we share gross profits equally from the sale of FUZEON in the United States and Canada. The sharing of expenses is according to contractual arrangements and is not equal in all cases. FUZEON was launched commercially in March 2003.

                                                 Three Months Ended
     (in thousands)                                 September 30,
                                                 2008          2007         Change
     Gross FUZEON sales by Roche               $  18,077     $  36,249     $ (18,172 )
     Less sales adjustments                       (3,137 )      (5,637 )       2,500
     Sales adjustments as a % of Gross Sales          17 %          16 %

     Net sales                                    14,940        30,612       (15,672 )
     Cost of goods sold                           (5,429 )     (10,182 )       4,753
     Cost of goods sold as a % of Net Sales           36 %          33 %

     Gross profit                                  9,511        20,430       (10,919 )
     Gross profit as a % of Net Sales                 64 %          67 %
     Selling and marketing expenses               (5,345 )      (8,508 )       3,163
     Other costs                                    (790 )        (639 )        (151 )

     Total shared profit                           3,376        11,283        (7,907 )
     Trimeris share *                              2,085         5,641        (3,556 )
     Costs exclusive to Trimeris                    (124 )        (123 )          (1 )

     Net income from collaboration             $   1,961     $   5,518     $  (3,557 )

* We have 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 and Roche's share of the collaboration income was not equal in the third quarter of 2008. For 2007, the Company's and Roche's share of the collaboration income was equal. Depending on the level of marketing expenses for 2008, our share of the collaboration profit may continue to be greater than that of Roche.

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

The table below presents the number of kits shipped to wholesalers in the U.S. and Canada during 2008 and 2007.

                           Kits Shipped    2008     2007
                           Q1              9,600   17,900
                           Q2              9,000   19,200
                           Q3              7,900   17,600
                           Q4                 -    17,500

                           Total          26,500   72,200

Sales adjustments: Sales adjustments are recorded by Roche based on their experience with selling FUZEON. Based on discussions with Roche, we have increased our expectation for sales adjustments from a range of 15% to 16.5% of gross sales to a range of 16% to 18% of gross sales for 2008.

Cost of goods sold: We have concluded our discussions related to the calculation of cost of goods sold for 2008. We believe that cost of goods sold, for 2008, will remain at current year-to-date levels of approximately 37% of net sales. Cost of goods sold is dependent on many factors, which are outside of the Company's control, including plant utilization, staffing levels and purchasing volumes. Therefore, we cannot accurately determine if future cost of goods sold as a percentage of net sales will increase, decrease or remain the same.

Selling and marketing expenses: We have 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 and Roche's share of the collaboration income was not equal in the third quarter of 2008. For 2007, the Company's and Roche's share of the collaboration income was equal. Depending on the level of marketing expenses for 2008, our share of the collaboration profit may continue to be greater than that of Roche.

Other costs: Other costs for the three months ended September 30, 2008 and 2007 include general and administrative costs and distribution charges. Other costs for the three months ended September 30, 2007 also include inventory write-offs. The Company is responsible for 50% of these costs under the Development and License Agreement.

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

Research and Development Expenses

The table below presents our research and development expenses for the three months ended September 30, 2008 compared to the three months ended September 30, 2007.

Three Months Ended (in thousands) September 30, Increase 2008 2007 (Decrease) Total research and development expenses $ 572 $ 3,809 $ (3,237 )

Total research and development expenses include:

• Development expenses for FUZEON, which we share equally with Roche; and

• Research expenses related to the Phase I clinical trial for TRI-1144, our lead drug candidate.

Total research and development expenses: Total research and development expenses decreased for the three months ended September 30, 2008 compared to the three months ended September 30, 2007, primarily as a result of the following:

• Decreased employee costs as a result of reduced headcount;

• Decreased costs related to TRI-1144 as we are in the final stages of reporting the results from this trial;

• Decreased expenses related to our employee share-based compensation; and

• Decrease in supplies related to the reduction of research and development activities.

We expect total research and development expenses, including payments to Roche for 2008 FUZEON development costs, to be less than those incurred in 2007, as a result of the 2008 strategic plan which eliminated all research and development personnel at Trimeris after June 30, 2008. After June 30, 2008, we believe that research and development expenses will be primarily related to the ongoing post marketing commitments with the FDA for FUZEON and the close out of our Phase I clinical trial for TRI-1144.

General and Administrative Expenses

The table below presents our general and administrative expenses for the three months ended September 30, 2008 compared to the three months ended September 30, 2007.

Three Months Ended (in thousands) September 30, Increase 2008 2007 (Decrease) Total general and administrative expenses $ 1,519 $ 1,674 $ (155 )

Total general and administrative expenses: Total general and administrative expenses decreased for the three months ended September 30, 2008 compared to the three months ended September 30, 2007, primarily as a result of the following:

• Decreased employee costs as a result of reduced headcount;

• Decreased expenses related to our employee share-based compensation.

We expect general and administrative expenses to decrease in 2008, when compared to 2007, as a result of the 2008 strategic plan which eliminated most general and administrative personnel at Trimeris after June 30, 2008.

Gains on disposal of equipment: The table below presents the gain on the disposal of equipment for the three months ended September 30, 2008 and 2007.

Three Months Ended (in thousands) September 30, Increase 2008 2007 (Decrease) Gain on disposal of equipment $ 10 $ - $ 10

Other Income (Expense): The table below presents our other income (expense) for the three months ended September 30, 2008 and 2007.

                                        Three Months Ended
           (in thousands)                  September 30,            Increase
                                       2008            2007        (Decrease)
           Interest income           $    397       $      815     $      (418 )
           Gain on investments            (15 )             -              (15 )
           Interest expense               (96 )           (115 )            19

           Total other income, net   $    286       $      700     $      (414 )

Interest income decreased for the three months ended September 30, 2008 primarily due to the interest rate environment and lower cash balances as a result of the special dividend paid on June 6, 2008.

Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as "Accrued marketing costs." Our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of any additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. We are increasing the liability over time to the expected payment amount. During the first quarter of 2008, the Company revised the estimated date that payments will begin from 2014 to 2017. As a result, we will accrete the marketing debt over a longer period of time resulting in lower interest expense in any particular period.

Income Tax Provision

We recognized an income tax expense of $47,000 in the third quarter of 2008 compared to income tax expense of $54,000 in the third quarter of 2007. For 2008, the Company believes, based on current estimates, that the effective annual blended tax rate is approximately 1.7%.

Currently, we carry a full valuation allowance against our deferred tax assets, the majority of which represent net operating loss tax carry forwards which we generated prior to achieving profitability. In the future, we may need to reduce the valuation allowance and recognize a deferred tax benefit. Management assesses this potential based upon all available evidence, including the last nine quarters of profitability, and forecasts. At the end of the third quarter, management determined that it was not appropriate to reduce the valuation allowance.

RESULTS OF OPERATIONS

Comparison of Nine Months ended September 30, 2008 and 2007

Revenues

The table below presents our revenue sources for the nine months ended
September 30, 2008 compared to the nine months ended September 30, 2007.



                                                Nine Months Ended
     (in thousands)                               September 30,         Increase
                                                 2008        2007      (Decrease)
     Milestone revenue                        $      199   $  9,369   $     (9,170 )
     Royalty revenue                               8,663     11,862         (3,199 )
     Collaboration income                          6,870     15,692         (8,822 )

     Total revenue and collaboration income   $   15,732   $ 36,923   $    (21,191 )

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

The table below presents our achieved milestones from Roche as of September 30, 2008 in thousands.We are recognizing the milestones with remaining unrecognized balances on a straight-line basis over the estimated commercial period of FUZEON.

                                            Total Revenue      Revenue for the Nine
         Milestone                       Recognized Through        Months Ended        End of Recognition
           Total       Date Achieved     September 30, 2008     September 30, 2008           Period
        $     2,500     June      2003   $             1,272   $                 150        November 2014  *
                750     June      2004                   343                      49        November 2014  *

Total   $     3,250                      $             1,615   $                 199

* During the third quarter of 2007, the Company extended the recognition of the remaining milestones through November 2014 as the patent term associated with these milestones was extended through this date. The original expiration of the associated patents was June 2013.

Milestone revenue decreased for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007, as a result of the acceleration of all revenue recognition for certain past milestone payments received from Roche into the first quarter of 2007. On March 13, 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement. Under this agreement, all rights and joint patents and other intellectual property rights to the next generation fusion inhibitor peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue recognition for past milestone payments received from Roche into the first quarter of 2007 because our period of joint development ended. These milestone payments were previously being amortized over the length of the joint research and development period of the next generation fusion inhibitor peptides or through December 2012.

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 nine months ended September 30, 2008 as compared to the nine months ended September 30 2007, 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 nine months ended September 30, 2008 and 2007, were $78.5 million and $107.5 million, respectively.

Collaboration income: The table below presents our collaboration income (United States and Canada) for the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007. Collaboration income is reported on our Statements of Operations as a component of revenue. Under our Development and License Agreement with Roche, we share gross profits equally from the sale of FUZEON in the United States and Canada. The sharing of expenses is according to contractual arrangements and is not equal in all cases. FUZEON was launched commercially in March 2003.

                                                  Nine Months Ended
     (in thousands)                                 September 30,
                                                 2008          2007         Change
     Gross FUZEON sales by Roche               $  58,342     $ 110,336     $ (51,994 )
     Less sales adjustments                      (10,325 )     (17,516 )       7,191
     Sales adjustments as a % of Gross Sales          18 %          16 %

     Net sales                                    48,017        92,820       (44,803 )
     Cost of goods sold                          (17,649 )     (30,807 )      13,158
     Cost of goods sold as a % of Net Sales           37 %          33 %

     Gross profit                                 30,368        62,013       (31,645 )
     Gross profit as a % of Net Sales                 63 %          67 %
     Selling and marketing expenses              (16,129 )     (26,794 )      10,665
     Other costs                                  (2,223 )      (2,568 )         345

     Total shared profit                          12,016        32,651       (20,635 )
     Trimeris share *                              7,306        16,325        (9,019 )
     Costs exclusive to Trimeris                    (436 )        (633 )         197

     Net income from collaboration             $   6,870     $  15,692     $  (8,822 )

* We have 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 and Roche's share of the collaboration income was not equal in the first nine months of 2008. For 2007, the Company's and Roche's share of the collaboration income was equal. Depending on the level of marketing expenses for 2008 our share of the collaboration profit may continue to be greater than that of Roche.

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

Sales adjustments: Sales adjustments are recorded by Roche based on their experience with selling FUZEON. Based on discussions with Roche we have increased our expectation for sales adjustments from a range of 15% to 16.5% of gross sales to a range of 16% to 18% of gross sales.

Cost of goods sold: We have concluded our discussions related to the calculation of cost of goods sold for 2008. We believe that cost of goods sold, for 2008, will remain at current levels of approximately 37% of net sales. Cost of goods sold is dependent on many factors, which are outside of the Company's control, including plant utilization, staffing levels and purchasing volumes. Therefore we cannot accurately determine if future cost of goods sold as a percentage of net sales will increase, decrease or remain the same.

Selling and marketing expenses: We have exercised our right under our . . .