UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

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

For the transition period from                      to                     

Commission File Number 0-23155

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.)

3500 PARAMOUNT PARKWAY

MORRISVILLE, NORTH CAROLINA 27560

(Address of principal executive offices, including zip code)

(919) 419-6050

Registrant’s telephone number, including area code:

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.001 par value	The NASDAQ Stock Market, LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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

Large accelerated filer   ¨ Accelerated filer  x Non-accelerated filer  ¨ Smaller reporting company  ¨

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 aggregate market value of the voting stock held by non-affiliates of the registrant, as of June 29, 2007 was approximately $64,965,300 (based on the last sale price of such stock as reported by The NASDAQ Stock Market, LLC, on its NASDAQ Global Market on June 29, 2007).

The number of shares of the registrant’s common stock outstanding as of March 7, 2008 was 22,272,122.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement for the 2008 Annual Meeting of Stockholders, and to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year are incorporated by reference in Part III of this Form 10-K.

TRIMERIS, INC.

FORM 10-K ANNUAL REPORT

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

Table of Contents

Item Number		Page
	PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Submission of Matters to a Vote of Security Holders	25
	PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 8.	Financial Statements and Supplementary Data	48
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	48
Item 9A.	Controls and Procedures	48
	PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	50
Item 11.	Executive Compensation	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence	50
Item 14.	Principal Accountant Fees and Services	50
	PART IV.
Item 15.	Exhibits and Financial Statement Schedules	51
Signature Page		S-1
Exhibit Index		S-2

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PART I

ITEM 1.    BUSINESS

Statements in this Annual Report on Form 10-K that are not historical fact are forward-looking statements. These forward-looking statements include statements regarding Trimeris, Inc.’s (“Trimeris” or the “Company”) expectations, hopes, beliefs, intentions or strategies regarding the future and are subject to a number of known and unknown risks and uncertainties, many of which are beyond our control. Such 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. While we believe these statements are accurate, our business is dependent on many factors, some of which are discussed in the “Risk Factors” and “Business” sections of this Annual Report on Form 10-K. Many of these factors are beyond our control, and any of these and other factors could cause actual clinical and financial results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials and our previous financial results are not necessarily indicative of our future financial results. Please read the “Risk Factors” section in this Annual Report on Form 10-K for further information regarding these factors. We undertake no obligation to release publicly the results of any revisions to the statements contained in this report to reflect events or circumstances that occur subsequent to the date of this Annual Report on Form 10-K.

Overview

We are a biopharmaceutical company primarily engaged in the commercialization of a class of antiviral drug treatments called fusion inhibitors. Fusion inhibitors impair viral fusion, a complex process by which viruses attach to, penetrate and infect host cells. If a virus cannot enter a host cell, the virus cannot replicate. By inhibiting the fusion process of particular types of viruses, like the Human Immunodeficiency Virus (“HIV”), our first commercial product and our next generation fusion inhibitor under research offer a novel mechanism of action with the potential to treat an important medical viral disease, HIV. We recently announced a change in strategic direction that involves terminating our research and development activities.

FUZEON is our first-generation HIV fusion inhibitor, developed in collaboration with F. Hoffmann-La Roche Ltd., (“Roche”). FUZEON has been shown to inhibit HIV viral fusion with host cells by blocking the conformational rearrangement of an HIV protein called gp41. The Food and Drug Administration (“FDA”) approved the use of FUZEON in combination with other anti-HIV drugs for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing anti-HIV therapy. The FDA granted accelerated approval for the commercial sale of FUZEON in 2003, and commercial sales of FUZEON began in March that same year. Full approval was granted in October 2004. Roche also filed an application for European marketing approval of FUZEON in September 2002 and was granted marketing approval under exceptional circumstances by the European Agency for the Evaluation of Medicinal Products in May 2003.

Roche is manufacturing FUZEON drug substance in its Boulder, Colorado facility. Roche uses this drug substance to produce FUZEON finished drug product at their manufacturing facility in Basel, Switzerland. FUZEON is distributed and sold by Roche through Roche’s sales and distribution network throughout the world in countries where regulatory approval has been received.

Commercial sales of FUZEON began in the United States in March 2003. Under our Development and License Agreement (defined below) with Roche, we share profits equally from the sale of FUZEON in the United States and Canada. During 2007, net sales of FUZEON in the United States and Canada decreased 7.3% to $124.3 from $134.2 million in 2006, and were $112.7 million in 2005. Net sales outside the United States and Canada grew 24.1% to $142.5 million in 2007 from $114.8 million in 2006 and were $95.5 million in 2005. Unit sales of FUZEON are expressed in kits shipped. A kit represents a one-month supply of FUZEON for a patient. During 2007, Roche sold and shipped approximately 72,200 kits to wholesalers in the United States and Canada.

In March 2007, the Company entered into an agreement with Roche that further amended the terms of the Research Agreement. Pursuant to this March 2007 agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides covered by the Research Agreement were returned to Trimeris.

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In exchange, Trimeris agreed to pay Roche a low single-digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit. In addition, Roche agreed to return the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche has retained an exclusive license to manufacture and sell FUZEON worldwide.

In late 2007, we shifted our strategic emphasis and announced that we would be reorganizing our corporate structure to maximize cash flows from FUZEON while also advancing TRI-1144 to a value-creating milestone. As a result, by the end of 2008, we expect that the Company will no longer be staffing a research and development function.

With this new structure in place, the Company intends to meet the following objectives during 2008:

• Continue activities that will help maintain the strength of the FUZEON franchise while relying more on Roche’s commercial and development capabilities.

• Initiate and complete a Phase I clinical trial of TRI-1144, our lead Next Generation Fusion Inhibitor (“NGFI”) peptide.

• Pursue strategic alternatives for the Company.

Commercial Products

FUZEON

FUZEON is our first and only marketed product for the treatment of HIV. The FDA has approved the use of FUZEON in combination with other anti-HIV drugs for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing anti-HIV therapy. The standard approach to treating HIV infection has been to lower viral loads by using a combination of drugs. There are approximately 30 FDA-approved drugs for the treatment of HIV.

FUZEON Mechanism of Action

FUZEON is a 36-amino acid synthetic peptide that binds to a key region of an HIV surface protein called gp41. FUZEON blocks HIV viral fusion by interfering with certain structural rearrangements within gp41 that are required for HIV to fuse to and enter a host cell.

In the HIV infection process, the gp120 surface protein is stripped away from the virus after gp120 binds to host cell receptors. Two specific regions in the gp41 protein are thus freed and can bind to one another and cause the viral membrane to fuse with the host cell membrane. If FUZEON is present in the bloodstream, it binds tightly to one of these regions within the gp41 protein and blocks the structural rearrangement necessary for the virus to fuse with the host cell. Since the virus cannot fuse with the host cell, it cannot penetrate and release its genetic material into the cell. As a result, HIV infection of the host cell is inhibited and HIV replication within that cell is prevented.

Commercial Results

Under our Development and License Agreement with Roche, Trimeris and Roche share profits from the sale of FUZEON in the United States and Canada. This amount is reported as collaboration income or loss, as a component of revenue, in the Statements of Operations. Collaboration income (loss) 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 margin. Gross margin is reduced by selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income (loss). For the year ended December 31, 2007, net sales of FUZEON in the United States and Canada totaled approximately $124.3 million compared to $134.2 million in 2006 and $112.7 million in 2005. During the year ended December 31, 2007, the gross profit from the sale of FUZEON exceeded sales, marketing and other expenses resulting in the Company’s share of operating income from the sale of FUZEON in the United States and Canada of $24.2 million compared to $21.7 million in 2006 and $8.6 million for 2005. Unit sales of FUZEON are expressed in kits shipped. A kit represents a one-month supply of FUZEON for a

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patient. For the year ended December 31, 2007, Roche sold and shipped approximately 72,200 kits, compared to 79,700 kits in 2006 and 72,000 kits in 2005. The number of kits shipped and the resulting sales levels may not remain constant and may increase or decrease in the future.

FUZEON is widely available through retail and specialty pharmacies across the U.S. and Canada. Revenue from FUZEON sales is recognized when Roche ships the drug, and title and risk of loss passes to wholesalers. All sales are recorded by Roche.

Under our Development and License Agreement with Roche, we receive a royalty based on net sales of FUZEON, as recorded by Roche, outside the United States and Canada. For the year ended December 31, 2007, net sales of FUZEON, as recorded by Roche, outside the United States and Canada were $142.5 million, as compared to $114.8 million in 2006 and $95.5 million in 2005. FUZEON is commercially available in over 55 countries, including all the major countries in Europe.

Regulatory

In October 2004, the FDA granted full approval to FUZEON. The FDA had previously granted accelerated approval to FUZEON on the basis of 24-week data in March 2003.

In June 2004, the European Medicines Evaluation Agency, (“EMEA”) granted full approval to Roche to market FUZEON in the European Union. Outside the United States, Roche has received approval and reimbursement for FUZEON in over 55 countries.

Manufacturing

Roche manufactures the bulk drug substance of FUZEON. Based on our progress and experience to date, we believe that Roche will be able to produce a supply of FUZEON sufficient to meet anticipated demand. If FUZEON sales levels do not meet Roche’s and our expectations, the resulting production volumes may not allow Roche to achieve its anticipated economies of scale for FUZEON. If Roche does not achieve these economies of scale, the costs of goods for FUZEON could increase.

Roche performs the fill-finish and all final product storage and packaging operations for FUZEON. Raw materials and supplies required for the production of FUZEON are generally available from various suppliers in quantities adequate to meet our needs. Each of our third-party service providers, suppliers and manufacturers are subject to continuing inspection by the FDA or comparable agencies in other jurisdictions. Any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products, including as a result of a failure of Roche’s or our third-party service provider’s facilities to pass any regulatory agency inspection, could significantly impair our ability to sell FUZEON.

We believe that Roche’s existing manufacturing facilities and outside sources will allow us to meet our near-term and long-term manufacturing needs for FUZEON. Roche’s manufacturing facilities operate under multiple licenses from the FDA, regulatory authorities in the EU and other regulatory authorities.

2007 Results and Developments

Given the demonstrated efficacy, durability and safety of FUZEON-based therapies in treatment experienced patients, we, in concert with our partner Roche, have focused much of our promotional efforts on three primary objectives: expanding the adoption and initiation of therapy with FUZEON, enhancing retention of patients on therapy, and ensuring full access for individuals that have been prescribed FUZEON. Following our corporate restructurings in 2006 and 2007, Trimeris has taken a lesser role in the day-to-day activities involved in the commercial support of FUZEON in the marketplace than in years prior. We expect Roche to continue with the current and planned major commercial initiatives with greater overall efficiency.

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New Market Entrants

In 2007, two new antiretroviral agents received U.S. FDA marketing approval (SELZENTRY^® and ISENTRESS^®) with a third (INTELENCE^®) approved in January 2008. Data from clinical trials with these new agents continued to demonstrate the benefits of combining FUZEON in regimens that contain these new, active agents. Nevertheless, the availability of a variety of new active agents for use in treatment-experienced patients has placed significant pressure on U.S. FUZEON. Sales for the fourth quarter of 2007, in dollars, were down 25% as compared to the fourth quarter of 2006. Each of these new agents are administered orally and have the potential to provide experienced patients with a more convenient treatment regimen.

The ability to combine FUZEON with active, newly approved drugs, or drugs in late stages of clinical development, provides treatment-experienced patients with the opportunity to fully re-suppress HIV replication. In order to facilitate immediate access to FUZEON for treatment-experienced patients involved in studies of new, active agents, Trimeris and Roche continue to support the FUZEON Accelerated Simultaneous Access Program (“ASAP”). This program provides immediate access to FUZEON for patients who are starting treatment with FUZEON in combination with an investigational anti-HIV drug obtained through an expanded access program (“EAP”). FUZEON ASAP helps to facilitate simultaneous initiation of FUZEON with an active investigational agent, in a regimen deemed medically appropriate by a physician. For patients starting treatment with FUZEON in combination with an investigational drug in expanded access, FUZEON ASAP provides up to a 90-day supply of FUZEON at no cost to the patient. Upon request, patient support and adherence programs, including Connections nurse visits, are provided to help facilitate successful initiation and continuation of therapy. Trimeris and Roche cannot ensure access to FUZEON for all patients beyond the initial 90 days if reimbursement is not then established. However, reimbursement assistance is available to assist in securing coverage for continued FUZEON use.

Alternative Administration

Since the commercial launch of FUZEON in 2003, we, along with Roche, have been exploring ways to enhance a patient’s ability to initiate and remain on FUZEON containing therapies, including the potential for using the Biojector 2000 (“B2000”) needle-free delivery system.

The B2000 has been used to deliver millions of injections in a wide range of healthcare settings since receiving FDA approval in 1996. The B2000 needle-free injection works by forcing medication rapidly through a tiny orifice held against the skin, creating a fine stream of fluid that penetrates the skin and deposits medication in the subcutaneous tissue. Positive data from the T-20 405 bioequivalence study of the B2000 needle-free device (versus standard needle/syringe) formed the basis for a supplemental NDA application (“sNDA”) to the FDA in May 2005 to include use of the B2000 for administration in the FUZEON label.

In 2005, the FDA issued an approvable letter regarding the B2000 sNDA. In its reply, the FDA indicated that the filing was approvable pending receipt of the final study report from the ongoing FUZEON WAND (With a Needle-Free Device; ENF-404) study, a randomized, open-label, two-way, cross-over study assessing the tolerability of the B2000 device for administration of FUZEON.

In 2006, the Company presented results from the WAND trial, showing that it achieved the primary endpoint of a 50% reduction in the incidence of painful injection site reactions or ISR's with use of the B2000 needle-free device compared to standard needle-syringes (36% for the device vs. 71% for needle-syringe, p<0.01). Following use of both administration systems, 84% of patients preferred the B2000 needle-free device versus 16% favoring standard needle/syringe administration.

Later that same year, the Company and Roche had discussions with the FDA regarding the submission of an amended sNDA for inclusion of the B2000 device as an administration option for FUZEON. The FDA acknowledged that, based on currently available evidence, administration with B2000 achieves similar blood levels of FUZEON compared to standard needle-syringe administration. However, the FDA indicated that a small number of certain adverse events related to administration of FUZEON with the B2000 device (hematomas and nerve pain) warrant review of additional information in order to better characterize the incidence of these events. Some of these events

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were associated with use of B2000 to deliver FUZEON either in close proximity to bone joints or into scar tissue. In the current product label, FUZEON is recommended for injection in the upper arm, upper leg and stomach. The FUZEON labeling also cautions against injecting into scar tissue.

Based on this information, the FDA requested additional safety information on the nature and occurrence of ISRs, including data from the FUZEON BOSS (Biojector Open Label Safety Study; ENF 407) trial, as well as from other data sources. Initiated in 2006, BOSS has completed enrollment of approximately 330 current or prior FUZEON patients at 43 trial sites in the U.S. and Puerto Rico in an eight-week study to assess the safety and patient acceptance of B2000 compared to standard needle-syringe administration for FUZEON. Data from BOSS were reported at ICAAC in September 2007 and indicated that use of the B2000 device was associated with an improved ISR profile in ENF-experienced patients, including a reduction in the incidence and severity of treatment-limiting ISRs, and was preferred by the patients compared to a needle and syringe (87.2% vs. 12.5%, respectively).

In advance of receiving additional B2000 safety data, the FDA requested and received changes to the current FUZEON labeling (both Package Insert and Patient Injection Instructions) to add precautions regarding hematoma and nerve pain associated with B2000 administration, as well as precautions regarding the use of the B2000 device in patients with bleeding disorders. In October of 2007, Roche and Trimeris announced that they were withdrawing the sNDA for the B2000 based on a comprehensive assessment of the clinical program as well as the significant delay in achieving U.S. regulatory approval due to the time required to generate additional data. Patients currently administering FUZEON with the device were not advised to discontinue use of the B2000 for administration as long as they continued to follow the precautions in the FUZEON label.

Current and Future FUZEON Clinical Trials

Following the Company’s reduction-in-workforce in 2006 and 2007, Roche has taken the primary role in conducting our current and future FUZEON clinical trials. Roche will be responsible for conducting ongoing clinical trials with FUZEON during 2008. The table below summarizes recently completed, clinical trials.

Name	Description
T20 BOSS	An assessment of the use of the B2000 system in patients at risk of discontinuing FUZEON therapy due to injection-related difficulties.
T20 Intense	Comparative trial in earlier line patients assessing ongoing FUZEON use compared to an induction/ maintenance approach.
T20 SwitchTox	An assessment of the substitution of Anti-Retrovirals (“ARV’s”) associated with undesirable side-effects/toxicities in favor of FUZEON.
T20 BLQ	An assessment of FUZEON in combination with an investigational protease inhibitor.

The T20 BOSS trial involves the use of the currently approved Biojector 2000 needle-free injection device manufactured by Bioject Medical Technologies, Inc., described above.

There are no further clinical trials with FUZEON planned for initiation in 2008.

Roche Collaboration

In 1999, we entered into a worldwide agreement with Roche to develop and market FUZEON and certain other compounds (the “Development and License Agreement”) and, in 2000, we and Roche entered into a research agreement (the “Research Agreement”) to discover develop and commercialize certain additional fusion inhibitor peptides. Our agreements with Roche granted them an exclusive, worldwide license for FUZEON and certain other peptide compounds in the field of HIV. Roche may terminate its license as a whole or for a particular country or countries in its sole discretion with advance notice. We agreed to share development expenses and profits for FUZEON and certain other compounds, in the United States and Canada equally with Roche. Outside of the United States and

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Canada, Roche agreed to fund all development costs and pay us royalties on net sales of FUZEON and the other compounds, for a specified term. In addition, the agreement calls for Trimeris to receive up to $68.0 million in upfront and milestone payments, of which we had achieved $28.3 million as of December 31, 2007. In 2006, Roche and Trimeris amended the terms of the Development and License Agreement to, among other things, modify the payments upon achievement of future milestones. The amendment eliminates the concept of a Replacement Compound (as defined in the Development and License Agreement) and, as a result, Roche remains responsible for only one remaining $5.0 million milestone payment 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.

Our collaboration with Roche is a contractual one and is not a separate legal entity. Consequently, we have no investment in any collaboration entity. All assets used in the manufacture of FUZEON by Roche are owned and operated by Roche.

Roche is responsible for the sales, marketing and distribution of FUZEON and all sales are made through their sales force. The results of our commercial operations are reported on our financial statements as “Collaboration income (loss)” which is calculated as follows: Total gross sales of FUZEON by Roche in the United States and Canada is reduced by estimates for discounts, rebates and returns resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross margin. Gross margin is reduced by selling and marketing expenses and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income (loss) is reported as collaboration income (loss). This information is disclosed below in “Management’s Discussion and Analysis of Financial Condition and Results of Operation—Critical Accounting Policies—Collaboration Income (Loss).”

Substantially all of the data used to calculate the collaboration income (loss) is derived from information provided by Roche. We compare sales amounts to data from third party services such as IMS for accuracy. Roche’s estimate of discounts, rebates and returns is first reviewed by Trimeris based on their knowledge of the payor mix and other factors. The collaboration has a North American Joint Marketing Committee (“NAJMC”), that oversees the commercialization activities related to FUZEON. The NAJMC consists of representatives from Roche and Trimeris. The NAJMC reviews the budgets for the direct marketing costs and Roche sales force costs charged to FUZEON and the costs of departments at Roche that devote time to FUZEON-related issues, such as government affairs and reimbursement. The actual costs are reviewed by the Trimeris NAJMC members and compared to budgeted amounts prior to inclusion in collaboration income (loss). In the event that we are not satisfied after reviewing the actual costs, we will withhold payment until presented with satisfactory documentation or appropriate adjustments to the charges are made.

We recognize 50% of the total collaboration gross profit (loss), which includes estimates made by and recorded by Roche for 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. Estimates for government rebate programs and cash discounts are determined by Roche based on contractual terms, historical information from Roche’s anti-HIV drug portfolio and Roche’s expectations regarding future utilization rates for these programs. Estimates for product returns are based on an on-going analysis of industry return patterns and historical return patterns by Roche for its anti-HIV drug portfolio. This includes the purchase of third-party data by Roche to assist Roche and us in monitoring channel inventory levels and subsequent prescriptions for FUZEON. We also monitor the activities and clinical trials of our key competitors and assess the potential impact on future FUZEON sales and return expectations where necessary. Expected returns of FUZEON kits are generally low as FUZEON has a high Wholesale Acquisition Cost (“WAC”), compared to other anti-HIV drugs, and requires significantly more storage space than other anti-HIV drugs due to the size of a monthly kit because FUZEON requires twice daily injections. Consequently, wholesalers tend to stock only the necessary volumes of FUZEON inventory. We believe that, on average, wholesalers hold approximately a 1.5 to 2 week supply of FUZEON that has been sold by Roche to wholesalers, but not yet purchased by patients. For the past three years, we have observed some seasonality in wholesaler purchasing patterns with wholesalers tending to increase on hand supplies of FUZEON to roughly 4 weeks during the fourth quarter. The current shelf life of FUZEON is 36 months. Roche reviews the estimates discussed above on a quarterly basis and adjusts estimates as appropriate for changes in facts or circumstances. This estimate may reduce or increase our share of collaboration income (loss) under our Development and License Agreement.

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In 2005, the Company amended the Development and License Agreement (“Manufacturing Amendment”) with Roche to set forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment addressed several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche became responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche became financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the United States and Canada. In addition, Roche became responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee governs the schedule of converting supply chain materials that are in inventory as of that date into product.

The Manufacturing Amendment outlined certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions. For further discussion of accounting matters related to the Manufacturing Amendment, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and Note 9—“Roche Collaboration” in the “Notes to the Financial Statements.”

In March 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement. Pursuant to this March 2007 agreement, all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides covered by the Research Agreement were returned to Trimeris. In exchange, Trimeris agreed to pay Roche a low single-digit royalty on future net sales of our lead NGFI candidate, TRI-1144, up to a specified limit. In addition, Roche agreed to return to Trimeris the rights to all intellectual property that Trimeris originally licensed to Roche under the Development and License Agreement, with the exception that Roche has retained an exclusive license to manufacture and sell FUZEON worldwide.

Prior to the execution of this agreement, Roche and Trimeris shared equally all costs related to the research and development of TRI-1144. Beginning in March 2007, all costs related to TRI-1144 research and development is borne solely by Trimeris. Trimeris has the sole right to continue development of TRI-1144, has filed for an Investigational New Drug Application with the FDA for TRI-1144 and is set to begin a Phase I/II clinical trial with this compound in March of 2008. No further studies beyond this Phase I study are being contemplated at this time.

Research

Prior to our re-organization in late 2007, we conducted research and development activities both internally and with our collaborative partners. Our research efforts focused primarily on treating viral diseases by identifying novel mechanisms for blocking viral entry. In total, our research and development (“R&D”) expenses were $12.9 million in 2007 compared with $18.3 million for each of 2006 and 2005. We do not plan to conduct research and development activities after the completion of the TRI-1144 Phase I clinical trial and do not expect to staff a research and development function after June 2008.

Viral Fusion Inhibitors

Viruses utilize the intracellular machinery of a cell to make components that are necessary for viral replication. Viruses cause disease when their uncontrolled replication interferes with the basic function of the invaded cells. The attraction of a virus to the cell it infects is based upon a specific interaction between the receptors on the surface of the target cell and the virus.

Viral infection of cells occurs through a cyclical, multi-step process, consisting of viral entry, intracellular replication and release. Once the viral genetic material is inside the target cell, this material then directs the target cell to produce viral proteins and enzymes that are necessary to complete the replication cycle of the virus. When viral replication is completed, newly formed viruses are released from the cell. These newly formed viruses spread by infecting new cells. The cycle is repeated when the replicated virus infects the new cells.

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Currently marketed antiviral therapies typically target specific enzymes that viruses use to replicate. Other compounds that are in clinical development, including ours, focus on the entry of the viruses into target cells. We have pioneered the discovery and development of a new class of anti-HIV compounds, called fusion inhibitors, that prevents one of the crucial steps in viral entry from occurring by blocking the conformational rearrangement of HIV required to allow HIV to fuse with a host cell. FUZEON is a first-generation fusion inhibitor that prevents HIV from entering and infecting cells.

TRI-1144

With respect to our next generation peptide program, our intention has been to identify a NGFI candidate that has an optimized virological and pharmacokinetic profile as well as to identify a sustained-release formulation for that peptide that will allow significantly less frequent dosing.

In January 2006, Roche and Trimeris announced the selection of two NGFI peptides for co-development and progression into further pre-clinical studies. The peptides, TRI-1144 and TRI-999, first synthesized at Trimeris, are distinct compounds derived from HR2 sequences of HIV. In connection with the announcement of the selection of two NGFI peptides for co-development and progression into further pre-clinical studies, Trimeris received a payment from Roche of $2.5 million. In September 2006, Roche and Trimeris agreed that, based on the results of completed preclinical testing, TRI-1144 had met the criteria previously established by the companies for further development. As a result, TRI-1144 was advanced as the lead pre-clinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be developed further.

TRI-1144 has been developed with the specific goal of achieving durable suppression of HIV by increasing the potency of the molecules and raising their genetic barrier to the development of resistance. Also, central to the development program is increased patient convenience via simpler, more patient-friendly administration with a target of less frequent dosing considering even the possibility of once-weekly dosing formulations. In 2006, data was presented at the Conference on Retroviruses and Opportunistic Infections (“CROI”) indicating that TRI-1144 possesses potent antiviral activity and durable control of HIV replication in vitro, with desirable pharmacokinetic properties in vivo.

More specifically, the studies presented at CROI included evaluations of TRI-1144 in three key areas:

• Potency against FUZEON -sensitive viruses: TRI-1144 demonstrated potent in vitro activity against a panel of 12 clinical isolates with varying degrees of sensitivity to FUZEON. Potency against this panel of FUZEON-sensitive viruses was up to seven times greater than that of FUZEON.

• Activity against FUZEON -resistant viruses and genetic barrier to resistance: TRI-1144 demonstrated substantial improvements in activity compared to FUZEON against viruses with FUZEON-related resistance. In addition, acquisition of resistance to TRI-1144 was very difficult to derive in vitro, as evidenced by prolonged and repeated exposure to the HIV virus in passaging studies. Together, these results suggest a substantially higher genetic barrier to development of resistance for TRI-1144.

• Phamacokinetic properties: TRI-1144 demonstrated slow, extended clearance properties in monkeys, which was four-fold greater than FUZEON, as well as subcutaneous bioavailability of greater than 80 percent.

In 2006, we initiated advanced formulation studies and preclinical toxicology studies with TRI-1144 as well as clinical scale manufacturing of TRI-1144 under current Good Manufacturing Practices (“cGMP”) conditions within our facility in Morrisville, North Carolina.

In March 2007, the Company entered into an agreement with Roche whereby Trimeris now has the sole right to continue development of TRI-1144. Prior to the execution of this agreement, Roche and Trimeris shared equally all costs related to the research and development of TRI-1144. Beginning in March 2007, any future costs related to TRI-1144 research and development that may be incurred will be borne solely by Trimeris. In connection with our 2008 strategic plan, we have filed an Investigational New Drug application (“IND”) for TRI-1144, and have initiated single ascending dose (SAD) Phase I clinical trial for TRI-1144. The complete development plan for TRI-1144, if any,

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has not yet been determined beyond this Phase I trial. It is likely that further development of TRI-1144 beyond the currently planned Phase I trial will require entering into a collaboration with another pharmaceutical company.

Sales, Marketing and Distribution

Trimeris does not exercise direct control over the sales, marketing or distribution of FUZEON. We currently rely on Roche for the sales, marketing and distribution of FUZEON, in accordance with the marketing terms contained in our Development and License agreement with Roche. Roche may terminate this agreement at any time with advance notice. If Roche fails to market FUZEON or our other drug candidates adequately, we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities. If Roche ceases to market FUZEON or our other drug candidates by terminating our agreement, and we were unable to reach agreement with one or more other marketing partners, we would be required to develop internal sales, marketing and distribution capabilities. We may not be able to establish cost-effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms on a timely basis, if at all. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Our agreement with Roche and any sales, marketing or distribution arrangements we establish with other parties gives Roche, and may give those parties, significant control over important aspects of the commercialization of FUZEON and our other drug candidates, including:

• market identification;

• marketing methods;

• pricing;

• drug positioning;

• composition and deployment of sales force; and

• promotional effort and activities.

We may not be able to control the amount or timing of resources that Roche or any third party may devote to our drug candidates.

FUZEON is currently widely available through retail and specialty pharmacies across the United States.

Patents, Proprietary Technology and Trade Secrets

Our success will depend, in part, on our ability, and the ability of our collaborators or licensors, to obtain protection for our products and technologies under United States and foreign patent laws, to preserve our trade secrets and to operate without infringing the proprietary rights of third parties.

We own or have exclusive licenses to 43 issued United States patents, numerous pending United States patent applications, and certain corresponding foreign patents and patent applications. Most of our United States patents issued to date are currently set to expire between 2012 and 2022.

We also rely on trade secrets, know-how and other proprietary information, which we seek to protect, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized disclosure. Our employees, consultants or advisors could disclose our trade secrets or proprietary information to competitors, which would be detrimental to us.

We have an exclusive, worldwide, royalty-bearing license from the New York Blood Center (“NYBC”) under certain U.S. and foreign patents and patent applications relating to certain HIV peptides. Under this license, the Company is required to pay the NYBC a royalty in the amount equal to one-half of one percent of Net Sales (as

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defined in the license) of FUZEON sold by Trimeris, or by a sublicensee, in any calendar year, until such time as $100 million of Net Sales is attained; after which the Company will pay the NYBC a royalty in an amount equal to one-quarter of one percent of Net Sales of FUZEON sold by Trimeris and any sublicensee in any calendar year in any Country where the NYBC has a pending, or issued, unexpired and valid claim contained in the licensed patents. The obligation to pay royalties to the NYBC under the Company’s exclusive license to the patents ends on August 22, 2012. We recognized expense of approximately $758,000, $773,000, and $717,000 during 2007, 2006, and 2005, respectively, for royalty payments due to the NYBC related to the sales of FUZEON.

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”).

The Roche Entities and the Company have not yet been served in this patent suit, brought by Novartis, related to the manufacture and sale of FUZEON (enfuvirtide). FUZEON is an innovative HIV fusion inhibitor that was approved in 2003, having been developed by Roche in collaboration with the Company.

The ‘271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. Roche and the Company are currently reviewing a copy of the complaint, which was obtained from a third party. Roche and the Company will respond to the issues raised in the complaint in due course.

Competition

We are engaged in a segment of the biopharmaceutical industry, the treatment of HIV, that is intensely competitive and changes rapidly. FUZEON competes, and our developmental stage HIV fusion inhibitor, TRI-1144, will compete, with numerous existing therapies. For example, there are 29 different drugs that are currently approved in the United States for the treatment of HIV. In addition, a number of companies are pursuing the development of novel pharmaceutical products that target HIV. Some companies, including several multi-national pharmaceutical companies, are simultaneously marketing several different drugs and may therefore be able to market their own combination drug therapies. We believe that a significant number of drugs are currently under development and will become available in the future for the treatment of HIV.

FUZEON is delivered via twice daily subcutaneous injections, each delivering 90 mg of FUZEON. The other approved anti-HIV drugs are delivered orally at various dosing intervals. We believe that this delivery method is one factor that may limit its uptake as compared to other competing drugs. In addition, the WAC of FUZEON is approximately $25,700 for one year of therapy. This price is significantly higher than any of the other approved anti-HIV drugs. FUZEON’s price relative to other approved anti-HIV drugs may also limit patient demand.

The standard of care for the treatment of HIV is to administer a regimen that combines drugs from each of the different classes of anti-HIV drugs. In the event drug candidates are approved that are effective against an HIV virus that has become resistant to currently approved drugs, we believe that using these drugs in combination with FUZEON may provide patients with additional treatment options that do not currently exist. These drugs may be either competitive with FUZEON, or synergistic with FUZEON, or in some circumstances, both.

The need for drugs that have a novel mechanism of action has stimulated interest in the inhibition of HIV entry into the cell. Several companies are developing or attempting to develop HIV drug candidates that inhibit entry of the virus by targeting one of the HIV co-receptors (i.e. either CCR5 or CXCR4). In 2007, Pfizer Inc. received U.S. marketing approval from the FDA for a CCR5 inhibitor, Maraviroc. Also in 2007, Schering-Plough Corp announced the initiation of Phase III studies for its CCR5 inhibitor, Vicriviroc. CCR5 inhibitors impede entry of the virus into the cell through a mechanism that is different from FUZEON.

In the latter part of 2007, Merck & Co., Inc. received U.S. FDA marketing approval for their integrase inhibitor, Raltegravir. Integrase inhibitors represent a novel class of antiretroviral drug and, like FUZEON, may be well-suited to therapy for treatment-experienced patients. Gilead Sciences, Inc. is also developing an integrase inhibitor (Elvitegravir)

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which is currently in clinical testing. Other companies, including Panacos Pharmaceuticals, Inc., are developing new classes of drugs with novel targets (e.g. Panacos’ maturation inhibitor, Beviramat). Tibotec Therapeutics has developed a next generation non-nucleoside reverse transcriptase inhibitor (“NNRTI”) with activity against viruses that are resistant to earlier forms of NNRTIs. Tibotec’s drug, Etravirine, received U.S. FDA marketing approval in early 2008.

We anticipate that we will face intense and increasing competition in the future as these and other new products enter the market and advanced technologies become available. Existing products or new products for the treatment of HIV developed by our competitors may be more effective, less expensive, or gain wider acceptance by patients and physicians than FUZEON or any other products eventually commercialized by us.

Many of our competitors have significantly greater financial, technical and human resources than we have and may be better able to develop, manufacture, sell, market and distribute products. Many of these competitors have products that have been approved or are in late-stage development. These competitors also operate large, well-funded research and development programs. In addition, smaller companies may prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore, academic institutions, governmental agencies and other public and private research organizations are becoming increasingly aware of the commercial value of their inventions for the treatment of HIV and are more actively seeking to commercialize the technology they have developed.

New developments in our areas of research and development are expected to continue at a rapid pace in both industry and academia. Our drug candidate TRI-1144, if successfully developed and approved, would face competition based on:

• the safety and effectiveness of the products;

• the convenience of the dosing regimen;

• the timing and scope of regulatory approvals;

• availability of manufacturing, sales, marketing and distribution capabilities;

• reimbursement coverage;

• price; and

• patent position.

While our experience to date is that new, active HIV drugs and those in clinical development have been used synergistically with FUZEON in order to achieve maximal viral suppression in treatment experienced patients, we cannot guarantee that this will translate into increased patient adoption. Our competitors may develop more effective or more affordable technology or products, or achieve earlier patent protection, product development or product commercialization than we can. Our competitors may succeed in commercializing products more rapidly or effectively than we can, which could have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Government Regulation

Human pharmaceutical products are subject to lengthy and rigorous preclinical testing and clinical trials and other extensive, costly and time-consuming procedures mandated by the FDA and foreign regulatory authorities. The regulatory approval process includes:

• the establishment of the safety and effectiveness of each product candidate; and

• confirmation by the FDA that good laboratory, clinical and manufacturing practices were maintained during testing and manufacturing.

This process typically takes a number of years, depending upon the type, complexity and novelty of the pharmaceutical product. This process is expensive and gives larger companies with greater financial resources a competitive advantage over us.

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The steps required by the FDA before new drugs may be marketed in the United States include:

• preclinical studies;

• the submission to the FDA of a request for authorization to conduct clinical trials on an investigational new drug (“IND”);

• adequate and well-controlled clinical trials to establish the safety and efficacy of the drug for its intended use;

• adequate control of a reliable manufacturing process;

• submission to the FDA of a New Drug Application, (“NDA”); and

• review and approval of the NDA by the FDA before the drug may be shipped or sold commercially.

In the United States, preclinical testing includes both culture and animal laboratory evaluation and characterization of the safety and efficacy of a drug and its formulation. Certain laboratories involved in preclinical testing must comply with FDA regulations regarding good laboratory practices. Preclinical testing results are submitted to the FDA as part of the IND and, unless there is objection by the FDA, the IND will become effective 30 days following its receipt by the FDA. Submission of an IND does not guarantee that human clinical trials will ever commence.

Clinical trials involve the administration of the investigational drug to healthy volunteers or to patients under the supervision of a qualified principal investigator. These clinical trials typically are conducted in three sequential phases, although the phases may overlap with one another.

Phase I clinical trials represent the initial administration of the investigational drug to a small group of healthy human subjects or, more rarely, to a group of selected patients with a targeted disease or disorder. The goal of Phase I clinical trials is typically to test for safety, dose tolerance, absorption, bio-distribution, metabolism, excretion and clinical pharmacology.

Phase II clinical trials involve a small sample of the actual intended patient population and seek to assess the effectiveness of the drug for the specific targeted indications, to determine dose tolerance and the optimal dose range and to gather additional information relating to safety and potential adverse effects.

Phase III clinical trials are initiated to establish further clinical safety and effectiveness of the investigational drug in a broader sample of the general patient population at geographically dispersed study sites in order to determine the overall risk-benefit ratio of the drug and to provide an adequate basis for all labeling for promotion and use. The results of the research and product development, manufacturing, preclinical testing, clinical trials and related information are submitted to the FDA in the form of an NDA for the approval of the marketing and shipment of the drug.

The FDA closely monitors the progress of each of the three phases of clinical trials and may, at its discretion, reevaluate, alter, suspend or terminate the testing based upon the data accumulated to that point and the FDA’s assessment of the risk/benefit ratio to the patient. Once Phase III trials are completed, drug developers submit the results of preclinical studies, clinical trials and information on the manufacturing of the drug to the FDA in the form of an NDA for approval to commence commercial sales. Once submitted, the FDA is required to take action on an NDA within a specified period of time. FDA action may be any one of the following: approval to market the drug, request for additional information or denial of approval. FDA approvals may not be granted on a timely basis, or at all. Furthermore, the FDA may prevent a drug developer from marketing a product under a label for its desired indications, which may impair commercialization of the product. Similar regulatory procedures must be complied with in countries outside the United States.

Our potential drug candidates may not receive commercialization approval in any country on a timely basis, if at all, even after substantial time and expenditures. If we are unable to demonstrate the safety and effectiveness of our product candidates to the satisfaction of the FDA or foreign regulatory authorities, we will be unable to commercialize our drug candidates. This would have a material adverse effect on our business, financial condition, results of operations and market price of our stock. Even if regulatory approval of a drug candidate is obtained, the approval may limit the indicated uses for which the drug candidate may be marketed.

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We, Roche, and any existing or potential future collaborative partners, are also subject to various federal, state and local laws and regulations relating to:

• safe working conditions;

• laboratory and manufacturing practices;

• the experimental use of animals; and

• the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents.

Compliance with these laws, regulations and requirements may be costly and time-consuming and the failure to maintain such compliance by us or our existing and potential future collaborative partners could have a material adverse effect on our business, financial condition and results of operations.

Drugs are also subject to extensive regulation outside the U.S. In the European Union, there is a centralized approval procedure that authorizes marketing of a product in all countries in the European Union (which includes most of the major countries in Europe). If this procedure is not used, under a decentralized system an approval in one country of the European Union can be used to obtain approval in another country of the European Union under a simplified application process. After approval under the centralized procedure, pricing and reimbursement approvals are also required in most countries.

Even after FDA approval has been obtained, further clinical trials may be required to provide additional data on safety and effectiveness and are required to gain clearance for the use of a product as a treatment for indications other than those initially approved.

Regulatory authorities track information on side effects and adverse events reported during clinical studies and after marketing approval. Side effects or adverse events that are reported during clinical trials can delay, impede or prevent marketing approval. Similarly, adverse events that are reported after marketing approval can result in additional limitations being placed on the product’s use and, potentially, withdrawal or suspension of the product from the market. Any adverse event, either before or after marketing approval, could result in product liability claims against us. Non-compliance with FDA safety reporting requirements may result in FDA regulatory action that may include civil action or criminal penalties.

If we seek to make certain changes to FUZEON or any other approved product, such as adding a new indication, making certain manufacturing changes, or changing manufacturers or suppliers of certain ingredients or components, we will need FDA review and approval before the change can be implemented.

The FDA, the FDA’s European counterpart, the EMEA and other regulatory agencies regulate and inspect equipment, facilities, and processes used in the manufacturing of pharmaceutical and biologic products prior to providing approval to market a product. If, after receiving clearance from regulatory agencies, a material change is made in manufacturing equipment, location or process, additional regulatory review and approval may be required. Roche and the Company also must adhere to cGMP and product-specific regulations enforced by the FDA through its facilities inspection program. The FDA, the EMEA and other regulatory agencies also conduct regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval. If, as a result of these inspections, it is determined that the equipment, facilities, or processes used in the manufacture of FUZEON do not comply with applicable regulations and conditions of product approval, regulatory agencies may seek civil, criminal, or administrative sanctions and/or remedies against us, including the suspension of our manufacturing operations. In addition, the FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval. Companies must comply with all applicable FDA requirements. If they do not, they are subject to the full range of civil and criminal penalties available to the FDA.

We and Roche are also subject to various federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claims laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business,

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including the purchase or prescription of a particular drug. Due to the breadth of the statutory provisions and the absence of guidance in the form of regulations or court decisions addressing industry practices, it is possible that our practices might be challenged under anti-kickback or similar laws. False claims laws prohibit anyone from knowingly and willingly presenting, or causing to be presented for payment to third party payors (including Medicare and Medicaid) claims for reimbursed drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services. Roche’s and our activities relating to the sale and marketing of FUZEON may be subject to scrutiny under these laws. Violations of fraud and abuse laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). If the government were to allege or convict us of violating these laws, our business could be harmed.

Third-Party Reimbursement and Healthcare Reform Measures

In the United States and elsewhere, sales of prescription drugs depend, in part, on the consumer’s ability to obtain reimbursement for the cost of the drugs from third-party payors, such as private and government insurance programs. Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. Because of the high cost of the treatment of HIV, many state legislatures are also reassessing reimbursement policies for these therapies. If third-party payor reimbursements for any drugs we commercialize are not available or are not available at a level that will allow us or our potential collaborative partners to sell these drugs on a competitive basis, our results of operations will be materially and adversely affected. In addition, an increasing emphasis in the United States on the reduction of the overall costs of health care through managed care has increased and will continue to increase the pressure to reduce the prices of pharmaceutical products. The announcement and/or adoption of these types of proposals or efforts could also materially and adversely affect our business, because the amount of revenues that we may potentially be able to generate in the future for any products we may commercialize could affect an investor’s decision to invest in us, the amount of funds we decide to spend now on our development and clinical trial efforts, and/or our decision to seek regulatory approval for certain drug candidates.

Recently, several major pharmaceutical companies have offered to sell their anti-HIV drugs at or below cost to certain countries in Africa, which could adversely affect the reimbursement climate, and the prices that may be charged, for HIV medications in the United States and the rest of the world. Third-party payors could exert pressure for price reductions in the United States and the rest of the world based on these offers to Africa. This price pressure could limit the amount that Roche would be able to charge for our drugs.

Furthermore, the indication approved by the FDA is for the use of FUZEON in combination with other anti-HIV drugs. Physicians may not readily prescribe FUZEON due to cost-benefit considerations when compared with other anti-HIV drug treatments. Higher prices could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

Roche has made significant progress in achieving reimbursement from the various payors in the United States. Currently FUZEON is covered by Medicaid in all 50 states, 46 of the state and territorial AIDS Drug Assistance Programs (“ADAPs”) and a majority of private insurers. However, there are reimbursement challenges remaining. Some of the payors require patients to meet minimum medical requirements, such as CD4 cell levels, to receive reimbursement. Other payors limit the number of patients that can receive reimbursement for FUZEON under their plans, and other payors may require co-payments by the patient in order to receive reimbursement for FUZEON that are significantly higher than those required for other anti-HIV drugs. We understand that Roche will continue to actively address these issues during 2007. Outside the United States, Roche has negotiated for reimbursement in most of the major markets.

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Environment

We seek to comply with all applicable statutory and administrative requirements concerning environmental quality. We have made, and will continue to make, expenditures for environmental compliance and protection. Expenditures for compliance with environmental laws have not had, and are not expected to have, a material effect on our capital expenditures, results of operations or competitive position.

Human Resources

As of March 3, 2008, we had 9 full-time employees, including a technical scientific staff of 1. None of our employees are covered by collective bargaining arrangements and management considers relations with our employees to be good.

Website

Our website address is www.trimeris.com. We make available free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, our directors’ and officers’ Section 16 reports, and all amendments to these reports as soon as reasonably practicable after filing, by providing a hyperlink to the EDGAR website directly to our reports.

ITEM 1A.     RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing our company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations.

Our business, financial condition or results of operations could be adversely affected by any of these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

We face intense competition in our efforts to increase sales of FUZEON and to develop TRI-1144 as a commercially successful drug. If we are unable to compete successfully, our business will suffer.

We are engaged in the HIV treatment sector of the biopharmaceutical industry which is intensely competitive and changes rapidly. We expect that new developments by other companies and academic institutions in the areas of HIV treatment will continue at a rapid pace.

FUZEON competes, and our other drug candidate TRI-1144, if it is successfully developed, will compete with numerous existing therapies, as well as a significant number of drugs that are currently under development and will become available in the future for the treatment of HIV. For example:

• Approximately 30 anti-HIV drugs are currently approved in the United States for the treatment of HIV, including drugs produced by GlaxoSmithKline, Bristol-Myers Squibb, Gilead, Merck, Roche, Pfizer, Tibotec. and Abbott Laboratories. Only one of these currently-approved drugs, FUZEON, is a viral fusion inhibitor.

• In 2007, Merck launched the sale of a first-in-class oral agent known as Isentress^®. Isentress is the first of a new class of drugs for the treatment of HIV known as integrase inhibitors. This drug appears to be potent, well-tolerated and has shown rapid, significant adoption by physicians and patients.

• We believe that other companies may be currently engaged in research efforts to develop viral fusion inhibitors. To our knowledge, none of these potentially competing drug candidates have entered human clinical trials.

We expect to face intense and increasing competition in the future as these new drugs enter the market and advanced technologies become available. We cannot assure you that existing or new drugs for the treatment of HIV developed by our competitors will not be more effective, less expensive or more effectively marketed and sold than FUZEON or any other drug treatment that we may develop.

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Many of our competitors have significantly greater financial, technical, human and other resources than we do. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore, academic institutions, governmental agencies and other public and private research organizations are becoming increasingly aware of the value of their inventions for the treatment of HIV and are more actively seeking to commercialize the technology they have developed.

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

We have invested a significant portion of our time and financial resources since our inception in the development of FUZEON. FUZEON is the only drug candidate for which we have obtained FDA approval. We anticipate that for the foreseeable future, our ability to generate revenues and profits, if any, will depend entirely on the successful commercialization of FUZEON. In light of our restructuring, commercialization of FUZEON will rely primarily on the support of Roche, and Roche’s ability to manufacture commercial quantities of FUZEON on a cost-effective basis with the requisite quality, and Roche’s ability to successfully market FUZEON throughout the world.

FUZEON is delivered via a twice daily dosing by injection under the skin. All of the other currently approved drug treatments for HIV are delivered orally. Patients and physicians may not readily accept daily injections of an anti-HIV drug treatment, which would limit their acceptance in the market. This delivery method may limit the use of FUZEON compared to other competing drugs. Moreover, because peptides are expensive to manufacture, the price of FUZEON is higher than the prices of currently approved anti-HIV drug treatments. The wholesale acquisition cost, or WAC, of one year’s supply of FUZEON in the United States is approximately $25,700. This price is significantly higher than any of the other approved anti-HIV drugs. Furthermore, the indication approved by the FDA is for the use of FUZEON in combination with other anti-HIV drugs, and is more restrictive than the indication for other approved anti-HIV drugs. Physicians may not readily prescribe FUZEON due to cost-benefit considerations when compared with other anti-HIV drug treatments. Higher prices could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

We rely on Roche to manufacture, market and distribute FUZEON throughout the world in countries where regulatory approval has been received. If Roche fails to market FUZEON adequately, we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities.

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.

Roche manufactures FUZEON bulk drug substance at their facility in Boulder, Colorado. Roche coordinates the manufacture of FUZEON with the balance of its manufacturing efforts. We do not have input into the manufacturing and production schedule at Roche’s Boulder facility and Roche’s decisions in this area may result in significant additional cost and expense relating to the manufacture of FUZEON.

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 November 2007, Roche and Trimeris were informed that they had been named as defendants in a patent infringement suit by Novartis Diagnostics, Inc. (“Novartis”) related to the manufacture and sale of FUZEON (see Item 3, “Legal Proceedings”). In connection with their suit, Novartis is seeking money damages, attorneys’ fees and injunctive relief which, if successful, would prevent Roche and Trimeris from manufacturing and selling FUZEON. The sale of FUZEON is currently our only significant source of revenue.

We may not be able to maintain profitability.

With the exception of fiscal years 2007 and 2006, we have had net operating losses since being founded in January 1993. As of December 31, 2007, our accumulated deficit was approximately $343.7 million. We had net income of $27.4 million in 2007, $7.4 million in 2006 and net losses of approximately $8.1 million in 2005. Since

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inception, we have spent our funds on our drug development efforts relating primarily to the development of FUZEON. If FUZEON sales levels do not remain at their current levels, or if expenses increase from their current levels we may experience losses in the future.

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.

We currently have insufficient internal resources to support and implement worldwide sales, marketing and distribution of pharmaceuticals. We currently rely on Roche for the sales, marketing and distribution of FUZEON, in accordance with the marketing terms contained in our development and license agreement with Roche. Roche may terminate this agreement at any time with advance notice. If Roche fails to adequately market FUZEON we do not have the ability under our Development and License Agreement to establish our own sales, marketing or distribution capabilities. If Roche ceases to market FUZEON and we were unable to reach agreement with one or more other marketing partners, we would be required to develop internal sales, marketing and distribution capabilities. We may not be able to establish cost-effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms on a timely basis, if at all. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

Our agreement with Roche as to sales, marketing and distribution gives Roche, and any sales, marketing or distribution arrangements we establish with other parties may give those parties, significant control over important aspects of the commercialization of our drugs, including:

• market identification;

• marketing methods;

• pricing;

• drug positioning;

• composition of sales force; and

• promotional activities.

We may not be able to control the amount or timing of resources that Roche or any third party may devote to FUZEON. .

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

Peptide-based therapeutics are made from long chains of molecular building blocks called amino acids. FUZEON is a large peptide composed of a precise 36-amino acid sequence. Large peptides are difficult and expensive to manufacture because the process of creating commercial quantities of a large peptide is lengthy and complicated. We and Roche have selected Roche’s facility in Boulder, Colorado to manufacture commercial quantities of the bulk drug substance of FUZEON. We and Roche have selected one of Roche’s manufacturing facilities to produce the finished drug product from such bulk drug substance through a process involving lyophilization, or freeze-drying. The process Roche is currently using to manufacture FUZEON bulk drug substance requires approximately five months to complete and is extremely complicated, requiring over 100 separate, precisely controlled chemical reactions. Roche is currently manufacturing FUZEON bulk drug substance on a commercial scale, and producing the finished drug product on a commercial scale. However, as a result of this complex manufacturing process, Roche may encounter unexpected difficulties or expense in manufacturing FUZEON in the future.

In addition, if sales of FUZEON do not increase, Roche could be forced to scale back manufacturing at the Boulder facility to levels that are less than optimal. Diminished sales of FUZEON will not allow us to achieve the economies of scale that keep our costs of goods low. Any increase in costs of goods would, in turn, decrease our gross margin and would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock.

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

HIV is prone to genetic mutations that can produce viral strains resistant to particular drug treatments. HIV has developed resistance, in varying degrees, to each of the currently approved anti-HIV drug treatments, including FUZEON. As a result, combination therapy, or the prescribed use of three or more anti-HIV drugs, has become the preferred method of treatment for HIV-infected patients, because in combination these drugs may prove effective against strains of HIV that have become resistant to one or more drugs in the combination. In the clinical trials we have conducted to date, HIV has demonstrated the ability to develop resistance to FUZEON, as it has with respect to all other currently-marketed anti-HIV drugs. If HIV, in a wide patient population, in a short time period, develops resistance to FUZEON or our other drug candidates when used in combination therapy, it would adversely affect demand for those drug candidates 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 candidates.

The technology platform underlying our drug development program is novel because it was designed to discover drug candidates that treat viral infection by preventing the virus from fusing to and entering host cells that viruses use to reproduce themselves. Historically, anti-HIV therapy has primarily involved the inhibition of specific viral enzymes that are necessary for HIV to replicate. We are not aware of any other approved anti-HIV pharmaceutical products that target the inhibition of viral fusion. As a result, existing preclinical and clinical data on the safety and efficacy of this technology are somewhat limited. Although the most common adverse side effect reported with respect to FUZEON to date has been mild to moderate local skin irritations at the site of injection, we may discover other unacceptable side effects of our drug candidates, including side effects that may only become apparent after long-term exposure. We may also encounter technological challenges relating to these technologies and applications in our research and development programs that we may not be able to resolve. Any such unexpected side effects or technological challenges may delay or otherwise adversely affect the development, regulatory approval and/or commercialization of our drug candidates.

We are dependent on the successful outcome of clinical trials for our Next—Generation Fusion Inhibitor drug candidate, TRI-1144.

The FDA granted full approval for the commercial sale of FUZEON in October 2004. We do not have any other drug candidates that have received FDA or any other regulatory authority for approval of commercialization. In order to obtain the regulatory approvals necessary to sell a drug candidate, like TRI-1144, commercially, we must demonstrate to the FDA and other applicable foreign regulatory authorities that the drug candidate is safe and effective for use in humans for each target indication. We attempt to demonstrate this through a lengthy and complex process of preclinical testing and clinical trials, which typically takes a number of years. We have filed an Investigational New Drug application (“IND”) for TRI-1144, and plan to initiate a single ascending dose (SAD) Phase I clinical trial for TRI-1144 in March of 2008.

We may not be able to demonstrate that a potential drug candidate, like TRI-1144, that appeared promising in preclinical testing will be safe or effective in clinical trials. We may be required to redesign, delay or cancel our clinical trial for TRI-1144 for some or all of the following reasons, any of which may adversely affect our results of operations:

• unanticipated adverse or ambiguous results from our preclinical testing or clinical trials;

• undesirable side effects that delay or extend the trials;

• our inability to locate, recruit and qualify a sufficient number of patients for our trials;

• difficulties in manufacturing sufficient quantities at the requisite quality of the particular drug candidate or any other components needed for our preclinical testing or clinical trials;

• regulatory delays or other regulatory actions;

• change in the focus of our development efforts; and

• re-evaluation of our clinical development strategy.

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Given the uncertainty surrounding the clinical trial process, we may not be able to successfully develop, commercialize and market TRI-1144 which would severely harm our business, impair our ability to generate revenues and adversely affect our stock price.

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

We currently have insufficient internal resources to support and implement worldwide sales, marketing and distribution of pharmaceuticals. Following a successful Phase I clinical trial for TRI-1144, should the Company decide to move forward with the development and commercialization of TRI-1144, we may not be able to establish cost- effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms on a timely basis, if at all. This would have a material adverse effect on our business, financial condition, results of operations and the market price of our stock. We currently do not have any plans to develop and commercialize TRI-1144 beyond the completion of a Phase I single ascending dose trial.

Obtaining regulatory approvals and maintaining compliance with government regulations will entail significant costs that could harm our ability to achieve profitability.

Due to uncertainties inherent in the clinical development and government regulatory approval process, we may underestimate the cost and/or length of time associated with the development and commercialization of our drug candidates. We will be required to expend significant resources to comply with regulations affecting research and development, testing, manufacturing, marketing and commercialization activities for our drug candidates. We do not separately track as an accounting item the amounts we spend to comply with regulatory requirements, but the majority of our activities and expenditures to date, including our preclinical and clinical trial activities and expenditures, have been undertaken directly or indirectly in order to comply with applicable governmental regulations. If compliance with these regulations proves more costly than anticipated, our financial condition and results of operations could be materially and adversely affected.

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

We do not have any manufacturing experience, nor do we have any manufacturing facilities. We and Roche have selected Roche’s facility in Boulder, Colorado to manufacture commercial quantities of the bulk drug substance of FUZEON. We and Roche have selected one of Roche’s manufacturing facilities to produce the finished drug product from such bulk drug substance through a process involving lyophilization, or freeze-drying. The manufacture of pharmaceutical products requires significant expertise and capital investment. Moreover, under our agreement with Roche, we are required to reimburse a portion of the expenses incurred by Roche in connection with its manufacture of FUZEON. Third-party manufacturers of pharmaceutical products often encounter difficulties in scaling up production, including problems involving production yields, quality control and assurance, shortage of qualified personnel, compliance with FDA regulations, production costs, and development of advanced manufacturing techniques and process controls. Our third-party manufacturers, including Roche, may not perform as agreed or may not remain in the contract manufacturing business for the time required to successfully produce and market FUZEON and our other drug candidates. The number of third-party manufacturers with the expertise and facilities to manufacture bulk drug substance of FUZEON on a commercial scale is extremely limited. In addition, only a limited number of third party manufacturers have the capability to produce a finished drug product on a commercial scale through a process involving lyophilization.

Roche’s facility in Boulder, Colorado is the only facility manufacturing FUZEON bulk drug substance. In the event the intended manufacturing plan generates insufficient supplies of FUZEON, or the Boulder facility ceases operation for any reason, we do not have an alternate manufacturing plan in place at this time and it would take a significant amount of time to arrange for alternative manufacturers. We do not have insurance to cover any shortages or other problems in the manufacturing of FUZEON or our other drug candidates. If our third-party manufacturers, including Roche, fail to deliver the required commercial quantities of bulk drug substance or finished drug product on a

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timely basis and at commercially reasonable prices, and we fail to promptly find one or more replacement manufacturers or develop our own manufacturing capabilities at a substantially equivalent cost and on a timely basis, the commercial development of FUZEON or our other drug candidates could be delayed or otherwise materially and adversely affected. Dependence upon third parties for the manufacture of FUZEON or our other drug candidates may harm our ability to develop and deliver products on a timely and competitive basis.

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

The FDA and other regulatory authorities must approve the facilities that will be used to manufacture commercial quantities of our drug candidates before commencement of commercial sales. In addition, these authorities require that our products be manufactured according to good manufacturing practice regulations. The failure by us, Roche or other third-party manufacturers to maintain current good manufacturing practices compliance and/or our failure to increase our manufacturing processes as needed to meet demand for our drugs could lead to refusal by the FDA to approve marketing applications. Failure in either respect could also be the basis for action by the FDA to withdraw approvals previously granted and for other regulatory action.

In addition, if we change the source or location of supply or modify the manufacturing process with respect to FUZEON or any of our other drug candidates, regulatory authorities will require us to demonstrate that the product produced by the new source or location or from the modified process is equivalent to the product used in any clinical trials we have conducted. If we are unable to demonstrate this equivalence, we will be unable to manufacture products from the new source or location of supply or use the modified process. As a result, we may incur substantial expenses in order to ensure equivalence, and our ability to generate revenues may be harmed.

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.

Our success depends in part on our ability and the ability of our collaborators and licensors to obtain, maintain and enforce patents and other proprietary rights for our drugs and technologies. Patent law relating to the scope of claims in the biotechnology field in which we operate is still evolving and involves a great deal of uncertainty.

Although we own or exclusively license more than 43 issued United States patents, and numerous pending United States patent applications, corresponding foreign patents and patent applications, including issued patents and patent applications relating to FUZEON, the issuance of a patent is not conclusive as to its validity or enforceability, and third parties may challenge the validity or enforceability of our patents. We cannot assure how much protection, if any, our patents will provide if we attempt to enforce them and/or if the patents are challenged in court or in other proceedings. It is possible that a competitor may successfully challenge our patents or that challenges will result in limitations of their coverage. In addition, the cost of litigation to uphold the validity of patents can be substantial. If we are unsuccessful in such litigation, third parties may be able to use our patented technologies without paying licensing fees or royalties to us. Further, we cannot assure that our pending patent applications will result in issued patents. Because U.S. patent applications may be maintained in secrecy until a patent issues or is otherwise published, we cannot assure that others have not filed patent applications for technology covered by our pending applications. Moreover, we cannot assure that we were the first to invent the technology, which, under U.S. patent law, is a prerequisite to obtaining patent coverage. In the event that a third party has also filed a U.S. patent application on the technology, we may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine priority of invention, i.e., which party was the first to invent. The costs of these proceedings can be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position.

Moreover, competitors may infringe our patents or successfully avoid them through design innovation. To prevent infringement or unauthorized use, we may need to file infringement claims. Such proceedings are expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or enforceable or may refuse to stop the other party from using the technology at issue on the grounds that its technology is not covered by our patents. Policing unauthorized use of our intellectual property is difficult, and we cannot assure you that we will be able to prevent infringement or misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

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Recently, several generic drug-makers in countries such as India have offered to sell HIV drugs currently protected under United States patents to patients in Africa at prices significantly below those offered by the drugs’ patent holders in other countries. There is a risk that these drugs produced by the generic drug-makers could be illegally made or imported into the United States and other countries at prices below those charged by the drugs’ patent holders. If any of these actions occur with respect to our drugs, it could limit the amount we could charge for our drugs.

In addition to our patented technology, we also rely on unpatented technology, trade secrets and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We require each of our employees, consultants and corporate partners to execute a confidentiality agreement at the commencement of an employment, consulting or collaborative relationship with us. However, these agreements may not provide effective protection of our technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

The occurrence of any of these risks could have a material adverse effect on our business, financial condition, results of operations and market price of our stock.

The intellectual property of our competitors or other third parties may prevent us from developing or commercializing our drug candidates.

Other companies, universities and research institutions conduct research and development efforts in market segments, including viral fusion inhibition and the treatment of HIV infection, where we and our collaborators focus research and development activities. In addition to the recent suit by Novartis (see above), we cannot assure that other third parties will not assert patent infringement or other intellectual property claims against us or our collaborators with respect to technologies used in FUZEON or our potential drug candidates. Any additional claims that might be brought against us relating to infringement of third party patents may cause us to incur additional significant expenses and, if successfully asserted against us, may cause us to pay substantial damages. Even if we were to prevail, any litigation could be costly and time-consuming and could divert the attention of our management and key personnel from our drug development efforts or other business operations. As a result of a patent infringement suit brought against us, we may have to cease or delay development activities, unless that party is willing to grant us rights to use its intellectual property. Thus we may have to obtain licenses from other parties before we could continue using, manufacturing, marketing or selling our potential drugs. Those licenses may not be available on commercially acceptable terms, if at all. If we do not obtain required licenses, we may not be able to market our potential drugs at all or we may encounter significant delays in drug development while we redesign potentially infringing drugs or methods.

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.

In the United States and elsewhere, sales of prescription drugs depend, in part, on the consumer’s ability to obtain reimbursement for the cost of the drugs from third-party payors, such as private and government insurance programs. Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. Because of the high cost of the treatment of HIV, many state legislatures are also reassessing reimbursement policies for this therapy. If third-party payor reimbursements for FUZEON or any of our other drug candidates that we commercialize are not available or are not available at a level that will allow us or our current or future collaborative partners to sell these drugs on a competitive basis, our results of operations will be materially and adversely affected. In addition, emphasis in the United States on the reduction of the overall costs of health care through managed care has increased and will continue to increase the pressure to reduce the prices of pharmaceutical products. The announcement and/or adoption of these types of proposals or efforts could also materially and adversely affect our business, because the amount of revenue that we may potentially be able to generate in the future for FUZEON or any of our other drug candidates could affect an investor’s decision to invest in us, the amount of funds we decide to spend now on our development and clinical trial efforts, and/or our decision to seek regulatory approval for certain drug candidates.

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The wholesale acquisition cost or WAC of a one year supply of FUZEON in the United States is approximately $25,700. A high drug price could also limit our ability to receive reimbursement coverage for our drugs from third-party payors, such as private or government insurance programs. If Roche is unable to obtain and maintain reimbursement from a significant number of third-party payors, it would have a material adverse effect on our business, financial condition and results of operations.

Roche has made significant progress in achieving reimbursement from the various payors in the United States. Currently FUZEON is covered by Medicaid in all 50 states, 46 of the state and territorial AIDS Drug Assistance Programs, or ADAPs, and a majority of private insurers. However there are reimbursement challenges remaining. Some of the payors require patients to meet minimum medical requirements, such as CD4 cell levels, to receive reimbursement. Other payors limit the number of patients that they will provide reimbursement for FUZEON, and other payors may require co-payments by the patient in order to receive reimbursement for FUZEON that are significantly higher than those required for other anti-HIV drugs.

Several major pharmaceutical companies have offered to sell their anti-HIV drugs at or below cost to certain countries in Africa, which could adversely affect the reimbursement climate, and the prices that may be charged, for HIV medications in the United States and the rest of the world. Third-party payors could exert pressure for price reductions in the United States and the rest of the world based on these offers to Africa. This price pressure could limit the amount that we would be able to charge for our drugs.

If an accident or injury involving hazardous materials occurs, we could incur fines or liability, which could materially and adversely affect our business and our reputation.

In our drug development programs, we use hazardous materials that are subject to government regulations, including chemicals, radioactive compounds and infectious disease agents, such as viruses and HIV-infected blood. We believe that our handling and disposal of these materials comply with the standards prescribed by state and federal regulations, but we cannot completely eliminate the risk of contamination or injury from these materials. If we fail to comply with these regulations or if a contamination, injury or other accident occurs in connection with our development activities, we could be held liable for any damages or penalized with fines. Although our general liability insurance coverage may cover some of these liabilities, the amount of the liability and fines could exceed our resources. We currently maintain general liability insurance coverage in the amount of approximately $1 million per occurrence and $2 million in the aggregate. However, insurance coverage is becoming increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against potential liabilities.

If the testing or use of our drug candidates harms people, we could face costly and damaging product liability claims far in excess of our liability and indemnification coverage.

Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products, such as undesirable side effects or injury during clinical trials. In addition, the use in our clinical trials of drugs that we or our potential collaborators may develop and the subsequent sale of these drugs by us or our potential collaborators may expose us to liability risks relating to these drugs.

We have obtained an advanced medical technology policy which includes limited product liability insurance coverage for our clinical trials in the amount of $10.0 million per occurrence and $10.0 million in the aggregate. However, insurance coverage is becoming increasingly expensive and we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against potential liabilities. We intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for drug candidates in development, but we cannot assure you that we will be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or that such insurance will provide adequate coverage against our potential liabilities. Furthermore, our collaborators or licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have a net worth sufficient to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage or indemnification payments that may be obtained by us could have a material adverse effect on our financial condition.

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

Our operating results are likely to fluctuate over time, due to a number of factors, many of which are outside of our control. Some of these factors include:

• the market acceptance and sales levels for FUZEON;

• the successful commercialization of FUZEON by Roche;

• the status and progress of our collaborative agreement with Roche;

• the status of our research and development activities;

• the development costs related to TRI-1144;

• the timing of regulatory actions;

• our ability to establish manufacturing, sales, marketing and distribution capabilities, either internally or through relationships with third parties;

• technological and other changes in the competitive landscape;

• changes in our existing or future research and development relationships and strategic alliances; and

• the commercial viability of FUZEON or our other drug candidates.

As a result, we believe that comparing our results of operations for one period against another period is not necessarily meaningful, and you should not rely on our results of operations in prior periods as an indication of our future performance. If our results of operations for a 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 meet or maintain the standards for maintaining internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002, our stock price could be materially harmed.

The Sarbanes-Oxley Act requires that we maintain effective internal control over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 has required and will continue to require that we incur substantial accounting expense and expend significant management efforts. In future years our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls that we would be required to remediate in a timely manner so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the NASDAQ Stock Market LLC or other regulatory authorities which would require additional financial and management resources and could adversely affect the market price of our common stock.

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.

We and Roche have entered into a collaboration for the development and commercialization of certain therapeutic peptides for the treatment of HIV. Through this collaboration, the companies have successfully developed and brought to market the first viral fusion inhibitor for the treatment of HIV, FUZEON. Under our Development and License Agreement, Roche has significant control over the sale and distribution of FUZEON to wholesalers. Roche sets the price of FUZEON to wholesalers, along with any rebates and incentives, and the terms of any returns. Roche records all sales of FUZEON.

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As such, Roche has exclusive control over the flow of important information relating to the sale of FUZEON that we require in order to timely and accurately report in our SEC filings. In addition, pursuant to Section 404 of the Sarbanes-Oxley Act we are required to maintain effective internal control over financial reporting and disclosure controls and procedures. Roche endeavors to provide us with timely and accurate financial data related to the sale of FUZEON so that we may meet our reporting requirements under federal securities laws. In the event that Roche fails to provide us with timely and accurate information, we may incur significant liability with respect to the federal securities laws, our disclosure controls and procedures under Sarbanes-Oxley and possibly be forced to restate our financial statements, any of which could adversely affect the market price of our common stock.

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

Our charter requires that we indemnify our directors and officers to the fullest extent permitted by Delaware corporate law. This could require us, with some legally prescribed exceptions, to indemnify our directors and officers against any and all expenses, judgments, penalties, fines and amounts reasonably paid in defense or settlement of an action, suit or proceeding brought against any of them by reason of the fact that he or she is or was a director or officer of Trimeris. In addition, expenses incurred by a director or officer in defending any such action, suit or proceeding must be paid by us in advance of the final disposition of that action, suit or proceeding if we receive an undertaking by the director or officer to repay us if it is ultimately determined that he or she is not entitled to be indemnified. We have also entered into indemnification agreements with each of our directors and executive officers. In furtherance of these obligations, we maintain directors’ and officers’ insurance in the amount of $40 million. Our policies expire in October 2008. For future renewals, if we are able to retain coverage, we may be required to pay a higher premium for our directors’ and officers’ insurance than in the past and/or the amount of our insurance coverage may be decreased.

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

If we raise funds by selling equity, equity-like instruments (including offering convertible preferred stock or convertible debt), we may dilute our stockholders’ percentage ownership interest in us. Any debt financings may contain restrictive terms that would limit our operating flexibility. Additionally, we may have to obtain funds through arrangements with collaborative partners. These partners may require us to relinquish rights to our technologies or drug candidates. Any of these forms of financing could materially and adversely affect our business, financial condition and results of operations.

Our business may require substantial additional capital, which we may not be able to obtain on commercially reasonable terms, we could be required to cut back or stop certain operations if we are unable to raise or obtain needed funding.

Our total cash, cash equivalents, and investment securities at December 31, 2007 were $69.6 million, up from $48.6 million at December 31, 2006. Our future capital requirements and level of expenses will depend upon numerous factors, including the costs associated with:

• our research and development activities, if any, including those relating to TRI-1144;

• our administrative activities, including business development;

• our collaboration with Roche including marketing and sales efforts; and

• the consummation of possible future acquisitions of technologies, products or businesses.

Our ability to continue investing in future products will depend on our cash position. Our first full year of profitability was 2006, however, we can give no assurance that we will in fact operate profitably in the future.

We have financed our activities primarily through public offerings and private placements of our common stock, and we expect to continue to rely primarily on sales of our equity securities if we are required to raise additional funds in the future. If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have

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a material adverse effect on the market price of our common stock and restrict or eliminate our ability to raise additional funds by selling equity. We also could be limited by overall market conditions. The public capital markets in which our common stock trades have been extremely volatile. Our failure to raise additional funds or to generate sufficient revenues to support our operations would seriously harm our business.

Available Information

We maintain a website on the World Wide Web at www.trimeris.com. We make available, free of charge, on our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the SEC. Our reports filed with, or furnished to, the SEC are also available at the SEC’s website at www.sec.gov.

ITEM 1B.    UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.    PROPERTIES

We lease approximately 61,000 square feet of laboratory and office space at 3500 Paramount Parkway, Morrisville, North Carolina. We lease this space under a sublease agreement that expires on January 23, 2015. We currently have excess capacity and are exploring options to sub-lease our facilities and therefore reduce our facilities expense.

ITEM 3.    LEGAL PROCEEDINGS

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 in the Eastern District of Texas (Marshall Division) 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”). Novartis is seeking a ruling that the 271 Patent is valid and enforceable, a determination that Trimeris and the Roche Entities are infringing or have infringed the ‘217 Patent, an injunction to prevent further infringement of the ‘271 Patent, and awards of compensatory damages, treble damages for willful infringement, costs and attorneys fees and other relief.

The Roche Entities and the Company have not yet been served in this patent suit, brought by Novartis, related to the manufacture and sale of FUZEON (enfuvirtide). FUZEON is an innovative HIV fusion inhibitor that was approved in 2003, having been developed by Roche in collaboration with the Company.

The ‘271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. Roche and the Company are currently reviewing a copy of the complaint, which was obtained from a third party. Roche and the Company will respond to the issues raised in the complaint in due course.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of 2007.

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PART II.

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has traded on the NASDAQ Global Market (formerly known as the Nasdaq National Market System) under the Nasdaq symbol “TRMS” since our initial public offering at $12.00 per share was consummated on October 7, 1997. We have not paid cash dividends in the past and none are expected to be paid in the foreseeable future. As of March 6, 2008, we had approximately 108 stockholders of record. The following table sets forth the high and low bid prices for our common stock for the period indicated as reported on the NASDAQ Global Market (formerly known as the Nasdaq National Market System). Prior to August 1, 2006, such quotations reflect inter-dealer prices without mark-up, mark-down or commissions and may not necessarily represent actual transactions.

	Year ended December 31,
	2007				2006
	High		Low		High		Low
1st Quarter	$	13.72	$	6.50	$	14.92	$	11.00
2nd Quarter	$	8.16	$	6.53	$	13.60	$	10.09
3rd Quarter	$	7.81	$	5.79	$	11.63	$	8.31
4th Quarter	$	8.21	$	6.10	$	13.10	$	7.21

Issuer Repurchases of Equity Securities

We did not repurchase any equity securities of the Company during the quarter ended December 31, 2007.

Equity Compensation Plan Information

The following table sets forth, as of December 31, 2007, information about our equity compensation plans that have been approved by our stockholders, including the number of shares of our common stock exercisable under all outstanding options, the weighted-average exercise price of all outstanding options and the number of shares available for future issuance under our equity compensation plans. We do not have any equity compensation plans that have not been approved by our stockholders.

Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted- average exercise price of outstanding options, warrants and rights			(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation Plans Approved by Stockholders	2,995,000	(1)	$	21.36	(1)	859,000	(2)
Equity Compensation Plans Not Approved by Stockholders	N/A			N/A		N/A

(1) This amount includes the following awards granted pursuant to the Amended and Restated Stock Incentive Plan:

• 2,910,000 shares issuable upon the exercise of outstanding stock options.

• 85,000 restricted stock shares. Since these restricted stock awards are freely transferable upon vesting and have no exercise price, they are not included in the weighted average exercise price calculation in column (b).

(2) This amount includes 613,000 options remaining available as of December 31, 2007 for grant under the Trimeris, Inc. 2007 Stock Incentive Plan, and 246,000 shares issuable under the Trimeris, Inc. 2007 Employee Stock Purchase Plan.

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Stock Performance Graph

The table compares the yearly percentage change in the cumulative total stockholder return on Trimeris common stock during the five fiscal years ended December 31, 2007 with cumulative total return on the Nasdaq stock market and the Nasdaq Pharmaceuticals index. The comparison assumes $100 was invested on December 31, 2002 in Trimeris common stock and in each of such indices and assumes reinvestment of any dividends.

CUMULATIVE TOTAL RETURN

	12/31/02		12/31/03		12/31/04		12/31/05		12/31/06		12/31/07
TRIMERIS, INC.	$	100	$	48.51	$	32.82	$	26.62	$	29.44	$	16.17
NASDAQ STOCK MARKET-US	$	100	$	149.52	$	162.72	$	166.18	$	182.57	$	197.97
NASDAQ PHARMACEUTICALS	$	100	$	146.59	$	156.13	$	171.93	$	168.29	$	176.99

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ITEM 6.    SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA

(in thousands, except per share data)

The selected financial data below is taken from the audited financial statements of the Company, which are included elsewhere in this Annual Report on Form 10-K, or from audited financial statements not included in this Annual Report on Form 10-K. Please read the financial statements and notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” while reading this selected financial data.

	For the Years Ended December 31,
	2007			2006			2005			2004			2003
Statements of Operations Data:
Revenue:
Milestone revenue	$	9,435		$	3,430		$	1,722		$	2,152		$	2,964
Royalty revenue		15,727			11,812			8,784			4,556			755
Collaboration income (loss)		24,223			21,738			8,553			(16,125	)		(25,515	)
Total revenue and collaboration income (loss)		49,385			36,980			19,059			(9,417	)		(21,796	)
Operating expenses:
Research and development expense		12,883			18,333			18,274			21,313			36,823
General and administrative expense		11,100			12,453			9,436			10,151			8,577
Total operating expenses		23,983			30,786			27,710			31,464			45,400
Operating income (loss)		25,402			6,194			(8,651	)		(40,881	)		(67,196	)
Other income (expense):
Interest income		3,010			1,987			1,300			953			1,534
Gain (loss) on sale of equipment		24			7			(9	)		—			—
Interest expense		(635	)		(781	)		(746	)		(160	)		(41	)
Total other income		2,399			1,213			545			793			1,493
Income (loss) before taxes and cumulative effect of change in accounting principle		27,801			7,407			(8,106	)		(40,088	)		(65,703	)
Income tax provision		376			275			—			—			—
Income (loss) before cumulative effect of change in accounting principle		27,425			7,132			(8,106	)		(40,088	)		(65,703	)
Cumulative effect of change in accounting principle		—			252			—			—			—
Net income (loss)	$	27,425			7,384			(8,106	)		(40,088	)		(65,703	)
Basic income (loss) per share before cumulative effect of accounting change	$	1.24		$	0.33		$	(0.37	)	$	(1.86	)	$	(3.06	)
Accounting change		—			0.01			—			—			—
Basic net income (loss) per share	$	1.24		$	0.34		$	(0.37	)	$	(1.86	)	$	(3.06	)
Diluted net income (loss) per share before cumulative effect of accounting change	$	1.24		$	0.33		$	(0.37	)	$	(1.86	)	$	(3.06	)
Accounting change		—			0.01			—			—			—
Diluted net income (loss) per share	$	1.24		$	0.34		$	(0.37	)	$	(1.86	)	$	(3.06	)
Weighted average shares used in basic per share computations		22,065			21,895			21,736			21,608			21,460
Weighted average shares used in dilutive per share computations		22,085			22,005			21,736			21,608			21,460

	As of December 31,
	2007			2006			2005			2004			2003
Balance Sheet Data:
Cash, cash equivalents and investment securities	$	69,592		$	48,639		$	36,889		$	48,402		$	92,198
Working capital		67,180			53,573			40,733			49,204			75,741
Total assets		94,121			74,903			60,142			64,820			98,600
Accumulated deficit		(343,661	)		(371,086	)		(378,470	)		(370,364	)		(330,276	)
Total stockholders' equity		67,322			37,772			24,373			30,346			68,668

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Selected Quarterly Financial Data

(in thousands, except per share data)

(unaudited)

	Q1 2007			Q2 2007			Q3 2007			Q4 2007
Statements of Operations Data:
Revenue:
Milestone revenue	$	9,208		$	83		$	78		$	66
Royalty revenue		3,862			3,219			4,781			3,865
Collaboration income		4,368			5,806			5,518			8,531
Total revenue and collaboration income		17,438			9,108			10,377			12,462
Operating expenses:
Research and development		3,097			2,959			3,809			3,018
General and administrative		6,539			1,937			1,674			950
Total operating expenses		9,636			4,896			5,483			3,968
Operating income		7,802			4,212			4,894			8,494
Other income (expense):
Interest income		670			727			815			808
Net gain on disposal of equipment		2			5			—			7
Interest expense		(201	)		(203	)		(115	)		(116	)
Total other income		471			529			700			699
Income before taxes		8,273			4,741			5,594			9,193
Income tax provision		122			66			54			134
Net income	$	8,151		$	4,675		$	5,540		$	9,059
Basic net income per share	$	0.37		$	0.21		$	0.25		$	0.41
Diluted net income per share	$	0.37		$	0.21		$	0.25		$	0.41
Weighted average shares used in basic per share computations		22,008			22,043			22,108			22,117
Weighted average shares used in diluted per share computations		22,124			22,184			22,132			22,141

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	Q1 2006			Q2 2006			Q3 2006			Q4 2006
Statements of Operations Data:
Revenue:
Milestone revenue	$	1,056		$	1,055		$	789		$	530
Royalty revenue		2,580			2,408			3,391			3,433
Collaboration income		3,794			3,815			5,559			8,570
Total revenue and collaboration income		7,430			7,278			9,739			12,533
Operating expenses:
Research and development:
Non-cash compensation		713			712			492			337
Other research and development expense		4,467			4,249			3,348			4,015
Total research and development expense		5,180			4,961			3,840			4,352
General and administrative:
Non-cash compensation		820			844			679			466
Other general and administrative expense		2,336			2,083			1,979			3,246
Total general and administrative expense		3,156			2,927			2,658			3,712
Total operating expenses		8,336			7,888			6,498			8,064
Operating income (loss)		(906	)		(610	)		3,241			4,469
Other income (expense):
Interest income		418			470			519			580
Net gain on disposal of equipment		—			—			7			—
Interest expense		(192	)		(194	)		(196	)		(199	)
Total other income		226			276			330			381
Income (loss) before taxes and cumulative effect of change in accounting principle		(680	)		(334	)		3,571			4,850
Income tax provision		—			—			124			151
Income (loss) before cumulative effect of change in accounting principle		(680	)		(334	)		3,447			4,699
Cumulative effect of change in accounting principle		252			—			—			—
Net income (loss)	$	(428	)	$	(334	)	$	3,447		$	4,699
Basic net income (loss) per share before cumulative effect of accounting change	$	(0.03	)	$	(0.02	)	$	0.16		$	0.21
Accounting change		0.01			—			—			—
Basic net income (loss) per share	$	(0.02	)	$	(0.02	)	$	0.16		$	0.21
Diluted net income (loss) per share before cumulative effectof accounting change	$	(0.03	)	$	(0.02	)	$	0.16		$	0.21
Accounting change		0.01			—			—			—
Diluted net income (loss) per share	$	(0.02	)	$	(0.02	)	$	0.16		$	0.21
Weighted average shares used in basic per share computations		21,858			21,896			21,911			21,913
Weighted average shares used in diluted per share computations		21,858			21,896			22,037			22,018

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion of our financial condition and results of operations should be read together with the financial statements and notes contained elsewhere in this Annual Report on Form 10-K. Certain statements in this section and other sections are forward-looking. While we believe these statements are accurate, our business is dependent on many factors, some of which are discussed in the “Risk Factors” and “Business” sections of this Annual Report on Form 10-K. Many of these factors are beyond our control and any of these and other factors could cause actual clinical and financial results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials. Please read the “Risk Factors” section in this Annual Report on Form 10-K. We undertake no obligation to release publicly the results of any revisions to the statements contained in this report to reflect events or circumstances that occur subsequent to the date of this Annual Report on Form 10-K.

OVERVIEW

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 compounds 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.

Overview of 2007

The Company recorded its second year of profitability resulting in positive cash flow from operations. This result was primarily driven by world wide sales of FUZEON and lower operating expenses. During the year, several notable events occurred:

Shift in Strategy – On December 10, 2007, we announced the strategic plan for 2008 that is designed to maximize cash flows from FUZEON while also advancing our next-generation fusion inhibitor, TRI-1144, to a value-creating milestone. With the 2008 plan, we have filed an Investigational New Drug application ("IND") for TRI-1144, and plan to initiate a single ascending dose (SAD) Phase I clinical trial for TRI-1144 in March of this year. In connection with the 2008 plan, we have implemented a program to reduce our workforce. After June 30, 2008, we expect that we will no longer staff any research or development functions.

Management Changes – During 2007, we saw numerous management changes. Most recently, on November 15, 2007, we appointed Martin A. Mattingly, Pharm.D. as Chief Executive Officer. Dr. Mattingly also joined our board of directors. On February 8, 2008, Andrew L. Graham and Michael A. Alrutz, J.D., Ph.D. were appointed Chief Financial Officer and General Counsel, respectively.

During 2007, we also saw several changes to the composition of our board of directors with the resignation of four directors and the elections of Stephen R. Davis and Barry D. Quart, Pharm. D. On February 8, 2008, we announced the election of Arthur B. Cohen and Joseph P. Healey to the board of directors, bringing the total number of directors to eight.

Competition – In late 2007, two new oral agents from novel classes became commercially available. As these new orally available agents achieve more widespread use, we believe that FUZEON sales will face significant pressure over the near term in the form of competition from these new market entrants. Specifically, the impact of the commercial launch of one of these agents, Isentress, has been observed with lower fourth quarter 2007 FUZEON sales.

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However, we believe that it is too early to predict what the long-term effect will be on FUZEON sales. It is our view that the long-term effect of novel drug regimens based on new market entrants will be influenced by the clinical success or failure of non-FUZEON containing treatment regimens prescribed for treatment-experienced patients.

Roche:

• Cost of Goods Sold—Recently, we entered into discussions with Roche related to the models used to calculate cost of goods sold for FUZEON. During the course of our discussions, we and Roche have concluded that the models being used resulted in an overestimate in the costs of goods sold being charged to the collaboration. As a result, we have received a credit from Roche of approximately $5.5 million for over charges to FUZEON cost of goods sold during the period from 2003 to 2006. The credit appears in the calculation of collaboration income for the fourth quarter 2007. At present, we remain in active discussions related to the calculation of cost of goods sold for 2007 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, we cannot be certain when a final resolution will be reached. For 2007, we have recorded our best estimate of the cost of goods sold based on the information provided by Roche.

• TRI 1144—on March 15, 2007, we announced that we reached agreement with Roche for the return of all rights to joint patents and other intellectual property related to next-generation HIV fusion inhibitor peptides to Trimeris that fall under the Roche-Trimeris 2000 Research Agreement. In return, we will pay Roche a nominal royalty on any future net sales of TRI-1144, up to a specified limit. In addition, Roche has agreed to return the rights to all intellectual property that Trimeris originally licensed to Roche under the 1999 Development and License Agreement, with the exception that Roche retains an exclusive license to manufacture and sell FUZEON worldwide. The commercial arrangement with Roche governing FUZEON sales remains unchanged. Trimeris currently has the sole right to develop TRI-1144. While Roche retains the right to conduct research on certain HIV gp41 fusion inhibitor peptides at Roche's cost for a specified period of time, we retain the right to opt-in and co-develop with Roche any one of these peptides under a 50-50 cost and profit split worldwide.

• Biojector^(R) 2000—on October 3, 2007, we and Roche provided an update on the efforts to offer a needle-free device which has been investigated for use with FUZEON. Based on a comprehensive assessment of the clinical program, and considering the significant delay in achieving U.S. regulatory approval due to the time required to generate additional data, we and Roche have withdrawn the supplemental application for approval to market the Biojector ^(R) 2000 device (known as “B2000” and manufactured by Bioject Medical Technologies, Inc.) for use with FUZEON.

Outlook for 2008

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

• Strategic Alternatives—we will continue to evaluate strategic alternatives to enhance shareholder value.

• Competition—we believe that FUZEON sales will face significant pressure over the near term in the form of competition from new market entrants. However, we also believe that it is too early to predict what the long-term effect will be on FUZEON sales.

• We will focus our efforts on maintaining profitability based on FUZEON sales.

• Staffing—we have implemented a program to reduce the Company’s workforce. After June 30, 2008, we expect that we will no longer staff any research or development functions.

• Cost of Goods Sold—at present, we remain in active discussions related to the calculation of cost of goods sold for 2007 and 2008 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, we cannot be certain when a final resolution will be reached. We will remain actively involved with Roche to optimize our cost of manufacturing.

• FUZEON Sales and Marketing—we believe that our selling and marketing expense in 2008 will be lower than 2007, as 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.

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• 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.

Overview of Roche Relationship

The Development and License Agreement

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

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

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

Collaboration Income and Loss

Currently, our only significant source of revenue is from the sale of FUZEON. Gross profit and royalty revenue from the sale of FUZEON exceeded the selling, marketing and other charges for the years ended December 31, 2007, 2006 and 2005, resulting in positive cash flow from the Development and License Agreement.

Product sales of FUZEON began in the United States on March 27, 2003 and are recorded by Roche. Under the Development and License Agreement, the Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, which is reported as collaboration income (loss) in the statements of operations as a component of revenue. Collaboration income (loss) 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 selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income (loss) is reported as collaboration income or loss as a component of revenue. Revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers. FUZEON is widely available through retail pharmacies and wholesalers across North America.

We receive 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. We receive a quarterly royalty report from Roche that summarizes these sales and the royalty amounts due to Trimeris.

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It is important to recognize that Roche is responsible for the manufacture, sales, marketing and distribution of FUZEON. Roche is manufacturing bulk quantities of FUZEON drug substance in its Boulder, Colorado facility and is producing finished drug product from bulk drug substance at other Roche facilities. The finished drug product is then shipped to another Roche facility for distribution. Roche’s sales force is responsible for selling FUZEON. Under our Development and License Agreement, we do not have the ability or rights to co-market this drug or field our own FUZEON sales force. All third party contracts for manufacturing, distribution, sale, and reimbursement are between Roche and the third party. We are not a party to any of the material contracts in these areas. Roche provides us 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. We review these items for accuracy and reasonableness. We receive 50% of the product gross profits for the United States and Canada.

Accrued Marketing Costs

For the years ended December 31, 2007, 2006 and 2005, Trimeris has recorded its share of selling and marketing expenses in accordance with terms and conditions of agreements we executed with Roche.

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 third quarter of 2007, the Company revised its estimate of the date that payments will begin from 2011 to 2014. During the year ended December 31, 2004, the Company’s share of selling and marketing expenses exceeded $11.2 million. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company’s estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the Development and License Agreement, discounted at a risk free interest rate. The Company is increasing the liability over time to the expected payment amount. The total liability of $17.9 million and $17.3 million at December 31, 2007 and 2006, respectively, is reflected on our balance sheets under the caption “Accrued marketing costs.”

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

Manufacturing Amendment

In September 2005, the Company entered into a Letter of Amendment (“Manufacturing Amendment”) with Roche, setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment amends and supplements the terms of the Development and License Agreement and addresses several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche will be responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche will therefore be financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the U.S. and Canada. In addition, Roche will be responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee will determine the schedule for converting supply chain materials that are in inventory as of that date into product.

The Manufacturing Amendment also sets forth the terms for which Roche-owned, FUZEON manufacturing equipment and facilities in Boulder may be used for the manufacture of other products. In addition, the Manufacturing Amendment provides for Trimeris’ payment of certain pre-launch inventory carrying costs related to the sale of FUZEON and Roche’s payment to Trimeris of an outstanding manufacturing milestone payment under the collaboration. The Manufacturing Amendment also outlines certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions.

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Advanced Payment—Roche

Under the Manufacturing Amendment, the Company will pay Roche for the Company’s share of the capital invested in Roche’s manufacturing facility over a seven-year period. As a result, Roche will no longer include 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 to be reviewed on an annual basis. Following such review, the Company’s contribution will be adjusted, when necessary, to reflect changes to the relative geographic distribution of FUZEON sales. During the third quarter of 2007, the Company and Roche reviewed certain FUZEON sales data which resulted in a change in the amount of the Company’s contribution to the capital investment. Following this 2007 review, the Company now expects to contribute approximately $12.8 million towards the capital investment as compared to its previous expectation of approximately $14.0 million. At December 31, 2007, we had capitalized costs of $10.4 million, and expect to pay approximately $400,000 per quarter through June 2009. In the event the Development and License Agreement is terminated, the Company would not be obligated for any unpaid amounts for capital investment.

These payments, net of the portion allocated to cost of goods sold, are recorded as an asset presented as “Advanced payment—Roche.” This asset is amortized based on the units of FUZEON sold during the collaboration period in order to properly allocate the capital investment to cost of goods sold as the related inventory is sold in future periods. Assuming all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 14 years. The carrying value of this asset will be evaluated annually for impairment or if an event occurs that triggers impairment.

Under the Manufacturing Amendment, if the Roche-owned facilities in Boulder, Colorado used for the manufacture of FUZEON, are used to produce other products for Roche, a credit to the collaboration will result. During the period from January 2006 through September 2006, a key intermediate used in the manufacture of another product was produced using these facilities that resulted in a credit to the collaboration. The Company’s share of this credit was approximately $632,000. During the period from July 2004 through June 2005, we also received a similar credit of which our share was approximately $900,000. During the period October 2007 through December 2007, we also hold a similar credit of which our share was approximately $191,000. These payments 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.

Development Expenses

Under the Development and License Agreement, development costs for FUZEON are shared equally. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Both Roche and Trimeris incur development costs for FUZEON. Quarterly, the companies reconcile the amounts expended and one party pays the other party on a 50/50 basis. Roche holds the Investigational New Drug (“IND”) and the New Drug Application (“NDA”) for FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. Development expenses pertaining to the United States and Canada are included in our statements of operations as operating expenses under Research and Development.

The Research Agreement

Research, or the process of identifying clinical candidates, is generally distinct from the advanced testing of these compounds, a process referred to herein as development (see discussion above “Development Expenses”). In the Company’s collaboration with Roche, the identification of compounds that may become clinical candidates had been governed by a separate research agreement and the work by the parties was performed according to an agreed upon research plan. In 2001, the Company entered into a research agreement (the “Research Agreement”) with Roche to discover, develop and commercialize novel generations of HIV fusion inhibitor peptides. In September 2006, we announced that our Research Agreement with Roche to co-develop a novel next generation fusion inhibitor (“NGFI”)

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was extended through December 31, 2008. The development work covered under the Research Agreement had focused on two distinct peptide classes, exemplified by TRI-999 and TRI-1144, as NGFI candidates. Based on the results of certain preclinical studies, TRI-1144 met the criteria established by Trimeris and Roche for further development and was being advanced as the lead preclinical NGFI candidate. TRI-999 did not satisfy these criteria and will not be further developed. In addition, the Company has the option to participate in the co-development and commercialization of certain Roche-developed fusion inhibitor peptides. In order to exercise its option, the Company must pay Roche a one-time, lump sum payment of $4.5 million, per candidate.

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

The following table summarizes our research and development expenses since inception (in thousands):

Project	2007			2006		2005		1993-2004		Cumulative
Fuzeon	$	515		$	4,177	$	6,929	$	216,062	$	227,683
T-1249		67			176		518		30,468		31,229
Next Generation Fusion Inhibitors		7,546			4,899		5,252		11,028		28,725
Early stage research		—			3,011		2,267		—		5,278
Other (comprised mostly of management personnel and overhead allocation costs)		4,855			4,177		3,308		7,494		19,834
All projects		12,983			16,440		18,274		265,052		312,749
SFAS 123R expense		(100	)		1,893		—		—		1,793
Total research and development	$	12,883		$	18,333	$	18,274	$	265,052	$	314,542

LIQUIDITY AND CAPITAL RESOURCES

The table below presents our cash flows for the years ended December 31, 2007, 2006 and 2005.

	Years ended December 31,
	2007			2006			2005
	(in thousands)
Net cash provided (used) in operating activities	$	21,592		$	12,177		$	(10,032	)
Net cash (used) provided by investing activities		(19,115	)		(6,152	)		4,871
Net cash provided by financing activities		173			468			619
Net increase (decrease) in cash and cash equivalents		2,650			6,493			(4,542	)
Cash and cash equivalents, beginning of period		30,052			23,559			28,101
Cash and cash equivalents, end of period	$	32,702		$	30,052		$	23,559

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

In 2007, the cash provided by operating activities primarily resulted from worldwide sales of FUZEON offset, in part, by cash used to fund research and development relating to FUZEON, and other product candidates, primarily TRI-1144, and marketing costs for the commercialization of FUZEON. In 2008, cash used in operating activities will depend on several factors including the sales, cost of sales and marketing expenses related to the sale of FUZEON (profitability of the collaboration with Roche) and the amount of money we deploy into post marketing commitments for FUZEON (development expenses) and costs related to the Phase I clinical trial for TRI-1144.

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In 2006, the cash provided by operating activities primarily resulted from worldwide sales of FUZEON offset, in part, by cash used to fund research and development relating to FUZEON, and other product candidates, primarily TRI-1144, and marketing costs for the commercialization of FUZEON.

In 2005, the cash used by operating activities was used primarily to fund research and development relating to FUZEON, T-1249 and other product candidates, primarily TRI-1144, and marketing costs for the commercialization of FUZEON.

Investing Activities:    In 2007, cash used by investing activities was primarily due to the reclassification of the investment of approximately $16.2 million 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. The Company, therefore, reclassified this investment to short-term investments from cash equivalents, based on information provided by the Fund manager. At December 31, 2007, the Fund’s NAV was $0.9874 per share. Cash used by investing activities also resulted from net purchases of investment securities available-for-sale of $2.3 million, purchases of property, furniture and equipment of $264,000 and patent costs of $384,000. In 2008, cash provided by investing activities will depend primarily on the net maturities of investments. We expect spending on patent costs in 2008 to approximate the spending in 2007. We do not expect to purchase any property, furniture and equipment in 2008; in fact, we are in the process of selling all of our research and development equipment.

In 2006, cash used by investing activities was primarily due to net purchases of investment securities—available-for-sale of $5.3 million, purchases of property, furniture and equipment of $485,000 and patent costs of $421,000.

In 2005, cash provided by investing activities was due to net maturities of investment securities available-for-sale of $7.0 million, offset in part by purchases of property, furniture and equipment of $1.3 million and patent costs of $805,000.

Financing Activities:    In 2007, 2006 and 2005, the cash provided by financing activities was due to the exercise of employee stock options and purchases of our stock under the employee stock purchase plan.

Total Cash, Cash Equivalents and Investment securities available-for-sale.    As of December 31, 2007, we had $69.6 million in cash and cash equivalents and investment securities available-for-sale, compared to $48.6 million as of December 31, 2006. The increase is primarily a result of cash provided by operating activities during the year ended December 31, 2007.

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;

• development costs for FUZEON which we share equally with Roche; and

• possible acquisitions and in licensing of research programs, clinical stage products and marketed products.

On December 10, 2007, Trimeris announced its strategic plan for 2008 that is designed to maximize cash flows from FUZEON while also advancing TRI-1144 to a value-creating milestone. Trimeris has filed an Investigational New Drug application (“IND”) with the FDA for TRI-1144, the Company's next-generation fusion inhibitor, and plans to initiate a single ascending dose (SAD) Phase I clinical trial for TRI-1144 in March 2008. In connection with the 2008 plan, Trimeris has implemented a program to reduce the Company's workforce. After June 30, 2008, the Company expects that it will no longer staff any research or development functions. As a result of this plan, excluding any extraordinary items, based on expected sales levels of FUZEON, expenses related to the sale of FUZEON, the

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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 a significant portion of our operating expense for the foreseeable future.

Contractual Obligations****	2008		2009		2010		2011		2012		Thereafter		Total
	(in thousands)
Operating leases*	$	1,538	$	1,569	$	1,600	$	1,632	$	1,666	$	3,575	$	11,580
Other contractual obligations**		1,600		800		—		—		—		—		2,400
Reduction in workforce***		4,119												4,119
Other long-term liabilities reflected on the Balance Sheet****		—		—		—		—		—		22,204		22,204
	$	7,257	$	2,369	$	1,600	$	1,632	$	1,666	$	25,779	$	40,303

Contractual Obligations.    The following table summarizes our material contractual commitments at December 31, 2007.

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

** We are making advance payments to Roche for our share of the cost of the capital improvements made at Roche’s Boulder manufacturing facility where FUZEON drug substance is produced. In 2005, we reached an agreement with Roche whereby we will pay Roche for our share of the capital invested in Roche’s manufacturing facility over a seven-year period. Under the terms of the agreement, our contribution to the capital improvements made at the Boulder manufacturing facility will be reviewed on an annual basis using sales data from the previous four quarters. During the third quarter of 2007, the Company and Roche reviewed the appropriate sales data resulting in a change to our share of the capital investment from approximately $14.0 million to approximately $12.8 million. At December 31, 2007, we have capitalized costs of $10.4 million, and expect to pay approximately $400,000 per quarter through June 2009. This amount, net of charges to cost of goods sold as the related inventory is sold, is recorded as an asset on our balance sheets under the caption “Advanced payment—Roche.” In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment.

*** During 2006 and 2007 the Company reduced its workforce and accrued an amount related to severance and other costs.

**** 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. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of these additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. During the third quarter of 2007, we revised our estimate of the date that payments will begin from 2011 to 2014.

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

New York Blood Center

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

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RESULTS OF OPERATIONS

Comparison of Years Ended December 31, 2007, 2006 and 2005

Revenues

The table below presents our revenue sources for the years ended December 31, 2007, 2006 and 2005.

	Years ended December 31,						2007 to 2006 Increase (Decrease)		2006 to 2005 Increase (Decrease)
	2007		2006		2005
Milestone revenue	$	9,435	$	3,430	$	1,722	$	6,005	$	1,708
Royalty revenue		15,727		11,812		8,784		3,915		3,028
Collaboration income		24,223		21,738		8,553		2,485		13,185
Total revenue and collaboration income	$	49,385	$	36,980		19,059	$	12,405	$	17,921

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 December 31, 2007. We are recognizing these milestones on a straight-line basis.

	Milestone Total			Date Achieved	Total Revenue Recognized Through December 31, 2007		Revenue Recognized for year ended December 31, 2007		End of Recognition Period
	(in thousands)
	$	4,600	*	July 1999	$	4,600	$	891	**
		2,000		October 2000		2,000		501	**
		8,000		March 2003		8,000		4,192	**
		5,000		May 2003		5,000		2,750	**
		2,500		June 2003		1,122		232	November 2014***
		750		June 2004		294		77	November 2014***
		2,500		January 2006		2,500		792	**
Total	$	25,350			$	23,516	$	9,435

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

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

*** 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.

In 2007, we recognized approximately $6.0 million more in milestone revenue when compared to 2006, primarily as a result of the acceleration of milestone revenue into the first quarter of 2007 (see ** discussion above).

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In 2006, we recognized approximately $1.7 million more in milestone revenue when compared to 2005. In January 2006, Roche agreed to pay the Company $2.5 million for the results of research that was performed outside the research plan during 2005. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. In March 2007, the Research Agreement was amended (see ** discussion above) and as a result the Company accelerated revenue, into the first quarter of 2007, for those milestone payments being amortized over the length of the research and development period of the NGFI peptides because our period of joint development had ended.

Royalty revenue:    Royalty revenue represents the royalty payment earned from Roche based on total net sales of FUZEON outside the United States and Canada. Sales of FUZEON outside the United States and Canada began in June 2003. In accordance with our agreement with Roche, our royalty rate has increased from 10% to 12%. This increase was in effect for the entire third quarter of 2006 and will remain at this level for the remainder of the collaboration. To calculate the royalty revenue, an 8% distribution charge is deducted from Roche’s reported net sales, from which the Company received a 12% royalty. Prior to the third quarter of 2006, to calculate the royalty revenue an 8% distribution charge was deducted from Roche’s reported net sales, from which Trimeris received a 10% royalty. Royalty revenue has been primarily increasing period over period as a result of sales in new countries being initiated. In 2008, we expect sales to face significant pressure over the near term in the form of competition from the new market entrants outside the U.S. and Canada. However, we also believe that it is too early to predict what the long-term effect will be on FUZEON sales.

The table below presents net sales outside the United States and Canada for the years ended December 31, 2007, 2006 and 2005. FUZEON was launched in June 2003 in the EU.

	Years ended December 31,						2007 to 2006 Increase (Decrease)		2006 to 2005 Increase (Decrease)
	2007		2006		2005
Total net sales outside the United States and Canada (as recorded by Roche)	$	142,450	$	114,790	$	95,477	$	27,660	$	19,313

Collaboration Income:    The table below presents our collaboration income for the United States and Canada for the years ended December 31, 2007, 2006 and 2005. 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. FUZEON was launched in March 2003.

	Years Ended December 31,									Increase (Decrease)		Increase (Decrease)
	2007			2006			2005
Gross Fuzeon sales by Roche	$	147,454		$	152,166		$	132,609		(4,712	)	$	19,557
Sales adjustments		(23,108	)		(18,005	)		(19,875	)	(5,103	)		1,870
Sales adjustments as a % of Gross Sales		16	%		12	%		15	%
Net sales		124,346			134,161			112,734		(9,815	)		21,427
Cost of goods sold		(45,486	)		(44,295	)		(45,854	)	(1,191	)		1,559
Cost of goods sold credit		10,940			—			—		10,940			—
Total cost of goods sold		(34,546	)		(44,295	)		(45,854	)	9,749			1,559
Cost of goods sold as a % of Net Sales		37	%		33	%		41	%
Gross profit		89,800			89,866			66,880		(66	)		22,986
Gross profit as a % of Net Sales		72	%		67	%		59	%
Selling and marketing expenses		(36,590	)		(45,809	)		(44,755	)	9,219			(1,054	)
Other costs		(3,248	)		(3,434	)		(7,854	)	186			4,420
Total shared profit and loss		49,962			40,623			14,271		9,339			26,352
Trimeris share*		24,981			22,511			9,270		2,470			13,241
Costs exclusive to Trimeris, Inc.		(758	)		(773	)		(717	)	15			(56	)
Collaboration income	$	24,223		$	21,738		$	8,553		2,485		$	13,185

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* On October 8, 2007, the Company entered into a letter agreement with Roche related to the sharing of sales and marketing expenses of FUZEON for 2007. Pursuant to this letter agreement, the parties have agreed upon their respective contributions towards the 2007 budget for North American selling and marketing expenses for FUZEON and, further, that these expenses will be split by Roche and the Company on a 50/50 basis. Under the terms of the Development and License Agreement, Roche cannot adopt a budget for the marketing of FUZEON above certain limits without the agreement of the Company. The Company’s contribution to selling and marketing expenses was limited in 2006 and 2005. As a result, the Company’s and Roche’s share of the collaboration income was not equal in 2006 or 2005.

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

The table below presents the number of kits sold and shipped to wholesalers in the U.S. and Canada during 2007, 2006, and 2005.

Kits Shipped	2007	2006	2005
Q1	17,900	17,100	15,000
Q2	19,200	19,800	16,900
Q3	17,600	19,900	18,500
Q4	17,500	22,900	21,600
Total	72,200	79,700	72,000

In late 2006, and in 2007, several new agents, including agents from novel classes, have become commercially available. At this point, we believe that FUZEON sales will face significant pressure over the near term in the form of competition from the new market entrants. However, we also believe that it is too early to predict what the long-term effect will be on FUZEON sales.

Sales adjustments:    Sales adjustments are recorded by Roche based on their experience with selling FUZEON. Sales adjustments for 2007 were within our expectations for the year. Roche adjusted some of its reserves at the end of 2006 resulting in an overall lower sales adjustment compared to 2005. There were no material revisions to Roche’s recorded estimates of sales adjustments for the year ended December 31, 2005. We expect sales adjustments to range between 15% to 16.5% of gross sales in 2008.

Cost of goods sold:    Recently, we entered into discussions with Roche related to the models used to calculate cost of goods sold for FUZEON. During the course of our discussions, we and Roche have concluded that the models being used resulted in an overestimate in the costs of goods sold being charged to the collaboration. As a result, the collaboration received a credit of approximately $10.9 million [Trimeris’ share is approximately $5.5 million] for over charges to FUZEON cost of goods sold during the period from 2003 to 2006. The credit appears in the calculation of collaboration income for the fourth quarter of 2007.

At present, we remain in active discussions related to the calculation of cost of goods sold for 2007 and 2008 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, we cannot be certain when a final resolution will be reached. For 2007, we have recorded our best estimate of the cost of goods sold based on the information provided by Roche.

Selling and marketing expenses:    Selling and marketing expenses for the year ended December 31, 2007 were lower than those for the year ended December 31, 2006 as a result of efficiencies identified with Roche. We believe that our selling and marketing expense in 2008 will be lower than 2007 as we have exercised our rights under the Development and License Agreement which prevents Roche from adopting a budget for the marketing of FUZEON above certain limits without the agreement of Trimeris.

Selling and marketing expenses for the year ended December 31, 2006 were comparable to the year ended December 31, 2005.

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Other costs:    Other costs for the year ended December 31, 2007 were comparable to the year ended December 31, 2006. Other costs primarily comprise general and administrative and distribution charges. Trimeris is responsible for 50% of these costs under the Development and License Agreement. We believe that other costs for 2008 will be less than 2007.

Other costs decreased for the year ended December 31, 2006 compared to the year ended December 31, 2005 as a result of lower inventory write-offs. Other costs for 2005 primarily comprise net inventory write offs and charges for the Boulder manufacturing facility. Also included in other costs for 2005, are general and administrative and distribution charges.

Costs exclusive to Trimeris:    Costs exclusive to Trimeris for the years ended December 31, 2007, 2006 and 2005 comprise license fees for certain technology paid to a third party. Depending on the level of FUZEON sales in certain markets, we believe that other costs for 2008 will approximate the levels seen in 2007.

Research and Development Expenses

The table below presents our research and development expense for the years ended December 31, 2007, 2006, and 2005.

	Years ended December 31,						2007 to 2006 Increase (Decrease)			2006 to 2005 Increase (Decrease)
	2007		2006		2005
Total research and development expense	$	12,883	$	18,333	$	18,274	$	(5,450	)	$	59

Total research and development expenses include:

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

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

Total research and development expense:    Total research and development expense decreased for the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily as a result of:

• decreased employee costs as a result of reduced headcount;

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

• decreased costs associated with ongoing post marketing commitments with the FDA for FUZEON;

• offset, in part, by increased costs for the development of our next generation fusion inhibitor peptide TRI-1144 and increased severance costs related to the reductions in workforce during 2007 for which we recorded an expense of $1.7 million in 2007.

Total research and development expense increased for the year ended December 31, 2006, compared to the year ended December 31, 2005, primarily as a result of:

• increased costs associated with non-cash employee stock compensation expense;

• increased severance costs related to the reductions in workforce that we implemented in November of 2006 for which we recorded an expense of $1.5 million in 2006;

• offset, in part, by decreased costs associated with ongoing clinical trials for FUZEON and T-1249 and decreased facilities costs as a result of combining our facilities into one location.

Total research personnel were 10, 46 and 57 at December 31, 2007, 2006 and 2005, respectively. We expect research and development expenses, net of the reimbursements for FUZEON, to be lower in 2008, as compared to 2007, as a result of our 2008 strategic plan which eliminates 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.

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In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for research that was performed outside the research plan during 2005. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In February 2006, Trimeris received this payment. See discussion under Milestone Revenue for recognition of milestone payments.

General and Administrative Expenses

The table below presents our general and administrative expense for the years ended December 31, 2007, 2006 and 2005.

	Years ended December 31,						2007 to 2006 Increase (Decrease)			2006 to 2005 Increase (Decrease)
	2007		2006		2005
Total general and administrative expense	$	11,100	$	12,453	$	9,436	$	(1,353	)	$	3,017

Total general and administrative expense:    Total general and administrative expense decreased for the year ended December 31, 2007 compared to the year ended December 31, 2006, primarily as a result of:

• decreased employee costs as a result of reduced headcount;

• decreased expenses related to our employee share-based compensation;

• offset, in part, by increased severance costs related to the reductions in workforce during 2007 for which we recorded an expense of $4.2 million in 2007.

Total general and administrative expense increased for the year ended December 31, 2006 compared to the year ended December 31, 2005, primarily as a result of:

• increased costs associated with non-cash employee stock compensation expense;

• the reduction in force that we implemented in December of 2006 for which we recorded an expense of $1.7 million in 2006;

• offset, in part, by decreased premiums for directors and officers’ insurance, and

• decreased facilities costs as a result of combining our facilities into one location.

Total general and administrative employees were 11, 26 and 34 at December 31, 2007, 2006 and 2005, respectively. We expect other general and administrative expenses to decrease in 2008, when compared to 2007, as a result of our 2008 strategic plan which eliminates most general and administrative personnel at Trimeris after June 30, 2008.

Other Income (Expense)

The table below presents our other income (expense) for the years ended December 31, 2007, 2006, and 2005.

	Years ended December 31,									2007 to 2006 Increase (Decrease)		2006 to 2005 Increase (Decrease)
	2007			2006			2005
Interest income	$	3,010		$	1,987		$	1,300		$	1,023	$	687
Gain (loss) on disposal of equipment		24			7			(9	)		17		16
Interest expense		(635	)		(781	)		(746	)		146		(35	)
Total other income	$	2,399		$	1,213		$	545		$	1,186	$	668

Other income (expense) consists of interest income, interest expense, accretion of interest and gain (loss) on disposal of equipment. Interest income increased for the year ended December 31, 2007, compared to the year ended December 31, 2006, as our average cash balance during 2007 was higher than 2006. Interest income increased for the

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year ended December 31, 2006, compared to the year ended December 31, 2005, as our average cash balance during 2006 was higher than 2005. Depending on interest rates, we expect that interest income will increase in 2008 compared to 2007 as we expect our cash balance to increase during 2008.

Interest expense across all periods is primarily a result of accreting the 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 to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of 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. During the year ended December 31, 2004, we reached our $11.2 million limitation for the year. We recorded an expense, and associated liability, of approximately $15.6 million as part of collaboration loss during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk free interest rate from the expected payment date based on achievement of the sales milestones in the agreement. We are increasing the liability over time to the expected payment amount. During the third quarter of 2007, the Company revised the estimated date that payments will begin from 2011 to 2014. As a result, we will accrete the marketing debt over a longer period of time resulting in lower interest expense in any particular period. In 2007, 2006 and 2004 we increased this liability by $635,000, $781,000 and $746,000, respectively, for accretion of interest. The total liability of $17.9 million at December 31, 2007 is reflected on our balance sheet under the caption “Accrued marketing costs.”

Income Tax Provision

During the year ended December 31, 2007, the Company recorded an income tax provision of $376,000. The expense was due primarily to the current tax expense caused by the Alternative Minimum Tax (“AMT”). A full valuation allowance was recognized related to the benefit of the AMT credit.

During the year ended December 31, 2006, the Company recorded an income tax provision of $275,000, of which $115,000 was payable on December 31, 2006 and included in accrued expenses on the balance sheet. The expense was due primarily to the current tax expense caused by the AMT. A full valuation allowance was recognized related to the benefit of the AMT credit.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases for our properties.

Critical Accounting Policies

We believe the following accounting policies are the most critical to our financial statements. We believe they are important to the presentation of our financial condition and results from operations, and require the highest degree of management judgment to make the estimates necessary to ensure their fair presentation. Actual results could differ from those estimates.

Revenue Recognition under Staff Accounting Bulletin No. 104

Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” summarizes the SEC’s views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB No. 104 establishes the SEC’s view that it is not appropriate to recognize revenue until all of the following criteria are met: persuasive evidence that an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; and collectability is reasonably assured. Further, SAB No. 104 requires that both title and the risks and rewards of ownership be transferred to the buyer before revenue can be recognized. We believe that our revenue recognition policies as described below are in compliance with SAB No. 104.

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Milestone Revenue and Deferred Revenue—Roche

SAB No. 104 provides guidance that it is appropriate to recognize revenue related to license and milestone payments over the research and development term of a collaboration agreement. As of the first quarter of 2007, all remaining milestones are being amortized over the patent term associated with these milestones. Prior to the first quarter of 2007, the primary estimates we made in connection with the application of this policy were the length of the period of the research and development under our Development and License Agreement with Roche and the estimated commercial life of FUZEON.

Through December 31, 2007, the Company has received a $10.0 million license fee, research milestone payments of $15.0 million and $3.3 million in manufacturing milestones related to Roche achieving certain production levels. The license fee and research milestones were recorded as deferred revenue and were being recognized ratably over the research and development period. The manufacturing milestones were also recorded as deferred revenue and are being recognized ratably through June 2014, which is the current expected commercial life of FUZEON. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for the results of research that was performed outside the research plan during 2005. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we planned to recognize the remainder of this payment over the extended period (the period of our continuing involvement).

On March 13, 2007, the Company entered into an agreement with Roche that amended the terms of the Research Agreement whereby all rights, joint patents and other intellectual property rights to the NGFI peptides falling under the Research Agreement, which includes the lead drug candidate, TRI-1144, reverted to Trimeris. As a result of this agreement, the Company accelerated revenue for those milestone payments being amortized over the length of the research and development period of the NGFI peptides because our period of joint development has ended. The acceleration of these milestone payments resulted in $8.7 million of additional milestone revenue being recognized during the three months ended March 31, 2007.

Collaboration Income (Loss)

Product sales of FUZEON began in the United States on March 27, 2003 and are recorded by Roche. Under the Development and License Agreement with Roche, the Company shares profits equally from the sale of FUZEON in the United States and Canada with Roche, which is reported as collaboration income (loss) in the statements of operations as a component of revenue. Collaboration income (loss) is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any estimated discounts, rebates or returns resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross margin. Gross profit is reduced by selling and marketing expenses and other costs related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income or loss as a component of revenue. Revenue is recognized when Roche ships drug and title and risk of loss passes to wholesalers. Roche prepares its estimates for sales returns and allowances, discounts and rebates based primarily on their 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 from operations in the period of adjustment.

We recognize 50% of the total collaboration gross profit/loss which includes estimates made by and recorded by Roche for 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. Estimates for government rebate programs and cash discounts are determined by Roche based on contractual terms, historical information from Roche’s anti-HIV drug portfolio, and Roche’s expectations regarding future utilization rates for these programs. Estimates for product returns are based on an on-going analysis of industry return patterns and historical return patterns by Roche for its anti-HIV drug portfolio. This includes the purchase of third-party data by Roche to assist Roche and us in monitoring channel inventory levels and subsequent prescriptions for FUZEON. We also

45

monitor the activities and clinical trials of our key competitors and assess the potential impact on future FUZEON sales and return expectations where necessary. Expected returns for FUZEON are generally low as FUZEON has a high WAC compared to other anti-HIV drugs, and requires significantly more storage space than other anti-HIV drugs due to the size of a monthly kit because FUZEON requires twice daily injections. Consequently wholesalers tend to stock only the necessary volumes of FUZEON inventory. We believe that wholesalers hold 1.5 to 2 weeks of FUZEON inventory on average. The current shelf life of FUZEON is 36 months. Roche reviews the estimates discussed above on a quarterly basis and revises estimates as appropriate for changes in facts or circumstances. These estimates reduce our share of collaboration income or loss under our Development and License Agreement.

Recently, we entered into discussions with Roche related to the models used to calculate cost of goods sold for FUZEON. During the course of our discussions, we and Roche have concluded that the models being used resulted in an overestimate in the costs of goods sold being charged to the collaboration. As a result, we have received a credit from Roche of approximately $5.5 million for over charges to FUZEON cost of goods sold during the period from 2003 to 2006. The credit appears in the calculation of collaboration income for the fourth quarter of 2007. At present, we remain in active discussions related to the calculation of cost of goods sold for 2007 and 2008 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, we cannot be certain when a final resolution will be reached. For 2007, we have recorded our best estimate of the cost of goods sold based on the information provided by Roche.

Calculation of Compensation Costs for Stock Options Granted to Employees

In December 2004, SFAS No. 123 (revised), “Share-Based Payment,” was issued. SFAS No. 123 (revised) requires that the cost resulting from all share-based payment transactions be recognized as a charge in the financial statements. This statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement method in accounting for share-based payment transactions with employees except for equity instruments held by employee share ownership plans. The primary estimate we make in connection with the calculation of this expense is the forfeiture rate of those options granted. The future volatility of our stock price and the term of those options granted are estimates used in calculating the value of the stock options in the Black-Scholes option-pricing model. We first segment the optionee population into like pools. For each pool we then estimate the future volatility based on the historical volatilities. A higher volatility would result in greater compensation costs, and a lower volatility would result in lower compensation costs for these stock options. For each pool we also estimate the forfeiture rate based on historical forfeiture rates. A higher forfeiture rate would result in less compensation costs, and a lower forfeiture rate would result in higher compensation costs. Additional, for each pool we estimate the term of the options. A longer term would result in greater compensation costs, and a shorter term would result in lower compensation costs for these stock options.

Capitalization of Patent Costs

The costs of patents are capitalized and are amortized using the straight-line method over the estimated remaining lives of the patents, either 17 years from the date the patent is granted or 20 years from the initial filing of the patent, depending on the patent. These costs are primarily legal fees and filing fees related to the prosecution of patent filings. We perform a continuous evaluation of the carrying value and remaining amortization periods of these costs. In the event future expected benefit to be derived from any patents are less than their carrying value, the related costs would be expensed at that time.

Accrued Marketing Costs

In 2004, we reached an agreement with Roche whereby our actual cash contribution to certain selling and marketing expenses for FUZEON in 2004 was limited to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, our share of 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. During the third quarter of 2007, the Company revised its estimate of the date that payments will begin from 2011 to 2014. During the year ended December 31, 2004, we reached our $11.2 million limitation for the year. We recorded an expense, and associated liability, of approximately $15.6 million as part of collaboration loss during the year ended December 31, 2004. This represents the net present value of our estimated share of the additional expenses, discounted at a risk free interest rate from the

46

expected payment date based on achievement of the sales milestones in the agreement. We are increasing the liability over time to the expected payment amount. In 2007, 2006 and 2005 we increased this liability by $635,000, $781,000 and $746,000 respectively, for accretion of interest. The total liability of $17.9 million at December 31, 2007 is reflected on our balance sheet under the caption “Accrued marketing costs.”

Advanced Payment—Roche

We are making advance payments to Roche for our share of the cost of the capital improvements made at Roche’s Boulder facility where FUZEON drug substance is produced. During the third quarter of 2007, the Company and Roche reviewed certain FUZEON sales data which resulted in a change in the amount of Company’s contribution to the capital investment. Following this 2007 review, the Company now expects to contribute approximately $12.8 million towards the capital investment as compared to its previous expectation of approximately $14.0 million. At December 31, 2007, we had capitalized costs of $10.4 million, and expect to pay approximately $400,000 per quarter through June 2009. This amount, net of charges to cost of goods sold as the related inventory is sold, is recorded as an asset on our balance sheet under the caption “Advanced payment—Roche.” This asset will be amortized to cost of goods sold based on the units of FUZEON sold during the collaboration period. We estimate that as of December 31, 2007, this asset has a remaining useful life of approximately 14 years. In the event our Development and License Agreement is terminated, we would not be obligated for any unpaid amounts for capital investment. In addition, other peptide drug candidates discovered under our collaboration with Roche can be manufactured using this same Roche facility. The carrying value of this asset will be evaluated if a triggering event occurs.

Recently Issued Accounting Pronouncements

In November 2007, the Financial Accounting Standards Board (“FASB”) Emerging Issues Task Force approved Issue No. 07-1 “Accounting for Collaborative Arrangements.” The objective of this Issue is to define collaborative arrangements and to establish reporting requirements for transactions between participants in a collaborative arrangement and between participants in the arrangement and third parties. This issue is effective for fiscal years beginning after December 15, 2008. We are currently assessing the impact of this issue on our financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS No. 141 (R)”). SFAS No. 141 (R) replaces SFAS No. 141, Business Combinations (“SFAS No. 141”), and establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and earlier adoption is prohibited.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective of SFAS No. 159 is to provide opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the impact of this statement on our financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact of this statement on our financial statements.

Corporate Code of Ethics

We have a code of ethics for our employees and officers. This document is available on our website at the following address: http://trimeris.com/140governance.aspx_code_of_ethics.pdf

47

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE OF 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. We have not experienced any material loss in our investment portfolio and we believe the market risk exposure in our investment portfolio has remained consistent over this period.

The table below presents the carrying value, which is approximately equal to fair market value, and related weighted-average interest rates for our investment portfolio at December 31, 2007. Fair market value is based on actively quoted market prices. Our investments are generally most vulnerable to changes in short-term interest rates in the United States. The majority of our investments mature in twelve months or less, and have been given a rating of A1 or higher by a nationally recognized statistical rating organization or are the debt obligations of a federal agency and, therefore, we believe that the risk of material loss of principal due to changes in interest rates is minimal.

	Carrying Amount		Average Interest Rate
	(thousands)
Cash and cash equivalents—fixed rate	$	32,554	4.87	%
Investment securities		36,890	4.85	%
Overnight cash investments—fixed rate		148	1.44	%
Total investment securities	$	69,592	4.85	%

Our exposure to credit risk relates to our investment in money market funds and 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. At December 31, 2007, the Fund’s NAV was $0.9874 per share. For the year ended December 31, 2007, we had an unrealized loss on available for sales securities of approximately $206,000. If the current credit environment continues to deteriorate, our investments in money market funds could become impaired and our investment in the Columbia Strategic Cash Portfolio could suffer losses, which would adversely impact our financial results.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 is included in Item 15 of this Annual Report on Form 10-K.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with the Company’s independent registered public accounting firm, KPMG LLP.

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.    We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

48

Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation of the disclosure controls and procedures as of December 31, 2007, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting.    Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria.

Our internal control over financial reporting as of December 31, 2007 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which appears on page F-1 of this Annual Report on Form 10-K. KPMG LLP has also audited the financial statements of the Company, as stated in their report which appears on page F-2, of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting.    There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

49

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by Item 10 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 12 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by Item 13 is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 as to principal accounting fees and services is incorporated by reference from the Company’s Proxy Statement to be filed by the Company with the SEC within 120 days after the end of the fiscal year.

50

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

		Page Number
(a)1.	Financial Statements
	Reports of Independent Registered Public Accounting Firm	F-1
	Balance Sheets as of December 31, 2007 and 2006	F-3
	Statements of Operations for the Years Ended December 31, 2007, 2006 and 2005	F-4
	Statements of Stockholders’ Equity for the Years Ended December 31, 2007, 2006 and 2005	F-5
	Statements of Cash Flows for the Years Ended December 31 2007, 2006 and 2005	F-6
	Notes to Financial Statements	F-7

(a)2.    Financial Statement Schedules

All financial statement schedules required under Regulation S-X are omitted, as the required information is not applicable.

(a)3.    Exhibits

The Exhibits filed as part of this Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits and are incorporated by reference. The Company has identified in the Exhibit Index each management contract and compensation plan or arrangement filed as an exhibit to this Annual Report on Form 10-K in response to Item 15(b) of Form 10-K.

51

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Trimeris, Inc.:

We have audited Trimeris, Inc.’s (the Company’s) internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the balance sheets of Trimeris, Inc. as of December 31, 2007 and 2006, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007, and our report dated March 17, 2008 expressed an unqualified opinion on those financial statements.

KPMG LLP

Raleigh, North Carolina

March 17, 2008

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Trimeris, Inc.:

We have audited the accompanying balance sheets of Trimeris, Inc. (the Company) as of December 31, 2007 and 2006, and the related statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trimeris, Inc. as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 1 to the financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123(R), Shared-Based Payment, as of January 1, 2006. As discussed in Note 8 to the financial statements, the Company adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), as of December 31, 2006.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 17, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

KPMG LLP

Raleigh, North Carolina

March 17, 2008

F-2

TRIMERIS, INC.

BALANCE SHEETS

(in thousands, except per share amounts)

	December 31, 2007			December 31, 2006
Assets
Current assets:
Cash and cash equivalents	$	32,702		$	30,052
Investment securities available-for-sale		27,938			17,983
Accounts receivable—Roche		12,240			13,341
Other receivables		60			36
Prepaid expenses		679			1,068
Total current assets		73,619			62,480
Property, furniture and equipment, net of accumulated depreciation and amortization of $11,842 and $11,187 at December 31, 2007 and 2006, respectively		1,644			2,160
Long-term investment securities available-for-sale		8,952			604
Patent costs, net of accumulated amortization of $604 and $438 at December 31, 2007 and 2006, respectively		2,724			2,584
Advanced payment—Roche		6,812			6,303
Deposits and other assets		370			772
Total assets	$	94,121		$	74,903
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	917		$	709
Accrued compensation—short-term		4,804			3,797
Deferred revenue—Roche		265			2,118
Accrued expenses		453			2,283
Total current liabilities		6,439			8,907
Deferred revenue—Roche		1,569			9,151
Accrued marketing costs		17,923			17,288
Accrued compensation—long-term		150			1,072
Other liabilities		718			713
Total liabilities		26,799			37,131
Stockholders’ equity:
Preferred stock at $.001 par value per share, 10,000 shares authorized, zero shares issued and outstanding		—			—
Common stock at $.001 par value per share, 60,000 shares authorized 22,272 and 22,132 shares issued and outstanding at December 31, 2007 and 2006, respectively		22			22
Additional paid-in capital		410,937			408,855
Accumulated deficit		(343,661	)		(371,086	)
Accumulated other comprehensive income (loss)		24			(19	)
Total stockholders’ equity		67,322			37,772
Total liabilities and stockholders’ equity	$	94,121		$	74,903

See accompanying notes to financial statements.

F-3

TRIMERIS, INC.

STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	For the Years Ended December 31,
	2007			2006			2005
Revenue:
Milestone revenue	$	9,435		$	3,430		$	1,722
Royalty revenue		15,727			11,812			8,784
Collaboration income		24,223			21,738			8,553
Total revenue and collaboration income		49,385			36,980			19,059
Operating expenses:
Research and development expense		12,883			18,333			18,274
General and administrative expense		11,100			12,453			9,436
Total operating expenses		23,983			30,786			27,710
Operating income (loss)		25,402			6,194			(8,651	)
Other income (expense):
Interest income		3,010			1,987			1,300
Gain (loss) on disposal of equipment		24			7			(9	)
Interest expense		(635	)		(781	)		(746	)
Total other income		2,399			1,213			545
Income (loss) before taxes and cumulative effect of change in accounting principle		27,801			7,407			(8,106	)
Income tax provision		376			275			—
Income (loss) before cumulative effect of change in accounting principle		27,425			7,132			(8,106	)
Cumulative effect of change in accounting principle		—			252			—
Net income (loss)	$	27,425		$	7,384		$	(8,106	)
Basic net income (loss) per share before cumulative effect of accounting change	$	1.24		$	0.33		$	(0.37	)
Accounting change		—			0.01			—
Basic net income (loss) per share	$	1.24		$	0.34		$	(0.37	)
Diluted net income (loss) per share before cumulative effect of accounting change	$	1.24		$	0.33		$	(0.37	)
Accounting change		—			0.01			—
Diluted net income (loss) per share	$	1.24		$	0.34		$	(0.37	)
Weighted average shares used in basic per share computations		22,065			21,895			21,736
Weighted average shares used in diluted per share computations		22,085			22,005			21,736

See accompanying notes to financial statements.

F-4

TRIMERIS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2007, 2006, and 2005

(in thousands)

	Common Stock				Additional Paid-in Capital			Accumulated Deficit			Deferred Compensation			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
	Number of Shares		Par Value
Balance as of December 31, 2004	21,917		$	22	$	403,307		$	(370,364	)	$	(2,613	)	$	(6	)	$	30,346
Net loss	—			—		—			(8,106	)		—			—			(8,106	)
Unrealized loss on available-for-sale securities	—			—		—			—			—			(4	)		(4	)
Comprehensive loss for period																		(8,110	)
Exercise of stock options	85			—		440			—			—			—			440
Issuance of stock for 401(K) match	57			—		650			—			—			—			650
Issuance of stock under Employee Stock Purchase Plan	20			—		179			—			—			—			179
Non-employee stock compensation expense	—			—		25			—			—			—			25
Restricted stock grant	—			—		5			—			(5	)		—			—
Restricted stock forfeited	(22	)		—		(313	)		—			313			—			—
Restricted stock amortization	—			—		—			—			843			—			843
Balance as of December 31, 2005	22,057		$	22	$	404,293		$	(378,470	)	$	(1,462	)	$	(10	)	$	24,373
Net income	—			—		—			7,384			—			—			7,384
Unrealized loss on available-for-sale securities	—			—		—			—			—			(3	)		(3	)
Comprehensive income for period	—			—		—			—			—			—			7,381
Cumulative effect of change in accounting principle	—			—		(252	)		—			—			—			(252	)
Adoption of SFAS 158 for postretirement benefits	—			—		—			—			—			(6	)		(6	)
Exercise of stock options	47			—		280			—			—			—			280
Issuance of stock for 401(K) match	59			—		745			—			—			—			745
Issuance of stock under Employee Stock Purchase Plan	21			—		188			—			—			—			188
Non-employee stock compensation expense	—			—		83			—			—			—			83
Employee stock option expense	—			—		4,300			—			—			—			4,300
Employee Stock Purchase Plan expense	—			—		88			—			—			—			88
Reversal of deferred compensation under SFAS 123R	—			—		(1,462	)		—			1,462			—			—
Restricted stock forfeited	(52	)		—					—			—			—			—
Restricted stock amortization	—			—		592			—			—			—			592
Balance as of December 31, 2006	22,132		$	22	$	408,855		$	(371,086	)	$	—		$	(19	)	$	37,772
Net income	—			—		—			27,425			—			—			27,425
Adjustment to OCI for postretirement benefts	—			—		—			—			—			218			218
Unrealized loss on available-for-sale securities	—			—		—			—			—			(175	)		(175	)
Comprehensive income for period	—			—		—			—			—			—			27,468
Exercise of stock options	30			—		104			—			—			—			104
Issuance of stock for 401(K) match	44			—		305			—			—			—			305
Issuance of stock under Employee Stock Purchase Plan	12			—		69			—			—			—			69
Issuance of restricted stock	85			—		869			—			—			—			869
Non-employee stock compensation expense	—			—		67			—			—			—			67
Employee stock option expense	—			—		611			—			—			—			611
Employee Stock Purchase Plan expense	—			—		57			—			—			—			57
Restricted stock forfeited	(31	)		—		—			—			—			—			—
Balance as of December 31, 2007	22,272		$	22	$	410,937		$	(343,661	)	$	—		$	24		$	67,322

See accompanying notes to financial statements.

F-5

TRIMERIS, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

	For the Years Ended December 31,
	2007			2006			2005
Cash flows from operating activities:
Net income (loss)	$	27,425		$	7,384		$	(8,106	)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Depreciation and amortization of property, furniture and equipment		779			958			1,022
Postretirement benefits		218			(6	)		—
Net (gain) loss on disposal of equipment		(10	)		(7	)		9
Other amortization		191			170			105
Amortization of deferred revenue—Roche		(9,435	)		(3,430	)		(1,722	)
Non-cash compensation expense		735			5,063			868
Issuance of restricted stock		869
Cumulative effect of change in accounting principle		—			(252	)		—
401(K) plan stock match		305			745			650
Patent costs expensed		78			115			118
Accrued marketing costs		635			781			746
Decrease (increase) in assets:
Accounts receivable—Roche		1,101			(2,841	)		(4,622	)
Other receivables		(24	)		18			118
Prepaid expenses		389			301			261
Advanced payment—Roche, net		(509	)		(1,085	)		(720	)
Deposits and other assets		377			252			(1,030	)
Increase (decrease) in liabilities:
Accounts payable		208			(1,210	)		495
Accrued compensation		85			2,028			(140	)
Accrued expenses		(1,830	)		686			1,337
Deferred revenue—Roche		—			2,500			—
Other liabilities		5			7			579
Net cash provided (used) by operating activities		21,592			12,177			(10,032	)
Cash flows from investing activities:
Purchases of investment securities—available-for-sale		(42,793	)		(19,792	)		(34,313	)
Reclass of cash and cash equivalents to short-term investments		(16,225	)		—			—
Maturities of investment securities—available-for-sale		40,540			14,532			41,280
Proceeds from the sale of equipment		11			14			37
Purchases of property, furniture and equipment		(264	)		(485	)		(1,328	)
Patent costs		(384	)		(421	)		(805	)
Net cash (used) provided by investing activities		(19,115	)		(6,152	)		4,871
Cash flows from financing activities:
Employee stock purchase plan stock issuance		69			188			179
Proceeds from exercise of stock options		104			280			440
Net cash provided by financing activities		173			468			619
Net increase (decrease) in cash and cash equivalents		2,650			6,493			(4,542	)
Cash and cash equivalents at beginning of year		30,052			23,559			28,101
Cash and cash equivalents at end of year	$	32,702		$	30,052		$	23,559
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	—		$	—		$	6
Cash paid during the period for income taxes	$	130		$	160		$	—
Supplemental disclosure of non-cash investing activity:
Other receivable for the sale of equipment	$	—		$	—		$	28

See accompanying notes to financial statements.

F-6

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Trimeris 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”), our first commercial product and our compounds 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.

The Company also has a separate agreement the (“Research Agreement”) with Roche that governs the identification of compounds that may become clinical candidates. In March 2007, the Company entered into an agreement with Roche that amends the terms of the Research Agreement whereby 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.

Liquidity

Under the current operating environment, based on current sales levels of FUZEON, we expect that our existing capital resources, together with the interest earned thereon, will be adequate to fund our current operations based on current expectations. However, any reduction in FUZEON sales below currently expected levels or increase in expenditures beyond currently expected levels could increase our capital requirements substantially beyond our current expectations.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents of $32.7 million and $30.1 million December 31, 2007 and 2006, respectively, are stated at cost and consist primarily of overnight commercial paper. The carrying amount of cash and cash equivalents approximates fair value.

Investment Securities Available-For-Sale

Investment securities, which consist of corporate bonds, Euro dollar bonds, certificates of deposit, auction rate securities and federal agency notes, are classified as available-for-sale, and are reported at fair value based on quoted market prices. 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.

F-7

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

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

Short-term investments include an investment of approximately $16.2 million 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. The Company, therefore, reclassified this investment to short-term investments from cash equivalents at December 31, 2007, based on information provided by the Fund manager. At December 31, 2007, the Fund’s NAV was $0.9874 per share. For the year ended December 31, 2007, the Company had an unrealized loss on its investment in the Fund of approximately $206,000.

Financial Instruments

Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments,” as amended, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value is determined using available market information.

Financial instruments, other than investment securities available-for-sale, held by the Company include accounts receivable, accrued marketing costs, and accounts payable. The Company believes that the carrying amount of these financial instruments approximates their fair value.

Property, Furniture and Equipment

Property, furniture and equipment are recorded at cost.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the lesser of the lease term or estimated useful life of the asset.

The depreciable lives of our property, furniture and equipment are as follows:

Equipment and furniture	3.5 years
Computer / software	3 years
Leasehold improvements	Lesser of useful life or life of lease—10 years

Intangible Assets

Management performs a continuing evaluation of the carrying value and remaining amortization periods of unamortized amounts of intangible assets. Any impairment would be recognized when the expected future operating cash flows derived from such intangible assets are less than their carrying value. During 2007, 2006 and 2005, $78,000, $115,000 and $118,000 respectively, of patent costs were expensed in other research and development expense because the expected future benefits from these patents was less than their carrying value.

The costs of patents are capitalized and are amortized using the straight-line method over the estimated remaining lives of the patents, the longer of 17 years from the date the patent is granted or 20 years from the initial filing of the patent.

F-8

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Patent amortization expense was $166,000, $146,000 and $92,000 in 2007, 2006 and 2005, respectively. The estimated aggregate amortization expense for the next five years is $148,000 per year for 2008 through 2012.

Also included in patent costs are intangibles that are not currently being amortized of $1,300,000 and $976,000 as of December 31, 2007 and 2006, respectively.

Accounts Payable

As of December 31, 2007 and 2006, there was $26,000 and $37,000, respectively, due to related parties included in accounts payable on the Company’s balance sheets.

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 third quarter of 2007, the Company revised its estimate of the date that payments will begin from 2011 to 2014. During the year ended December 31, 2004, the Company’s share of selling and marketing expenses exceeded $11.2 million. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company’s estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the Development and License Agreement, discounted at a risk free interest rate. The Company is increasing the liability over time to the expected payment amount. In 2007, 2006 and 2005, the Company increased the initial recorded liability by $635,000, $781,000 and $746,000, respectively for accretion of interest. The total liability of $17.9 million and $17.3 million at December 31, 2007 and 2006, respectively, is reflected on our balance sheet under the caption “Accrued marketing costs.”

For the years ended December 31, 2007 and 2006, Trimeris has recorded its share of selling and marketing expenses in accordance with the terms and conditions of agreements we executed with Roche.

Advanced Payment—Roche

In September 2005, the Company entered into a Letter of Amendment (“Manufacturing Amendment”) with Roche, which amended the Development and License Agreement and set forth certain rights and responsibilities that the parties previously agreed to with respect to the manufacture and sale of FUZEON. The Company will pay Roche for the Company’s share of the capital invested in Roche’s manufacturing facility over a seven-year period. As a result, Roche will no longer include 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 to be reviewed on an annual basis. Following such review, the Company’s contribution will be adjusted, when necessary, to reflect changes to the relative geographic distribution of FUZEON sales. During the third quarter of 2007, the Company and Roche reviewed certain FUZEON sales data which resulted in a change in the amount of Company’s contribution to the capital investment. Following this 2007 review, the Company now expects to contribute approximately $12.8 million towards the capital investment as compared to its previous expectation of approximately $14.0 million. Through December 31, 2007, the Company had capitalized costs of $10.4 million, and expects to pay approximately $400,000 per quarter through June 2009. In the event the Development and License Agreement is terminated, the Company would not be obligated for any unpaid amounts for capital investment.

F-9

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

These payments, net of the portion allocated to cost of goods sold, are recorded as an asset presented as “Advanced payment—Roche.” This asset is amortized based on the units of FUZEON sold during the collaboration period in order to properly allocate the capital investment to cost of goods sold as the related inventory is sold in future periods. Assuming all payments are made and sales of FUZEON continue, the Company estimates that this asset has a remaining useful life of approximately 14 years. The carrying value of this asset will be evaluated annually for impairment or if an event occurs that triggers impairment.

Under the Manufacturing Amendment (see Note 9), 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. During the period from January 2006 through September 2006, a key intermediate used in the manufacture of another product was produced using these facilities that resulted in a credit to the collaboration. The Company’s share of this credit was approximately $632,000. During the period from July 2004 through June 2005, and from October 2007 through December 2007, we received a similar credit of which our share was approximately $900,000 and $191,000 respectively. These payments 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.

Milestone Revenue and Deferred Revenue—Roche

Through December 31, 2007, the Company has received a $10.0 million license fee, research milestone payments of $15.0 million and $3.3 million in manufacturing milestone payments related to Roche achieving certain production levels. The license fee and research milestones were recorded as deferred revenue and were being recognized ratably over the research and development period. The manufacturing milestones were also recorded as deferred revenue and are being recognized ratably over the patent term associated with these milestones, or November 2014.

At the time of the license fee payment, Roche was granted a warrant to purchase Trimeris stock. The fair value of the warrant, $5.4 million, was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million license fee payment.

Over the course of the collaboration our estimate of the end of the research and development period has changed:

• In January 2005, based on our then current evaluation of our research and development programs, we placed further clinical development of T-1249 on hold indefinitely due to challenges in achieving an extended release formulation that would allow significantly less dosing frequency. Taking into account the additional research that will be required to achieve our goals for formulation, in January 2005, we changed our estimate of the end of the research and development period from December 2010 to December 2012.

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

• 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 that date. The original expiration of the associated patents was June 2013.

In December 2005, Roche and Trimeris agreed to an amount to be reimbursed to Trimeris, for research expenses incurred over the course of the year. For 2005, the total reimbursement of research expenses from Roche amounted to $2.0 million and was recorded in the fourth quarter of 2005, as a reduction of research and development expense. This payment did not become due until January 2006 upon the next generation peptides passing Roche’s internal review and

F-10

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

is distinct from the milestone payments that were made under the Development and License Agreement signed in 1999. In addition, in January 2006, Roche agreed to pay Trimeris $2.5 million for the results of research that was performed outside the research plan during 2005. In February 2006, Trimeris received this payment and initially recognized it as a component of revenue over the term of the annual 2006 research plan. During the third quarter of 2006, we extended our Research Agreement with Roche from January 1, 2007 to December 31, 2008. As a result, we planned to recognize the remainder of this milestone over the extended period (the period of our continuing involvement). As a result of this amendment to the Research Agreement, the Company recognized $792,000 less in milestone revenue during 2006. In accordance with the March 2007 agreement with Roche (discussed above), the Company accelerated these milestone payments into revenue.

In 2006, Roche and Trimeris amended the terms of the Research Agreement that, among other things, modified the payment of future milestones under the Development and License Agreement. As a result of the amendment, Roche will only be responsible for one remaining $5.0 million milestone payable upon the achievement of a certain cumulative twelve-month sales threshold for FUZEON in the U.S. and Canada.

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 earned. Royalties of $15.7 million, $11.8 million and $8.8 million were recognized as revenue during the years ended December 31, 2007, 2006 and 2005, respectively. During, and effective for the entire third quarter of 2006, our royalty rate increased from 10% to 12%. This increase was in effect for the entire third quarter of 2006 and will remain at this level for the remainder of the collaboration.

Collaboration Income

Product sales of FUZEON began in the United States on March 27, 2003, and are recorded by Roche. Under the Development and License Agreement with Roche, the Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche. Collaboration income is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross profit. Gross profit is reduced by selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income as a component of revenue. Total net sales of FUZEON in the United States and Canada were $124.3 million, $134.2 million and $112.7 million during the years ended December 31, 2007, 2006 and 2005, respectively. During the years ended December 31, 2007, 2006 and 2005, the gross profit from the sale of FUZEON exceeded sales, marketing and other expenses resulting in the Company’s share of operating income from the sale of FUZEON in the United States and Canada of $24.2 million, $21.7 million and $8.6 million, respectively. Revenue is recognized when Roche ships the drug and title and risk of loss passes to wholesalers.

Recently, the Company entered into discussions with Roche related to the models used to calculate cost of goods sold for FUZEON. During the course of the discussions, the Company and Roche concluded that the models being used resulted in an overestimate in the costs of goods sold being charged to the collaboration. As a result, the Company received a credit from Roche of approximately $5.5 million for over charges to FUZEON cost of goods sold during the period from 2003 to 2006. The credit appears in the calculation of collaboration income for the fourth quarter 2007. At present, the Company remains in active discussions related to the calculation of cost of goods sold for 2007 and 2008 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, the Company cannot be certain when a final resolution will be reached. For 2007, the Company recorded their best estimate of the cost of goods sold based on the information provided by Roche.

F-11

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

It is important to recognize that Roche is responsible for the manufacture, sales, marketing and distribution of FUZEON. Roche is manufacturing bulk quantities of FUZEON drug substance in its Boulder, Colorado facility and is producing finished drug product from bulk drug substance at other Roche facilities. The finished drug product is then shipped to a Roche facility for distribution. Roche’s sales force is responsible for selling FUZEON. Under the Company’s Development and License Agreement with Roche, the Company does not have the ability or rights to co-market this drug or field our 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 its 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.

Concentrations

The Company has a Development and License Agreement with Roche, which accounted for 100% of the Company’s royalty revenue for the years ended December 31, 2007, 2006 and 2005. This agreement with Roche also provides the basis for substantially all of the Company’s results from the collaboration. Substantially all of the accounts receivable at December 2007 and 2006 are comprised of receivables from Roche.

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and short-term investments. The Company has established guidelines relating to diversification and maturities of its cash equivalents and short-term investments which are designed to manage risk. The Company’s cash equivalents consist of bank deposits, certificates of deposit and money market funds. Bank deposits may at times be in excess of FDIC insurance limits. The Company’s short-term investments include the investment in Bank of America Corporation’s Columbia Strategic Cash Portfolio as discussed above.

Research and Development

Research and development costs, including the cost of producing drug material for clinical trials, are charged to operations as incurred.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities, and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets.

Use of Estimates

The preparation of financial statements in conformity with U.S. 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 the reported amounts of revenues and

F-12

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates made by the Company in the preparation of its financial statements are: the estimate of the cost of goods sold for the collaboration; the estimate of the future volatility of our stock price used to calculate the value of stock options granted to both employees and non-employees; the estimate(s) of sales returns and allowances, discounts and rebates related to sales of FUZEON; the estimate of losses incurred related to unusable product and supplies; the estimate of the period when our liability for accrued marketing costs comes due; the estimate of the patent life of FUZEON; and the estimate of the expected future operating cash flows from our intangible patent assets.

Basic and Diluted Net Income (Loss) Per Share

In accordance with SFAS No. 128, “Earnings Per Share” (“SFAS No. 128”), basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per common share reflects the maximum dilutive effect of common stock issuable upon exercise of stock options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan. The dilutive effect of outstanding options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of stock-based compensation required by SFAS No. 123 (revised). The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2007, 2006 and 2005 (in thousands, except per share amounts):

	2007		2006	2005
Numerator:
Net income (loss)	$	27,425	7,384	(8,106	)
Denominator:
Weighted average common shares used for basic calculation		22,065	21,895	21,736
Weighted average effect of dilutive securities:
Employee stock options		—	34	—
Restricted stock		20	76	—
Denominator for diluted calculation	$	22,085	22,005	21,736
Net income per share:
Basic	$	1.24	0.34	(0.37	)
Diluted	$	1.24	0.34	(0.37	)

The calculation of diluted net income per share excludes all anti-dilutive shares. For the years ended December 31, 2007 and 2006, 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 the period, amounted to approximately 2.8 million and 3.7 million, respectively. Also excluded for 2007 and 2006 were 362,000 warrants to purchase common stock due to their antidilutive effect.

Basic and diluted net loss per common share are the same for the year ended December 31, 2005, as common equivalent shares from stock options, restricted stock, and stock warrants were anti-dilutive.

At December 31, 2007, there were 2,910,000 options to purchase common stock and 362,000 warrants to purchase common stock outstanding. At December 31, 2006, there were 3,804,000 options to purchase common stock, 126,000 restricted stock grants, which became fully vested in 2007, 50,000 restricted stock grants (of which 29,000 became fully vested in January 2007 and 21,000 were forfeited), and 362,000 warrants to purchase common stock outstanding. At December 31, 2005, there were 3,393,000 options to purchase common stock outstanding, a warrant outstanding with Roche to purchase 362,000 shares of common stock and 207,000 restricted stock grants.

F-13

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Stock-Based Compensation

The Company adopted SFAS No. 123 (revised) using the modified prospective method on January 1, 2006. Accordingly, during the year ended December 31, 2006, the Company recorded stock-based compensation expense for awards granted prior to, but not yet vested, as of January 1, 2006, and awards granted after January 1, 2006, using the Black-Scholes valuation model. The Company has recognized the compensation expense using a straight-line amortization method. As SFAS No. 123 (revised) requires that stock-based compensation expense be based on awards that are ultimately expected to vest, stock-based compensation for the years ended December 31, 2007 and 2006, has been reduced for estimated forfeitures. When estimating forfeitures, the Company considered voluntary termination behaviors as well as trends of actual option forfeitures. As a result of the adoption of SFAS No. 123 (revised), the Company recognized non-cash compensation expense of approximately $735,000 (net of forfeitures) and $4.4 million relating to the fair value of employee stock compensation during the years ended December 31, 2007 and 2006.

Compensation costs for stock options granted to non-employees are accounted for in accordance with SFAS No. 123 (revised) and Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which require that compensation be measured at the end of each reporting period for changes in the fair value of the Company’s common stock until the options are vested.

Prior to the adoption of SFAS No. 123 (revised), the Company applied APB 25 and provided the disclosures required under SFAS No. 123. Employee stock-based compensation expense was not reflected in our results of operations for the year ended December 31, 2005 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. Forfeitures of awards were recognized as they occurred. See further disclosures in Footnote 6 “Stock Based Compensation.”

Comprehensive Income

Comprehensive income (loss) includes all non-owner changes in equity during a period and is divided into two broad classifications: net income (loss) and other comprehensive income (“OCI”). OCI includes revenue, expenses, gains, and losses that are excluded from earnings under generally accepted accounting principles. For the Company, OCI consists of unrealized gains or losses on securities available-for-sale, and actuarial gains and losses and prior service costs for the postretirement health insurance plan that have not been recognized as components of net periodic postretirement benefit costs.

Segment Reporting

SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information,” establishes standards for reporting information about the Company’s operating segments. The Company operates in one business segment, the business of discovery, development and commercialization of novel pharmaceuticals.

F-14

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

2.    INVESTMENT SECURITIES AVAILABLE-FOR-SALE

The following is a summary of available-for-sale securities. Estimated fair values of available-for-sale securities are based generally on quoted market prices (in thousands).

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Market Value
December 31, 2007
Short-term investment securities available-for-sale
Investments re-classified from cash and cash equivalents	$	16,431				206	$	16,225
Other debt securities maturing within 1 year		7,841		4		4		7,841
Corporate debt securities maturing within 1 year		2,136		1		—		2,137
Federal agency notes maturing within 1 year		1,735		1		1		1,735
Total short-term invesmtent securities available-for-sale	$	28,143	$	6	$	211	$	27,938
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Market Value
Long-term investment securities available-for-sale
Other debt securities maturing after 1 year through 5 years		2,693		6		—	$	2,699
Corporate debt securities maturing after 1 year through 5 years		4,249		1		4		4,246
Federal agency notes maturing after 1 year through 5 years		1,998		9		—		2,007
Total long-term invesmtent securities available-for-sale	$	8,940	$	16	$	4	$	8,952
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Market Value
December 31, 2006
Short-term investment securities available-for-sale
Other debt securities maturing within 1 year	$	10,906		—		2	$	10,904
Other debt securities maturing after 1 year through 5 years		1,429		—		1		1,428
Corporate debt securities maturing within 1 year		1,724		—		—		1,724
Corporate debt securities maturing after 1 year through 5 years		3,135		—		7		3,128
Federal agency notes maturing within 1 year		801		—		2		799
Total short-term invesmtent securities available-for-sale	$	17,995	$	—	$	12	$	17,983
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Market Value
Long-term investment securities available-for-sale
Corporate debt securities maturing after 1 year through 5 years		300		—		—		300
Federal agency notes maturing after 1 year through 5 years		305		—		1		304
Total long-term invesmtent securities available-for-sale	$	605	$	—	$	1	$	604

There were no sales of these investments or realized gains or losses during 2007 or 2006.

F-15

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Short-term investments include an investment of approximately $16.2 million 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. The Company, therefore, reclassified this investment to short-term investments from cash equivalents, based on information provided by the Fund manager. At December 31, 2007, the Fund’s NAV was $0.9874 per share. For the year ended December 31, 2007, the Company had an unrealized loss on its investment in the Fund of approximately $206,000.

3.    LEASES

The Company had no property, furniture or equipment under capital leases at December 31, 2007 and 2006.

The Company has several non-cancelable operating leases, primarily for office space and office equipment, that extend through January 2015. Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease. Rental expense, including maintenance charges, for operating leases during 2007, 2006 and 2005, was $1.8 million, $1.8 million and $2.4 million, respectively.

Future minimum lease payments under non-cancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2007 (in thousands) are:

	OPERATING LEASES
Year ending December 31:
2008	$	1,538
2009		1,569
2010		1,600
2011		1,632
2012		1,666
Thereafter		3,575
Total minimum lease payments	$	11,580

In 2004, the Company entered into a sublease agreement for its office and laboratory space in Morrisville, North Carolina. The sublease called for the payment of a security deposit for which the Company has accrued $126,000 as of December 31, 2007.

4.    PROPERTY, FURNITURE AND EQUIPMENT

Property, furniture and equipment consists of the following at December 31, 2007 and 2006 (in thousands):

	2007			2006
Furniture and equipment	$	12,320		$	12,181
Leasehold improvements		1,166			1,166
		13,486			13,347
Less accumulated depreciation and amortization		(11,842	)		(11,187	)
	$	1,644		$	2,160

Depreciation expense was $779,000, $958,000 and $1.0 million for the years ended December 31, 2007, 2006 and 2005 respectively.

F-16

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

5.    STOCKHOLDERS’ EQUITY

Warrant

In July 1999, the Company granted Roche a warrant to purchase 362,000 shares of common stock at a purchase price of $20.72 per share. The warrant is exercisable prior to the tenth annual anniversary of the grant date and was not exercised as of December 31, 2007. The fair value of the warrant of $5.4 million was credited to additional paid-in capital in 1999, and as a reduction of the $10.0 million up-front payment received from Roche. We deferred $4.6 million, the net of the $10.0 million up-front payment and the $5.4 million warrant, over the research and development period. The value of the warrant was calculated using the Black-Scholes option-pricing model using the following assumptions: estimated dividend yield of 0%; expected stock price volatility of 86.00%; risk-free interest rate of 5.20%; and expected option life of ten years.

Preferred Stock

The Board of Directors has the authority to issue shares of preferred stock and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences, without any further vote or action by the stockholders. There are no shares of preferred stock outstanding at December 31, 2007 and 2006.

6.    STOCK BASED COMPENSATION

The fair value of common stock options is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the years ended December 31, 2007, 2006 and 2005:

	2007	2006	2005
Estimated dividend yield	0.00%	0.00%	0.00%
Expected stock price volatility	46.0-71.0%	39.0-52.0%	45.0-50.0%
Risk-free interest rate	3.95-4.96%	4.46-4.96%	3.50-4.26%
Expected term of options (in years)	4.4-9.0	4.4-9.0	5
Expected life of employee stock purchase plan options (in years)	1	2	2

The Company’s computation of expected volatility for the year ended December 31, 2007 is based on historical volatility from publicly traded and quoted options on the Company’s stock. The computation of expected life in 2007 was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The range provided above results from the behavior patterns of separate groups of employees that have similar historical experience. The risk-free interest rate for periods within the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of the grants.

The table below presents the Company’s stock based compensation expense for the years ended December 31, 2007, 2006 and 2005:

	2007			2006		2005
	(in thousands)
Employee Stock Option Plan*	$	612		$	4,300	$	—
Employee Stock Purchase Plan		57			88		—
Restricted stock to employees		(1	)		592		843
Non-employee stock options		67			83		25
Total stock option expense**	$	735		$	5,063	$	868

* Includes the Stock Option Plan (formally known as the Trimeris, Inc. Amended and Restated Stock Incentive Plan) and the Trimeris, Inc. 2007 Stock Option Plan

** The Company adopted SFAS 123 (revised) on January 1, 2006.

F-17

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Employee Stock Option Plan

In 1993, the Company adopted a stock option plan, which allowed for the issuance of non-qualified and incentive stock options (“1993 Plan”). During 1996, the Trimeris, Inc. Amended and Restated Stock Incentive Plan (the “Employee Stock Option Plan”) was implemented and replaced the 1993 Plan. Under the Employee Stock Option Plan, the Company was able to grant non-qualified or incentive stock options for up to 6,252,941 shares of common stock. During October 2007, the 1996 Employee Stock Option Plan expired and the Trimeris, Inc. 2007 Stock Option Plan was implemented. Under the 2007 Stock Option Plan, the Company may grant non-qualified or incentive stock options for up to 1,000,000 shares of common stock. The exercise price of each incentive stock option shall not be less than the fair market value of the Company’s common stock on the date of grant and an option’s maximum term is ten years. Outstanding incentive stock options have been issued at prices ranging from $0.34 to $78.50 per share. The vesting period generally occurs over four years. At December 31, 2007, there were approximately 613,000 options remaining available for grant. No more grants will be made under the 1993 Plan or the Employee Stock Option Plan. The Company has sufficient authorized and unissued shares to make all issuances under its share based compensation plans.

A summary of option activity under the Employee Stock Option Plan and the 2007 Stock Option Plan during the year ended December 31, 2007 is presented below:

	Number of Shares		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
	(in thousands)					(in thousands)
Outstanding options at January 1, 2007	3,804		$	22.35	6.24	$	3,506
Granted	686			7.75
Exercised	(31	)		3.40
Cancelled	(1,549	)		18.13
Options outstanding at December 31, 2007	2,910		$	21.36	5.29	$	9,706
Options vested or expected to vest at December 31, 2007	945		$	24.06	2.20	$	2.00
Options exercisable at December 31, 2007	2,248		$	25.30	4.05	$	2.00

The weighted-average grant-date fair value of options granted during the years ended December 31, 2007, 2006, and 2005, was $5.29, $5.25 and $6.13, respectively. The total intrinsic value of options exercised during the years ended December 31, 2007, 2006, 2005 was $157,000, $311,000, and $687,000, respectively.

The following summarizes information about stock options outstanding as of December 31, 2007:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Number Outstanding as of December 31, 2007	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$.34-6.63	1,000	0.44	$	6.63	1,000	$	6.63
$6.64-8.00	700,000	7.91	$	7.31	148,000	$	7.83
$8.01-11.63	570,000	3.68	$	10.78	541,000	$	10.88
$11.64-15.00	518,000	6.81	$	13.33	456,000	$	13.44
$15.01-40.00	404,000	4.06	$	22.04	385,000	$	22.36
$40.01-45.11	357,000	3.82	$	43.04	357,000	$	43.04
$45.12-50.00	189,000	4.32	$	47.32	189,000	$	47.32
$50.01-78.50	171,000	2.40	$	62.69	171,000	$	62.69
$0.34-78.50	2,910,000	5.29	$	21.36	2,248,000	$	25.30

F-18

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

A summary of the activity of the Company’s nonvested options during the year ended December 31, 2007, is presented below:

	Number of Shares		Weighted- Average Grant- Date Fair Value
	(in thousands)
Nonvested at January 1, 2007	1,030		$	6.86
Granted	686			4.53
Vested	(316	)		5.94
Forfeited	(738	)		5.58
Nonvested at December 31, 2007	662		$	4.64

As of December 31, 2007, there was approximately $1.4 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Employee Stock Option Plan and the 2007 Stock Option Plan, which is expected to be recognized over a weighted-average period of 2.4 years. The total fair value of shares vested during the year ended December 31, 2007 and 2006 was $1.9 million and $3.9 million, respectively.

Employee Stock Purchase Plan

From 1997 through October 2007, the Company offered an Employee Stock Purchase Plan (the “1997 ESPP”), which permitted eligible employees to purchase newly issued shares of common stock of the Company up to an aggregate of 250,000 shares. Under the 1997 ESPP, employees had the ability to purchase from the Company a designated number of shares through payroll deductions at a price per share equal to 85% of the lesser of the fair market value of the Company’s common stock as of the date of the grant or the date the right to purchase is exercised. During the years ended December 31, 2007, 2006 and 2005, 8,000, 21,000 and 20,000 shares were issued under this plan. The 1997 ESPP expired during 2007 and was replaced with a new plan (the “2007 ESPP”). During the year ended December 31, 2007, 4,000 shares were issued under the 2007 ESPP. At December 31, 2007, there were 246,000 shares remaining available for issuance. As a result of the adoption of SFAS No. 123 (revised), the Company recognized $57,000 and $88,000 of compensation expense for the years ended December 31, 2007 and 2006, respectively, related to the fair value of the shares purchased under the 1997 ESPP.

Restricted Stock

In June 2004, an aggregate grant of 191,500 shares of restricted stock was made to substantially all employees. The majority of the grants vested 100% after three years. In March 2007, we granted 35,000 shares of restricted stock to our then CFO and General Counsel in connection with his employment agreement. The grant vests 100% three years from the date of grant. In the first quarter of 2007, upon the retirement of this individual, we recognized all of the compensation cost related to this grant. In July 2007, we granted 50,000 restricted stock units to a consultant. The units vest 100% in March 2009 on a monthly basis and in connection with the consultant’s provision of services or availability to provide services if none are requested. In the third quarter of 2007, we recognized all of the compensation cost related to this grant as the ongoing service criteria was deemed non-substantive. Non-cash compensation expense, related to these restricted stock grants, in the amount of $66,000, $592,000 and $843,000 was recognized for the years ended December 31, 2007, 2006 and 2005, respectively. Total unrecognized compensation cost related to restricted stock grants, as of December 31, 2007 and 2006, was $0 and $230,000, respectively.

SFAS No. 123 (revised) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Prior to the adoption of SFAS No. 123 (revised), the Company recognized actual forfeitures of restricted stock upon occurrence. The cumulative effect of the change in accounting principle relating to this change was $252,000, and is included in the statement of operations for the year ended December 31, 2006.

F-19

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

Prior to the adoption of SFAS No. 123 (revised), the Company’s outstanding restricted stock granted to employees in June 2004 and the CEO in September 2004, was recorded as deferred compensation on the balance sheet as of December 31, 2005. Upon the adoption of SFAS No. 123 (revised) as of January 1, 2006, the unearned deferred compensation balance of approximately $1.5 million was reclassified to additional-paid-in-capital.

A summary of the activity of the Company’s nonvested restricted stock during the year ended December 31, 2007 is presented below:

	Number of Shares
	(in thousands)
Nonvested at January 1, 2007	155
Granted	85
Vested	(124	)
Forfeited	(31	)
Nonvested at December 31, 2007	85

Options Granted to Non-employees

Compensation costs for stock options granted to non-employees are accounted for in accordance with SFAS No. 123 (revised) and EITF 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” which requires that compensation be measured at the end of each reporting period for changes in the fair value of the Company’s common stock until the options are vested.

The Company recorded expense of $67,000, $83,000 and $25,000 during the years ended December 31, 2007, 2006 and 2005 respectively, related to expense of non-cash compensation charges. As of December 31, 2007, there were no options outstanding to non-employees.

Pro forma Information for Periods Prior to the Adoption of SFAS No. 123 (revised)

Prior to the adoption of SFAS No. 123 (revised), the Company applied APB 25 and provided the disclosures required under SFAS No. 123. Employee stock-based compensation expense was not reflected in our results of operations for the year ended December 31, 2005 for employee stock option awards as all options were granted with an exercise price equal to the market value of the underlying common stock on the date of grant. Forfeitures of awards were recognized as they occurred.

The pro forma amounts for the year ended December 31, 2005 were as follows (in thousands, except per share data):

	Year ended December 31, 2005
Net loss, as reported	$	(8,106	)
Stock-based compensation expense included in reported net loss		843
Stock-based compensation expense that would have been included in the determination of net loss if the fair value method was applied		(6,030	)
Pro forma net loss	$	(13,293	)
Basic and diluted net loss per share:
As reported	$	(0.37	)
Pro forma	$	(0.61	)

7.    INCOME TAXES

During the years ended December 31, 2007 and 2006, the Company recorded an income tax provision of approximately $376,000 and $275,000, respectively. The expenses were due primarily to the current tax expense caused by the Alternative Minimum Tax (“AMT”). A full valuation allowance was recognized related to the benefit of the AMT credit.

F-20

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

At December 31, 2007, the Company has net operating loss carryforwards (“NOLs”) for federal tax purposes of approximately $310.6 million, which expire in varying amounts between 2011 and 2025. Of the $310.6 million of available federal NOL’s, the usage of $12 million is limited to $4 million per year until 2009 by the rules and regulations under IRC Section 382. The Company has state net economic losses of approximately $258.0 million, which expire in varying amounts between 2008 and 2020. The Company has research and development credits of $10.8 million, which expire in varying amounts between 2013 and 2026. The Company has Alternative Minimum Tax credit carryforwards of approximately $646,000 which are available to reduce regular Federal income taxes, if any, over an indefinite period.

The Tax Reform Act of 1986 contains provisions, which limit the ability to utilize net operating loss carryforwards and tax credit carryforwards in the case of certain events including significant changes in ownership interests. If the Company’s NOLs and/or tax credits are limited, and the Company has taxable income, which exceeds the permissible yearly NOL, the Company would incur a federal income and/or state tax liability even though NOLs would be available in future years.

The components of deferred tax assets and deferred tax liabilities as of December 31, 2007 and 2006 are as follows (in thousands):

	2007			2007
Deferred tax assets:
Tax loss carryforwards	$	120,300		$	123,819
Tax credits		9,784			10,762
Deferred revenue		645			3,850
Reserves and accruals		10,518			10,114
Total gross deferred tax assets		141,247			148,545
Valuation allowance		(141,247	)		(148,545	)
Net deferred asset		—			—
Deferred tax liability		—			—
Net deferred tax assets (liability)	$	—		$	—

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance represents the amount necessary to reduce the Company’s gross deferred tax assets to the amount that is more likely than not to be realized. The decrease in the valuation allowance was approximately $5.6 million for the year ended December 31, 2007. The decrease in the valuation allowance was $3.0 million for the year ended December 31, 2006, and it increased $3.4 million for the year ended December 31, 2005. The valuation allowance includes deferred tax assets that when realized, may increase equity rather than reduce tax expense. The Company will evaluate this amount when the criteria for recognizing the deferred tax asset relating to these amounts are met.

The company adopted FIN 48 on December 31, 2006. The Company had unrecognized tax benefits of $1.6 million as of the date of adoption. The company did not record any cumulative effect adjustment to retained earnings as a result of adopting FIN 48. As of December 31, 2007, the company had unrecognized tax benefits of $1.7 million. Of the $1.7 million of unrecognized tax benefits at the end of 2007, none would impact the effective tax rate if recognized.

Trimeris is subject to income taxes in the United States and North Carolina. The number of open years varies based on the statute of limitations for each jurisdiction. Currently Trimeris has no agreements with either taxing authority extending the statute.

Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:

In thousands of dollars
Balance as of January 1, 2007	$	1,553
Additions for tax positions taken during prior years		0
Reductions for tax positions taken during prior years		0
Additions for tax positions taken during the current year		159
Settlements		0
Expiration of statutes of limitations		0
Balance as of December 31, 2007	$	1,712

F-21

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

During the next 12 months, the Company does not anticipate any significant changes to the total amount of unrecognized tax benefits.

The Company does not accrue interest and penalties related to these unrecognized tax benefits because the unrecognized tax benefits would not result in the cash payment of additional tax.

The reasons for the difference between the actual income tax expense (benefit) for the years ended December 31, 2007, 2006 and 2005 and the amount computed by applying the statutory federal income tax rate to income (losses) before income tax expense (benefit) are as follows (in thousands):

	2007			% of Pre- tax Loss		2006			% of Pre- tax Loss		2005			% of Pre- tax Loss
Income tax expense (benefit) at statutory rate	$	9,730		35.00	%	$	2,520		34.00	%	$	(2,756	)	-34.00	%
State income taxes, net of federal benefit		(407	)	-1.04	%		95		1.29	%		(100	)	-1.24	%
Non-deductible meals and entertainment expenses and other		(37	)	-0.09	%		51		0.68	%		360		4.44	%
Non-deductible compensation		234		0.84	%		966		13.03	%		—		0.00	%
Research credit		—		0.00	%		(376	)	-5.07	%		(945	)	-11.65	%
Change in federal portion of valuation allowance		(9,144	)	-32.89	%		(2,981	)	-40.22	%		3,441		42.45	%
Income tax expense (benefit)	$	376		1.35	%	$	275		3.71	%	$	—		—

8.    EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company sponsors a 401(k) Profit Sharing Plan (the “401(k) Plan”) under Section 401 (k) of the Internal Revenue Code covering all qualified employees. Participants may elect a salary reduction from 1% to 75% as a contribution to the 401(k) Plan, up to the annual Internal Revenue Service allowable contribution limit. Modifications of the salary reductions may be made monthly. The 401(k) Plan permits the Company to match participants’ contributions. Beginning in 1998, the Company has matched up to 100% of a participant’s contributions with Company stock, provided the participant was employed on the last day of the year. The number of shares issued is based on the contributions to be matched divided by the closing price of the Company’s stock on the last trading day of the year. During 2007, 44,000 shares were issued, and compensation expense of $305,000 was recognized. During 2006, 59,000 shares were issued, and compensation expense of $745,000 was recognized. During 2005, 57,000 shares were issued, and compensation expense of $650,000 was recognized. These shares vest ratably based on a participant’s years of service and are fully vested after four years of service.

The normal retirement age shall be the later of a participant’s 65th birthday or the fifth anniversary of the first day of the 401(k) Plan year in which participation commenced. The 401(k) Plan does not have an early retirement provision.

Post-Retirement Health Insurance Continuation Plan

In June 2001, the Company adopted a post-retirement health insurance continuation plan (“Plan”). Employees who have achieved the eligibility requirements of 60 years of age and 10 years of service are eligible to participate in the Plan. The Plan provides participants the opportunity to continue participating in the Company’s group health plan after their date of retirement. Participants will pay the cost of health insurance premiums for this coverage, less any contributions by the Company; this amount was previously capped at $300 per month per participant. In November 2003, the Plan was amended and the limit on contributions by the Company was changed to 50% of the health insurance premium for the employee and his or her spouse.

F-22

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

In December 2007, the Plan was terminated. As a result, the Company reduced the associated liability to $165,000 at December 31, 2007. The remaining liability relates to benefit obligations that existed prior to the termination of the Plan.

SFAS 158

On December 31, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” SFAS 158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan assets and the accumulated postretirement benefit obligation) of its postretirement plan in the December 31, 2006 balance sheet, with a corresponding adjustment to accumulated other comprehensive loss.

Included in accumulated other comprehensive income at December 31, 2007 are the following amounts that have not yet been recognized in net periodic benefit cost: unrecognized prior service costs of $56,000 and unrecognized actuarial gains of $213,000. The prior service cost and actuarial gain included in accumulated other comprehensive income and expected to be recognized in net periodic benefit cost during the year ending December 31, 2008 is $5,000 and $9,000, respectively.

Reconciliation of Funded Status and Accumulated Postretirement Benefit Obligation

The reconciliation of the beginning and ending balances of the projected postretirement benefit obligation and the fair value of plan assets for the years ended December 31, 2007 and 2006, and the accumulated postretirement benefit obligation at December 31, 2007 and 2006, is as follows (in thousands):

	December 31,
	2007			2006
Change in Postretirement Benefit Obligation
Postretirement benefit obligation at beginning of year	$	415		$	321
Service cost		53			74
Interest cost		25			18
Actuarial loss		19			125
Benefits Paid		(11	)		—
Special Termination Benefit		83			—
Curtailments		(419	)		(123	)
Postretirement benefit obligation at end of year	$	165		$	415

There were no plan assets as of December 31, 2007 and 2006. Consequently, the plan was fully unfunded as of these dates. The accrual of the unfunded balances is included in accrued compensation- short-term and long-term, respectively, as of December 31, 2007 and 2006.

The components of net periodic post-retirement benefits cost and the significant assumptions of the Plan for 2007, 2006 and 2005 consisted of the following (in thousands):

	2007			2006			2005
Service cost	$	53		$	74		$	71
Interest cost		25			18			17
Amortization of net actuarial gain		(10	)		(17	)		(16	)
Amortization of prior service costs		16			24			24
Curtailments		243			(47	)		—
Total	$	327		$	52		$	96

F-23

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

The Plan’s funded status as of December 31, 2007 and 2006 is as follows:

	2007			2006
Accumulated post-retirement benefit obligation (APBO)	$	(165	)	$	(415	)
Unrecognized prior service cost		(56	)		247
Unrecognized net gain		213			(241	)
Accrued post-retirement benefit cost	$	(8	)	$	(409	)

The accumulated post-retirement benefit obligation (“APBO”) was determined using a discount rate of 6.00% at December 31, 2007 and 2006. This rate is determined based on high-quality fixed income investments that match the duration of the expected retiree medical benefits. The Company has typically used the corporate Aa bond rate for this assumption. An assumed annual medical trend rate of 9% was used beginning in 2008, reducing by 1% per year to an ultimate rate of 5% in 2012. A 1% increase in the trend factors would increase the projected APBO by approximately $18,000 and would increase the service and interest cost components by approximately $1,000. A 1% decrease in the trend factors would decrease the projected APBO by approximately $15,000 and would decrease the service and interest cost components by approximately $1,000.

The expected future benefit payments under the plan (in thousands) are as follows:

Year(s) ending	Amount
2008	$	15
2009		13
2010		9
2011		9
2012		10
2013 to 2017		59
Total	$	115

9.    ROCHE COLLABORATION

The Development and License Agreement

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

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

As mentioned above, in March 2007, the Company entered into an agreement with Roche that amends the terms of both the Development and License Agreement and the Research Agreement (defined below). This amendment states that all intellectual property that was formerly shared between the companies, other than intellectual property related to

F-24

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

FUZEON, shall now belong solely to Trimeris. The returned intellectual property covers both research and development stage molecules, including T-1249. Currently, there are no patients being treated with T-1249. Following the March 2007 amendment, Roche is only responsible for one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve month sales threshold for FUZEON in the United States and Canada.

Manufacturing Amendment

In 2005, the Company entered into a Manufacturing Amendment with Roche setting forth certain rights and responsibilities with respect to the manufacture and sale of FUZEON. The Manufacturing Amendment amends and supplements the terms of the Development and License Agreement and addresses several aspects of the parties’ collaboration related to the manufacture of FUZEON. According to the terms of the Manufacturing Amendment, Roche will be responsible for all decisions regarding future FUZEON manufacturing volume, including management of the inventory supply chain. Subject to certain exceptions, Roche will therefore be financially responsible for all write-offs of expired Product (as defined in the Development and License Agreement) sold in the U.S. and Canada. In addition, Roche will be responsible for write-offs of all supply chain materials not currently in inventory as of the date of execution of the Manufacturing Amendment and the collaboration’s Joint Steering Committee will determine the schedule for converting supply chain materials that are in inventory as of that date into product.

The Manufacturing Amendment also sets forth the terms for which Roche-owned, FUZEON manufacturing equipment and facilities in Boulder may be used for the manufacture of other products. In addition, the Manufacturing Amendment provides for Trimeris’ payment of certain pre-launch inventory carrying costs related to the sale of FUZEON and Roche’s payment to Trimeris of an outstanding manufacturing milestone payment under the collaboration. The Manufacturing Amendment also outlines certain methodologies for the allocation of standard cost variances between the parties, the sharing of financial data related to FUZEON manufacturing, and the methodology for calculating currency conversions.

Cost of Goods Sold

Recently, the Compan entered into discussions with Roche related to the models used to calculate cost of goods sold for FUZEON. During the course of the discussions, the Company and Roche concluded that the models being used resulted in an overestimate in the costs of goods sold being charged to the collaboration. As a result, the Company received a credit from Roche of approximately $5.5 million for over charges to FUZEON cost of goods sold during the period from 2003 to 2006. The credit appears in the calculation of collaboration income for the fourth quarter 2007. At present, the Company remains in active discussions related to the calculation of cost of goods sold for 2007 and, as such, cannot accurately determine if cost of goods sold as a percentage of net sales will increase, decrease or remain the same. Although discussions are on-going, the Company cannot be certain when a final resolution will be reached. For 2007, the Company recorded its best estimate of the cost of goods sold based on the information provided by Roche.

Development Expenses

Under the Development and License Agreement, development costs for FUZEON are shared equally. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Both Roche and Trimeris incur development costs for FUZEON. Quarterly, the companies reconcile the amounts expended and one party pays the other party on a 50/50 basis. Roche holds the Investigational New Drug (“IND”) and the New Drug Application (“NDA”) for FUZEON and is responsible for all regulatory issues, maintenance activities and communications with the FDA. Development expenses pertaining to the United States and Canada are included in our statements of operations as operating expenses under Research and Development.

F-25

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

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

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

10.    COMMITMENTS AND CONTINGENCIES

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

Under the Development and License Agreement, Trimeris and Roche are obligated to share the future development expenses for FUZEON and T-1249 for the United States and Canada.

In 2004, the Company entered into a sublease agreement for its office and laboratory space in Morrisville, North Carolina. The sublease called for the payment of a security deposit for which the Company has accrued $126,000 as of December 31, 2007.

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”).

The Roche Entities and the Company have not yet been served in this patent suit, brought by Novartis, related to the manufacture and sale of FUZEON (enfuvirtide). FUZEON is an innovative HIV fusion inhibitor that was approved in 2003, having been developed by Roche in collaboration with the Company.

The ‘271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. Roche and the Company are currently reviewing a copy of the complaint, which was obtained from a third party. Roche and the Company will respond to the issues raised in the complaint in due course.

F-26

TRIMERIS, INC.

NOTES TO FINANCIAL STATEMENTS—CONTINUED

11.    REDUCTION IN WORKFORCE

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

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

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

During December 2007, the Company implemented a reduction in force in connection with its 2008 strategic plan. The 2008 strategic plan is designed to maximize cash flows from FUZEON, while also advancing TRI-1144 to a value creating milestone. In connection with the strategic plan and as a result of the reduction in force, the Company expects that it will no longer staff any research and development functions. The Company recognized expense of $1.7 million for severance and other costs during the fourth quarter of 2007 related to this 2008 strategic plan.

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

	Severance and Benefits 2006			Severance and Benefits 2007			Total
2006 severance charge	$	3,161		$	—		$	3,161
Payments		(64	)		—			(64	)
Balance at December 31, 2006		3,097			—			3,097
2007 severance charge		—			3,344			3,344
Adjustments		130			—			130
Payments		(1,061	)		—			(1,061	)
Balance at March 31, 2007		2,166			3,344			5,510
2007 severance charge					77			77
Adjustments		(66	)		—			(66	)
Payments		(440	)		(543	)		(983	)
Balance at June 30, 2007		1,660			2,878			4,538
Adjustments		2			(92	)		(90	)
Payments		(676	)		(246	)		(922	)
Balance at September 30, 2007		986			2,540			3,526
2007 severance charge					1,688			1,688
Adjustments		(35	)		(9	)		(44	)
Payments		(384	)		(667	)		(1,051	)
Balance at December 31, 2007	$	567		$	3,552		$	4,119

F-27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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)
March 17, 2008	/s/    MARTIN A. MATTINGLY
	Martin A. Mattingly Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Capacity	Date
/s/    MARTIN MATTINGLY         Martin A. Mattingly	Chief Executive Officer and Director	March 17, 2008
/s/    ANDREW L. GRAHAM         Andrew L. Graham	Chief Financial Officer and Secretary (principal accounting officer)	March 17, 2008
/s/    ARTHUR B. COHEN         Arthur B. Cohen	Director	March 17, 2008
/s/    STEPHEN R. DAVIS         Stephen R. Davis	Director	March 17, 2008
/s/    FELIX J. BAKER         Felix J. Baker	Director	March 17, 2008
/s/    JULIAN C. BAKER         Julian C. Baker	Director	March 17, 2008
/s/    BARRY D. QUART         Barry D. Quart, PharmD.	Director	March 17, 2008
/s/    KEVIN C. TANG         Kevin C. Tang	Director	March 17, 2008
/s/    JOSEPH P. HEALEY         Joseph P. Healey	Director	March 17, 2008

S-1

EXHIBIT INDEX

(a) Exhibits

3.1(n)	Second Amended and Restated Bylaws of the Registrant.
3.2(n)	Fifth Amended and Restated Certificate of Incorporation of the Registrant
4.1*	Specimen certificate for shares of Common Stock.
4.2(n)	Description of Capital Stock (contained in the Fifth Amended and Restated Certificate of Incorporation of the Corporation of the Registrant, filed as Exhibit 3.2).
10.1*	License Agreement dated February 3, 1993, between the Registrant and Duke University.
10.2(p)	Trimeris, Inc. Amended and Restated Stock Incentive Plan. †
10.3*	Trimeris, Inc. Employee Stock Purchase Plan. †
10.4*	Sixth Amended and Restated Registration Rights Agreement dated June 27, 1997, by and among the Registrant and certain stockholders of the Registrant.
10.5*	Form of Indemnification Agreements.
10.6*	License Agreement dated September 9, 1997 between the Registrant and The New York Blood Center.
10.7(e)	Poyner & Spruill, L.L.P. Defined Contribution Prototype Plan and Trust for the Trimeris, Inc. Employee 401(k) Plan. †
10.8(e)	Adoption Agreement for the Trimeris, Inc. Employee 401(k) Plan. †
10.9(g)	Executive Employment Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 8, 2004. †
10.10(g)	Incentive Stock Option Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 9, 2004. †
10.11(g)	Restricted Stock Agreement by and between Trimeris, Inc. and Steven Skolsky dated September 9, 2004. †
10.12(a)	Development and License Agreement between Trimeris and Hoffmann-La Roche dated July 1, 1999 (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.).
10.13(a)	Financing Agreement between Trimeris, Inc. and Roche Finance Ltd. dated as of July 9, 1999.
10.14(a)	Registration Rights Agreement between Trimeris, Inc. and Roche Finance Ltd. dated as of July 9, 1999.
10.15(f)	Sublease Agreement between Trimeris, Inc. and PPD Development, LP dated June 30, 2004.
10.16(f)	Lease Agreement and Amendments between PPD Development, LP (formerly PPD Pharmaco, Inc.) and Weeks Realty, LP relating to Sublease Agreement filed as Exhibit 10.15 hereto.
10.17(b)	Research Agreement between Trimeris, Inc., F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc. dated January 1, 2000 (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.).
10.18(c)	Form of Purchase Agreement dated as of May 7, 2001 by and between Trimeris, Inc. and the purchasers set forth on the signature page thereto.
10.19(h)	First Amendment to the Research Agreement by and between Trimeris, Inc. and F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc. dated November 13, 2003. (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.)

S-2

10.20(d)	Form of Purchase Agreement dated as of January 23, 2002 by and between Trimeris, Inc. and the purchasers set forth on the signature page thereto.
10.21(f)	Rescission of the Amendment to the Development and License Agreement dated July 12, 2004 by and between Trimeris, Inc., F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc.
10.22(i)	Amendment to the Development and License Agreement between Trimeris, Inc. and Hoffman-La Roche dated on July 12, 2004. (Portions of this exhibit have been omitted pursuant to an order of the Commission granting confidential treatment.)
10.23(j)	Description of non-management director compensation arrangements.
10.24(k)	Letter Agreement between Trimeris, Inc. and Roche Laboratories, Inc. dated May 12, 2005.
10.25(l)	License Agreement between The Regents of the University of California and Hoffman-La Roche Inc. and Trimeris, Inc. for Method for Preventing and Treating a Viral Condition by Inhibiting Membrane Fusion dated June 27, 2005.
10.26(m)	Letter of Amendment with F. Hoffman-La Roche, Ltd. and Hoffman-La Roche Inc. dated September 2, 2005.
10.27(o)	Trimeris, Inc. Incentive Pay Plan. †
10.28(q)	Second Amendment to the Research Agreement between F. Hoffman-La Roche Ltd. and Hoffman-La Roche Inc. and Trimeris, Inc. (effective as of December 31, 2005)
10.29(r)	Amended and Restated Severance Pay Plan, effective December 3, 2006
10.30(s)	Third Amendment to the Research Agreement between F. Hoffman-La Roche, Ltd. and Hoffman-La Roche Inc. and Trimeris, Inc. (effective as of August 15, 2006)
10.31(t)	Letter of Agreement between Trimeris, Inc. and F. Hoffman–La Roche, Ltd. dated March 13, 2007
10.32(u)	Executive Employment Agreement by and between Trimeris, Inc. and Dani P. Bolognesi dated March 9, 2007 †
10.33(u)	Executive Employment Agreement by and between Trimeris, Inc. and Robert R. Bonczek dated March 9, 2007 †
10.34(v)	Letter Agreement by and between Dani P. Bolognesi and Trimeris, Inc. dated March 14, 2007†
10.35(v)	Settlement Agreement and Release by and between Dani P. Bolognesi and Trimeris, Inc. dated March 15, 2007
10.36(v)	Letter Agreement by and between Robert R. Bonczek and Trimeris, Inc. dated March 14, 2007†
10.37(v)	Settlement Agreement and Release by and between Robert R. Bonczek and Trimeris, Inc. dated March 15, 2007
10.38(w)	Executive Employment Agreement between Trimeris, Inc. and Carol Ohmstede dated August 1, 2006 †
10.39(w)	Letter Agreement between Trimeris, Inc. and Carol Ohmstede dated August 1, 2007†
10.40(w)	Letter Agreement between Trimeris, Inc. and Andrew L. Graham dated August 1, 2007†
10.41(w)	Executive Engagement Agreement between Trimeris, Inc., Hickey & Hill, Inc. and E. Lawrence Hill, Jr. dated August 2, 2007 †
10.42(w)	Executive Engagement Agreement between Trimeris, Inc., Hickey & Hill, Inc. and Daniel Ratto dated August 2, 2007 †
10.43(x)	Letter Agreement between Trimeris, Inc. and Roche Laboratories Inc., dated October 5, 2007
10.44(y)	Executive Employment Agreement by and between Trimeris, Inc. and Martin A. Mattingly dated November 14, 2007 †

S-3

10.45(z)	Executive Employment Agreement by and between Trimeris, Inc. and Andrew L. Graham dated January 24, 2008 †
10.46(z)	Executive Employment Agreement by and between Trimeris, Inc. and Michael A. Alrutz dated January 24, 2008 †
10.47(aa)	Trimeris, Inc. 2007 Stock Incentive Plan †
10.48	Trimeris, Inc. 2007 Stock Incentive Plan – form of Option Agreement †
10.49	Trimeris, Inc. 2007 Employee Stock Purchase Plan †
23	Consent of KPMG LLP
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

† Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 15(a) of this report.

* Incorporated by reference to Trimeris’ Registration Statement on Form S-1, as amended (File No. 333-31109) initially filed with the Commission on July 11, 1997.

†† Portions of this exhibit have been omitted pursuant to a request for confidential treatment filed with the Commission.

(a) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 filed with the Commission on August 13, 1999.

(b) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2001 filed with the Commission on August 13, 2001.

(c) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on May 11, 2001.

(d) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on January 30, 2002.

(e) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Commission on March 27, 2003.

(f) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2004 filed with the Commission on August 9, 2004.

(g) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 10, 2004.

(h) Incorporated by reference to Trimeris’ Annual Report on Form 10-K/A for the year ended December 31, 2003 filed with the Commission on October 15, 2004.

(i) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2004 filed with the Commission on October 15, 2004.

(j) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Commission on March 11, 2005.

(k) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on May 12, 2005.

(l) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on June 27, 2005.

(m) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 26, 2005.

(n) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed with the Commission on November 8, 2005.

(o) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on January 30, 2006.

(p) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2005 filed with the Commission on March 10, 2006.

S-4

(q) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on February 21, 2006.

(r) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on December 7, 2006.

(s) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on September 7, 2006.

(t) Incorporated by reference to Trimeris’ Annual Report on Form 10-K for the year ended December 31, 2006 filed with the Commission on March 16, 2007.

(u) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on March 15, 2007.

(v) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on March 20, 2007.

(w) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 filed with the Commission on August 9, 2007.

(x) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on October 11, 2007.

(y) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on November 20, 2007.

(z) Incorporated by reference to Trimeris’ Current Report on Form 8-K filed with the Commission on January 30, 2008.

(aa) Incorporated by reference to Trimeris’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

All financial statement schedules have been omitted because either they are not required, are not applicable or the information is otherwise set forth in the Financial Statements and Notes thereto.

S-5