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 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 2009, the Company recorded net income of $1.6 million, or $.07 per share, compared to $3.6 million or $0.16 per share, in the third quarter of 2008. This result was primarily driven by decreased FUZEON® sales, an increase in tax expense, offset in part, by lower operating expenses.

2009 will continue to be a year of transition for Trimeris:

• Strategic Alternatives - As discussed in Note 1, Basis of Presentation, and Note 10, Subsequent Events, in the notes to our unaudited condensed financial statements in Item 1 above, on October 2, 2009 the Company entered into the Merger Agreement with Arigene pursuant to which Arigene has commenced the Tender Offer to purchase all of the outstanding shares of the Company common stock. If the Tender Offer and subsequent Merger contemplated by the Merger Agreement are consummated, the Company will become a wholly owned subsidiary of Arigene. Pursuant to Arigene's Offer to Purchase, filed with the SEC on October 19, 2009, Arigene has disclosed that it expects that, following the Merger, the business and operations of the Company will be continued substantially as they are currently being conducted. Notwithstanding the foregoing, Arigene will continue to evaluate the business and operations of the Company during the pendency of the Tender Offer and after the consummation of the Tender Offer and the Merger and will take such actions as it deems appropriate under the circumstances then existing with a view to optimizing development of the Company's potential in conjunction with Arigene's existing business. Notwithstanding the pendency of the proposed transactions described above, we are actively managing our business as follows:

• Profitability - We are focusing our efforts on maintaining profitability based on FUZEON sales.

• FUZEON Sales and Marketing - We continue to believe that our selling and marketing expense in 2009 will be lower than 2008, as we have exercised again 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.

• 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.

• Cost of Goods Sold - We have 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. 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 on-going, 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.

RESULTS OF OPERATIONS

Comparison Of Three Months Ended September 30, 2009 and September 30, 2008

Revenues

The table below presents our revenue sources for the three months ended
September 30, 2009 compared to the three months ended September 30, 2008.



                                               Three Months Ended       Increase
    (in thousands)                               September 30,         (Decrease)
                                                2009         2008
    Milestone revenue                        $       67    $     67   $         -
    Royalty revenue                               2,141       3,373         (1,232 )
    Collaboration income                          1,702       1,756            (54 )


    Total revenue and collaboration income   $    3,910    $  5,196   $     (1,286 )

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

The table below presents certain achieved milestones from Roche as of September 30, 2009. We are recognizing the milestones with remaining unrecognized balances on a straight-line basis through the expiration of certain FUZEON patents.

                                                    Total Revenue        Revenue Recognized
                                                     Recognized             for the Three
                  Milestone                     Through September 30,       Months Ended       End of Recognition
(in thousands)      Total      Date Achieved            2009             September 30, 2009          Period
                 $     2,500    June  2003     $                 1,471   $                50     November 2014
                         750    June  2004                         409                    17     November 2014

Total            $     3,250                   $                 1,880   $                67

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, 2009 as compared to the three months ended September 30, 2008 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, 2009 and September 30, 2008, were $19.4 million and $30.6 million, respectively.

Collaboration income: The table below presents our collaboration income (United States and Canada) for the three months ended September 30, 2009 compared to the three months ended September 30, 2008. Collaboration income is reported on our condensed Statements of Operations as a component of revenue. 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. FUZEON sales have been significantly impacted by the market introduction of three new oral HIV agents in late 2007 and early 2008.

                                                 Three Months Ended
     (dollars in thousands)                         September 30,
                                                 2009           2008         Change

     Gross FUZEON sales by Roche               $  13,844      $ 18,077      $ (4,233 )
     Less sales adjustments                       (3,467 )      (3,137 )        (330 )
     Sales adjustments as a % of Gross Sales          25 %          17 %


     Net sales                                    10,377        14,940        (4,563 )
     Cost of goods sold                           (3,732 )      (5,429 )       1,697
     Cost of goods sold as a % of Net Sales           36 %          36 %


     Gross profit                                  6,645         9,511        (2,866 )
     Gross profit as a % of Net Sales                 64 %          64 %
     Selling and marketing expenses               (2,860 )      (5,345 )       2,485
     Roche development expenses                     (124 )        (410 )         286
     Other costs                                    (118 )        (790 )         672

     Total shared profit                           3,543         2,966           577
     Trimeris share *                              1,772         1,880          (108 )
     Costs exclusive to Trimeris                     (70 )        (124 )          54


     Collaboration income                      $   1,702      $  1,756      $    (54 )

* 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 2009 or 2008. Depending on the level of marketing expenses for 2009, 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 2009 and 2008.

                           Kits Shipped    2009     2008
                           Q1              5,000    9,600
                           Q2              4,800    9,000
                           Q3              5,500    7,900
                           Q4                 -     9,500

                           Total          15,300   36,000

Sales adjustments: Sales adjustments are recorded by Roche based on their experience with selling FUZEON. Based on discussions with Roche, we expect sales adjustments for 2009 to fall within a range of 16% to 18% of gross sales for 2009. Sales adjustments for the third quarter of 2009 were higher than expected as a result of adjustments to reflect actual YTD commercial and government contracting.

Cost of goods sold: We have 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. 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 on-going, 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.

During 2008, we recorded a reserve for 2008 excess capacity charges in the amount of $4.1 million to be shared equally between Roche and Trimeris. In the first quarter of 2009, Roche informed us that actual excess capacity charges for 2008 were $1.9 million. The difference of $2.2 million has been recorded as a credit to cost of goods sold for the first quarter of 2009. Trimeris' share of this credit was $1.1 million. We are disputing with Roche the remainder of the excess capacity charges for 2008. 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: 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 2009 or 2008. Depending on the level of marketing expenses for 2009, our share of the collaboration profit may continue to be greater than that of Roche.

Roche development expenses: On January 1, 2009, we adopted Financial Accounting Standards Board, or ("FASB"), Accounting Standards Codification ("ASC"), Topic 808, "Collaborative Arrangements," ("ASC 808"). As a result, all development expenses generated at Roche related to FUZEON are included in the Company's collaboration income. Prior to January 1, 2009, such amounts were presented in research and development expenses. Prior period amounts have been reclassified to conform to the current period's presentation.

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 development costs to continue to decline as a majority of activities have been completed.

Other costs: Other costs for the three months ended September 30, 2009 and September 30, 2008 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.

Research and Development Expenses

The table below presents our research and development expenses for the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

Total research and development expenses $ - $ 367 $ (367 )

On January 1, 2009, we adopted ASC 808. As a result, we reclassified $205,000 from research and development expenses in the three months ended September 30, 2008 to collaboration income (see discussion above "Collaboration Income").

Total research and development expenses for 2008 primarily related to the preclinical development of the next generation HIV fusion inhibitor peptide TRI-1144 for which the Company has subsequently discontinued research and development. The Company no longer incurs any research and development expenses.

General and Administrative Expenses

The table below presents our general and administrative expenses for the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

Total general and administrative expenses $ 1,669 $ 1,519 $ 150

Total general and administrative expenses increased for the three months ended September 30, 2009 compared to the three months ended September 30, 2008, primarily as a result of activities related to the negotiation of the Merger Agreement with Arigene and the Purchaser.

We expect general and administrative expenses to decrease in 2009, when compared to 2008, as a result of the 2008 strategic plan which eliminated most general and administrative personnel at Trimeris after June 30, 2008 and reduced operating lease expenses.

Gain on disposal of equipment: The table below presents the gain on the disposal of equipment for the three months ended September 30, 2009 and September 30, 2008.

                                          Three Months Ended
       (in thousands)                        September 30,
                                                                     Increase
                                          2009           2008       (Decrease)

       Gain on disposal of equipment   $       -      $       10   $        (10 )

The gain on disposal of equipment for 2008 was due to the Company selling property, furniture and equipment due to the Company relocating its corporate office and shutting down the previous laboratory and office space.

Other Income (Expense): The table below presents our other income (expense) for the three months ended September 30, 2009 and September 30, 2008.

                                         Three Months Ended
          (in thousands)                    September 30,
                                                                     Increase
                                         2009            2008       (Decrease)

          Interest income              $     59         $  397      $      (338 )
          Gain/(Loss) on investments        241            (15 )            256
          Interest expense                  (64 )          (96 )             32


          Total other income, net      $    236         $  286      $       (50 )

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

Interest expense relates to the accretion of the excess marketing expenses recorded on the balance sheets as "Accrued marketing costs." The Company and Roche agreed to limit the Company's actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, the Company's share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. During the fourth

quarter of 2008, we revised our estimate of the date that payments will begin from 2017 to 2022. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company's estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the Development and License Agreement, discounted at a risk free interest rate. The Company is increasing the liability over time to the expected payment amount. For the three months ended September 30, 2009 and September 30, 2008, the Company increased the recorded liability by $64,000 and $96,000, respectively, for accretion of interest. The total liability of $18.5 million and $18.3 million at September 30, 2009 and December 31, 2008 is reflected on our condensed balance sheet.

Income Tax Provision

We recognized income tax expense of $833,000 in the third quarter of 2009 compared to an income tax expense of $47,000 in the third quarter of 2008. For 2009, the Company believes, based on current estimates, that the effective annual blended tax rate is approximately 34.2%.

At December 31, 2008, the Company had net operating loss carryforwards ("NOLs") for federal tax purposes of approximately $302.4 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 ("IRC"), as amended, occurred during 2008. The effect of this ownership change is 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 $7.8 million of NOL carryforwards will be available for utilization prior to 2025.

In the fourth quarter of 2008, we recognized a deferred tax benefit of $506,000 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 eleven 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 Nine Months Ended September 30, 2009 and September 30, 2008

Revenues

The table below presents our revenue sources for the nine months ended
September 30, 2009 compared to the nine months ended September 30, 2008.



                                                Nine Months Ended       Increase
     (in thousands)                               September 30,        (Decrease)
                                                 2009        2008
     Milestone revenue                        $      199   $    199   $         -
     Royalty revenue                               6,251      8,663         (2,412 )
     Collaboration income                          5,555      6,154           (599 )


     Total revenue and collaboration income   $   12,005   $ 15,016   $     (3,011 )

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

The table below presents certain achieved milestones from Roche as of September 30, 2009. We are recognizing the milestones with remaining unrecognized balances on a straight-line basis through the expiration of certain FUZEON patents.

                                                    Total Revenue
                                                     Recognized          Revenue for the Nine
                  Milestone                     Through September 30,        Months Ended        End of Recognition
                    Total      Date Achieved            2009              September 30, 2009           Period
(in thousands)
                 $     2,500    June  2003     $                 1,471   $                 150     November 2014
                         750    June  2004                         409                      49     November 2014

Total            $     3,250                   $                 1,880   $                 199

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, 2009 as compared to the nine months ended September 30 2008, 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, 2009 and September 30, 2008, were $56.6 million and $78.5 million, respectively.

Collaboration income: The table below presents our collaboration income (United States and Canada) for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. 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. FUZEON sales have been significantly impacted by the market introduction of three new oral HIV agents in late 2007 and early 2008.

                                                 Nine Months Ended
    (dollars in thousands)                         September 30,
                                                2009          2008          Change

    Gross FUZEON sales by Roche               $ 37,906      $  58,342      $ (20,436 )
    Less sales adjustments                      (7,828 )      (10,325 )        2,497
    Sales adjustments as a % of Gross Sales         21 %           18 %


    Net sales                                   30,078         48,017        (17,939 )
    Cost of goods sold                          (8,306 )      (17,649 )        9,343
    Cost of goods sold as a % of Net Sales          28 %           37 %


    Gross profit                                21,772         30,368         (8,596 )
. . .