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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2008

For the transition period from              to             

Commission File Number 0-23155

TRIMERIS, INC.

(Exact name of registrant as specified in its charter)

2530 Meridian Parkway, 2^nd Floor

Durham, North Carolina 27713

(Address of principal executive offices, including zip code)

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

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

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

The number of shares outstanding of the registrant’s common stock as of October 23, 2008 was 22,252,122.

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

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TRIMERIS, INC.

FORM 10-Q

September 30, 2008

INDEX

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PART I. FINANCIAL INFORMATION

TRIMERIS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except par value)

(unaudited)

See accompanying notes to condensed financial statements.

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TRIMERIS, INC.

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

See accompanying notes to condensed financial statements.

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TRIMERIS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

See accompanying notes to condensed financial statements.

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TRIMERIS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. BASIS OF PRESENTATION

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

Trimeris has a worldwide agreement (the “Development and License Agreement”) with F. Hoffmann-La Roche Ltd., (“Roche”) to develop and market T-20, marketed as FUZEON, whose generic name is enfuvirtide. FUZEON is manufactured and distributed by Roche through Roche’s sales and distribution network throughout the world in countries where regulatory approval has been received. The Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, and receives a royalty based on net sales of FUZEON outside the United States and Canada.

The Development and License Agreement with Roche accounted for 100% of the Company’s royalty revenue for the three and nine months ended September 30, 2008 and 2007. The Development and License Agreement also provides substantially all of the Company’s collaboration and milestone revenue. Substantially all of the accounts receivable at September 30, 2008 and December 31, 2007, are comprised of receivables from Roche owing under the Development and License Agreement.

The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles and applicable Securities and Exchange Commission (the “SEC”) regulations for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to the SEC rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results that may be expected for a full year. The information included in this Form 10-Q should be read in conjunction with the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and the 2007 financial statements and notes thereto included in the Company’s 2007 Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on March 17, 2008.

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

2. BASIC AND DILUTED NET INCOME PER SHARE

In accordance with SFAS No. 128, “Earnings Per Share” (“SFAS No. 128”), basic net income per common share is calculated by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilutive effect of common stock issuable upon exercise of stock options, restricted stock, stock warrants and purchases under the Company’s Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). The dilutive effect of outstanding options, restricted stock, stock warrants and purchases under the Employee Stock Purchase Plan is reflected in diluted earnings per share by application of the treasury stock method, which includes consideration of stock-based compensation required by SFAS No. 123 (revised), “Share-Based Payment”. The following table sets forth the computation of basic and diluted net income per share for the three and nine months ended September 30, 2008 and 2007 (in thousands, except per share amounts):

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The calculation of diluted net income per share excludes all anti-dilutive shares. For the three and nine months ended September 30, 2008, the number of anti-dilutive shares issuable upon exercise of options that were excluded, as calculated based on the weighted average closing price of the Company’s common stock for these periods, amounted to approximately 2,500,000 for each period. Also excluded for the three and nine months ended September 30, 2008 were 362,000 warrants to purchase common stock, due to their anti-dilutive effect. For the three and nine months ended September 30, 2007, the number of anti-dilutive shares issuable upon exercise of options that were excluded amounted to approximately 2,791,000 and 2,746,000, respectively. Also excluded for the three and nine months ended September 30, 2007 were 362,000 warrants to purchase common stock, due to their anti-dilutive effect.

At September 30, 2008, there were 2,500,000 options to purchase common stock, 30,000 shares of restricted stock that vest in August 2011, 85,000 shares of restricted stock/restricted stock units that vest in March 2009 and 362,000 warrants to purchase common stock outstanding. At September 30, 2007, there were 2,820,000 options to purchase common stock, 85,000 shares of restricted stock/restricted stock units that vest in March 2009 and 362,000 warrants to purchase common stock outstanding.

3. STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2008 and 2007, approximately $285,000 and $519,000, respectively, was charged to interest expense for the accretion of the liability resulting from the Company’s share of estimated selling and marketing expenses. The Company recorded a liability of $15.6 million during 2004, as part of collaboration loss, which represented the net present value of the Company’s estimated share of these expenses, based on the expected timing and terms of payment under the Development and License Agreement, as amended July 12, 2004. No cash was paid for interest during the nine months ended September 30, 2008 and 2007.

4. ROCHE COLLABORATION

The Development and License Agreement

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

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

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As mentioned above, in March 2007, the Company entered into an agreement with Roche that amended the terms of both the Development and License Agreement and the Research Agreement (defined below). This amendment provided that all intellectual property that was formerly shared between the companies, other than intellectual property related to FUZEON, would now belong solely to 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 responsible for only one remaining $5.0 million milestone under the Development and License Agreement payable upon the achievement of a certain cumulative twelve-month sales threshold for FUZEON in the United States and Canada.

Collaboration Income

Product sales of FUZEON began in the United States in March 2003 and are recorded by Roche. Under the Development and License Agreement with Roche, the Company shares gross profits from the sale of FUZEON in the United States and Canada equally with Roche. Collaboration income is calculated as follows: Total gross sales of FUZEON in the United States and Canada is reduced by any discounts, returns or rebates resulting in total net sales. Net sales are reduced by costs of goods sold resulting in gross profit. Gross profit is reduced by certain selling, marketing and other expenses related to the sale of FUZEON, resulting in operating income or loss. The Company’s share of the operating income or loss is reported as collaboration income or loss as a component of revenue. Total net sales of FUZEON in the United States and Canada were $48.0 million and $92.8 million during the nine months ended September 30, 2008 and 2007, respectively. Total net sales of FUZEON in the United States and Canada were $14.9 million and $30.6 million during the three months ended September 30, 2008 and 2007, respectively. During the nine months ended September 30, 2008 and 2007, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses resulting in the Company’s share of operating profit from the sale of FUZEON in the United States of $6.9 million and $15.7 million, respectively. During the three months ended September 30, 2008 and 2007, the gross profit from the sale of FUZEON exceeded the sales, marketing and other expenses resulting in the Company’s share of operating profit from the sale of FUZEON in the United States of $2.0 million and $5.5 million, respectively. Revenue is recognized when Roche ships the drug and title and risk of loss passes to wholesalers. FUZEON is widely available through retail pharmacies and wholesalers across North America.

Roche is responsible for the manufacture, sales, marketing and distribution of FUZEON. Roche manufactures bulk quantities of FUZEON drug substance in its Boulder, Colorado facility and produces finished drug product from bulk drug substance at another Roche facility. The finished drug product is then shipped to a Roche facility for distribution. Roche’s sales force is responsible for selling FUZEON. Under the Company’s Development and License Agreement with Roche, the Company does not have the ability or rights to co-market this drug or field its own FUZEON sales force. All third party contracts for manufacturing, distribution, sale, and reimbursement are between Roche and the third party. The Company is not a party to any of the material contracts in these areas. Roche provides the Company with information on manufacturing, sales and distribution of FUZEON. Roche is responsible for estimating reductions to gross sales for expected returns of expired products, government rebate programs, such as Medicaid reimbursements, and customer incentives, such as cash discounts for prompt payment. The Company reviews these items for accuracy and reasonableness.

Roche prepares estimates for sales returns and allowances, discounts and rebates based primarily on its historical experience with FUZEON and other anti-HIV drugs and their estimates of the payor mix for FUZEON, updated for changes in facts and circumstances on a quarterly basis. If actual results differ from these estimates, these estimates will be adjusted, which could have an effect on results of operations in the period of adjustment.

Accrued Marketing Costs

The Company and Roche agreed to limit the Company’s actual cash contribution to the FUZEON selling and marketing expenses in 2004 to approximately $11.2 million, even though Roche spent significantly more on these expenses. If certain cumulative levels of sales for FUZEON in the United States and Canada are achieved, the Company’s share of the additional expenses incurred by Roche during 2004 will be payable to Roche beginning at a future date over several years from that future date. During the first quarter of 2008, the Company revised its estimate of the date that payments will begin from 2014 to 2017. During the year ended December 31, 2004, the Company’s share of selling and marketing expenses exceeded $11.2 million. During 2004, the Company recorded $15.6 million as part of collaboration loss, which represented the net present value of the Company’s estimated share of the expenses that were in excess of approximately $11.2 million. This amount was determined by taking into account the expected timing and terms of payment under the Development and License Agreement, discounted at a risk free interest rate. The Company is increasing the liability over time to the expected payment amount. For the three months ended September 30, 2008 and 2007, the Company increased the recorded liability by $96,000 and $115,000, respectively, for accretion of interest. For the nine months ended September 30, 2008 and 2007, the Company increased the recorded liability by $285,000 and $519,000, respectively, for accretion of interest. The total liability of $18.2 million and $17.9 million at September 30, 2008 and December 31, 2007, respectively, is reflected on our balance sheets under the caption “Accrued marketing costs.”

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The accrued marketing costs apply only to the 2004 FUZEON marketing costs; with respect to both 2008 and 2007, there are no accrued marketing costs.

Advanced Payment—Roche

In September 2005, the Company entered into a Letter of Amendment (“Manufacturing Amendment”) with Roche, which amended the Development and License Agreement and set forth certain rights and responsibilities that the parties previously agreed to with respect to the manufacture and sale of FUZEON. The Company will pay Roche for the Company’s share of the capital invested in Roche’s manufacturing facility over a seven-year period. 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 first quarter of 2008, 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 2008 review, the Company expected to contribute approximately $12.1 million towards the capital investment as compared to its previous expectation of approximately $12.8 million. At September 30, 2008, we had capitalized costs of $11.2 million, and expect to pay approximately $285,000 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 13 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. Through September 30, 2008, the Company’s share of this credit was approximately $1.9 million. These credits have been recorded on the Company’s balance sheets as a reduction to the “Advanced payment – Roche.” These credits offset variances that would otherwise have been allocated to FUZEON if the facilities had remained underutilized and will be recognized when the related FUZEON produced during these periods is sold.

Royalty Revenue

The Company receives royalties on sales of FUZEON in countries outside of the United States and Canada. Roche is responsible for all activities related to FUZEON outside of the United States and Canada, including regulatory, manufacturing, sales and distribution. These royalties are recognized as revenue when the sales are made by Roche. To calculate the royalty revenue, an 8% distribution charge is deducted from Roche’s reported net sales, from which the Company receives a 12% royalty. Royalties of $3.4 million and $4.8 million were recognized as revenue during the three months ended September 30, 2008 and 2007, respectively. Royalties of $8.7 million and $11.9 million were recognized as revenue during the nine months ended September 30, 2008 and 2007, respectively.

Development Expenses

Under the Development and License Agreement, development costs for FUZEON are shared equally. Development typically includes certain clinical and pre-clinical studies performed on a clinical candidate compound, as well as post-marketing commitments related to approved drugs. Currently only Roche incurs 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 next generations of HIV fusion inhibitor

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peptides (“NGFI”). 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 the Company. 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. The Company has maintained the option to participate in the co-development and commercialization of certain Roche-developed fusion inhibitor peptides, as described in the preceding paragraph.

5. COMPREHENSIVE INCOME

SFAS No. 130, “Reporting Comprehensive Income”, establishes rules for the reporting and display of comprehensive income or loss and its components. Comprehensive income includes all non-owner changes in equity during a period and is divided into two broad classifications: net income and other comprehensive income (“OCI”). OCI includes revenue, expenses, gains, and losses that are excluded from earnings under generally accepted accounting principles. For the Company, OCI consists of unrealized gains or losses on securities available-for-sale, and actuarial gains and losses and prior service costs for the post-retirement health insurance plan that have not been recognized as components of net periodic post-retirement benefit costs.

The table below presents the Company’s OCI for the three and nine months ended September 30, 2008 and 2007.

6. INVESTMENT SECURITIES AVAILABLE-FOR-SALE

Investment securities, which consist of corporate bonds, Euro-dollar bonds, certificates of deposit, 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.

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

Investment securities include an investment of approximately $5.6 million at September 30, 2008 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 September 30, 2008, the Fund’s NAV was $0.9572 per share. For the quarter ended September 30, 2008, we recorded a loss in the amount of $15,000. If the current credit environment continues to deteriorate, our investments in this money market fund could become impaired and our investment in the Columbia Strategic Cash Portfolio could suffer losses, which would adversely impact our financial results.

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The Company adopted SFAS No. 157, “Fair Value Measurements,” effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. SFAS No. 157 applies to all financial assets and liabilities that are being measured and reported on a fair value basis. There was no impact to the financial statements upon the adoption of SFAS No. 157. SFAS No. 157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The statement requires fair value measurements be classified and disclosed in one of the following three categories:

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

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

The types of instruments valued based on quoted prices in less active markets, or alternative pricing sources with reasonable levels of price transparency, include the Bank of America Corporation’s Columbia Strategic Cash Portfolio.

The following table sets forth, by level, within the fair value hierarchy, financial assets and liabilities accounted for at fair value under SFAS No. 157 as of September 30, 2008 (in thousands):

Assets measured at fair value on a recurring basis were presented in the balance sheet as of September 30, 2008 as follows (in thousands):

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

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7. INCOME TAXES

Income tax expense has been accrued for the three and nine months ended September 30, 2008 in the amount of $47,000 and $110,000, respectively. For the three and nine months ended September 30, 2007, income tax expense was accrued in the amount of $54,000 and $242,000, respectively. The Company is anticipating incurring a current tax liability for Federal alternative minimum taxes and does not believe that it is more likely than not that the corresponding alternative minimum tax credit will be realized in the foreseeable future.

8. COMMITMENTS AND CONTINGENCIES

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

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 paid $126,000 as of September 30, 2008. During the second quarter of 2008, the Company relocated its corporate offices and shut down its existing facility. As a result, the Company recorded a liability and associated expense of $939,000 for future lease commitments.

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 ‘271 Patent that is the subject of the infringement suit was granted to Novartis on October 23, 2007. On March 7, 2008, the Company received formal service of the complaint in this case and on May 29, 2008, Roche and Trimeris filed an answer and counterclaim requesting relief on several grounds including non-infringement, patent invalidity, unenforceability and double-patenting. Also on May 29, 2008, Roche and Trimeris filed a motion to transfer or, in the alternative, dismiss Trimeris pursuant to the Federal Rules of Civil Procedure. On July 30, 2008, Novartis filed an answer to the Roche-Trimeris counterclaims. On August 1, 2008, Roche and Trimeris filed a reply in support of Trimeris’ motion to transfer. On September 3, 2008, the Court dismissed the Roche - Trimeris motion for transfer of venue without prejudice. On October 10, 2008, Roche and Trimeris filed a renewed motion to transfer. The Court has not yet ruled on this renewed motion. No trial date has been scheduled and the outcome of this matter cannot be determined at this time.

9. 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.

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 a 2008 strategic plan 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.

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

10. SPECIAL DIVIDEND

On May 8, 2008, the Company’s Board of Directors declared a one-time special cash dividend of $1.50 per share of common stock to stockholders of record on May 22, 2008. On August 6, 2008, the Board of Directors approved a downward adjustment to the exercise price of all stock options existing prior to May 22, 2008 of $1.14. The downward adjustment to the exercise price of all stock options had no impact on the financial statements.

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Executive Summary

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

Trimeris has a worldwide agreement (the “Development and License Agreement”) with F. Hoffmann-La Roche Ltd., or “Roche,” to develop and market T-20, marketed as FUZEON, whose generic name is enfuvirtide. FUZEON is manufactured and distributed by Roche through Roche’s sales and distribution network throughout the world in countries where regulatory approval has been received. The Company shares gross profits equally from the sale of FUZEON in the United States and Canada with Roche, and receives a royalty based on net sales of FUZEON outside the United States and Canada.

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

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

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

Recent announcements

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

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

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

RESULTS OF OPERATIONS

Comparison Of Three Months Ended September 30, 2008 and 2007

Revenues

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

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

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

Royalty revenue: Royalty revenue represents the royalty payments earned from Roche based on total net sales of FUZEON outside the United States and Canada and will continue until all patents covering FUZEON, licensed to Roche, on a country by country basis have expired. Sales of FUZEON outside the United States and Canada began in June 2003. To calculate the royalty revenue, an 8% distribution charge is deducted from Roche’s reported net sales, from which the Company receives a 12% royalty. Royalty revenue decreased for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007 as a result of decreased net sales of FUZEON outside the U.S. and Canada. Net sales of FUZEON outside the U.S. and Canada for the three months ended September 30, 2008 and 2007, were $30.6 million and $43.3 million, respectively.

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

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

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

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

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

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Selling and marketing expenses: We have exercised our right under our Development and License Agreement with Roche that prevents Roche from adopting a budget for the marketing of FUZEON above a certain limit without our consent. As a result, the Company’s and Roche’s share of the collaboration income was not equal in the third quarter of 2008. For 2007, the Company’s and Roche’s share of the collaboration income was equal. Depending on the level of marketing expenses for 2008, our share of the collaboration profit may continue to be greater than that of Roche.

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

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

Research and Development Expenses

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

Total research and development expenses include:

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

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

General and Administrative Expenses

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

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

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

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

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

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

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

Income Tax Provision

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

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

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RESULTS OF OPERATIONS

Comparison of Nine Months ended September 30, 2008 and 2007

Revenues

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

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

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